Document:

Second Supplemental Indenture, dated as of August 8, 2003

 Exhibit 4.2 
  
 Dated as of August 8, 2003 
  
 VALE OVERSEAS LIMITED, 
 as Issuer

  
 and 
  
 COMPANHIA VALE DO RIO DOCE, 
 as Guarantor 
  
 and 
  
 JPMORGAN CHASE BANK, 
 as Trustee 
  
 SECOND SUPPLEMENTAL INDENTURE 
  

U.S.$300,000,000 
 Series A and Series B

 9% Guaranteed Notes due 2013 
  

 1 

 TABLE OF CONTENTS 
  

	 	  	 	  	Page
				
	             1
	  	 	  	 Definitions
	  	2
				
	 	  	 	  	 1.1            Provisions of the Original Indenture
	  	2
				
	 	  	 	  	 1.2            Definitions
	  	2
				
	 2
	  	 	  	 General Terms And Conditions of The Notes
	  	4
				
	 	  	 	  	 2.1            Designation and Principal Amount
	  	4
				
	 	  	 	  	 2.2            Forms Generally
	  	5
				
	 	  	 	  	 2.3            Transfers and Exchanges
	  	16
				
	 	  	 	  	 2.4            Form of Trustee’s Certificate of
Authentication
	  	20
				
	 	  	 	  	 2.5            Maintenance of Office or Agency
	  	20
				
	 	  	 	  	 2.6            Luxembourg Listing
	  	20
				
	 	  	 	  	 2.7            Registration Rights
	  	20
				
	 	  	 	  	 2.8            Prescription Period
	  	20
				
	 3
	  	 	  	 Miscellaneous Provisions
	  	20
				
	 	  	 	  	 3.1            Separability of Invalid Provisions
	  	20
				
	 	  	 	  	 3.2            Execution in Counterparts
	  	21
				
	 4
	  	 	  	 The Trustee
	  	21
		
	 ANNEX A
	  	A-1
		
	 ANNEX B
	  	B-1
		
	 ANNEX C
	  	C-1

  

 i 

 Second Supplemental Indenture, dated as of August 8, 2003, among VALE OVERSEAS LIMITED, a Cayman Islands
exempted company incorporated with limited liability (herein called the “Company”), having its principal office at Walker House, P.O. Box 908 GT, Mary Street, Georgetown, Grand Cayman, Cayman Islands, COMPANHIA VALE DO RIO
DOCE, a company organized under the laws of the Federative Republic of Brazil (herein called the “Guarantor”), having its principal office at Avenida Graça Aranha, No. 26, 17° Andar, 20005-900 Rio de Janeiro, RJ,
Brazil, and JPMORGAN CHASE BANK, a bank duly organized and existing under the laws of the State of New York, having its principal corporate trust office at 4 New York Plaza, New York, New York 10004, as Trustee (herein called the
“Trustee”) to the Indenture, dated as of March 8, 2002, among the Company, the Guarantor and the Trustee (herein called the “Original Indenture”). 
  
 W I T N E S S E T H : 
  
 Whereas, the Original Indenture provides for the issuance from time to time thereunder, in series, of Securities of the Company carrying the Guaranty of the
Guarantor, and Section 9.1 of the Original Indenture provides for the establishment of the form or terms of Securities issued thereunder through one or more supplemental indentures; 
  
 Whereas, the Company and the Guarantor desire by this Second Supplemental Indenture to create two series of Securities to be issuable
under the Original Indenture, as supplemented by this Second Supplemental Indenture, and to be known as the Company’s 9% Series A Guaranteed Notes due 2013 (the “Series A Notes”) and the Company’s 9% Series B Guaranteed
Notes due 2013 (the “Series B Notes”, and, together with the Series A Notes, the “Notes”), which are to be limited in aggregate principal amount as specified in this Second Supplemental Indenture and the terms and
provisions of which are to be as specified in this Second Supplemental Indenture; 
  
 Whereas, the Company and the Guarantor have agreed, under and subject to the Registration Rights Agreement to exchange the Series A Notes, which will be offered under Rule 144A and Regulation S of the Securities Act for Series B
Notes which will be registered under the Securities Act; 
  
 Whereas, the
Company and the Guarantor have duly authorized the execution and delivery of this Second Supplemental Indenture to establish the Notes as series of Securities under the Original Indenture and to provide for, among other things, the issuance of and
the form and terms of the Notes and additional covenants for the benefit of the Holders thereof and the Trustee; and 
  
 Whereas, all things necessary to make this Second Supplemental Indenture a valid and binding legal obligation of the Company and the Guarantor according to its
terms have been done. 
  
 Now, Therefore, for and in consideration
of the premises and the purchase and acceptance of the Notes by the Holders thereof and for the purpose of setting forth, as provided in the Original Indenture, the form of the Notes and the terms, provisions and conditions thereof, the Company and
the Guarantor covenant and agree with the Trustee as follows: 
  
 It is hereby
covenanted and agreed that the terms and conditions upon which the Notes are issued, authenticated, delivered and accepted by all Persons (as defined on the Original Indenture) who shall from time to time be or become the Holders thereof, which said
terms and conditions the Trustee hereby accepts and agrees to discharge pursuant to the terms hereof, are as follows: 
  

 1 

	1	Definitions 

  

	 	1.1	Provisions of the Original Indenture 

  
 Except insofar as herein otherwise expressly provided, all the definitions, provisions, terms and conditions of the Original Indenture shall remain in
full force and effect. The Original Indenture, as amended and supplemented by this Second Supplemental Indenture, is in all respects ratified and confirmed, and the Original Indenture and this Second Supplemental Indenture shall be read, taken and
considered as one and the same instrument for all purposes. 
  

	 	1.2	Definitions 

  
 For all purposes of this Second Supplemental Indenture and the Notes, except as otherwise expressly provided or unless the subject matter or context
otherwise requires: 
  

	 	1.2.1	any reference to an “Article” or a “Section” refers to an Article or Section, as the case may be, of this Second Supplemental Indenture;

  

	 	1.2.2	the words “herein”, “hereof” and “hereunder” and other words of similar import refer to this Second Supplemental Indenture as a whole and not to
any particular Article, Section or other subdivision; 

  

	 	1.2.3	all terms used in this Second Supplemental Indenture that are defined in the Original Indenture have the meanings assigned to them in the Original Indenture, except as
otherwise provided in this Second Supplemental Indenture; 

  

	 	1.2.4	the term “Securities” as defined in the Original Indenture and as used in any definition therein, shall be deemed to include or refer to, as applicable, the Notes;
and 

  

	 	1.2.5	the following terms have the meanings given to them in this Section 1.2.5. 

  
 “Agent Member Transferee” has the meaning specified in Section 2.3.2 hereof. 
  
 “Agent Member Transferor” has the meaning specified in
Section 2.3.2 hereof. 
  
 “Applicable
Procedures” means with respect to any transfer or transaction involving a Global Note or beneficial interest therein, the rules and procedures of the Depositary, Euroclear and Clearstream, Luxembourg for such Global Note, in each case to
the extent applicable to such transaction and as in effect from time to time. 
  
 “Distribution Compliance Period” means the period of 40 consecutive days beginning on and including the later of (i) the day on which the Series A Notes are first offered to persons other than
distributors (as defined in Regulation S) in reliance on Regulation S notice of such day to be given by the Company to the Trustee and (ii) the day on which the closing of the offering of the Series A Notes pursuant to the Purchase Agreement occurs.

  

 2 

 “Event of Default” shall have the same meaning as set forth in the Original Indenture.

  
 “Exchange Offer” means the “Exchange
Offer” contemplated by the Registration Rights Agreement, i.e. the exchange of the Series A Notes for Series B Notes which are subject to a registration statement declared effective by the Commission. 
  
 “Global Note” means a Note that evidences all or part of
the Notes and is authenticated and delivered to, and registered in the name of, the Depositary for such Notes or a nominee thereof. Global Notes shall include Restricted Global Notes, Regulation S Global Notes and Unrestricted Global Notes and shall
be Global Securities for purposes of the Original Indenture. 
  
 “Governmental Authority” means any public legal entity or public agency of Brazil, including, but not limited to, any central bank, whether created by any competent authority, federal, state or local government, or any
other legal entity now existing or hereafter created, or now or hereafter owned or controlled, directly or indirectly, by any public legal entity or public agency of Brazil including, but not limited to, any central bank. 
  
 “Government of Brazil” means the government of Brazil or
any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. 
  
 “Initial Purchasers” means the initial purchasers of the Series A Notes listed in Schedule I to the
Purchase Agreement. 
  
 “Notes” has the meaning
specified in the recitals hereof. 
  
 “Owner
Transferee” has the meaning specified in Section 2.3.2 hereof. 
  
 “Owner Transferor” has the meaning specified in Section 2.3.2 hereof. 
  
 “Permitted Holder” at any time means any Person who, at such time, is the holder of at least $5,000,000 in aggregate principal amount of
Notes. 
  
 “Permitted Lien” shall have the
meaning set forth in the Original Indenture, except that references therein to “the date hereof” shall mean the date of this Second Supplemental Indenture and that the reference to Vitoria Energia in paragraph (v) thereof shall be deleted.

  
 “Predecessor Note” of any particular Note
means every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 3.5 of the Original Indenture in exchange
for or in lieu of a mutilated, destroyed, lost or stolen Note shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Note. 
  
 “Purchase Agreement” means the Purchase Agreement, dated August 1, 2003, among the Company, the Guarantor and the Initial Purchasers.

  

 3 

 “Qualified Institutional Buyer” means a “qualified institutional buyer” as
defined in Rule 144A(a)(1) under the Securities Act. 
  
 “Registration Rights Agreement” has the meaning specified in Section 2.7 hereof. 
  
 “Regulation S” means Regulation S under the Securities Act. 
  
 “Regulation S Global Note” has the meaning specified in Section 2.2 hereof. 
  
 “Relevant Date” in respect of any payment means the date on
which such payment first becomes due or (if the full amount of the monies payable has not been received by the Trustee on or prior to such due date) the date on which notice is given to the Holders that such monies have been so received. 

 
 “Restricted Global Note” has the meaning specified in
Section 2.2 hereof. 
  
 “Restricted Global Transferred
Amount” has the meaning specified in Section 2.3.2 hereof. 
  
 “Restricted Notes” means Notes offered and sold in their initial distribution in transactions exempt from the registration requirements of the Securities Act other than pursuant to Regulation S and shall include all Notes
issued upon registration of transfer of, in exchange for or in lieu of Restricted Notes except as otherwise provided in Section 2.3 hereof. 
  
 “Restrictive Legends” has the meaning specified in Section 2.3.1 hereof. 
  
 “Rule 144A” means Rule 144A under the Securities Act. 
  
 “Series A Notes” has the meaning specified in the recitals
hereof. 
  
 “Series B Notes” has the meaning
specified in the recitals hereof. 
  
 “Shelf Registration
Statement” means the Shelf Registration Statement contemplated by the Registration Rights Agreement, i.e. a registration statement with respect to the Series A Notes declared effective by the Commission. 
  
 “Stated Maturity Date” has the meaning specified in Section
2.1 hereof. 
  
 “Unrestricted Global Note” has
the meaning specified in Section 2.2 hereof. 
  

	2	General Terms And Conditions of The Notes 

  

	 	2.1	Designation and Principal Amount 

  
 There is hereby authorized and established two series of Securities designated the 9% Series A Guaranteed Notes due 2013 and the 9% Series B Guaranteed
Notes due 2013, initially limited to an aggregate principal amount of $300,000,000 (which amount does not include Notes authenticated and delivered upon registration of transfer of, or in 

  

 4 

 exchange for, or in lieu of, other Securities of such series pursuant to Sections 3.4, 3.5, 9.6 or 11.5
of the Original Indenture), which amount shall be specified in the Company Order for the authentication and delivery of Notes pursuant to Section 3.3 of the Original Indenture. The principal of the Notes shall be due and payable at the Stated
Maturity Date. 
  
 The Company may, from time to time and without
the consent of the Holders, issue additional notes on terms and conditions identical to those of the Notes, which additional notes shall increase the aggregate principal amount of, and shall be consolidated and form a single series with, the Notes.
The Notes shall be known and designated as the “9% Guaranteed Notes due 2013” of the Company. Their Stated Maturity Date shall be on August 15, 2013, (the “Stated Maturity Date”). The Notes shall (subject to Section
10.6 of the Original Indenture) be unsecured and shall bear interest at the rate of 9% per annum, from August 15, 2003 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, as the case may be,
payable semi-annually on August 15 and February 15, commencing February 15, 2004 (an “Interest Payment Date”), until the principal thereof is paid or made available for payment. To the extent interest due on any Interest Payment
Date is not paid, interest shall accrue thereon at the Default Rate of Interest, except as provided herein, until such unpaid interest and interest accrued thereon are paid in full. As provided in the Registration Rights Agreement, in the event that
either the Exchange Offer is not completed or the Shelf Registration Statement, if required by the Registration Rights Agreement, is not declared effective on or prior to February 15, 2004 then, pursuant to and subject to the Registration Rights
Agreement, the interest rate on the Notes will increase by 0.25% per annum, and will increase an additional 0.25% per annum if the same is not completed or effective on May 15, 2004, for an aggregate maximum additional interest of 0.50% per annum.
These additional amounts will be payable on the Notes, pursuant to and subject to the Registration Rights Agreement, until the earlier of (i) completion of the Exchange Offer, regardless of how many Notes are exchanged therein, (ii) effectiveness of
the Shelf Registration Statement or (iii) the Notes becoming freely tradable under the Securities Act. The Notes shall have such other terms as are set forth therein. 
  
 The Series A Notes and the Series B Notes shall be considered collectively to be a single class for all purposes of this
Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. 
  

	 	2.2	Forms Generally 

  
 The Notes shall be in substantially the forms set forth in this Section 2.2, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Second Supplemental Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the officers executing such Notes, as evidenced by their execution thereof. 
  
 The Trustee shall authenticate (i) the Series A Notes for original issue on the date hereof in the aggregate principal amount of
$[    ],000,000 and (ii) the Series B Notes from time to time for issue only in exchange for a like principal amount of Series A Notes, in each 

  

 5 

 
case upon a Company Order, which written order shall specify the amount of Series B Notes to be authenticated and the date of original issue thereof.

  
 Upon their original issuance, Notes offered and sold to
Qualified Institutional Buyers in accordance with Rule 144A shall be issued in the form of one or more Global Notes in definitive, fully registered form without coupons, substantially in the form set forth in this Section 2.2, with such applicable
legends as provided herein (each, a “Restricted Global Note”). Such Restricted Global Notes shall be registered in the name of the Depositary, or its nominee, and deposited with the Trustee, at its Corporate Trust Office, as
custodian for the Depositary, duly executed by the Company, and by the Guarantor, in the case of the Guaranty endorsed thereon, and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of any Restricted Global Notes
may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary, as provided in Section 2.3 hereof. 
  
 Upon their original issuance, Notes offered and sold in reliance on Regulation S shall initially be issued in the form of
one or more Global Notes in definitive, fully registered form without coupons, substantially in the form set forth in this Section 2.2, with such applicable legends as provided herein (each, a “Regulation S Global Note”). Such
Regulation S Global Notes shall be registered in the name of the Depositary, or its nominee, and deposited with the Trustee, at its Corporate Trustee Office, as custodian for the Depositary, duly executed by the Company, and by the Guarantor, in the
case of the Guaranty endorsed thereon, and authenticated by the Trustee as herein provided. After such time as the applicable Distribution Compliance Period shall have terminated, each such Regulation S Global Note shall be referred to herein as an
“Unrestricted Global Note”. The aggregate principal amount of any Regulation S Global Note or any Unrestricted Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depositary, as provided in Section 2.3 hereof. 
  
 Notwithstanding the foregoing, upon consummation of an Exchange Offer, the Company shall issue and, upon receipt of a Company Order as described above, the Trustee shall authenticate one or more Unrestricted Global Notes in aggregate
principal amount equal to the principal amount of the Global Notes accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Unrestricted Global Notes, the Trustee shall reduce accordingly the aggregate principal amount of
the Global Notes accepted for exchange. 
  

	 	2.2.1	Form of Face of Note 

  
 [INCLUDE IF NOTE IS A GLOBAL NOTE — THIS IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO, AS SUPPLEMENTED BY THE
SECOND SUPPLEMENTAL INDENTURE, AND IS REGISTERED IN THE NAME OF THE DEPOSITARY OR A NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY VALE OVERSEAS LIMITED, COMPANHIA VALE DO RIO DOCE AND THE TRUSTEE AND ANY AGENT THEREOF AS OWNER AND HOLDER OF
THIS NOTE FOR ALL PURPOSES. 
  

 6 

 UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR REGISTERED NOTES IN DEFINITIVE REGISTERED FORM
IN THE LIMITED CIRCUMSTANCES REFERRED TO IN SECTION 3.4.2 OF THE INDENTURE, AS SUPPLEMENTED BY THE SECOND SUPPLEMENTAL INDENTURE, THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A
NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.] 
  
 [INCLUDE IF NOTE IS A GLOBAL NOTE AND THE DEPOSITARY IS THE DEPOSITORY
TRUST COMPANY — UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO VALE OVERSEAS LIMITED OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN
EXCHANGE FOR THIS CERTIFICATE OR ANY PORTION HEREOF IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON OTHER THAN THE DEPOSITORY TRUST COMPANY OR A NOMINEE THEREOF IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] 
  
 [INCLUDE IF NOTE IS A RESTRICTED GLOBAL NOTE (UNLESS, PURSUANT TO SECTION 2.3 OF THE SECOND SUPPLEMENTAL INDENTURE, THE COMPANY DETERMINES AND CERTIFIES TO THE TRUSTEE THAT THE LEGEND MAY BE REMOVED) —
NEITHER THIS GLOBAL NOTE, THE GUARANTY HEREOF NOR ANY BENEFICIAL INTEREST HEREIN HAS BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE “SECURITIES ACT”). NEITHER THIS GLOBAL NOTE, THE GUARANTY HEREOF NOR ANY BENEFICIAL
INTEREST HEREIN MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER OR BUYERS IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION 

  

 7 

 
STATEMENT UNDER THE SECURITIES ACT (PROVIDED THAT AS A CONDITION TO REGISTRATION OF TRANSFER OF THIS GLOBAL NOTE AS SET FORTH ABOVE, VALE OVERSEAS LIMITED
MAY REQUIRE DELIVERY OF ANY DOCUMENTS OR OTHER EVIDENCE THAT IT, IN ITS ABSOLUTE DISCRETION, DEEMS NECESSARY OR APPROPRIATE TO EVIDENCE COMPLIANCE WITH SUCH EXEMPTION), AND, IN EACH CASE, IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE
STATES OF THE UNITED STATES AND OTHER JURISDICTIONS. NOTES OWNED BY AN INVESTOR THAT IS NOT A QUALIFIED INSTITUTIONAL BUYER OR A NON U.S. PERSON MAY NOT BE HELD IN BOOK-ENTRY FORM AND MAY NOT BE TRANSFERRED WITHOUT CERTIFICATION THAT THE TRANSFER
COMPLIES WITH THE FOREGOING RESTRICTIONS, AS PROVIDED IN THE SECOND SUPPLEMENTAL INDENTURE UNDER WHICH THE NOTES ARE ISSUED.] 
  
 [INCLUDE IF NOTE IS A REGULATION S GLOBAL NOTE (UNLESS, PURSUANT TO SECTION 2.3 OF THE SECOND SUPPLEMENTAL INDENTURE, THE COMPANY DETERMINES AND
CERTIFIES TO THE TRUSTEE THAT THE LEGEND MAY BE REMOVED) — THIS NOTE AND THE GUARANTY HEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE “SECURITIES ACT”) AND MAY NOT BE OFFERED, SOLD OR DELIVERED
IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON, UNLESS SUCH NOTES AND GUARANTY ARE REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF IS AVAILABLE. THE FOREGOING SHALL NOT
APPLY FOLLOWING THE EXPIRATION OF FORTY DAYS FROM THE LATER OF (i) THE DATE ON WHICH THESE NOTES WERE FIRST OFFERED AND (ii) THE DATE OF ISSUANCE OF THESE NOTES.] 
  
 VALE OVERSEAS LIMITED 
 [SERIES A] [SERIES B] 
             % GUARANTEED NOTES DUE 2013 
 GUARANTEED BY
COMPANHIA VALE DO RIO DOCE 
  
 [If Restricted Global Note -
CUSIP Number [            ] 
  
 [If Regulation S Global Note - CINS Number [            ]/ ISIN 
  
 Number [            ]/Common Code Number
[            ]] 
  
 [If Unrestricted Global Note – CUSIP Number [            ]] 
  
 No.
[            ]                        
$[            ] 
  
 Vale Overseas Limited, a company duly organized and existing under the laws of the Cayman Islands (herein called the “Company”, which term includes any 

  

 8 

 
successor Person under the Indenture, as supplemented by the Second Supplemental Indenture hereinafter referred to), for value received, hereby promises to
pay to [            ], or registered assigns, the principal sum of [            ] Dollars [if the Note is a Global Note, then
insert —, or such other principal amount as set forth in the Schedule of Increases or Decreases in Global Note attached hereto] on August 15, 2013, and to pay interest thereon from August 15, 2003 or from the most recent Interest Payment
Date to which interest has been paid or duly provided for, as the case may be, semi-annually on February 15 and August 15 in each year, commencing February 15, 2004 at the rate of 9% per annum, until the principal hereof is paid or made available
for payment, provided that any amount of interest on this Note which is overdue shall bear interest (to the extent that payment thereof shall be legally enforceable) at the Default Rate of Interest, except as provided for herein, from the
date such amount is due to but not including the day it is paid or made available for payment, and such overdue interest shall be paid as provided in Section 3.6 of the Original Indenture. As provided in the Registration Rights Agreement, in the
event that either the Exchange Offer is not completed or the Shelf Registration Statement, if required by the Registration Rights Agreement, is not declared effective on or prior to February 15, 2004 then, pursuant to and subject to the Registration
Rights Agreement, the interest rate on the Notes will increase by 0.25% per annum, and will increase an additional 0.25% per annum if the same is not completed or effective on May 15, 2004, for an aggregate maximum additional interest of 0.50% per
annum. These additional amounts will be payable on the Notes, pursuant to and subject to the Registration Rights Agreement, until the earlier of (i) completion of the Exchange Offer, regardless of how many Notes are exchanged therein, (ii)
effectiveness of the Shelf Registration Statement or (iii) the Notes becoming freely tradable under the Securities Act. 
  
 The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture and Second
Supplemental Indenture, be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on the Regular Record Date for such interest, which shall be February 1 or August 1 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on the relevant Regular Record Date and may either be paid
to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders
of the Notes not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may
be required by such exchange, all as more fully provided in the Indenture or Second Supplemental Indenture. Interest on this Note shall be computed on the basis set forth in the Indenture, as supplemented by the Second Supplemental Indenture.

  

 9 

 Payment of the principal of and interest on this Note will be made to the Person entitled thereto
according to the Security Register at the office of the Trustee or agency of the Company in the Borough of Manhattan, The City of New York, New York, maintained for such purpose and at any other office or agency maintained by the Company for such
purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts upon surrender of this Note in the case of any payment due at the Maturity of the principal thereof
(other than any payment of interest payable on an Interest Payment Date); provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register; provided, further, that all payments of the principal of and interest on this Note, the Permitted Holders of which have given wire transfer instructions to the Trustee, the Company, or its agent
at least 10 Business Days prior to the applicable payment date, will be required to be made by wire transfer of immediately available funds to the accounts with financial institutions in the United States specified by such Permitted Holders in such
instructions. [if the Note is a Global Note, then insert — Notwithstanding the foregoing, payment of any amount payable in respect of a Global Note will be made in accordance with the Applicable Procedures of the Depositary.] 

 
 Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. 
  
 Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Note shall
not be entitled to any benefit under the Indenture, as supplemented by the Second Supplemental Indenture or be valid or obligatory for any purpose. 
  
 Executed as a Deed on the date first appearing below. 
  

	 	 	Dated:	 	 
		
	 	 	VALE OVERSEAS LIMITED
			
	 	 	 By:
	 	

	 	 	 	 	 Name:

	 	 	 	 	 Title:

			
	 	 	 By:
	 	

	 	 	 	 	 Name:

	 	 	 	 	 Title:

  
 The undersigned (the
“Guarantor”) hereby irrevocably and unconditionally guarantees the full and punctual payment (whether at the Stated Maturity Date, upon redemption, purchase pursuant to an offer to purchase or acceleration or 

  

 10 

 
otherwise) of the principal, premium, interest, Additional Amounts and all other amounts that may come due and payable under this Note. 
  
 In Witness Whereof, the Guarantor has caused this instrument to be
duly endorsed. 
  

	 	 	 Dated:

		
	 	 	COMPANHIA VALE DO RIO DOCE
			
	 	 	 By:
	 	

	 	 	 	 	 Name:

	 	 	 	 	 Title:

			
	 	 	 By:
	 	

	 	 	 	 	 Name:

	 	 	 	 	 Title:

  

	 	2.2.2	Form of Reverse of Note 

  
 This Note is a duly authorized issue of securities of the Company issued in one or more series (the “Securities”) under an Indenture,
dated as of March 8, 2002 (herein called the “Original Indenture”, which term shall have the meaning assigned to it in such instrument), as supplemented by a Second Supplemental Indenture dated as of August 8, 2003 (herein called
the “Second Supplemental Indenture”), among the Company, the Guarantor and JPMorgan Chase Bank, as Trustee (herein called the “Trustee”, which term includes any successor trustee under the Indenture), and reference
is hereby made to the Original Indenture, as supplemented by the Second Supplemental Indenture, for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Guarantor, the Trustee and the
Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof (herein called the “Notes”), initially limited in
aggregate principal amount to $300,000,000. 
  
 The full and
punctual payment of the principal, premium, if any, and interest and all other amounts payable under this Note is irrevocably and unconditionally guaranteed by the Guarantor. 
  
 Additional notes on terms and conditions identical to those of this Note may be issued by the Company without the consent
of the Holders of the Notes. The amount evidenced by such additional Notes shall increase the aggregate principal amount of, and shall be consolidated and form a single series with, the Notes. 
  
 If an Event of Default or Illegality Event with respect to Notes shall
occur and be continuing, the principal of all of the Notes may be declared due and payable in 

  

 11 

 
the manner and with the effect provided in the Original Indenture, as supplemented by the Second Supplemental Indenture. 
  
 All payments of principal and interest in respect of the Notes shall be
made without withholding or deduction for any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of the Cayman Islands or Brazil, or any Successor
Jurisdiction or any authority therein or thereof having power to tax (“Foreign Taxes”) except to the extent that such Foreign Taxes are required by the Cayman Islands, Brazil, such Successor Jurisdiction or any such authority to be
withheld or deducted. In the event of any withholding or deduction for any Foreign Taxes, the Company or the Guarantor, as the case may be, shall pay such additional amounts (“Additional Amounts”) as will result in receipt by the
Holders of Notes on the respective due dates of such amounts as would have been received by them had no such withholding or deduction (including for any Foreign Taxes payable in respect of Additional Amounts) been required, except that no such
Additional Amounts shall be payable with respect to any payment on a Note: 
  

	 	(i)	to, or to a third party on behalf of, a Holder who is liable for any such taxes, duties, assessments or other governmental charges which would not have been imposed but for (A) a
connection between the Holder and the Cayman Islands or Brazil other than the mere holding of such Note and the receipt of payments with respect to such Note or (B) failure by the Holder to comply with any certification, identification or other
reporting requirement concerning the nationality, residence, identity or connection between the Cayman Islands, Brazil or a Successor Jurisdiction, or applicable political subdivision or authority thereof or therein having power to tax, of such
Holder, if compliance is required by such jurisdiction, or any political subdivision or authority thereof or therein having power to tax, as a precondition to exemption from, or reduction in the rate of, the tax, assessment or other governmental
charge and the Company has given the Holders at least 30 days’ notice that Holders will be required to provide such certification, identification or other requirement; 

  

	 	(ii)	in respect of any such taxes, duties, assessments or other governmental charges with respect to a Note surrendered (if surrender is required) more than 30 days after the later of
(x) the date on which such payment first became due and payable and (y) if the full amount due and payable has not been received by the Trustee on or prior to such date, the date on which notice is given to the Holders that the full amount is so
received by the Trustee, except to the extent that the Holder of such Note would have been entitled to such Additional Amounts on surrender of such Note for payment on the last day of such 30-day period; 

  

	 	(iii)	in respect of estate, inheritance, gift, sales, transfer, personal property or similar tax, assessment or governmental charge imposed with respect to a Note;

  

 12 

	 	(iv)	in respect of any tax, assessment or other governmental charge payable otherwise than by deduction or withholding from payments on the Notes or by direct payment by the Company or
the Guarantor in respect of claims made against the Company or the Guarantor; 

  

	 	(v)	where such Additional Amount is imposed on a payment to an individual and is required to be made pursuant to any European Union Directive on the taxation of savings implementing the
conclusions of the ECOFIN Council meeting of November 26-27, 2000 or any law implementing or complying with, or introduced in order to conform to, such directive; or 

  

	 	(vi)	in respect of any combination of the above. 

  
 For purposes of the provisions described in Clause (i) above, the term “Holder” of any Note means the direct nominee of any beneficial
owner of such Note, which holds such beneficial owner’s interest in such Note. Notwithstanding the foregoing, the limitations on the Company’s or the Guarantor’s obligation to pay Additional Amounts set forth in Clause (i) above shall
not apply if (a) the provision of information, documentation or other evidence described in such Clause (i) would be materially more onerous, in form, in procedure or in the substance of information disclosed, to a Holder or beneficial owner of a
Note (taking into account any relevant differences between U.S. and Cayman Islands or Brazilian law, regulation or administrative practice) than comparable information or other reporting requirements imposed under U.S. tax law (including tax
treaties between the United States and the Cayman Islands or Brazil), regulation (including proposed regulations) and administrative practice. 
  
 The Company or the Guarantor, as the case may be shall promptly provide the Trustee with documentation (which may consist of certified copies of such
documentation) satisfactory to the Trustee evidencing the payment of Foreign Taxes in respect of which the Company or the Guarantor has paid any Additional Amounts. Copies of such documentation shall be made available to the Holders of the Notes or
the Paying Agent, as applicable, upon request therefor. 
  
 The
Company or the Guarantor, as the case may be shall pay all stamp, issue, registration, documentary or other similar duties, if any, which may be imposed by the Cayman Islands or Brazil or any governmental entity or political subdivision therein or
thereof, or any taxing authority of or in any of the foregoing, with respect to the Indenture, the Second Supplemental Indenture or the issuance of the Notes or the Guaranty. 
  
 All references herein, in the Indenture or in the Second Supplemental Indenture, to principal, premium or interest in
respect of any Note shall be deemed to include all Additional Amounts, if any, payable in respect of such principal, premium or interest, unless the context otherwise requires, and express mention of the payment of Additional Amounts in any
provision hereof shall not be construed as excluding reference to Additional Amounts in those provisions hereof where such express mention is not made. 
  

 13 

 In the event that Additional Amounts actually paid with respect to the Notes pursuant to the preceding
paragraphs are based on rates of deduction or withholding of withholding taxes in excess of the appropriate rate applicable to the Holder of such Notes, and, as a result thereof such Holder is entitled to make claim for a refund or credit of such
excess from the authority imposing such withholding tax, then such Holder shall, by accepting such Notes, be deemed to have assigned and transferred all right, title, and interest to any such claim for a refund or credit of such excess to the
Company. However, by making such assignment, the Holder makes no representation or warranty that the Company will be entitled to receive such claim for a refund or credit and incurs no other obligation with respect thereto. 
  
 All references in the Indenture, the Second Supplemental Indenture and the
Notes to principal in respect of any Note shall be deemed to mean and include any Redemption Price payable in respect of such Note pursuant to any redemption right hereunder (and all such references to the Stated Maturity Date of the principal in
respect of any Note shall be deemed to mean and include the Redemption Date with respect to any such Redemption Price), and all such references to principal, premium, interest or Additional Amounts shall be deemed to mean and include any amount
payable in respect hereof pursuant to Section 10.7 of the Indenture. 
  
 The Notes are subject to redemption upon not less than 30 nor more than 90 days’ notice by mail, at any time, as a whole but not in part, at the election of the Company, at a cash price equal to the sum of (i) the principal amount of
the Notes being redeemed, (ii) accrued and unpaid current interest thereon to but not including the date fixed for redemption, and (iii) any Additional Amounts (as defined in the Indenture) which would otherwise be payable up to but not including
the date fixed for redemption, if, as a result of any amendment to, or change in, the laws (or any laws, rules, or regulations thereunder) of the Cayman Islands or Brazil or any political subdivision or taxing authority thereof or therein affecting
taxation or any amendment to or change in an official interpretation, administration or application of such laws, rules, or regulations (including a holding by a court of competent jurisdiction), under which amendment or change of such laws, rules,
or regulations or the interpretation thereof becomes effective on or after the date of the Second Supplemental Indenture, the Company would be obligated, after taking measures the Company considers reasonable to avoid such requirement, to pay
Additional Amounts in excess of the Additional Amounts that the Company would be obligated to pay if payments made on the Notes were subject to withholding or deduction of Foreign Taxes at the rate of 15 percent. 
  
 The Indenture, as supplemented by a supplemental indenture, permits, with
certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture, as supplemented, at
any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions 

  

 14 

 (i) permitting the Holders of a majority in principal amount of the Securities at the time Outstanding
of any series to be affected under the Indenture, as supplemented, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture, as supplemented, and (ii) permitting the
Holders of a majority in principal amount of the Securities at the time Outstanding of any series to be affected under the Indenture as supplemented, on behalf of the Holders of all Securities of such series, to waive certain past defaults under the
Indenture as supplemented by the Second Supplemental Indenture and their consequences. Any such consent or waiver by the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note
issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note. 
  
 As provided in and subject to the provisions of the Indenture, as supplemented by the Second Supplemental Indenture, the
Holder of this Note shall not have the right to institute any proceeding with respect to the Indenture, the Second Supplemental Indenture, or for the appointment of a receiver or trustee, or for any other remedy thereunder, unless such Holder shall
have previously given the Trustee written notice of a continuing Event of Default or Illegality Event with respect to the Notes, the Holders of not less than 25% in principal amount of the Notes at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of Default or Illegality Event as Trustee and offered the Trustee indemnity reasonably satisfactory to it, and the Trustee shall not have received from the Holders of a
majority in principal amount of Notes at the time Outstanding a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The foregoing
shall not apply to any suit instituted by the Holder of this Note for the enforcement of any payment of principal hereof or any interest hereon on or after the respective due dates expressed herein. 
  
 No reference herein to the Indenture or the Second Supplemental Indenture
and no provision of this Note or of the Indenture or the Second Supplemental Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any interest on this Note at the times,
place and rate, and in the coin or currency, herein prescribed. 
  
 As provided in the Indenture and the Second Supplemental Indenture and subject to certain limitations therein set forth (including, without limitation, the restrictions on transfer under Sections 2.2 and 2.3 of the Second Supplemental
Indenture) the transfer of this Note is registrable in the Security Register, upon surrender of this Note for registration of transfer at the office of the Trustee or agency of the Company in any place where the principal of and any interest on this
Note are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Notes of this Series and of like tenor, of authorized 

  

 15 

 denominations and for the same aggregate principal amount, will be issued to the designated transferee
or transferees. 
  
 The Notes are issuable only in registered
form without coupons in denominations of [if the Note is not a Restricted Certificated Note, then insert — $1,000 and any multiple thereof] [if the Note is a Restricted Certificated Note, then insert — $100,000 and any
integral multiple of $1,000 in excess thereof]. As provided in the Indenture, as supplemented by the Second Supplemental Indenture, and subject to certain limitations therein set forth, Notes are exchangeable for a like aggregate principal amount of
Notes of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. 
  
 No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. 
  
 Prior to due surrender of this Note for registration of transfer, the Company, the Guarantor, the Trustee and any agent of the Company, the Guarantor or of the Trustee may treat the Person in whose name this Note is registered as the owner
hereof for all purposes, whether or not this Note is overdue, and neither the Company, the Guarantor, the Trustee nor any such agent shall be affected by notice to the contrary. 
  
 [If the Note is a Global Note, then insert — This Note is a Global Note and is subject to the provisions of the
Indenture and the Second Supplemental Indenture relating to Global Notes, including the limitations in Section 2.3 of the Second Supplemental Indenture on transfers and exchanges of Global Notes.] 
  
 This Note, the Indenture and the Second Supplemental Indenture shall be
governed by and construed in accordance with the laws of the State of New York. 
  
 All terms used in this Note which are defined in the Indenture, as supplemented by the Second Supplemental Indenture, shall have the meanings assigned to them in the Indenture, as supplemented by the Second
Supplemental Indenture. 
  
 ABBREVIATIONS 
  
 The following abbreviations, when used in the inscription of the face of
this Note, shall be construed as though they were written out in full according to applicable laws or regulations: 
  
 TEN COM - as tenants in common 
 TEN ENT -
as tenants by the entireties 
 JT TEN - as joint tenants with right of survivorship and not as tenants in common 
  
 UNIF GIFT MIN ACT —
[                            ] 
 (Cust) 
  

 16 

 Custodian
[                     ] under Uniform (Minor) 
 Gifts to Minors Act [                    ] 
 (State) 
  
 Additional
abbreviations may also be used 
 though not in the above list. 
  
 [TO BE ATTACHED TO GLOBAL NOTES] 
  
 SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE 
  
 The initial principal amount of this Global Note is $[            ]. The
following increases or decreases in this Global Note have been made: 
  

	 Date of
 Exchange

	 	 Amount of
 Decrease in
 Principal Amount
 of this Global Note

	 	 Amount of Increase
 in Principal
 Amount of this
 Global Note

	  	 Principal Amount
 of this Global Note
following such
 Decrease or
 Increase

	  	 Signature of
Authorized Officer
 of Trustee or Notes
Custodian

	 	 	 	 	 	  	 	  	 
	 	 	 	 	 	  	 	  	 
	 	 	 	 	 	  	 	  	 

  

	 	2.3	Transfers and Exchanges 

  

	 	2.3.1	Restricted Notes Restricted Notes shall be subject to the restrictions on transfer (the “Transfer Restrictions”) provided in the applicable legend(s) (the
“Restrictive Legends”) required to be set forth on the face of each Restricted Note pursuant to Section 2.2, unless compliance with the Transfer Restrictions shall be waived by the Company in writing delivered to the Trustee.

  
 The Transfer Restrictions shall cease and
terminate with respect to any particular Restricted Note upon receipt by the Company of evidence satisfactory to it (which may include an opinion of independent counsel experienced in matters of United States federal securities law) that, as of the
date of determination, such Restricted Note (a) has been transferred by the Holder thereof pursuant to Rule 144 promulgated under the Securities Act, (b) has been sold pursuant to an effective registration statement under the Securities Act, or (c)
has been transferred in a transaction satisfying all the requirements of Rule 903 or 904 (as applicable) of Regulation S, and receipt by the Trustee of an Officer’s Certificate certifying that the Company has received such evidence which may
include an opinion of counsel stating that the Transfer Restrictions have ceased and terminated with respect to such Note. All references in the preceding sentence to any regulation, rule or provision thereof shall be deemed also to refer to any
successor provisions thereof. In addition, the Company may terminate the Transfer Restrictions with respect to any particular Restricted Note in such other circumstances as it determines are appropriate for this purpose and shall deliver to the
Trustee an opinion of counsel, if any, and Officer’s Certificate certifying 

  

 17 

 
that the Transfer Restrictions have ceased and terminated with respect to such Note. 
  
 At the request of the Holder and upon the surrender of such Restricted Notes to the Trustee or Security Registrar for
exchange in accordance with the provisions of this Section 2.3, any Restricted Note as to which the Transfer Restrictions shall have terminated in accordance with the preceding paragraph shall be exchanged for a new Note of like aggregate principal
amount, but without the Restrictive Legends. Any Restricted Note as to which the Restrictive Legends shall have been removed pursuant to this paragraph (and any Note issued upon registration of transfer of, exchange for or in lieu of such Restricted
Note) shall thereupon cease to be a “Restricted Note” for all purposes of this Second Supplemental Indenture. 
  
 The Trustee shall not be liable for any action taken or omitted to be taken by it in good faith and without negligence on its part in accordance with
such notice or any opinion of counsel. 
  
 As used in this
Section 2.3.1, the term “transfer” encompasses any sale, pledge, transfer or other disposition of any Notes referred to herein. 
  

	 	2.3.2	Transfers Between Global Notes 

  

	 	(i)	Restricted Global Note to Regulation S Global Note If the owner of a beneficial interest (an “Owner Transferor”) in a Restricted Global Note wishes at any
time to transfer such beneficial interest to a Person (an “Owner Transferee”) who wishes to take delivery thereof in the form of a beneficial interest in a Regulation S Global Note, such transfer may be effected, subject to the
Applicable Procedures, only in accordance with the provisions of this Section 2.3.2(i). Upon receipt by the Trustee, as Security Registrar, at the Corporate Trust Office of (l) written instructions given in accordance with the Applicable Procedures
from the Agent Member, whose account is to be debited (an “Agent Member Transferor”) with respect to the Restricted Global Note, directing the Trustee, as Security Registrar, to credit or cause to be credited to a specified account
of another Agent Member (an “Agent Member Transferee”) a beneficial interest in a Regulation S Global Note in a principal amount equal to the beneficial interest in the Restricted Global Note to be so transferred
(the “Restricted Global Transferred Amount”), (2) a written order given in accordance with the Applicable Procedures containing information regarding the account of the Agent Member Transferee to be credited with, and the Agent
Member Transferor to be debited by, the Restricted Global Transferred Amount, and (3) a certificate in substantially the form set forth in Annex A given by the Owner Transferor, the Trustee, as Security Registrar, shall instruct the Depositary to
reduce the principal amount of the Restricted Global Note, and to increase the principal amount of the Regulation S Global Note, by the Restricted Global Transferred Amount, and to credit, or 

  

 18 

	 	 
cause to be credited to, the account of the Agent Member Transferee a beneficial interest in the Regulation S Global Note, and to debit, or cause to be
debited to, the account of the Agent Member Transferor a beneficial interest in the Restricted Global Note, in each case having a principal amount equal to the Restricted Global Transferred Amount. 

  

	 	(ii)	Restricted Global Note to Unrestricted Global Note If an Owner Transferor wishes at any time to transfer a beneficial interest in a Restricted Global Note to an Owner
Transferee who wishes to take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 2.3.2(ii). Upon receipt by
the Trustee, as Security Registrar, at the Corporate Trust Office of (l) written instructions given in accordance with the Applicable Procedures from the Agent Member Transferor directing the Trustee, as Security Registrar, to credit or cause to be
credited to a specified account of an Agent Member Transferee (which may but need not be an account with Euroclear or Clearstream, Luxembourg) a beneficial interest in the Unrestricted Global Note in a principal amount equal to the Restricted Global
Transferred Amount, (2) a written order given in accordance with the Applicable Procedures containing information regarding the account of the Agent Member Transferee to be credited with, and the account of the Agent Member Transferor to be debited
for, the Restricted Global Transferred Amount, and (3) a certificate in substantially the form set forth in Annex B given by the Owner Transferor, the Trustee, as Security Registrar, shall instruct the Depositary to reduce the principal amount of
the Restricted Global Note, and to increase the principal amount of the Unrestricted Global Note, by the Restricted Global Transferred Amount, and to credit, or cause to be credited to, the account of the Agent Member Transferee a beneficial
interest in the Unrestricted Global Note, and to debit, or cause to be debited to, the account of the Agent Member Transferor a beneficial interest in the Restricted Global Note, in each case having a principal amount equal to the Restricted Global
Transferred Amount. 

  

	 	(iii)	 Regulation S Global Note or Unrestricted Global Note to Restricted Global Note If an Owner Transferor wishes at any time to transfer a beneficial interest in
a Regulation S Global Note or an Unrestricted Global Note to an Owner Transferee who wishes to take delivery thereof in the form of a beneficial interest in a Restricted Global Note, such transfer may be effected, subject to the Applicable
Procedures, only in accordance with this Section 2.3.2(iii). Upon receipt by the Trustee, as Security Registrar, at the Corporate Trust Office of (1) written instructions given in accordance with the Applicable Procedures from the Agent Member
Transferor, directing the Trustee, as Security Registrar, to credit, or cause to be credited to, a specified account of an Agent Member Transferee a beneficial interest in the Restricted Global Note in a principal amount equal to that of the
beneficial interest in the Regulation S Global Note or Unrestricted Global Note to be so 

  

 19 

	 	 
transferred, (2) a written order given in accordance with the Applicable Procedures containing information regarding the account of the Agent Member
Transferee to be credited with, and the account of the Agent Member Transferor to be debited for, such beneficial interest, and (3) with respect to a transfer of a beneficial interest in the Regulation S Global Note (but not the Unrestricted Global
Note), a certificate in substantially the form set forth in Annex C given by the Owner Transferor, the Trustee, as Security Registrar, shall instruct the Depositary to reduce the principal amount of the Regulation S Global Note or Unrestricted
Global Note, as the case may be, and increase the principal amount of the Restricted Global Note, by the principal amount of the beneficial interest in the Regulation S Global Note or Unrestricted Global Note to be so transferred, and to credit, or
cause to be credited to, the account of the Agent Member Transferee such beneficial interest in the Restricted Global Note, and to debit, or cause to be debited to, the account of the Agent Member Transferor such beneficial interest in the
Regulation S Global Note or Unrestricted Global Note, as the case may be. 

  

	 	2.3.3	In case of any transfer or exchange the procedures and requirements for which are not addressed in detail in this Section 2.3, such transfer or exchange will be subject to
such procedures and requirements as may be reasonably prescribed by the Company from time to time and, in the case of a transfer or exchange involving a Global Note, the Applicable Procedures. 

  

	 	2.3.4	Notwithstanding the foregoing, during the period of two years after the issue date of the Notes, the Company shall not, and shall not permit any of its Affiliates that are
Subsidiaries to, purchase or agree to purchase or otherwise acquire any Restricted Notes, whether as beneficial owner or otherwise (except as agent on behalf of and for the account of customers in the ordinary course of business as a securities
broker in unsolicited broker’s transactions) unless, immediately upon any such purchase, the Company or any such Affiliate shall submit such Restricted Notes to the Trustee for cancellation. The Company further agrees to ask its Affiliates that
are not Subsidiaries to agree not to purchase or otherwise acquire any Restricted Notes, whether as beneficial owner or otherwise, except as permitted in the preceding sentence. 

  

	 	2.4	Form of Trustee’s Certificate of Authentication 

  
 The Trustee’s certificate of authentication shall be in substantially the following form: 
  
 This is one of the Notes referred to in the within mentioned Indenture, as
supplemented by the Second Supplemental Indenture. 
  
 Dated:

  
 JPMORGAN CHASE BANK 
  
  

 20 

	 	 	 as Trustee

			
	 	 	 By:
	 	  

	 	 	 	 	 Authorized Officer

  

	 	2.5	Maintenance of Office or Agency 

  
 With respect to any Notes that are not in the form of a Global Note, the Company will maintain (i) in the Borough of Manhattan, The City of New York and
(ii) in Luxembourg, so long as the Notes are listed on the Luxembourg Stock Exchange and the rules and regulations of the Luxembourg Stock Exchange so require, an office or agency, in each case in accordance with Section 10.2 of the Original
Indenture. 
  

	 	2.6	Luxembourg Listing 

  
 The Company shall use all reasonable efforts to cause the Notes to be duly authorized for listing on the Luxembourg Stock Exchange or another recognized
securities exchange and shall from time to time take such other actions as shall be necessary or advisable to maintain the listing of the Notes thereon. 
  

	 	2.7	Registration Rights 

  
 The Holders of the Notes are entitled to the benefits of a Registration Rights Agreement dated the date hereof among the Company, the Guarantor and the
Initial Purchasers (the “Registration Rights Agreement”), which Registration Rights Agreement provides for the registration of the Notes with the Commission or the issue of notes so registered in exchange for the outstanding Notes.

  

	 	2.8	Prescription Period 

  
 Claims for payment of principal in respect of the Notes shall be prescribed upon the expiration of 10 years, and claims for payment of interest in respect
of the Notes shall be prescribed upon the expiration of 5 years, in each case from the Relevant Date thereof. 
  

	3	Miscellaneous Provisions 

  

	 	3.1	Separability of Invalid Provisions 

  
 In case any one or more of the provisions contained in this Second Supplemental Indenture should be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions contained in this Second Supplemental Indenture, and to the extent and only to the extent that any such provision is invalid, illegal or unenforceable, this Second
Supplemental Indenture shall be construed as if such provision had never been contained herein. 
  

 21 

	 	3.2	Execution in Counterparts 

  
 This Second Supplemental Indenture may be simultaneously executed and delivered in any number of counterparts, each of which when so executed and
delivered shall be deemed to be an original, and such counterparts shall together constitute but one and the same instrument. 
  

	4	The Trustee 

  
 The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Second Supplemental Indenture or
for or in respect of the recitals contained herein, all of which are made solely by the Company and the Guarantor. 
  

 22 

 In Witness Whereof, the parties hereto have caused this Second Supplemental Indenture to be duly executed on their
respective behalves, all as of the day and year first written above. 
  

	 Executed as a DEED by
 VALE OVERSEAS LIMITED,
 the Company

		
	 By:
	 	 /S/    FABIO
BARBOSA
  

	 	 	 Name:

	 	 	 Title:

		
	 By:
	 	 /s/    
  

	 	 	 Name:

	 	 	 Title:

	
	 COMPANHIA VALE DO RIO DOCE,
 as Guarantor

		
	 By:
	 	 /S/    FABIO
BARBOSA
  

	 	 	 Name:

	 	 	 Title:

		
	 By:
	 	 /s/
  

	 	 	 Name:

	 	 	 Title:

	
	 JPMORGAN CHASE BANK,
 as Trustee

		
	 By:
	 	 /S/    LESLEY
DALEY
  

	 	 	 Name:  Lesley Daley

	 	 	 Title:    Trust Officer

  
  

 23 

 ANNEX A 
  

FORM OF TRANSFER CERTIFICATE 
 FOR
TRANSFER FROM RESTRICTED GLOBAL 
 NOTE TO REGULATION S GLOBAL NOTE 
 (Transfers pursuant to § 2.3.2(i) 
 of the Supplemental Indenture)

  
 JPMorgan Chase Bank, 
 as Trustee 
 4 New York Plaza 
 New York, New York 10004 
 Attn: Institutional Trust Services 
  
 Re:        9% Series A Guaranteed Notes due 2013
of Vale Overseas Limited (the “Notes”) 
  
 Reference is hereby made
to the Second Supplemental Indenture, dated August 8, 2003 (the “Supplemental Indenture”), among Vale Overseas Limited, Companhia Vale do Rio Doce, as Guarantor, and JPMorgan Chase Bank, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Supplemental Indenture. 
  
 This letter relates to $300,000,000 principal amount of Notes which are evidenced by one or more Restricted Global Notes (CUSIP No. [            ]) and held with the Depositary in
the name of [INSERT NAME OF TRANSFEROR] (the “Transferor”). The Transferor has requested a transfer of such beneficial interest in the Notes to a person who will take delivery thereof in the form of an equal principal amount of
Notes evidenced by one or more Regulation S Global Notes (CINS No. [            ]). 
  
 In connection with such request and in respect of such Notes, the Transferor does hereby certify that such transfer has been effected pursuant to and in accordance with
Rule 903 or Rule 904 (as applicable) or Rule 144 under the United States Securities Act of 1933 (the “Securities Act”), and accordingly the Transferor does hereby further certify that: 
  

	(i)	If the transfer is being effected pursuant to Rule 903 and Rule 904: 

  

	 	(1)	the offer of the Notes was not made to a person in the United States; 

  

	 	(2)	either: 

  

	 	(A)	at the time the buy order was originated, the transferee was outside the United States or the Transferor and any person acting on its behalf reasonably believed that the transferee
was outside the United States, or 

  

	 	(B)	the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any person acting on its behalf knows that
the transaction was pre-arranged with a buyer in the United States; 

  
  

 A-1 

	 	(3)	no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or 904(b) of Regulations S, as applicable; and 

  

	 	(4)	the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. 

  

	(ii)	If the transfer is being effected pursuant to Rule 144, the Notes are being transferred in a transaction permitted by Rule 144. 

  
 This certificate and the statements contained herein are made for your benefit and the
benefit of the Company and the underwriters or initial purchasers, if any, of the initial offering of such Notes being transferred. Terms used in this certificate and not otherwise defined in the Supplemental Indenture have the meanings set forth in
Regulation S or Rule 144 under the Securities Act. 
  
 [Insert Name of
Transferor] 
  

	By:	 	  

	 	 	 Name:

	 	 	 Title:

		
	Date:	 	  

		
	 cc:
	 	 Vale Overseas Limited

  
  

 A-2 

 ANNEX B 
  

FORM OF TRANSFER CERTIFICATE 
 FOR
TRANSFER FROM RESTRICTED GLOBAL 
 NOTE TO UNRESTRICTED GLOBAL NOTE 
 (Transfers Pursuant to § 2.3.2(ii) 
 of the Supplemental Indenture)

  
 JPMorgan Chase Bank, 
 as Trustee 
 4 New York Plaza 
 New York, New York 10004 
 Attn: Institutional Trust Services 
  
 Re:        9% Series A Guaranteed Notes due 2013
of Vale Overseas Limited (the “Notes”) 
  
 Reference is hereby made
to the Second Supplemental Indenture, dated August 8, 2003 (the “Supplemental Indenture”), among Vale Overseas Limited, Companhia Vale do Rio Doce, as Guarantor, and JPMorgan Chase Bank, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Supplemental Indenture. 
  
 This letter relates to $300,000,000 principal amount of Notes which are evidenced by one or more Restricted Global Notes (CUSIP No. [            ]) and held with the Depositary in
the name of [INSERT NAME OF TRANSFEROR] (the “Transferor”). The Transferor has requested a transfer of such beneficial interest in the Notes to a person that will take delivery thereof in the form of an equal principal amount of
Notes evidenced by one or more Unrestricted Global Notes (CINS No. [            ]). 
  
 In connection with such request and in respect of such Notes, the Transferor does hereby certify that such transfer has been effected pursuant to and in accordance with
either (i) Rule 903 or Rule 904 (as applicable) under the United States Securities Act of 1933 (the “Securities Act”), or (ii) Rule 144 under the Securities Act, and accordingly the Transferor does hereby further certify that:

  

	(i)	If the transfer has been effected pursuant to Rule 903 and Rule 904: 

  

	 	(1)	the offer of the Notes was not made to a person in the United States; 

  

	 	(2)	either: 

  

	 	(A)	at the time the buy order was originated, the transferee was outside the United States or the Transferor and any person acting on its behalf reasonably believed that the transferee
was outside the United States, or 

  

	 	(B)	the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any person acting on its behalf knows that
the transaction was pre-arranged with a buyer in the United States; 

  

 B-1 

	 	(3)	no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable; and 

  

	 	(4)	the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. 

  

	(ii)	If the transfer has been effected pursuant to Rule 144, the Notes have been transferred in a transaction permitted by Rule 144. 

  
 This certificate and the statements contained herein are made for your benefit and the
benefit of the Company and the underwriters or initial purchasers, if any, of the Notes being transferred. Terms used in this certificate and not otherwise defined in the Supplemental Indenture have the meanings set forth in Regulation S under the
Securities Act. 
  

	[Insert Name of Transferor]
		
	 By:
	 	  

	 	 	 Name:

	 	 	 Title:

		
	 Date:
	 	  

		
	 cc:
	 	 Vale Overseas Limited

  

 B-2 

 ANNEX C 
  

FORM OF TRANSFER CERTIFICATES 
 FOR
TRANSFER FROM REGULATION S GLOBAL 
 NOTE OR UNRESTRICTED GLOBAL NOTE 
 TO RESTRICTED GLOBAL NOTE 
 (Transfers Pursuant to § 2.3.2(iii)

 of the Supplemental Indenture) 
  
 [Transferor Certificate] 
  
 JPMorgan Chase Bank, 
 as Trustee 
 4 New York Plaza 
 New York, New York 10004 
 Attn: Institutional Trust Services 
  
 Re:        9% Series A Guaranteed Notes due 2013 of Vale Overseas Limited (the “Notes”) 
  
 Reference is hereby made to the Second Supplemental Indenture, dated August 8, 2003 (the
“Supplemental Indenture”), among Vale Overseas Limited, Companhia Vale do Rio Doce, as Guarantor, and JPMorgan Chase Bank, as Trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the
Supplemental Indenture. 
  
 This letter relates to $300,000,000 principal amount
of Notes which are evidenced by one or more Regulation S Global Notes (CINS No. [            ]) (Common Code: [            ];
ISIN: [            ]) in the name of [INSERT NAME OF TRANSFEROR] (the “Transferor”). The Transferor has requested a transfer of such beneficial interest in the Notes to a
person that will take delivery thereof (the “Transferee”) in the form of an equal principal amount of Notes evidenced by one or more Restricted Global Notes (CUSIP No.
[            ]). 
  
 In connection with such request and in respect of such Notes, the Transferor does hereby certify that: 
  

	 	(1)	Such transfer is being effected in accordance with all applicable securities laws of any state of the United States or any other jurisdiction; 

  

	 	(2)	the Notes are being transferred in accordance with Rule 144A to a transferee whom the Transferor reasonably believes is a qualified institutional buyer within the meaning of Rule
144A(a)(1) and is purchasing the Notes for its own account or any account with respect to which the transferee exercises sole investment discretion, in each case in a transaction meeting the requirements of Rule 144A; and 

 

	 	(3)	it has notified the transferee that it has relied on Rule 144A as a basis for the exemption from the registration requirements of the Securities Act used in connection with the
transfer. 

  
 This certificate and the statements contained herein
are made for your benefit and the benefit of the Company and the underwriters and initial purchasers, if any, of the Notes being transferred. 
  

 C-1 

	[Insert Name of Transferor]
		
	 By:
	 	  

	 	 	 Name:

	 	 	 Title:

		
	Date:	 	  

		
	 cc:
	 	 Vale Overseas Limited

  
  

 C-2Form of Securities Purchase Agreement Dated September 10, 2003

 EXHIBIT 4.1 
  
 SECURITIES PURCHASE AGREEMENT 
  
 This SECURITIES PURCHASE AGREEMENT (“Agreement”) is entered into as of September 10, 2003, by and between Private Media Group, Inc. a Nevada
corporation (the “Company”), with a registered office at 3230 Flamingo Road, Suite 156, Las Vegas, Nevada 89121 and the purchaser identified on the signature page of this Agreement (“Purchaser,” and together with such other
investors who participate in the “Offering” described below, “Purchasers”) with regard to the following: 
  
 RECITALS 
  
 A. The Company is offering for sale (the “Offering”) to accredited investors in a private placement up to Four Million Dollars ($4,000,000.00)
(the “Maximum Offering Amount”) of its units, consisting of Convertible Notes (the “Notes”) in the form of Exhibit A attached hereto, which Notes are convertible into shares (the “Note Shares”) of the Company’s
Common Stock, par value $.001 per share (the “Common Stock”), (ii) Series A Warrants in the form of Exhibit B attached hereto (the “Series A Warrants”), and (iii) Series B Warrants in the form of Exhibit C attached hereto (the
“Series B Warrants” and, together with the Series A Warrants, the “Warrants”). The Warrants entitle the holder thereof to purchase the number of shares (the “Warrant Shares”) of Common Stock as set forth below. The
Notes, the Note Shares, the Warrants and the Warrant Shares being offered and sold to Purchaser are each referred to as a “Security” and collectively the “Securities.” 

 B. Pursuant to the Offering, the Company desires to issue and sell to Purchasers, and Purchasers desires
to purchase from the Company, Notes and Warrants upon and subject to the terms and conditions hereinafter set forth. 
  
 C. Contemporaneously with the “First Closing” under this Agreement, the parties will be executing and delivering a Registration Rights Agreement
in the form attached hereto as Exhibit D (the “Registration Rights Agreement”), pursuant to which the Company agrees to provide certain registration rights under the Securities Act, the rules and regulations promulgated thereunder and
applicable state securities laws. 
  
 D. The Company and Purchaser
are executing and delivering this Agreement in reliance upon the exemption from registration afforded by the provisions of Section 4(2) under the Securities Act of 1933 (the “Securities Act”), and Regulation D (“Regulation D”),
as promulgated by the United States Securities and Exchange Commission (the “SEC”). 
  
 AGREEMENTS 
  
 NOW, THEREFORE, in
consideration of their respective promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Purchaser hereby agree as follows: 
  
 ARTICLE I 
  
 PURCHASE AND SALE OF SECURITIES 
  
 1.1 Purchase of Notes and Warrants. Subject to the terms and the satisfaction or waiver of the conditions set forth in this Agreement, the Company and
Purchaser agree that Purchaser will purchase from the Company and the Company will issue and sell to Purchaser, 

  

 2 

 
severally and not jointly with the other Purchasers, the Notes in the aggregate principal amount equal to the Subscription Amount set forth on the signature
page of this Agreement next to the Purchaser’s name (the “Subscription Amount”) together with such number of Warrants as determined below. The issuance, sale and purchase of the Securities shall be consummated in two (2) separate
closings. The first closing is hereinafter referred to as the “First Closing,” and the second closing is hereinafter referred to as the “Second Closing (each of the First Closing and the Second Closing is sometimes referred to herein
as a “Closing.” 
  
 a. On the date of the First Closing,
subject to the satisfaction or waiver of the conditions set forth in Articles VI and VII hereof, the Company shall issue to Purchaser a Note (the “First Closing Note”) dated the date of the First Closing in the original principal amount
equal to one half of the Subscription Amount (the “First Closing Purchase Price”). In addition, the Company shall issue to Purchaser the Warrants in accordance with Section 1.2. 
  
 b. The Second Closing (if any) shall be consummated on the date which is five (5) days after the date on which the
Registration Statement contemplated by Section 2.1 of the Registration Rights Agreement (the “Registration Statement”) is declared effective (the “Effective Date”). Within one (1) business day after the Effective Dated, the
Company shall represent to Purchaser in writing (“Second Closing Notice”) that (i) the Registration Statement has been declared effective and is expected to remain effective for the foreseeable future; and (ii) the conditions set forth in
Section 7.2 hereof have been satisfied or will be satisfied upon the Second Closing. 
  
 c. On the date of the Second Closing (if any), subject to the satisfaction or waiver of the conditions set forth in Articles VI and VII hereof, the Company shall issue to Purchaser a Note (the “Second Closing
Note”) dated the date of the Second Closing in the 

  

 3 

 
original principal amount equal to one half of Purchaser’s Subscription Amount (the “Second Closing Purchase Price”). The Company shall not
intentionally perform any act, or intentionally omit to perform any act, that directly or indirectly prevents or excuses the consummation of the Second Closing. 
  

1.2 Warrants. All of the Warrants shall be issued to Purchaser at the First Closing. The number of Series A Warrants issuable at the First Closing
shall be such number determinable by multiplying thirty percent (30%) by the quotient of the Subscription Amount divided by the initial Conversion Price of the Note ($2.00). The number of Series B Warrants issuable at the First Closing shall be such
number determinable by multiplying twenty percent (20%) by the quotient of the Subscription Amount divided by the initial Conversion Price of the Note ($2.00). 
  

1.3 Form of Payment. At the First Closing, Purchaser shall pay one-half of the Subscription Amount for the First Closing Note and the Warrants by wire
transfer to the Company (less any amounts deductible under this Agreement), in accordance with the Company’s written wiring instructions, against delivery of a duly executed First Closing Note and certificates representing the Warrants (which
shall have been delivered to Purchaser’s counsel in escrow prior to the date of the First Closing). At the Second Closing, Purchaser shall pay the remaining half of the Subscription Price for the Second Closing Note by wire transfer to the
Company, in accordance with the Company’s written wiring instructions, against delivery of a duly executed Second Closing Note (which shall have been delivered to Purchaser’s counsel in escrow prior to the date of the Second Closing).

  
 1.4 Closing Dates. Subject to the satisfaction or waiver of
the conditions set forth in Articles VI and VII below, the date and time of the issuance, sale and purchase of the Securities 

  

 4 

 
pursuant to this Agreement shall be (i) for the First Closing, within three (3) business days of the execution of this Agreement and (ii) for the Second
Closing, on the day three (3) business days following receipt by Purchaser of the Second Closing Notice from the Company. Each Closing shall occur at 10:00 a.m. local time, at the location designated by a majority-in-interest of the Purchasers.

  
 ARTICLE II 
  
 PURCHASER’S REPRESENTATIONS AND WARRANTIES 
  
 Purchaser represents and warrants to the Company (severally, and not jointly
with any other Purchasers) that as of the date hereof, as of the First Closing and as of the Second Closing: 
  
 2.1 Investment Purpose. Purchaser is purchasing the Securities for Purchaser’s own account for investment only and not with a view toward or in
connection with the public sale or distribution thereof except in accordance with applicable securities laws, and Purchaser has no present intention of selling, granting any participation in or otherwise distributing the same except in accordance
with applicable securities laws. By executing this Agreement, Purchaser further represents that Purchaser does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or
to any third person, with respect to any of the Securities. Purchaser will not resell the Securities except pursuant to sales that are exempt from the registration requirements of the Securities Act and/or sales registered under the Securities Act.
Purchaser understands that Purchaser must bear the economic risk of this investment indefinitely, unless the Securities are registered pursuant to the Securities Act and any applicable state securities laws or an exemption from such registration is
available, and that the Company has no present intention of registering any such Securities other than as contemplated by the Registration Rights Agreement. By making the representations in 

  

 5 

 
this Section 2.1, Purchaser does not agree to hold the Securities for any minimum or other specific term and reserves the right to dispose of the Securities
at any time in accordance with or pursuant to a registration statement or an exemption from registration under the Securities Act. 
  
 2.2 Accredited Investor Status. Purchaser is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D. Purchaser has not
been formed solely for the purpose of acquiring the Securities. Purchaser is not a registered broker-dealer under Section 15 of the Exchange Act. Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement. 
  
 2.3 Reliance on Exemptions. Purchaser understands that the Securities are
being offered and sold to Purchaser in reliance upon specific exemptions from the registration requirements of the United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and Purchaser’s
compliance with, the representations, warranties, agreements, acknowledgments and understandings of Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of Purchaser to acquire the Securities.

  
 2.4 Information. Purchaser and its counsel have been furnished
all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been specifically requested by Purchaser which is all the information Purchaser considers
necessary or appropriate for deciding to purchase the Securities. Purchaser has been afforded the opportunity to ask questions of the Company and has received what Purchaser believes to be complete and satisfactory answers to any such inquiries.
Neither 

  

 6 

 
such inquiries nor any other due diligence investigation conducted by Purchaser or any of its representatives shall modify, amend or affect Purchaser’s
right to rely on the Company’s representations and warranties contained in Article III hereof. Purchaser understands that Purchaser’s investment in the Securities involves a high degree of risk. 
  
 2.5 Governmental Review. Purchaser understands that no United States federal
or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities or an investment therein. 
  
 2.6 Transfer or Resale. Purchaser understands that (i) except as provided in the Registration Rights Agreement, the
Securities have not been and will not be registered under the Securities Act or any state securities laws, and may not be transferred unless subsequently registered thereunder or an exemption from such registration is available; (ii) any sale of
such Securities made in reliance on Rule 144 under the Securities Act (or a successor rule) (“Rule 144”) may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any resale of such Securities
without registration under the Securities Act under circumstances in which the seller is deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the
rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the Securities Act or any state securities laws or to comply with the terms and conditions of
any exemption thereunder (in each case, other than pursuant to this Agreement or the Registration Rights Agreement). 
  
 2.7 Legends. Purchaser understands that, subject to Article V hereof, the certificates for the Securities will bear a restrictive legend (the
“Legend”) in the following form: 
  

	THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS

  

 7 

	AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS, OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.

  
 2.8 Authorization;
Enforcement. This Agreement and the Registration Rights Agreement have been duly and validly authorized, executed and delivered on behalf of Purchaser and are valid and binding agreements of Purchaser enforceable against Purchaser in accordance with
their terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar laws affecting creditors’ rights, and subject to general equity principles and to limitations
on availability of equitable relief, including specific performance. 
  
 2.9 Residency. Purchaser’s residence is as set forth on the signature page of this Agreement. 
  
 2.10 Entirety of Representations. Purchaser does not make any other representations or warranties, express or implied, to the Company in connection with
the transactions contemplated hereby or by any other Investment Agreements (as defined below) and any and all prior representations and warranties, if any, which may have been made by Purchaser to the Company in connection with the transactions
contemplated hereby shall be deemed to have been merged in this Agreement and any such prior representations and warranties, if any, shall not survive the execution and delivery of this Agreement. 
  
 ARTICLE III 
  
 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 
  

 8 

 The Company represents and warrants to Purchaser that as of the date hereof, as of the First Closing and
as of the Second Closing,, except as specifically set forth in the Schedules of Exceptions attached hereto (the “Schedule of Exceptions”): 
  
 3.1 Organization and Qualification. The Company and each of its subsidiaries is duly organized, validly existing and in good standing under the laws of
the jurisdiction in which it is organized, and has the requisite corporate power and authority to own its properties and to carry on its business as now being conducted. The Company and each of its subsidiaries is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction where the failure to so qualify would have a Material Adverse Effect. “Material Adverse Effect” means any material adverse effect on either (i) the business,
operations, properties, financial condition or operating results of the Company and its subsidiaries, taken as a whole on a consolidated basis, (ii) the Securities, (iii) the transactions contemplated hereby or by the agreements or instruments to be
entered into in connection herewith or (iv) the authority or ability of the Company to perform its obligations under, or the ability of Purchaser to realize the benefits to Purchaser under, this Agreement, the Notes, the Warrants, the Registration
Rights Agreements or other agreements or instruments to be entered into in connection herewith and therewith (collectively, the “Investment Agreements”). 
  
 3.2 Authorization; Enforcement. (a) The Company has the requisite corporate power and authority to enter into and perform
the Investment Agreements, and to issue and sell, perform its obligations with respect to, the Investment Agreements in accordance with their terms, and to issue the Note Shares and the Warrant Shares in accordance with the respective terms and
conditions of the Notes and the Warrants; (b) the execution, delivery and performance of this Agreement, the Notes, the Registration Rights Agreement and the other Investment 

  

 9 

 
Agreements by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation the issuance of the
Notes and the Warrants and the reservation for issuance and issuance of the Note Shares and the Warrant Shares) have been duly authorized by all necessary corporate action and, except as set forth on Schedule 3.2 hereof, no further consent or
authorization of the Company, its board of directors, or its stockholders or any other person, body or agency is required with respect to any of the transactions contemplated hereby or thereby (whether under rules of the Nasdaq SmallCap Market or
the Nasdaq National Market (“Nasdaq”), the National Association of Securities Dealers or otherwise), other than the declaration or ordering of effectiveness by the SEC of the Registration Statement as contemplated by the Registration
Rights Agreement (collectively, the “Consents”); (c) this Agreement has been, and the Notes, the Registration Rights Agreement and the Warrants will be, as of their delivery by the Company on the First Closing or the Second Closing, as the
case may be, duly executed and delivered by the Company; and (d) this Agreement constitutes, and the Notes, the Registration Rights Agreement and the Warrants will constitute, as of their delivery by the Company on the First Closing or the Second
Closing, as the case may be, legal, valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms, except as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws affecting creditors’ rights, and subject to general equity principles and to limitations on availability of equitable relief, including specific performance. 
  
 3.3 Capitalization. The capitalization of the Company as of the date hereof,
including the authorized capital stock, the number of shares issued and outstanding, the number of shares reserved for issuance pursuant to the Company’s stock option plans, the number of shares 

  

 10 

 
reserved for issuance pursuant to securities (other than the Note Shares and the Warrant Shares) exercisable for, or convertible into or exchangeable for any
shares of Common Stock and the number of shares to be initially reserved for issuance upon the exercise of the conversion of the Notes and the exercise of the Warrants is set forth on Schedule 3.3. All of such outstanding shares of capital stock
have been, or upon issuance will be, validly issued, fully paid and non-assessable. Except as set forth in Schedule 3.3, no shares of capital stock of the Company (including the Note Shares and the Warrant Shares) are subject to preemptive rights or
any other similar rights of the stockholders of the Company or any liens or encumbrances. Except as disclosed in Schedule 3.3, as of the date of this Agreement, (i) there are no outstanding options, warrants, scrip, rights to subscribe for, calls or
commitments of any character whatsoever relating to, or securities or rights convertible into or exercisable or exchangeable for, any shares of capital stock of the Company or any of its subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its subsidiaries, (ii) there are no agreements or arrangements under which the Company or any of
its subsidiaries is obligated to register the sale of any of its or their securities under the Securities Act (except the Registration Rights Agreement) and (iii) there are no anti-dilution or price adjustment provisions contained in any security
issued by the Company (or in any agreement providing rights to holders of such securities). True and correct copies of the Company’s Certificate of Incorporation as currently in effect (“Certificate of Incorporation”), and the
Company’s Bylaws as currently in effect (the “Bylaws”) are contained as exhibits to the Company’s Registration Statement on Form S-1 (No. 333-69654) filed with the SEC. The Company has set forth on Schedule 3.3 all instruments
and agreements (other than the Certificate 
  

 11 

 
of Incorporation and Bylaws) governing securities convertible into or exercisable or exchangeable for Common Stock of the Company (and the Company shall
provide to Purchaser copies thereof upon the request of Purchaser). Except as set forth on Schedule 3.3, the Company has no indebtedness for borrowed money and no agreement providing for indebtedness for borrowed money. Except as set forth on
Schedule 3.3, the Company has no subsidiaries and has no investments, either debt or equity, in any other entity. The Company does not have any so-called stockholder rights plan or “poison pill” and there are no “shark-repellant”
charter or bylaw provisions or so-called “state anti-takeover” statutes applicable, in any case, to all or any portion of the transactions contemplated hereby, including, without limitation, issuance of the Securities. The Company shall
provide Purchaser with a written update of this representation signed by the Company’s Chief Executive Officer or Chief Financial Officer on behalf of the Company as of the date of the applicable Closing. 
  
 3.4 Issuance of Note Shares and Warrant Shares. The Note Shares and Warrant
Shares are duly authorized and reserved for issuance, and, upon conversion of the Notes or the exercise of the Warrants in accordance with their respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens,
claims and encumbrances and will not be subject to preemptive rights or other similar rights of stockholders of the Company, other than (i) restrictions on transferability as may be applicable under federal and state securities laws; (ii)
restrictive stock legends in accordance with the Investment Agreements; or (iii) those created by Purchaser. 
  
 3.5 No Conflicts. The execution, delivery and performance of each of the Investment Agreements by the Company, and the consummation by the Company of the
transactions contemplated hereby and thereby will not (a) result in a violation of the Certificate of 

  

 12 

 
Incorporation or Bylaws, (b) 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 to which the Company or any of its subsidiaries is a party (except for such conflicts, defaults, terminations, amendments,
accelerations, and cancellations as would not, individually or in the aggregate, have a Material Adverse Effect), or (c) result in a violation of any law, rule, regulation, order, judgment or decree (including, without limitation, U.S. federal and
state securities laws and regulations) applicable to the Company or any of its subsidiaries, or by which any property or asset of the Company or any of its subsidiaries, is bound or affected. Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation, Bylaws or other organizational documents, and neither the Company nor any of its subsidiaries is in default (and no event has occurred which, with notice or lapse of time or both, would put the Company
or any of its subsidiaries in default) under, nor has there occurred any event giving others (with notice or lapse of time or both) any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to
which the Company or any of its subsidiaries is a party, except for possible defaults or rights as would not, individually or in the aggregate, have a Material Adverse Effect. The business of the Company and its subsidiaries is not being conducted
in violation of any law, ordinance, rule, regulation, order, judgment or decree of any governmental entity, court or arbitration tribunal, except for possible violations the sanctions for which would not have a Material Adverse Effect. Except as set
forth on Schedule 3.5, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency or any regulatory or self-regulatory agency in order for it to execute,
deliver or perform any of its obligations under this Agreement 
  

 13 

 
or the Registration Rights Agreement or to perform its obligations in accordance with the terms hereof or thereof. The Company is not in violation of the
listing requirements of Nasdaq and does not reasonably anticipate that the Common Stock will be de-listed by Nasdaq for the foreseeable future. 
  
 3.6 Registration and SEC Documents. The Common Stock is registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) and has been so registered since November 16, 1998. Except as disclosed in Schedule 3.6, since December 31, 2001 the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Exchange Act (all of the foregoing filed after December 31, 2001 and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein,
being referred to herein as the “SEC Documents” and all the SEC documents filed at least five days prior to the date of this Agreement, the “Filed SEC Documents”). The Company has made available to Purchaser true and complete
copies of the SEC Documents. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except to the extent corrected by a subsequent Filed SEC Document. None of the statements made in any such SEC Documents is currently required to be updated or amended under
applicable law (except for such statements as have been amended or updated by subsequent Filed SEC Documents prior to the date of this 

  

 14 

 
Agreement). The financial statements of the Company included in the SEC Documents have been prepared in accordance with U.S. generally accepted accounting
principles, consistently applied, and the rules and regulations of the SEC during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements,
to the extent they do not include footnotes or are condensed or summary statements) and fairly present in all material respects the consolidated financial position of the Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal, immaterial year-end audit adjustments). Except as set forth in the financial statements of the Company
included in the Filed SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred subsequent to the date of such financial statements in the ordinary course of business consistent with past practice
and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under U.S. generally accepted accounting principles to be reflected in such financial statements, in each case of clause (i) and (ii)
above which, individually or in the aggregate, are not material to the financial condition, business, operations, properties, operating results or prospects of the Company and its subsidiaries taken on a whole. The Filed SEC Documents contain,
describe or incorporate by reference all material undischarged written or oral contracts, agreements, leases or other instruments not made in the ordinary course of business to which the Company or any subsidiary is a party or by which the Company
or any subsidiary is bound or to which any of the properties or assets of the Company or any subsidiary is subject (each a “Contract”). None of the Company, its subsidiaries or, to the best knowledge of the Company, any of the other
parties thereto, is in breach or violation of any Contract, which 
  

 15 

 
breach or violation would have a Material Adverse Effect. No event, occurrence or condition exists which, with the lapse of time, the giving of notice, or
both, or the happening of any further event or condition, would become a breach or default by the Company or its subsidiaries under any Contract which breach or default would have a Material Adverse Effect. 
  
 3.7 Absence of Certain Changes. Since December 31, 2002, there has been no
material adverse change and no material adverse development in the business, properties, operations, financial condition or results of operations of the Company or any of its subsidiaries, except as disclosed in Schedule 3.7 or as disclosed in the
SEC Documents filed after such date but prior to the date hereof. 
  
 3.8 Absence of Litigation. Except as disclosed in Schedule 3.8, there is no action, suit, proceeding, or to the knowledge of the Company or any of its subsidiaries, inquiry or investigation before or by any court, public board, governmental
agency or authority, or self-regulatory organization or body pending or, to the knowledge of the Company or any of its subsidiaries, threatened against or affecting the Company, any of its subsidiaries, or any of their respective directors or
officers in their capacities as such, wherein an unfavorable decision, ruling or finding would have a Material Adverse Effect or would adversely affect the transactions contemplated by this Agreement or any of the other Investment Agreements or
which would adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, this Agreement or any of such other Investment Agreements. The Company and each of its subsidiaries are
unaware of any facts which could give rise to a claim or proceeding which, if asserted or conducted with results unfavorable to the Company or any of its subsidiaries, could have a Material Adverse Effect. 
  

 16 

 3.9 Disclosure. No information relating to or concerning the Company set forth in this Agreement or
provided to Purchaser in connection with the transactions contemplated hereby contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made herein or therein, in light of the
circumstances under which they were made, not misleading. Except for the execution and performance of this Agreement and the other Investment Agreements, no material fact (within the meaning of the federal securities laws of the United States)
exists with respect to the Company or any of its subsidiaries which has not been Publicly Disclosed (as defined in Rule 101(e) of Regulation FD). 
  
 3.10 Acknowledgment Regarding Purchaser’s Purchase of the Securities. The Company acknowledges and agrees that Purchaser is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement or the transactions contemplated hereby, that this Agreement and the transactions contemplated hereby, and the relationship between Purchaser and the
Company, are “arms-length,” and that any statement made by Purchaser, or any of its representatives or agents, in connection with this Agreement or the transactions contemplated hereby is not advice or a recommendation, is merely
incidental to Purchaser’s purchase of the Securities and has not been relied upon in any way by the Company, its officers, directors or other representatives. The Company further represents to Purchaser that the Company’s decision to enter
into this Agreement and the transactions contemplated hereby has been based solely on an independent evaluation by the Company and its representatives. The Company further acknowledges that Purchaser has acted alone and not in concert with any other
purchaser of Company securities and that Purchaser’s attorneys and other advisors have only represented Purchaser and its affiliates and no other purchaser of Company securities. 
  

 17 

 3.11 Current Public Information. The Company is currently eligible to register the resale of the Note
Shares and Warrant Shares on a registration statement on Form S-3 under the Securities Act. 
  
 3.12 No General Solicitation or Advertising. Neither the Company nor any person acting on behalf of the Company has conducted any “general solicitation or general advertising,” as described in Rule 502(c)
under Regulation D, with respect to any of the Securities being offered hereby. 
  
 3.13 No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would prevent the parties hereto from consummating the transactions contemplated hereby pursuant to an exemption from registration under the Securities Act pursuant to the provisions of Regulation D. The
transactions contemplated hereby are exempt from the registration requirements of the Securities Act, assuming the accuracy of the representations and warranties herein contained of Purchaser to the extent relevant for such determination.

  
 3.14 No Brokers. The Company has taken no action which would
give rise to any claim by any person for brokerage commissions, finder’s fees or similar payments relating to this Agreement or the transactions contemplated hereby, except for agreements described to Purchaser (the fees of which shall be paid
in full by the Company). The Company will indemnify Purchaser from and against any fees and expenses sought or other claims arising out of a breach by the Company of this Section 3.14, including reasonable costs and attorneys’ fees related to
the enforcement of this Section 3.14 by Purchaser. 
  

 18 

 3.15 Acknowledgment of Dilution. The number of Warrant Shares issuable upon exercise of the Warrants and
the number of Note Shares issuable in connection with the conversion of the Notes, may increase substantially in certain circumstances, including the circumstance wherein the trading price of the Common Stock declines. The Company’s executive
officers and directors have studied and fully understand the nature of the securities being sold hereunder and recognize that they have a potential dilutive effect. The board of directors of the Company has concluded in its good faith business
judgment that such issuance is in the best interests of the Company. The Company acknowledges that its obligation to issue the Warrant Shares upon exercise of the Warrants and the Note Shares upon conversion of the Notes is binding upon it and
enforceable regardless of the dilution that such issuance may have on the ownership interests of other stockholders. 
  
 3.16 Intellectual Property. Each of the Company and its subsidiaries owns or possesses adequate and enforceable rights to use all patents, patent
applications, trademarks, trademark applications, trade names, service marks, copyrights, copyright applications, licenses, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems
or procedures) and other similar rights and proprietary knowledge (collectively, “Intangibles”) used or necessary for the conduct of its business as now being conducted and as previously described in the Company’s Annual Report on
Form 10-K for its most recently ended fiscal year. To the best of the Company’s knowledge, neither the Company nor any subsidiary of the Company infringes on or is in conflict with any right of any other person with respect to any Intangibles
nor is there any infringement or claim of infringement by a third party against or involving the Company or any of its subsidiaries, which infringement, 

  

 19 

 
conflict or claim, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a Material Adverse Effect.

  
 3.17 Foreign Corrupt Practices. Neither the Company, nor any
of its subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any subsidiary has, in the course of his actions for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of
any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee. Without limiting the
generality of the foregoing, the Company and its subsidiaries have not directly or indirectly made or agreed to make (whether or not said payment is lawful) any payment to obtain, or with respect to, sales other than usual and regular compensation
to its or their employees and sales representatives with respect to such sales. 
  
 3.18 Key Employees; Company’s Knowledge. Each Key Employee (as defined below) is currently serving the Company in the capacity disclosed in Schedule 3.18. No Key Employee, to the best of the knowledge of the
Company and its subsidiaries, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement
or any restrictive covenant, and the continued employment of each Key Employee does not subject the Company or any of its subsidiaries to any liability with respect to any of the foregoing matters. No Key Employee has, to the best of the knowledge
of the Company and its 

  

 20 

 
subsidiaries, any intention to terminate or limit his employment with, or services to, the Company or any of its subsidiaries, nor is any such Key Employee
subject to any constraints (e.g., litigation) which would cause such employee to be unable to devote his full time and attention to such employment or services. “Key Employee” means each of Berth Milton, Charles Prast, Javier Sanchez and
Johan Gillborg. For purposes hereof, the term “knowledge of the Company” shall mean the aggregate knowledge of each of the Key Employees after due inquiry. 
  
 3.19 Legends. Except for the legends contemplated by Section 2.7 and Section 5.1 hereof, the Securities shall bear no other
legend. 
  
 3.20 Form S-3 Eligibility. The Company is currently
eligible to register the resale of its Common Stock on a registration statement on Form S-3 under the 1933 Act. There exist no facts or circumstances that would prohibit or delay the preparation and filing of a registration statement on Form S-3
with respect to the Registrable Securities (as defined in the Registration Right Agreement) within the time periods referred to therein. 
  
 3.21 Solvency. The Company (both before and after giving effect to the transactions contemplated by this Agreement) is solvent (i.e., its
assets have a fair market value in excess of the amount required to pay its probable liabilities on its existing debts as they become absolute and matured) and currently the Company has no information that would lead it to reasonably conclude that
the Company would not have the ability to, nor does it intend to take any action that would impair its ability to, pay its debts from time to time incurred in connection therewith as such debts mature. The Company did not receive a qualified opinion
from its auditors with respect to its most recent fiscal year end and does not anticipate or know of any basis upon which its auditors might issue a qualified opinion in respect of its current fiscal year. 
  

 21 

 3.22 No Investment Company. The Company is not, and upon the issuance and sale of the Securities
as contemplated by this Agreement will not be an “investment company” required to be registered under the Investment Company Act of 1940 (an “Investment Company”). The Company is not controlled by an Investment Company.

  
 3.23 Internal Controls. The Company and each of its
subsidiaries established and maintains a system of disclosure controls and procedures and internal control over financial reporting as required by Rule 13a-15 under the Exchange Act. Within 90 days preceding the date of each applicable report filed
with the SEC on Form 10-Q and Form 10-K (the “SEC Reports”), the Company has conducted an evaluation under the supervision and with the participation of its management, including the Company’s Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures, and has concluded that its disclosure controls and procedures are effective to ensure that information required to be disclosed in the SEC
Reports is recorded, processed, summarized and reported, within the periods specified in, and in accordance with the requirements of, the SEC’s rules, regulations and forms. Based on such evaluations, (i) there were no significant deficiencies
in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize and report financial data or material weaknesses in internal controls and (ii) there was no fraud, whether or not
material, that involved management or other employees of the Company or any subsidiary who have a significant role in the Company’s internal controls. 
  
 3.24 Environmental Matters. Except except as would not, singly or in the aggregate, result in a Material Adverse Effect, (A) neither the Company nor any
of its subsidiaries is in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance, code, 

  

 22 

 
policy or rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or
judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and
regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products (collectively, “Hazardous Materials”) or to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, “Environmental Laws”), (B) the Company and its subsidiaries have all permits, authorizations and approvals required
under any applicable Environmental Laws and are each in compliance with their requirements, (C) there are no pending or threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company or any of its subsidiaries and (D) there are no events or circumstances that might reasonably be expected to form the basis of an order
for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against or affecting the Company or any of its subsidiaries relating to Hazardous Materials or any Environmental Laws. 
  
 3.25 Title to Properties. The Company and its subsidiaries have good and
marketable title to all real property owned by the Company and its subsidiaries and good title to all other properties owned by them, in each case, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or
encumbrances of any kind except such as (A) are described in the Filed SEC Documents or Schedule 3.25 hereto, or (B) do not, singly or in the aggregate, materially affect the value of such property and do not interfere with the use made and proposed

  

 23 

 
to be made of such property by the Company or any of its subsidiaries; and all of the leases and subleases material to the business of the Company and its
subsidiaries, considered as one enterprise, and under which the Company or any of its subsidiaries holds properties, are in full force and effect, and neither the Company nor any subsidiary has any notice of any material claim of any sort that has
been asserted by anyone adverse to the rights of the Company or any subsidiary under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or such subsidiary to the continued possession of the leased
or subleased premises under any such lease or sublease. 
  
 3.26
Insurance. The Company and its subsidiaries maintain insurance covering their properties, assets, operations, personnel and business against such risks and in such amounts as is customary for businesses of their type and size; and neither the
Company nor any of its subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage or obtain similar coverage as necessary to continue its business. 
  
 3.27 Tax Matters. The Company has timely prepared and filed all tax returns
required to have been filed by the Company with all appropriate governmental agencies and timely paid all taxes owed by it, in each case taking into account permitted extensions. The charges, accruals and reserves on the books of the Company in
respect of taxes for all fiscal periods are adequate in all material respects, and there are no material unpaid assessments against the Company nor, to the knowledge of the Company, any basis for the assessment of any additional taxes, penalties or
interest for any fiscal period or audits by any federal, state or local taxing authority except such as which are not material. All material taxes and other assessments and levies that the Company is required to withhold or to collect for payment
have been duly withheld and collected and paid to the proper governmental entity or third party when due. There are no tax liens or 

  

 24 

 
claims pending or threatened against the Company or any of its respective assets or property except with regard to the proceeding by the Swedish Tax
Authority as described in the Company’s Form 10-K filed with the SEC for the period ended December 31, 2002. There are no outstanding tax sharing agreements or other such arrangements between the Company and any other corporation or entity.

  
 ARTICLE IV 
  
 COVENANTS 
  
 4.1 Best Efforts. Purchaser and the Company shall use their best efforts to timely satisfy each of the conditions described
in Articles VI and VII, respectively, of this Agreement. 
  
 4.2
Securities Laws. The Company shall take such action as is necessary to sell the Securities to Purchaser in accordance with applicable securities laws of the states of the United States, and shall provide evidence of any such action so taken to
Purchaser at its request. Without limiting any of the Company’s obligations under this Agreement, the Registration Rights Agreement or the Securities, from and after the date of the First Closing, neither the Company nor any person acting on
its behalf shall take any action which would adversely affect any exemptions from registration under the Securities Act with respect to the transactions contemplated hereby. In addition, from and after the date of the First Closing the Company shall
not take any action which shall cause it to violate any requirements of the Nasdaq Stock Market which are applicable to the Company or the listing of its Common Stock. 
  
 4.3 Reporting Status; Eligibility to Use Form S-3. So long as Purchaser beneficially owns any of the Securities, the Company
shall timely file all reports required to be filed with the SEC pursuant to the Exchange Act, and the Company shall not terminate its status as an issuer 

  

 25 

 
required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would permit such termination. The Company
currently meets, and will use its reasonable best efforts to take all necessary action to continue to meet, the “registrant eligibility” requirements set forth in the general instructions to Form S-3. 
  
 4.4 Use of Proceeds. The Company shall use the proceeds from the sale of the
Securities for (i) the buy-out of Zonevision, a UK joint venture, (ii) cable and satellite broadcast investments and (iii) working capital. 
  
 4.5 Intentionally Omitted. 
  
 4.6 Expenses. The Company shall pay to Purchaser, or at its direction, at the First Closing (or Purchaser may withhold from the portion of the
Subscription Price otherwise payable by Purchaser at the First Closing), the sum of $10,000 as reimbursement on a non-accountable basis for the expenses reasonably incurred by Purchaser and its affiliates and advisors in connection with the
negotiation, preparation, execution, and delivery of this Agreement and the other Investment Agreements, including, without limitation, Purchaser’s and its affiliates’ and advisors’ due diligence and attorneys’ fees and expenses
(the “Expenses”). Other than as set forth in this Section 4.6, each party shall pay the fees and expenses of its advisors, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement. 
  
 4.7 Information. The Company agrees to deliver the following reports to Purchaser until Purchaser transfers, assigns or sells all of its Securities: (a) within five (5) business days after the filing with the SEC, a
copy of its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, any proxy statements and any Current Reports on Form 8-K; and (b) on the same 

  

 26 

 
business day as released, copies of all press releases issued by the Company or any of its subsidiaries. 
  
 4.8 Listing. For so long as Purchaser owns any of the Securities, the Company
shall use its best efforts to continue the listing and trading of its Common Stock on the Nasdaq SmallCap Market, the Nasdaq National Market, the New York Stock Exchange or the American Stock Exchange, secure and maintain listing and trading of the
Note Shares and Warrant Shares on such exchange, and comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of such exchange. 
  
 4.9 Prospectus Delivery Requirement. Purchaser understands that the Securities Act may require delivery of a prospectus
relating to the Common Stock in connection with any sale thereof pursuant to a registration statement under the Securities Act covering the resale by Purchaser of the Common Stock being sold, and Purchaser shall use its reasonable efforts to comply
with the applicable prospectus delivery requirements of the Securities Act in connection with any such sale. 
  
 4.10 Intentionally Omitted. 
  
 4.11 Corporate Existence. So long as Purchaser beneficially owns any Securities, the Company shall maintain its corporate existence, except in the event
of a merger, consolidation or sale of all or substantially all of the Company’s assets, as long as the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements and
instruments entered into in connection herewith regardless of whether or not the Company would have had a sufficient number of shares of Common Stock authorized and available for issuance in order to effect the full exercise of the Warrants or full
conversion of the Notes outstanding as of the date of such transaction (including, without limitation, without 

  

 27 

 
giving effect to any limitations on conversion or exercise thereof) and (ii) is a publicly traded corporation whose common stock is listed for trading on the
Nasdaq SmallCap Market, the Nasdaq National Market, the New York Stock Exchange or the American Stock Exchange. 
  
 4.12 Transactions with Affiliates. The Company and each of its subsidiaries will not enter into any agreement or arrangement, written or oral, directly or
indirectly, with an affiliate, or provide services or sell goods to, or for the benefit of, or pay or otherwise distribute monies, goods or other valuable consideration to, an affiliate, except upon fair and reasonable terms under the circumstances
as determined by the Company in good faith, taking into account all of the facts and circumstances of such agreement or arrangement, and except for existing intercompany debt or transactions with or between the Company and any of its wholly-owned
subsidiaries and payments and benefits to officers and directors in their capacities as such in the ordinary course of business, consistent with past practices. 
  

4.13 Other Purchasers in Offering. Simultaneously with or prior to the First Closing, the Company shall sell equity securities pursuant to the Offering
to third party Purchasers not acting in concert with Purchaser, subject to Section 7.1(ix) (i.e. the aggregate purchase price for the Notes and the Warrants sold in the Offering shall not be less than $2,000,000 nor more than $4,000,000, including
the Subscription Price of Purchaser under this Agreement). The equity securities sold in the Offering to other Purchasers shall be, and have such terms and conditions, no more favorable to such buyers than those purchased hereunder by Purchaser. The
Company further covenants that it shall not amend, restate or otherwise alter the terms and conditions applicable to any other Purchaser in Offering so as to make them more favorable to such buyer than those purchased hereunder by Purchaser.

  

 28 

 4.14 No Integration. The Company shall not make any offers or sales of any security (other than pursuant
to the Offering) under circumstances that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of Securities to be integrated with any other offering of securities by the Company for
the purpose of any stockholder approval provision applicable to the Company or its securities or the 1933 Act. 
  
 4.15 Certain Indemnification. The Company agrees to indemnify (which indemnity shall include advancement of expenses as they are incurred) and hold
harmless Purchaser and each of Purchaser’s officers, directors, employees, partners, agents and affiliates for loss or damage or expenses (including reasonable attorneys fees) arising as a result of or related to (a) any breach or alleged
breach by the Company of any of its representations or covenants set forth herein, (b) any cause of action, suit or claim brought or made against Purchaser and arising out of or resulting from the execution, delivery, performance or enforcement of
the Investment Agreements or any other certificate, instrument or document contemplated hereby or thereby, (c) any cause of action, suit or claim brought or made against Purchaser that Purchaser has acted in concert with any other person by virtue
of the negotiation, execution, delivery, performance or enforcement of the Investment Agreements or any other certificate, instrument or document contemplated hereby or thereby, or the consummation of the transactions contemplated herein or therein
(d) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities or (e) the status of Purchaser or holder of the Securities as an investor in the Company. To the extent
that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the indemnified liabilities which is permissible under applicable law.
Notwithstanding, in no event shall the Company be required 

  

 29 

 
to indemnify Purchaser for any claims to the extent that a court of competent jurisdiction shall have determined by a final judgment that such claims had
arisen or were the result of Purchaser’s misconduct, including without limitation, violations of law, breach by Purchaser of a contract with a third party, or negligence. After receipt by Purchaser of notice of any action, proceeding or claim
subject to the indemnification provisions herein (each event a “Circumstance”), Purchaser shall promptly give the Company notice describing the Circumstance. The Company shall have the right (without prejudice to the right of Purchaser to
participate at its own expense through counsel of its own choosing) to defend or prosecute such claim at their expense and through counsel of their own choosing if they give written notice of their intention to do so no later than the time by which
the interest of Purchaser would be materially prejudiced as a result of its failure to have received such notice; provided, however, that if the defendants in any action shall include both the Company and Purchaser, and Purchaser shall have
reasonably concluded that counsel selected by the Company has a conflict of interest because of the availability of different or additional defenses to Purchaser, Purchaser shall cooperate fully in the defense of such claim and shall make available
to the Company pertinent information under its control relating thereto, but shall be entitled to be reimbursed, as provided in this Section 8, for all costs and expense incurred by it in connection therewith; provided, however, that such
reimbursement shall not apply to amounts paid in settlement of any claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld. The failure to deliver written notice to the
Company within a reasonable time of the commencement of any such Circumstance shall not relieve the Company of any liability to Purchaser under this Section 4.15, except to the extent that the Company is actually prejudiced in its ability to defend
such action. 
  

 30 

 4.16 Confidential Information. The Company acknowledges that as of the date of this Agreement it has not
furnished Purchaser with any material non-public information. The Company agrees that from and after the date of this Agreement it will not furnish Purchaser with any material non-public information without (i) first advising the Purchaser that the
information proposed to be furnished is material non-public information, and (ii) obtaining the prior written consent of the Purchaser to the receipt of such information. As a condition to furnishing any such non-public information, the Company may
require written assurances that the Purchaser use reasonable efforts to maintain such information in confidence. 
  
 4.17 Restriction on Equity Financings. The Company agrees that from and after the date of the First Closing until the earlier to occur of (i) the
effectiveness of the Registration Statement covering the Note Shares and the Warrant Shares, or (ii) one year from the date of filing of the Registration Statement under the Registration Rights Agreement, the Company will not sell or issue any
Common Stock or any right, option, warrant or other instrument convertible into or exchangeable for its Common Stock except pursuant to those options, warrants, rights or instruments issued or proposed to be issued as set forth in Schedule 3.3.

  
 ARTICLE V 
  
 LEGEND REMOVAL, TRANSFER, AND CERTAIN SALES 
  
 5.1 Removal of Legend. The Legend shall be removed and the Company shall
issue a certificate without any legend to the holder of any Security upon which such Legend is stamped, and a certificate for a Security shall be originally issued without any legend, if, (a) the registration statement registering the sale of any
such Security by Purchaser is then effective, or 

  

 31 

 
(b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions
and reasonably acceptable to the Company and its transfer agent (the reasonable cost of which shall be borne by the Company), to the effect that a public sale or transfer of such Security may be made without registration under the Securities Act, or
(c) such Securities are available for sale or transfer pursuant to Rule 144(k) under the Securities Act. Purchaser agrees to sell all Securities, including those represented by a certificate(s) from which the Legend has been removed, or which were
originally issued without the Legend, pursuant to an effective registration statement and to deliver a prospectus in connection with such sale or in compliance with an exemption from the registration requirements of the Securities Act. . If all or
any portion of a Note or Warrant purchased by Purchaser is converted or exercised (as applicable) at a time when there is an effective registration statement to cover the resale of the Note Shares or Warrant Shares purchased by Purchaser
(“Underlying Shares”), as the case may be, or if such Underlying Shares may be sold under Rule 144(k) or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations
thereof) then such Underlying Shares shall be issued free of all legends. The Company agrees that following the Effective Date or at such time as such legend is no longer required under this Article V, it will, no later than three Trading Days
following the delivery by a Purchaser to the Company or the Company’s transfer agent of a certificate representing Underlying Shares issued with a restrictive legend (such third Trading Day, the “Legend Removal Date”, deliver or cause
to be delivered to Purchaser a certificate representing such shares that is free from all restrictive and other legends. In addition to Purchaser’s other available remedies, the Company shall pay to Purchaser, in cash, as liquidated damages and
not as a penalty, for each $5,000 of Underlying Shares (based on the closing bid price of the 
  

 32 

 
Common Stock on the primary trading market for the Common Stock on the date such Securities are submitted to the Company’s transfer agent) delivered for
removal of the restrictive legend and subject to this Section 5.1, $50 per business day (increasing to $100 per business day 3 business days after such damages have begun to accrue) for each business day after the Legend Removal Date until such
certificate is delivered without a legend. 
  
 5.2 Transfer Agent
Instructions. The Company shall instruct its transfer agent to issue certificates, registered in the name of Purchaser or its nominee, for the Note Shares and the Warrant Shares in such amounts as specified from time to time by Purchaser to the
Company upon, and in accordance with, the conversion of the Notes or the exercise of the Warrants, as the case may be. Such certificates shall bear a legend only in the form of the Legend and only to the extent permitted by this Agreement. Nothing
in this Section shall affect in any way Purchaser’s obligations and agreement set forth in Section 5.1 hereof to resell the Securities pursuant to an effective registration statement and to deliver a prospectus in connection with such sale or
in compliance with an exemption from the registration requirements of applicable securities laws. Without limiting the foregoing, if (a) Purchaser provides the Company with an opinion of counsel, which opinion of counsel shall be in form, substance
and scope customary for opinions of counsel in comparable transactions and reasonably acceptable to the Company (the reasonable cost of which shall be borne by the Company), to the effect that the Securities to be sold or transferred may be sold or
transferred pursuant to an exemption from registration or (b) Purchaser transfers Securities to an affiliate or pursuant to Rule 144, the Company shall permit the transfer, and, in the case of Purchaser’s Note Shares and Warrant Shares,
promptly instruct its transfer agent to issue one or more certificates in such name and in such denomination as specified by Purchaser in order to effect such a transfer or sale. The Company acknowledges that 

  

 33 

 
a breach by it of its obligations hereunder will cause irreparable harm to Purchaser by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5.1 will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Article
V, that Purchaser shall be entitled, in addition to all other available remedies, to an order of specific performance requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security
being required. 
  
 ARTICLE VI 
  
 CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL 
  
 6.1 Conditions to the Company’s Obligation to Sell. The obligation of
the Company hereunder to issue and sell the First Closing Note and the Warrants to Purchaser at the First Closing, and to issue the Second Closing Note to Purchaser at the Second Closing, is subject to the satisfaction, as of the date of each
Closing, of each of the following conditions thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion: 
  
 (i) Purchaser shall have executed the signature page to this
Agreement and the Registration Rights Agreement and delivered the same to the Company. 
  
 (ii) Purchaser, at each Closing, shall have delivered the portion of the Subscription Price required to be delivered by Purchaser for the
Securities purchased. 
  
 (iii) The
representations and warranties of Purchaser shall be true and correct as of the date when made and as of the applicable Closing as though made at that time, and Purchaser shall have performed, satisfied and complied in all material respects with the
covenants and agreements required by this Agreement to be performed or complied with by Purchaser at or prior to the Closing. 
  

 34 

 (iv) No statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which restricts or prohibits the
consummation of any of the transactions contemplated by this Agreement. 
  
 ARTICLE VII 
  
 CONDITIONS TO PURCHASER’S OBLIGATION
TO PURCHASE 
  
 7.1 Conditions to the First Closing. The
obligation of Purchaser hereunder to purchase the First Closing Note and Warrants on the date of the First Closing is subject to the satisfaction of each of the following conditions (including conditions to be performed at the First Closing),
provided that these conditions are for Purchaser’s sole benefit and may be waived by Purchaser at any time in Purchaser’s sole discretion: 
  
 (i) The Company shall have executed the signature page to this Agreement and the Registration Rights Agreement and delivered the same to
Purchaser’s counsel. 
  
 (ii) The Company
shall have delivered a duly executed First Closing Note and duly executed Warrants being so purchased by Purchaser at the First Closing. 
  
 (iii) The Common Stock shall be listed on the Nasdaq SmallCap Market, the Nasdaq National Market, the New York Stock Exchange or the
American Stock Exchange and trading in the Common Stock shall not have been suspended by the Nasdaq SmallCap Market, the Nasdaq National Market, the New York Stock Exchange or the American Stock Exchange, the SEC or other regulatory authority and no
de-listing or suspension shall be reasonably likely for the foreseeable future. 
  
 (iv) The representations and warranties of the Company shall be true and correct as of the date when made and as of the First Closing as
though made at that time and the Company shall have performed, satisfied and complied with the covenants and agreements required by this Agreement and the other Investment Agreements to be performed or complied with by the Company at or prior to the
First Closing. Purchaser’s counsel shall have received a certificate, executed by the Chief Executive Officer or 

  

 35 

 
Chief Financial Officer of the Company, dated as of the First Closing to the foregoing effect and as to such other matters as may be reasonably requested by
Purchaser. 
  
 (v) No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement. 
  
 (vii) Purchaser’s counsel shall have received an opinion of the Company’s outside legal counsel, dated as of the First Closing
in the form attached hereto as Exhibit E. 
  
 (viii) The Company shall have filed with Nasdaq a notification in accordance with Nasdaq Rule 4310(c)(17)(D). 
  
 (ix) Simultaneously with or prior to the First Closing, the Company shall have sold equity securities to Purchasers pursuant to the
Offering for an aggregate of a minimum of two million dollars ($2,000,000.00) or a maximum of four million dollars ($4,000,000.00) (including the Securities sold pursuant hereto). 
  
 7.2 Conditions to the Second Closing. The obligation of Purchaser hereunder to purchase the Second Closing Note on the date
of the Second Closing is subject to the satisfaction of each of the following conditions (including conditions to be performed at the Second Closing), provided that these conditions are for Purchaser’s sole benefit and may be waived by
Purchaser at any time in Purchaser’s sole discretion: 
  
 (i) The First Closing shall have been consummated. 
  
 (ii) The Company shall have delivered a duly executed Second Closing Note being so purchased by Purchaser at the Second Closing (each in
such denominations as Purchaser shall request). 
  
 (iii) The Common Stock shall be listed on the Nasdaq SmallCap Market, the Nasdaq National Market, the New York Stock Exchange or the American Stock Exchange and trading in the Common Stock shall not have been suspended by the Nasdaq 

  

 36 

 
SmallCap Market, the Nasdaq National Market, the New York Stock Exchange or the American Stock Exchange, the SEC or other regulatory authority and no
delisting or suspension shall be reasonably likely for the foreseeable future. 
  
 (iv) The representations and warranties of the Company shall be true and correct as of the date when made and as of the Second Closing as
though made at that time and the Company shall have performed, satisfied and complied with the covenants and agreements required by this Agreement and the other Investment Agreements to be performed or complied with by the Company at or prior to the
Second Closing, in each case, with respect to representations and warranties, except for such changes as would not have a Material Adverse Effect. Purchaser’s counsel shall have received a certificate, executed by the Chief Executive Officer or
Chief Financial Officer of the Company, dated as of the Second Closing to the foregoing effect and as to such other matters as may be reasonably requested by Purchaser. 
  
 (v) No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement. 
  
 (vi)
Purchaser’s counsel shall have received an opinion of the Company’s outside legal counsel, dated as of the Second Closing, in the form attached hereto as Exhibit E. 
  
 (vii) The Registration Statement shall have been declared effective by the SEC, and shall be available for
use by Purchaser for the resale of all of Purchaser’s Registrable Securities (as defined in the Registration Rights Agreement), within 120 days of the date of the First Closing. 
  
 (viii) No proceeding commenced by or against the Company under any provision of the United States Bankruptcy
Code or under any other foreign, state or federal bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization,
arrangement, or other similar relief shall have occurred. 
  

 37 

 (ix) Since the First Closing, no event has occurred which has had a Material Adverse
Effect (as defined in Section 3.1). 
  
 ARTICLE VIII 
  
 GOVERNING LAW; MISCELLANEOUS 
  
 8.1 Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to contracts made and to be performed in the State of New York. The parties hereto irrevocably consent to the jurisdiction of the United States federal courts located in the
Southern District in the State of New York and the state courts located in the County of New York in the State of New York in any suit or proceeding based on or arising under this Agreement or the transactions contemplated hereby and irrevocably
agree that all claims in respect of such suit or proceeding may be determined in such courts. The Company irrevocably waives the defense of an inconvenient forum to the maintenance of such suit or proceeding. The Company further agrees that service
of process upon the Company mailed by the first class mail shall be deemed in every respect effective service of process upon the Company in any suit or proceeding arising hereunder. Nothing herein shall affect Purchaser’s right to serve
process in any other manner permitted by law. The parties hereto agree that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful
manner. The Company irrevocably waives its right to a jury trial in any such suit or proceeding. 
  
 8.2 Counterparts; Facsimile Signatures. This Agreement may be executed in two or more counterparts, including, without limitation, by facsimile
transmission, all of which counterparts shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. 
  

 38 

 8.3 Headings. The headings of this Agreement are for convenience of reference and shall not form part of,
or affect the interpretation of, this Agreement. 
  
 8.4
Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction. 
  
 8.5 Scope of Agreement; Amendments. Except as specifically set forth herein or in the other Investment Agreements, neither Purchaser nor the Company makes any representation, warranty, covenant or undertaking with respect to the
transactions contemplated hereby. No provision of this Agreement may be waived other than by an instrument in writing signed by the party to be charged with enforcement and no provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and Purchaser. 
  
 8.6 Notice. Any
notice herein required or permitted to be given shall be in writing and may be personally served or delivered by courier or by facsimile-machine confirmed telecopy, and shall be deemed delivered at the time and date of receipt (which shall include
telephone line facsimile transmission). The addresses for such communications shall be: 
  
 If to the Company: 
  
 Private Media Group, Inc. 
 Carretera de Rubi 22-26, 08190 Sant Cugat del Valles 
 Barcelona, Spain 
 Telecopy: (34) 93-589-5400 
 Attention: Chief Financial Officer 
  
 with a copy to (which shall not constitute notice hereunder): 
  
 Guzik & Associates 
 11355 West Olympic Blvd., Third Floor 
 Los Angeles, California 90064 
 Attention: Samuel S. Guzik, Esq. 
  

 39 

 Telecopy: 310-914-8606 
  
 If to Purchaser: 
  

To the address designated by Purchaser on the signature page of this Agreement, with a copy (which shall not constitute notice hereunder) to its
counsel designated on the signature page 
  
 Each party shall provide notice to
the other parties of any change in address. 
  
 8.7 Successors and
Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of
Purchaser. 
  
 8.8 Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person. 
  
 8.9 Survival. The representations and warranties of Purchaser and the Company
shall survive the Closing hereunder and the covenants of the parties shall survive the Closing, in each case notwithstanding any due diligence investigation conducted by or on behalf of Purchaser. 
  
 8.10 Further Assurances. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby. 
  
 8.11 Remedies. No provision of this Agreement providing for any remedy to Purchaser shall limit any remedy which would otherwise be available to Purchaser at law or in equity. Nothing in this Agreement shall limit any
rights Purchaser may have with any applicable federal or state securities laws with respect to the investment contemplated hereby. The Company 

  

 40 

 
acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to Purchaser and that the remedy at law for any such breach may be
inadequate. The Company therefore agrees that, in the event of any such and breach or threatened breach, Purchaser shall be entitled, in addition to all other available remedies, to an order of specific performance, without the necessity of showing
economic loss and without any bond or other security being required. 
  
 8.12 Termination. In the event that the First Closing shall not have occurred on or before September 19, 2003, unless the parties agree otherwise, this Agreement shall terminate. 
  
 8.13 Directly or Indirectly. Where any provision in this Agreement refers to action to be taken by any person, or which such
person is prohibited from taking, such provision shall be applicable whether the action in question is taken directly or indirectly by such person. 
  
 8.14 Failure or Indulgence Not Waiver. No failure or delay on the part of a party 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. 
  
 8.15 Public Filings; Publicity. Immediately following the First Closing, the Company shall issue a press release with
respect to the transactions contemplated hereby. Purchaser shall have the right to approve before issuance any press releases (including the foregoing press releases), SEC or other filings, or any other public statements, with respect to the
transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of Purchaser, to make any press release or SEC, Nasdaq, the National Association of Securities Dealers or exchange filings with
respect to such transactions as is required by applicable law and regulations (although Purchaser shall (to the extent time permits) be 

  

 41 

 
consulted by the Company in connection with any such press release prior to its release and shall be provided with a copy thereof). 
  
 8.16 Independent Nature of Purchasers’ Obligations and Rights. The
obligations of Purchaser under any Investment Agreement are several and not joint with the obligations of any other Purchasers, and Purchaser shall be responsible in any way for the performance of the obligations of any other Purchasers under any
Investment Agreement. The decision of Purchaser to purchase Securities pursuant to this Agreement has been made by Purchaser independently of any other Purchasers and independently of any information, materials, statements or opinions as to the
business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company or of any subsidiary which may have been made or given by any other Purchasers or by any agent or
employee of any other Purchasers, and Purchaser, its agents and employees shall have no liability to any other Purchasers (or any other person) relating to or arising from any such information, materials, statements or opinions. Nothing contained
herein or in any Investment Agreement, and no action taken by Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Investment Agreements. Purchaser acknowledges that no other Purchasers have acted as agent for Purchaser in connection
with making its investment hereunder and that no other Purchasers will be acting as agent of Purchaser in connection with monitoring its investment hereunder. Purchaser shall be entitled to independently protect and enforce its rights, including
without limitation, the rights arising out of this Agreement or out of the other Investment Agreements, and it shall not be necessary for any other Purchasers to be joined as an 

  

 42 

 
additional party in any proceeding for such purpose. The Company has elected to provide all Purchasers with the same terms and Investment Agreements for the
convenience of the Company and not because it was required or requested to do so by the Purchasers. 
  
 *** 
  

 43 

 IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused this Securities Purchase
Agreement to be duly executed as of the date first above written. 
  

	COMPANY:
	
	 PRIVATE MEDIA GROUP, INC.

		
	 By:
	 	  

		
	 Its:
	 	

		
	“PURCHASER”	 	 
	
	

	(name)

		
	 By:
	 	

	 Name:
	 	

	 Title:
	 	

		
	Subscription Amount(USD):	 	  

		
	Address:	 	  

	 	 	  

	 	 	  

	With a copy to:
	 	 	  

	 	 	  

	 	 	  

	Residence:	 	  

  

 44 

 EXHIBIT “A” 
  
 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”).
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE REASONABLY
ACCEPTABLE TO THE BORROWER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. 
  
 CONVERTIBLE NOTE 
  
 New York, NY 
 Issue Date:                     , 200   [First Closing Date/Second Closing Date] 
  
 FOR VALUE RECEIVED, PRIVATE MEDIA GROUP, INC., a Nevada corporation
(hereinafter called the “Borrower”) hereby promises to pay to the order of                          or permitted
assigns (the “Holder”) the sum of                          Dollars (USD
$            ), on August 31, 2006 (the “Maturity Date”) (subject to acceleration as provided herein), and to pay interest on the unpaid principal balance hereof at the
rate of seven percent (7%) per annum from [Date of Issuance] (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or otherwise. Following the occurrence and during the continuance of an Event
of Default, interest on this Note shall be payable at the Default Rate, which Default Rate shall be twenty per cent (20%) per annum (“Default Interest”). Interest shall accrue commencing on the Issue Date, shall be computed on the basis of
a 365-day year and the actual number of days elapsed and shall be payable quarterly, in cash, on the first day of each March, June, September and December of each year commencing [third month following the Issue Date] until the Maturity Date, and
any accrued and unpaid interest on the Maturity Date shall be paid in full on the Maturity Date together with the then outstanding principal balance hereof. All payments of principal and accrued interest (to the extent not converted into common
stock, par value $.001 per share, of the Borrower (the “Common Stock”) in accordance with the terms hereof) shall be made in U.S. currency. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by
written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a
business day. As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the City of New York, New York are authorized or required by law or executive order to
remain closed. 
  
 This Note is being executed and delivered
pursuant to that certain Securities Purchase Agreement between the Holder and the Borrower dated as of September 10, 2003 (the “Agreement”). Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed
thereto in the Agreement. 
  
 So long as no Event of Default has
occurred and is continuing, at the option of the Borrower, in lieu of payment of any interest on this Note in cash, upon not less than 15 Trading Days (as hereinafter defined) irrevocable notice to the Holder prior to the interest payment date (such
period being referred to herein as the Interest Notice Period), the Borrower may pay such interest by delivering to the Holder validly issued, fully paid and non-assessable shares of its Common Stock, which shares shall be free of all liens, claims
and encumbrances, within three business days of the interest payment date, which shares, for purpose of calculating the number of shares of Common Stock in respect of any such interest payment, shall be valued at the Market Price as of the due date
of the applicable interest payment. The Market Price shall be defined, as of the date of determination, as the average of the five (5) lowest daily volume-weighted average prices (“VWAP”) for the Common Stock during the fifteen (15)
consecutive Trading Days immediately preceding, but not including, the determination date, as reported by Bloomberg LP. 

 Notwithstanding the foregoing, in no event shall the Borrower be entitled to make any interest payment by
delivery of shares of Common Stock unless at all times during the applicable Interest Notice Period and at the time of such payment such shares (i) are listed on Nasdaq, and (ii) covered by an effective Registration Statement pursuant to which a
current Prospectus meeting the requirements of the Act have been furnished to the Holder, or the shares may be resold by the Holder pursuant to Rule 144 under the Act without regard to any restrictions on the number of shares which may be resold
pursuant to such Rule. 
  
 The following terms shall apply to this
Note: 
  
 ARTICLE I. CONVERSION RIGHTS 
  
 1.1 CONVERSION RIGHT OF HOLDER. 
  
 The Holder shall have the right from time to time, and at any time on or
prior to the Maturity Date, to convert at any time all or from time to time any part of the outstanding and unpaid principal amount of this Note of at least $25,000, or such lesser amount as shall remain unpaid at the time of the conversion
(together with accrued interest thereon that remains unpaid on the due date thereof, if any), into validly issued, fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the date of issuance of this Note, or any shares
of capital stock of Borrower into which such Common Stock shall hereafter be changed or reclassified (the “Common Stock”), free of any liens, claims or encumbrances (except for encumbrances under the Act or applicable state securities
laws) at the conversion price determined as provided herein (the “Conversion Price”). The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined
below) by the Conversion Price in effect on the date a notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), is delivered to the Borrower by the Holder in accordance with Section 1.4 below (the
“Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) accrued interest that remains
unpaid as of the due date thereof, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, including Default Interest. 
  
 1.2 CONVERSION PRICE. The Conversion Price shall be USD $2.00, subject, in each case, to equitable adjustments for stock
splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar
events, as provided in Section 1.6 of this Note. “Trading Day” shall mean any day on which the Common Stock is traded for any period on Nasdaq, or on the principal securities exchange or other securities market on which the Common Stock is
then being traded. 
  
 1.3 AUTHORIZED SHARES. The Borrower
covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock upon the full conversion of this Note.

  
 1.4 METHOD OF CONVERSION. 
  
 (a) This Note may be converted by the Holder in whole or in part (provided
such partial conversion is at least $25,000, or such lesser amount as shall remain unpaid at the time of the conversion (together with accrued interest thereon that remains unpaid on the due date thereof)) at any time from time to time after the
Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile or other reasonable means of communication dispatched on the Conversion Date prior to 12:00 Midnight, New York City Time) and (B) subject to Section 1.4(b),
surrendering this Note at the principal office of the Borrower. 
  

 2 

 (b) Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance
with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the
principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of
any dispute or discrepancy, such records of the Borrower shall be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this
Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new note of like tenor, registered as the Holder (upon payment by the Holder of any
applicable transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this
paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof. 
  
 (c) The issuance of certificates for Common Stock upon conversion of this
Note shall be made without charge to the Holder for such shares for any issuance tax or other costs in respect thereof, provided that the Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than the Holder. 
  
 (d) Upon receipt by the Borrower from the Holder of a facsimile transmission (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section
1.4, the Borrower shall issue and deliver or cause to be issued and delivered to the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (and, solely in the case of conversion of
the entire unpaid principal amount hereof, surrender of this Note) (such third business day being hereinafter referred to as the “Deadline”) in accordance with the terms hereof. 
  
 (e) Subject to the provisions of Section 1.7, upon receipt by the Borrower of a Notice of Conversion, the Holder shall be
deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower
defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein
provided, on such conversion. 
  
 (f) In lieu of delivering
physical certificates representing the Common Stock issuable upon conversion, provided the Borrower’s transfer agent is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”)
program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable
upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system. 
  
 (g) The Borrower understands that a delay in the delivery of the shares of Common Stock in the form required pursuant to
this Section 1.4 beyond the Deadline could result in economic loss to the Holder. If the Borrower fails for any reason to deliver to the Holder such certificate or certificates by the Deadline, the Borrower shall pay to the Holder, in cash, as
liquidated damages and not as a penalty, for each $5,000 of principal amount being converted, $50 per business day (increasing to $100 per business day after 3 business days after such damages begin to accrue and increasing to $200 per business day
6 business days after such after such damages begin to accrue) for each business day after the Deadline 

  

 3 

 
until such certificates are delivered. The Borrower’s obligations to issue and deliver the Note Shares upon conversion of this Note in accordance with
the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to
enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Borrower or any violation or alleged violation of law by the Holder or
any other person, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with the issuance of such Note Shares. At any time after the Deadline until the Note Shares have
been delivered, the Holder shall have the right to rescind the conversion without waiving its right to collect any amounts owing hereunder. In addition to any other rights available to the Holder, if the Borrower fails for any reason to deliver to
the Holder such certificate or certificates pursuant to this Section 1.4 by the Deadline, and if after the Deadline the Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise) Common Stock to deliver in
satisfaction of a sale by such Holder of the Note Shares which the Holder anticipated receiving upon such conversion (a “Buy-In”), then the Borrower shall, (A) pay in cash to the Holder (in addition to any remedies available to or elected
by the Holder) the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder
anticipated receiving from the conversion at issue multiplied by (2) the actual sale price of the Common Stock at the time of the sale (including brokerage commissions, if any) giving rise to such purchase obligation and (B) at the option of the
Holder, either reissue this Note in principal amount equal to the principal amount of the attempted conversion or deliver to the Holder the number of shares of Common Stock that would have been issued had the Borrower timely complied with its
delivery requirements under this Section 1.4. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of this Note with respect to which the actual sale
price of the Underlying Shares at the time of the sale (including brokerage commissions, if any) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Borrower shall be required to
pay the Holder $1,000. The Holder shall provide the Borrower written notice indicating the amounts payable to the Holder in respect of the Buy-In. 
  
 1.5 CONCERNING THE SHARES. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless either (i) such shares
shall have been included in an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion or other similar letter of legal counsel to the effect that such sale or transfer is
exempt from the registration requirements of the Act or (iii) such shares are sold pursuant to Rule 144 under the Act (or a successor rule). Subject to the removal provisions set forth below, each certificate for shares of Common Stock issuable upon
conversion of this Note that is not covered by an effective registration statement prior to the satisfaction of the Rule 144(k) holding period, shall bear a legend substantially in the following form, as appropriate: 
  
 “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN
FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE BORROWER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.” 
  
 The legend set forth above shall be removed and the Borrower shall issue to the Holder a new
certificate therefor free of any transfer legend in accordance with the terms and subject to the conditions of the Agreement. 
  

 4 

 1.6 EFFECT OF CERTAIN EVENTS. The number and character of shares issuable upon conversion of this Note
(or any shares of stock or other securities or property at the time receivable or issuable upon conversion of this Note) and the Conversion Price are subject to adjustment upon the occurrence of the following events: 
  
 (a) Adjustment for Stock Splits, Stock Dividends, Recapitalizations,
etc. If the Borrower, at any time after the initial issuance of this Note, subdivides (by any stock split, stock dividend, recapitalization, reorganization, reclassification or otherwise) its shares of Common Stock into a greater number of
shares, then, after the date of record for effecting such subdivision, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. If the Borrower, at any time after the initial issuance of this Note,
combines (by reverse stock split, recapitalization, reorganization, reclassification or otherwise) its shares of Common Stock into a smaller number of shares, then, after the date of record for effecting such combination, the Conversion Price in
effect immediately prior to such combination will be proportionately increased. 
  
 (b) Adjustment for Other Dividends and Distributions. In case the Borrower shall make or issue, or shall fix a record date for the determination of eligible holders entitled to receive, a dividend or other
distribution payable with respect its Common Stock that is payable in (a) securities of the Borrower (other than issuances with respect to which adjustment is made under Section 1.6(a)), or (b) assets (other than cash dividends of less than 5% paid
or payable solely out of retained earnings), then, and in each such case, the Holder, upon conversion of this Note at any time after the consummation, effective date or record date of such event, shall receive, in addition to the shares issuable
upon such exercise prior to such date, the securities or such other assets of the Borrower to which the Holder would have been entitled upon such date if the Holder had converted this Note immediately prior thereto (all subject to further adjustment
as provided in this Note), and such securities or other assets shall be held in escrow by the Borrower for the benefit of the Holder 
  
 (c) Adjustment for Reorganization, Consolidation, Merger. In case of any reorganization of the Borrower (or of any other corporation or entity, the
stock or other securities of which are at the time receivable on the conversion of this Note), after the date of this Note, or in case, after such date, the Borrower (or any such corporation or entity) shall consolidate with or merge into another
corporation or entity or convey all or substantially all of its assets to another corporation or entity, then, and in each such case, the Holder, upon the conversion of this Note at any time after the consummation of such reorganization,
consolidation, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the conversion of this Note prior to such consummation, the stock or other securities or property to which the
Holder would have been entitled upon the consummation of such reorganization, consolidation, merger or conveyance if the Holder had converted this Note immediately prior thereto, all subject to further adjustment as provided in this Note, and the
successor or purchasing corporation or entity in such reorganization, consolidation, merger or conveyance (if other than the Borrower) shall duly execute and deliver to the Holder a supplement hereto acknowledging such corporation’s or
entity’s obligations under this Note; and in each such case, the terms of this Note shall be applicable to the shares of stock or other securities or property receivable upon the exercise of this Note after the consummation of such
reorganization, consolidation, merger or conveyance 
  
 (d)
Adjustment for Certain Share Issuances. Except as otherwise provided in Sections 1.6(a)-(c) or Section 1.6(e)(vi) hereof, if the Borrower shall at any time prior to the exercise in full of this Note issues or sells, or in accordance with
Section 1.6(e) hereof is deemed to have issued and sold, any shares of Common Stock to a person other than the Holder for a consideration per share (the “Offer Price”) less than the Conversion Price in effect at the time of such issuance,
then, and thereafter successively upon each such issue, the Conversion Price shall be reduced as follows: (i) the number of shares of Common Stock outstanding immediately prior to such issue shall be multiplied by the Conversion Price in effect at
the time of such issue and the product shall be added to the aggregate consideration, if any, received by the Borrower upon such issue of additional shares of Common Stock; and (ii) the sum so obtained shall be divided by the number of shares of
Common Stock outstanding 

  

 5 

 
immediately after such issue. The resulting quotient shall be the adjusted Conversion Price. Notwithstanding anything in this Note to the contrary, this
provision shall only have the effect of reducing the Conversion Price. 
  
 (e) Effect on Conversion Price of Certain Events. For purposes of determining the adjusted Conversion Price under Section 1.6(d) hereof, the following will be applicable: 
  
 (i) Issuance of Rights or Options. If the Borrower in any manner issues or grants any warrants, rights or options,
whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities exercisable, convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights and options to
purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”), and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price on the date of
issuance (“Below Market Options”), then the maximum total number of shares of Common Stock issuable upon the exercise of all such Below Market Options (assuming full exercise, conversion or exchange of Convertible Securities, if
applicable) will, as of the date of the issuance or grant of such Below Market Options, be deemed to be outstanding and to have been issued and sold by the Borrower for such price per share. For purposes of the preceding sentence, the price per
share for which Common Stock is issuable upon the exercise of such Below Market Options is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or granting of such Below Market
Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Below Market Options, plus, in the case of Convertible Securities issuable upon the exercise of such Below Market
Options, the minimum aggregate amount of additional consideration payable upon the exercise, conversion or exchange thereof at the time such Convertible Securities first become exercisable, convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise of all such Below Market Options (assuming full conversion of Convertible Securities, if applicable). Except as contemplated hereinbelow, no further adjustment to the Conversion Price will
be made upon the actual issuance of such Common Stock upon the exercise of such Below Market Options or upon the exercise, conversion or exchange of Convertible Securities issuable upon exercise of such Below Market Options. 
  
 (ii) Issuance of Convertible Securities. If the Borrower in any
manner issues or sells any Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options) and the price per share for which Common Stock is issuable upon such exercise, conversion
or exchange is less than the Conversion Price on the date of issuance, then the maximum total number of shares of Common Stock issuable upon the exercise, conversion or exchange of all such Convertible Securities will, as of the date of the issuance
of such Convertible Securities, be deemed to be outstanding and to have been issued and sold by the Borrower for such price per share. For the purposes of the preceding sentence, the price per share for which Common Stock is issuable upon such
exercise, conversion or exchange is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Borrower upon the exercise, conversion or exchange thereof at the time such Convertible Securities first become exercisable, convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the exercise, conversion or exchange of all such Convertible Securities. Except as contemplated hereinbelow, no further adjustment to the Conversion Price will be made upon the actual issuances of such Common Stock upon
exercise, conversion or exchange of such Convertible Securities. 
  
 (iii) Change in Option Price or Conversion Rate. If there is a change at any time in (i) the amount of additional consideration payable to the Borrower upon the exercise of any Options; (ii) the amount of additional consideration, if
any, payable to the Borrower upon the exercise, conversion or exchange or any Convertible Securities; or (iii) the rate at which any Convertible Securities 

  

 6 

 
are convertible into or exchangeable for Common Stock (other than under or by reason of provisions designed to protect against dilution), the Conversion
Price in effect at the time of such change will be readjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed additional consideration or
changed conversion rate, as the case may be, at the time initially granted, issued or sold. 
  
 (iv) Treatment of Expired Options and Unexercised Convertible Securities. If, in any case, the total number of shares of Common Stock issuable upon exercise of any Options or upon exercise, conversion or
exchange of any Convertible Securities is not, in fact, issued and the rights to exercise such Option or to exercise, convert or exchange such Convertible Securities shall have expired or terminated, the Conversion Price then in effect will be
readjusted to the Conversion Price which would have been in effect at the time of such expiration or termination had such Options or Convertible Securities, to the extent outstanding immediately prior to such expiration or termination (other than in
respect of the actual number of shares of Common Stock issued upon exercise or conversion thereof), never been issued. 
  
 (v) Exceptions to Adjustment of Conversion Price. No adjustment to the Conversion Price will be made (a) pursuant to options, warrants, or other
obligations to issue shares outstanding on the date hereof as disclosed to Holder in writing; or (b) pursuant to options that may be issued under any employee incentive stock option, any qualified stock option plan, and/or any other stock option
plan adopted by the Borrower. 
  
 (f) Computation of
Consideration. For purposes of any computation respecting consideration received pursuant to Section 1.6(d), the following shall apply: 
  
 (i) in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall
any deduction be made for any commissions, discounts or other expenses incurred by the Borrower for any underwriting of the issue or otherwise in connection therewith; 
  
 (ii) in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board of Directors of the Borrower (irrespective of the accounting treatment thereof); and 
  
 (iii) in the case of the issuance of securities convertible into or
exercisable or exchangeable for shares of Common Stock, the aggregate consideration received therefor shall be deemed to be the consideration received by the Borrower for the issuance of such securities plus the additional minimum consideration, if
any, to be received by the Borrower upon the conversion, exercise or exchange thereof (the consideration in each case to be determined in the same manner as provided in clauses (i) and (ii) of this Subsection (f). 
  
 (g) Notice of Certain Events and Adjustments. The Borrower shall give
ten days prior written notice of the record date fixed for any event referred to in Section 1.6(b) or (c). The Borrower shall promptly give written notice of each adjustment or readjustment of the Conversion Price or the number of shares of Shares
or other securities issuable upon conversion of this Note. The notice shall describe the adjustment or readjustment and show in reasonable detail the facts on which the adjustment or readjustment is based. 
  
 1.7 STATUS AS STOCKHOLDER. Upon submission of a Notice of Conversion by a
Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount) shall be deemed 

  

 7 

 
converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate,
excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this
Note. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for
any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower), the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note
and the Borrower shall, as soon as practicable, return such unconverted Note to the holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall
retain all of its rights and remedies under or related to this Note. 
  
 1.8 CERTAIN LIMITATIONS ON CONVERSION 
  
 (a)
Notwithstanding anything herein to the contrary, if the Borrower has not obtained Shareholder Approval (as defined below) and if such approval is required by the applicable rules and regulations of the principal trading market of the Common Stock
(or any successor entity) (“Principal Market”), then the Borrower may not issue upon conversion of the Notes issued in the Offering, in the aggregate, in excess of (1) 19.999% of the number of shares of Common Stock outstanding on the
business day immediately preceding the date of the First Closing, (2) less any shares of Common Stock issued as payment of interest or issuable upon exercise of the Warrants issued to Holders of the Notes on the Issue Date pursuant to the Agreement
and shares issuable upon exercise of 100,000 Warrants issued to Neveric Capital, Inc. (such number of shares, the “Issuable Maximum”). Each Holder shall be entitled to a portion of the Issuable Maximum equal to the quotient obtained by
dividing (x) the aggregate principal amount of the Note(s) issued and sold to such Holder on the Issue Date by (y) the aggregate principal amount of all Notes issued and sold by the Borrower on the Issue Date. If any Holder shall no longer hold the
Note(s), then such Holder’s remaining portion of the Issuable Maximum shall be allocated pro-rata among the remaining Holders. If on any Conversion Date: (1) the applicable Conversion Price then in effect is such that the shares issuable under
this Note on any Conversion Date together with the aggregate number of shares of Common Stock issued and that would then be issuable upon conversion in full of all then outstanding Notes would exceed the Issuable Maximum, and (2) the Borrower’s
shareholders shall not have previously approved the transactions contemplated by the Transaction Documents, as may be required by the applicable rules and regulations of the Principal Market (or any successor entity), if any (the “Shareholder
Approval”), then the Borrower shall issue to the Holder requesting a conversion a number of shares of Common Stock equal to such Holder’s pro-rata portion (which shall be calculated pursuant to the terms hereof) of the Issuable Maximum
and, with respect to the remainder of the aggregate principal amount of the Notes (including any accrued interest) then held by such Holder for which a conversion in accordance with the applicable conversion price would result in an issuance of
shares of Common Stock in excess of such Holder’s pro-rata portion (which shall be calculated pursuant to the terms hereof) of the Issuable Maximum (the “Excess Principal”), the Borrower shall be prohibited from converting such
Excess Principal, and shall notify the Holder of the reason therefor. This Note shall thereafter be unconvertible until and unless Shareholder Approval is subsequently obtained or is otherwise not required, but this Note shall otherwise remain in
full force and effect. The Borrower and the Holder understand and agree that shares of Common Stock issued to and then held by the Holder as a result of conversions of Notes shall not be entitled to cast votes on any resolution to obtain Shareholder
Approval pursuant hereto. So long as this Note is outstanding, neither the Borrower nor any subsidiary of the Borrower shall issue any securities to the extent that such issuance results in the Borrower being unable to issue any Note Shares upon
conversion of this Note by virtue of the cap set forth in this Section. Absent an adjustment pursuant to Section 1.6(d), this Note may be converted in full by the Holder. 
  
 (b) Notwithstanding anything to the contrary contained herein, this Note shall not be convertible into Common Stock to the
extent (but only to the extent) that Holder, any of its affiliates, or 

  

 8 

 
any other party which may be deemed to be acting as a group in concert with Holder or any of its affiliates for the purposes of Section 13(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) would beneficially own in excess of 4.9% (the “Applicable Percentage”) of the outstanding shares of Common Stock. To the extent the above limitation applies, the
determination of whether this Note shall be convertible (vis-a-vis other convertible, exercisable or exchangeable securities owned by Holder) shall, subject to such aggregate percentage limitation, be determined on the basis of first submission to
the Borrower for conversion or exercise or exchange, as the case may be. No prior inability to convert this Note pursuant to this paragraph shall have any effect on the applicability of the provisions of this subparagraph with respect to any
subsequent determination of convertibility. For the purposes of this subparagraph, beneficial ownership and all determinations and calculations, including without limitation, with respect to calculations of percentage ownership, shall be determined
in accordance with Section 13(d) of the Exchange Act, and Regulation 13D and G thereunder. The provisions of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms this subparagraph (b) to correct this
paragraph (or any portion hereof) which may be defective or inconsistent with the intended Applicable Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to
such Applicable Percentage limitation. 
  
 ARTICLE II. PREPAYENT
BY THE BORROWER 
  
 2.1 PREPAYMENT BY THE BORROWER. Borrower
shall not be entitled to pay any principal hereof prior to its maturity without the prior consent of Holder, which consent Holder may withhold in its absolute discretion. 
  
 ARTICLE III. EVENTS OF DEFAULT 
  
 If any of the following events of default (each, an “Event of Default”) shall occur: 
  
 3.1 FAILURE TO PAY PRINCIPAL OR INTEREST ON NOTE. The Borrower fails (a) to
pay the principal hereof or any other Note of the Holder when due, whether at maturity, upon acceleration or otherwise or (b) to pay any installment of interest hereon or any other Note of the Holder when due and, in the case of clause (b), such
failure continues for a period of five (5) days after the due date thereof); 
  
 3.2 CONVERSION AND THE SHARES. The Borrower fails to issue shares of Common Stock to the Holder upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to
transfer any certificate for shares of Common Stock issued to the Holder upon conversion of this Note and when required by this, or fails to remove any restrictive legend on any certificate for any shares of Common Stock issued to the Holder upon
conversion of this Note as and when required by this Note or the Securities Purchase Agreement and any such failure shall continue uncured for ten (10) days after the Borrower shall have been notified thereof in writing by the Holder, or Borrower
publicly announces that it does not intend to honor the conversion rights of the Holder; 
  
 3.3 BREACH OF COVENANT. The Borrower breaches any covenant or other term or condition of this Note or any other Investment Agreement in any material respect and such breach, if subject to cure, continues for a period
of thirty (30) days after the occurrence thereof; 
  
 3.4 BREACH
OF REPRESENTATION. Any representation or warranty of the Borrower made in any Investment Agreement shall be false or misleading in any material respect. 
  
 3.5 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 

  

 9 

 
of its property or business, or such a receiver or trustee shall otherwise be appointed; 
  
 3.6 JUDGMENTS. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary
of the Borrower or any of its property or other assets for more than $500,000, and shall remain unvacated, unbonded or unstayed for a period of sixty (60) days unless otherwise consented to by the Holder, which consent will not be unreasonably
withheld; 
  
 3.7 BANKRUPTCY. Bankruptcy, insolvency,
reorganization or liquidation proceedings or other proceedings for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower; provided, however, that in the
case of any involuntary bankruptcy, such involuntary bankruptcy shall continue and undischarged or undismissed for a period of sixty (60) days; or 
  
 3.8 DELISTING OF COMMON STOCK. The Borrower’s Common Stock ceases to be listed for trading on the Nasdaq SmallCap Market, the Nasdaq National Market,
the New York Stock Exchange or the American Stock Exchange; or 
  
 3.9 CHANGE IN CONTROL. A Change in Control Transaction (as defined herein) shall exist; 
  
 then, upon the occurrence and during the continuation of any Event of Default, at the option of the Holder, this Note shall become immediately due and payable (except in the case of any Event of Default under Section
3.5 or 3.7 this Note shall automatically become due and payable), and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Payment Amount (as defined below). The “Default
Payment Amount” shall mean the sum of (i) the greater of: (A) 120% of the outstanding principal amount of this Note, or (B) the outstanding principal amount of this Note divided by the Conversion Price on (x) the date the Default Payment Amount
is demanded or otherwise due or (y) the date the Default Payment Amount is paid in full, whichever is less, multiplied by the Market Price on (x) the date the Default Payment Amount is demanded or otherwise due or (y) the date the Default Payment
Amount is paid in full, whichever is greater, and (ii) all other amounts, costs, expenses and liquidated damages due in respect of this Note, including accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment,
including any Default Interest. 
  
 A “Change in Control Transaction”
will be deemed to exist if (i) there occurs any consolidation, merger or other business combination of the Borrower with or into any other corporation or other entity or person (whether or not the Borrower is the surviving corporation), or any other
corporate reorganization or corporate transaction or series of related transactions in which in any of such events the voting stockholders of the Borrower prior to such event cease to own 50% or more of the voting power, or corresponding voting
equity interests, of the surviving corporation after such event (including without limitation any “going private” transaction under Rule 13e-3 promulgated pursuant to the Exchange Act or tender offer by the Borrower under Rule 13e-4
promulgated pursuant to the Exchange Act for 20% or more of the Borrower’s Common Stock), (ii) any person (as defined in Section 13(d) of the Exchange Act), together with its affiliates and associates (as such terms are defined in Rule 405
under the Securities Act), other than Berth Milton or his affiliates, beneficially owns or is deemed to beneficially own (as described in Rule 13d-3 under the Exchange Act without regard to the 60-day exercise period) in excess of 35% of the
Borrower’s voting power, (iii) there is a replacement of more than one-half of the members of the Borrower’s Board of Directors which is not approved by those individuals who are members of the Borrower’s Board of Directors on the
date thereof, (iv) in one or a series of related transactions, there is a sale or transfer of all or substantially all of the assets of the Borrower, determined on a consolidated basis, or (v) the Borrower enters into an agreement providing for an
event set forth in (i), (ii), (iii) or (iv) above. 
  
 ARTICLE
IV. MISCELLANEOUS 
  
 4.1 FAILURE OR INDULGENCE NOT WAIVER. No
failure or delay on the part of the 

  

 10 

 
Holder 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 privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

  
 4.2 NOTICES. Any notice herein required or permitted to be
given shall be in writing and may be personally served or delivered by courier or sent by United States mail and shall be deemed to have been given upon receipt if personally served (which shall include telephone line facsimile transmission) or sent
by courier or three (3) days after being deposited in the United States mail, certified, with postage pre-paid and properly addressed, if sent by mail. For the purposes hereof, the address of the Holder shall be as shown on the records of the
Borrower; and the address of the Borrower shall be Private Media Group, Inc., Carretera de Rubi 22-26, 08190 Sant Cugat del Valles, Barcelona, Spain; facsimile (34) 93-589-5400. Both the Holder and the Borrower may change the address for
service by service of written notice to the other as herein provided. 
  
 4.3 AMENDMENTS. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. 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. 
  
 4.4 ASSIGNABILITY. This Note shall be binding upon the Borrower and its successors and permitted assigns, and shall inure to be the benefit of the Holder
and its successors and assigns. 
  
 4.5 RANK; COST OF COLLECTION.
The obligation of the Borrower under this Note shall rank in right of payment on parity with all other unsubordinated, unsecured obligations of the Borrower. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof
costs of collection, including reasonable attorneys’ fees. 
  
 4.6 GOVERNING LAW. This Note shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed in the State of New York. The Borrower hereto irrevocably consents to the
jurisdiction of the United States federal courts located in the Southern District in the State of New York and the state courts located in the County of New York in the State of New York in any suit or proceeding based on or arising under this Note
and irrevocably agrees that all claims in respect of such suit or proceeding may be determined in such courts. The Borrower irrevocably waives the defense of an inconvenient forum to the maintenance of such suit or proceeding. The Borrower further
agrees that service of process upon the Borrower mailed by the first class mail shall be deemed in every respect effective service of process upon the Borrower in any suit or proceeding arising hereunder. Nothing herein shall affect the
Holder’s right to serve process in any other manner permitted by law. The Borrower agrees that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such
judgment or in any other lawful manner. The Borrower irrevocably waives its right to a jury trial in any such suit or proceeding. In the event that any provision of this Note 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 unenforceability of any other provision of this Note. 
  
 4.7. MAXIMUM PAYMENTS. 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.

  

 11 

 IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer
on the Issue Date. 
  
 PRIVATE MEDIA GROUP, INC. 
  

	 By:
	 	  

	 Charles Prast

	 President

  

 12 

 Exhibit A 
  

NOTICE OF CONVERSION 
 OF
CONVERTIBLE NOTE 
  
 TO: Private Media Group,
Inc. 
  
 (1) Pursuant to the terms of the attached Convertible
Note (the “Note”) or copy thereof, the undersigned hereby elects to convert $                     principal amount of the Note into
shares of Common Stock of Private Media Group, Inc., a Nevada corporation (the “Borrower”). Capitalized terms used herein and not otherwise defined herein have the respective meanings provided in the Note. 
  
 (2) Please issue a certificate or certificates for the number of shares of
Common Stock into which such principal amount of the Note (plus interest thereon to the extent not paid in cash in accordance with the terms of the Note) is convertible (            
shares, based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto: 
  

	  

	 Name

	
	  

	  

	 Address

	
	  

	 SS or Tax ID Number (if applicable)

  
 (3) Holder
acknowledges and affirms that the Common Stock issued pursuant to this Notice of Conversion has been or will be sold in accordance with the requirements of the 1933 Act, if applicable, or pursuant to an exemption under the 1933 Act. 
  
 Date                     
  

	  

	 (Signature of Registered Holder)

	 (must be signed exactly as name appears in the Note)

  

 13 

 EXHIBIT B 
  

SERIES A WARRANT 
  
 NO. A-             
  
 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS, OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT
TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. 
  
 Right to Purchase              Shares of 
 Common Stock, par value $.001 per share 
  
 Date: [First Closing Date]

  
 PRIVATE MEDIA GROUP, INC. 
 SERIES A WARRANT 
  
 THIS CERTIFIES THAT, for value received,              (together with any transferees as
permitted under this Series A Warrant (this “Warrant”), the “Holder”), or its registered assigns, is entitled to purchase from PRIVATE MEDIA GROUP, INC., a Nevada corporation (the “Company”), at any time or from time to
time during the period specified in Section 2 hereof,              fully paid and nonassessable shares of the Company’s common stock, par value $.001 per share (the “Common
Stock”), at an exercise price of $2.00 per share (the “Exercise Price”), subject to adjustment as provided in Section 4 hereof. This Warrant is being issued pursuant to that certain Securities Purchase Agreement dated as of September
10, 2003 between the Company and the Holder (the “Securities Purchase Agreement”). The number of shares of Common Stock issuable upon the exercise of the Warrants hereunder (the “Warrant Shares”) and the Exercise Price are
subject to the antidilution provisions as provided in Section 4 hereof. The term “Warrants” means this Warrant and the other warrants of the Company issued pursuant to the terms of the Securities Purchase Agreement. 
  
 Capitalized terms not defined herein shall have the meanings set forth in the
Securities Purchase Agreement. 
  
 The term “Closing Bid
Price” means, for any security as of any date, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg Financial Markets or a comparable
reporting service of national reputation reasonably selected by the Company if Bloomberg Financial Markets is not 

 
then reporting closing bid prices of such security (collectively, “Bloomberg”), or if the foregoing does not apply, the last reported sale price of
such security in the over-the-counter market on the electronic bulletin board of such security as reported by Bloomberg, or, if no sale price is reported for such security by Bloomberg, the average of the bid prices of any market makers for such
security as reported in the “pink sheets” by the National Quotation Bureau, Inc. If the Closing Bid Price cannot be calculated for such security on such date on any of the foregoing bases, the Closing Bid Price of such security on such
date shall be the fair market value as reasonably determined by an independent investment banking firm reasonably selected by the Company with the costs of such appraisal to be borne by the Company. 
  
 This Warrant is subject to the following terms, provisions, and conditions:

  
 1. Mechanics of Exercise. Subject to the provisions hereof,
including, without limitation, the limitations contained in Section 8(f) hereof, this Warrant may be exercised as follows: 
  
 (a) Manner of Exercise. This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant (or evidence of loss, theft,
destruction or mutilation thereof in accordance with Section 8(c) hereof), together with a completed exercise agreement in the Form of Exercise Agreement attached hereto as Exhibit 1 (the “Exercise Agreement”), to the Company at the
Company’s principal executive offices (or such other office or agency of the Company as it may reasonably designate by notice to the Holder), and upon (i) payment to the Company in cash, by certified or official bank check or by wire transfer
for the account of the Company, of the Exercise Price for the Warrant Shares specified in the Exercise Agreement or (ii) if the Holder elects to effect a Cashless Exercise (as defined in Section 12(c) below), delivery to the Company of a written
notice of an election to effect a Cashless Exercise for the Warrant Shares specified in the Exercise Agreement. Notwithstanding anything in the foregoing which may be to the contrary, the exercise shall become effective and the Warrant Shares so
purchased shall be deemed to be issued to the Holder or Holder’s designees, as the record owner of such shares, as of the date on which the completed Exercise Agreement is delivered to the Company, so long as this Warrant and payment of
Exercise Price or notice of Cashless Exercise is delivered to the Company within three (3) business days after such date. 
  
 (b) Issuance of Certificates. Subject to Section 1(c), certificates for the Warrant Shares so purchased, representing the aggregate number of shares
specified in the Exercise Agreement, shall be delivered to the Holder within a reasonable time, not exceeding three (3) business days, after this Warrant shall have been so exercised (the “Delivery Period”). The certificates so delivered
shall be in such denominations as may be requested by the Holder and shall be registered in the name of Holder or such other name as shall be designated by such Holder; provided, however, if any certificate for Warrant Shares is to be issued in a
name other than that in which the Warrant surrendered in exchange therefor is registered, it shall be a condition of the issuance thereof that the Warrant so surrendered is properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange will pay to the Company any transfer or other taxes required by reason of the issuance of a certificate for shares of the Company’s Common Stock in any name other than that of the registered Holder of the Warrant
surrendered, or establish to the satisfaction of the Company that such tax has been 

  

 2 

 
paid or is not payable. If this Warrant shall have been exercised only in part, then, unless this Warrant has expired, the Company shall, at its expense, at
the time of delivery of such certificates, deliver to the Holder a new Warrant representing the number of shares with respect to which this Warrant shall not then have been exercised. In lieu of delivering physical certificates representing the
Common Stock issuable upon the exercise of this Warrant, upon request of the Holder, the Company shall use its commercially reasonable efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon exercise to the
Holder by crediting the account of the Holder’s prime broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system or other electronic delivery system selected by the Holder. 
  
 (c) Exercise Disputes. In the case of any dispute with respect to an
exercise, the Company shall promptly issue such number of shares of Common Stock as are not disputed in accordance with Section 1(b) hereof. If such dispute involves the calculation of the Exercise Price, the Company shall submit the disputed
calculations to a nationally recognized independent accounting firm (selected by the Company and reasonably acceptable to Holder) via facsimile within two (2) business days of receipt of the Exercise Agreement. The accounting firm shall audit the
calculations and notify the Company and the converting Holder of the results no later than two (2) business days from the date it receives the disputed calculations. The accounting firm’s calculation shall be deemed conclusive, absent manifest
error. The Company shall then issue the appropriate number of shares of Common Stock in accordance with Section 1(b) hereof. 
  
 (d) Fractional Shares. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable in an amount equal to the same fraction of the Market Price of a share of Common Stock (as determined for exercise of this Warrant into whole shares of Common Stock);
provided that in the event that sufficient funds are not legally available for the payment of such cash adjustment, any fractional shares of Common Stock issuable shall be rounded up to the next whole number. 
  
 (e) The Company understands that a delay in the delivery of the shares of
Common Stock in the form required pursuant to this Warrant beyond the expiration of the Delivery Period could result in economic loss to the Holder. If the Company fails to deliver to the Holder a certificate or certificates representing the Shares
of Common Stock on or before the expiration of the Delivery Period, then the Holder will have the right to rescind such exercise. In addition to any other rights available to the Holder, if the Company fails to deliver to the Holder a certificate or
certificates representing the Warrant Shares pursuant to an exercise on or before the expiration of the Delivery Period, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (1) pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of Warrant Shares that the Company was required to deliver to the
Holder in connection with the exercise at issue times (B) the price at which the sell order giving rise to 

  

 3 

 
such purchase obligation was executed, and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant
Shares for which such exercise was not honored or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (1) of
the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In, together with applicable
confirmations and other evidence reasonably requested by the Company. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof. 
  
 2. Period of Exercise. This Warrant is exercisable at any time or from time
to time on or after the date hereof and before 5:00 P.M., Eastern time on the fifth (5th) anniversary of the date
hereof (the “Exercise Period”). 
  
 3. Certain
Agreements of the Company. The Company hereby covenants and agrees as follows: 
  
 (a) Shares to be Fully Paid. All Warrant Shares will, upon issuance in accordance with the terms of this Warrant, be validly issued, fully paid, and non-assessable and free from all taxes, liens, claims and
encumbrances. 
  
 (b) Reservation of Shares. During the Exercise
Period, the Company shall at all times have authorized, and reserved for the purpose of issuance upon exercise of this Warrant, a sufficient number of shares of Common Stock to provide for the full exercise of this Warrant. 
  
 (c) Listing. The Company shall promptly secure the listing of the shares of
Common Stock issuable upon exercise of this Warrant upon the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange or the American Stock Exchange as required by Section 4.8 of the Securities Purchase Agreement and upon each
national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed or become listed and shall maintain, such listing of all shares of Common Stock from time to time issuable upon the exercise of
this Warrant. 
  

 4 

 (d) Certain Actions Prohibited. The Company will not, by amendment of its charter or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it
hereunder, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such actions as may reasonably be requested by the Holder of this Warrant in order to protect the exercise
privilege of the Holder of this Warrant, consistent with the tenor and purpose of this Warrant. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the Exercise Price then in effect, and (ii) will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon
the exercise of this Warrant. 
  
 4. Antidilution Provisions.
During the Exercise Period, the Exercise Price shall be subject to adjustment from time to time as provided in this Section 4. In the event that any adjustment of the Exercise Price as required herein results in a fraction of a cent, such Exercise
Price shall be rounded up or down to the nearest cent. 
  
 (a)
Adjustment for Certain Share Issuances. Except as otherwise provided in Section 4(b)(vi), 4(c) and 4(e) hereof, if the Company shall at any time prior to the exercise in full of this Warrant issues or sells, or in accordance with Section 4(b) hereof
is deemed to have issued and sold, any shares of Common Stock to a person other than the Holder (otherwise than pursuant to Section 4(c)—(f) below) for a consideration per share (the “Offer Price”) less than the Exercise Price in
effect at the time of such issuance, then, and thereafter successively upon each such issue, the Exercise Price shall be reduced as follows: (i) the number of shares of Common Stock outstanding immediately prior to such issue shall be multiplied by
the Exercise Price in effect at the time of such issue and the product shall be added to the aggregate consideration, if any, received by the Company upon such issue of additional shares of Common Stock; and (ii) the sum so obtained shall be divided
by the number of shares of Common Stock outstanding immediately after such issue. The resulting quotient shall be the adjusted Exercise Price. 
  
 (b) Effect on Exercise Price of Certain Events. For purposes of determining the adjusted Exercise Price under Section 4(a) hereof, the following will be
applicable: 
  
 (i) Issuance of Rights or Options. If the
Company in any manner issues or grants any warrants, rights or options, whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities exercisable, convertible into or exchangeable for Common Stock
(“Convertible Securities”) (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”), and the price per share for which Common Stock is issuable upon the
exercise of such Options is less than the Exercise Price on the date of issuance (“Below Market Options”), then the maximum total number of shares of Common Stock issuable upon the exercise of all such Below Market Options (assuming full
exercise, conversion or exchange of Convertible Securities, if applicable) will, as of the date of the issuance or grant of such Below Market Options, be deemed to be 

  

 5 

 
outstanding and to have been issued and sold by the Company for such price per share. For purposes of the preceding sentence, the price per share for which
Common Stock is issuable upon the exercise of such Below Market Options is determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the issuance or granting of such Below Market Options, plus
the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of all such Below Market Options, plus, in the case of Convertible Securities issuable upon the exercise of such Below Market Options, the
minimum aggregate amount of additional consideration payable upon the exercise, conversion or exchange thereof at the time such Convertible Securities first become exercisable, convertible or exchangeable, by (ii) the maximum total number of shares
of Common Stock issuable upon the exercise of all such Below Market Options (assuming full conversion of Convertible Securities, if applicable). Except as contemplated hereinbelow, no further adjustment to the Exercise Price will be made upon the
actual issuance of such Common Stock upon the exercise of such Below Market Options or upon the exercise, conversion or exchange of Convertible Securities issuable upon exercise of such Below Market Options. 
  
 (ii) Issuance of Convertible Securities. 
  
 (A) If the Company in any manner issues or sells any Convertible
Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options) and the price per share for which Common Stock is issuable upon such exercise, conversion or exchange is less than the Exercise
Price on the date of issuance, then the maximum total number of shares of Common Stock issuable upon the exercise, conversion or exchange of all such Convertible Securities will, as of the date of the issuance of such Convertible Securities, be
deemed to be outstanding and to have been issued and sold by the Company for such price per share. For the purposes of the preceding sentence, the price per share for which Common Stock is issuable upon such exercise, conversion or exchange is
determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the exercise, conversion or exchange thereof at the time such Convertible Securities first become exercisable, convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of all such Convertible Securities. Except as contemplated hereinbelow, no further adjustment to the Exercise Price will be made upon the actual issuances of such Common Stock upon exercise, conversion or exchange of such
Convertible Securities. 
  
 (iii) Change in Option Price or
Conversion Rate. If there is a change at any time in (i) the amount of additional consideration payable to the Company upon the exercise of any Options; (ii) the amount of additional consideration, if any, payable to the Company upon the exercise,
conversion or exchange or any Convertible Securities; or (iii) the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock (other than under or by reason of provisions designed to protect against dilution), the
Exercise Price in effect at the time of such change will be readjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed 

  

 6 

 
additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. 
  
 (iv) Treatment of Expired Options and Unexercised Convertible Securities.
If, in any case, the total number of shares of Common Stock issuable upon exercise of any Options or upon exercise, conversion or exchange of any Convertible Securities is not, in fact, issued and the rights to exercise such Option or to exercise,
convert or exchange such Convertible Securities shall have expired or terminated, the Exercise Price then in effect will be readjusted to the Exercise Price which would have been in effect at the time of such expiration or termination had such
Options or Convertible Securities, to the extent outstanding immediately prior to such expiration or termination (other than in respect of the actual number of shares of Common Stock issued upon exercise or conversion thereof), never been issued.

  
 (v) Calculation of Consideration Received. For purposes of
any computation respecting consideration received pursuant to Section 4(a), the following shall apply: 
  

	 	(A)	in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any
commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith; and 

  

	 	(B)	in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the Board of Directors of Company (irrespective of the accounting treatment thereof). 

  
 (vi) Exceptions to Adjustment of Exercise Price. No adjustment to the Exercise Price will be made (a) pursuant to options, warrants, or other obligations
to issue shares outstanding on the date hereof as disclosed to Holder in writing; or (b) pursuant to options that may be issued under any employee incentive stock option, any qualified stock option plan, and/or any other stock option plan adopted by
the Company. 
  
 (c) Subdivision or Combination of Common Stock.
If the Company, at any time after the initial issuance of this Warrant, subdivides (by any stock split, stock dividend, recapitalization, reorganization, reclassification or otherwise) its shares of Common Stock into a greater number of shares,
then, after the date of record for effecting such subdivision, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company, at any time after the initial issuance of this Warrant, combines (by
reverse stock split, recapitalization, reorganization, reclassification or otherwise) its shares of Common Stock into a smaller number of shares, then, after the date of record for effecting such combination, the Exercise Price in effect immediately
prior to such combination will be proportionately increased. 
  

 7 

 (d) Adjustment in Number of Shares. Upon each adjustment of the Exercise Price pursuant to the
provisions of Section 4(c), the number of shares of Common Stock issuable upon exercise of this Warrant shall be adjusted by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of shares of
Common Stock issuable upon exercise of this Warrant immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. 
  
 (e) Major Transactions. 
  
 (i) If the Company shall consolidate with or merge into any corporation or reclassify its outstanding shares of Common Stock (other than by way of
subdivision or reduction of such shares), or if there shall occur any share exchange pursuant to which all of the outstanding shares of Common Stock are converted into other securities or property, then each holder of a Warrant shall thereafter be
entitled to receive consideration, in exchange for such Warrant, equal to the greater of, as determined in the sole discretion of such holder: (x) a warrant to purchase (at the same aggregate exercise price and on the same terms and conditions as
the Warrant surrendered) the number of shares of stock or securities or property of the Company, or of the entity resulting from such transaction, to which a holder of the number of shares of Common Stock delivered upon exercise of such Warrant
would have been entitled upon such transaction had the holder of such Warrant exercised (without regard to any limitations on exercise herein contained) the Warrant on the trading date immediately preceding the public announcement of such
transaction and had such Common Stock been issued and outstanding and had such holder been the holder of record of such Common Stock at the time of such transaction, and the Company shall make lawful provision therefor as a part of such
consolidation, merger or reclassification; and (y) cash paid by the Company in immediately available funds, in an amount equal to the Black-Scholes Amount (as defined herein) times the number of shares of Common Stock for which this Warrant was
exercisable (without regard to any limitations on exercise herein contained) on the date immediately preceding the date of such transaction. 
  
 (ii) If, in connection with a business acquisition or a series of business acquisitions occurring within any six (6) month period, the Company shall
issue capital stock representing in excess of twenty percent (20%) of its Common Stock outstanding immediately prior to such issuance (determined on a fully-diluted basis), or if the Company shall sell all or substantially all of its assets, then
each Holder of a Warrant shall, at the option of each such Holder, be entitled to receive consideration, in exchange for such Warrant held by it, in cash paid by the Company from immediately available funds, in an amount equal to the Black-Scholes
Amount times the number of shares of Common Stock for which this Warrant was exercisable (without regard to any limitations on exercise herein contained) on the date immediately preceding the date of such transaction. 
  
 (iii) No sooner than ten (10) days nor later than five (5) days prior to the
consummation of any transaction of a sort described in paragraphs (i) or (ii) above, but not prior to the public announcement of any such transaction, the Company shall deliver written notice (“Notice of Major Transaction”) to the Holder
of this Warrant, which Notice of Major Transaction shall be deemed to have been delivered one (1) business day following the 

  

 8 

 
Company’s sending such notice by telecopy (provided that the Company sends a confirming copy of such notice on the same day by overnight courier) of
such Notice of Major Transaction. Such Notice of Major Transaction shall indicate the amount and type of the consideration which the Holder would receive under clause (i) of this Section 4(e). 
  
 For purposes of this Section 4(e), the “Black-Scholes Amount”
shall be an amount determined by calculating the “Black-Scholes” value of an option to purchase one share of Common Stock on the applicable page on the Bloomberg online page, using the following variable values: (i) the current market
price of the Common Stock equal to the closing trade price on the last trading day before the date of the Notice of the Major Transaction; (ii) volatility of the Common Stock equal to the volatility of the common Stock during the 100 trading day
period preceding the date of the Notice of the Major Transaction; (iii) a risk free rate equal to the interest rate on the United States treasury bill or treasury note with a maturity corresponding to the remaining term of this Warrant on the date
of the Notice of the Major Transaction; and (iv) an exercise price equal to the Exercise Price on the date of the Notice of the Major Transaction. In the event such calculation function is no longer available utilizing the Bloomberg online page, the
Holder shall calculate such amount in its sole discretion using the closest available alternative mechanism and variable values to those available utilizing the Bloomberg online page for such calculation function. 
  
 (iv) Notwithstanding anything in this Section 4(e) which may be to the
contrary, if following a transaction which triggers the applicability of paragraphs (i) or (ii), the Common Stock remains outstanding or holders of Common Stock receive any common stock or substantially similar equity interest, in each of the
foregoing cases which is publicly traded, each Holder may, at its option in lieu of receiving the consideration set forth in paragraphs (i) or (ii) above, as applicable, retain its Warrants and such Warrants shall continue to apply to such common
stock or shall apply, as nearly as practicable, to such other common stock or equity interest, as the case may be. 
  
 (f) Distribution of Assets. In case the Company shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of
Common Stock as a partial liquidating dividend, by way of return of capital or otherwise (including any dividend or distribution to the Company’s stockholders of cash or shares (or rights to acquire shares) of capital stock of a subsidiary) (a
“Distribution”), at any time after the initial issuance of this Warrant, then the Holder shall be entitled upon exercise of this Warrant for the purchase of any or all of the shares of Common Stock subject hereto, to receive the amount of
such assets (or rights) which would have been payable to the Holder had such Holder been the holder of such shares of Common Stock on the record date for the determination of stockholders entitled to such Distribution. 
  
 (g) Notices of Adjustment. Upon the occurrence of any event which requires
any adjustment of the Exercise Price pursuant to this Section 4, then, and in each such case, the Company shall give notice thereof to the Holder, which notice shall state the Exercise Price resulting from such adjustment and the increase or
decrease in the number of Warrant Shares purchasable at such price upon exercise, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Such calculation shall be certified 

  

 9 

 
by the Chief Financial Officer of the Company. 
  
 (h) Minimum Adjustment of Exercise Price. No adjustment of the Exercise Price shall be made in an amount of less than 1% of the Exercise Price in effect
at the time such adjustment is otherwise required to be made, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustments so carried
forward, shall amount to not less than 1% of such Exercise Price. 
  
 (i) Other Notices. In case at any time: 
  
 (i) the
Company shall declare any dividend upon the Common Stock payable in shares of stock of any class or make any other distribution to the holders of the Common Stock; 
  
 (ii) the Company shall offer for subscription pro rata to the holders of the Common Stock any additional shares of stock of
any class or other rights; 
  
 (iii) there shall be any capital
reorganization of the Company, or reclassification of the Common Stock, or consolidation or merger of the Company with or into, or sale of all or substantially all of its assets to, another corporation or entity; or 
  
 (iv) there shall be a voluntary or involuntary dissolution, liquidation or
winding-up of the Company; then, in each such case, the Company shall give to the Holder (a) notice of the date on which the books of the Company shall close or a record shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the holders of Common Stock entitled to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up and
(b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, notice of the date (or, if not then known, a reasonable approximation thereof by the Company) when the same shall take
place. Such notice shall also specify the date on which the holders of Common Stock shall be entitled to receive such dividend, distribution, or subscription rights or to exchange their Common Stock for stock or other securities or property
deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding-up, as the case may be. Such notice shall be given at least ten (10) days prior to the record date or the date on which the
Company’s books are closed in respect thereto, but in no event earlier than public announcement of such proposed transaction or event. Failure to give any such notice or any defect therein shall not affect the validity of the proceedings
referred to in clauses (i), (ii), (iii) and (iv) above. 
  
 (j)
Certain Definitions. 
  
 (i) “Market Price” means, as
of the date of determination, the average of the five (5) lowest volume weighted average prices (“VWAPs”) for the fifteen (15) consecutive trading dates immediately preceding, but not including, the determination date, as reported by
Bloomberg. 
  

 10 

 (iii) “Common Stock,” for purposes of this Section 4, includes the Common Stock and any
additional class of stock of the Company having no preference as to dividends or distributions on liquidation, provided that the shares purchasable pursuant to this Warrant shall include only Common Stock in respect of which this Warrant is
exercisable, or shares resulting from any subdivision or combination of such Common Stock, or in the case of any reorganization, reclassification, consolidation, merger, or sale of the character referred to in Section 4(e) hereof, the stock or other
securities or property provided for in such Section. 
  
 5.
[Intentionally Deleted] 
  
 6. Issue Tax. The issuance of
certificates for Warrant Shares upon the exercise of this Warrant shall be made without charge to the Holder for such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the Holder. 
  
 7. No Rights or Liabilities as a Stockholder. This Warrant shall not entitle the Holder to any voting rights or other rights as a stockholder of the
Company. No provision of this Warrant, in the absence of affirmative action by the Holder to purchase Warrant Shares, and no mere enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the
Exercise Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 
  
 8. Transfer, Exchange and Replacement of Warrant. 
  
 (a) Transfer. This Warrant and the rights granted to the Holder are 

  

 11 

 
transferable, in whole or in part, upon surrender of this Warrant, together with a properly executed assignment in the Form of Assignment attached hereto as
Exhibit 2, at the office or agency of the Company referred to in Section 8(e) below, provided, however, that any transfer or assignment shall be subject to the provisions of Section 5.1 and 5.2 of the Securities Purchase Agreement. Until due
presentment for registration of transfer on the books of the Company, the Company may treat the registered holder hereof as the owner and holder hereof for all purposes, and the Company shall not be affected by any notice to the contrary.
Notwithstanding anything to the contrary contained herein, the registration rights described in Section 9 hereof are assignable only in accordance with the provisions of the Registration Rights Agreement. In addition, this Warrant may be pledged,
and all rights of the Holder under this Warrant may be assigned, without further consent of the Company, to a bona fide pledgee, subject to the provisions of this Warrant and the Securities Purchase Agreement, including, without limitation, this
Section 8(a). 
  
 (b) Warrant Exchangeable for Different
Denominations. This Warrant is exchangeable, upon the surrender hereof by the Holder at the office or agency of the Company referred to in Section 8(e) below, for new Warrants, in the form hereof, of different denominations representing in the
aggregate the right to purchase the number of shares of Common Stock which may be purchased hereunder, each of such new Warrants to represent the right to purchase such number of shares as shall be designated by the Holder at the time of such
surrender. 
  
 (c) Replacement of Warrant. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant or, in the case of any such loss, theft, or destruction, upon delivery, of an indemnity agreement reasonably satisfactory in form and
amount to the Company, or, in the case of any such mutilation, upon surrender and cancellation of this Warrant, the Company, at its expense, will execute and deliver, in lieu thereof, a new Warrant or Warrants, in the form hereof, in such
denominations as Holder may request representing in the aggregate the right to purchase the number of shares of Common Stock which may be purchased hereunder. 
  

(d) Cancellation; Payment of Expenses. Upon the surrender of this Warrant in connection with any transfer, exchange, or replacement as provided in this
Section 8, this Warrant shall be promptly canceled by the Company. The Company shall pay all issuance taxes (other than securities transfer taxes) and charges payable in connection with the preparation, execution, and delivery of Warrants pursuant
to this Section 8. 
  
 (e) Warrant Register. The Company shall
maintain, at its principal executive offices (or such other office or agency of the Company as it may reasonably designate by notice to the Holder), a register for this Warrant, in which the Company shall record the name and address of the person in
whose name this Warrant has been issued, as well as the name and address of each transferee and each prior owner of this Warrant. 
  
 (f) Additional Restriction on Exercise. Notwithstanding anything to the contrary contained herein, this Warrant shall not be exercisable by the Holder to
the extent (but only to the extent) that, if exercisable by Holder, Holder, any of its affiliates, or any other party 

  

 12 

 
which may be deemed to be acting as a group in concert with Holder or any of its affiliates for the purposes of Section 13(d) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”) would beneficially own in excess of 4.9% (the “Applicable Percentage”) of the outstanding shares of Common Stock. To the extent the above limitation applies, the determination of whether
the Warrants shall be exercisable (vis-a-vis other convertible, exercisable or exchangeable securities owned by Holder) and of which Warrants shall be exercisable (as among Warrants) shall, subject to such aggregate percentage limitation, be
determined on the basis of first submission to the Company for conversion or exercise or exchange, as the case may be. No prior inability to exercise Warrants pursuant to this paragraph shall have any effect on the applicability of the provisions of
this paragraph with respect to any subsequent determination of exercisability. For the purposes of this paragraph, beneficial ownership and all determinations and calculations, including without limitation, with respect to calculations of percentage
ownership, shall be determined in accordance with Section 13(d) of the Exchange Act, and Regulation 13D and G thereunder. The provisions of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms this
Section 8(f) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Applicable Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable
to properly give effect to such Applicable Percentage limitation. 
  
 9. Registration Rights. The Holder of this Warrant (and certain assignees thereof) is entitled to the benefit of such registration rights in respect of the Warrant Shares as are set forth in the Registration Rights Agreement. 
  
 10. Notices. Any notice herein required or permitted to be given shall be in
writing and may be personally served or delivered by courier or by confirmed telecopy, and shall be deemed delivered at the time and date of receipt (which shall include telephone line facsimile transmission). The addresses for such communications
shall be: 
  
 If to the Company: 
  
 Private Media Group, Inc. 
 Carretera de Rubi 22-26, 08190 Sant Cugat del Valles 
 Barcelona, Spain 
 Telecopy: (34) 93-589-5400 
 Attention: Chief Financial Officer 
  
 with a copy to: 
  
 Guzik & Associates 
 11355 West Olympic Blvd., Third Floor 
 Los Angeles, California 90064 
 Telecopy: 310-914-8606 
 Attention: Samuel S. Guzik, Esq. 
  
 and if to the Holder, at such address as Holder shall have provided in writing to the Company, or at such other address as each such party furnishes by notice given in
accordance with this Section 10. 
  

 13 

 11. Governing Law; Jurisdiction. This Warrant shall be governed by and construed in accordance with the
laws of the State of New York applicable to contracts made and to be performed in the State of New York. The parties hereto irrevocably consent to the jurisdiction of the United States federal courts located in the Southern District in the State of
New York and the state courts located in the County of New York in the State of New York in any suit or proceeding based on or arising under this Agreement or the transactions contemplated hereby and irrevocably agree that all claims in respect of
such suit or proceeding may be determined in such courts. The Company irrevocably waives the defense of an inconvenient forum to the maintenance of such suit or proceeding. The Company further agrees that service of process upon the Company mailed
by the first class mail shall be deemed in every respect effective service of process upon the Company in any suit or proceeding arising hereunder. Nothing herein shall affect the Holder’s right to serve process in any other manner permitted by
law. A final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. The Company irrevocably waives its right to a jury trial in
any such suit or proceeding. 
  
 12. Miscellaneous. 
  
 (a) Amendments. This Warrant and any provision hereof may only be amended by
an instrument in writing signed by the Company and the Holder. 
  
 (b) Descriptive Headings. The descriptive headings of the several Sections of this Warrant are inserted for purposes of reference only, and shall not affect the meaning or construction of any of the provisions hereof. 
  
 (c) Cashless Exercise. Notwithstanding anything to the contrary contained in
this Warrant, this Warrant may be exercised by presentation and surrender of this Warrant to the Company at its principal executive offices with a written notice of the Holder’s intention to effect a cashless exercise, including a calculation
of the number of shares of Common Stock to be issued upon such exercise in accordance with the terms hereof (a “Cashless Exercise”). In the event of a Cashless Exercise, in lieu of paying the Exercise Price in cash, the Holder shall
surrender this Warrant for the number of shares of Common Stock determined by multiplying the number of Warrant Shares to which it would otherwise be entitled by a fraction, the numerator of which shall be the difference between the then current
fair value per share of the Common Stock and the then effective Exercise Price, and the denominator of which shall be such then current fair value per share of the Common Stock. For purposes of this Section 12(c), the “fair value” per
share of Common Stock shall be the average of the closing prices, as reported by Bloomberg, for the five (5) consecutive trading days immediately preceding, but not including, the date of determination. 
  
 (d) Assignability. This Warrant shall be binding upon the Company and its
successors and assigns and shall inure to the benefit of Holder and its successors and assigns. The Holder shall notify the Company upon the assignment of this Warrant. 
  

 14 

 IN WITNESS WHEREOF, the Company has caused this Series A Warrant to be signed by its duly authorized
officer. 
  

	 PRIVATE MEDIA GROUP, INC.

	
	 By:

	 Name:

	 Title:

  

 15 

 Exhibit 1 
  
 FORM OF EXERCISE AGREEMENT 
  
 (To be Executed by the Holder in order to Exercise the Warrant) 
  
 The undersigned hereby irrevocably exercises the right to purchase              of the
shares of common stock of PRIVATE MEDIA GROUP, INC., a Nevada corporation (the “Company”), evidenced by the attached Warrant, and [herewith makes payment of the Exercise Price with respect to such shares in full/ elects to effect a
Cashless Exercise pursuant to the terms of the Warrant], all in accordance with the conditions and provisions of said Warrant. 
  
 (i) The undersigned agrees not to offer, sell, transfer or otherwise dispose of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. 
  
 (ii) The undersigned requests that stock certificates for such shares be issued, and a Warrant representing any unexercised portion hereof be issued,
pursuant to the Warrant in the name of the Holder (or such other person or persons indicated below) and delivered to the undersigned (or designee(s) at the address (or addresses) set forth below: 
  

	 Date:

	 	

	 	 	 Signature of Holder

		
	 	 	 Name of Holder (Print)

		
	 	 	 Address:

		
	 	 	

		
	 	 	

  

 16 

 Exhibit 2 
  
 FORM OF ASSIGNMENT 
  
 FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers all rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock covered thereby set forth hereinbelow, to: 
  

	 Name of Assignee

	 	 Address

	 	 No. of Shares

	 	 	 	 	 
	 	 	 	 	

  
 and hereby irrevocably constitutes and
appoints
                                        
as agent and attorney-in-fact to transfer said Warrant on the books of the within-named corporation, with full power of substitution in the premises. 
  
 Date:                     ,
             
  

	In the presence of
	  

  

	 Name:
	 	  

	 Signature:
	 	  

	 	 	Title of Signing Officer or
	 	 	Agent (if any):
	  

	 Address:
	 	  

	  

	 Note:    The above signature should correspond exactly with the name on the face of the within
Warrant.

  

 17 

 EXHIBIT C 
  

SERIES B WARRANT 
  
 NO. B-             
  
 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS, OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT
TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. 
  
 Right to Purchase              Shares of 
 Common Stock, par value $.001 per share 
  
 Date: [First Closing Date]

  
 PRIVATE MEDIA GROUP, INC. 
 SERIES B WARRANT 
  
 THIS CERTIFIES THAT, for value received,
                     (together with any transferees as permitted under this Series B Warrant (this “Warrant”), the
“Holder”), or its registered assigns, is entitled to purchase from PRIVATE MEDIA GROUP, INC., a Nevada corporation (the “Company”), at any time or from time to time during the period specified in Section 2 hereof,
                     (            ) fully paid and nonassessable shares of
the Company’s common stock, par value $.001 per share (the “Common Stock”), at an exercise price of $1.00 per share (the “Exercise Price”), subject to adjustment as provided in Section 4 hereof. This Warrant is being issued
pursuant to that certain Securities Purchase Agreement dated as of September 10, 2003 between the Company and the Holder (the “Securities Purchase Agreement”). The number of shares of Common Stock issuable upon the exercise of the Warrants
hereunder (the “Warrant Shares”) and the Exercise Price are subject to the antidilution provisions as provided in Section 4 hereof. The term “Warrants” means this Warrant and the other warrants of the Company issued pursuant to
the terms of the Securities Purchase Agreement. 
  
 Capitalized
terms not defined herein shall have the meanings set forth in the Securities Purchase Agreement. 
  
 The term “Closing Bid Price” means, for any security as of any date, the closing bid price of such security on the principal securities exchange
or trading market where such security is listed or traded as reported by Bloomberg Financial Markets or a comparable reporting service of national reputation reasonably selected by the Company if Bloomberg Financial Markets is not then reporting
closing bid prices of such security (collectively, “Bloomberg”), or if the foregoing 

 
does not apply, the last reported sale price of such security in the over-the-counter market on the electronic bulletin board of such security as reported by
Bloomberg, or, if no sale price is reported for such security by Bloomberg, the average of the bid prices of any market makers for such security as reported in the “pink sheets” by the National Quotation Bureau, Inc. If the Closing Bid
Price cannot be calculated for such security on such date on any of the foregoing bases, the Closing Bid Price of such security on such date shall be the fair market value as reasonably determined by an independent investment banking firm reasonably
selected by the Company with the costs of such appraisal to be borne by the Company. 
  
 This Warrant is subject to the following terms, provisions, and conditions: 
  
 1. Mechanics of Exercise. Subject to the provisions hereof, including, without limitation, the limitations contained in Section 8(f) hereof, this Warrant
may be exercised as follows: 
  
 (a) Manner of Exercise. Subject
to Section 2(b) hereof, this Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant (or evidence of loss, theft, destruction or mutilation thereof in accordance with Section 8(c) hereof), together with a
completed exercise agreement in the Form of Exercise Agreement attached hereto as Exhibit 1 (the “Exercise Agreement”), to the Company at the Company’s principal executive offices (or such other office or agency of the Company as it
may reasonably designate by notice to the Holder), and upon (i) payment to the Company in cash, by certified or official bank check or by wire transfer for the account of the Company, of the Exercise Price for the Warrant Shares specified in the
Exercise Agreement or (ii) if the Holder elects to effect a Cashless Exercise (as defined in Section 12(c) below), delivery to the Company of a written notice of an election to effect a Cashless Exercise for the Warrant Shares specified in the
Exercise Agreement. Notwithstanding anything in the foregoing which may be to the contrary, the exercise shall become effective and the Warrant Shares so purchased shall be deemed to be issued to the Holder or Holder’s designees, as the record
owner of such shares, as of the date on which the completed Exercise Agreement is delivered to the Company, so long as this Warrant and payment of Exercise Price or notice of Cashless Exercise is delivered to the Company within three (3) business
days after such date. 
  
 (b) Issuance of Certificates. Subject to
Section 1(c), certificates for the Warrant Shares so purchased, representing the aggregate number of shares specified in the Exercise Agreement, shall be delivered to the Holder within a reasonable time, not exceeding three (3) business days, after
this Warrant shall have been so exercised (the “Delivery Period”). The certificates so delivered shall be in such denominations as may be requested by the Holder and shall be registered in the name of Holder or such other name as shall be
designated by such Holder; provided, however, if any certificate for Warrant Shares is to be issued in a name other than that in which the Warrant surrendered in exchange therefor is registered, it shall be a condition of the issuance thereof that
the Warrant so surrendered is properly endorsed and otherwise in proper form for transfer and that the person requesting such exchange will pay to the Company any transfer or other taxes required by reason of the issuance of a certificate for shares
of the Company’s Common Stock in any name other than that of the registered Holder of the Warrant surrendered, or establish to the satisfaction of the Company that such tax has been paid or is not payable. If this Warrant shall have been
exercised only in part, then, unless this 

  

 2 

 
Warrant has expired, the Company shall, at its expense, at the time of delivery of such certificates, deliver to the Holder a new Warrant representing the
number of shares with respect to which this Warrant shall not then have been exercised. In lieu of delivering physical certificates representing the Common Stock issuable upon the exercise of this Warrant, upon request of the Holder, the Company
shall use its commercially reasonable efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon exercise to the Holder by crediting the account of the Holder’s prime broker with DTC through its Deposit
Withdrawal Agent Commission (“DWAC”) system or other electronic delivery system selected by the Holder. 
  
 (c) Exercise Disputes. In the case of any dispute with respect to an exercise, the Company shall promptly issue such number of shares of Common Stock as
are not disputed in accordance with Section 1(b) hereof. If such dispute involves the calculation of the Exercise Price, the Company shall submit the disputed calculations to a nationally recognized independent accounting firm (selected by the
Company and reasonably acceptable to Holder) via facsimile within two (2) business days of receipt of the Exercise Agreement. The accounting firm shall audit the calculations and notify the Company and the converting Holder of the results no later
than two (2) business days from the date it receives the disputed calculations. The accounting firm’s calculation shall be deemed conclusive, absent manifest error. The Company shall then issue the appropriate number of shares of Common Stock
in accordance with Section 1(b) hereof. 
  
 (d) Fractional Shares.
No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but the Company shall pay a cash adjustment in respect of any fractional share which would otherwise be issuable in an amount equal to the same fraction of the
Market Price of a share of Common Stock (as determined for exercise of this Warrant into whole shares of Common Stock); provided that in the event that sufficient funds are not legally available for the payment of such cash adjustment, any
fractional shares of Common Stock issuable shall be rounded up to the next whole number. 
  
 (e) The Company understands that a delay in the delivery of the shares of Common Stock in the form required pursuant to this Warrant beyond the expiration of the Delivery Period could result in economic loss to the
Holder. If the Company fails to deliver to the Holder a certificate or certificates representing the Shares of Common Stock on or before the expiration of the Delivery Period, then the Holder will have the right to rescind such exercise. In addition
to any other rights available to the Holder, if the Company fails to deliver to the Holder a certificate or certificates representing the Warrant Shares pursuant to an exercise on or before the expiration of the Delivery Period, and if after such
date the Holder is required by its broker to purchase (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such
exercise (a “Buy-In”), then the Company shall (1) pay in cash to the Holder the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y)
the amount obtained by multiplying (A) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (B) the price at which the sell order giving rise to such purchase obligation
was executed, and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not 

  

 3 

 
honored or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and
delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (1) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in
respect of the Buy-In, together with applicable confirmations and other evidence reasonably requested by the Company. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant
to the terms hereof. 
  
 2. Period; Conditions to Exercise.

  
 (a) Subject to Section 2(b) hereof, this Warrant is
exercisable at any time after the earliest to occur of subsections (i) - (iii) below and before 5:00 P.M., Eastern Time on [             , 2004] [the first (1st) anniversary of the First Closing Date] (the “Exercise Period”): 
  
 (i) Adverse Change in Market Price. The Market Price of the Common Stock on
            , 2004 [the 6 month anniversary of the First Closing Date] is less than the Market Price on
                         , 2003 [the First Closing Date] (as appropriately and equitably adjusted for any
subdivision or combination of Common Stock); or 
  
 (ii) Material
Adverse Effect. Upon any change constituting a Material Adverse Effect (as defined in the Securities Purchase Agreement) on the Company during the Exercise Period; or 
  
 (iii) Issuance of Certain Securities. The Company (x) issues any Common Stock at a price less than $2.00 per share (as
appropriately and equitably adjusted for any subdivision or combination of Common Stock), or (y) issues any convertible securities exercisable or convertible into Common Stock at an exercise or convertible price less than $2.00 per share (as
appropriately and equitably adjusted for any subdivision or combination of Common Stock), or (z) amends the terms of any convertible securities exercisable or convertible into Common Stock to provide for an exercise or convertible price less than
$2.00 per share (as appropriately and equitably adjusted for any subdivision or combination of Common Stock), except in any such case for issuances (or amendments) (a) upon the exercise of any warrants, options or convertible securities granted,
issued and outstanding and on the same terms in effect on the date of issuance of this Warrant; (b) upon the grant, purchase or exercise of any stock or 

  

 4 

 
options which may hereafter be granted, purchased or exercised under any of the Company’s stock option plans or employee stock purchase plan now
existing or to be implemented in the future, so long as the issuance of such stock or options is approved by a majority of the independent members of the Board of Directors of the Company or a majority of the members of a committee of independent
directors established for such purpose; (c) upon the exercise of the Warrants pursuant to their terms, or (d) upon the issuance of securities otherwise to Purchasers in the Offering pursuant to the Securities Purchase Agreement. 
  
 3. Certain Agreements of the Company. The Company hereby covenants and agrees
as follows: 
  
 (a) Shares to be Fully Paid. All Warrant Shares
will, upon issuance in accordance with the terms of this Warrant, be validly issued, fully paid, and non-assessable and free from all taxes, liens, claims and encumbrances. 
  
 (b) Reservation of Shares. During the Exercise Period, the Company shall at all times have authorized, and reserved for the
purpose of issuance upon exercise of this Warrant, a sufficient number of shares of Common Stock to provide for the exercise of this Warrant. 
  
 (c) Listing. The Company shall promptly secure the listing of the shares of Common Stock issuable upon exercise of this Warrant upon the Nasdaq National
Market, the Nasdaq SmallCap Market, the New York Stock Exchange or the American Stock Exchange as required by Section 4.8 of the Securities Purchase Agreement and upon each national securities exchange or automated quotation system, if any, upon
which shares of Common Stock are then listed or become listed and shall maintain, such listing of all shares of Common Stock from time to time issuable upon the exercise of this Warrant. 
  
 (d) Certain Actions Prohibited. The Company will not, by amendment of its charter or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such actions as may reasonably be requested by the Holder of this Warrant in order to protect the exercise privilege of the Holder of this Warrant,
consistent with the tenor and purpose of this Warrant. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise
Price then in effect, and (ii) will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. 

 
 4. Antidilution Provisions. During the Exercise Period, the Exercise Price
shall be subject to adjustment from time to time as provided in this Section 4. In the event that any adjustment of the Exercise Price as required herein results in a fraction of a cent, such Exercise Price shall be rounded up or down to the nearest
cent. 
  
 (a) Adjustment for Certain Share Issuances. Except as
otherwise provided in Section 4(b)(vi), 4(c) and 4(e) hereof, if the Company shall at any time prior to the exercise in 

  

 5 

 
full of this Warrant issues or sells, or in accordance with Section 4(b) hereof is deemed to have issued and sold, any shares of Common Stock to a person
other than the Holder (otherwise than pursuant to Section 4(c) - (f) below) for a consideration per share (the “Offer Price”) less than the Exercise Price in effect at the time of such issuance, then, and thereafter successively upon each
such issue, the Exercise Price shall be reduced as follows: (i) the number of shares of Common Stock outstanding immediately prior to such issue shall be multiplied by the Exercise Price in effect at the time of such issue and the product shall be
added to the aggregate consideration, if any, received by the Company upon such issue of additional shares of Common Stock; and (ii) the sum so obtained shall be divided by the number of shares of Common Stock outstanding immediately after such
issue. The resulting quotient shall be the adjusted Exercise Price. 
  
 (b) Effect on Exercise Price of Certain Events. For purposes of determining the adjusted Exercise Price under Section 4(a) hereof, the following will be applicable: 
  
 (i) Issuance of Rights or Options. If the Company in any manner issues or grants any warrants, rights or options, whether
or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities exercisable, convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights and options to purchase
Common Stock or Convertible Securities are hereinafter referred to as “Options”), and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Exercise Price on the date of issuance
(“Below Market Options”), then the maximum total number of shares of Common Stock issuable upon the exercise of all such Below Market Options (assuming full exercise, conversion or exchange of Convertible Securities, if applicable) will,
as of the date of the issuance or grant of such Below Market Options, be deemed to be outstanding and to have been issued and sold by the Company for such price per share. For purposes of the preceding sentence, the price per share for which Common
Stock is issuable upon the exercise of such Below Market Options is determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the issuance or granting of such Below Market Options, plus the
minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of all such Below Market Options, plus, in the case of Convertible Securities issuable upon the exercise of such Below Market Options, the minimum
aggregate amount of additional consideration payable upon the exercise, conversion or exchange thereof at the time such Convertible Securities first become exercisable, convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the exercise of all such Below Market Options (assuming full conversion of Convertible Securities, if applicable). Except as contemplated hereinbelow, no further adjustment to the Exercise Price will be made upon the
actual issuance of such Common Stock upon the exercise of such Below Market Options or upon the exercise, conversion or exchange of Convertible Securities issuable upon exercise of such Below Market Options. 
  
 (ii) Issuance of Convertible Securities. 
  
 (A) If the Company in any manner issues or sells any 

  

 6 

 
Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options) and the price per share
for which Common Stock is issuable upon such exercise, conversion or exchange is less than the Exercise Price on the date of issuance, then the maximum total number of shares of Common Stock issuable upon the exercise, conversion or exchange of all
such Convertible Securities will, as of the date of the issuance of such Convertible Securities, be deemed to be outstanding and to have been issued and sold by the Company for such price per share. For the purposes of the preceding sentence, the
price per share for which Common Stock is issuable upon such exercise, conversion or exchange is determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the issuance or sale of all such
Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise, conversion or exchange thereof at the time such Convertible Securities first become exercisable, convertible or
exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise, conversion or exchange of all such Convertible Securities. Except as contemplated hereinbelow, no further adjustment to the Exercise Price will be
made upon the actual issuances of such Common Stock upon exercise, conversion or exchange of such Convertible Securities. 
  
 (iii) Change in Option Price or Conversion Rate. If there is a change at any time in (i) the amount of additional consideration payable to the Company
upon the exercise of any Options; (ii) the amount of additional consideration, if any, payable to the Company upon the exercise, conversion or exchange or any Convertible Securities; or (iii) the rate at which any Convertible Securities are
convertible into or exchangeable for Common Stock (other than under or by reason of provisions designed to protect against dilution), the Exercise Price in effect at the time of such change will be readjusted to the Exercise Price which would have
been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. 
  
 (iv) Treatment of Expired Options and Unexercised Convertible Securities.
If, in any case, the total number of shares of Common Stock issuable upon exercise of any Options or upon exercise, conversion or exchange of any Convertible Securities is not, in fact, issued and the rights to exercise such Option or to exercise,
convert or exchange such Convertible Securities shall have expired or terminated, the Exercise Price then in effect will be readjusted to the Exercise Price which would have been in effect at the time of such expiration or termination had such
Options or Convertible Securities, to the extent outstanding immediately prior to such expiration or termination (other than in respect of the actual number of shares of Common Stock issued upon exercise or conversion thereof), never been issued.

  
 (v) Calculation of Consideration Received. For purposes of
any computation respecting consideration received pursuant to Section 4(a), the following shall apply: 

  

 7 

	 	(A)	in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any
commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith; and 

  

	 	(B)	in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the Board of Directors of Company (irrespective of the accounting treatment thereof). 

  
 (vi) Exceptions to Adjustment of Exercise Price. No adjustment to the Exercise Price will be made (a) pursuant to options, warrants, or other obligations
to issue shares outstanding on the date hereof as disclosed to Holder in writing; or (b) pursuant to options that may be issued under any employee incentive stock option, any qualified stock option plan, and/or any other stock option plan adopted by
the Company. 
  
 (c) Subdivision or Combination of Common Stock.
If the Company, at any time after the initial issuance of this Warrant, subdivides (by any stock split, stock dividend, recapitalization, reorganization, reclassification or otherwise) its shares of Common Stock into a greater number of shares,
then, after the date of record for effecting such subdivision, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company, at any time after the initial issuance of this Warrant, combines (by
reverse stock split, recapitalization, reorganization, reclassification or otherwise) its shares of Common Stock into a smaller number of shares, then, after the date of record for effecting such combination, the Exercise Price in effect immediately
prior to such combination will be proportionately increased. 
  
 (d) Adjustment in Number of Shares. Upon each adjustment of the Exercise Price pursuant to the provisions of Section 4(c), the number of shares of Common Stock issuable upon exercise of this Warrant shall be adjusted by multiplying a number
equal to the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable upon exercise of this Warrant immediately prior to such adjustment and dividing the product so obtained by the adjusted
Exercise Price. 
  
 (e) Major Transactions. 
  
 (i) If the Company shall consolidate with or merge into any corporation or
reclassify its outstanding shares of Common Stock (other than by way of subdivision or reduction of such shares), or if there shall occur any share exchange pursuant to which all of the outstanding shares of Common Stock are converted into other
securities or property, then each holder of a Warrant shall thereafter be entitled to receive consideration, in exchange for such Warrant, equal to the greater of, as determined in the sole discretion of such holder: (x) a warrant to purchase (at
the same aggregate exercise price and on the same terms and 

  

 8 

 
conditions as the Warrant surrendered) the number of shares of stock or securities or property of the Company, or of the entity resulting from such
transaction, to which a holder of the number of shares of Common Stock delivered upon exercise of such Warrant would have been entitled upon such transaction had the holder of such Warrant exercised (without regard to any limitations on exercise
herein contained) the Warrant on the trading date immediately preceding the public announcement of such transaction and had such Common Stock been issued and outstanding and had such holder been the holder of record of such Common Stock at the time
of such transaction, and the Company shall make lawful provision therefor as a part of such consolidation, merger or reclassification; and (y) cash paid by the Company in immediately available funds, in an amount equal to the Black-Scholes Amount
(as defined herein) times the number of shares of Common Stock for which this Warrant was exercisable (without regard to any limitations on exercise herein contained) on the date immediately preceding the date of such transaction. 
  
 (ii) If, in connection with a business acquisition or a series of business
acquisitions occurring within any six (6) month period, the Company shall issue capital stock representing in excess of twenty percent (20%) of its Common Stock outstanding immediately prior to such issuance (determined on a fully-diluted basis), or
if the Company shall sell all or substantially all of its assets, then each Holder of a Warrant shall, at the option of each such Holder, be entitled to receive consideration, in exchange for such Warrant held by it, in cash paid by the Company from
immediately available funds, in an amount equal to the Black-Scholes Amount times the number of shares of Common Stock for which this Warrant was exercisable (without regard to any limitations on exercise herein contained) on the date immediately
preceding the date of such transaction. 
  
 (iii) No sooner than
ten (10) days nor later than five (5) days prior to the consummation of any transaction of a sort described in paragraphs (i) or (ii) above, but not prior to the public announcement of any such transaction, the Company shall deliver written notice
(“Notice of Major Transaction”) to the Holder of this Warrant, which Notice of Major Transaction shall be deemed to have been delivered one (1) business day following the Company’s sending such notice by telecopy (provided that the
Company sends a confirming copy of such notice on the same day by overnight courier) of such Notice of Major Transaction. Such Notice of Major Transaction shall indicate the amount and type of the consideration which the Holder would receive under
clause (i) of this Section 4(e). 
  
 For purposes of this Section
4(e), the “Black-Scholes Amount” shall be an amount determined by calculating the “Black-Scholes” value of an option to purchase one share of Common Stock on the applicable page on the Bloomberg online page, using the following
variable values: (i) the current market price of the Common Stock equal to the closing trade price on the last trading day before the date of the Notice of the Major Transaction; (ii) volatility of the Common Stock equal to the volatility of the
common Stock during the 100 trading day period preceding the date of the Notice of the Major Transaction; (iii) a risk free rate equal to the interest rate on the United States treasury bill or treasury note with a maturity corresponding to the
remaining term of this Warrant on the date of the Notice of the Major Transaction; and (iv) an exercise price equal to the Exercise Price on the date of the Notice of the Major Transaction. In the event such calculation function is no longer
available utilizing the Bloomberg online page, the Holder shall calculate such amount in its sole discretion using the closest available alternative 

  

 9 

 
mechanism and variable values to those available utilizing the Bloomberg online page for such calculation function. 
  
 (iv) Notwithstanding anything in this Section 4(e) which may be to the
contrary, if following a transaction which triggers the applicability of paragraphs (i) or (ii), the Common Stock remains outstanding or holders of Common Stock receive any common stock or substantially similar equity interest, in each of the
foregoing cases which is publicly traded, each Holder may, at its option in lieu of receiving the consideration set forth in paragraphs (i) or (ii) above, as applicable, retain its Warrants and such Warrants shall continue to apply to such common
stock or shall apply, as nearly as practicable, to such other common stock or equity interest, as the case may be. 
  
 (f) Distribution of Assets. In case the Company shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of
Common Stock as a partial liquidating dividend, by way of return of capital or otherwise (including any dividend or distribution to the Company’s stockholders of cash or shares (or rights to acquire shares) of capital stock of a subsidiary) (a
“Distribution”), at any time after the initial issuance of this Warrant, then the Holder shall be entitled upon exercise of this Warrant for the purchase of any or all of the shares of Common Stock subject hereto, to receive the amount of
such assets (or rights) which would have been payable to the Holder had such Holder been the holder of such shares of Common Stock on the record date for the determination of stockholders entitled to such Distribution. 
  
 (g) Notices of Adjustment. Upon the occurrence of any event which requires
any adjustment of the Exercise Price pursuant to this Section 4, then, and in each such case, the Company shall give notice thereof to the Holder, which notice shall state the Exercise Price resulting from such adjustment and the increase or
decrease in the number of Warrant Shares purchasable at such price upon exercise, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Such calculation shall be certified by the Chief
Financial Officer of the Company. 
  
 (h) Minimum Adjustment of
Exercise Price. No adjustment of the Exercise Price shall be made in an amount of less than 1% of the Exercise Price in effect at the time such adjustment is otherwise required to be made, but any such lesser adjustment shall be carried forward and
shall be made at the time and together with the next subsequent adjustment which, together with any adjustments so carried forward, shall amount to not less than 1% of such Exercise Price. 
  
 (i) Other Notices. In case at any time: 
  
 (i) the Company shall declare any dividend upon the Common Stock payable in
shares of stock of any class or make any other distribution to the holders of the Common Stock; 
  
 (ii) the Company shall offer for subscription pro rata to the holders of the Common Stock any additional shares of stock of any class or other rights;

  

 10 

 (iii) there shall be any capital reorganization of the Company, or reclassification of the Common Stock,
or consolidation or merger of the Company with or into, or sale of all or substantially all of its assets to, another corporation or entity; or 
  
 (iv) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company; 
  
 then, in each such case, the Company shall give to the Holder (a) notice of the date on
which the books of the Company shall close or a record shall be taken for determining the holders of Common Stock entitled to receive any such dividend, distribution, or subscription rights or for determining the holders of Common Stock entitled to
vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up and (b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation
or winding-up, notice of the date (or, if not then known, a reasonable approximation thereof by the Company) when the same shall take place. Such notice shall also specify the date on which the holders of Common Stock shall be entitled to receive
such dividend, distribution, or subscription rights or to exchange their Common Stock for stock or other securities or property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least ten (10) days prior to the record date or the date on which the Company’s books are closed in respect thereto, but in no event earlier than public announcement of such proposed
transaction or event. Failure to give any such notice or any defect therein shall not affect the validity of the proceedings referred to in clauses (i), (ii), (iii) and (iv) above. 
  
 (j) Certain Definitions. 
  
 (v) “Market Price” means, as of the date of determination, the average of the five (5) lowest volume weighted average prices
(“VWAPs”) for the fifteen (15) consecutive trading dates immediately preceding, but not including, the determination date, as reported by Bloomberg. 
  

(ii) “Common Stock,” for purposes of this Section 4, includes the Common Stock and any additional class of stock of the Company having no
preference as to dividends or distributions on liquidation, provided that the shares purchasable pursuant to this Warrant shall include only Common Stock in respect of which this Warrant is exercisable, or shares resulting from any subdivision or
combination of such Common Stock, or in the case of any reorganization, reclassification, consolidation, merger, or sale of the character referred to in Section 4(e) hereof, the stock or other securities or property provided for in such Section.

  
 5. [Intentionally Deleted] 
  

 11 

 6. Issue Tax. The issuance of certificates for Warrant Shares upon the exercise of this Warrant shall be
made without charge to the Holder for such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than the Holder. 
  
 7. No Rights or Liabilities as a Stockholder. This Warrant shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company. No provision of this Warrant, in the absence of affirmative action by the Holder
to purchase Warrant Shares, and no mere enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the Exercise Price or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company. 
  
 8. Transfer, Exchange
and Replacement of Warrant. 
  
 (a) Transfer. This Warrant and
the rights granted to the Holder are transferable, in whole or in part, upon surrender of this Warrant, together with a properly executed assignment in the Form of Assignment attached hereto as Exhibit 2, at the office or agency of the Company
referred to in Section 8(e) below, provided, however, that any transfer or assignment shall be subject to the provisions of Section 5.1 and 5.2 of the Securities Purchase Agreement. Until due presentment for registration of transfer on the books of
the Company, the Company may treat the registered holder hereof as the owner and holder hereof for all purposes, and the Company shall not be affected by any notice to the contrary. Notwithstanding anything to the contrary contained herein, the
registration rights described in Section 9 hereof are assignable only in accordance with the provisions of the Registration Rights Agreement. In addition, this Warrant may be pledged, and all rights of the Holder under this Warrant may be assigned,
without further consent of the Company, to a bona fide pledgee, subject to the provisions of this Warrant and the Securities Purchase Agreement, including, without limitation, this Section 8(a). 
  
 (b) Warrant Exchangeable for Different Denominations. This Warrant is
exchangeable, upon the surrender hereof by the Holder at the office or agency of the Company referred to in Section 8(e) below, for new Warrants, in the form hereof, of different denominations representing in the aggregate the right to purchase the
number of shares of 

  

 12 

 
Common Stock which may be purchased hereunder, each of such new Warrants to represent the right to purchase such number of shares as shall be designated by
the Holder at the time of such surrender. 
  
 (c) Replacement of
Warrant. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant or, in the case of any such loss, theft, or destruction, upon delivery, of an indemnity agreement reasonably
satisfactory in form and amount to the Company, or, in the case of any such mutilation, upon surrender and cancellation of this Warrant, the Company, at its expense, will execute and deliver, in lieu thereof, a new Warrant or Warrants, in the form
hereof, in such denominations as Holder may request representing in the aggregate the right to purchase the number of shares of Common Stock which may be purchased hereunder. 
  
 (d) Cancellation; Payment of Expenses. Upon the surrender of this Warrant in connection with any transfer, exchange, or
replacement as provided in this Section 8, this Warrant shall be promptly canceled by the Company. The Company shall pay all issuance taxes (other than securities transfer taxes) and charges payable in connection with the preparation, execution, and
delivery of Warrants pursuant to this Section 8. 
  
 (e) Warrant
Register. The Company shall maintain, at its principal executive offices (or such other office or agency of the Company as it may reasonably designate by notice to the Holder), a register for this Warrant, in which the Company shall record the name
and address of the person in whose name this Warrant has been issued, as well as the name and address of each transferee and each prior owner of this Warrant. 
  

(f) Additional Restriction on Exercise. Notwithstanding anything to the contrary contained herein, this Warrant shall not be exercisable by the Holder
to the extent (but only to the extent) that, if exercisable by Holder, Holder, any of its affiliates, or any other party which may be deemed to be acting as a group in concert with Holder or any of its affiliates for the purposes of Section 13(d) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”) would beneficially own in excess of 4.9% (the “Applicable Percentage”) of the outstanding shares of Common Stock. To the extent the above limitation applies,
the determination of whether the Warrants shall be exercisable (vis-a-vis other convertible, exercisable or exchangeable securities owned by Holder) and of which Warrants shall be exercisable (as among Warrants) shall, subject to such aggregate
percentage limitation, be determined on the basis of first submission to the Company for conversion or exercise or exchange, as the case may be. No prior inability to exercise Warrants pursuant to this paragraph shall have any effect on the
applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. For the purposes of this paragraph, beneficial ownership and all determinations and calculations, including without limitation, with
respect to calculations of percentage ownership, shall be determined in accordance with Section 13(d) of the Exchange Act, and Regulation 13D and G thereunder. The provisions of this paragraph shall be implemented in a manner otherwise than in
strict conformity with the terms this Section 8(f) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Applicable Percentage beneficial ownership limitation herein contained or to make changes
or supplements necessary or desirable to properly give effect to such Applicable Percentage limitation. 
  

 13 

 9. Registration Rights. The Holder of this Warrant (and certain assignees thereof) is entitled to the
benefit of such registration rights in respect of the Warrant Shares as are set forth in the Registration Rights Agreement. 
  
 10. Notices. Any notice herein required or permitted to be given shall be in writing and may be personally served or delivered by courier or by confirmed
telecopy, and shall be deemed delivered at the time and date of receipt (which shall include telephone line facsimile transmission). The addresses for such communications shall be: 
  
 If to the Company: 
  
 Private Media Group, Inc. 
 Carretera de
Rubi 22-26, 08190 Sant Cugat del Valles 
 Barcelona, Spain 
 Telecopy: (34) 93-589-5400 
 Attention: Chief Financial Officer 
  
 with a copy to: 
  
 Guzik & Associates 
 11355 West Olympic Blvd., Third Floor 
 Los
Angeles, California 90064 
 Telecopy: 310-914-8606 
 Attention: Samuel S. Guzik, Esq. 
  
 and if to the
Holder, at such address as Holder shall have provided in writing to the Company, or at such other address as each such party furnishes by notice given in accordance with this Section 10. 
  
 11. Governing Law; Jurisdiction. This Warrant shall be governed by and construed in accordance with the laws of the State of
New York applicable to contracts made and to be performed in the State of New York. The parties hereto irrevocably consent to the jurisdiction of the United States federal courts located in the Southern District in the State of New York and the
state courts located in the County of New York in the State of New York in any suit or proceeding based on or arising under this Agreement or the transactions contemplated hereby and irrevocably agree that all claims in respect of such suit or
proceeding may be determined in such courts. The Company irrevocably waives the defense of an inconvenient forum to the maintenance of such suit or proceeding. The Company further agrees that service of process upon the Company mailed by the first
class mail shall be deemed in every respect effective service of process upon the Company in any suit or proceeding arising hereunder. Nothing herein shall affect the Holder’s right to serve process in any other manner permitted by law. A final
non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. The Company irrevocably waives its right to a jury trial in any such suit
or proceeding. 
  

 14 

 12. Miscellaneous. 
  
 (a) Amendments. This Warrant and any provision hereof may only be amended by an instrument in writing signed by the Company
and the Holder. 
  
 (b) Descriptive Headings. The descriptive
headings of the several Sections of this Warrant are inserted for purposes of reference only, and shall not affect the meaning or construction of any of the provisions hereof. 
  
 (c) Cashless Exercise. Notwithstanding anything to the contrary contained in this Warrant, this Warrant may be exercised by
presentation and surrender of this Warrant to the Company at its principal executive offices with a written notice of the Holder’s intention to effect a cashless exercise, including a calculation of the number of shares of Common Stock to be
issued upon such exercise in accordance with the terms hereof (a “Cashless Exercise”). In the event of a Cashless Exercise, in lieu of paying the Exercise Price in cash, the Holder shall surrender this Warrant for the number of shares of
Common Stock determined by multiplying the number of Warrant Shares to which it would otherwise be entitled by a fraction, the numerator of which shall be the difference between the then current fair value per share of the Common Stock and the then
effective Exercise Price, and the denominator of which shall be such then current fair value per share of the Common Stock. For purposes of this Section 12(c), the “fair value” per share of Common Stock shall be the average of the closing
prices, as reported by Bloomberg, for the five (5) consecutive trading days immediately preceding, but not including, the date of determination. 
  
 (d) Assignability. This Warrant shall be binding upon the Company and its successors and assigns and shall inure to the benefit of Holder and its
successors and assigns. The Holder shall notify the Company upon the assignment of this Warrant. 
  

 15 

 IN WITNESS WHEREOF, the Company has caused this Series B Warrant to be signed by its duly authorized
officer. 
  

	 PRIVATE MEDIA GROUP, INC.

		
	 By:
	 	  

	 Name:
	 	 
	 Title:
	 	 

  

 16 

 Exhibit 1 
  
 FORM OF EXERCISE AGREEMENT 
  
 (To be Executed by the Holder in order to Exercise the Warrant) 
  
 The undersigned hereby irrevocably exercises the right to purchase              of the
shares of common stock of PRIVATE MEDIA GROUP, INC., a Nevada corporation (the “Company”), evidenced by the attached Warrant, and [herewith makes payment of the Exercise Price with respect to such shares in full/ elects to effect a
Cashless Exercise pursuant to the terms of the Warrant], all in accordance with the conditions and provisions of said Warrant. 
  
 (i) The undersigned agrees not to offer, sell, transfer or otherwise dispose of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. 
  
 (ii) The undersigned requests that stock certificates for such shares be issued, and a Warrant representing any unexercised portion hereof be issued,
pursuant to the Warrant in the name of the Holder (or such other person or persons indicated below) and delivered to the undersigned (or designee(s) at the address (or addresses) set forth below: 
  

	 Date:
	 	  

	  	

	 	 	 	  	 Signature of Holder

			
	 	 	 	  	 Name of Holder (Print)

			
	 	 	 	  	 Address:

			
	 	 	 	  	

			
	 	 	 	  	

  

 17 

 Exhibit 2 
  
 FORM OF ASSIGNMENT 
  
 FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers all rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock covered thereby set forth hereinbelow, to: 
  

	 Name of Assignee

	 	 Address

	 	 No. of Shares

	 	 	 	 	 
	 	 	 	 	

  
 and hereby irrevocably constitutes and
appoints                      as agent and attorney-in-fact to transfer said Warrant on the books of the within-named corporation, with full
power of substitution in the premises. 
  
 Date:
                ,          
  

	In the presence of	  	 	 	 
	  

	  	 	 	 
	 	  	 Name:
	 	  

			
	 	  	 Signature:
	 	  

	 	  	 	 	 Title of Signing Officer or
 Agent (if any):

	 	  	

	 	  	 Address:
	 	  

	 	  	

			
	 	  	 Note:
	 	The above signature should correspond exactly with the name on the face of the within Warrant.

  

 18 

 EXHIBIT “D” 
  
 REGISTRATION RIGHTS AGREEMENT 
  

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”), is made as of September 10, 2003 by and between Private Media Group, Inc., a Nevada
corporation (the “Company”), and the purchaser identified on the signature page of this Agreement (“Initial Purchaser”). 
  
 RECITALS 
  
 A. In connection with the Securities Purchase Agreement dated as of September 10, 2003, by and between the Company and the Initial Purchaser (the
“Securities Purchase Agreement”), the Company has agreed, upon the terms and subject to the conditions contained therein, to issue and sell to the Initial Purchaser its Notes which are convertible into shares of the Company’s Common
Stock (the “Note Shares”) and Warrants (each a “Warrant” and, together with all of the warrants issuable under the Securities Purchase Agreement, the “Warrants”) entitling the holder thereof to purchase the number of
shares of Common Stock set forth in the Securities Purchase Agreement (the “Warrant Shares”). 
  
 B. To induce the Initial Purchaser to execute and deliver the Securities Purchase Agreement, the Company has agreed to provide certain registration rights
under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the “Securities Act”), and applicable state securities laws. 
  
 AGREEMENTS 
  
 NOW THEREFORE, in consideration of their respective promises and the mutual
covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Initial Purchaser hereby agree as follows: 
  
 ARTICLE I. 
 DEFINITIONS 
  
 1.1 Definitions. As used in this Agreement, the following terms shall have the following meanings: 
  
 (a) “Purchaser” or “Purchasers” means the Initial Purchaser, any transferees or assignees who agree to become bound by the provisions
of this Agreement in accordance with Article IX hereof, and any other persons owning or having the right to acquire Registrable Securities and their permitted transferees or assignees. 
  
 (b) “register,” “registered,” and “registration” refer to a registration effected by preparing
and filing a Registration Statement or Statements in compliance with the Securities Act and pursuant to Rule 415 under the Securities Act or any successor rule providing for 

 
offering securities on a continuous basis (“Rule 415”), and the declaration or ordering of effectiveness of such Registration Statement by the
United States Securities and Exchange Commission (the “SEC”). 
  
 (c) “Registrable Securities” means Note Shares and the Warrant Shares issuable to or issued to the Initial Purchaser and all other Purchasers in the Offering, including any shares of Common Stock issued or issuable with respect to
the Notes or the Warrants; provided, however, that Registrable Securities shall not include shares of Common Stock that (i) have previously been registered, or (ii) have otherwise been sold to the public. 
  
 (d) “Registration Statement” means a registration statement of the
Company under the Securities Act. 
  
 1.2 Capitalized Terms.
Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Securities Purchase Agreement. 
  
 ARTICLE II. 
 REGISTRATION 
  
 2.1 Mandatory Registration. The Company shall prepare, and as soon as
possible on or prior to the thirtieth (30th) day after the date of the First Closing (the “Filing Date”), file with the SEC a Registration Statement on Form S-3 (or, if Form S-3 is not then available, on such form of Registration Statement
as is then available to effect a registration of 130% of the Registrable Securities. The Registration Statement (and each amendment or supplement thereto, and each request for acceleration of effectiveness thereof) shall be provided to Purchasers
and their designated counsel prior to its filing or other submission. Such Registration Statement shall include only the Registrable Securities. 
  
 2.2 [Intentionally Deleted] 
  
 2.3 Payments by the Company. (a) The Company shall use its best efforts to cause the Registration Statement required to be filed pursuant to Section 2.1
hereof to become effective as soon as possible but shall cause such Registration Statement to become effective in no event later than the earlier of (i) the ninetieth (90th) day following the First Closing (or the one hundred and twentieth (120th) day following the First Closing if reviewed in writing by the SEC) and (ii) the
fifth day following the date on which the Company is notified by the SEC that such Registration Statement will not be reviewed or is no longer subject to further review and comments (such applicable date, the “Registration Deadline”). If
the Registration Statement is not effective as required by this Section 2.3, the Company shall thereafter continue to use its best efforts to cause such Registration Statement to become effective. If (i) the Registration Statement registering all
Registrable Securities is not filed on or before the Filing Date, (ii) prior to the effective date of the Registration the Company does not respond to comments of the Commission within 15 days of receipt thereof, (iii) the Registration Statement
covering the Registrable Securities required to be filed by the Company pursuant to Section 2.1 hereof is not declared effective by the SEC on or before the Registration Deadline (a “Registration Failure”), or (iv) if after such
Registration Statement has been declared effective by the SEC, sales of any of the Registrable Securities covered thereby cannot be made pursuant to such Registration Statement 

  

 2 

 
(including, but not limited to, by reason of a stop order, the Company’s failure to update the registration statement, the failure of any post-effective
amendment to the registration statement to be promptly declared effective or any other reason outside the control of Purchasers) (a “Registration Suspension”), or if the Common Stock of the Company is not listed or included for quotation
on one of the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange or the American Stock Exchange after being so listed or included for quotation thereon (a “Listing Suspension”), then the Company will make
payments to Purchasers in such amounts and at such times as shall be determined pursuant to this Section 2.3, as partial relief for the damages to Purchasers by reason of any such delay in or reduction of their ability to sell the Registrable
Securities (which remedy shall not be exclusive of any other remedies available at law or in equity). 
  
 (b) In the event of a Registration Failure or Listing Failure, the Company shall pay to each Purchaser an amount equal to 1.5% of the Subscription Amount
of the Notes (as defined in the Securities Purchase Agreement) then held by the Purchaser and for each month that such a default or failure continues (prorated per day for partial months), 1.5% of the Subscription Amount of the Notes then held by
the Purchaser. Such payments shall be made in cash within five (5) days after the end of each period that gives rise to such obligation, provided that, if any such period extends for more than thirty (30) days, payments shall be made for each such
thirty (30) day period within five (5) days after the end of such thirty (30) day period, each such thirty day period being counted as a month for purposes of this Section 2.3(b). Interest shall accrue on overdue payments at the rate of 12% per
annum. 
  
 2.4 Piggy-Back Registrations. If at any time prior to
the expiration of the Registration Period (as hereinafter defined) the Company shall file with the SEC a Registration Statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity
securities (other than on Form S-4 or Form S-8 or their then equivalents relating to equity securities to be issued solely in connection with an acquisition of any entity or business or equity securities issuable in connection with stock option or
other employee benefit plans), then the Company shall send to each Purchaser who has a right to have Registrable Securities covered by a Registration Statement pursuant to this Agreement written notice of such determination and, if within fifteen
(15) days after the date of such notice, such Purchaser shall so request in writing, the Company shall include in such Registration Statement all or any part of the Registrable Securities such Purchaser requests to be registered, except that if, in
connection with any underwritten public offering for the account of the Company the managing underwriter(s) thereof shall impose a limitation on the number of shares of Common Stock which may be included in the Registration Statement because, in
such underwriter(s)’ judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution, then the Company shall be obligated to include in such Registration Statement only such limited portion of the
Registrable Securities with respect to which such Purchaser has requested inclusion hereunder as the underwriter shall permit. Any exclusion of Registrable Securities shall be made pro rata among Purchasers seeking to include Registrable Securities,
in proportion to the number of Registrable Securities sought to be included by such Purchasers; provided, however, that the Company shall not exclude any Registrable Securities unless the Company has first excluded all outstanding securities, the
holders of which are not entitled to inclusion of such securities in such Registration Statement or are not entitled to pro rata inclusion with the Registrable Securities; and provided, further, however, that, after giving effect to the 

  

 3 

 
immediately preceding proviso, any exclusion of Registrable Securities shall be made pro rata with holders of other securities having the right to include
such securities in the Registration Statement. If an offering in connection with which a Purchaser is entitled to registration under this Section 2.4 is an underwritten offering, then each Purchaser whose Registrable Securities are included in such
Registration Statement shall, unless otherwise agreed by the Company, offer and sell such Registrable Securities in an underwritten offering using the same underwriter or underwriters and, subject to the provisions of this Agreement, on the same
terms and conditions as other shares of Common Stock included in such underwritten offering. 
  
 2.5 Eligibility for Form S-3. The Company represents and warrants that it does meet, and covenants that it shall use its reasonable best efforts to continue to meet the requirements for the use of Form S-3 for
registration of the re-sale by the Purchasers of the Registrable Securities and the Company shall file all reports required to be filed by the Company with the SEC in a timely manner so as to maintain such eligibility for the use of Form S-3.

  
 ARTICLE III. 
 OBLIGATIONS OF THE COMPANY 
  
 In connection with the registration of the Registrable Securities, the Company shall have the following obligations: 
  
 3.1 The Company shall prepare promptly and file with the SEC the
Registration Statement required by Section 2.1, and cause such Registration Statement relating to Registrable Securities to become effective as soon as possible after such filing, and keep the Registration Statement effective pursuant to Rule 415 at
all times until such date as is the earlier of (i) the date on which all of the Registrable Securities have been sold (and no further Registrable Securities may be issued in the future) and (ii) the date on which all of the Registrable Securities
(in the reasonable opinion of counsel to Purchasers) may be immediately sold to the public without registration and without restriction as to the number of Registrable Securities to be sold, whether pursuant to Rule 144 or otherwise (the
“Registration Period”). No Registration Statement (including any amendments or supplements thereto and prospectuses contained therein and all documents incorporated by reference therein) shall 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. 
  
 3.2 The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and
the prospectus used in connection with the Registration Statement as may be necessary to keep the Registration Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities of the Company covered by the Registration Statement until the termination of the Registration Period. The Company shall cause such amendment to become effective as soon as practicable
following the filing thereof. If for any reason from time to time there are Registrable Securities which are not included or which are not allowed to be included by the SEC in a Registration Statement filed pursuant hereto, the Company shall file
additional registration statements as soon as practicable following a request by any Purchaser to effect a registration of all of such Registrable Securities, which registration statement shall be subject to 
  

 4 

 
all terms of this Agreement and shall use its best efforts to cause such registration statement to become effective as soon as practicable after such filing.

  
 3.3 The Company shall furnish to each Purchaser whose
Registrable Securities are included in the Registration Statement and its legal counsel (a) promptly after the same is prepared and publicly distributed, filed with the SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment or supplement thereto, and, in the case of a Registration Statement referred to in Section 2.1, each written correspondence by or on behalf of the Company to the SEC or
the staff of the SEC, and each item of correspondence from the SEC or the staff of the SEC, in each case relating to such Registration Statement (other than any portion, if any, thereof which contains information for which the Company has sought
confidential treatment), and (b) such number of copies of a prospectus, including a preliminary prospectus, and all amendments and supplements thereto and such other documents as such Purchaser may reasonably request in order to facilitate the
disposition of the Registrable Securities owned (or to be owned) by such Purchaser. Each Purchaser agrees that it shall keep such communications between the Company and the SEC confidential (such confidentiality shall not be construed to mean that
such materials are “material, non-public information” as described in the Exchange Act). 
  
 3.4 The Company shall use commercially reasonable efforts to (a) register and qualify the Registrable Securities covered by the Registration Statement
under securities laws of such jurisdictions in the United States as each Purchaser who holds (or has the right to hold) Registrable Securities being offered reasonably requests, (b) prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (c) take such other actions as may be reasonably necessary to maintain such
registrations and qualifications in effect at all times during the Registration Period, and (d) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition thereto to (i) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3.4, (ii) subject itself to general
taxation in any such jurisdiction, (iii) file a general consent to service of process in any such jurisdiction or (iv) make any change in its charter or bylaws which the Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders. 
  
 3.5 In the
event Purchasers who hold a majority in interest of the Registrable Securities being offered in an offering pursuant to a Registration Statement or any amendment or supplement thereto under Section 2.1 or 3.2 hereof select underwriters for the
offering, the Company shall enter into and perform its obligations under an underwriting agreement, in usual and customary form, including, without limitation, customary indemnification and contribution obligations, with the underwriters of such
offering. 
  
 3.6 As soon as practicable after becoming aware of
such event, the Company shall notify (by telephone and also by facsimile and reputable overnight courier) each Purchaser of the happening of any event, of which the Company has knowledge, as a result of which the 

  

 5 

 
prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements therein not misleading, and use its best efforts promptly to (but in any event it shall within five (5) days) prepare a supplement or amendment to the Registration Statement to
correct such untrue statement or omission, and deliver such number of copies of such supplement or amendment to each Purchaser as such Purchaser may reasonably request; provided that for not more than ten (10) consecutive calendar days (or a total
of not more than thirty (30) calendar days in any twelve (12) month period), the Company may delay the disclosure of material non-public information concerning the Company (as well as delay the updating of any prospectus or Registration Statement),
the disclosure of which at the time is not, in the good faith opinion of the Company, in the best interests of the Company (an “Allowed Delay”); provided, further, that the Company shall promptly (i) notify Purchasers in writing of the
existence of (but in no event, without the prior written consent of such Purchaser, shall the Company disclose to any Purchaser any of the facts or circumstances regarding) material non-public information giving rise to an Allowed Delay, and (ii)
advise Purchasers in writing to cease all sales under such Registration Statement until the end of the Allowed Delay. The period of any Allowed Delay shall not constitute a breach of this Agreement, but shall constitute a Registration Suspension for
purposes of paying liquidated damages hereunder. 
  
 3.7 The
Company shall use its best efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement, and, if such an order is issued, to obtain the withdrawal of such order at the earliest practicable time
and to notify (by telephone and also by facsimile and reputable overnight carrier) each Purchaser who holds Registrable Securities being sold (or, in the event of an underwritten offering, the managing underwriters) of the issuance of such order and
the resolution thereof. Notwithstanding anything to the contrary, the Company shall cause the Transfer Agent to deliver unlegended shares of Common Stock to a transferee of Purchaser in connection with any sale of Registrable Securities with respect
to which such Purchaser has entered into a contract for sale prior to receipt of notice of such suspension and for which such Purchaser has not yet settled. 
  
 3.8 The Company shall permit a single firm of counsel designated by the Purchasers to review the Registration Statement and all amendments and supplements
thereto a reasonable period of time prior to their filing with the SEC, and not file any document in a form to which such counsel reasonably objects. 
  
 3.9 The Company shall make generally available to its security holders as soon as practical, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in form complying with the provisions of Rule 158 under the Securities Act) covering a twelve-month period beginning not later than the first day of the Company’s fiscal quarter next following the
effective date of the Registration Statement. 
  
 3.10 The Company
shall make available for inspection by (i) any Purchaser, (ii) any underwriter participating in any disposition pursuant to the Registration Statement, (iii) one firm of attorneys and one firm of accountants retained by Purchasers, and (iv) one firm
of attorneys retained by all such underwriters (collectively, the “Inspectors”) all pertinent financial and other records, and pertinent corporate documents and properties of the Company (collectively, the “Records”), as shall be
reasonably deemed necessary by each Inspector in 

  

 6 

 
connection with such Registration Statement and cause the Company’s officers, directors and employees to supply all information which any Inspector may
reasonably request in connection therewith; provided, however, that each Inspector shall hold in confidence and shall not make any disclosure (except to a Purchaser) of any Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified in writing, unless (a) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement or to otherwise comply with
federal or state securities laws, (b) the release of such Records is ordered pursuant to a subpoena or other order from a court or government body of competent jurisdiction, or is otherwise required by applicable law or legal process or (c) the
information in such Records has been made generally available to the public other than by disclosure in violation of this or any other agreement (to the knowledge of the relevant Purchaser). The Company shall not be required to disclose any
confidential information in such Records to any Inspector until and unless such Inspector shall have entered into confidentiality agreements (in form and reasonable substance satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 3.10. Each Purchaser agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice
to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential. Nothing herein shall be deemed to limit a Purchaser’s ability
to sell Registrable Securities in a manner which is consistent with applicable laws and regulations. 
  
 3.11 The Company shall hold in confidence and not make any disclosure of information concerning a Purchaser provided to the Company unless (a) disclosure
of such information is necessary to comply with federal or state securities laws, (b) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, (c) the release of such information
is ordered pursuant to a subpoena or other order from a court or governmental body of competent jurisdiction or is otherwise required by applicable law or legal process, (d) such information has been made generally available to the public other than
by disclosure in violation of this or any other agreement (to the knowledge of the Company), or (e) such Purchaser consents to the form and content of any such disclosure. The Company agrees that it shall, upon learning that disclosure of such
information concerning a Purchaser is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to such Purchaser prior to making such disclosure, and allow Purchaser, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information. 
  
 3.12 The Company shall cause the listing and the continuation of listing of the Common Stock and of all the Registrable Securities covered by the
Registration Statement on the Nasdaq National Market System, the Nasdaq SmallCap Market, the New York Stock Exchange or the American Stock Exchange, and cause the Registrable Securities to be quoted or listed on each additional national securities
exchange or quotation system upon which the Common Stock is then listed or quoted. 
  
 3.13 The Company shall provide a transfer agent and registrar, which may be a single entity, for the Registrable Securities not later than the effective date of the Registration Statement. 
  

 7 

 3.14 The Company shall cooperate with each Purchaser who hold Registrable Securities being offered and
the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing Registrable Securities to be offered pursuant to the Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may be, as the managing underwriter or underwriters, if any, or a Purchaser may reasonably request and registered in such names as the managing underwriter or underwriters,
if any, or a Purchaser may request, and, within one (1) business day after a Registration Statement which includes Registrable Securities is ordered effective by the SEC, the Company shall cause legal counsel selected by the Company to deliver, to
the transfer agent for the Registrable Securities (with copies to Purchasers whose Registrable Securities are included in such Registration Statement) an opinion of such counsel in the form attached hereto as Exhibit 1. 
  
 3.15 At the request of any Purchaser, the Company shall promptly prepare and
file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and the prospectus used in connection with the Registration Statement as may be necessary in order to change the plan of distribution
set forth in such Registration Statement. 
  
 3.16 The Company
shall comply with all applicable laws related to a Registration Statement and offering and sale of securities and all applicable rules and regulations of governmental authorities in connection therewith (including, without limitation, the Securities
Act and the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the Commission). 
  
 3.17 The Company shall take all such other actions as any Purchaser or the underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities. 
  
 3.18 The
Registration Statement shall state that it covers such indeterminate number of additional shares to prevent dilution resulting from stock splits, stock dividends and other similar transactions. 
  
 ARTICLE IV. 
 OBLIGATIONS OF PURCHASERS 
  
 In connection with the registration of the Registrable Securities, each Purchaser shall have the following obligations: 
  
 4.1 It shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Purchaser that such Purchaser shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by
it as shall be required by the Securities Act to effect the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request. At least ten (10) business days
prior to 

  

 8 

 
the first anticipated filing date of the Registration Statement, the Company shall notify each Purchaser of the information the Company requires from each
such Purchaser. 
  
 4.2 Purchaser, by such Purchaser’s
acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of the Registration Statement hereunder, unless such Purchaser has notified the
Company in writing of such Purchaser’s election to exclude all of such Purchaser’s Registrable Securities from the Registration Statement. 
  
 4.3 Purchaser whose Registrable Securities are included in a Registration Statement understands that the Securities Act may require delivery of a
prospectus relating thereto in connection with any sale thereof pursuant to such Registration Statement, and each such Purchaser shall use its reasonable efforts to comply with the applicable prospectus delivery requirements of the Securities Act in
connection with any such sale. 
  
 4.4 Purchaser agrees that, upon
receipt of written notice from the Company of the happening of any event of the kind described in Section 3.6, such Purchaser will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Purchaser’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 3.6 and, if so directed by the Company, such Purchaser shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction) all copies in such Purchaser’s possession (other than a limited number of permanent file copies), of the prospectus covering such Registrable Securities current at
the time of receipt of such notice. Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of a Purchaser in connection with any sale of Registrable
Securities with respect to which such Purchaser has entered into a contract for sale prior to receipt of such notice and for which such Purchaser has not yet settled. 
  
 4.5 Without limiting Purchasers’ rights under Section 2.1 or 3.2 hereof, no Purchaser may participate in any
underwritten distribution hereunder unless such Purchaser (a) agrees to sell such Purchaser’s Registrable Securities on the basis provided in any underwriting arrangements in usual and customary form entered into by the Company, (b) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements, and (c) agrees to pay its pro rata share of all underwriting
discounts and commissions and any expenses in excess of those payable by the Company pursuant to Article V. 
  
 ARTICLE V. 
 EXPENSES OF REGISTRATION 
  
 All expenses, other than underwriting discounts and commissions and legal
fees and expenses of counsel to the Purchasers, incurred in connection with registrations, filings or qualifications pursuant to Articles II and III, including, without limitation, all registration, listing and qualification fees, printers and
accounting fees, the fees and disbursements of counsel for the Company shall be borne by the Company. The reasonable fees and disbursements of one counsel 

  

 9 

 
selected by Purchasers pursuant to Section 2.1, not to exceed $15,000 hereof shall be borne by the Company. 
  
 ARTICLE VI. 
 INDEMNIFICATION 
  
 In the event any Registrable Securities are included in a Registration Statement under this Agreement: 
  
 6.1 To the extent permitted by law, the Company will indemnify, hold harmless and defend (a) each Purchaser who holds such Registrable Securities, (b)
each underwriter of Registrable Securities and (c) the directors, officers, partners, members, employees, and agents of and persons who control any Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), if any, (each, an “Indemnified Person”), against any joint or several losses, claims, damages, liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced or threatened, in respect thereof, “Claims”) to which any of them may become subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration Statement or the omission or alleged omission to state therein a material fact required to be stated or necessary to make the statements therein not misleading, (ii) any
untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior to the effective date of such Registration Statement, or contained in the final prospectus (in any amendment or supplement, if the
Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements
therein were made, not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities (the matters in the foregoing clauses (i) through (iii) being, collectively, “Violations”). Subject to the restrictions set forth in Section 6.3 with respect to the number of
legal counsel, the Company shall reimburse Purchasers, each such underwriter and controlling person, and each such other Indemnified Person, promptly as such expenses are incurred and are due and payable, for any reasonable legal fees or other
reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6.1: (x) shall not apply to an
Indemnified Person with respect to a Claim arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person expressly for use in the Registration
Statement or any such amendment thereof or supplement thereto; (y) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably
withheld; and (z) with respect to any preliminary prospectus, shall not inure to the benefit of any Indemnified Person if the untrue statement or omission of material fact contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented, if such corrected 

  

 10 

 
prospectus was timely made available by the Company pursuant to Section 3.3 hereof, and the Indemnified Person was promptly advised in writing not to use the
incorrect prospectus prior to the use giving rise to a Violation and such Indemnified Person, notwithstanding such advice, used it. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities by Purchasers pursuant to Article IX. 
  
 6.2 In connection with any Registration Statement in which a Purchaser is participating, each such Purchaser agrees to indemnify, hold harmless and
defend, to the same extent and in the same manner set forth in Section 6.1, the Company, each of its directors, each of its officers who signs the Registration Statement, its employees, agents and persons, if any, who control the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and any other stockholder selling securities pursuant to the Registration Statement, together with its directors, officers and members, and any person who controls such
stockholder or underwriter within the meaning of the Securities Act or the Exchange Act (each an “Indemnified Party”), against any Claim to which any of them may become subject, under the Securities Act, the Exchange Act or otherwise,
insofar as such Claim arises out of or is based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished to the Company by such Purchaser
expressly for use in connection with such Registration Statement; and subject to Section 6.3 such Purchaser will reimburse any legal or other expenses (promptly as such expenses are incurred and are due and payable) reasonably incurred by them in
connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 6.2 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior
written consent of such Purchaser, which consent shall not be unreasonably withheld; provided, further, however, that a Purchaser shall be liable under this Agreement (including this Section 6.2 and Article VII) for only that amount as does not
exceed the net proceeds actually received by such Purchaser as a result of the sale of Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on
behalf of such Indemnified Party and shall survive the transfer of the Registrable Securities by Purchasers pursuant to Article IX. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section
6.2 with respect to any preliminary prospectus shall not inure to the benefit of any Indemnified Party if the untrue statement or omission of material fact contained in the preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented, and the Indemnified Party failed to utilize such corrected prospectus. 
  
 6.3 Promptly after receipt by an Indemnified Person or Indemnified Party under this Article VI of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to made against any indemnifying party under this Article VI, deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually
satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that such indemnifying party shall diligently pursue such defense and that such indemnifying party shall not be
entitled to assume such 

  

 11 

 
defense and an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the fees and expenses to be paid by the
indemnifying party, if the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential conflicts of interest between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such proceeding or the actual or potential defendants in, or targets of, any such action include both the Indemnified Person or the Indemnified Party and any such Indemnified
Person or Indemnified Party reasonably determines that there may be legal defenses available to such Indemnified Person or Indemnified Party which are different from or in addition to those available to such indemnifying party. The indemnifying
party shall pay for only one separate legal counsel for the Indemnified Persons or the Indemnified Parties, as applicable, and such legal counsel shall be selected by Purchasers holding a majority-in-interest of the Registrable Securities included
in the Registration Statement to which the Claim relates, if Purchasers are entitled to indemnification hereunder, or by the Company, if the Company is entitled to indemnification hereunder, as applicable. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Article VI, except to the extent that the
indemnifying party is actually prejudiced in its ability to defend such action. 
  
 ARTICLE VII. 
 CONTRIBUTION 
  
 To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to
make the maximum contribution with respect to any amounts for which it would otherwise be liable under Article VI to the fullest extent permitted by law; provided, however, that (i) no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation, and (ii) contribution (together with any indemnification or other obligations under this
Agreement) by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities. 
  
 ARTICLE VIII. 
 REPORTS UNDER THE EXCHANGE ACT 
  
 With a view to making
available to Purchasers the benefits of Rule 144 promulgated under the Securities Act or any other similar rule or regulation of the SEC that may at any time permit Purchasers to sell securities of the Company to the public without registration
(“Rule 144”), the Company agrees to, so long as such Purchaser beneficially owns (without giving effect to any limitations on the conversion or exercise thereof) Registrable Securities: 
  
 8.1 File with the SEC in a timely manner and make and keep available all
reports and other documents required of the Company under the Securities Act and the Exchange Act so long as the Company remains subject to such requirements (it being understood that nothing herein shall limit the Company’s obligations under
Section 4.3 of the Securities Purchase Agreement) and the filing and availability of such reports and other documents is required for the applicable provisions of Rule 144; and 
  

 12 

 8.2 Furnish to each Purchaser promptly upon request, (i) a written statement by the Company that it has
complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested to permit Purchasers to sell such securities pursuant to Rule 144 without registration. 
  
 ARTICLE IX. 
 ASSIGNMENT OF REGISTRATION RIGHTS

  
 The rights of Purchasers hereunder, including the right to
have the Company register Registrable Securities pursuant to this Agreement, shall be automatically assigned by each Purchaser to any transferee if: (a) Purchaser agrees in writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time after such assignment, (b) the Company is, within ten (10) business days after such transfer or assignment, furnished with written notice of (i) the name and address of such
transferee or assignee, and (ii) the securities with respect to which such registration rights are being transferred or assigned, (c) following such transfer or assignment, the further disposition of such securities by the transferee or assignee is
restricted under the Securities Act or applicable state securities laws, (d) at or before the time the Company receives the written notice contemplated by clause (b) of this sentence, the transferee or assignee agrees in writing for the benefit of
the Company to be bound by all of the provisions contained herein, (e) such transfer shall have been made in accordance with the applicable requirements of the Securities Purchase Agreement and (f) such transferee shall be an “accredited
investor” as such term is defined in Rule 501 of the Securities Act. 
  
 In lieu of the foregoing and in connection with a particular transfer, Purchaser may require the Company to enter into a separate registration agreement with such transferee providing for rights and obligations of the
Company and such transferee shall not be deemed Purchaser hereunder with respect to such transferred Registrable Securities in such event. 
  
 ARTICLE X. 
 AMENDMENT OF REGISTRATION RIGHTS

  
 Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with written consent of the Company, the Initial Purchaser (if it still holds Registrable Securities and is affected by such
amendment or waiver) and Purchasers who hold a majority interest of the Registrable Securities. Any amendment or waiver effected in accordance with this Article X shall be binding upon each Purchaser and the Company. Notwithstanding the foregoing,
no amendment or waiver shall retroactively affect any Purchaser without its consent or prospectively adversely affect any Purchaser who no longer owns any Notes, Warrants or Registrable Securities without its consent. Neither Article VI nor Article
VII hereof may be amended or waived in a manner adverse to a Purchaser without its consent. 
  

 13 

 ARTICLE XI. 
 MISCELLANEOUS 
  
 11.1 A person or
entity is deemed to be a holder (or a holder in interest) of Registrable Securities whenever such person or entity owns of record such Registrable Securities (or the Note or Warrant which may be converted into or exercised for Registrable
Securities). If the Company receives conflicting instructions, notices or elections from two or more persons or entities with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election
received from the registered owner of such Registrable Securities (or the Note or Warrant). 
  
 11.2 Any notices herein required or permitted to be given shall be in writing and may be personally served or delivered by courier or by confirmed telecopy, and shall be deemed delivered at the time and date of
receipt (which shall include telephone line facsimile transmission). The addresses for such communications shall be: 
  
 If to the Company: 
  
 Private Media Group, Inc. 
 Carretera de
Rubi 22-26, 08190 Sant Cugat del Valles 
 Barcelona, Spain 
 Telecopy: (34) 93-589-5400 
 Attention: Chief Financial Officer 
  
 with a copy to (which shall not constitute notice hereunder): 

 
 Guzik & Associates 
 11355 West Olympic Blvd., Third Floor 
 Los
Angeles, California 90064 
 Telecopy: 310-914-8606 
 Attention: Samuel S. Guzik, Esq. 
  
 If to the Initial Purchaser: 
  
 To the address
designated on the signature page, 
  
 with a copy to (which
shall not constitute notice hereunder) its counsel designated on the signature page, if any, 
  
 And if to any other Purchaser, at such address as such Purchaser shall have provided in writing to the Company, 
  
 or at such other address as each such party furnishes by notice given in accordance with this Section 11.2. 
  

 14 

 11.3 Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by
a party in exercising such right or remedy, shall not operate as a waiver thereof. 
  
 11.4 This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed in the State of New York. The parties hereto irrevocably
consent to the jurisdiction of the United States federal courts located in the Southern District in the State of New York and the state courts located in the County of New York in the State of New York in any suit or proceeding based on or arising
under this Agreement or the transactions contemplated hereby and irrevocably agree that all claims in respect of such suit or proceeding may be determined in such courts. The Company irrevocably waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding. The Company further agrees that service of process upon the Company mailed by the first class mail shall be deemed in every respect effective service of process upon the Company in any suit or proceeding
arising hereunder. Nothing herein shall affect a Purchaser’s right to serve process in any other manner permitted by law. The parties hereto agree that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may
be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. The Company irrevocably waives its right to a jury trial in any such suit or proceeding. 
  
 11.5 This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof.
There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein. 
  
 11.6 Subject to the requirements of Article IX hereof, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto. Notwithstanding anything to the contrary contained herein, including, without limitation, Article IX, the rights of a Holder hereunder shall be assignable to and exercisable by a bona fide pledgee of the Registrable Securities
in connection with a Holder’s margin or brokerage accounts. 
  
 11.7 The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 
  
 11.8 This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto, by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement. 
  
 11.9 Each party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement
and the consummation of the transactions contemplated hereby. 
  

 15 

 11.10 If any provision of this Agreement shall be invalid or unenforceable, such invalidity or
unenforceability shall not affect the validity or enforceability of the remainder of this Agreement. 
  

 16 

 IN WITNESS WHEREOF, the undersigned Initial Purchaser and the Company have caused this Registration
Rights Agreement to be duly executed as of the date first above written. 
  

	COMPANY:
	
	 PRIVATE MEDIA GROUP, INC.

		
	 By:
	 	  

		
	 Its:
	 	 

  
  

	“INITIAL PURCHASER”
	  

	(name)
	 	 	 By:
	 	  

	 	 	 Name:
	 	  

	 	 	 Title:
	 	  

		
	Subscription Amount(USD):	 	  

		
	Address:	 	  

	 	 	  

	 	 	  

	With a copy to:
	 	 	  

	 	 	  

  

 17 

 EXHIBIT 1 
 to 
 Registration 
 Rights 
 Agreement 
  
                     
    , 2003 
  
 InterWest Transfer Co., Inc.,

 1981 East 4800 South, Suite 100, 
 Salt Lake City, Utah 84117

  
 Re: Private Media Group, Inc.

  
 Ladies and Gentlemen: 
  
 We are counsel to Private Media Group, Inc.., a Nevada corporation (the
“Company”), and we understand that [Purchaser] (the “Holder”) has purchased from the Company certain Notes (“Notes”) that are convertible into shares of the Company’s common stock, par value $.001 per share (the
“Common Shares”) and warrants (the “Warrants”) that are convertible into the Company’s Common Stock, par value $.001 per share (the “Common Stock”). The Notes and Warrants were purchased by the Holder pursuant to a
Securities Purchase Agreement, dated as of September 10, 2003, between the Holder and the Company (the “Agreement”). Pursuant to a Registration Rights Agreement between the Company and the Holder (the “Registration Rights
Agreement”), the Company agreed with the Holder, among other things, to register the Registrable Securities (as that term is defined in the Registration Rights Agreement) under the Securities Act of 1933, as amended (the “Securities
Act”), upon the terms provided in the Registration Rights Agreement. In connection with the Company’s obligations under the Registration Rights Agreement, , the Company filed a Registration Statement on Form S-3 (File No. 333-
                    ) (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) relating to
the Registrable Securities, which names the Holder as a selling stockholder thereunder. On                     
    , 2003, the SEC declared the Registration Statement effective. 
  
 Based on the foregoing, we are of the opinion that the Registrable Securities have been registered under the Securities Act. 
  
 Very truly yours, 
  
 cc: [Purchaser] 
  

 18 

 EXHIBIT “E” 
  
 [Letterhead of Guzik & Associates] 
  
 [First Closing Date/Second Closing Date] 
  
 [To the Purchaser Under the Securities Purchase Agreement] 
  

	 	  	Re: Private Media Group, Inc. 

  
 Ladies and Gentlemen: 
  
 We have acted as counsel to Private Media Group, Inc., a Nevada corporation (the “Company”), in connection with the Securities Purchase
Agreement, dated as of September 10, 2003, between              [Purchaser] (“Purchaser”) and the Company (the “Agreement”) and the transactions
contemplated therein. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings assigned to such terms in the Agreement. 
  

In so acting, we have examined the Agreement, including the exhibits thereto, and the Company’s Certificate of Incorporation and By-laws, as in
effect on the date hereof, and we have examined and considered such corporate records, certificates and matters of law as we have deemed appropriate as a basis for our opinions set forth below. 
  
 Based upon the foregoing and subject to the assumptions, limitations,
qualifications and exceptions stated herein, we are of the opinion that as of the date hereof: 
  

	 	1.	The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and has full corporate power and authority to conduct its
business and to own its properties. 

  

	 	2.	The Company has the requisite corporate power and authority to enter into and perform the Investment Agreements, and to issue and sell, perform its obligations with respect to, the
Investment Agreements in accordance with their terms, and to issue the Note Shares and the Warrant Shares in accordance with the respective terms and conditions of the Notes and the Warrants. 

  

	 	3.	The execution, delivery and performance of the Agreement, the Notes, the Registration Rights Agreement and the other Investment Agreements by the Company and the consummation by it
of the transactions contemplated thereby (including without limitation the issuance of the Notes and the Warrants and the reservation for issuance and issuance of the Note Shares and the Warrant Shares) 

 Page 2 
  
 have been duly authorized by all necessary corporate action and no further consent or authorization of the Company, its board of directors, or its
stockholders or any other person, body or agency is required as of the date hereof with respect to any of the transactions contemplated thereby. 
  

	 	4.	The Agreement, the Registration Rights Agreement, the First Closing Note [and the Second Closing Note] and the Warrants have been duly executed and delivered by the Company.

  

	 	5.	The Agreement, the Registration Rights Agreement, the First Closing Note and the Warrants are, and the Second Closing Note will be, when issued in accordance with the terms of the
Agreement, the legal, valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws affecting creditors’ rights, and subject to general equity principles and to limitations on availability of equitable relief, including specific performance. 

  

	 	6.	The Note Shares and the Warrant Shares have been duly and validly authorized and, when issued and paid for pursuant to the respective Notes and Warrants, will be validly issued,
fully paid and nonassessable, free of any liens, claims or encumbrances other than encumbrances arising under applicable securities laws or liens, claims and encumbrances imposed by the Purchaser. 

  

	 	7.	To our knowledge, neither the issuance nor sale of the Securities contemplated by the Agreement will give rise to any preemptive rights or rights of first refusal on behalf of any
person. 

  

	 	8.	The execution and delivery by the Company of the Agreement and the consummation of the transactions contemplated by the Agreement will not result in the violation by the Company of
any law, statute, rule, or regulation, or, to our knowledge, any order, writ, injunction, judgment or decree of any court or governmental authority known to us by which the Company is bound, or of any provision of the Certificate of Incorporation or
By-laws of the Company. 

  

	 	9.	The Offering is exempt from the registration requirements of the Securities Act. 

  

	 	10.	To our knowledge, the Company is eligible to register the resale of the Securities as a secondary offering on a registration statement on Form S-3 under the Securities Act as
contemplated by the Registration Rights Agreement. 

  

 2 

 Page 3 
  

	 	11.	The total authorized capital stock of the Company on the date hereof consists of (i) 100,000,000 shares of Common Stock and (ii) 10,000,000 shares of Preferred Stock. Of such
authorized Common Stock,              shares are issued and outstanding on the date hereof. Of such authorized Preferred Stock, no shares are issued and outstanding on the date
hereof. To our knowledge, except as set forth in Schedule 3.2 to the Agreement, no other shares of capital stock of the Company are reserved for issuance and there are no outstanding options, warrants or other rights to subscribe for or purchase
from the Company any shares of its capital stock or any securities convertible into or exchangeable for its capital stock on the date hereof (before giving effect to the transactions contemplated by the Agreements and any related transactions which
are part of the Offering). 

  

	 	12.	The execution, delivery and performance of the Agreements by the Company and the consummation by the Company of the transactions contemplated by the Investment Agreements do not and
will not result in a violation of or 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 of which we have knowledge to which the Company is a party or its property is bound (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect. 

  
 The phrase Ato our knowledge» or phrases of similar import mean to the best of our knowledge after due inquiry.

  
 These opinions are limited to the matters expressly stated
herein and are rendered solely for your benefit and may not be quoted or relied upon for any other purpose or by any other person. 
  
 The opinions expressed herein are subject to the following assumptions, limitations, qualifications and exceptions: 
  
 (a) We have assumed the genuineness of all signatures, the authenticity of
all agreements submitted to us as originals, the conformity with originals of all such documents submitted to us as copies, and the authenticity of certificates of public officials. 
  
 (b) We have assumed that the Purchaser has the legal right, capacity and power to enter into, enforce and perform all of its
obligations under the Investment Agreements. Furthermore, we have assumed the due authorization by the Purchaser of all requisite action and 
  

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 the due execution and delivery of the Agreements by the Purchaser, and that such Agreements are valid and binding upon the Purchaser and are enforceable against the
Purchaser in accordance with their terms. 
  
 Our examination of
law relevant to the matters covered by this opinion is limited to the laws of the State of New York, the State of Nevada and the federal law of the United States, and we express no opinion as to the effect on the matters covered by this opinion of
the laws of any other jurisdiction. 
  
 This opinion is given as
of the date hereof and we assume no obligation, to update or supplement this opinion to reflect any facts or circumstances which may hereafter come to our attention or any changes in laws which may hereafter occur. 
  
 Very truly yours, 
  
 Samuel S. Guzik 
 Guzik & Associates 
  

 4

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