Document:

EX-10.1

 

EXHIBIT 10.1

DATATRAK INTERNATIONAL, INC.

SHARE PURCHASE AGREEMENT

     This Share Purchase Agreement (this “Agreement”), is made and entered into effective
as of December 23, 2004, by and among DATATRAK International, Inc., an Ohio corporation (the
“Company”), and the purchasers listed on Schedule A attached hereto (collectively, the
“Purchasers” and individually, a “Purchaser”).

1. Authorization of Sale of the Purchased Shares

     This Agreement provides for the sale of certain of the common shares, without par value (the
“Common Shares”), of the Company. Subject to the terms and conditions of this Agreement, the
Company has authorized the sale of up to 600,000 Common Shares (the “Purchased Shares”) to the
Purchasers.

2. Agreement to Sell and Purchase the Purchased Shares

     2.1 Purchase and Sale

     Subject to the terms and conditions of this Agreement, each Purchaser severally agrees to
purchase, and the Company agrees to sell and issue to each Purchaser, at the Closing (as defined
below) that number of Purchased Shares set forth opposite such Purchaser’s name on Schedule
A attached hereto.

     2.2 Purchase Price

     The purchase price of each Purchased Share shall be $9.50 (the “Per Share Price”). The
Company shall not, during the period beginning on the date of this Agreement and ending ninety (90)
days after the Closing Date (as defined below), without adjusting the Per Share Price hereunder
accordingly, sell (i) Common Shares at a price per Common Share of less than the Per Share Price,
or (ii) options, warrants or any other securities that can be converted into, or otherwise
exchanged for, the Company’s Common Shares at a conversion, exchange or exercise price per Common
Share of less than the Per Share Price. In the event the Company shall, during the period
beginning on the date of this Agreement and ending ninety (90) days after the Closing Date, sell
any of the Company’s Common Shares at, or any instruments that can be converted into or otherwise
exchanged for the Company’s Common Shares (the “Subsequent Sale”) exercisable at, a price per
Common Share (the “Subsequent Purchase Price”) of less than the Per Share Price, the Company shall,
within ten (10) business days of the Subsequent Sale, pay to the Purchaser a cash amount equal to
the number of Purchased Shares times the difference between the Per Share Price and the Subsequent
Purchase Price.

     2.3 Warrants

     Subject to the terms and conditions of this Agreement, the Company agrees to issue to each
Purchaser a warrant, in the form attached hereto as Exhibit C (a “Warrant”), for the right
to purchase the number of Common Shares set forth opposite such Purchaser’s name on Schedule

 

 

A under the heading “Number of Warrant Shares.” The Common Shares to be issued upon
exercise of Warrants shall constitute “Warrant Shares”. As set forth on Schedule A and
Exhibit C, (i) each Purchaser’s Warrant will entitle that Purchaser to purchase up to a
number of Warrant Shares equal to 15% of the Purchased Shares purchased by that Purchaser at a per
share price of $14.40, which is equal to 120% of the closing market price as of the date prior to
the date of this Agreement, and (ii) each Warrant is exercisable for a period of three years ending
on the third anniversary of the date of this Agreement.

3. Delivery of the Purchased Shares at the Closing

     (a) The completion of the purchase and sale of the Purchased Shares and the issuance of the
Warrants (the “Closing”) shall occur at the offices of Calfee, Halter & Griswold LLP, counsel to
the Company, at 1400 McDonald Investment Center, 800 Superior Avenue, Cleveland, Ohio at 9:00 a.m.
local time as soon as practicable and as agreed by the parties hereto within five business days
following the execution of this Agreement (the “Closing Date”).

     (b) At the Closing, the Company shall authorize its transfer agent (the “Transfer Agent”) to
issue to each Purchaser one or more stock certificates (the “Certificates”) registered in the name
of such Purchaser, or in such nominee name(s) as designated by such Purchaser in writing,
representing the number of Purchased Shares set forth in Section 2 above and bearing an appropriate
legend (the “Legend”) referring to the fact that the Purchased Shares were sold in reliance upon
the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended
(the “Securities Act”), and Rule 506 under the Securities Act. The Company will deliver the
Certificates together with the Warrants against delivery of payment for the Purchased Shares by
the Purchasers by means of wire transfer of immediately available funds to an account designated by
the Company. Prior to the Purchasers’ delivery of payment for the Purchased Shares, the Company
will deliver via facsimile a copy of the Certificates to be delivered upon Closing to the office of
the Purchasers (at the fax number indicated on the signature pages attached hereto).

     (c) The Company’s obligation to complete the purchase and sale of the Purchased Shares and the
issuance of the Warrants shall be subject to the following conditions, any one or more of which may
be waived by the Company:

               (i) receipt by the Company of same-day funds in the full amount of the purchase price for the
Purchased Shares being purchased under this Agreement; and

               (ii) the accuracy in all material respects of the representations and warranties made by the
Purchasers and the fulfillment in all material respects of those undertakings of the Purchasers to
be fulfilled before the Closing.

     (d) The Purchasers’ obligations to accept delivery of such stock certificates and Warrants and
to pay for the Purchased Shares evidenced by the certificates shall be subject to the following
conditions, any one or more of which may be waived by a Purchaser with respect to such Purchaser’s
obligation:

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               (i) the representations and warranties made by the Company in this Agreement shall be accurate
in all material respects and the undertakings of the Company shall have been fulfilled in all
material respects on or before the Closing;

               (ii) the Company shall have delivered to the Purchasers a certificate executed by the
President and Chief Executive Officer and the Vice President of Finance and Chief Financial Officer
of the Company, dated the Closing Date, in form and substance reasonably satisfactory to the
Purchasers, to the effect that the representations and warranties of the Company set forth in
Section 4 hereof are true and correct in all material respects as of the date of this Agreement and
as of the Closing Date, and that the Company has complied with all the agreements and satisfied all
the conditions in this Agreement on its part to be performed or satisfied on or before the Closing
Date; and

               (iii) the Company shall have delivered to Purchasers a legal opinion in substantially the form
attached hereto as Exhibit A.

4. Representations, Warranties and Covenants of the Company

     Except as set forth on the Schedule of Exceptions attached hereto as Exhibit B, the
Company hereby represents and warrants to the Purchasers as follows (which representations and
warranties shall be deemed to apply, where appropriate, to each subsidiary of the Company):

     4.1 Organization and Qualification

     The Company has been duly incorporated and is validly existing as a corporation in good
standing under the laws of the State of Ohio. The Company has the corporate power and authority to
own, lease and operate its properties and to conduct its business as currently conducted and to
enter into and perform its obligations under this Agreement. The Company is duly qualified as a
foreign corporation to transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of property or the conduct
of business, except where the failure to so qualify would not, singly or in the aggregate, have a
material adverse effect on the results of operations and financial condition of the Company.

     4.2 Capitalization

     (a) The authorized capital stock of the Company consists of 25,000,000 Common Shares and
1,000,000 Serial Preferred Shares, without par value.

     (b) As of September 30, 2004, the issued and outstanding capital stock of the Company
consisted of 6,101,532 Common Shares. The shares of issued and outstanding capital stock of the
Company have been duly authorized and validly issued, are fully paid and nonassessable and have not
been issued in violation of or are not otherwise subject to any preemptive or other similar rights.

     (c) As of September 30, 2004, the Company has reserved for future issuance 1,270,351 Common
Shares issuable upon the exercise of outstanding stock options and 272,775 Common Shares available
for future grants of stock options under the Company’s Amended and

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Restated 1992 Share Incentive Plan, Amended and Restated 1994 Directors’ Share Option Plan,
Amended and Restated 1996 Outside Directors’ Stock Option Plan, Amended and Restated 1996 Key
Employees and Consultants Stock Option Plan and Amended and Restated 1999 Outside Director Stock
Option Plan.

     (d) As of September 30, 2004, the Company has reserved 12,625 Common Shares for issuance upon
the exercise of outstanding warrants to purchase Common Shares for a purchase price of $4.80 per
Common Share.

     With the exception of the foregoing, and except as set forth on Exhibit B, there are
no outstanding subscriptions, options, warrants, convertible or exchangeable securities or other
rights granted to or by the Company to purchase Common Shares or other securities of the Company
and there are no commitments, plans or arrangements to issue any Common Shares or any security
convertible into or exchangeable for Common Shares.

     4.3 Issuance, Sale and Delivery of the Purchased Shares and Warrants

     (a) The Purchased Shares and the Warrants have been duly authorized for issuance and sale to
the Purchasers pursuant to this Agreement and, when issued and delivered by the Company pursuant to
this Agreement against payment of the consideration set forth in this Agreement, will be validly
issued and fully paid and nonassessable and free and clear of all pledges, liens and encumbrances.
The certificates evidencing the Purchased Shares are in due and proper form under Ohio law. The
Company has reserved from its duly authorized capital stock the maximum number of shares of Common
Stock issuable upon exercise of the Warrants.

     (b) The issuance of the Purchased Shares is not subject to preemptive or other similar rights.
No further approval or authority of the shareholders or the Board of Directors of the Company will
be required for the issuance and sale of the Purchased Shares to be sold by the Company as
contemplated in this Agreement.

     (c) Subject to the accuracy of the Purchasers’ representations and warranties in Section 5 of
this Agreement, the offer, sale, and issuance of the Purchased Shares and the issuance of the
Warrants in conformity with the terms of this Agreement constitute transactions exempt from the
registration requirements of Section 5 of the Securities Act and from the registration or
qualification requirements of the laws of any applicable state or United States jurisdiction.

     4.4 Financial Statements

     The financial statements included (as exhibits or otherwise) in the Company Documents (as
defined below) present fairly the financial position of the Company as of the dates indicated and
the results of their operations for the periods specified. Except as otherwise stated in such
Company Documents, such financial statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis, and any supporting schedules included
with the financial statements present fairly the information stated in the financial statements.
The financial data set forth in the Company Documents were prepared on an accounting basis
consistent with such financial statements.

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     4.5 No Material Change

     Since September 30, 2004,

     (a) there has been no material adverse change or any development involving a prospective
material adverse change in the results of operation or financial condition of the Company, whether
or not arising in the ordinary course of business;

     (b) there have been no transactions entered into by the Company other than those in the
ordinary course of business, which are material with respect to the Company; and

     (c) there has been no dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock.

     4.6 Environmental

     Except as would not, singly or in the aggregate, reasonably be expected to have a material
adverse effect on the results of operations and financial condition of the Company,

     (a) the Company is in compliance with all applicable Environmental Laws (as defined below);

     (b) the Company has all permits, authorizations and approvals required under any applicable
Environmental Laws and is in compliance with the requirements of such permits authorizations and
approvals;

     (c) there are no pending or, to the knowledge of the Company, threatened Environmental Claims
(as defined below) against the Company; and

     (d) under applicable law, there are no circumstances with respect to any property or
operations of the Company that are reasonably likely to form the basis of an Environmental Claim
against the Company.

     For purposes of this Agreement, the following terms shall have the following meanings:
“Environmental Law” means any United States (or other applicable jurisdiction’s) Federal, state,
local or municipal statute, law, rule, regulation, ordinance, code, policy or rule of common law
and any judicial or administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, relating to the environment, health, safety or any chemical,
material or substance, exposure to which is prohibited, limited or regulated by any governmental
authority. “Environmental Claims” means any and all administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation,
investigations or proceedings relating in any way to any Environmental Law.

     4.7 No Defaults

     The Company is not in violation of its articles of incorporation or code of regulations or in
material default in the performance or observance of any obligation, agreement, covenant or
condition contained in any material contract, indenture, mortgage, loan agreement, deed, trust,

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note, lease, sublease, voting agreement, voting trust, or other instrument or material
agreement to which the Company is a party or by which it may be bound, or to which any of the
property or assets of the Company is subject.

     4.8 Labor Matters

     No labor dispute with the employees of the Company exists or, to the knowledge of the Company,
is imminent.

     4.9 No Actions

     There is no action, suit or proceeding before or by any court or governmental agency or body,
domestic or foreign, now pending, or, to the knowledge of the Company, threatened, against or
affecting the Company which, singly or in the aggregate, might result in any material adverse
change in the results of operations and financial condition of the Company, or which, singly or in
the aggregate, might materially and adversely affect the consummation of this Agreement, nor, to
the knowledge of the Company, is there any reasonable basis therefore. The Company is not in
default with respect to any judgment, order or decree of any court or governmental agency or
instrumentality which, singly or in the aggregate, would have a material adverse effect on the
results of operations or financial condition of the Company.

     4.10 Intellectual Property

     (a) The Company, to its knowledge, owns or is licensed to use all patents, patent
applications, inventions, trademarks, trade names, applications for registration of trademarks,
service marks, service mark applications, copyrights, know-how, manufacturing processes, formulae,
trade secrets, licenses and rights in any thereof and any other intangible property and assets that
are material to the business of the Company as now conducted and as proposed to be conducted (in
this Agreement called the “Proprietary Rights”), or is seeking, or will seek, to obtain rights to
use such Proprietary Rights that are material to the business of the Company as proposed to be
conducted.

     (b) The Company does not have any knowledge of, and the Company has not given or received any
notice of, any pending conflicts with or infringement of the rights of others with respect to any
Proprietary Rights or with respect to any license of Proprietary Rights which are material to the
business of the Company.

     (c) No action, suit, arbitration, or legal, administrative or other proceeding, or
investigation is pending, or, to the knowledge of the Company, threatened, which involves any
Proprietary Rights, nor, to the knowledge of the Company, is there any reasonable basis therefore.

     (d) The Company is not subject to any judgment, order, writ, injunction or decree of any court
or any Federal, state, local, foreign or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any arbitrator, and has not entered into or is
not a party to any contract which restricts or impairs the use of any such Proprietary Rights in a
manner which would have a material adverse effect on the use of any of the Proprietary Rights.

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     (e) The Company has not received written notice of any pending conflict with or infringement
upon any third-party proprietary rights.

     (f) The Company has not entered into any consent, indemnification, forbearance to sue or
settlement agreement with respect to Proprietary Rights other than in the ordinary course of
business. No claims have been asserted by any person with respect to the validity of the Company’s
ownership or right to use the Proprietary Rights and, to the knowledge of the Company, there is no
reasonable basis for any such claim to be successful.

     (g) The Company has complied, in all material respects, with its obligations relating to the
protection of the Proprietary Rights which are material to the business of the Company used
pursuant to licenses.

     (h) To the knowledge of the Company, no person is infringing on or violating the Proprietary
Rights.

     4.11 Permits

     To the Company’s knowledge, it possesses and is operating in compliance with all material
licenses, certificates, consents, authorities, approvals and permits from all state, federal,
foreign and other regulatory agencies or bodies necessary to conduct the businesses now operated by
it, and the Company has not received any notice of proceedings relating to the revocation or
modification of any such permit or any circumstance which would lead it to believe that such
proceedings are reasonably likely which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially and adversely affect the results of
operations and financial condition of the Company.

     4.12 Due Execution, Delivery and Performance

     (a) This Agreement has been duly executed and delivered by the Company and constitutes a valid
and binding obligation of the Company, enforceable against the Company in accordance with its
terms.

     (b) The execution, delivery and performance of this Agreement and the consummation of the
transactions contemplated in this Agreement and the fulfillment of the terms of this Agreement,
including the sale, issuance and delivery of the Purchased Shares and the issuance and delivery of
the Warrants, (i) have been duly authorized by all necessary corporate action on the part of the
Company, its directors and shareholders; (ii) will not conflict with or constitute a material
breach of, or default under, or result in the creation or imposition of any material lien, charge
or encumbrance upon any property or assets of the Company pursuant to, any material contract,
indenture, mortgage, loan agreement, deed, trust, note, lease, sublease, voting agreement, voting
trust or other instrument or agreement to which the Company is a party or by which it may be bound,
or to which any of the property or assets of the Company is subject; (iii) will not trigger
anti-dilution rights or other rights to acquire additional equity securities of the Company; and
(iv) will not result in any violation of the provisions of the articles of incorporation or code of
regulations of the Company or any applicable statute, law, rule, regulation, ordinance, decision,
directive or order.

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     4.13 Properties

     The Company has good and marketable title to its properties, free and clear of all material
security interests, mortgages, pledges, liens, charges, encumbrances and claims of record. The
properties of the Company are, in the aggregate, in good repair (reasonable wear and tear
excepted), and suitable for their respective uses. Any real property held under lease by the
Company is held under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the conduct of the business of the Company. The Company owns or
leases all such properties as are necessary to its business or operations as now conducted.

     4.14 Compliance

     The Company has conducted and is conducting its business in compliance with all applicable
Federal, state, local and foreign statutes, laws, rules, regulations, ordinances, codes, decisions,
decrees, directives and orders, except where the failure to do so would not, singly or in the
aggregate, have a material adverse effect on the results of operations and financial condition of
the Company.

     4.15 Taxes

     The Company has filed all material tax returns required to be filed, which returns are true
and correct in all material respects, and the Company is not in default in the payment of any
taxes, including penalties and interest, assessments, fees and other charges, shown thereon due or
otherwise assessed, other than those being contested in good faith and for which adequate reserves
have been provided or those currently payable without interest which were payable pursuant to said
returns or any assessments with respect thereto.

     4.16 Transfer Taxes

     On the Closing Date, all stock transfer or other taxes (other than income taxes) that are
required to be paid in connection with the sale and transfer of the Purchased Shares to be sold to
the Purchasers under this Agreement will be, or will have been, fully paid or provided for by the
Company and all laws imposing such taxes will be or will have been fully complied with.

     4.17 Insurance

     The Company maintains insurance of the type and in the amount that the Company reasonably
believes is adequate for its business, including, but not limited to, insurance covering all real
and personal property owned or leased by the Company against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against by similarly situated companies, all of
which insurance is in full force and effect.

     4.18 Securities and Exchange Commission Filings

     The Company, since November 30, 2003, has filed on time with the Securities and Exchange
Commission (the “Commission”) all documents required to be filed by the Company under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”).

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     4.19 Form S-3

     The Company satisfies the registrant requirements for the use of a registration statement on
Form S-3 to register the Purchased Shares for resale by the Purchaser under the Securities Act.

     4.20 Additional Information

     The Company represents and warrants that the information contained in the following documents
(the “Company Documents”), which will be provided to Purchaser before the Closing, is or will be
true and correct in all material respects as of their respective final dates:

     (a) the Company’s Annual Report on Form 10-K for the year ended December 31, 2003;

     (b) the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2004, June
30, 2004 and September 30, 2004;

     (c) the Company’s Proxy Statement for its 2004 Annual Meeting of Shareholders; and

     (d) all other documents, if any, filed by the Company with the Commission since September 30,
2004 pursuant to the reporting requirements of the Securities Exchange Act.

     4.21 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 in any security or solicited any offers to buy
any security under circumstances that would require registration under the Securities Act of the
issuance of the Purchased Shares to the Purchasers. The Company will not make any offers or sales
of any security (other than the Purchased Shares and the Warrants) that would cause the offering of
the Purchased Shares and the Warrants to be integrated with any other offering of securities by the
Company for purposes of any registration requirement under the Securities Act or any applicable
rules of Nasdaq (or of any national securities exchange on which the Company’s Common Shares are
then traded).

     4.22 Listing of Common Shares

     If the Common Shares are listed on a national securities exchange or automated quotation
system on the date the Registration Statement becomes effective, the Company agrees to promptly
secure the listing of the Purchased Shares and Warrant Shares upon each national securities
exchange or automated quotation system upon which Common Shares are then listed. The Company has
taken no action designed to delist, or which is likely to have the effect of delisting, the Common
Shares from any of the national securities exchange or automated quotation system upon which the
Common Shares are currently listed.

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     4.23 Securities Laws Disclosure; Publicity

     The Company shall issue a press release disclosing the transactions contemplated hereby prior
to 8:30 AM (New York time) the day after the date of this Agreement and file a Current Report on
Form 8-K disclosing the transactions contemplated hereby on or before the fourth business day after
the date of this Agreement. The Current Report on Form 8-K will disclose the material terms of the
transactions contemplated hereby, including the number of Purchased Shares, the Per Share Price and
the number of Common Shares that may be issued upon exercise of the Warrants. In addition, the
Company will make such other filings and notices in the manner and time required by the Commission
and Nasdaq.

     4.24 No Manipulation of Stock

     The Company has not taken and will not, in violation of applicable law, take any action
outside the ordinary course of business designed to or that might reasonably be expected to cause
or result in unlawful manipulation of the price of the Common Shares to facilitate the sale or
resale of the Common Shares.

     4.25 Purchasers’ Fees and Expenses

     The Company shall reimburse the Purchasers for the payment of reasonable legal and other
out-of-pocket expenses actually incurred by the Purchasers in connection with the negotiation,
execution and consummation of this Agreement and the agreements and transactions contemplated by
this Agreement, in an amount not to exceed $15,000 in the aggregate.

5. Representations, Warranties and Covenants of the Purchasers

     5.1 Securities Law Representations and Warranties

     Each Purchaser, severally and not jointly, represents, warrants and covenants to the Company
as follows:

     (a) The Purchaser is knowledgeable, sophisticated and experienced in making, and is qualified
to make, decisions with respect to investments in shares representing an investment decision like
that involved in the purchase of the Purchased Shares and the Warrants, including investments in
securities issued by the Company, and has requested, received, reviewed and considered all
information it deems relevant in making an informed decision to purchase the Purchased Shares.

     (b) The Purchaser is acquiring the number of Purchased Shares and Warrants set forth in
Section 2 above in the ordinary course of its business and for its own account for investment (as
defined for purposes of the Hart-Scott-Rodino Antitrust Improvement Act of 1976 and the regulations
thereunder) only, and has no present intention of distributing any of the Purchased Shares,
Warrants or Warrant Shares nor any arrangement or understanding with any other persons regarding
the distribution of such Purchased Shares, Warrants or Warrant Shares within the meaning of Section
2(11) of the Securities Act, other than as contemplated in Section 7 of this Agreement.

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     (c) The Purchaser will not, directly or indirectly, offer, sell, pledge, transfer or otherwise
dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of
the Purchased Shares, Warrants or Warrant Shares except in compliance with the Securities Act and
the rules and regulations promulgated thereunder (the “Rules and Regulations”).

     (d) The Purchaser has completed or caused to be completed the Stock Certificate Questionnaire
and the Registration Statement Questionnaire, attached to this Agreement as Appendices I and II,
for use in preparation of the Registration Statement (as defined in Section 7.3 below), and the
answers to the Questionnaires are true and correct as of the date of this Agreement and will be
true and correct as of the effective date of the Registration Statement; provided that the
Purchasers shall be entitled to update such information by providing notice thereof to the Company
before the effective date of such Registration Statement.

     (e) The Purchaser has, in connection with its decision to purchase the number of Purchased
Shares and Warrants set forth in Section 2 above, relied solely upon the Company Documents and the
representations and warranties of the Company contained in this Agreement.

     (f) The Purchaser is an “accredited investor” within the meaning of Rule 501 of Regulation D
promulgated under the Securities Act.

     (g) The Purchaser has not, from the time the Purchaser first became aware of the transactions
contemplated by this Agreement through the date of this Agreement, directly or indirectly, entered
into any hedging or similar transaction regarding any Common Shares or granted any option to sell
(including without limitation any short sale, whether or not against the box), loaned, pledged,
transferred, established an open “put equivalent position” within the meaning of Rule 16a-1(h)
under the Exchange Act, or otherwise granted any rights (including, without limitation, any put or
call option) with respect to any Common Shares or any security (other than a broad-based market
basket or index) that included, relates to or derives any significant part of its value from Common
Shares. From the date of this Agreement to the Closing, the Purchaser agrees not to, directly or
indirectly, enter into any hedging or similar transaction regarding any Common Shares or grant any
option to sell (including, without limitation, any short sale, whether or not against the box),
loan, pledge, transfer, establish an open “put equivalent position” within the meaning of Rule
16a-1(h) under the Exchange Act, or otherwise granted any rights (including, without limitation,
any put or call option) with respect to any Common Shares or with respect to any security (other
than a broad-based market basket or index) that included, relates to or derives any significant
part of its value from Common Shares.

     (h) The Purchasers have not and will not act in concert, or as part of a group or partnership
in connection with their purchase of the Purchased Shares, the Warrants and the Warrant Shares or
any other transactions contemplated under this Agreement.

     5.2 Resales of Common Shares

     (a) The Purchaser hereby covenants with the Company not to make any sale of the Purchased
Shares, Warrants or Warrant Shares without satisfying the requirements of the Securities Act and
the Rules and Regulations, including, in the event of any resale under the

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Registration Statement, the prospectus delivery requirements under the Securities Act, and the
Purchaser acknowledges and agrees that such Common Shares are not transferable on the books of the
Company pursuant to a resale under the Registration Statement unless the certificate submitted to
the transfer agent evidencing the Common Shares is accompanied by a separate officer’s certificate:

               (i) in the form of Appendix III to this Agreement;

               (ii) executed by an officer of, or other authorized person designated by, the Purchaser; and

               (iii) to the effect that (A) the Common Shares have been sold in accordance with the
Registration Statement and (B) the requirement of delivering a current prospectus has been
satisfied.

     (b) The Purchaser acknowledges that there may occasionally be times when the Company
determines, in good faith following consultation with its Board of Directors or a committee
thereof, the use of the prospectus forming a part of the Registration Statement (the “Prospectus,”
as further defined in Section 7.3.1 below) should be suspended until such time as an amendment or
supplement to the Registration Statement or the Prospectus has been filed by the Company and any
such amendment to the Registration Statement is declared effective by the Commission, or until such
time as the Company has filed an appropriate report with the Commission pursuant to the Exchange
Act. The Purchaser hereby covenants that it will not sell any Common Shares pursuant to the
Prospectus during the period commencing at the time at which the Company gives the Purchaser
written notice of the suspension of the use of the Prospectus and ending at the time the Company
gives the Purchaser written notice that the Purchaser may thereafter effect sales pursuant to the
Prospectus. The Company may, upon written notice to the Purchasers, suspend the use of the
Prospectus for up to thirty (30) days in any 365-day period based on the reasonable determination
of the Company’s Board of Directors that there is a significant business purpose for such
determination, such as pending corporate developments, public filings with the SEC or similar
events. The Company shall in no event be required to disclose the business purpose for which it
has suspended the use of the Prospectus if the Company determines in its good faith judgment that
the business purpose should remain confidential. In addition, the Company shall notify each
Purchaser (i) of any request by the SEC for an amendment or any supplement to such Registration
Statement or any related prospectus, or any other information request by any other governmental
agency directly relating to the offering, and (ii) of the issuance by the SEC of any stop order
suspending the effectiveness of such Registration Statement or of any order preventing or
suspending the use of any related prospectus or the initiation or threat of any proceeding for that
purpose. In the event that the suspension of the Prospectus is longer than the thirty (30) days
permitted above, or occurs more than once in any 365-day period, the Company shall pay to each
Purchaser liquidated damages in an amount equal to 0.25% of the total purchase price of the
Purchased Shares purchased by such Purchaser pursuant to this Agreement for each week the
Prospectus remains suspended past and in violation of the foregoing time restrictions.

     (c) The Purchaser further covenants to notify the Company promptly of the sale of any of its
Purchased Shares or Warrant Shares, other than sales pursuant to a Registration

12

 

Statement contemplated in Section 7 of this Agreement or sales upon termination of the
transfer restrictions pursuant to Section 7.4 of this Agreement.

     5.3 Due Execution, Delivery and Performance

     (a) This Agreement has been duly executed and delivered by the Purchaser and constitutes a
valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with
its terms.

     (b) The execution, delivery and performance of this Agreement and the consummation of the
transactions contemplated in this Agreement and the fulfillment of the terms of this Agreement have
been duly authorized by all necessary corporate, agency or other action and will not conflict with
or constitute a breach of, or default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Purchaser pursuant to, any contract,
indenture, mortgage, loan agreement, deed, trust, note, lease, sublease, voting agreement, voting
trust or other instrument or agreement to which the Purchaser is a party or by which it or any of
them may be bound, or to which any of the property or assets of the Purchaser is subject, nor will
such action result in any violation of the provisions of the charter or bylaws of the Purchaser or
any applicable statute, law, rule, regulation, ordinance, decision, directive or order.

6. Survival of Representations, Warranties and Agreements

     Notwithstanding any investigation made by any party to this Agreement, all covenants,
agreements, representations and warranties made by the Company and the Purchasers in this Agreement
and in the certificates for Common Shares delivered pursuant to this Agreement shall survive the
execution of this Agreement, the delivery to the Purchasers of the Purchased Shares being purchased
and the payment therefore.

7. Form D Filing; Registration; Compliance with the Securities Act; Covenants

     7.1 Form D Filing; Registration of Shares

                         7.1.1 Definitions

     As used in this Section 7.1, the following terms shall have the following meanings:

     (a) “Person” means any individual, partnership, corporation, limited liability company, joint
stock company, association, trust, unincorporated organization, or governmental agency or political
subdivision thereof.

     (b) “Public Offering” means an offer registered with the Commission and the appropriate state
securities commissions by the Company of its Common Shares and made pursuant to the Securities Act.

     (c) “Registrable Shares” means the Purchased Shares purchased pursuant to this Agreement and
the Warrant Shares; provided, however, that a Purchased Share or Warrant Share

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shall cease to be a Registrable Share for purposes of this Section 7.1 when it no longer is a
Restricted Share.

     (d) “Restricted Share” means any Purchased Share or Warrant Share except any that (i) have
been registered pursuant to an effective registration statement under the Securities Act and sold
in a manner contemplated by the prospectus included in such registration statement, (ii) have been
transferred in compliance with the resale provisions of Rule 144 under the Securities Act (or any
successor provision thereto) or is transferable pursuant to paragraph (k) of Rule 144 under the
Securities Act (or any successor provision thereto), or (iii) otherwise have been transferred and a
new Common Share not subject to transfer restrictions under the Securities Act has been delivered
by or on behalf of the Company.

                         7.1.2 Registration Statement; Expenses

     The Company shall:

     (a) file in a timely manner a Form D relating to the sale of the Common Shares under this
Agreement, pursuant to Regulation D as promulgated by the Commission;

     (b) use its best efforts to prepare and file with the Commission a Registration Statement (the
“Registration Statement”) on Form S-3 (or, if the Company is ineligible to use Form S-3, then on
Form S-1), relating to the sale of the Registrable Shares by the Purchasers from time to time on
Nasdaq (National Market, Small Cap Market or the facilities of any national securities exchange on
which the Company’s Common Shares are then traded) or in privately negotiated transactions, within
30 days following the Closing Date (subject to receipt of necessary information from the
Purchasers);

     (c) provide to Purchasers any information required to permit the sale of Purchased Shares or
Warrant Shares under Rule 144 of the Securities Act;

     (d) subject to receipt of necessary information from the Purchasers, use its best efforts to
cause the Commission to notify the Company of the Commission’s willingness to declare the
Registration Statement effective on or before 90 days after filing the Registration Statement with
the Commission or on or before 120 days after such filing in the event the Commission initiates a
review of the Registration Statement; provided, however, the Company shall be obligated to request
that the Commission accelerate the date upon which the Registration Statement will be effective
within five business days after the Company’s receipt of notice from the Commission that the
Commission will not undertake any further review or comment of the Registration Statement and if
the Company fails to do so, the Company shall pay to each Purchaser liquidated damages in an amount
equal to 0.25% of the total purchase price of the Purchased Shares purchased by such Purchaser
pursuant to this Agreement for each week the Company fails to request such acceleration;

     (e) notify Purchasers promptly upon the Registration Statement, and any post-effective
amendment thereto, being declared effective by the Commission;

     (f) prepare and file with the Commission such amendments and supplements to the Registration
Statement and the Prospectus (as defined in Section 7.3.1 below) and take such

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other action, if any, as may be necessary to keep the Registration Statement effective until
the earlier of (i) the date on which all Registrable Shares may be resold by the Purchasers without
registration and without regard to any volume limitations by reason of Rule 144(k) under the
Securities Act or any other rule of similar effect or (ii) all of the Registrable Shares have been
sold pursuant to the Registration Statement or Rule 144 under the Securities Act or any other rule
of similar effect;

     (g) promptly furnish to the Purchasers with respect to the Common Shares registered under the
Registration Statement such reasonable number of copies of the Prospectus, including any
supplements to or amendments of the Prospectus, in order to facilitate the public sale or other
disposition of all or any of the Common Shares registered under the Registration Statement by the
Purchasers;

     (h) during the period when copies of the Prospectus are required to be delivered under the
Securities Act or the Exchange Act, will file all documents required to be filed with the
Commission pursuant to Section 13, 14 or 15 of the Exchange Act within the time periods required by
the Exchange Act and the rules and regulations promulgated thereunder;

     (i) file documents required of the Company for customary Blue Sky clearance in all states
requiring Blue Sky clearance; provided, however, that the Company shall not be required to qualify
to do business or consent to service of process in any jurisdiction in which it is not now so
qualified or has not so consented;

     (j) bear all expenses in connection with the procedures in paragraphs (a) through (i) of this
Section 7.1.2 and the registration of the Registrable Shares pursuant to the Registration
Statement, not including any fees or expenses of counsel for the Purchasers; and

     (k) cause the Registration Statement not to relate to any Common Shares other than the
Registrable Shares, any Common Shares issuable to the Placement Agent (as defined in Exhibit
B) upon the exercise of warrants granted to the Placement Agent in connection with this
Agreement and related transactions and any Common Shares that have registration rights that were
granted in writing prior to the date of this Agreement.

               7.1.3 Piggyback Registration Rights

     (a) Until such date as the Registration Statement to be filed in accordance with Section
7.1.2(b) is declared effective by the Commission, if the Company proposes to register any of its
Common Shares or any other common shares of the Company under the Securities Act (other than a
registration (i) on Form S-8 or S-4 or any successor or similar forms, (ii) relating to Common
Shares or any other common shares of the Company issuable upon exercise of employee or consultant
share options or in connection with any employee benefit or similar plan of the Company or (iii) in
connection with a direct or indirect acquisition by the Company of another Person or any
transaction with respect to which Rule 145 (or any successor provision) under the Securities Act
applies), whether or not for sale for its own account, it will each such time, give prompt written
notice at least 20 days prior to the anticipated filing date of the registration statement relating
to such registration to the Purchasers, which notice shall set forth such Purchasers’ rights under
this Section 7.1.3 and shall offer the Purchasers the opportunity to

15

 

include in such registration statement such number of Registrable Shares as the Purchasers may
request. Upon the written request of a Purchaser made within 10 days after the receipt of notice
from the Company (which request shall specify the number of Registrable Shares intended to be
disposed of by such Purchasers), the Company will use its best efforts to effect the registration
under the Securities Act of all Registrable Shares that the Company has been so requested to
register by the Purchasers, to the extent requisite to permit the disposition of the Registrable
Shares to be so registered; provided, however, that (A) if such registration involves a Public
Offering, the Purchasers requesting the registration must sell their Registrable Shares to the
underwriters on the same terms and conditions as apply to the Company and (B) if, at any time after
giving written notice of its intention to register any Registrable Shares pursuant to this Section
7.1.3 and prior to the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register such Registrable Shares,
the Company shall give written notice to the Purchasers and, thereupon, shall be relieved of its
obligation to register any Registrable Shares in connection with such registration. The Company’s
obligations under this Section 7.1.3 shall terminate on the date that the Registration Statement to
be filed in accordance with Section 7.1.2(b) is declared effective by the Commission.

     (b) If a registration pursuant to this Section 7.1.3 involves a Public Offering and the
managing underwriter thereof advises the Company that, in its view, the number of Common Shares
proposed to be included in such registration exceeds the largest number of Common Shares that can
be sold without having an adverse effect on such Public Offering (the “Maximum Offering Size”), the
Company will include in such registration only that number of Common Shares which does not cause
the Maximum Offering Size to be exceeded, in the following order of priorities: (i) first, all
securities the Company proposes to sell for its own account, (ii) second, up to the full number of
securities proposed to be registered for the account of the holders of securities entitled to
inclusion of their securities in the registration statement by reason of demand registration
rights, and (iii) third, the securities requested to be registered by other holders of securities
entitled to participate in the registration, drawn from them pro-rata based on the number of shares
each has requested to be included in such registration.

     If as a result of the proration provisions of this Section 7.1.3(b), the Purchasers are not
entitled to include all such Registrable Shares in such registration, such Purchasers may elect to
withdraw their request to include any Registrable Shares in such registration.

     Notwithstanding the foregoing, the Company shall have no obligations under this Section 7.1.3
hereof at any time that such Registrable Shares are the subject of an effective registration
statement.

               7.1.4 Delay in Effectiveness of Registration Statement

     In the event that the Registration Statement is not filed with the Commission on or before the
30th day following the Closing Date, the Company shall pay to each Purchaser liquidated damages in
an amount equal to 0.25% of the total purchase price of the Purchased Shares purchased by such
Purchaser pursuant to this Agreement for each week after the date that the Registration Statement
is not filed as required under this Agreement.

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     In the event that the Registration Statement is not declared effective on or before the 90th
day after filing the Registration Statement with the Commission or on or before the 120th day after
such filing in the event the Commission initiates a review of the Registration Statement, the
Company shall pay to each Purchaser liquidated damages in an amount equal to 0.25% of the total
purchase price of the Purchased Shares purchased by such Purchaser pursuant to this Agreement for
each week after the date that the Registration Statement is not declared effective as required
under this Agreement.

     7.2 Transfer of Common Shares After Registration

     Each Purchaser agrees that it will not effect any disposition of Purchased Shares or Warrant
Shares or its right to purchase the Purchased Shares or Warrant Shares that would constitute a sale
within the meaning of the Securities Act, except as contemplated in the Registration Statement
referred to in Section 7.1 or as otherwise permitted by law, and that it will promptly notify the
Company of any changes in the information set forth in the Registration Statement regarding the
Purchaser or its plan of distribution.

     7.3 Indemnification

     For the purpose of this Section 7.3, the term “Registration Statement” shall include any
preliminary or final prospectus, exhibit, supplement or amendment included in or relating to the
Registration Statement referred to in Section 7.1.

                         7.3.1 Indemnification by the Company

     The Company agrees to indemnify and hold harmless each of the Purchasers and each person, if
any, who controls any Purchaser within the meaning of the Securities Act, against any losses,
claims, damages, liabilities or expenses, joint or several, to which such Purchasers or such
controlling person may become subject, under the Securities Act, the Exchange Act, or any other
federal or state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written consent of the
Company, which consent shall not be unreasonably withheld or unreasonably delayed), insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated
below) arise out of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, including the Prospectus, financial
statements and schedules, and all other documents filed as a part thereof, as amended at the time
of effectiveness of the Registration Statement, including any information deemed to be a part
thereof as of the time of effectiveness pursuant to paragraph (b) of Rule 430A, or pursuant to Rule
434, of the Rules and Regulations, or the Prospectus, in the form first filed with the Commission
pursuant to Rule 424(b) of the Regulations, or filed as part of the Registration Statement at the
time of effectiveness if no Rule 424(b) filing is required (the “Prospectus”), or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged omission to state in
any of them a material fact required to be stated therein or necessary to make the statements in
any of them, in light of the circumstances under which they were made, not misleading, or arise out
of or are based in whole or in part on any inaccuracy in the representations and warranties of the
Company contained in this Agreement, or any failure of the Company to perform its obligations under
this Agreement or under applicable law, and will

17

 

reimburse each Purchaser and each such controlling person for any legal and other expenses as
such expenses are reasonably incurred by such Purchaser or such controlling person in connection
with investigating, defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage, liability or expense arises out of or is
based upon (i) an untrue statement or alleged untrue statement or omission or alleged omission made
in the Registration Statement, the Prospectus or any amendment or supplement of the Registration
Statement or Prospectus in reliance upon and in conformity with written information furnished to
the Company by or on behalf of the Purchaser expressly for use in the Registration Statement or the
Prospectus, or (ii) the failure of such Purchaser to comply with the covenants and agreements
contained in Sections 5.2 or 7.2 of this Agreement respecting resale of Purchased Shares and
Warrant Shares, or (iii) the inaccuracy of any representations made by such Purchaser in this
Agreement or (iv) any untrue statement or omission of a material fact required to make such
statement not misleading in any Prospectus that is corrected in any subsequent Prospectus that was
delivered to the Purchaser before the pertinent sale or sales by the Purchaser.

                         7.3.2 Indemnification by the Purchaser

     Each Purchaser will severally and not jointly indemnify and hold harmless the Company, each of
its directors, each of its officers who signed the Registration Statement and each person, if any,
who controls the Company within the meaning of the Securities Act, against any losses, claims,
damages, liabilities or expenses to which the Company, each of its directors, each of its officers
who signed the Registration Statement or controlling person may become subject, under the
Securities Act, the Exchange Act, or any other federal or state statutory law or regulation, or at
common law or otherwise (including in settlement of any litigation, if such settlement is effected
with the written consent of such Purchaser, which consent shall not be unreasonably withheld)
insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon (i) any failure on the part of such Purchaser to
comply with the covenants and agreements contained in Sections 5.2 or 7.2 of this Agreement
respecting the sale of Purchased Shares and Warrant Shares or (ii) the inaccuracy of any
representation made by such Purchaser in this Agreement or (iii) any untrue or alleged untrue
statement of any material fact contained in the Registration Statement, the Prospectus, or any
amendment or supplement to the Registration Statement or Prospectus, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, the Prospectus, or any amendment or supplement
thereto, in reliance upon and in conformity with written information furnished to the Company by or
on behalf of such Purchaser expressly for use therein; provided, however, that the Purchaser shall
not be liable for any such untrue or alleged untrue statement or omission or alleged omission of
which the Purchaser has delivered to the Company in writing a correction before the occurrence of
the transaction from which such loss was incurred, and the Purchaser will reimburse the Company,
each of its directors, each of its officers who signed the Registration Statement or controlling
person for any legal and other expense reasonably incurred by the Company, each of its directors,
each of its officers who signed the Registration Statement or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim, damage, liability,
expense or action.

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                         7.3.3 Indemnification Procedure

     (a) Promptly after receipt by an indemnified party under this Section 7.3 of notice of the
threat or commencement of any action, such indemnified party will, if a claim in respect thereof is
to be made against an indemnifying party under this Section 7.3, promptly notify the indemnifying
party in writing of the claim; but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party for contribution or
otherwise under the indemnity agreement contained in this Section 7.3 or to the extent it is not
prejudiced as a result of such failure.

     (b) In case any such action is brought against any indemnified party and such indemnified
party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with all other
indemnifying parties similarly notified, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party; provided, however, if the defendants in any such action
include both the indemnified party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be a conflict between the positions of the indemnifying party
and the indemnified party in conducting the defense of any such action or that there may be legal
defenses available to it or other indemnified parties that are different from or additional to
those available to the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise participate in the defense
of such action on behalf of such indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of its election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party will not be liable
to such indemnified party under this Section 7.3 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof unless:

               (i) the indemnified party shall have employed such counsel in connection with the assumption
of legal defenses in accordance with the proviso to the preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of more than one separate
counsel, approved by such indemnifying party representing all of the indemnified parties who are
parties to such action) or

               (ii) the indemnifying party shall not have employed counsel reasonably satisfactory to the
indemnified party to represent the indemnified party within a reasonable time after notice of
commencement of action, in each of which cases the reasonable fees and expenses of counsel shall be
at the expense of the indemnifying party. Notwithstanding the provisions of this Section 7.3, the
Purchaser shall not be liable for any indemnification obligation under this Agreement in excess of
the amount of net proceeds received by the Purchaser from the sale of Purchased Shares and Warrant
Shares.

                         7.3.4 Contribution

     If the indemnification provided for in this Section 7.3 is required by its terms but is for
any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified
party under this Section 7.3 in respect to any losses, claims, damages, liabilities or expenses

19

 

referred to in this Agreement, then each applicable indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of any losses, claims, damages,
liabilities or expenses referred to in this Agreement:

     (a) in such proportion as is appropriate to reflect the relative benefits received by the
Company and the Purchaser from the placement of Purchased Shares and Warrants, or

     (b) if the allocation provided by clause (a) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred to in clause (a)
above but the relative fault of the Company and the Purchaser in connection with the statements or
omissions or inaccuracies in the representations and warranties in this Agreement that resulted in
such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable
considerations.

     The respective relative benefits received by the Company on the one hand and each Purchaser on
the other shall be deemed to be in the same proportion as the amount paid by such Purchaser to the
Company pursuant to this Agreement for the Purchased Shares purchased by such Purchaser that were
sold pursuant to the Registration Statement bears to the difference (the “Difference”) between the
amount such Purchaser paid for the Purchased Shares that were sold pursuant to the Registration
Statement and the amount received by such Purchaser from such sale. The relative fault of the
Company and each Purchaser shall be determined by reference to, among other things, whether the
untrue or alleged statement of a material fact or the omission or alleged omission to state a
material fact or the inaccurate or the alleged inaccurate representation or warranty relates to
information supplied by the Company or by such Purchaser and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include, subject to the limitations set forth in
Section 7.3.3, any legal or other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim. The provisions set forth in Section 7.3.3
with respect to the notice of the threat or commencement of any threat or action shall apply if a
claim for contribution is to be made under this Section 7.3.4; provided, however, that no
additional notice shall be required with respect to any threat or action for which notice has been
given under Section 7.3 for purposes of indemnification. The Company and each Purchaser agree that
it would not be just and equitable if contribution pursuant to this Section 7.3 were determined
solely by pro rata allocation (even if the Purchaser were treated as one entity for such purpose)
or by any other method of allocation which does not take account of the equitable considerations
referred to in this paragraph. Notwithstanding the provisions of this Section 7.3, no Purchaser
shall be required to contribute any amount in excess of the amount by which the Difference exceeds
the amount of any damages that such Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent misrepresentation. The
Purchasers’ obligations to contribute pursuant to this Section 7.3 are several and not joint.

     7.4 Termination of Conditions and Obligations

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     The restrictions imposed by Section 5 or this Section 7 upon the transferability of Purchased
Shares shall cease and terminate as to any particular number of the Purchased Shares upon the
passage of two years from the Closing Date or at such time as an opinion of counsel satisfactory in
form and substance to the Company shall have been rendered to the effect that such conditions are
not necessary in order to comply with the Securities Act. The restrictions imposed by Section 5 or
this Section 7 upon the transferability of Warrant Shares shall cease and terminate as to any
particular number of the Warrant Shares upon the passage of two years from the issuance date of
those Warrant Shares or at such time as an opinion of counsel satisfactory in form and substance to
the Company shall have been rendered to the effect that such conditions are not necessary in order
to comply with the Securities Act.

     7.5 Information Available

     From the date of this Agreement through the date the Registration Statement covering the
resale of Registrable Shares owned by any Purchaser is no longer effective, the Company will
furnish to such Purchaser:

     (a) as soon as practicable after available (but in the case of the Company’s Annual Report to
Shareholders, within 90 days after the end of each fiscal year of the Company), one copy of:

               (i) its Annual Report to Shareholders (which Annual Report shall contain financial statements
audited in accordance with generally accepted accounting principles by a national firm of certified
public accountants);

               (ii) if not included in substance in the Annual Report to Shareholders, its Annual Report on
Form 10-K;

               (iii) if not included in substance in its Quarterly Reports to Shareholders, its quarterly
reports on Form 10-Q; and

               (iv) a full copy of the particular Registration Statement covering the Common Shares (the
foregoing, in each case, excluding exhibits);

     (b) upon the request of the Purchaser, a reasonable number of copies of the Prospectus to
supply to any other party requiring the Prospectus.

     7.6 Rule 144 Information

     Until the earlier of (i) the date on which all Purchased and Warrant Shares may be resold by
the Purchasers without registration and without regard to any volume limitations by reason of Rule
144(k) under the Securities Act or any other rule of similar effect or (ii) all of the Purchased
and Warrant Shares have been sold pursuant to the Registration Statement or Rule 144 under the
Securities Act or any other rule of similar effect, the Company shall file all reports required to
be filed by it under the Securities Act, the Rules and Regulations and the Exchange Act and shall
take such further action to the extent required to enable the Purchasers to sell the Purchased and
Warrant Shares pursuant to Rule 144 under the Securities Act (as such rule may be amended from time
to time).

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     7.7 Removal of Legend

     The Company shall cause counsel to issue, no later than 5 business days after the Registration
Statement becomes effective, a legal opinion instructing the Company’s transfer agent to promptly
effect removal of the Legend from certificates representing Purchased Shares or Warrant Shares upon
written request to the transfer agent from a Purchaser or transferee that is entitled to exercise
rights under this Agreement as long as the Registration Statement is effective. After receipt of a
written request from the Purchaser or a transferee that is entitled to rights under this Agreement
and subject to the satisfaction of any applicable provisions contained in Sections 5 and 7 hereof,
the Company shall cause counsel to promptly issue a legal opinion to the Company’s transfer agent,
if required by the Company’s transfer agent, to effect the removal of the Legend from certificates
representing Purchased Shares or Warrant Shares (i) if such Common Shares have been resold or
transferred pursuant to a registration statement then-effective under the Securities Act, (ii) if,
in connection with a sale transaction, the Company is provided by the seller with an opinion of
counsel reasonably acceptable to the Company to the effect that a public sale, assignment, pledge
or transfer of such Common Shares may be made without registration under the Securities Act, (iii)
if such Common Shares are eligible for sale under Rule 144(k) of the Securities Act (or any
successor rule), or (iv) following any sale of such Common Shares pursuant to Rule 144, provided
that the seller provides such representations that the Company shall reasonably request confirming
compliance with the requirements of Rule 144.

     7.8 Transferees

     As a condition of any transfer of Purchased Shares or Warrant Shares, any transferee shall
agree in writing to be bound by the terms of this Agreement and shall have the rights of a
Purchaser under this Agreement, unless such Common Shares are transferred either (i) pursuant to a
registration statement then-effective under the Securities Act or (ii) after the restrictions set
forth in Section 5 and Section 7 have been terminated pursuant to Section 7.4 above.

8. Broker’s Fee

     The Purchasers acknowledge that the Company intends to pay to Stonegate Securities, Inc. a fee
in respect of the sale of the Purchased Shares to certain of the Purchasers. Each of the parties
to this Agreement hereby represents that, on the basis of any actions and agreements by it, there
are no other brokers or finders entitled to compensation in connection with the sale of the
Purchased Shares to the Purchasers. The Company shall indemnify and hold harmless the Purchasers
from and against all fees, commissions or other payments owing by the Company to Stonegate
Securities, Inc. or any other person or firm acting on behalf of the Company hereunder.

9. Notices

     All notices, requests, consents and other communications under this Agreement shall be in
writing, shall be mailed by first-class registered or certified airmail, confirmed facsimile or
nationally recognized overnight express courier postage prepaid, and shall be delivered as
addressed as follows:

     (a) if to the Company, to:

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Terry C. Black

Chief Financial Officer

DATATRAK International, Inc.

6150 Parkland Boulevard, Suite 100

Mayfield Heights, Ohio 44124

                         with a copy to:

Thomas F. McKee, Esq.

Calfee, Halter & Griswold LLP

1400 McDonald Investment Center

800 Superior Avenue

Cleveland, Ohio 44114

or to such other person at such other place as the Company shall designate to the Purchaser in
writing; and

     (b) if to a Purchaser, at its address as set forth on the signature page to this Agreement, or
at such other address or addresses as may have been furnished to the Company in writing.

     Such notice shall be deemed effectively given upon confirmation of receipt by facsimile, one
business day after deposit with such overnight courier or three days after deposit of such
registered or certified airmail with the U.S. Postal Service, as applicable.

10. Modification; Amendment

     This Agreement may not be modified or amended except pursuant to an instrument in writing
signed by the Company and each of the Purchasers.

11. Termination

     This Agreement may be terminated as to any Purchaser, at the option of such Purchaser, if the
Closing has not occurred on or before five (5) business days from the date of this Agreement;
provided that no Purchaser may terminate this Agreement if the Closing has not occurred due to the
failure of such Purchaser to fulfill an obligation under this Agreement.

12. Headings

     The headings of the various sections of this Agreement have been inserted for convenience of
reference only and shall not be deemed to be part of this Agreement.

13. Severability

     If any provision contained in this Agreement should be held to be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the remaining provisions
contained in this Agreement shall not in any way be affected or impaired thereby.

23

 

14. Governing Law; Jurisdiction

     This Agreement shall be governed by and construed in accordance with the laws of the State of
Delaware applicable to contracts made and performed entirely within such state and the federal law
of the United States of America. Nothing herein shall affect the right of the Purchaser to serve
process in any manner permitted by law or limit the right of the Purchaser to bring proceedings
against the Company in the competent courts of any jurisdiction or jurisdictions.

15. Counterparts

     This Agreement may be executed in two or more counterparts, each of which shall constitute an
original, but all of which, when taken together, shall constitute but one instrument, and shall
become effective when one or more counterparts have been signed by each party to this Agreement and
delivered to the other parties.

[signature pages follow]

24

 

In Witness Whereof, the parties to this Agreement have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first above written.

	 	 	 
	

	 	DATATRAK International, Inc.
	 
	 	 
	 
	 	 
	

	 	By   /s/ Jeffrey A. Green
	 
	 	 
	

	 	Name:     Jeffrey A.
Green
	 
	 	 
	

	 	Its:    President
and Chief Executive Officer
	 
	 	 
	 
	 	 
	

	 	Purchaser
[executed by each of the parties listed on Schedule A]
	 
	 	 
	

	 	Entity:    
	 
	 	 
	

	 	By:    
	 
	 	 
	

	 	Name:    
	 
	 	 
	

	 	Title:    
	 
	 	 
	

	 	Address:
	 
	 	 
	

	 	Facsimile:    
	 
	 	 

SHARE PURCHASE AGREEMENT
SIGNATURE PAGE

 

 

Schedule A

PURCHASERS

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Number of	 	Warrant Share
	Name
	 	Shares
	 	Warrant Shares
	 	Exercise Price

	Select Contrarian
Value Partners, L.P.
	 	 	 50,000	 	 	 	7,500	 	 	$	14.40	 
	Ball & Co fbo Fidelity
Securities Fund: Fidelity Small Cap Growth Fund
	 	 	10,000	 	 	 	1,500	 	 	$	14.40	 
	
Gryphon Master Fund, L.P.	 	 	52,631	 	 	 	7,895	 	 	$	14.40	 
	
GSSF Master Fund, LP	 	 	52,631	 	 	 	7,895	 	 	$	14.40	 
	
Capital Ventures International	 	 	78,947	 	 	 	11,842	 	 	$	14.40	 
	Alpha Capital Aktiengesellschaft
	 	 	52,631	 	 	 	7,895	 	 	$	14.40	 
	Midsummer Investments, Ltd.
	 	 	105,263	 	 	 	15,789	 	 	$	14.40	 
	Truk Opportunity Fund, LLC
	 	 	39,579	 	 	 	5,937	 	 	$	14.40	 
	Truk International Fund, LP
	 	 	2,526	 	 	 	379	 	 	$	14.40	 
	TCMP3
Partners
	 	 	42,105	 	 	 	6,316	 	 	$	14.40	 

 

 

Exhibit A

FORM OF OPINION

December __, 2004

Purchasers of Common Shares of

DATATRAK International, Inc.

Ladies and Gentlemen:

     We have acted as counsel to DATATRAK International, Inc., an Ohio corporation (the “Company”),
in connection with the issuance and sale to you of the Company’s Common Shares, without par value
(the “Common Shares”), and issuance to you of warrants to purchase Common Shares (the “Warrants”)
pursuant to the Share Purchase Agreement dated as of December    , 2004 (the “Purchase Agreement”)
between the Company and each of the Purchasers and in such amounts as listed on Schedule A
thereto (each a “Purchaser” and collectively, the “Purchasers”). The Common Shares purchased by
you pursuant to the Purchase Agreement are referred to below as the “Purchased Shares” and the
Common Shares issuable upon exercise of the Warrants are referred to below as the “Warrant Shares”.
This opinion is being delivered to you pursuant to Section 3(d)(iii) of the Purchase Agreement.
Capitalized terms used herein and not expressly defined shall have the meanings assigned to them in
the Purchase Agreement.

     In rendering the opinions set forth herein, we have examined executed originals (including
counterparts) or satisfactory copies of the following:

     (a) the Sixth Amended and Restated Articles of Incorporation of the Company (the “Articles of
Incorporation”);

     (b) the Code of Regulations of the Company, as amended to date (the “Code of Regulations”);

     (c) the Purchase Agreement;

     (d) the Warrants;

     (e) resolutions adopted by the Board of Directors of the Company authorizing, inter
alia, the execution and delivery of the Purchase Agreement and the Warrants;

     (f) a certificate from the Secretary of State of Ohio, dated December    , 2004, with respect
to the status of the Company as a corporation in good standing under the laws of the State of Ohio
as of such date;

 

 

     (g) a certificate of the Chief Executive Officer and Chief Financial Officer of the Company in
the form attached hereto as Exhibit A (the “Officers’ Certificate”); and

     (h) such other corporate documents and records of the Company, such other certifications or
representations as to factual matters of public officials and officers of the Company, and such
other documents as we have deemed necessary or appropriate for the purposes of the opinions
rendered herein.

     Any opinion herein relating to the Company’s good standing is based solely upon the
above-referenced certificate of good standing and Articles of Incorporation as certified by the
Secretary of State of Ohio. With respect to other factual matters, we have relied exclusively upon
the facts provided to us by the Company and the representations and warranties contained in the
Purchase Agreement. Insofar as an opinion herein relates to our knowledge of factual matters set
forth in the Officers’ Certificate, we have relied solely upon such certificate with respect to the
accuracy of such matters and we have not independently verified or established the accuracy
thereof. In each place where the phrase “to our knowledge” or similar language appears, such
reference is based solely upon: (i) the certificates and documents expressly referred to herein,
including the Officers’ Certificate and (ii) the actual knowledge of the attorneys in this office
who have, as attorneys, devoted substantive attention to the transactions contemplated by the
Purchase Agreement (consisting solely of Thomas F. McKee, Arthur C. Hall III and Seth M. Jupin) and
of any other attorneys currently with our firm whom we have determined are likely, in the course of
representing any of said parties, to have knowledge of the matters covered by this opinion.

     In rendering our opinions we have assumed the following:

     1. all records and documents examined by us in the preparation of this opinion are complete,
authentic and accurate;

     2. all signatures contained in such records and documents (other than the signatures of the
officers of the Company) are genuine signatures of the parties purporting to have signed the same;

     3. all natural persons signing such documents and records had, at the time of such signing,
full legal capacity to sign and deliver such documents;

     4. all documents submitted to us as copies in connection with our opinions conform to the
respective originals thereof;

     5. with respect to the Purchasers, each such Purchaser has all requisite power and authority
to enter into and to perform the Purchase Agreement;

     6. the execution, delivery and performance of the Purchase Agreement has been duly authorized
by each Purchaser and has been duly executed and delivered by each such Purchaser;

     7. the Purchase Agreement is the legal, valid and binding obligation of each Purchaser,
enforceable against such Purchaser in accordance with its terms;

 

 

     8. the execution, delivery and consummation of the Purchase Agreement by each Purchaser will
not (i) violate any provision of law applicable to such Purchaser, (ii) violate any order, judgment
or decree of any court or other agency of government binding on such Purchaser, or (iii) conflict
with, result in a breach of, constitute (with or without notice or lapse of time or both) a default
under, or require the termination of any contractual obligation of such Purchaser; and

     9. no action has been taken which amends, revokes or terminates any of the corporate or
organizational documents or records, certificates or representations which we have reviewed.

     Based upon and subject to the foregoing, and based upon such investigation of law as we have
deemed necessary, and subject to the qualifications, exceptions, limitations and further
assumptions set forth below, we are of the opinion that:

     1. The Company is a corporation validly existing and in good standing under the laws of the
State of Ohio. The Company has the requisite power to own or lease its property and assets and
conduct its business as currently conducted.

     2. The authorized capital stock of the Company consists of 25,000,000 Common Shares and
1,000,000 Serial Preferred Shares, the designation and terms of which may be established by
appropriate action of the Board of Directors. Relying solely on a certificate of the Company’s
transfer agent, National City Bank, dated as of December    , 2004, the issued and outstanding
shares of capital stock of the Company as of September 30, 2004 consisted of 6,101,532 Common
Shares. The issuance and sale of the Purchased Shares and the issuance of the Warrants pursuant to
the Purchase Agreement has been duly authorized. When the Purchased Shares are issued and
delivered against payment of the consideration therefore in accordance with the Purchase Agreement,
such shares will be validly issued, fully paid and non-assessable and free of any pre-emptive or
similar right. If any Warrant Shares are issued and delivered against payment of the consideration
therefore in accordance with the terms of the applicable Warrant, such shares will be validly
issued, fully paid and non-assessable and free of any pre-emptive or similar right.

     3. The Company has the requisite corporate power and authority to execute, deliver and perform
the Purchase Agreement and the Warrants and to consummate the transactions contemplated thereby.
The execution and delivery of the Purchase Agreement and the Warrants by the Company and the
consummation by it of the transactions contemplated thereby have been duly authorized by all
requisite corporate action of the Company. The Purchase Agreement and the Warrants have been duly
executed and delivered on behalf of the Company and each constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with its terms.

     4. Neither the execution, delivery, performance nor consummation of the Purchase Agreement or
the Warrants by the Company will (a) conflict with, or result in a breach or a violation of, any
provision of the Articles of Incorporation or Code of Regulations of the Company or (b) constitute,
with or without notice or the passage of time or both, a breach, violation or default, or give rise
to any right of termination, modification, cancellation,

 

 

prepayment, suspension, limitation, revocation or acceleration, under (1) any applicable
federal or Ohio statute, rule or regulation known to us, or, to our knowledge, any order, writ or
decree of any federal or state court, government or governmental agency or body having jurisdiction
over the Company or (2) any material agreement to which the Company is a party which was either
filed as an exhibit to the Company’s periodic filings with the Securities and Exchange Commission.

     5. The Company is not required to obtain any consent, approval or authorization of, or to make
any registration, declaration or filing with, any governmental entity or, to our knowledge, any
other third party as a condition to or in connection with the valid execution and delivery of the
Purchase Agreement or the Warrants or the consummation by the Company of its obligations under the
Purchase Agreement or the Warrants, except as may be necessary to qualify the sale of the Common
Shares or the Warrants under state securities or blue sky laws, including the filing of a Form D
pursuant to Regulation D (“Regulation D”) under the Securities Act of 1933, as amended (the
“Securities Act”), and the filing of a Form D with the Securities Commissioners of the states in
which sales occur.

     6. Based on the representations of the Purchasers in Section 5 of the Purchase Agreement, no
registration of the Purchased Shares or Warrants pursuant to the Securities Act is required for the
offer and sale thereof by the Company in the manner and under the circumstances contemplated by
reason of the exemption contained in Section 4(2) of such act, and the offer and sale of the
Purchased Shares and the Warrants as contemplated by the Purchase Agreement has been and is being
made in compliance with applicable state securities laws.

     7. Relying solely on the representations in the Officers’ Certificate, there is no litigation
pending or threatened against the Company or involving any of its respective properties or assets
by or before any court or other governmental entity which would reasonably be expected to have a
material adverse effect on the Company, or which questions the validity or enforceability of, or
seeks to enjoin or invalidate, the Purchase Agreement or any action to be taken by the Company in
connection therewith.

     The foregoing opinions are subject to the following further assumptions, limitations,
qualifications and exceptions:

     (a) Our opinions are subject to and affected by (i) applicable bankruptcy, insolvency,
avoidance, reorganization, bulk transfer, moratorium or similar laws affecting the rights of
creditors generally, including, without limitation, statutory and other laws regarding fraudulent
transfers and conveyances and preferential transfers, and (ii) general principles of equity
(regardless of whether considered in a proceeding in equity or at law). Moreover, the exercise of
the rights and remedies under the Purchase Agreement or Warrants could be subject to limitation if
(i) the enforcement of such rights and remedies by the Purchasers is not reasonably necessary for
the protection of the Purchasers, (ii) the penalties imposed bear no reasonable relation to the
damages suffered by the Purchasers, (iii) the enforcement of the rights and remedies violates the
obligations of the Purchasers of fair dealing and to act reasonably and in good faith, or would be
commercially unreasonable, (iv) any defaults or breaches by the Company are deemed by a court not
to be material, or (v) a court having jurisdiction finds that

 

 

such remedies, covenants or provisions were, at the time made, or are in application,
unconscionable as a matter of law or contrary to public policy. Furthermore, no opinion is
expressed as to whether any provisions are specifically enforceable or as to the enforceability of
any provision providing for indemnification, which provisions may be unenforceable or limited by
the federal laws of the United States, state laws or public policy.

     (b) We express no opinion as to the validity, binding effect or enforceability of any
provision in the Purchase Agreement or the Warrants to the extent that such provision: (i) purports
to waive any requirement of diligent performance or other care on any Purchaser’s part, (ii)
provides that delays or course of dealing will not operate as a waiver or that a waiver must be in
writing, (iii) provides for the payment of attorneys’ fees, (iv) provides for the establishment of
evidentiary standards, (v) attempts to modify or waive any defenses that the Company may have
either at law or in equity, and (vi) provides for the waiver of objections to jurisdiction, venue
or statute of limitations or provides for a choice of governing laws other than the laws of the
State of Ohio.

     (c) We express no opinion with respect to (i) the accuracy or completeness of any information
provided by the Company to the Purchasers regarding the Company or (ii) compliance by the Company
or any other party with the disclosure or other requirements of federal or state securities laws or
the effect of any noncompliance with such laws on the Purchase Agreement or the Warrants. With
respect to the opinion expressed in paragraph 6, we have assumed the accuracy of the
representations made by the Company’s placement agent (the “Placement Agent”) in its placement
agency agreement with the Company, including that the Placement Agent has not taken any action in
connection with the sale of the Purchased Shares and the issuance of the Warrants as contemplated
by the Purchase Agreement which would cause such sale and issuance not to comply with Regulation D.
Further, the opinion expressed in paragraph 6 above shall not be construed as being applicable to
any subsequent sale of Purchased Shares or Warrant Shares, with respect to which we render no
opinion.

     The opinions expressed herein are limited to the laws of the State of Ohio and United States
federal laws. We express no opinion as to the effect or applicability of the laws of any other
jurisdictions.

     Our opinions are limited to the matters expressly stated herein. No implied opinion may be
inferred to extend any opinion beyond the matters expressly stated herein. The opinions expressed
herein are expressed solely to you and, without the express written consent of the undersigned, may
not be reproduced, filed publicly or relied upon by any other persons for any reason.

Very truly yours,

CALFEE, HALTER & GRISWOLD LLP

 

 

Exhibit B

SCHEDULE OF EXCEPTIONS

4.2 Pursuant to the Company’s Placement Agency Agreement with Stonegate Securities, Inc. LLC (the
“Placement Agent”), upon the Closing, the Company has agreed to issue to the Placement Agent
warrants entitling the Placement Agent to purchase an amount of Purchased Shares equal to 5% of the
total number of Purchased Shares sold pursuant to the Share Purchase Agreement to investors who
participated in the offering as a result of the Placement Agent for a period of three years at an
exercise price per share equal to $14.40.

 

 

Exhibit C

FORM OF WARRANT

THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER SECURITIES LAWS, HAVE BEEN TAKEN FOR
INVESTMENT, AND MAY NOT BE SOLD OR TRANSFERRED OR OFFERED FOR SALE OR TRANSFER UNLESS A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS WITH RESPECT
TO SUCH SECURITIES IS THEN IN EFFECT, OR IN THE OPINION OF COUNSEL (WHICH OPINION IS REASONABLY
SATISFACTORY TO THE ISSUER OF THESE SECURITIES), SUCH REGISTRATION UNDER THE SECURITIES ACT AND
OTHER APPLICABLE SECURITIES LAWS IS NOT REQUIRED.

			
	Date:

December 28, 2004
	 	Warrant to Purchase

***          ***

Shares

DATATRAK International, Inc.

(Incorporated under the laws of the State of Ohio)

WARRANT FOR THE PURCHASE OF SHARES OF

THE NO PAR VALUE COMMON SHARES

Warrant Price: $14.40 per share, subject to adjustment as provided below.

     THIS IS TO CERTIFY that, for value received,            (“Purchaser”) and its assigns
(collectively, the “Holder”), is entitled to purchase, subject to the terms and conditions
hereinafter set forth, up to ***     *** shares of the no par value common shares (“Common
Shares”) of DATATRAK International, Inc., an Ohio corporation (the “Company”), and to receive
certificate(s) for the Common Shares so purchased.

     1. Exercise Period and Vesting. The exercise period is the period beginning on the date of
this Warrant (the “Issuance Date”) and ending at 5:00 p.m.,
Cleveland, Ohio time, on December 23, 2007 (the “Exercise Period”). This Warrant is vested in full as of the Issuance Date and is
immediately exercisable by Holder. This Warrant will terminate automatically and immediately upon
the expiration of the Exercise Period.

     2. Exercise of Warrant.

          (a) This Warrant may be exercised, in whole or in part, at any time and from time to time
during the Exercise Period. Such exercise shall be accomplished by the presentation

1

 

and surrender to the Company of this Warrant with an executed subscription in substantially
the form attached hereto as Exhibit A (the “Subscription”) and either (i) tender to the
Company of the purchase price equal to the per share warrant price set forth above (the “Warrant
Price”) multiplied by the number of Common Shares that this Warrant is being exercised for, in
cash, by wire transfer or by certified check or bank cashier’s check, payable to the order of the
Company, or (ii) or, after December 28, 2005, if a registration statement is not then-effective
under the Securities Act covering the Common Shares issuable under this Warrant, in a “cashless” or
“net-issue” exercise in which the Subscription specifies the number of Common Shares to be
delivered to the Holder (“Deliverable Shares”) and the number of Common Shares with respect to
which this Warrant is being surrendered in payment of the aggregate purchase price for the
Deliverable Shares (“Surrendered Shares”); provided that the Warrant Price multiplied by the number
of Deliverable Shares shall not exceed the value of the Surrendered Shares. For the purposes of
this provision, each Surrendered Share will be attributed a value equal to the average of the
“current market price” (as defined in Section 4(c) below) for the 20 trading days immediately
preceding the date of exercise less the Warrant Price.

          (b) Upon a valid exercise of this Warrant pursuant to the terms of subsection (a) above , the
Company will deliver to the Holder, as promptly as possible, a certificate or certificates
representing the shares of Common Shares so purchased, registered in the name of the Holder or its
transferee (as permitted under Section 3 below). With respect to any exercise of this Warrant, the
Holder will for all purposes be deemed to have become the holder of record of the number of shares
of Common Shares purchased hereunder on the date this Warrant is validly exercised pursuant to the
terms of subsection (a) above (the “Exercise Date”), irrespective of the date of delivery of the
certificate evidencing such shares, except that, if the date of such receipt is a date on which the
stock transfer books of the Company are closed, such person will be deemed to have become the
holder of such shares at the close of business on the next succeeding date on which the stock
transfer books are open. Fractional shares of Common Shares will not be issued upon the exercise
of this Warrant. In lieu of any fractional shares that would have been issued but for the
immediately preceding sentence, the Holder will be entitled to receive cash equal to the current
market price of such fraction of a share of Common Shares on the trading day immediately preceding
the Exercise Date. In the event this Warrant is exercised in part, the Company shall issue a new
Warrant to the Holder covering the aggregate number of shares of Common Shares as to which this
Warrant remains exercisable for.

     3. Transferability and Exchange.

     This Warrant, and the Common Shares issuable upon the exercise hereof, may not be sold,
transferred, pledged or hypothecated unless the Company shall have been provided with an opinion of
counsel, or other evidence reasonably satisfactory to it, that such transfer is not in violation of
the Securities Act, and any applicable state securities laws. Subject to the satisfaction of the
aforesaid condition, this Warrant and the underlying shares of Common Shares shall be transferable
from time to time by the Holder upon written notice to the Company (However, Purchaser agrees not
to transfer the warrant to any competitor of the Company). If this Warrant is transferred, in
whole or in part, the Company shall, upon surrender of this Warrant to the Company, deliver to each
transferee a Warrant evidencing the rights of such transferee to purchase the number of shares of
Common Shares that such transferee is entitled to purchase pursuant to such transfer. The Company
may place a legend similar to the legend at the

2

 

top of this Warrant on any replacement Warrant and on each certificate representing shares
issuable upon exercise of this Warrant or any replacement Warrants. Only a registered Holder may
enforce the provisions of this Warrant against the Company. A transferee of the original
registered Holder becomes a registered Holder only upon delivery to the Company of the original
Warrant and an original Assignment, substantially in the form set forth in Exhibit B
attached hereto.

     This Warrant is exchangeable upon its surrender by the Holder to the Company for new Warrants
of like tenor and date representing in the aggregate the right to purchase the number of shares
purchasable hereunder, each of such new Warrants to represent the right to purchase such number of
shares as may be designated by the Holder at the time of such surrender.

     4. Adjustments to Warrant Price and Number of Shares Subject to Warrant. The Warrant Price
and the number of shares of Common Shares purchasable upon the exercise of this Warrant are subject
to adjustment from time to time upon the occurrence of any of the events specified in this Section
4. For the purpose of this Section 4, “Common Shares” means shares now or hereafter authorized of
any class of common shares of the Company and any other stock of the Company, however designated,
that has the right to participate in any distribution of the assets or earnings of the Company
without limit as to per share amount (excluding, and subject to any prior rights of, any class or
series of preferred stock).

          (a) In case the Company shall (i) pay a dividend or make a distribution in shares of Common
Shares or other securities, (ii) subdivide its outstanding shares of Common Shares into a greater
number of shares, (iii) combine its outstanding shares of Common Shares into a smaller number of
shares, or (iv) issue by reclassification of its shares of Common Shares other securities of the
Company, then the Warrant Price in effect at the time of the record date for such dividend or on
the effective date of such subdivision, combination or reclassification, and/or the number and kind
of securities issuable on such date, shall be proportionately adjusted so that the Holder of any
Warrant thereafter exercised shall be entitled to receive the aggregate number and kind of shares
of Common Shares (or such other securities other than Common Shares) of the Company, at the same
aggregate Warrant Price, that, if such Warrant had been exercised immediately prior to such date,
the Holder would have owned upon such exercise and been entitled to receive by virtue of such
dividend, distribution, subdivision, combination or reclassification. Such adjustment shall be
made successively whenever any event listed above shall occur.

          (b) In case the Company shall fix a record date for the making of a distribution to all
holders of Common Shares (including any such distribution made in connection with a consolidation
or merger in which the Company is the surviving corporation) of cash, evidences of indebtedness or
assets, or subscription rights or warrants, the Warrant Price to be in effect after such record
date shall be determined by multiplying the Warrant Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the current market price per share of
Common Shares on such record date, less the amount of cash so to be distributed (or the fair market
value (as determined in good faith by, and reflected in a formal resolution of, the Board of
Directors of the Company) of the portion of the assets or evidences of indebtedness so to be
distributed, or of such subscription rights or warrants, applicable to one

3

 

share of Common Shares, and the denominator of which shall be such current market price per
share of Common Shares. Such adjustment shall be made successively whenever such a record date is
fixed; and in the event that such distribution is not so made, the Warrant Price shall again be
adjusted to be the Warrant Price which would then be in effect if such record date had not been
fixed.

          (c) For the purpose of any computation under any subsection of this Section 4 or under any
subsection of Section 2, the “current market price” per share of Common Shares on any date shall be
the per share price of the Common Shares on the trading day immediately prior to the event
requiring an adjustment hereunder and shall be: (i) if the principal trading market for such
securities is a national or regional securities exchange, the closing price on such exchange on
such day; or (ii) if sales prices for shares of Common Shares are reported by the Nasdaq National
Market or Nasdaq Small Cap Market (or a similar system then in use), the last reported sales price
so reported on such day; or (iii) if neither (i) nor (ii) above are applicable, and if bid and ask
prices for shares of Common Shares are reported in the over-the-counter market by Nasdaq (or, if
not so reported, by the National Quotation Bureau), the average of the high bid and low ask prices
so reported on such day. Notwithstanding the foregoing, if there is no reported closing price,
last reported sales price, or bid and ask prices, as the case may be, for the day in question, then
the current market price shall be determined as of the latest date prior to such day for which such
closing price, last reported sales price, or bid and ask prices, as the case may be, are available,
unless such securities have not been traded on an exchange or in the over-the-counter market for 30
or more days immediately prior to the day in question, in which case the current market price shall
be determined in good faith by, and reflected in a formal resolution of, the Board of Directors of
the Company.

          (d) Notwithstanding any provision herein to the contrary, no adjustment in the Warrant Price
shall be required unless such adjustment would require an increase or decrease of at least 1% in
the Warrant Price; provided, however, that any adjustments which by reason of this subsection (d)
are not required to be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 4 shall be made to the nearest cent or the nearest
one-hundredth of a share, as the case may be.

          (e) In the event that at any time, as a result of an adjustment made pursuant to subsection
(a) above, the Holder of any Warrant thereafter exercised shall become entitled to receive any
shares of capital stock of the Company other than shares of Common Shares, thereafter the number of
such other shares so receivable upon exercise of any Warrant shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the provisions with
respect to the shares of Common Shares contained in this Section 4, and the other provisions of
this Warrant shall apply on like terms to any such other shares.

          (f) If the Company merges or consolidates into or with another corporation or entity, or if
another corporation or entity merges into or with the Company (excluding such a merger in which the
Company is the surviving or continuing corporation and which does not result in any
reclassification, conversion, exchange, or cancellation of the outstanding shares of Common
Shares), or if all or substantially all of the assets or business of the Company are sold or
transferred to another corporation, entity, or person, then, as a condition to such consolidation,

4

 

merger, or sale (a “Transaction”), lawful and adequate provision shall be made whereby the
Holder shall have the right from and after the Transaction to receive, upon exercise of this
Warrant and upon the terms and conditions specified herein and in lieu of the shares of the Common
Shares that would have been issuable if this Warrant had been exercised immediately before the
Transaction, such shares of stock, securities, or assets as the Holder would have owned immediately
after the Transaction if the Holder had exercised this Warrant immediately before the effective
date of the Transaction.

     5. Registration Rights. The Company hereby grants to Holder, if Holder is not Purchaser, with
respect to the shares of Common Shares underlying this Warrant, registration rights identical to
those that are granted to Purchasers pursuant to that certain Share Purchase Agreement (the “Share
Purchase Agreement”) dated as of December 23, 2004 by and among the Company, Purchaser and the
other parties thereto.

     6. Reservation of Shares. The Company agrees at all times to reserve and hold available out
of its authorized but unissued shares of Common Shares the number of shares of Common Shares
issuable upon the full exercise of this Warrant. The Company further covenants and agrees that all
shares of Common Shares that may be delivered upon the exercise of this Warrant will, upon
delivery, be fully paid and nonassessable and free from all taxes, liens and charges with respect
to the purchase thereof hereunder.

     7. Notices to Holder. Upon any adjustment of the Warrant Price (or number of shares of Common
Shares purchasable upon the exercise of this Warrant) pursuant to Section 4, the Company shall
promptly thereafter cause to be given to the Holder written notice of such adjustment. Such notice
shall include the Warrant Price (and/or the number of shares of Common Shares purchasable upon the
exercise of this Warrant) after such adjustment, and shall set forth in reasonable detail the
Company’s method of calculation and the facts upon which such calculations were based. Where
appropriate, such notice shall be given in advance and included as a part of any notice required to
be given under the other provisions of this Section 7.

     In the event of (a) any fixing by the Company of a record date with respect to the holders of
any class of securities of the Company for the purpose of determining which of such holders are
entitled to dividends or other distributions, or any rights to subscribe for, purchase or otherwise
acquire any shares of capital stock of any class or any other securities or property, or to receive
any other right, (b) any capital reorganization of the Company, or reclassification or
recapitalization of the capital stock of the Company or any transfer of all or substantially all of
the assets or business of the Company to, or consolidation or merger of the Company with or into,
any other entity or person, or (c) any voluntary or involuntary dissolution or winding up of the
Company, then and in each such event the Company will give the Holder a written notice specifying,
as the case may be (i) the record date for the purpose of such dividend, distribution, or right,
and stating the amount and character of such dividend, distribution, or right; or (ii) the date on
which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger,
conveyance, dissolution, liquidation, or winding up is to take place and the time, if any is to be
fixed, as of which the holders of record of Common Shares (or such capital stock or securities
receivable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common
Shares (or such other stock securities) for securities or other property deliverable

5

 

upon such event. Any such notice shall be given at least 10 days prior to the earliest date
therein specified.

     8. No Rights as a Shareholder. This Warrant does not entitle the Holder to any voting rights
or other rights as a shareholder of the Company, nor to any other rights whatsoever except the
rights herein set forth.

     9. Additional Covenants of the Company. For so long as the Common Shares are listed for
trading on any regional or national securities exchange or Nasdaq (National Market or Small Cap
Market), the Company shall, upon issuance of any shares for which this Warrant is exercisable, at
its expense, promptly obtain and maintain the listing of such shares. The Company shall also
comply with the reporting requirements of Sections 13 and 15(d) of the Exchange Act for so long as
and to the extent that such requirements apply to the Company.

     The Company shall not, by amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant. Without limiting the generality of the foregoing, the Company
(a) will at all times reserve and keep available, solely for issuance and delivery upon exercise of
this Warrant, shares of Common Shares issuable from time to time upon exercise of this Warrant, (b)
will not increase the par value of any shares of capital stock receivable upon exercise of this
Warrant above the amount payable therefor upon such exercise, and (c) 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 stock.

     10. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of
the Company, the Holder and their respective successors and permitted assigns.

     11. Notices. The Company agrees to maintain a ledger of the ownership of this Warrant (the
“Ledger”). Any notice hereunder shall be given by registered or certified mail if to the Company,
at its principal executive office and, if to the Holder, to its address shown in the Ledger of the
Company; provided, however, that the Holder may at any time on three (3) days written notice to the
Company designate or substitute another address where notice is to be given. Notice shall be
deemed given and received after a certified or registered letter, properly addressed with postage
prepaid, is deposited in the U.S. mail.

     12. Severability. Every provision of this Warrant is intended to be severable. If any term or
provision hereof is illegal or invalid for any reason whatsoever, such illegality or invalidity
shall not affect the remainder of this Warrant.

     13. Governing Law. This Warrant shall be governed by and construed in accordance with the
laws of the State of Ohio without giving effect to the principles of choice of laws thereof.

     14. Attorneys’ Fees. In any action or proceeding brought to enforce any provision of this
Warrant, the prevailing party shall be entitled to recover reasonable attorneys’ fees in addition
to its costs and expenses and any other available remedy.

6

 

     15. Entire Agreement. This Warrant (including the Exhibits attached hereto) and, with respect
to registration rights, the Share Purchase Agreement, constitute the entire understanding between
the Company and the Holder with respect to the subject matter hereof, and supersedes all prior
negotiations, discussions, agreements and understandings relating to such subject matter.

     IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized
officer as of the date first set forth above.

	 	 	 
	

	 	DATATRAK INTERNATIONAL, INC.
	 
	 	 
	 
	 	 
	

	 	By:
	

	 	   
	

	 	Title:
	

	 	   

7

 

Exhibit A

SUBSCRIPTION FORM

(To be Executed by the Holder to Exercise the Rights To Purchase Common Shares Evidenced by the
Within Warrant)

     The undersigned hereby irrevocably subscribes for           shares (the “Shares”) of the Common
Shares of DATATRAK International, Inc. (the “Company”) pursuant to and in accordance with the terms
and conditions of the attached Warrant (the “Warrant”), and hereby exercises the Warrant:

     (a) by making payment herewith of $           for the Shares ($           per Share) by tendering
cash, wire transferring or delivering a certified check or bank cashier’s check, payable to the
order of the Company; or

     (b) in a “cashless” or “net-issue exercise” for, and to purchase the Shares (the “Deliverable
Shares”), and herewith makes payment therefor with            Surrendered Shares (as defined in the
Warrant). Pursuant to Section 2 of the Warrant, the undersigned attributed a value of $           per
Surrendered Share.

     The undersigned requests that a certificate for the Shares be issued in the name of the
undersigned and be delivered to the undersigned at the address stated below. If the Shares are not
all of the shares purchasable pursuant to the Warrant, the undersigned requests that a new Warrant
of like tenor for the balance of the remaining shares purchasable thereunder be delivered to the
undersigned at the address stated below.

     In connection with the issuance of the Shares, I hereby represent to the Company that I am
acquiring the Shares for my own account for investment and not with a view to, or for resale in
connection with, a distribution of the shares within the meaning of the Securities Act of 1933, as
amended (the “Securities Act”).

     I understand that because the Shares may not be registered at the time of exercise of the
Warrant under the Securities Act, I must hold such Shares indefinitely unless the Shares are
subsequently registered and qualified under the Securities Act or is exempt from such registration
and qualification. I shall make no transfer or disposition of the Shares unless (a) such transfer
or disposition can be made without registration under the Securities Act by reason of a specific
exemption from such registration and such qualification, or (b) a registration statement has been
filed pursuant to the Securities Act and has been declared effective with respect to such
disposition.

     In the event the Shares are not registered at the time of exercise of the Warrant, I agree
that each certificate representing the Shares delivered to me shall bear substantially the same
legend as set forth on the front page of the Warrant.

     I further agree that the Company may place stop orders on the certificates evidencing the
Shares with the transfer agent, if any, to the same effect as the above legend. The legend and
stop transfer notice referred to above shall be removed only upon my furnishing to the Company of
an opinion of counsel (reasonably satisfactory to the Company) to the effect that such legend may
be removed.

	 	 	 
	Date:   

	 	Signed:    
	

	 	
Address:    

A-1

 

Exhibit B

ASSIGNMENT

(To be Executed by the Holder to Effect Transfer of the Attached Warrant)

     For Value Received                                          hereby sells, assigns and transfers to
                                         the Warrant attached hereto and the rights represented thereby to
purchase                     shares of Common Shares in accordance with the terms and conditions hereof, and
does hereby irrevocably constitute and appoint                                          as attorney to transfer
such Warrant on the books of the Company with full power of substitution.

	 	 	 
	Dated:

	 	Signed: 

	 
	 	 
	Please print or typewrite

	 	Please insert Social Security
	name and address of

	 	or other Tax Identification
	assignee:

	 	Number of Assignee:
	 
	 	 
	
 

	 	
 
	 
	 	 
	
 
	 
	 	 
	
 

 

 

Appendix I

DATATRAK INTERNATIONAL, INC.

STOCK CERTIFICATE QUESTIONNAIRE

     Pursuant to Section 3 of the Agreement, please provide us with the following information:

1. The exact name that your Common Shares are to be registered in (this is the name that will
appear on your stock certificate(s)). You may use a nominee name if appropriate:

                                                                                                         

2. The relationship between the Purchaser of the Common Shares and the Registered Holder listed in
response to item 1 above:                                                             

3. The mailing address of the Registered Holder listed in response to item 1 above:

                                                                                                    

                                                                                                    

                                                                                                    

                                                                                                    

4. The Social Security Number or Tax Identification Number of the Registered Holder listed in
response to item 1 above:

                                                                                                         

 

 

Appendix II

DATATRAK INTERNATIONAL, INC.

REGISTRATION STATEMENT QUESTIONNAIRE

     In connection with the preparation of the Registration Statement, please provide us with the
following information:

	1.	 	Pursuant to the “Selling Shareholder” section of the Registration Statement, please state
your or your organization’s name exactly as it should appear in the Registration Statement:

                                                                                                                                                                     

	2.	 	Please provide the number of Warrant Shares that you or your organization will hold Warrants
to purchase immediately after Closing:

                                                                                                                                                                     

	3.	 	Please provide the number of Common Shares that you or your organization will own immediately
after Closing, including those Common Shares purchased by you or your organization pursuant to
this Purchase Agreement and those Common Shares purchased
by you or your organization through other transactions:

                                                                                                                                                                     

	4.	 	Have you or your organization had any position, office or other material relationship within
the past three years with the Company or its affiliates?

           Yes            No

     If yes, please indicate the nature of any such relationships below:

                                                                                                                                                                

                                                                                                                                                                

                                                                                                                                                                

                                                                                                                                                                

 

 

Appendix III

PURCHASER’S CERTIFICATE OF SUBSEQUENT SALE

     The undersigned, an officer of, or other person duly authorized by

[fill in official name of individual or institution]

hereby certifies that he/she/it is the Purchaser of the Common Shares evidenced by the attached
certificate, and as such, sold such Common Shares on                                         , 200      in accordance with
Registration Statement number 333-                                        , and complied with the requirement of delivering
a current prospectus in connection with such sale.

Print or Type:

Name of Purchaser (Individual or Institution):

Name of Individual representing Purchaser (if an Institution)

Title of Individual representing Purchaser (if an Institution):

Signature:

Individual Purchaser or Individual representing Purchaser:Exhibit 4.9

                                 SECURED PROMISSORY NOTE

$675,000.00
                                                                    March 1,2003
          1.   Parties

               1.1 Hamilton Aerospace Technologies, Inc., a Delaware corporation
with its principal place of business in Pima County1 Arizona, and Renegade
Venture Corporation, a Nevada corporation, jointly and severally (collectively
"Borrowers').

               1.2 American Capital Ventures, L.L.C., a Florida limited
liability company ("Lender").

          2.   Borrowers' Promise to Pay.

               2.1 For value received, Borrowers jointly and severally promise
to pay to the order of Lender, its successor or assigns, Six Hundred
Seventy-Five Thousand and 00/l00 Dollars ($675,000.00), in 1awful currency of
the United States of America (the "Principal"), plus interest (the "Interest")
on the Principal from time to time remaining unpaid.

               2.2 Lender may, at its option and in its sole and absolute
discretion, advance additional funds to Borrowers in an amount not to exceed
$2,000,000.00. If such additional funds are advanced by Lender to Borrowers,
such additional funds shall be governed by all of the terms of this Note, and
the Security Agreements shall secure same to the same extent as the funds
initially funded under this Note.

          3.   Payments

               3.1 So long as no default exists under or with respect to this
Promissory Note (this "Note"), the Security Agreements securing this Note of
even date herewith (the "Security Agreements") which are by this reference
expressly incorporated herein, or any other documents executed in connection
therewith or any other documents executed by Borrowers in favor of Lender
(whether or not directly attributable to this Note or the Security Agreements,
Interest on this Note shall be payable in monthly installments at the rate of
one and One quarter percent (1.25%) per month. The rate of Interest applied
shall sometimes be referred to herein as the "Applicable Interest Rate."

               3.2 Upon default in this Note, Interest shall be payable at the
highest rate of interest permitted by law or, if no maximum rate is prescribed
by law, at the annual rate of eighteen percent (18%) per annum (the "Default
Rate") ,subject to the terms hereof.

               3.3 Commencing on the first (1st) day of April, 2003, and then
monthly on the first (1st) day of each and every month thereafter (hereinafter
referred to as a "Payment Date"), Borrowers shall pay monthly installments of
Interest on the then outstanding Principal balance of the Note.

               3.4 The entire unpaid Principal and any accumulated, accrued or
unpaid Interest thereon shall be due and payable on the first (I SI) day of
September, 2003 (the "Maturity Date"). Lender may, at its option in its sole and
absolute discretion, and subject to the requirements of Paragraph 13.7 of this

<PAGE>

Note, extend the Maturity Date of this Note for an additional three (3) months,
up to and including December 1, 2003. Notwithstanding the foregoing, in the
event of any placement or sale, prior to the Maturity Date, of any debt or
equity by the Borrowers in an amount which is equal to or greater than
$300,000.00, then that amount of the Note shall be due immediately upon such
placement or sale in the same manner as if the Maturity Date had occurred.

               3.5 Interest shall be calculated on the basis of the actual
number of days elapsed divided by 365.

               3.6 All payments hereunder shall be made in lawful money of the
United States of America.

               3.7 In the event that the Applicable Interest Rate or the Default
Rate exceeds the maximum rate of interest allowed by applicable law, as amended
from time to time, in any interest period during the term or any extension of
this Note, only the maximum rate of interest allowed shall then be charged, but
thereafter in any interest period or periods during which the rate is less than
the maximum rate allowed by applicable law, as amended from time to time, the
Applicable Interest Rate and the Default Rate shall be increased so that Lender,
its successors or assigns, may collect interest in such amount as may have been
charged pursuant to the terms of this Note, but which was not charged because of
the limitation imposed by law.

               3.8 It is the intent of the parties hereto that in no event shall
the amount of interest due or payment in the nature of interest payable
hereunder exceed the maximum rate of interest allowed by applicable law, as
amended from time to time, and in the event any such payment is paid by
Borrowers or received by the Lender, then such excess sum shall be credited as a
payment of principal, unless Borrowers shall notify lender, in writing, that
Borrowers elect to have such excess sum returned to it forthwith. Lender may, in
determining the maximum rate of interest allowed under applicable law, as
amended from time to time, take advantage of any law, rule, or regulation in
effect from time to time, available to Lender which exempts Lender from any
limit upon the rate of interest it may charge or grants to Lender the right to
charge a higher rate of interest than that allowed by Arizona law.

          4. Application of Payments. So long as no default has occurred in this
Note, all payments hereunder shall first be applied to Interest, then to
Principal. Upon default in this Note, all payments hereunder shall first be
applied to costs pursuant to Section 8.3, then to Interest and the remainder to
Principal.

          5. Prepayment. This Note may be prepaid in whole or in part without
penalty. Any prepayment shall be accompanied by an amount equal to the Interest
accrued thereon to the date of receipt of such prepayment in collected funds.

          6. Other Instruments. The term "Loan Documents" shall mean any and all
of the documents heretofore, now or hereafter executed by Borrowers, by others,
or by Borrowers and others, in favor of Lender, which wholly or partly secure or
are executed in connection with this Note, including, without limitation, the
Security Agreements.

          7. Place of Payment All payments hereunder shall be made at the office
of Lender located at 2901 Clint Moore Road, Suite 259, Boca Raton, Florida
33496, or such other place as Lender may from time to time designate in writing.

<PAGE>

          8.   Default

               8.1 If any payment of Principal, Interest, or other sum due
Lender hereunder or under any of the Loan Documents is not paid within ten (10)
calendar days after the date when due, or if any other default occurs under any
of the Loan Documents or under any other document executed by Borrowers in favor
of Lender and is not cured within the applicable grace period, if any, or if any
obligation of Borrowers under any of the Loan Documents is not fully performed,
then this Note shall be in default.

               8.2 Upon default in this Note, Lender, at its option, may declare
the entire unpaid Principal balance of this Note, together with accrued
Interest, to be immediately due and payable without notice or demand.

               8.3 In addition to payments of Interest and Principal, if there
is a default in this Note, Lender shall be entitled to recover from Borrowers
all of Lender's costs of collection, including Lender's attorneys' fees,
paralegal's fees and legal assistants' fees (at all tribunal levels, whether for
services incurred in collection, litigation, bankruptcy proceedings, appeals, or
otherwise), and all other costs incurred in Connection therewith.

          9. Late Charge A late charge of Twenty-Five ($25.00) Dollars shall be
imposed on each and every payment, including the final payment due hereunder,
not received by Lender within ten (10) days after it is due. The late charge is
not a penalty, but liquidated damages to defray administrative and related
expenses due to such late payment. The late charge shall be immediately due and
payable and shall be paid by Borrowers to Lender without notice or demand. This
provision for a late charge is not and shall not be deemed a grace period' and
Lender has no obligation to accept a late payment. The acceptance of a late
payment shall not constitute a wavier of any default then existing or thereafter
arising in this Note. Further, Lender's failure to collect a late charge at any
time shall not constitute a waiver of Lender's right to thereafter, at any time
and from time to time (including, without limitation, upon acceleration on the
Note or upon payment in full of the Loan), collect such previously uncollected
late charges or to collect subsequently accruing late charges.

          10. Waivers. Borrowers and any endorsers, sureties, guarantors, and
all others who are, or may become liable for the payment hereof severally: (a)
waive presentment for payment, demand, notice of demand, notice of non-payment
or dishonor, protest and notice of protest of this Note, and all other notices
in connection with the delivery, acceptance, performance1 default or enforcement
of time of payment of this Note or other modifications hereof from time to time
prior to or after the Maturity Date hereof; whether by acceleration or in due
course, without notice, consent6 or consideration to any of the foregoing, (c)
agree to any substitution, exchange, addition, or release of any of the security
for the indebtedness evidenced by this Note or the addition or release of any
party or person primarily or secondarily liable hereon, (d) agree that Lender
shall not be required first to institute any suit, or to exhaust its remedies
against the Undersigned or any other person or party to become liable hereunder
or against the security in order to enforce the payment of this Note and (e)
agree that, notwithstanding the occurrence of any of the foregoing (except by
the express written release by Lender of any such person), the undersigned shall
be and remain, jointly and severally directly and primarily liable for all sums
due under this Note.

          11. Set-Offs. Borrowers and any endorsers, sureties, guarantors, and
all others who are, or who may become liable for the payment hereof; severally
expressly grant to Lender a continuing lien security interest in and authorize
and empower Lender, at its sole discretion, at any time after the occurrence of

<PAGE>

a default hereunder to appropriate and, in such order as Lender may elect, apply
to the payment hereof or to the payment of any and all indebtedness, liabilities
and obligations of such parties to Lender or any of Lender's affiliates, whether
now existing or hereafter created or arising or now owned or howsoever after
acquired by Lender or any of Lender's affiliates (whether such indebtedness,
liabilities and obligations are or will be joint or several, direct or indirect,
absolute or contingent, liquidated or unliquidated, matured or unmatured,
including, but not limited to, any letter of credit issued by Lender for the
account of any such parties), any and all money, general or specific deposits,
or collateral of any such parties now or hereafter in the possession of Lender.

          12. Submission to Jurisdiction. Borrowers, and any endorsers,
sureties, guarantors and all others who are, or who may become, liable for the
payment hereof severally, irrevocably and unconditionally (a) agree that any
suit, action, or other legal proceeding arising out of or relating to this Note
may be brought, at the option of the Lender, in a court of record of the State
of Arizona in Pima County, in the United States District Court whose
jurisdiction includes Pima County, Arizona, or in any other court of competent
jurisdiction; (b) consent to the jurisdiction of each such court in any such
Suit, action or proceeding; and (c) waive any objection which it or they may
have to the laying of venue of any such suit, action, or proceeding in any of
such courts.

          13. Miscellaneous Provisions.

               13.1 The term "Lender" as used herein shall mean Lender, its
Successors, participants and assigns and any holder of this Note.

               13.2 Time is of the essence in this Note.

               13.3 The captions of sections of this Note are for convenient
reference only, and shall not affect the construction or interpretation of any
of the terms and provisions set forth in this Note.

               13.4 If more than one person signs this Note, each is and shall
be jointly and severally liable hereunder; and if Borrower is a general
partnership, then all partners in Borrower (and if Borrower is limited
partnership then all general partners in Borrower) shall be jointly and
Severally liable hereunder, notwithstanding any contrary provision in the
partnership laws of the State of Arizona.

               13.5 This Note shall be construed, interpreted, enforced and
governed by and in accordance with the laws of the State of Arizona (excluding
the principles thereof governing conflicts of law), and federal law, in the
event federal law permits a higher rate of interest than Arizona law.

               13.6 If any provision or portion of this Note is declared or
found by a court pf competent jurisdiction to be unenforceable or null and void,
such provision or portion thereof shall be deemed stricken and severed from this
Note, and the remaining provisions and portions thereof shall continue in full
force and effect.

               13.7 This Note may not be amended, extended, renewed or modified
nor shall any waiver of any provision hereof he effective, except by an
instrument in writing executed by an authorized officer of Lender. Any waiver of
any provision hereof shall be effective only in the specific instance and for
the specific purpose for which given.

          14. Waiver of Trial bv Jury. BORROWERS AND LENDER (BYACCEPTANCE OF
THIS INSTRUMENT) HEREBY KNOWINGLY, IRREVOCABLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHT EITHER MY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION,
PROCEEDING OR COUNTERCLAIM BASED ON THE NOTE, OR ARISING OUT OF, UNDER OR IN
CONNE~ON WITH THIS NOTE OR ANY LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY
HERETO OR TO ANY LOAN DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
BORROWERS AND LENDER ENTERING INTO THE SUBJECT LOAN TRANSACTION.

                      [SIGNATURES APPEAR ON FOLLOWING PAGE]

<PAGE>

Hamilton Aerospace Technologies, Inc, a Delaware corporation

By:  /s/
   -------------------------------
Name:     John B. Sawyer
Title:    President

Renegade Venture Corporation, a Nevada corporation

By:  /s/
   -------------------------------
Name:     Ian Herman
Title:    Chairman/Chief Executive Officer

<PAGE>

AMERICAN CAPITAL VENTURES, L                                         Page 1 of 1
   Dito Hamilton

  From:      Alan Brooks [Alan.Brooks(C)worldnet.att.netl
  Sent:      Thursday, March 04, 2004 11:00 AM
  To:        Dito Hamilton
  Subject:   AMERICAN CAPITAL VENTURE settlement of note

                        AMERICAN CAPITAL VENTURES, L.L.C.

                                   MEMORANDUM

FROM: Alan Brooks

TO: Ian Herman, John Sawyer,

DATE: February 5,2004

          The amount of the repayment is $354,375.00. The current interest rate
is 1.25% or $4,429.69 monthly. Per our previous discussion, you would be willing
to repay the loan in six payments consisting of $30,000.00 paid monthly with
interest at 1.5% per month 18% per annum (the Default Rate) on the unpaid
balance.

          However, the theoretical default date is 12/1/03, therefore I would
suggest that the 1.5% monthly be retroactive, the additional interest due would
then he $1,771.87 for December and January. I would suggest this be rolled into
the principal amount due. Therefore the principal note amount would be increased
to $356,146.87.

          If payments of $30,000.00 monthly were made beginning 2/15/04 as
discussed, The balloon portion due would therefore be $176,146.87 on the first
day of the seventh month.

          The payment schedule would be as follows:

                                  Principal          InterestPrincipal Balance
                February 15, $30,000.00              $5,342.20       $326,146.87
                March 15,          30,000.00          4,892.20        296,146.87
                April 15,          30,000.00          4,442.20        266,146.87
                May 15,            30,000.00          3,992.20        236,146.87
                June 15,           30,000.00          3,542.20        206,146.87
                July 15.           30.000.00          3.092.20        176.146.87
                August 15,       $176,146.87                    N/A

         Included in this extension are 712,296 warrants to purchase common
shares at 25% below market. (2 shares for each dollar invested), the warrants
will be cashless.

Regards,
Alan Brooks
3/24/04

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