Document:

EX-4.1  E-2 SHARE PURCHASE AGREEMENT

 

EXHIBIT 4.1

DATATRAK INTERNATIONAL, INC.

SHARE PURCHASE AGREEMENT

     This Share Purchase Agreement (this “Agreement”), is made and entered into
effective as of August 6, 2003, 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 Common Shares

     Subject to the terms and conditions of this Agreement, the Company has
authorized the sale of up to $3,000,000 of its common shares, without par value
(the “Common Shares”), of the Company.

	2.	 	Agreement to Sell and Purchase the Common 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 Common Shares set
forth opposite such Purchaser’s name on Schedule A attached hereto.

	 	2.2	 	Purchase Price

     The purchase price of each Common Share shall be $4.00 (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 price per Common Share 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 Common Shares times the difference between the Per Share Price and the
Subsequent Purchase Price.

	3.	 	Delivery of the Common Shares at the Closing

     (a)  The completion of the purchase and sale of the Common Shares (the
“Closing”) shall occur at the offices of Calfee, Halter & Griswold LLP, counsel
to the Company, at 1400

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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 three business days following the execution of this Agreement, or such
later time and date as may be agreed by the parties (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 Common Shares set forth in Section 2 above and bearing an appropriate
legend referring to the fact that the Common 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 against delivery of payment for
the Common 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 Common 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
Common Shares 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 Common 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 to pay for the Common 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:

           (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

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

           (iv) the Company shall have obtained gross proceeds of at least $1,000,000
from the sale of the Common Shares at the Closing.

	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 June 30, 2003, the issued and outstanding capital stock of the
Company consisted of 5,352,990 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)  The Company has reserved 1,527,334 Common Shares for future issuance
upon the exercise of stock options granted or available for future grant under
the Company’s Amended and 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)  The Company has not reserved any Common Shares for issuance upon the
exercise of outstanding warrants to purchase Common Shares.

     
     With the exception of the foregoing, 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,

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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 Common Shares

     
     (a)  The Common Shares 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 Common Shares are in due and proper form under Ohio
law.

     
     (b)  The issuance of the Common 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 Common 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
Common Shares 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.

	 	4.5	 	No Material Change

     
   Since March 31, 2003,

     
     (a)  there has been no material adverse change or any development involving
a prospective material adverse change in or affecting the condition, financial
or otherwise, or in the earnings, assets, business affairs or business
prospects 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.

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	 	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, 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

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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 properties or assets thereof or which might materially and adversely
affect the consummation of this Agreement, nor, to the knowledge of the
Company, is there any reasonable basis therefor. 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 assets, properties or business 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 therefor.

     
     (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.

     
     (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.

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     (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 Common Shares, (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 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 Company 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 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.

     
     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.

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	 	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 Common 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 July 31, 2002, 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”).

	 	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 Common 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:

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     (a)  the Company’s Annual Report on Form 10-K for the year ended December
31, 2002;

     
     (b)  the Company’s Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2003;

     
     (c)  the Company’s Proxy Statement for its 2003 Annual Meeting of
Shareholders; and

     
     (d)  all other documents, if any, filed by the Company with the Commission
since March 31, 2003 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
Common Shares to the Purchasers. The Company will not make any offers or sales
of any security (other than the Common Shares) that would cause the offering of
the Common Shares 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 Common
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.

	 	4.23	 	Securities Laws Disclosure; Publicity

     
     Prior to 8:30 AM (New York time) the day after the Closing Date, the
Company shall issue a press release disclosing the transactions contemplated
hereby and file a Current Report on Form 8-K disclosing the transactions
contemplated hereby. 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.

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	5.	 	Representations, Warranties and Covenants of the Purchasers

	 	5.1	 	Securities Law Representations and Warranties

     
     Each Purchaser 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 Common Shares, 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 Common Shares.

     
     (b)  The Purchaser is acquiring the number of Common Shares 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 Common Shares nor any arrangement
or understanding with any other persons regarding the distribution of such
Common Shares within the meaning of Section 2(11) of the Securities Act, other
than as contemplated in Section 7 of this Agreement.

     
     (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 Common 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 Common Shares 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.

	 	5.2	 	Resales of Common Shares

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

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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 Common 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 Common Shares, other than sales pursuant to a Registration
Statement contemplated in Section 7 of this Agreement or sales upon termination
of the transfer restrictions pursuant to Section 7.4 of this Agreement.

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	 	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 the Common Shares
delivered pursuant to this Agreement shall survive the execution of this
Agreement, the delivery to the Purchasers of the Common Shares being purchased
and the payment therefor.

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

	 	7.1	 	Form D Filing; Registration of Common 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)  “Purchase Price” means the total cost of the Common Shares purchased
at the Per Share Price (the total number of the Common Shares purchased
multiplied by the Per Share Price).

12.

 

     
     (d)  “Registrable Shares” means the Common Shares purchased pursuant to
this Agreement; provided, however, that a Common Share shall cease to be a
Registrable Share for purposes of this Section 7.1 when it no longer is a
Restricted Share.

     
     (e)  “Restricted Share” means any Common 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)  as soon as practicable after the Closing Date, but in no event later
than the 30th day following the Closing Date (subject to receipt of necessary
information from the Purchasers), prepare and file with the Commission a
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 (the
“Registration Statement”);

     
     (c)  provide to Purchasers any information required to permit the sale of
the Common 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;

     
     (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 other action, if any, as may be necessary to keep the
Registration Statement effective until the earlier of (i) the date on which the
Common Shares may be resold by the Purchasers without

13.

 

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 Common 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 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; and

     
     (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 Common Shares
pursuant to the Registration Statement.

	 	7.1.3	 	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 1.0% of
the total purchase price of the Common 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.

     
     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 Common 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.

	 	7.1.4	 	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

14.

 

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 7.1.4
and shall offer the Purchasers the opportunity to 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 7.1.4 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 7.1.4
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 7.1.4 involves a Public
Offering and the managing underwriter thereof advises the Company that, in its
view, the number of Common Shares, if any, or other Common Shares that the
Company and the Purchasers intend to include in such registration exceeds the
largest number of Common Shares (including any other Common Shares or warrants
of the Company) 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 exceed the
Maximum Offering Size, 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 and
the Purchasers pursuant to this Agreement.

     
     If as a result of the proration provisions of this Section 7.1.4(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 7.1.4 hereof at any time that such Registrable Shares are the
subject of an effective registration statement.

15.

 

	 	7.2	 	Transfer of Common Shares After Registration

     
     Each Purchaser agrees that it will not effect any disposition of the
Common Shares or its right to purchase the Common 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 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

16.

 

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 the Common 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 the Common 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.

	 	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

17.

 

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 the Common 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 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 Common Shares,
or

18.

 

     
     (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 Common 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 Common 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

     
     The restrictions imposed by Section 5 or this Section 7 upon the
transferability of the Common Shares shall cease and terminate as to any
particular number of the Common 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.

19.

 

	 	7.5	 	Information Available

     
     From the date of this Agreement through the date the Registration
Statement covering the resale of Common 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 the Common 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 Common 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 Common Shares pursuant to Rule 144 under the Securities
Act (as such rule may be amended from time to time).

	8.	 	Broker’s Fee

     
     The Purchasers acknowledge that the Company intends to pay to Scottsdale
Capital Advisors, Stonegate Securities, Inc. and Cardinal Capital, a fee in
respect of the sale of the Common 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 Common 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
Scottsdale Capital Advisors, Stonegate Securities, Inc. and Cardinal Capital or
any other person or firm acting on behalf of the Company hereunder.

20.

 

	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:

	 	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 thirty (30) days
from the date of 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.

21.

 

	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.

	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 Page to Follow.]

22.

 

     
     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
	 
	 	Company:
	 	 

By:
	 	 

Name:
	 	 

Title:
	 	 

	 	Address:
	 	 

	 	 

	 	Facsimile:
	 
	 	 

SHARE PURCHASE AGREEMENT

SIGNATURE PAGE

 

 

Schedule A

PURCHASERS

	 	 	 	 	 
	Name	 	Shares
	
	 	

	Select Contrarian Value Partners
	 	 	100,000	 
	Capital Ventures International
	 	 	75,000	 
	American Pension Services, Inc.
FUB Custodian for Jeff W. Homes SEP
	 	 	30,000	 
	B & B Investments Projects Group Three, LLC
	 	 	75,000	 
	Delaware Charter GTY & TR
  FBO
William B. McKee Roth IRA
	 	 	20,000	 
	Michael
Fischer
	 	 	7,500	 
	Bruce Howard
	 	 	5,000	 
	Ronald & Barbara Marusiak
	 	 	5,000	 
	Stephen A. McConnell
	 	 	20,000	 
	Sanjiv Singh
	 	 	15,000	 
	Midsummer Investment, Ltd.
	 	 	125,000	 
	Islandia, LP
	 	 	75,000	 
	Rainbow Trading Corporation
	 	 	50,000	 

 

 

Exhibit A

FORM OF OPINION

August ______, 2003

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”), pursuant
to the Share Purchase Agreement dated as of August 6, 2003 (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”). 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)  resolutions adopted by the Board of Directors of the Company
authorizing, inter alia, the execution and delivery of the Purchase Agreement;

     (e)  a certificate from the Secretary of State of Ohio, dated August 6,
2003, 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;

     (f)  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

     (g)  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, John J. Jenkins and Richard J. Mattera)
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 leases 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 August 6, 2003, the issued and outstanding shares of capital
stock of the Company as of June 30, 2003 consisted of 5,352,990 Common Shares.
The issuance and sale of Common Shares pursuant to the Purchase Agreement has
been duly authorized, and when issued and delivered against payment of the
consideration therefor 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.

     3.     The Company has the requisite corporate power and authority to execute,
deliver and perform the Purchase Agreement and to consummate the transactions
contemplated thereby. The execution and delivery of the Purchase Agreement 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 has been duly executed and delivered on behalf of the
Company and the Purchase Agreement 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 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 or set
forth as a material contract in the Officers’ Certificate.

     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 consummation by the Company of its

 

 

obligations under the Purchase Agreement, except as may be necessary to
qualify the sale of the Common Shares 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 Common Shares 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 Common
Shares 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
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 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. 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
Common Shares as contemplated by the Purchase Agreement which would cause such
sale 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 Common 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 Scottsdale
Capital Advisors, Stonegate Securities, Inc. and Cardinal Securities, LLC (the
“Placement Agents”), upon the Closing, the Company has agreed to issue to the
Placement Agents warrants entitling the Placement Agents to purchase an amount
of Common Shares equal to five percent (5%) of the total number of Common
Shares sold pursuant to the Share Purchase Agreement to investors who
participated in the offering as a result of the Placement Agents for a period
of five (5) years at an exercise price per share equal to one hundred twenty
percent (120%) of the price at which the Common Shares are sold to the
Purchasers under the Share Purchase Agreement.

 

 

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 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:

     

________________________________________________

	3.	 	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:

1EX-4.2 E-2 FORM OF WARRANT FOR COMMON SHRS OF CMPY

 

EXHIBIT 4.2

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:	 	
Warrant to Purchase
	August 8, 2003	 	
***______***
	 	 	
Shares

DATATRAK International, Inc.

(Incorporated under the laws of the State of Ohio)

REPRESENTATIVE’S WARRANT FOR THE PURCHASE OF SHARES OF

THE NO PAR VALUE COMMON SHARES [the Warrant will be for the same Securities

sold in the Placement]

Warrant Price: $ 4.80 per share, subject to adjustment as provided below.

     THIS IS TO CERTIFY that, for value received, _______________________
(“Placement Agent”) 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 August 8, 2008 (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. 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 tender to the Company of the purchase price
set forth above as the warrant price (the “Warrant Price”), in cash, by wire
transfer or by certified check or bank cashier’s check, payable to the order of
the Company, together with presentation and surrender to the Company of this
Warrant

2

 

with an executed subscription in substantially the form attached hereto as
Exhibit A (the “Subscription”). Upon receipt of the foregoing, 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, a properly executed
Subscription and payment of the Warrant Price is received by the Company (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, Placement Agent 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 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

3

 

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).

     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.

     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 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.

     For the purpose of any computation under any subsection of this Section 4,
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
System or Small Cap Market System (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

4

 

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.

     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.

     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.

     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, 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, with respect
to the shares of Common Shares underlying this Warrant, registration rights
identical to those that are granted to Purchasers in the Placement (as such
terms are defined in that certain Placement Agency Agreement, dated as of
August 6, 2003, by and between the Company and Placement Agent); it being
specifically agreed and understood that the shares of Common Shares underlying
this Warrant will be included in any registration statement filed by the
Company which includes shares of Common Shares, or shares of Common Shares
underlying any securities, issued to Purchasers in the Placement.

     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

5

 

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 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

6

 

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.

     15. Entire Agreement. This Warrant (including the Exhibits attached
hereto) constitutes 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 makes payment of $ 

   
         
 
therefor ($4.80
per Share) by tendering cash, wire transferring or delivering a certified check
or bank cashier’s check, payable to the order of the Company. 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 is 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:

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