EXHIBIT 4.1
FORM OF SUBSCRIPTION AGREEMENT
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THE SECURITIES, INCLUDING THE UNDERLYING SECURITIES, WHICH ARE THE SUBJECT
OF THIS SUBSCRIPTION AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1993, AS AMENDED, (THE "ACT") OR UNDER THE LAWS OF ANY
STATE OR OTHER JURISDICTION. THEY MAY NOT BE OFFERED OR SOLD IN THE UNITED
STATES OR TO U.S. PERSONS (AS THAT TERM IS DEFINED IN REGULATION S UNDER
THE ACT), UNLESS THEY ARE REGISTERED UNDER THE ACT AND UNDER THE LAWS OF
THE STATES WHERE EACH SALE IS MADE, OR AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS IS AVAILABLE IN THE OPINION OF COUNSEL TO THE HOLDER THEREOF
SATISFACTORY TO THE COMPANY AND ITS COUNSEL.
Dear Subscriber:
You (the "Subscriber") hereby agree to purchase, and ChemTrak Incorporated,
a Delaware corporation (the "Company") hereby agrees to issue and to sell to the
Subscriber, the number of shares of Series A Preferred Stock (the "Preferred
Stock") convertible in accordance with the terms thereof into shares of the
Company's $0.001 par value common stock (the "Company Shares") as set forth on
the signature page hereof for the aggregate consideration as set forth on the
signature page hereof. The Certificate of Designation of the Rights of the
Preferred Stock is annexed hereto as Exhibit A. (The Company Shares are
sometimes referred to herein as the "Shares"). (The Preferred Stock and the
Company Shares are collectively referred to herein as, the "Securities"). Upon
acceptance of this Agreement by the Subscriber which shall occur no later than
January 25, 1998, the Company shall issue and deliver to the Subscriber the
Preferred Stock against payment, by federal funds (U.S.) wire transfer of the
purchase price of the Preferred Stock. This Subscription Agreement relates to
the offering of a maximum of 1,300 shares of Preferred Stock.
The following terms and conditions shall apply to this subscription.
1. Subscriber's Representations and Warranties. The Subscriber hereby
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represents and warrants to and agrees with the Company that:
(a) Information on Company. The Subscriber has been furnished with
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and has read the Company's most recent Form 10-K and subsequent forms 10-Q and
8-K as filed with the U.S. Securities and Exchange Commission (the "Commission")
(collectively, with exhibits thereto, hereinafter referred to as the "Reports").
In addition, the Subscriber has received from the Company such other information
concerning its operations, financial condition and other matters as the
Subscriber has requested, and considered all factors the Subscriber deems
material in deciding on the advisability of investing in the Securities (such
information in writing is collectively, the "Other Written Information").
(b) Information on Subscriber. The Subscriber is an "accredited
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investor", as such term is defined in Regulation D promulgated by the Commission
under the Act, is experienced in investments and business matters, has made
investments of a speculative nature and has purchased securities of United
States publicly-owned companies in the past and, with its representatives, has
such knowledge and experience in financial, tax and other business matters as to
enable the Subscriber to utilize the information made available by the Company
to evaluate the merits and risks of and to make an informed investment decision
with respect to the proposed purchase, which represents a speculative
investment. The Subscriber has the authority and is duly and legally qualified
to purchase and own the Securities.
(c) Site and Condition of Sale. The Subscriber is not a U.S. Person
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as that term is defined in Section 902(o) of Regulation S under the Act. At the
time of the buy order and execution of this Agreement by the Subscriber,
Subscriber was outside the U.S. The Subscriber acknowledges that neither the
Subscriber, its affiliates or persons acting on its behalf nor the Company
solicited this offer to purchase the Securities within the United States and
that the sale of the Note and Company Shares will not take place within the
United States (for this purpose, the "United States" means the Unites States of
America, its territories and possessions, and any state of the United States and
the District of Columbia). The Subscriber also acknowledges that the Securities
have not been registered under the laws of any other country or jurisdiction and
that the Company takes no responsibility for complying with any such laws, and
that the Subscriber agrees to comply with all applicable securities laws in
connection with any subsequent disposition of such Securities.
(d) Investment Intent. The Subscriber is subscribing for the
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Securities for its own account and benefit and not as a nominee or for the
account of any other person or entity or any U.S. Person. To the best knowledge
of the Subscriber, there are no distributors participating in this offering. The
Subscriber has no present intention of selling or distributing the Securities or
any part thereof. The Subscriber has sufficient financial resources to hold the
Securities for an indefinite period of time.
(e) No Market Manipulation; Short Sales. The Subscriber has not
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taken, and will not take, directly or indirectly, any action designed to, or
that might reasonably be expected to, cause or result in a manipulation of the
price of the Company Shares.
(f) No Offer in United States. No offer to buy the Securities was
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made to the Company by the Subscriber in the United States.
(g) No Pre-Arranged Transaction. The transactions contemplated by
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this Agreement:
(i) have not been pre-arranged with a purchaser who is in the
United States or is a U.S. Person; and
(ii are not part of a plan or scheme to evade the registration
provisions of the Act.
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(h) No Directed Selling Efforts in Regard to this Transaction.
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Neither the Subscriber, nor to the best knowledge of the Subscriber, the Company
nor any person acting for the Subscriber, the Company or any distributor has
conducted any "directed selling efforts" as that term is defined in Regulation
S. Such activity includes, without limitation, but is not limited to the
mailing of printed material to investors residing in the United States, the
holding of promotional seminars in the United States, the placement of
advertisements with radio or television stations broadcasting in the United
States or in publications with a general circulation in the United States, which
discuss the offering of Securities.
(i) Correctness of Representations. The Subscriber represents that
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the foregoing representations and warranties are true and correct as of the date
hereof and, unless the Subscriber otherwise notifies the Company prior to the
Closing Date, shall be true and correct as of the Closing Date. The foregoing
representations and warranties shall survive the Closing Date subject to the
applicable statute of limitations.
2. Company Representations and Warranties. The Company represents and
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warrants to and agrees with the Subscriber that:
(a) Due Incorporation. The Company is a corporation duly organized,
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validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power to own its properties and to carry on its
business as now being conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in each jurisdiction where
the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
do so qualify would not have a material adverse effect on the business,
operations or prospects or condition (financial or otherwise) of the Company.
(b) Outstanding Stock. All issued and outstanding shares of capital
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stock of the Company and each of its subsidiaries has been duly authorized and
validly issued and are fully paid and non-assessable.
(c) Authority; Enforceability. This Agreement has been duly
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authorized, executed and delivered by the Company and is a valid and binding
agreement enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights generally and
to general principles of equity; and the Company has full corporate power and
authority necessary to enter into this Agreement and to perform its obligations
hereunder.
(d) Additional Issuances. There are no outstanding agreements or
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preemptive or similar rights affecting the Company's common stock or preferred
stock and no outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, or agreements or understandings with
respect to the sale or issuance of, any shares of common stock or equity of the
Company or other equity interest in any of the subsidiaries of the Company,
except as described in the Reports or Other Written Information.
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(e) Consents. No consent, approval, authorization or order of any
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court, governmental agency or body or arbitrator having jurisdiction over the
Company, or any of its affiliates is required for execution of this Agreement,
including, without limitation, issuance and sale of the Preferred Stock and the
issuance of the Shares upon any conversion of the Preferred Stock or the
performance of obligations hereunder, except for the filing of a Certificate of
Designation with the Secretary of State of Delaware and a notice to be filed
with the California Department of Corporations upon completion of the
transaction contemplated hereby.
(f) No Violation or Conflict. Assuming the representations and
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warranties of the Subscriber in Paragraph 1 are true and correct and the
Subscriber complies with its obligations under this Agreement, neither the sale
of the Preferred Stock nor any conversion of the Preferred Stock, nor the
issuance of the Company Shares upon any conversion of the Preferred Stock nor
the performance of its obligations under this Agreement by the Company will:
(i) violate, conflict with, result in a breach of, or constitute
a default (or an event which with the giving of notice of the lapse of time or
both would be reasonably likely to constitute a default) under (A) the
certificate of incorporation, charter or bylaws of the Company, or any of its
affiliates, (B) any decree, judgment, order, law, treaty, rule, regulation or
determination applicable to the Company, or any of its affiliates of any
court, governmental agency or body, or arbitrator having jurisdiction over the
Company, or any of its affiliates or over the properties or assets of the
Company, or any of its affiliates, (C) the terms of any material bond,
debenture, Preferred Stock or any other evidence of indebtedness, or any
agreement, stock option or other similar plan, indenture, lease, mortgage,
deed of trust or other instrument to which the Company, or any of its
affiliates is a party, by which the Company, or any of its affiliates is
bound, or to which any of the properties of the Company, or any of its
affiliates is subject, or (D) the terms of any "lock-up" or similar provision
of any underwriting or similar agreement to which the Company, or any of its
affiliates is a party; or
(ii) result in the creation or imposition of any lien, charge
or encumbrance upon the Securities or any of the assets of the Company, or any
of its affiliates.
(g) The Securities. The Securities upon issuance:
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(i) are, or will be, free and clear of any security interests,
liens, claims or other encumbrances;
(ii) have been, or will be, duly and validly authorized and on
the date of issuance and on the date payment for the Preferred Stock is
transmitted to the Company (hereinafter the "Closing Date") or the Conversion
Date as such term is defined in the Certificate to Set Forth Designations,
Voting Powers, Preferences, Limitations, Restrictions, and Relative Rights of
Series A 6% Cumulative Convertible Preferred Stock, $0.001 Par Value Per Share
(hereinafter the "Conversion Date"), as the case may be, the Preferred Stock and
Shares issuable upon conversion of the Preferred Stock, will be duly and validly
issued, fully paid and nonassessable;
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(iii) will not have been issued or sold in violation of any
preemptive or other similar rights of the holders of any securities of the
Company;
(iv) will not subject the holders thereof to personal liability
by reason of being such holders; and
(v) the Company Shares, are quoted on, and to the best
knowledge of Company will be, at the expiration of the Restricted Period,
eligible for trading on, the National Association of Securities Dealers
Automated Quotations Systems ("NASDAQ") SmallCap Market.
(h) Litigation. There is no pending or, to the best knowledge of the
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Company, threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its affiliates that would materially affect the execution by the
Company or the performance by the Company of its obligations under this
Agreement.
(i) No Directed Selling Efforts in Regard to this Transaction.
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Neither the Company nor any distributor, if any, participating in the offering
of the Securities nor any person acting for the Company or any such distributor
has conducted any "directed selling efforts" as that term is defined in
Regulation S. Such activity includes, without limitation, the mailing of
printed material to investors residing in the United States, the holding of
promotional seminars in the United States, the placement of advertisements with
radio or television stations broadcasting in the United States or in
publications with a general circulation in the United States, which discuss the
offering of the Securities.
(j) No Market Manipulation. The Company has not taken, and will not
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take, directly or indirectly, any action designed to, or that might reasonably
be expected to, cause or result in stabilization or manipulation of the price of
the common stock of the Company to facilitate the sale or resale of the Company
Shares or affect the price at which the Company Shares are purchasable upon
conversion of the Preferred Stock.
(k) Reporting Company. The Company is a publicly-held company whose
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common stock is (and has been for the past 90 days) registered pursuant to
Section 12(g) of the Securities Exchange Act of 1934 (the "1934 Act") and is
duly listed for trading on The NASDAQ SmallCap Market. Pursuant to the
provisions of the 1934 Act, the Company has timely filed all reports and other
materials required to be filed thereunder with the Securities and Exchange
Commission during the preceding twelve months, and is eligible presently and as
of the end of the Restricted Period to file a Form S-3 to register the Company
Shares. The Company has received no notice, either oral or written, with
respect to the continued eligibility of the Common Stock for such listing, and
the Company has maintained all requirements for the continuation of such
listing.
(l) Information Concerning Company. The Reports and Other Written
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Information contain all material information relating to the Company and its
operations and financial condition as of their respective dates which
information is required to be disclosed therein. Since the date of the
financial statements set forth in the Reports, there has been no material
adverse change in the Company's business, financial condition or affairs not
disclosed in the Reports. The Reports and Other Written
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Information do not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
(m) Offer to Buy. No offer to buy the Preferred Stock was made to the
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Company by any person in the United States.
(n) Pre-Arranged Transaction. The transactions contemplated by this
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Agreement:
(i) have not been pre-arranged with a purchaser who is in the
United States or is a U.S. Person; and
(ii) are not part of a plan or scheme to evade the registration
provisions of the Act.
(o) Stop Transfer. The Company has not issued, and will not issue any
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stop transfer order or other order impeding the sale and delivery of the
Securities, or any underlying Company Shares except as may be required by
Regulation D or Regulation S, as same may be amended. No restrictive legend
will be imprinted on the Company Shares except as may be required by Regulation
S, as same may be amended. Such Regulation S legend, if required, will be a
self-liquidating legend. The Company's transfer agent will be instructed by the
Company to deem the legend removed from the Company Shares from and after the
60th day after the Closing Date. The self-liquidating legend shall be as
follows:
"The Securities represented hereby have not been registered under the
United States Securities Act of 1933, as amended (the "Act"), and
until ____________, 1998 (60 days from the issue date of the Preferred
Stock, which such securities underlie) may not be offered or sold in
the United States (as defined in Regulation S under the Act) or to, or
for the account or benefit of U.S. Persons (as defined in Regulation S
under the Act), and only then pursuant to registration under the Act
or an exemption from the registration requirements of the Act and
applicable state securities laws."
(p) Use of Funds. The proceeds of this subscription and additional
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subscriptions for Preferred Stocks issued or to be issued on substantially
similar terms in the aggregate principal amount of up to $1,300,000 will be
employed by the Company for working capital purposes.
(q) Dilution. The number of Shares issuable upon conversion of the
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Preferred Stocks may increase substantially in certain circumstances, including,
but not necessarily limited to, the circumstance wherein the trading price of
the Common Stock declines prior to the conversion. The Company's executive
officers and directors have studied and fully understand the nature of the
Securities being sold hereby and recognize that they have a potential dilutive
effect. The board of directors of the Company has concluded, in its good faith
business judgment, that such issuance is in the best interests of the Company.
The Company specifically acknowledges that its obligation to issue the Shares
upon
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conversion of the Preferred Stock is binding upon the Company and enforceable
regardless of the dilution such issuance may have on the ownership interests
of other shareholders of the Company.
(r) Defaults. Neither the Company nor any of its subsidiaries is in
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violation of its Certificate of Incorporation or ByLaws. Except as described in
the Reports and Other Written Information, neither the Company nor any of its
subsidiaries is (i) in default under or in violation of any other material
agreement or instrument to which it is a party or by which it or any of its
properties are bound or affected, which default or violation would have a
material adverse effect, (ii) in default with respect to any order of any court,
arbitrator or governmental body or subject to or party to any order of any court
or governmental authority arising out of any action, suit or proceeding under
any statute or other law respecting antitrust, monopoly, restraint of trade,
unfair competition or similar matters, or (iii) in violation of any statute,
rule or regulation of any governmental authority material to its business.
(s) Reservation of Common Stock. During the period the conversion
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right exists, the Company will have reserved from its authorized and unissued
common stock a sufficient number of shares to provide for the issuance of common
stock upon the full conversion of the Preferred Stock at the Conversion Price
(as defined in the Certificate to Set Forth Designations, Voting Powers,
Preferences, Limitations, Restrictions, and Relative Rights of Series A 6%
Cumulative Convertible Preferred Stock, $0.001 Par Value Per Share) in effect
from time to time.
(t) Correctness of Representations. The Company represents that the
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foregoing representations and warranties are true and correct as of the date
hereof and, unless the Company otherwise notifies the Subscriber prior to the
Closing Date, shall be true and correct as of the Closing Date. The foregoing
representations and warranties shall survive the Closing Date subject to the
applicable statutes of limitations.
3. Regulation S Offering. The sale of Securities hereby is deemed made
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pursuant to Rule 903(c)(2) of Regulation S, and is intended to comply with the
provisions of Regulation S. The Preferred Stock has not been and will not be
registered under the Act or under the securities laws of any state or
jurisdiction of the United States ("State Laws"). On the Closing Date, the
Company will provide an opinion, the form of which is annexed hereto as Exhibit
B, from the Company's legal counsel. Upon conversion of the Preferred Stock,
the Company Shares will be freely transferable on the books and records of the
Company.
4. Conversion of Preferred Stock; Transfer of Securities. The Preferred
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Stock will not be converted by Subscriber until at least the 60th day from the
Closing Date (as hereinafter defined). Neither the Preferred Stock nor the
Shares will be transferred or resold to any U.S. Person until the 60th day from
the Closing Date, (the "Restriction Period") and then only in accordance with
the Act and applicable State Laws. On the Closing Date, the Company will
provide the opinion of its counsel described in Section 3 above.
5. Reverse Split. The Company shall give the Subscriber not less than
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twenty (20) days' prior written notice of any proposed combination of shares or
other reclassification or recapitalization
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of the common stock resulting in a reduction of the number of Shares issuable
upon conversion of the Preferred Stock.
6. Legal Fees. The Company shall pay to counsel to the Subscriber its
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xxxx for services rendered to the Subscriber in reviewing this Agreement and
closing the Preferred Stock purchase in an amount equal to three-fourths of one
percent (3/4%) of the amount of this subscription.
7. Covenants of the Company. The Company covenants and agrees with the
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Subscriber to:
(a) use its best efforts to continue to comply with all applicable
reporting requirements of the Exchange Act;
(b) refrain from engaging, and insure that none of its affiliates will
engage, in any Directed Selling Efforts, as defined in Regulation S, with
respect to the Securities;
(c) advise the Subscriber, promptly after it receives notice of
issuance by the Commission, any state securities commission or any other
regulatory authority of any stop order or of any order preventing or suspending
the use of any offering of any securities of the Company, or of the suspension
of the qualification of the common stock of the Company for offering or sale in
any jurisdiction, or the initiation of any proceeding for any such purpose.
(d) make all necessary filings in connection with the sale of the
Preferred Stock to the Subscriber under any United States laws and regulations,
or by any domestic securities exchange or trading market, and to provide a copy
thereof to the Subscriber promptly after such filing.
8. Covenants of the Company and Subscriber Regarding Indemnifications.
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(a) The Company agrees to indemnify, hold harmless, reimburse and
defend Subscriber against any claim, costs, expense, liability, obligation, loss
or damage (including reasonable legal fees) of any nature, incurred by or
imposed upon Subscriber which results, arises out of or is based upon (i) any
misrepresentation by Company or breach of any warranty by Company in this
Agreement or in any Exhibits or Schedules attached hereto, or Reports or other
Written Information; or (ii) any breach or default in performance by Company of
any covenant or undertaking to be performed by Company hereunder.
(b) Subscriber agrees to indemnify, hold harmless, reimburse and
defend the Company at all times against any claim, costs, expense, liability,
obligation, loss or damage (including reasonable legal fees) of any nature,
incurred by or imposed upon the Company which results, arises out of or is based
upon (i) any misrepresentation by Subscriber in this Agreement or in any
Exhibits or Schedules attached hereto; or (ii) any breach or default in
performance by Subscriber of any covenant or undertaking to be performed by
Subscriber hereunder.
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9. Transfer Agent Instructions.
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(a) Upon the conversion of the Preferred Stock, the Subscriber thereof
shall submit such Preferred Stock, and the Company's transfer agent shall,
within three (3) business days of receipt of such Preferred Stock issue one or
more certificates representing that number of shares of common stock into which
the Preferred Stock is convertible in accordance with the provisions regarding
conversion set forth in Exhibit A hereto. The Company shall act as Preferred
Stock Registrar and shall maintain an appropriate ledger containing the
necessary information with respect to the Preferred Stock.
(b) Upon the conversion after the Restricted Period of any Preferred
Stock, the Company shall, at its expense, take all necessary action (including
the issuance of an opinion of counsel in the form annexed as Exhibit C) to
assure that the Company's Preferred Stock Registrar and transfer agent shall
issue stock certificates without restrictive legend or stop orders in the name
of Subscriber (or its nominee) or such other persons as designated by
Subscriber) and in such denominations to be specified at conversion representing
the number of shares of common stock issuable upon such conversion, as
applicable. The Company warrants that no instructions other than these
instructions, instructions to impose a "stop transfer" instruction with respect
to the Preferred Stock until the end of the Restricted Period have been or will
be given to the Preferred Stock Registrar or to the transfer agent of the
Company's Common Stock and that the Shares will be unlegended, and freely
transferable on the transfer books of the Company, and will not be subject to
any transfer limitations other than those imposed by applicable securities laws.
Nothing in this Section 9, however, shall affect in any way Subscriber's or such
nominee's obligations and agreement to comply with all applicable securities
laws upon resale of the Securities. The parties agree that these procedures are
intended to comply with the requirements of Regulation S.
(c) Subscriber will give notice of its decision to exercise its right
to convert the Preferred Stock by telecopying an executed and completed Notice
of Conversion to the Company and delivering thereafter, the original Notice of
Conversion and the Preferred Stock certificate to the Preferred Stock Registrar
by express courier. Each date on which a Notice of Conversion is telecopied to
the Company in accordance with the provisions hereof shall be deemed a
Conversion Date. The Company will or cause the Preferred Stock Registrar or
transfer agent, as the case may be, to transmit the certificates representing
the Shares of common stock issuable upon conversion of any Preferred Stock (and
a Preferred Stock certificate representing the balance of the Preferred Stock
not so converted) to the Subscriber via express courier for receipt by such
Subscriber within three business days after receipt by the Preferred Stock
Registrar of the original Notice of Conversion and the Preferred Stock
certificate representing the Preferred Stock to be converted (the "Delivery
Date").
(d) The Company understands that a delay after the Restricted Period
in the delivery of the Shares in the form required pursuant to Section 9 hereof,
and Series A Preferred Stock certificates representing the unconverted balance
of a Series A Preferred Stock certificate tendered for conversion beyond the
Delivery Date or Mandatory Conversion Date (as that term is employed in the
Certificate of Designation), as the case may be, could result in economic loss
to the Subscriber. As compensation to the Subscriber for such loss, the Company
agrees to pay late payments to the Subscriber for late delivery of Shares in the
form required pursuant to Section 9 hereof, upon Conversion and late delivery of
a
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Series A Preferred Stock certificate for the unconverted portion of a Series A
Preferred Stock certificate in the amount of $100 per business day after the
Delivery Date for each $10,000 of Stated Value of Preferred Stock being
converted and Preferred Stock certificate remaining undelivered. The Company
shall pay any payments incurred under this Section in immediately available
funds upon demand. Furthermore, in addition to any other remedies which may be
available to the Subscriber, in the event that the Company fails for any reason
to effect delivery of the Shares within three business days after the Delivery
Date, the Subscriber will be entitled to revoke the relevant Notice of
Conversion by delivery in a notice to such effect to the Company whereupon the
Company and the Subscriber shall each be restored to their respective positions
immediately prior to the delivery of such notice of revocation, except that late
payment charges described above shall be payable through the date notice of
revocation is given to the Company.
(e) Nothing contained herein or in any document referred to herein
shall be deemed to establish or require the payment of a rate of interest or
other charges in excess of the maximum permitted by applicable law. In the
event that the rate of interest required to be paid or other charges hereunder
exceed the maximum permitted by such law, any payments in excess of such maximum
shall be credited against amounts owed by the Company to the Subscriber and thus
refunded to the Company.
10. Registration Rights; Procedure; Indemnification.
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10.1. Registration Rights. If available under the securities laws in
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effect on the date of conversion, the shares of Common Stock issuable upon full
or partial conversion of the Preferred Stock shall be issued pursuant to
Regulation S of the Act and shall be transferable and assignable pursuant to
Regulation S. Provided the shares issued upon the conversion of the Preferred
Stock so then qualify, the Company acknowledges its obligation to issue the
shares without any restrictive or other legend. The Company acknowledges that
it is the Company's obligation to issue the Company Shares upon conversion of
the Preferred Stock, without any restrictive legend, as freely transferable
shares on the books and records of the Company except as may be required by
Regulation S, as same may be amended. Notwithstanding the foregoing, if in the
reasonable judgment of the holder of the Preferred Stock, the Company Shares
that may be acquired upon conversion of the Preferred Stock cannot immediately
upon conversion, be resold in the United States without any holding period,
restrictive legend or unless registered under the Act:
(i) On one occasion, for a period commencing 60 days after the
date hereof, but not later than two years from the date hereof, the Company,
upon a written request therefor from any record holder or holders of more than
50% of the aggregate of the Company's shares issuable or issued on the
conversion of the Preferred Stocks which are still held by the Subscribers on
the day the Shares are no longer transferable without any restrictive legend
(the common stock of the Company issued and issuable on conversion of the
Preferred Stock being, the "Registrable Securities"), shall prepare and file
with the SEC a registration statement under the Act covering the Registrable
Securities which are the subject of such request. In addition, upon the
receipt of such request, the Company shall promptly give written notice to all
other record holders of the Registrable Securities that such registration
statement is to be filed and shall include in such registration statement
Registrable Securities for which it has received written requests within 20
days after the Company gives such written notice. Such other
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requesting record holders shall be deemed to have exercised their demand
registration right under this Section 10.1. As a condition precedent to the
inclusion of Registrable Securities, the holder thereof shall provide the
Company with such information as the Company reasonably requests and the
Holder shall enter into an appropriate underwriting agreement with the
underwriter(s), if any, of the Registrable Securities. The obligation of the
Company under this Section 10.1(a)(i) shall be limited to one registration
statement.
(ii) If the Company at any time proposes to register any of
its securities under the Act for sale to the public, whether for its own
account or for the account of other security holders or both, except with
respect to registration statements on Forms X-0, X-0 or another form not
available for registering the Registrable Securities that may be acquired upon
exercise of the Preferred Stock for sale to the public, provided the
Registrable Securities are not otherwise registered for resale by the
Subscriber pursuant to an effective registration statement, each such time it
will give at least 30 days' prior written notice to the record holder of the
Registrable Securities of its intention so to do. Upon the written request of
the holder, received by the Company within 30 days after the giving of any
such notice by the Company, to register any of the Registrable Securities, the
Company will cause such Registrable Securities as to which registration shall
have been so requested to be included in the securities to be covered by the
registration statement proposed to be filed by the Company, all to the extent
required to permit the sale or other disposition of the Registrable Securities
so registered by the holder of such Registrable Securities (the "Seller"). In
the event that any registration pursuant to this Section 10.1(ii) shall be, in
whole or in part, an underwritten public offering of common stock of the
Company, the number of shares of Registrable Securities to be included in such
an underwriting may be reduced by the managing underwriter if and to the
extent that the Company and the underwriter shall be of the opinion that such
inclusion would adversely affect the marketing of the securities to be sold by
the Company therein; provided, however, that the Company shall notify the
Seller in writing of any such reduction. Notwithstanding the forgoing
provisions, the Company may withdraw any registration statement referred to in
this Section 10.1(ii) without thereby incurring any liability to the Seller.
(iii) If, at the time any written request for registration is
received by the Company pursuant to Section 10.1(i), the Company has
determined to proceed with the actual preparation and filing of a registration
statement under the Act in connection with the proposed offer and sale for
cash of any of its securities for the Company's own account, such written
request shall be deemed to have been given pursuant to Section 10.1(ii) rather
than Section 10.1(i), and the rights of the holders of Registrable Securities
covered by such written request shall be governed by Section 10.1(ii) except
that the Company may not withdraw such registration or limit the amount of
Registrable Securities included in such registration.
(iv) The Company shall file with the Commission, within thirty
(30) days of the Closing Date, as defined in Section 12(b) herein, and use its
reasonable commercial efforts to cause to be declared effective a Form S-3
registration statement in order to register for resale and distribution under
the Act, all shares of common stock of the Company issuable upon conversion of
the Preferred Stock. The registration statement described in this paragraph
must be declared effective by the Commission within sixty (60) days of the
Closing Date. The Company will register not less than 32,820 shares in the S-3
Registration Statement for each $10,000 of Preferred Stock Stated Value. Such
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registration statement will be promptly amended or additional registration
statements will be promptly filed by the Company as required to register
additional shares of common stock to allow conversion of all Preferred Stock.
10.2. Registration Procedures. If and whenever the Company is required
-----------------------
by the provisions hereof to effect the registration of any shares of Registrable
Securities under the Act, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement with
respect to such securities and use its reasonable commercial efforts to cause
such registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as hereinafter provided):
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in paragraph (a) above and comply with the provisions of
the Act with respect to the disposition of all of the Registrable Securities
covered by such registration statement in accordance with the Seller's intended
method of disposition set forth in such registration statement for such period;
(c) furnish to the Seller, and to each underwriter if any, such number
of copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons reasonably may request
in order to facilitate the public sale or their disposition of the securities
covered by such registration statement;
(d) use its reasonable commercial efforts to register or qualify the
Seller's Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Seller or, in the
case of an underwritten public offering, the managing underwriter shall
reasonably request, provided, however, that the Company shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction;
(e) list the Registrable Securities covered by such registration
statement with any securities exchange or stock market on which the Registrable
Securities of the Company is then listed;
(f) immediately notify the Seller and each underwriter under such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Act, of the happening of any event of which
the Company has knowledge as a result of which the prospectus contained in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing;
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(g) make available for inspection by the Seller, any underwriter
participating in any distribution pursuant to such registration statement, and
any attorney, accountant or other agent retained by the Seller or underwriter,
all financial and other records, pertinent corporate documents and properties of
the Company, and cause the Company's officers, directors and employees to supply
all information reasonably requested by the seller, underwriter, attorney,
accountant or agent in connection with such registration statement.
(h) at the request of the Holder, provided a demand for registration
has been made pursuant to Section 10.1(i) or a request for registration has been
made pursuant to Section 10.1(ii), the shares issuable upon the conversion of
the Preferred Stock will be included in a registration statement filed pursuant
to this Section 10. In the event of a firm commitment underwritten public
offering in which the Registrable Securities are so included, the lockup, if
any, requested by the managing underwriter may not exceed 120 days after the
effective date thereof.
(i) in connection with each registration hereunder, the Seller will
furnish to the Company in writing such information with respect to itself and
the proposed distribution by it as reasonably shall be necessary in order to
assure compliance with federal and applicable state securities laws. In
connection with each registration pursuant to this Section 10 covering an
underwritten public offering, the Company and the Seller agree to enter into a
written agreement with the managing underwriter in such form and containing such
provisions as are customary in the securities business for such an arrangement
between such underwriter and companies of the Company's size and investment
stature.
(j) the Company and the Subscriber agree that the Holder will suffer
damages if any registration statement required under Section 10.1, above,
covering all Registrable Securities is not filed within 30 days after request by
the Holder or not declared effective by the Commission within 120 days after
such request [or 60 days after the Closing Date in reference to the registration
statement on Form S-3 described in Section 10.1(iv)], and maintained in the
manner and within the time period contemplated by Section 10 hereof, and it
would not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (i) such registration statement is not filed within 30 days of
such request, or is not declared effective by the Commission on or prior to the
date that is 120 days after such request [or 60 days after the Closing Date in
reference to the registration statement on Form S-3 described in Section
10.1(iv)], or (ii) the registration statement is filed and declared effective
but shall thereafter cease to be effective (without being succeeded immediately
by an additional registration statement filed and declared effective) for a
period of time which shall exceed 40 days in the aggregate per year but not more
than 20 consecutive calendar days (defined as a period of 365 days commencing on
the date the registration statement is declared effective) (each such event
referred to in clauses (i) and (ii) is referred to herein as a "Registration
Default"), then, for so long as such default shall continue, the Company shall
pay in cash as Liquidated Damages to each holder of a Preferred Stock an amount
equal to three (3%) percent per calendar month (or fraction thereof) of the
Stated Value of the Preferred Stock then owned of record by such holder
immediately following the occurrence of such Registration Default and for the
amount of the Preferred Stock converted for which the Holder has received and is
holding common shares which are not unlegended and freely transferable on the
books and records of the Company. No
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damages shall accrue or be payable under this Section 10.2(j) for any portion
of the Preferred Stock that has been converted and for which damages are
accruing under Section 9 hereof.
(k) For purposes of this Section 10, the period of distribution of
securities in a firm commitment underwritten public offering shall be deemed to
extend until 120 days afters each underwriter has completed the distribution of
all securities purchased by it, or sooner if the managing underwriter consents,
and the period of distribution of securities in any other registration shall be
deemed to extend until the earlier of the sale of all securities covered thereby
and 180 days after the effective date thereof.
10.3. Expenses. All expenses incurred by the Company in complying with
--------
Section 10, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including counsel fees) incurred
in connection with complying with state securities or "blue sky" laws, fees of
the National Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents and registrars and costs of insurance are called "Registration
Expenses". All underwriting discounts and selling commissions applicable to the
sale of Registrable Securities, including any fees and disbursements of any
special counsel to the Seller, are called "Selling Expenses". The Seller shall
pay the fees and costs of its own counsel, if any.
The Company will pay all Registration Expenses in connection with each
registration statement under Section 10. All Selling Expenses in connection
with each registration statement under Section 10 shall be borne by the Seller
in proportion to the number of shares sold by the Seller relative to the number
of shares sold under such registration statement or as all sellers thereunder
may agree.
10.4. Indemnification and Contribution.
--------------------------------
(a) In the event of a registration of any Registrable Securities under
the Act pursuant to Section 10, the Company will indemnify and hold harmless the
Seller, each officer of the Seller, each director of the Seller, each
underwriter of such Registrable Securities thereunder and each other person, if
any, who controls such Seller or underwriter within the meaning of the Act,
against any losses, claims, damages or liabilities, joint or several, to which
the Seller, or such underwriter or controlling person may become subject under
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any registration
statement under which such Registrable Securities was registered under the Act
pursuant to Section 10, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, 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,
and will reimburse the Seller, each such underwriter and each such controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such case
if and to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission so made in conformity with information furnished by any such
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Seller, the underwriter or any such controlling person in writing specifically
for use in such registration statement or prospectus.
(b) In the event of a registration of any of the Registrable
Securities under the Act pursuant to Section 10, the Seller will indemnify and
hold harmless the Company, each person, if any, who controls the Company within
the meaning of the Act, each officer of the Company, each director of the
Company, each underwriter and each person who controls any underwriter within
the meaning of the Act, against all losses, claims, damages or liabilities,
joint or several, to which the Company or such officer, director, underwriter or
controlling person may become subject under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the registration statement under which such
Registrable Securities were registered under the Act pursuant to Section 10, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, 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, and will reimburse the
Company and each such officer, director, underwriter and controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided, however, that the Seller will be liable hereunder in any such case if
and only to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with information
pertaining to such Seller, as such, furnished in writing to the Company by such
Seller specifically for use in such registration statement or prospectus, and
provided, further, however, that the liability of the Seller hereunder shall be
limited to the proportion of any such loss, claim, damage, liability or expense
which is equal to the proportion that the public offering price of the
Registrable Securities sold by the Seller under such registration statement
bears to the total public offering price of all securities sold thereunder, but
not in any event to exceed the gross proceeds received by the Seller from the
sale of Registrable Securities covered by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 10.4(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 10.4(c) if and to the extent the indemnifying party is prejudiced
by such omission. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in and, to the
extent it shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 10.4(c) for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action include both the
indemnified party and the
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indemnifying party and the indemnified party shall have reasonably concluded
that there may be reasonable defenses available to it which are different from
or additional to those available to the indemnifying party or if the interests
of the indemnified party reasonably may be deemed to conflict with the
interests of the indemnifying party, the indemnified parties shall have the
right to select one separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the reasonable
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution in the
event of joint liability under the Act in any case in which either (i) the
Seller, or any controlling person of the Seller, makes a claim for
indemnification pursuant to this Section 10.4 but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case notwithstanding the
fact that this Section 10.4 provides for indemnification in such case, or (ii)
contribution under the Act may be required on the part of the Seller or
controlling person of the Seller in circumstances for which indemnification is
provided under this Section 10.4; then, and in each such case, the Company and
the Seller will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that the Seller is responsible only for the portion
represented by the percentage that the public offering price of its securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, provided, however, that, in
any such case, (A) the Seller will not be required to contribute any amount in
excess of the public offering price of all such securities offered by it
pursuant to such registration statement; and (B) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 10(f) of the Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
11. Future Offerings.
----------------
(a) For a period of 120 days from the Closing Date, except for those
described in the Reports or Other Written Information, the Company will not
issue any equity, or convertible debt or other securities or conduct any public
or private offering without the consent of the Subscriber, which shall not be
unreasonably withheld.
(b) Right of First Refusal. Subject to the provisions of Section
----------------------
11(a) hereof, and in any event, until six months from the Closing Date and for
so long as any Preferred Stock is outstanding and unconverted, the Subscriber
shall be given not less than ten (10) business days prior written notice of any
proposed sale by the Company of its common stock, preferred stock or other
securities in offerings made pursuant to the provisions of Regulation D or
Regulation S under the Act, or any other exemption from registration, whether
state or federal. The Subscriber shall have the right during the ten (10)
business days following the notice to purchase an amount of securities in the
same proportion as being purchased in the aggregate offering to which this
Subscription Agreement relates, of those securities proposed to be issued and
sold, in accordance with the terms and conditions set forth in the notice of
sale, provided that, in the case of securities offered pursuant to Regulation D,
the Subscriber may purchase such securities pursuant to Regulation S if it is
then not a U.S. Person, and such regulation
-16-
is then available to the Company. In the event such terms and conditions are
modified during the notice period, the Subscriber shall be given prompt notice
of such modification and shall have the right during the original notice
period or for a period of ten (10) business days following the notice of
modification, whichever is longer, to exercise such right.
(c) Right of Participation. The Subscriber shall be given not less
----------------------
than thirty (30) days' prior written notice of any proposed public offering by
the Company of its common stock. The Subscriber shall have the right during
such thirty (30) day period to irrevocably subscribe through the managing
underwriter, if any, for up to that percentage of the total number of Shares
being offered by the Company in such public offering as equals the percentage
obtained by dividing by the number of the Company Shares owned by the Subscriber
immediately prior to such public offering together with such Common Shares
issuable upon conversion of the Preferred Stock, by the number of shares of the
Company's outstanding common stock immediately prior to such public offering.
This right of participation shall expire six months from the Closing Date, with
respect to any public offering by the Company that has not commenced prior to
such date.
12. Miscellaneous.
-------------
(a) Notices. All notices or other communications given or made
-------
hereunder shall be in writing and shall be personally delivered or deemed
delivered the day telecopied (with copy mailed by regular, certified or
registered mail, or overnight courier) to the party to receive the same at its
address set forth below or to such other address as either party shall hereafter
give to the other by notice duly made under this Section: (i) if to the
Company, to ChemTrak, Inc., 000 X. Xxxxxx Xxxxxx, Xxxxxxxxx, XX 00000,
telecopier number: (000) 000-0000; and (ii) if to the Subscriber, to the name,
address and telecopy number set forth on the first page hereof.
(b) Closing. The consummation of the transactions contemplated herein
-------
shall take place at the offices of Grushko & Xxxxxxx, 000 Xxxxxxxx, Xxxxx 000,
Xxx Xxxx, Xxx Xxxx 00000, upon the satisfaction of all conditions to Closing set
forth in this Agreement. The closing date shall be the date the subscriber
funds are transmitted by wire transfer to the Company (the "Closing Date").
(c) Entire Agreement; Assignment. This Agreement represents the
----------------------------
entire agreement between the parties hereto with respect to the subject matter
hereof and may be amended only by a writing executed by both parties. No right
or obligation of either party shall be assigned by that party without prior
notice to and the written consent of the other party.
(d) Execution. This Agreement may be executed by facsimile
---------
transmission, followed by delivery of an executed original copy.
(e) Law Governing this Agreement. This Agreement shall be governed by
----------------------------
and construed in accordance with the laws of the United States of America and
the State of Delaware. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of Delaware or in the federal courts located in the state of
Delaware. Both parties hereby irrevocably agree to submit to the jurisdiction
of such courts.
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The prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs.
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
Very truly yours,
CHEMTRAK, INC.
By:
--------------------------------------
Dated As Of January ____, 1998
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