EXHIBIT B STOCK PURCHASE AND LOAN OPTION AGREEMENT MR3 SYSTEMS, INC. WARRANT I
EXHIBIT
10.3
EXHIBIT
B
MR3
SYSTEMS, INC.
WARRANT
I
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE
SECURITIES ACT OF 1933; THEY HAVE BEEN ACQUIRED BY THE HOLDER FOR INVESTMENT
AND
MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF
EXCEPT AS MAY BE AUTHORIZED UNDER THE SECURITIES ACT OF 1933, AND THE RULES
AND
REGULATIONS PROMULGATED THEREUNDER.
This
certifies that, for good and valuable consideration, receipt of which is
hereby
acknowledged, MRD Holdings Inc. (the “Holder”)
is
entitled to purchase, subject to the terms and conditions of this Warrant,
from
MR3 Systems, Inc., a Delaware corporation (the “Company”),
a
number of fully paid and nonassessable shares of Common Stock (the “Shares”)
of the
Company, which when issued upon exercise and added to the number of shares
of
Common Stock and Series B Convertible Preferred Stock of the Company currently
owned by the Holder on the date of exercise, will equal fifty-one percent
(51%)
of the total number of outstanding shares of capital stock and fifty-one
percent
(51%) of the total number of outstanding voting securities of the Company,
calculated on a fully-diluted as converted-to-common basis, during the period
commencing on the date hereof (the “Commencement
Date”)
and
ending at 5:00 p.m. California time, on the date which is ten (10)
years
from the Commencement Date (the “Expiration
Date”),
at
which time this Warrant will expire and become void unless earlier terminated
as
provided herein. This Warrant has been issued in connection with that certain
Stock Purchase and Loan Option Agreement between Holder and the Company
(“Purchase
Agreement”)
dated
May 30, 2005 (“Purchase
Agreement”).
Upon
exercise of this Warrant, the Company will issue to Holder a new Warrant
in the
form hereof, representing Holder’s continuing right to purchase that number of
shares of Common Stock of the Company, which when issued upon exercise, and
added to the number of shares of Common Stock and Series B Preferred Stock
currently owned by the Holder on the date of exercise will equal fifty-one
percent (51%) of the total number of outstanding shares of capital stock
and
fifty-one percent (51%) of the total number of outstanding voting securities
of
the Company, calculated on a fully-diluted as converted-to-common basis.
The
Company shall provide Investor with written notice within five (5) business
days
after the issuance of any capital stock of the Company pursuant to the exercise,
conversion or exchange of stock options, rights to acquire stock or other
equity
securities or securities convertible into stock or other equity securities,
convertible notes, warrants and/or other equity securities of the Company
outstanding on the date hereof, so as to enable Investor to exercise this
Warrant.
1. Vesting
and Exercise Price.
(a) The
right
to exercise this Warrant shall fully vest on the Commencement Date.
(b) The
aggregate exercise or purchase price for the Shares shall be one cent ($.01)
(the “Exercise
Price”).
2. Exercise
and Payment.
(a) Cash
Exercise.
At any
time after the Commencement Date, this Warrant may be exercised, in whole
or in
part, from time to time by the Holder, during the term hereof, by surrender
of
this Warrant and the Notice of Exercise annexed hereto duly completed and
executed by the Holder to the Company at the principal executive offices
of the
Company, together with payment in the amount of the Exercise Price then in
effect, as designated in the Notice of Exercise. Payment may be in cash or
by
check payable to the order of the Company.
(b) Net
Issuance.
In lieu
of payment of the Exercise Price described in Section 2(a), the Holder may
elect
to receive, without the payment by the Holder of any additional consideration,
Shares equal to the value of this Warrant or any portion hereof by the surrender
of this Warrant or such portion to the Company, with the net issue election
notice annexed hereto (the “Net
Issuance Election Notice”)
duly
executed, at the office of the Company. Thereupon, the Company shall issue
to
the Holder such number of fully paid and nonassessable Shares as is computed
using the following formula:
where:
X
= Y
(A-B)
A
X
= the
number of Shares to be issued to the Holder pursuant to this Section 2.
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Y
=
|
the
number of Shares covered by this Warrant in respect of which the
net
issuance election is made pursuant to this Section
2.
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A
=
|
the
fair market value of one Share, as determined in accordance with
the
provisions of this Section 2.
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B
=
|
the
Exercise Price in effect under this Warrant at the time the net
issuance
election is made pursuant to this Section
2.
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For
purposes of this Section 2, the “fair market value” per Share shall
mean:
i. If
the
class of Shares is traded on a national securities exchange or is listed
on the
Nasdaq National Market (the “NNM”)
or
other over-the-counter quotation system, the fair market value shall be the
last
reported sale price of a Share on such exchange or on the NNM or other
over-the-counter quotation system on the last business day before the effective
date of exercise of the net issuance election or if no such sale is made
on such
day, the mean of the closing bid and asked prices for such day on such exchange,
the NNM or over-the-counter quotation system; and
ii. If
the
class of Shares is not so listed and bid and ask prices are not reported,
the
fair market value shall be the price per Share which the Company could obtain
from a willing buyer for Shares sold by the Company, as such price shall
be
determined in good faith by the Company’s Board of Directors.
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(c) Replacement
Warrant.
Immediately following the exercise of this Warrant, the Company shall prepare
a
new Warrant, substantially identical hereto, representing the right to purchase,
for an aggregate exercise price of one cent ($0.01), a number of fully paid
and
nonassessable shares of Common Stock of the Company, which when issued upon
exercise and added to the number of shares of Common Stock and Series B
Convertible Preferred Stock of the Company then-owned by the Holder on the
date
of exercise, will equal fifty-one percent (51%) of the total number of
outstanding shares of capital stock and fifty-one percent (51%) of the total
number of outstanding voting securities of the Company, calculated on a
fully-diluted as converted-to-common basis.
3. Delivery
of Certificates.
Within
a reasonable time after exercise, in whole or in part, of this Warrant, the
Company shall issue in the name of and deliver to the Holder, a certificate
or
certificates for the number of fully paid and nonassessable Shares which
the
Holder shall have requested in the Notice of Exercise or Net Issuance Election
Notice. If this Warrant is exercised in part, the Company shall deliver to
the
Holder a new Warrant for the unexercised portion of this Warrant at the time
of
delivery of such certificate or certificates.
4. No
Fractional Shares.
No
fractional Shares or scrip representing fractional Shares will be issued
upon
exercise of this Warrant. If upon any exercise of this Warrant a fraction
of a
Share results, the Company will pay the Holder the difference between the
cash
value of the fractional Share and the portion of the Exercise Price allocable
to
the fractional Share.
5. Charges,
Taxes and Expenses.
The
Holder shall pay all transfer taxes or other incidental charges, if any,
in
connection with the transfer of the Shares purchased pursuant to the exercise
hereof from the Company to the Holder.
6. Loss,
Theft, Destruction or Mutilation of Warrant.
Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant, and in case of loss, theft
or
destruction, of indemnity or security reasonably satisfactory to the Company,
and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated,
the
Company will make and deliver a new Warrant of like tenor and dated as of
such
cancellation, in lieu of this Warrant.
7. Saturdays,
Sundays, Holidays, Etc.
If the
last or appointed day for the taking of any action or the expiration of any
right required or granted herein shall be a Saturday or a Sunday or shall
be a
legal holiday, then such action may be taken or such right may be exercised
on
the next succeeding weekday which is not a legal holiday.
8. Rights
As Shareholder.
Prior
to exercise of this Warrant, the Holder shall not be entitled to any rights
as a
shareholder of the Company with respect to the Shares, including (without
limitation) the right to vote such Shares, receive dividends or other
distributions thereon, or be notified of Shareholder meetings, and, except
as
provided in the Purchase Agreement and in the Investor Rights and Stockholder
Agreement dated May 30, 2005, the Holder shall not be entitled to any notice
or
other communication concerning the business or affairs of the Company. However,
in the event of any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who
are
entitled to receive any dividend (other than a cash dividend) or other
distribution, any right to subscribe for, purchase or otherwise acquire any
Common Stock or any other securities or property, or to receive any other
right,
the Company shall mail to each Holder of this Warrant, at least ten (10)
days
prior to the date specified therein, a notice specifying the date on which
any
such record is to be taken for the purpose of such dividend, distribution
or
right, and the amount and character of such dividend, distribution or right.
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9. Restricted
Securities.
The
Holder understands that this Warrant and the Shares purchasable hereunder
constitute “restricted securities” under the federal securities laws inasmuch as
they are, or will be, acquired from the Company in transactions not involving
a
public offering and accordingly may not, under such laws and applicable
regulations, be resold or transferred without registration under the Securities
Act of 1933 (the “1933
Act”)
or an
applicable exemption from such registration. In this connection, the Holder
acknowledges that Rule 144 of the Securities and Exchange Commission (the
“SEC”)
is not
now, and may not in the future be, available for resale of the Warrant and
the
Shares purchasable hereunder. Unless the Shares are subsequently registered,
the
Holder further acknowledges that the securities legend on Exhibit A
to the
Notice of Exercise attached hereto shall be placed on any Shares issued to
the
Holder upon exercise of this Warrant.
10. Certification
of Investment Purpose.
Unless
a current registration statement under the 1933 Act shall be in effect with
respect to the securities to be issued upon exercise of this Warrant, the
Holder
covenants and agrees that, at the time of exercise hereof, he will deliver
to
the Company a written certification executed by the Holder that the securities
acquired by such Holder upon exercise hereof are for the account of such
Holder
and acquired for investment purposes only and that such securities are not
acquired with a view to, or for sale in connection with, any distribution
thereof.
11. Disposition
of Shares.
Holder
hereby agrees not to make any disposition of any Shares purchased hereunder
unless and until:
(a) Holder
shall have notified the Company of the proposed disposition and provided
a
written summary of the terms and conditions of the proposed
disposition;
(b) Holder
shall have complied with all requirements of this Warrant applicable to the
disposition of the Shares; and
(c) Holder
shall have provided the Company with written assurances, in form and substance
reasonably satisfactory to legal counsel of the Company, that (i) the
proposed disposition does not require registration of the Shares under the
1933
Act or (ii) all appropriate action necessary for compliance with the
registration requirements of the 1933 Act or of any exemption from registration
available under the 1933 Act has been taken.
The
Company shall not
be
required (i) to
transfer on its books any Shares which have been sold or transferred in
violation of the provisions of this Section 11 or (ii) to
treat as the owner of the Shares, or otherwise to accord voting or dividend
rights to, any transferee to whom the Shares have been transferred in
contravention of the terms of this Warrant.
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12. Transferability.
(a) General.
This
Warrant shall be transferable only on the books of the Company maintained
at its
principal office in San Francisco, California or wherever its principal office
may then be located, upon delivery thereof duly endorsed by the Holder or
by its
duly authorized attorney or representative, accompanied by proper evidence
of
succession, assignment or authority to transfer. Upon any registration of
transfer, the Company shall execute and deliver new Warrants to the person
entitled thereto.
(b) Limitations
on Transfer.
This
Warrant shall not be sold, transferred, assigned or hypothecated by the Holder
except to (i) one or more persons, each of whom on the date of transfer is
an
officer of the Holder; (ii) a general partnership or general partnerships,
the
general partners of which are the Holder and one or more persons, each of
whom
on the date of transfer is an officer of the Holder; (iii) a successor to
the
Holder in any merger or consolidation; (iv) a purchaser of all or substantially
all of the Holder’s assets; or (v) any person receiving this Warrant from one or
more of the persons listed in this Section 12(b) at such person’s or persons’
death pursuant to will, trust or the laws of intestate succession. This Warrant
may be divided or combined, upon request to the Company by the Holder, into
a
certificate or certificates representing the right to purchase the same
aggregate number of Shares.
13. Miscellaneous.
(a) Construction.
Unless
the context indicates otherwise, the term “Holder” shall include any transferee
or transferees of this Warrant pursuant to Section 12(b), and the term “Warrant”
shall include any and all warrants outstanding pursuant to this Agreement,
including those evidenced by a certificate or certificates issued upon division,
exchange, substitution or transfer pursuant to Section 12(b).
(b) Restrictions.
By
receipt of this Warrant, the Holder makes the same representations with respect
to the acquisition of this Warrant as the Holder is required to make upon
the
exercise of this Warrant and acquisition of the Shares purchasable hereunder
as
set forth in the Form of Investment Letter attached as Exhibit A to
the
Notice of Exercise attached hereto.
(c) Notices.
Unless
otherwise provided, any notice required or permitted under this Warrant shall
be
given in writing and shall be deemed effectively given upon personal delivery
to
the party to be notified or three (3) days following deposit with the United
States Post Office, by registered or certified mail, postage prepaid and
addressed to the party to be notified (or one (1) day following timely deposit
with a reputable overnight courier with next day delivery instructions),
or upon
confirmation of receipt by the sender of any notice by facsimile transmission,
at the address indicated below or at such other address as such party may
designate by ten (10) days’ advance written notice to the other
parties.
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To
Holder:
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Xxxxxxx
X. X. Xxxx
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MRD
Holdings Inc.
The
Naaman’s Building Suite 206
000
Xxxxxxxxxx Xx.,
XX
00000
Xxxxxxxxxx
Xxxxxxxx,
XXX
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To
the Company:
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Xx.
Xxxxxxx X. Xxx
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Chief
Executive Officer
MR3
Systems, Inc.
000
Xxxxxxx Xxxxxx, Xxxxx 000
Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000
(d) Governing
Law.
This
Warrant shall be governed by and construed under the laws of the State of
California as applied to agreements among California residents entered into
and
to be performed entirely within California.
(e) Entire
Agreement.
This
Warrant, the exhibits and schedules hereto, and the documents referred to
herein, constitute the entire agreement and understanding of the parties
hereto
with respect to the subject matter hereof, and supersede all prior and
contemporaneous agreements and understandings, whether oral or written, between
the parties hereto with respect to the subject matter hereof.
(f) Binding
Effect.
This
Warrant and the various rights and obligations arising hereunder shall inure
to
the benefit of and be binding upon the Company and its successors and assigns,
and Holder and its successors and assigns.
(g) Waiver;
Consent.
This
Warrant may not be changed, amended, terminated, augmented, rescinded or
discharged (other than by performance), in whole or in part, except by a
writing
executed by the parties hereto, and no waiver of any of the provisions or
conditions of this Warrant or any of the rights of a party hereto shall be
effective or binding unless such waiver shall be in writing and signed by
the
party claimed to have given or consented thereto.
(h) Severability.
If one
or more provisions of this Warrant are held to be unenforceable under applicable
law, such provision shall be excluded from this Warrant and the balance of
the
Warrant shall be interpreted as if such provision were so excluded and the
balance shall be enforceable in accordance with its terms.
IN
WITNESS WHEREOF, the parties hereto have executed this Warrant effective
as of
the date hereof.
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DATED:
May 30, 2005
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THE
COMPANY:
MR3
SYSTEMS, INC.
By:
/s/
Xxxxxxx X. Xxx
Name:
Xxxxxxx X. Xxx, Ph.D.
Title:
Chief Executive Officer
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HOLDER:
MRD
HOLDINGS INC.
By:
/s/
Xxxxxxx X.X. Xxxx
Name:
Xxxxxxx X. X. Xxxx
Title:
Managing Director
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-7-
EXHIBIT
B
NOTICE
OF EXERCISE
To: MR3
SYSTEMS, INC.
The
undersigned hereby elects to purchase _____________ shares of _________ Stock
(the “Shares”)
of MR3
Systems, Inc., a Delaware corporation (the “Company”)
pursuant to the terms of the attached Warrant, and tenders herewith payment
of
the purchase price pursuant to the terms of the Warrant.
Attached
as Exhibit A is an investment representation letter addressed to the
Company and executed by the undersigned as required by Section 10
of the
Warrant.
Please
issue certificates representing the Common Stock purchased hereunder in the
names and in the denominations indicated on Exhibit A attached
hereto.
Please
issue a new Warrant for the unexercised portion of the attached Warrant,
if any,
in the name of the undersigned.
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Dated:
______________________________________
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________________________________________
Name:_________________________________________
Title:__________________________________________
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-8-
EXHIBIT
B
NET
ISSUANCE ELECTION NOTICE
To:
MR3
SYSTEMS, INC.
Date:_____________
The
undersigned hereby elects under Section 2 of the attached Warrant to surrender
the right to purchase ___________ shares of ___________ Stock (the “Shares”)
pursuant to the attached Warrant. The Certificate(s) for the Shares issuable
upon such net issuance election shall be issued in the name of the undersigned
or as otherwise indicated below.
Attached
as Exhibit A is an investment representation letter addressed to the Company
and
executed by the undersigned as required by Section 12 of the
Warrant.
Please
issue certificates representing the Shares purchased hereunder in the names
and
in the denominations indicated on Exhibit A attached hereto.
Please
issue a new Warrant for the unexercised portion of the attached Warrant,
if any,
in the name of the undersigned.
___________________________
Signature
___________________________
Name
for
Registration
___________________________
Mailing
Address
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EXHIBIT
B
STOCK
PURCHASE AND LOAN OPTION AGREEMENT
EXHIBIT
A-1
To: MR3
SYSTEMS, INC.
In
connection with the purchase by the undersigned of _________ shares of Common
Stock (the “Shares”)
of MR3
Systems, Inc., a Delaware corporation (the “Company”),
upon
exercise of that certain Warrant dated as of _______, 2005, the undersigned
hereby represents and warrants as follows:
The
Shares to be received by the undersigned upon exercise of the Warrant are
being
acquired for its own account, not as a nominee or agent, and not with a view
to
resale or distribution of any part thereof, and the undersigned has no present
intention of selling, granting any participation in, or otherwise distributing
the same. The undersigned further represents that it does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or
grant
participation to such person or to any third person, with respect to the
Shares.
The undersigned believes it has received all the information it considers
necessary or appropriate for deciding whether to purchase the
Shares.
The
undersigned understands that the Shares are characterized as “restricted
securities” under the federal securities laws inasmuch as they are being
acquired from the Company in transactions not involving a public offering
and
that under such laws and applicable regulations such securities may be resold
without registration under the Securities Act of 1933, as amended (the
“Act”),
only
in certain limited circumstances. In this connection, the undersigned represents
that it is familiar with SEC Rule 144, as presently in effect, and understands
the resale limitations imposed thereby and by the Act.
Without
in any way limiting the representations set forth above, the undersigned
agrees
not to make any disposition of all or any portion of the Shares unless and
until:
There
is
then in effect a registration statement under the Act covering such proposed
disposition and such disposition is made in accordance with such registration
statement; or
(i) The
undersigned shall have notified the Company of the proposed disposition and
shall have furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition, and (ii) if requested, the
undersigned shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company that such disposition will not require
registration of such shares under the Act. The Company will not require an
opinion of counsel for sales made pursuant to Rule 144 except in unusual
circumstances.
-10-
EXHIBIT
B
STOCK
PURCHASE AND LOAN OPTION AGREEMENT
The
undersigned understands the instruments evidencing the Shares may bear the
following legend:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE
SECURITIES ACT OF 1933; THEY HAVE BEEN ACQUIRED BY THE HOLDER FOR INVESTMENT
AND
MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF
EXCEPT AS MAY BE AUTHORIZED UNDER THE SECURITIES ACT OF 1933, AND THE RULES
AND
REGULATIONS PROMULGATED THEREUNDER.
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Dated:
______________________________________
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________________________________________
Name:_________________________________________
Title:__________________________________________
|
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