THIS WARRANT AND THE SECURITIES RECEIVABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED OR DISPOSED OF UNLESS AND UNTIL SUCH SECURITIES ARE REGISTERED UNDER
THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF LEGAL
COUNSEL IS DELIVERED TO THE COMPANY STATING THAT AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
WARRANT
WARRANT NO. W-0305-1-CRII-SASCO Business Trust
THIS CERTIFIES THAT, for value received in the amount of one hundred
sixty thousand dollars (US $160,000.00) (the "Purchase Price"), CRII-SASCO
BUSINESS TRUST (the "Holder") is entitled at any time during the Exercise Period
(as such term and other capitalized terms are defined in Article 1 hereof),
subject to the terms and conditions set forth herein, to purchase from CELL
ROBOTICS INTERNATIONAL, INC., a Colorado corporation (the "Company"), sixteen
million (16,000,000) shares of Common Stock (subject to adjustment as provided
herein) at the Warrant Price, all on the terms and conditions and pursuant to
the provisions hereinafter set forth. The Purchase Price shall be paid by Holder
in immediately available funds within five business days of the Effective Date
(as defined below).
1. DEFINITIONS.
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Applicable Law" shall mean all laws, rules and regulations applicable
to the Person, conduct, action or covenant in question, including, but not
limited to, all applicable common law and equitable principles, all provisions
of all applicable state and federal constitutions, statutes, rules, regulations
and orders of governmental body, and all orders, judgments and decrees of all
courts and arbitrators.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean the common stock, par value $.004 per share,
of the Company and any capital stock into which such common stock shall have
been changed and any other stock resulting from any reclassification of such
stock which is not preferred as to dividends or assets over any other class of
stock which shall be in effect from time to time.
"Designated Office" shall have the meaning set forth in Article 7.
"Exercise Period" shall mean, subject to the terms and conditions of
Section 2.7, a period of six (6) months commencing on April 11, 2005 and ending
at 5:00 p.m., local time, at the Designated Office on October 11, 2005.
"Exercise Price" shall mean twenty-five cents ($0.25), subject to
adjustment as provided in Article 3 and Section 2.7.
"Notice of Exercise" shall mean the form of Notice of Exercise attached
hereto as Exhibit A.
"Person" shall mean any natural person, corporation, unincorporated
organization, trust, joint-stock company, joint venture, association, company,
limited or general partnership, any government or any agency or political
subdivision of any government.
"Restricted Common Stock" shall mean shares of Common Stock which are,
or which upon their issuance on the exercise of this Warrant would be, evidenced
by a certificate bearing the restrictive legend set forth in Section 4.3.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Transfer" shall mean any disposition of the Warrant Stock or of any
interest therein, which would constitute a sale thereof within the meaning of
the Securities Act.
"Trading Price" shall mean (a) if the Common Stock is actively traded
on any national securities exchange or any Nasdaq quotation or market system,
then the closing price at which sales of Common Stock shall have been sold and
(b) if the shares of Common Stock are not actively traded on any such exchange
or system, then the arithmetic mean of the bid and asked prices of a share of
the Common Stock.
"Warrant" shall mean this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, this Warrant.
"Warrant Price" shall mean an amount equal to (a) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.2, multiplied by (b) the Exercise Price as of the date of such
exercise.
"Warrant Stock" shall mean the shares of Common Stock issued, issuable
or both (as the context may require) to the Holder of this Warrant upon the
exercise thereof.
2. RIGHTS GRANTED EXERCISE OF WARRANT.
2.1. Right of Exercise. Subject to Section 9.1, the Holder shall be
entitled to exercise this Warrant at any time and from time to time during the
Exercise Period.
2.2. Manner of Exercise. Subject to the terms and conditions of this
Warrant, the Holder shall have the right to exercise this Warrant during
Exercise Period, in whole or in part, by delivering to the Company at the
Designated Office (a) a Notice of Exercise, duly executed by the Holder,
specifying the number of shares of Common Stock to be purchased, (b) payment of
the Warrant Price by certified or official bank check, (c) this Warrant and (d)
in the event this Warrant is being exercised by any Person other than the Holder
pursuant to this Section 2.2, it shall be accompanied by proof acceptable to the
Company of the right of such Person or Persons
to exercise this Warrant. Upon receipt thereof, the Company shall, as promptly
as practicable, execute (or cause to be executed) and deliver (or cause to be
delivered) to the Holder a certificate or certificates representing the
aggregate number of full shares of Common Stock issuable upon such exercise. The
certificate or certificates so delivered shall be, to the extent possible, in
such denomination or denominations as the Holder shall request in the Notice of
Exercise and shall be registered in the name of the Holder or, subject to the
terms of this Warrant, such other name as shall be designated in the Notice of
Exercise. This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and the Holder
and/or any other Person so designated to be named therein shall be deemed to
have become a holder of record of such shares for all purposes, as of the date
the items specified in clauses (a) through (d) above are received by the
Company. If this Warrant shall have been exercised in part, the Company shall,
at the time of delivery of the certificate or certificates representing the
shares of Common Stock being issued, deliver to the Holder a new warrant
evidencing the rights of the Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant, which new warrant shall in all other respects
be identical with this Warrant, or, at the request of the Holder, appropriate
notation may be made on this Warrant and the same returned to the Holder.
Notwithstanding any provision herein to the contrary, the Company shall not be
required to register shares in the name of any Person who acquires this Warrant
(or part hereof) or any Warrant Stock otherwise than in accordance with this
Warrant.
2.3. Exercise Increments. Notwithstanding anything contained herein to
the contrary Holder agrees to exercise this Warrant by delivery of the Notice of
Exercise, payment of the Warrant Price and other documents and instruments
required by Section 2.2 as follows:
(a) The Holder shall exercise this Warrant for not less than 4,000,000
shares of Warrant Stock upon the Company's satisfaction of the matters described
under the column entitled "Covenant" on Exhibit B attached hereto set forth
opposite the column designated as "Exercise I";
(b) The Holder shall exercise this Warrant for not less than 4,000,000
shares of Warrant Stock upon the Company's satisfaction of the matters described
under the column entitled "Covenant" on Exhibit B attached hereto set forth
opposite the column designated as "Exercise II";
(c) The Holder shall exercise this Warrant for not less than 4,000,000
shares of Warrant Stock upon the Company's satisfaction of the matters described
under the column entitled "Covenant" on Exhibit B attached hereto set forth
opposite the column designated as "Exercise III"; and
(d) The Holder shall exercise this Warrant for not less than 4,000,000
shares of Warrant Stock upon the Company's satisfaction of the matters described
under the column entitled "Covenant" on Exhibit B attached hereto set forth
opposite the column designated as "Exercise IV."
2.4. Payment of Taxes. The issuance of a certificate or certificates
for shares of Common Stock upon exercise of this Warrant shall be made without
charge for any stamp or other similar tax in respect of such issuance. However,
if any such certificate is to be issued in a name other than that of the Holder,
the Person or Persons requesting the issuance thereof shall pay to the Company
the amount of any tax which may be payable in respect of any transfer
involved in such issuance or shall establish to the satisfaction of the Company
that such tax has been paid.
2.5. Fractional Shares. The Company shall not be required to issue
fractions of shares of Common Stock upon exercise of this Warrant or to
distribute certificates which evidence fractional shares of Common Stock. If the
exercise of this Warrant would result in a fractional share of Common Stock or
the right to acquire a fractional share of Common Stock, such fractional share
shall be disregarded and the number of shares of Common Stock issuable upon the
exercise of this Warrant shall be rounded up or down to the nearest whole share.
The Holder expressly waives his right to receive any fractional shares upon
exercise of this Warrant.
2.6. Compliance with Law and Regulations. This Warrant and the
obligation of the Company to sell and deliver the shares of Warrant Stock
hereunder shall be subject to all Applicable Laws and to such approvals by any
government or regulatory agency as may be required. Notwithstanding any other
provision of this Warrant, this Warrant may not be exercised if its exercise, or
the receipt of the shares of Warrant Stock pursuant thereto, would be contrary
to Applicable Law.
2.7. General Covenants. The Company agrees to perform the agreements
and covenants set forth on Exhibit C attached hereto.
3. ADJUSTMENTS AND ANTI-DILUTION PROVISIONS.
3.1. Adjustment for Change in Capital Stock. In the event of any change
in the Common Stock of the Company by reason of any combination, subdivision,
split, reclassification, stock dividend or any similar change affecting the
Common Stock, then in any such event the number and kind of shares of Common
Stock subject to this Warrant and the Exercise Price shall be adjusted, in such
manner as the Board of Directors deems equitable to prevent substantial dilution
or enlargement of the rights granted to the Holder. The adjustment shall become
effective immediately after the record date in the case of a dividend or
distribution and immediately after the effective date in the case of a
subdivision, combination or reclassification. Such adjustment shall be made
successively whenever any event listed above shall occur.
3.2. Reorganization of Company. If at any time while this Warrant is
outstanding and unexpired there shall be (a) a reorganization of the Company,
(b) a merger or consolidation of the Company with or into another entity in
which the Company is not the surviving entity, or a reverse triangular merger in
which the Company is the surviving entity but the shares of the Company's
capital stock outstanding immediately prior to the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, or (c) a sale or transfer of the Company's properties and
assets as, or substantially as, an entirety to any other Person, then lawful and
adequate provision will be made whereby the Holder will thereafter have the
right to purchase and receive upon the basis and upon the terms and conditions
specified in this Warrant and in lieu of the shares of Common Stock of the
Company immediately theretofore purchasable and receivable upon the exercise of
this Warrant, the kind and amount of stock and other securities and assets
(including, without limitation, cash) receivable upon such merger, consolidation
or sale by a holder of the number of shares of Common Stock of the Company
deliverable upon the exercise of this Warrant immediately prior to such merger,
consolidation or sale. In any such case, appropriate provisions will be made
with respect to the rights and
interests of the Holder to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Exercise Price and of the
number of shares of Common Stock purchasable upon the exercise of this Warrant)
will thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise hereof. The
foregoing provisions of this Section 3.2 shall similarly apply to successive
reorganizations, mergers, consolidations and sales and to the stock or
securities of any other corporation that are at the time receivable upon the
exercise of this Warrant. If this Section 3.2 applies to a transaction, Section
3.1 shall not apply to such transaction.
3.3. Notice of Adjustment. Whenever the Exercise Price is adjusted, the
Company shall promptly mail to the Holder a notice setting forth the Exercise
Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment. Such certificate prepared in good faith shall be
conclusive evidence of the correctness of such adjustment absent manifest error.
3.4. Company Determination Final. Any determination that the Company or
the Board of Directors must make pursuant to this Warrant is conclusive absent
manifest error.
3.5. When No Adjustment Required. No adjustment need be made for any
transaction referred to in Section 3.2 if the Holder is entitled to participate
in the transaction on a basis and with notice that the Board of Directors
determines to be fair and appropriate in light of the basis and notice on which
holders of Common Stock participate in the transaction. No adjustment need be
made for a change in the par value or no par value of the Common Stock.
4. RESTRICTIONS ON TRANSFER AND COMPLIANCE WITH SECURITIES ACT AND
REGISTRATION.
4.1 Agreement to Be Bound. The Holder, by acceptance of this Warrant,
agrees to be bound by the provisions of this Article 4. The Holder further
agrees that all shares of Warrant Stock will be disposed of only in accordance
with the Securities Act and the rules and regulations of the Commission
promulgated thereunder.
4.2. Compliance with the Securities Act. This Warrant and the Warrant
Stock have not been registered under the Securities Act or any applicable state
securities law. The Holder hereof, by acceptance hereof, agrees that this
Warrant and all shares purchased upon exercise hereof will be disposed of only
in accordance with the Securities Act and the rules and regulations of the
Commission promulgated thereunder or of any applicable state securities law. The
Holder represents and warrants that (a) he, she or it is an "accredited
investor," as that term is defined in Rule 501(a) of Regulation D under the
Securities Act, and is acquiring the Common Stock for his, her or its own
account, for investment and not with a view to any "distribution" within the
meaning of the Securities Act; (b) he, she or it has been furnished with all
information which he, she or it deems necessary to evaluate the merits and risks
of this Warrant and the purchase of the Common Stock upon exercise thereof; (c)
he, she or it has had the opportunity to ask questions concerning the Common
Stock and the Company and all questions posed have been answered to his, her or
its satisfaction; (d) he, she or it has been given the opportunity to obtain any
additional information he, she or it deems necessary to verify the accuracy of
any information obtained concerning the Common Stock and the Company; and (e)
he, she or it has such knowledge and experience in financial and business
matters that he, she or it is able to evaluate the merits and risks of
purchasing the Common Stock and to make an informed investment decision relating
thereto.
4.3. Restrictive Legends. Except as otherwise provided in this Article
4, each certificate for Warrant Stock initially issued upon the exercise of this
Warrant, and each certificate for Warrant Stock issued to any subsequent
transferee of any such certificate, shall be stamped or otherwise imprinted with
a legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED OR DISPOSED OF UNLESS AND UNTIL SUCH SECURITIES
ARE REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN OPINION OF LEGAL COUNSEL IS DELIVERED TO THE COMPANY STATING
THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE."
4.4. Transfers. No shares of Restricted Common Stock issued upon the
exercise hereof shall be Transferred other than pursuant to an effective
registration statement under the Securities Act or, if required by the Company,
an opinion of counsel is delivered to the Company stating an exemption from the
registration provisions thereof. Each certificate, if any, evidencing such
shares of Restricted Common Stock issued upon any such Transfer, other than in a
public offering pursuant to an effective registration statement, shall bear the
restrictive legend set forth in Section 4.3, unless (a) such Transfer is in
accordance with the provisions of Rule 144 under the Securities Act (or any
other rule or provision permitting sale without registration under the
Securities Act), (b) such Restricted Common Stock shall have been effectively
registered under the Securities Act and disposed of pursuant thereto or (c) in
the opinion of counsel delivered at the request of the Holder, which opinion
shall be reasonably acceptable to the Company, such legend is not required for
the purposes of compliance with the Securities Act. The holder of the Restricted
Common Stock shall not be entitled to Transfer such Restricted Common Stock
except in accordance with this Section 4.4.
5. RESERVATION AND AUTHORIZATION OF COMMON STOCK.
From and after the date of this Warrant, the Company shall at all times
reserve and keep available for issuance upon the exercise of this Warrant such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of this Warrant. All shares of Common
Stock issuable pursuant to the terms hereof, when issued upon exercise of this
Warrant with payment therefor in accordance with the terms hereof, shall be duly
and validly issued and fully paid and nonassessable.
6. THEFT, LOSS, DESTRUCTION.
Upon receipt by the Company from the Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and an indemnity reasonably satisfactory to it and,
in case of mutilation, upon surrender and cancellation hereof, the Company will
execute and deliver in lieu hereof a new Warrant of like tenor to the Holder;
provided, however, in the case of mutilation, no indemnity shall be required if
this Warrant in identifiable form is surrendered to the Company for
cancellation.
7. OFFICE OF THE COMPANY.
As long as this Warrant remains outstanding, the Company shall maintain
an office or agency, which may be the principal executive offices of the Company
or the offices of the transfer agent of the Company (the "Designated Office"),
where this Warrant may be presented for exercise, registration of transfer,
division or combination as provided in this Warrant. Such Designated Office
shall initially be the principal office of the Company at 2715 Broadbent Parkway
N.E., Albuquerque, New Mexico 87107; thereafter, such office shall be the office
of the Company or of an agency designated by the Company in a notice delivered
to the Holder.
8. NO SHAREHOLDER RIGHTS.
Prior to the exercise of this Warrant, the Holder of this Warrant shall
not be entitled to any rights of a shareholder of the Company, including,
without limitation, the rights to vote, to receive dividends or other
distributions, and shall not be entitled to receive any notice of any
proceedings of the Company except as provided herein.
9. MISCELLANEOUS.
9.1. Termination of Warrant. Except those rights which by their terms
specifically extend beyond the end of the Exercise Period, this Warrant and all
rights granted herein, to the extent those rights have not lapsed or been
exercised, will terminate and become null and void at the end of the Exercise
Period or as otherwise specifically provided herein.
9.2. Notices. All notices, requests, demands, claims and other
communications under this Warrant shall be in writing. Any notice, request,
demand, claim or other communication hereunder shall be deemed duly given if
(and then two business days after) it is sent by (a) confirmed facsimile; (b)
overnight delivery; or (c) registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Company: Cell Robotics International, Inc.
2715 Broadbent Parkway N.E.
Albuquerque, New Mexico 87107
Attn: President
Facsimile: (505) 344-8112
If to the Holder: CRII-SASCO Business Trust
12180 Greenspoint Drive, Suite 134
Houston, Texas 77060
Attn: Susan Smith
Facsimile: 281-587-0558
The Holder or the Company may send any notice, request, demand, claim or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail or electronic mail), but no such notice,
request, demand, claim or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. The
Holder or the Company may change the address to which notices,
requests, demands, claims and other communications hereunder are to be delivered
by giving the other party notice in the manner provided in this Warrant.
9.3. Succession and Assignment. This Warrant shall be binding upon and
inure to the benefit of the Holder and the Company and their respective
successors and permitted assigns. Neither the Holder or the Company may assign
either this Warrant or any of its rights, interests or obligations hereunder
without the prior written approval of the other party.
9.4. Severability. Any term or provision of this Warrant that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.5. Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
9.6. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF NEW MEXICO WITHOUT GIVING
EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE
OF NEW MEXICO OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE
LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW MEXICO. Any legal action or
proceeding with respect to this Warrant shall be brought in any New Mexico state
or federal court sitting in Bernalillo County, New Mexico, and, by execution and
delivery of this Warrant, the Holder and the Company hereby accept for
themselves and in respect of their property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The Holder and the Company hereby
irrevocably waive any objection, including, without limitation, any objection to
the laying of venue or based on the grounds of forum non conveniens, which they
may now or hereafter have to the bringing of any such action or proceeding in
such respective jurisdictions.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its President and Chief Executive Officer on the _11th__ day of
April 2005 (the "Effective Date").
CELL ROBOTICS INTERNATIONAL, INC.
By: /s/
----------------------------------------
Eutimio L. Sena
President and Chief Executive Officer
ACCEPTED AND AGREED TO BY:
CRII-SASCO BUSINESS TRUST
By: /s/
---------------------------------
Name: Cruze Alderete
-------------------------------
Title: Fiduciary
------------------------------
EXHIBIT A
NOTICE OF EXERCISE FORM
(To be executed only upon partial or full exercise of the within Warrant)
The undersigned registered Holder of the within Warrant irrevocably
exercises the within Warrant for and purchases _______________ shares of Common
Stock, par value $0.004 per share ("Common Stock"), of CELL ROBOTICS
INTERNATIONAL, INC. (the "Company") and herewith makes payment therefor in the
amount of $________________, all at the price and on the terms and conditions
specified in the within Warrant and requests that a certificate (or _____
certificates in denominations of ______________ shares) for the shares of Common
Stock of the Company hereby purchased be issued in the name of and delivered to
(choose one) (a) the undersigned or (b) ________________________________, whose
address is ___________________________________________________, and, if such
shares of Common Stock shall not include all the shares of Common Stock issuable
as provided in the within Warrant, that a new Warrant of like tenor for the
number of shares of Common Stock of the Company not being purchased hereunder be
issued in the name of and delivered to (choose one) (a) the undersigned or (b)
_____________________________, whose address is _____________________________.
The undersigned is aware that the Common Stock has not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or any
state securities laws. The undersigned understands that the reliance by the
Company on exemptions under the Securities Act is predicated in part upon the
truth and accuracy of the statements of the undersigned.
The undersigned represents and warrants that (a) he, she or it is an
"accredited investor," as that term is defined in Rule 501(a) of Regulation D
under the Securities Act and is acquiring the Common Stock for his or her own
account, for investment and not with a view to any "distribution" within the
meaning of the Securities Act; (b) the undersigned has no present intention of
making any transfer of the Common Stock; (c) he, she or it has been furnished
with all information which he, she or it deems necessary to evaluate the merits
and risks of the purchase of the Common Stock; (d) he, she or it has had the
opportunity to ask questions concerning the Common Stock and the Company and all
questions posed have been answered to his, her or its satisfaction; (e) he, she
or it has been given the opportunity to obtain any additional information he,
she or it deems necessary to verify the accuracy of any information obtained
concerning the Common Stock and the Company; and (f) he, she or it has such
knowledge and experience in financial and business matters that he, she or it is
able to evaluate the merits and risks of purchasing the Common Stock and to make
an informed investment decision relating thereto.
The undersigned understands that because the Common Stock has not been
registered under the Securities Act, he, she or it must continue to bear the
economic risk of the investment for an indefinite time and the Common Stock
cannot be sold unless the Common Stock is subsequently registered under
applicable federal and state securities laws or an exemption from such
registration is available.
The undersigned agrees that he, she or it will in no event sell or
distribute or otherwise dispose of all or any part of the Common Stock unless
(a) there is an effective registration
statement under the Securities Act and applicable state securities laws covering
any such transaction involving the Common Stock, as applicable, or (b) such
Common stock is sold in a transaction exempt from such registration. The
undersigned agrees that, if requested by the Company, and at the expense of the
undersigned, he or she shall deliver an opinion of counsel, which opinion shall
be reasonably satisfactory to the Company that such registration or
qualification is not required.
The undersigned consents to the placing of a legend on its certificate
for the Common Stock stating that the Common Stock has not been registered and
setting forth the restriction on transfer contemplated hereby and to the placing
of a stop transfer order on the books of the Company and with any transfer
agents against the shares until the Common Stock may be legally resold or
distributed without restriction.
Signature Guaranteed: By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
Date:
-----------------------------------------
NOTICE: THE SIGNATURE TO THIS NOTICE OF EXERCISE MUST CORRESPOND WITH THE NAME
AS WRITTEN UPON THE FACE OF THE WITHIN WARRANT IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. THE SIGNATURE ON THIS NOTICE
OF EXERCISE MUST BE GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY IN THE
UNITED STATES OR A MEMBER FIRM OF THE NEW YORK STOCK EXCHANGE.
EXHIBIT B
COVENANTS TO EXERCISE
<Table>
<Caption>
- ------------------------------------------------------------------------------------------- --------------------------
COVENANT EXERCISE
- ------------------------------------------------------------------------------------------- --------------------------
FINANCIAL OVERSIGHT
- ------------------------------------------------------------------------------------------- --------------------------
A. ACCOUNTS PAYABLE
The Company will submit a detailed report of all accounts payable categorized by EXERCISE I
vendor, aging, amounts and current status of negotiated settlement disposition.
The detailed report will identify most critical payables and sufficient support
of criticality.
- ------------------------------------------------------------------------------------------- --------------------------
B. NOTES PAYABLE
The Company will submit a detailed report of all notes payable categorized by EXERCISE II
holder, principal, terms and conditions, supporting collateral and accrued
interest to a date certain. The Company will submit a negotiated settlement plan
to Holder. Prior to the exercise of the Warrant Stock relating to this
condition, the Company will use its best efforts to obtain favorable negotiated
settlements relating to such notes payable. Prior to the exercise of the Warrant
Stock relating to this condition, the Company will make its best efforts to
obtain financing to consolidate such notes payable into a single instrument. The
Holder understands the sensitivity of notes payable executed with directors,
shareholders and officers of the Company and, therefore, will not assign a
target or milestone to this effort.
- ------------------------------------------------------------------------------------------- --------------------------
C. WORKING CAPITAL FACILITY
The Company agrees to submit a detailed report outlining the amount of principle
and interest owing as of March 4, 2005 and the amounts required for future draws
as of March 4, 2005. Holder will not unreasonable deter the Company from making
future draws under the Company existing debt facilities outstanding on the date
hereof if deemed necessary in the judgment of the Company for continuity of its
operations prior to any exercise of this Warrant. EXERCISE II
CRII understands the Holder's desires to restructure the terms of this Facility
as a condition of funding. The Lender has expressed a willingness to make
reasonable modifications to the Facility to enable the investment by the Holder.
- ------------------------------------------------------------------------------------------- --------------------------
D. INVENTORY
The Company will submit a detailed report of all inventories of the Company EXERCISE I
categorized by raw materials, work in progress, finished goods, discrepant
material, and obsolete materials with values as assigned in the financial
statements. These amounts will be substantiated by a the audited physical
inventory conducted as of December 31, 2004.
- ------------------------------------------------------------------------------------------- --------------------------
INVESTORS OVERSIGHT
- ------------------------------------------------------------------------------------------- --------------------------
A. BOARD NOMINATION AND APPOINTMENT
EXERCISE I
The Company agrees to nominate and appoint one member selected by the Holder to
the Company's Board of Directors. The Holder represent that the nominees by the
Holder for directors of the Company will have the appropriate credentials and
professional tenure appropriate to serve on the Company's Board of Directors and
represents the interest of the Company's shareholders. The Company will not
unreasonably withhold the nomination and appointment of the Holder's nominees
but reserves the right to review the nominees' credentials and speak to his or
her references.
- ------------------------------------------------------------------------------------------- --------------------------
</Table>
<Table>
- ------------------------------------------------------------------------------------------- --------------------------
The Company agrees to nominate and appoint a second member selected by the Holder EXERCISE II
to the Company's Board of Directors. The Holder represent that the nominees by
the Holder for directors of the Company will have the appropriate credentials
and professional tenure appropriate to serve on the Company's Board of Directors
and represents the interest of the Company's shareholders. The Company will not
unreasonably withhold the nomination and appointment of the Holder's nominees
but reserves the right to review the nominees' credentials and speak to his or
her references.
- ------------------------------------------------------------------------------------------- --------------------------
EXECUTIVE RETENTION
- ------------------------------------------------------------------------------------------- --------------------------
The Company understands the importance of continuity of qualified leadership for EXERCISE I
the successful execution of the Company's business plan. The Company agrees to
execute an employment contract with each of its current President and Chief
Executive Officer and Chief Operating Officer. The Company agrees to prepare a
form employment contract for the Chief Financial Officer, which shall be
substantially similar in desired outcomes to the employment contracts of the
Chief Executive Officer and Chief Operating Officer. The employment contracts
shall include sufficient retention incentives to enable the Company to complete
the business plan of the Company being funded by Holder. Holder agree that the
Company's Compensation Committee must approve such employment contracts and that
the Company's Board of Directors must ratify such employment contracts. Holder
shall have the right to review and comment upon such employment contracts.
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VALUATION OF INTELLECTUAL PROPERTY AND ENTERPRISE VALUE
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The Company agrees to complete an independent and certified valuation of its EXERCISE III
intellectual property and its enterprise value. The Company further agrees that
this valuation will be incorporated in its balance sheet at the earliest
possible time.
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EMPLOYEE ACCRUED AND UNPAID COMPENSATION
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The Holder is aware of accrued and unpaid compensation certain employees and EXERCISE II
officers of the Company. The Company and Holder agree to establish a certain and
mutually agreed allocation of proceeds to pay accrued and unpaid compensation to
the Company's employees and officers.
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SEARCH: PERMANENT CHIEF FINANCIAL OFFICER
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The Company agrees to initiate a search for a permanent Chief Financial Officer EXERCISE I
with appropriate credentials and experience with publicly traded companies and
with a company in a rebuilding and growth mode.
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PUBLIC DISCLOSURE OF FUNDING
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The Company agrees to submit to Holder for review any public disclosure related EXERCISE I
to the grant of this Warrant prior to its release. The Holder reserves the right
to comment upon and reasonably modify the content of any pubic disclosure.
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</Table>
<Table>
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SHAREHOLDER MEETING
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The Company agrees to submit a plan and schedule for the calling of a EXERCISE IV
shareholder meeting of the Company at the earliest reasonable time for the
election of the Company's Board of Directors and such other matters requiring
shareholder approval.
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</Table>
EXHIBIT C
GENERAL COVENANTS
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BUSINESS PLAN
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The Company agrees to update its 5-year business plan and financial projections
to reflect current product, market and distribution/sales plans. Holder and
Company will jointly develop and incorporate into the business plan sections
that relate to Holder initiated opportunities in Mexico and with U.S. Native
American healthcare organizations.
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USE OF PROCEEDS
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A. GENERAL
The Company agrees to submit an updated use of proceeds report that supports the
financial outcomes of the business plan of the Company. The Company will
establish appropriate budgeting, reporting and control processes to enable
Holder to perform its desired oversight of their investment. The Company will
establish appropriate investment policies and cash management processes to
optimize the use of funds.
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B. LASETTE SERIES PRODUCT LINE
The Company understands that the Holder's principal interests in the Company is
the market potential of its Lasette series product line of the Company. The
Holder and the Company agree that the use of proceeds will principally be used
to fund the production, marketing, and sales of such product, domestically and
internationally. The Company and the Holder agree that proceeds may also be used
for research and development and product enhancements for this product line.
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C. WORKSTATION PRODUCT LINE
The Company and the Holder agree to continue marketing and sales efforts and to
continue to develop distributor channels for the Workstation product line of the
Company. Research and development and product enhancements for such product line
will be budgeted at $500,000 assuming that a business case supports the
investment. Should there be an opportunity with substantial revenue potential or
for a strategic market/client entry, the Company may present its business case
to the Board in support of funding from the proceeds of the investment.
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D. ULTRALIGHT
The Holder understands that the UltraLight product has not been commercially
introduced and has substantial competitive and price/performance attributes. The
Holder is aware that there is an unresolved dispute about ownership of the
technology and the marketing rights to such product. The Company agrees to use
its best efforts to expeditiously resolve such dispute and keep the Holder
informed of the progress and outcome of such dispute; provided that it is
understood that the Company cannot predict or control neither the speed or the
outcome of an attempt to resolve such dispute. The Holder supports developing
OEM arrangements with a strategic partner or that seeks to license or sell the
technology to a bona fide purchaser of such product line.
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FINANCIAL OVERSIGHT
- --------------------------------------------------------------------------------
E. GENERAL OVERHEAD EXPENSES:
The Company and the Holder agree to work jointly to reduce general overhead
expenses over a mutually agreed timeframe. The Holder understands that the
Company will be in a rebuilding mode and expects overhead and burn rate of the
Company to increase commensurate with growth.
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CURRENCY WITH REQUIRED FILINGS AND REPORTS
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The Company agrees to be fully compliant and current with all Commission and
regulatory filings and reports to include but not limited to financial
reporting, disclosures mandated by Section 409 of the Sarbanes-Oxley Act of
2002, Form SB-2 and Form S-8 registration statements, FDA regulatory compliance
and ISO/CE certification requirements.
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PRESERVATION OF ASSETS AND INTELLECTUAL PROPERTY
- --------------------------------------------------------------------------------
The Company agrees to preserve and maintain title to and safeguard the value of
all of its assets and intellectual property. The Company shall not distribute or
further encumber its assets and intellectual property in advance of Holder's
exercise in full of this Warrant, subject to the existing encumbrances of Mr.
Oton Tisch and F.A. Voight & Associates. The Company further agrees to maintain
the marketability of its products through appropriate market required
enhancements and improvements.
- --------------------------------------------------------------------------------