EXHIBIT 10.6
 
EXHIBIT E
STOCK PURCHASE AND LOAN OPTION AGREEMENT
 
SECURITY AGREEMENT
 
THIS SECURITY AGREEMENT (this “Agreement”), dated as of  May 30, 2005, by and
between MR3 Systems, Inc., a Delaware corporation (“Borrower”), and MRD Holdings
Inc. (“Lender”), pursuant to a Stock Purchase and Loan Option Agreement dated
May 30, 2005, between Borrower and Lender (the “Purchase Agreement”).
 
W I T N E S S E T H:
 
WHEREAS, all capitalized terms not otherwise defined herein shall have the same
meanings as defined in the Purchase Agreement.
 
WHEREAS, pursuant to the Purchase Agreement, the Lender loaned to Borrower the
principal amount of $4,500,000 pursuant to the Convertible Promissory Notes (the
“Notes”) described in the Purchase Agreement.
 
WHEREAS, in order to induce the Lender to complete the transaction contemplated
by the Purchase Agreement, Borrower has agreed to execute and deliver to Lender
this Agreement for the benefit of Lender and to grant to it a first priority
security interest in certain property of the Borrower to secure the prompt
payment, performance and discharge in full of all of the obligations under this
Agreement and the Notes.
 
NOW, THEREFORE, in consideration of the agreements herein contained and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:
 
1.    Certain Definitions. As used in this Agreement, the following terms shall
have the meanings set forth in this Section 1. Terms used but not otherwise
defined in this Agreement that are defined in Article 9 of the UCC (such as
“general intangibles” and “proceeds”) shall have the respective meanings given
such terms in Article 9 of the UCC.
 
(a)  “Collateral” means the collateral in which Lender is are granted a security
interest by this Agreement and which shall include the following, whether
presently owned or existing or hereafter acquired or coming into existence, and
all additions and accessions thereto and all substitutions and replacements
thereof, and all proceeds, products and accounts thereof, including, without
limitation, all proceeds from the sale or transfer of the Collateral and of
insurance covering the same and of any tort claims in connection therewith:
 
(i)  All Goods of Borrower , including, without limitations, all machinery,
equipment, computers, vehicles, trucks, appliances, furniture, special and
general tools, fixtures, test and quality control devices and other equipment of
every kind and nature and wherever situated, together with all documents of
title and documents representing the same, all additions and accessions thereto,
replacements therefor, all parts therefor, and all substitutes for any of the
foregoing and all other items used and useful in connection with Borrower’s
businesses and all improvements thereto (collectively, the “Equipment”); and
 
(ii)  All Inventory of Borrower ; and
 
 
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EXHIBIT E
STOCK PURCHASE AND LOAN OPTION AGREEMENT
 
(iii)  All of Borrower’s contract rights and general intangibles, including,
without limitation, all partnership interests, stock or other securities,
licenses, distribution and other agreements, computer software development
rights, leases, franchises, customer lists, quality control procedures, grants
and rights, goodwill, trademarks, service marks, trade styles, trade names,
patents, patent applications, copyrights, deposit accounts, and income tax
refunds (collectively, the “General Intangibles”); and
 
(iv)  All Receivables of Borrower including all insurance proceeds, and rights
to refunds or indemnification whatsoever owing, together with all instruments,
all documents of title representing any of the foregoing, all rights in any
merchandising, goods, equipment, motor vehicles and trucks which any of the same
may represent, and all right, title, security and guaranties with respect to
each Receivable, including any right of stoppage in transit; and
 
(v)  All Intellectual Property of Borrower; and
 
(vi)  All of Borrower’s documents, instruments and chattel paper, files,
records, books of account, business papers, computer programs and the products
and proceeds of all of the foregoing Collateral set forth in clauses (i)-(iv)
above.
 
(b)  “Company” shall mean, collectively, and all of the subsidiaries of Company,
a list of which is contained in Schedule A, attached hereto.
 
(c)  “Obligations” means all of Borrower’s obligations under this Agreement and
all obligations of Borrower (and any successor or assign of Borrower ) under the
Notes and the Purchase Agreement, in each case, whether now or hereafter
existing, voluntary or involuntary, direct or indirect, absolute or contingent,
liquidated or unliquidated, whether or not jointly owed with others, and whether
or not from time to time decreased or extinguished and later decreased, created
or incurred, and all or any portion of such obligations or liabilities that are
paid, to the extent all or any part of such payment is avoided or recovered
directly or indirectly from Borrower as a preference, fraudulent transfer or
otherwise as such obligations may be amended, supplemented, converted, extended
or modified from time to time.
 
(d)  “UCC” means the Uniform Commercial Code, as currently in effect in the
State of California.
 
2.    Grant of Security Interest. As an inducement to complete the transaction
contemplated by the Purchase Agreement, and to secure the complete and timely
payment, performance and discharge in full, as the case may be, of all of the
Obligations, Borrower hereby, unconditionally and irrevocably, pledges, grants
and hypothecates to Lender, a continuing security interest in, a continuing lien
upon, an unqualified right to possession and disposition of and a right of
set-off against, in each case to the fullest extent permitted by law, all of
Borrower’s right, title and interest of whatsoever kind and nature in and to the
Collateral (the “Security Interest”).
 
3.    Representations, Warranties, Covenants and Agreements of Borrower.
Borrower represents and warrants to, and covenants and agrees with, Lender as
follows:
 
 
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EXHIBIT E
STOCK PURCHASE AND LOAN OPTION AGREEMENT
 
(a)  Borrower has the requisite power (corporate or otherwise) and authority to
enter into this Agreement and otherwise to carry out its obligations thereunder.
The execution, delivery and performance by Borrower of this Agreement and the
filings contemplated therein have been duly authorized by all necessary action
on the part of Borrower and no further action is required by it. This Agreement
constitutes a legal, valid and binding obligation of Borrower enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditor’s rights generally.
 
(b)  Borrower represents and warrants that it has no place of business or
offices where its respective books of account and records are kept (other than
temporarily at the offices of its attorneys or accountants) or places where
Collateral is stored or located, except as set forth on Schedule A attached
hereto;
 
(c)  Borrower is the sole owner of the Collateral, free and clear of any liens,
security interests, encumbrances, rights or claims, and is fully authorized to
grant the Security Interest in and to pledge the Collateral, except as set forth
on Schedule C. There is not on file in any governmental or regulatory authority,
agency or recording office an effective financing statement, security agreement,
license or transfer or any notice of any of the foregoing (other than those that
have been filed in favor of Lender pursuant to this Agreement) covering or
affecting any of the Collateral, except as set forth on Schedule C. So long as
this Agreement shall be in effect, Borrower shall not execute and shall not
knowingly permit to be on file in any such office or agency any such financing
statement or other document or instrument (except to the extent filed or
recorded in favor of Lender pursuant to the terms of this Agreement), except as
set forth on Schedule C.
 
(d)  No part of the Collateral has been judged invalid or unenforceable. No
written claim has been received that any Collateral or Borrower’s use of
Collateral violates the rights of any third party. There has been no adverse
decision to Borrower’s claim of ownership rights in or exclusive rights to use
the Collateral in any jurisdiction or Borrower’s right to keep and maintain such
Collateral in full force and effect, and there is no proceeding involving said
rights pending or, to the best knowledge of Borrower, threatened before any
court, judicial body, administrative or regulatory agency, arbitrator or other
governmental authority.
 
(e)  Borrower shall at all times maintain their books of account and records
relating to the Collateral at Borrower’s principal place of business and the
Collateral at the locations set forth on Schedule A attached hereto and may not
relocate such books of account and records or tangible Collateral unless it
delivers to Lender least thirty (30) days prior to such relocation (i) written
notice of such relocation and the new location thereof (which must be within the
United States) and (ii) evidence that appropriate financing statements and other
necessary documents have been filed and recorded and other steps have been taken
to perfect the Security Interest to create in favor of Lender valid, perfected
and continuing first priority liens in the Collateral.
 
(f)  This Agreement creates in favor of Lender a valid security interest in the
Collateral securing the payment and performance of the Obligations and, upon
making the filings described in the immediately following sentence, a perfected
first priority security interest in such Collateral. Except for the filing of
financing statements on Form-1 under the UCC with the jurisdictions indicated on
Schedule B, attached hereto, no authorization or approval of or filing with or
notice to any governmental authority or regulatory body is required either (i)
for the grant by Borrower of, or the effectiveness of, the Security Interest
granted hereby or for the execution, delivery and performance of this Agreement
by Borrower or (ii) for the perfection of or exercise by Lender of his rights
and remedies hereunder.
 
 
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EXHIBIT E
STOCK PURCHASE AND LOAN OPTION AGREEMENT
 
(g)  On the date of execution of this Agreement, Borrower will deliver to Lender
one or more executed UCC financing statements with respect to the Security
Interest for filing with the jurisdictions indicated on Schedule B, attached
hereto and in such other jurisdictions as may be requested by Lender.
 
(h)  Except as set forth on Schedule C, the execution, delivery and performance
of this Agreement does not conflict with or cause a breach or default, or an
event that with or without the passage of time or notice, shall constitute a
breach or default, under any agreement to which Borrower is a party or by which
Borrower is bound. Except as set forth on Schedule C, no consent (including,
without limitation, from stock holders or creditors of Borrower) is required for
Borrower to enter into and perform its obligations hereunder.
 
(i)  Borrower shall at all times maintain the liens and Security Interest
provided for hereunder as valid and perfected first priority liens and security
interests in the Collateral in favor of Lender until this Agreement and the
Security Interest hereunder shall terminate pursuant to Section 11. Borrower
hereby agrees to defend the same against any and all persons. Borrower shall
safeguard and protect all Collateral for the account of Lender. At the request
of Lender, Borrower will sign and deliver to Lender at any time or from time to
time one or more financing statements pursuant to the UCC (or any other
applicable statute) in form reasonably satisfactory to Lender and will pay the
cost of filing the same in all public offices wherever filing is, or is deemed
by Lender to be, necessary or desirable to effect the rights and obligations
provided for herein. Without limiting the generality of the foregoing, Borrower
shall pay all fees, taxes and other amounts necessary to maintain the Collateral
and the Security Interest hereunder, and Borrower shall obtain and furnish to
Lender from time to time, upon demand, such releases and/or subordinations of
claims and liens which may be required to maintain the priority of the Security
Interest hereunder.
 
(j)  Borrower will not transfer, pledge, hypothecate, encumber, license, sell or
otherwise dispose of any of the Collateral without the prior written consent of
Lender.
 
(k)  Borrower shall keep and preserve its Equipment, Inventory and other
tangible Collateral in good condition, repair and order and shall not operate or
locate any such Collateral (or cause to be operated or located) in any area
excluded from insurance coverage.
 
(l)  Borrower shall, within ten (10) days of obtaining knowledge thereof, advise
Lender promptly, in sufficient detail, of any substantial change in the
Collateral, and of the occurrence of any event which would have a material
adverse effect on the value of the Collateral or on Lender’s security interest
therein.
 
 
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EXHIBIT E
STOCK PURCHASE AND LOAN OPTION AGREEMENT
 
(m)  Borrower shall promptly execute and deliver to Lender such further deeds,
mortgages, assignments, security agreements, financing statements or other
instruments, documents, certificates and assurances and take such further action
as Lender may from time to time request and may in its sole discretion deem
necessary to perfect, protect or enforce its security interest in the
Collateral.
 
(n)  Borrower shall permit Lender and its representatives and agents to inspect
the Collateral at any time, and to make copies of records pertaining to the
Collateral as may be requested by Lender from time to time.
 
(o)  Borrower will take all steps reasonably necessary to diligently pursue and
seek to preserve, enforce and collect any rights, claims, causes of action and
accounts receivable in respect of the Collateral.
 
(p)  Borrower shall promptly notify Lender in sufficient detail upon becoming
aware of any attachment, garnishment, execution or other legal process levied
against any Collateral and of any other information received by Borrower that
may materially affect the value of the Collateral, the Security Interest or the
rights and remedies of Lender hereunder.
 
(r)  All information heretofore, herein or hereafter supplied to Lender by or on
behalf of Borrower with respect to the Collateral is accurate and complete in
all material respects as of the date furnished.
 
(s)  Schedule A attached hereto contains a list of all of the subsidiaries of
Borrower.
 
4.    Defaults. The following events shall be “Events of Default”:
 
(a)  The occurrence of an Event of Default (as defined in the Notes);
 
(b)  Any representation or warranty of Borrower in the Purchase Agreement, or in
the Notes, shall prove to have been incorrect in any material respect when made;
and
 
(c)  The failure by Borrower to observe or perform any of its obligations
hereunder or in the Notes or the Purchase Agreement for ten (10) days after
receipt by Borrower of notice of such failure from Lender.
 
5.    Duty To Hold In Trust. Upon the occurrence of any Event of Default and at
any time thereafter, Borrower shall, upon receipt by it of any revenue, income
or other sums subject to the Security Interest, whether payable pursuant to the
Notes or otherwise, or of any check, draft, note, trade acceptance or other
instrument evidencing an obligation to pay any such sum, hold the same in trust
for Lender and shall forthwith endorse and transfer any such sums or
instruments, or both, to Lender for application to the satisfaction of the
Obligations.
 
6.    Rights and Remedies Upon Default. Upon occurrence of any Event of Default
and at any time thereafter, Lender shall have the right to exercise all of the
remedies conferred hereunder and under the Notes and Purchase Agreement , and
Lender shall have all the rights and remedies of Lender under the UCC and/or any
other applicable law (including the Uniform Commercial Code of any jurisdiction
in which any Collateral is then located). Without limitation, Lender shall have
the following rights and powers:
 
 
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EXHIBIT E
STOCK PURCHASE AND LOAN OPTION AGREEMENT
 
(a)  Lender shall have the right to take possession of the Collateral and, for
that purpose, enter, with the aid and assistance of any person, any premises
where the Collateral, or any part thereof, is or may be placed and remove the
same, and Borrower shall assemble the Collateral and make it available to such
Lender at places which such Lender shall reasonably select, whether at
Borrower’s premises or elsewhere, and make available to such Lender, without
rent, all of Borrower’s respective premises and facilities for the purpose of
such Lender taking possession of, removing or putting the Collateral in saleable
or disposable form.
 
(b)   Lender shall have the right to operate the business of Borrower using the
Collateral and shall have the right to assign, sell, lease or otherwise dispose
of and deliver all or any part of the Collateral, at public or private sale or
otherwise, either with or without special conditions or stipulations, for cash
or on credit or for future delivery, in such parcel or parcels and at such time
or times and at such place or places, and upon such terms and conditions as such
Lender may deem commercially reasonable, all without (except as shall be
required by applicable statute and cannot be waived) advertisement or demand
upon or notice to Borrower or right of redemption of Borrower, which are hereby
expressly waived. Upon each such sale, lease, assignment or other transfer of
Collateral, Lender may, unless prohibited by applicable law which cannot be
waived, purchase all or any part of the Collateral being sold, free from and
discharged of all trusts, claims, right of redemption and equities of Borrower,
which are hereby waived and released.
 
7.    Applications of Proceeds. The proceeds of any such sale, lease or other
disposition of the Collateral hereunder shall be applied first, to the expenses
of retaking, holding, storing, processing and preparing for sale, selling, and
the like (including, without limitation, any taxes, fees and other costs
incurred in connection therewith) of the Collateral, to the reasonable
attorneys’ fees and expenses incurred by Lender in enforcing its rights
hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations and to the payment of
any other amounts required by applicable law, after which Lender shall pay to
Borrower any surplus proceeds. If, upon the sale, license or other disposition
of the Collateral, the proceeds thereof are insufficient to pay all amounts to
which Lender is legally entitled, Borrower will be liable for the deficiency,
together with interest thereon, at the rate of fifteen percent (15%) per annum
(the “Default Rate”), and the reasonable fees of any attorneys employed by
Lender to collect such deficiency. To the extent permitted by applicable law,
Borrower waives all claims, damages and demands against Lender arising out of
the repossession, removal, retention or sale of the Collateral, unless due to
the gross negligence or willful misconduct of a Lender.
 
8.    Costs and Expenses. Borrower agrees to pay all out-of-pocket fees, costs
and expenses incurred in connection with any filing required hereunder,
including without limitation, any financing statements, continuation statements,
partial releases and/or termination statements related thereto or any expenses
of any searches reasonably required by Lender. Borrower shall also pay all other
claims and charges which in the reasonable opinion of Lender might prejudice,
imperil or otherwise affect the Collateral or the Security Interest therein.
Borrower will also, upon demand, pay to Lender the amount of any and all
reasonable expenses, including the reasonable fees and expenses of its counsel
and of any experts and agents, which Lender may incur in connection with (i) the
enforcement of this Agreement, (ii) the custody or preservation of, or the sale
of, collection from, or other realization upon, any of the Collateral, or (iii)
the exercise or enforcement of any of the rights of Lender under the Notes.
Until so paid, any fees payable hereunder shall be added to the principal amount
of the Notes and shall bear interest at the Default Rate.
 
 
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EXHIBIT E
STOCK PURCHASE AND LOAN OPTION AGREEMENT
 
9.    Responsibility for Collateral. Borrower assumes all liabilities and
responsibility in connection with all Collateral, and the obligations of
Borrower hereunder or under the Notes shall in no way be affected or diminished
by reason of the loss, destruction, damage or theft of any of the Collateral or
its unavailability for any reason.
 
10.    Security Interest Absolute. All rights of Lender and all Obligations of
Borrower hereunder, shall be absolute and unconditional, irrespective of:
(a) any lack of validity or enforceability of this Agreement, the Purchase
Agreement and/or the Notes, or any agreement entered into in connection with the
foregoing, or any portion hereof or thereof; (b) any change in the time, manner
or place of payment or performance of, or in any other term of, all or any of
the Obligations, this Agreement, the Purchase Agreement or any other amendment
or waiver of or any consent to any departure from the Notes, this Agreement, or
any other agreement entered into in connection with the foregoing; (c) any
exchange, release or nonperfection of any of the Collateral, or any release or
amendment or waiver of or consent to departure from any other collateral for, or
any guaranty, or any other security, for all or any of the Obligations; (d) any
action by Lender to obtain, adjust, settle and cancel in its sole discretion any
insurance claims or matters made or arising in connection with the Collateral;
or (e) any other circumstance which might otherwise constitute any legal or
equitable defense available to Borrower, or a discharge of all or any part of
the Security Interest granted hereby. Until the Obligations shall have been paid
and performed in full, the rights of Lender shall continue even if the
Obligations are barred for any reason, including, without limitation, the
running of the statute of limitations or bankruptcy. Borrower expressly waives
presentment, protest, notice of protest, demand, notice of nonpayment and demand
for performance. In the event that at any time any transfer of any Collateral or
any payment received by Lender hereunder shall be deemed by final order of a
court of competent jurisdiction to have been a voidable preference or fraudulent
conveyance under the bankruptcy or insolvency laws of the United States, or
shall be deemed to be otherwise due to any party other than Lender, then, in any
such event, Borrower’s obligations hereunder shall survive cancellation of this
Agreement, and shall not be discharged or satisfied by any prior payment thereof
and/or cancellation of this Agreement, but shall remain a valid and binding
obligation enforceable in accordance with the terms and provisions hereof.
Borrower waives all right to require Lender to proceed against any other person
or to apply any Collateral which Lender may hold at any time, or to marshal
assets, or to pursue any other remedy. Borrower waives any defense arising by
reason of the application of the statute of limitations to any obligation
secured hereby.
 
11.    Term of Agreement. This Agreement and the Security Interest shall
terminate on the date on which all payments under the Notes have been made in
full and all other Obligations have been paid or discharged. Upon such
termination, Lender, at the request and at the expense of Borrower, will join in
executing any termination statement with respect to any financing statement
executed and filed pursuant to this Agreement.
 
 
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EXHIBIT E
STOCK PURCHASE AND LOAN OPTION AGREEMENT
 
12.    Power of Attorney; Further Assurances.
 
(a)  Borrower authorizes Lender, and does hereby make, constitute and appoint
it, and its respective officers, agents, successors or assigns with full power
of substitution, as Borrower’s true and lawful attorney-in-fact, with power, in
its own name or in the name of Borrower, to, after the occurrence and during the
continuance of an Event of Default, (i) endorse any notes, checks, drafts, money
orders, or other instruments of payment (including payments payable under or in
respect of any policy of insurance) in respect of the Collateral that may come
into possession of Lender; (ii) to sign and endorse any UCC financing statement
or any invoice, freight or express bill, bill of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications and notices in
connection with accounts, and other documents relating to the Collateral; (iii)
to pay or discharge taxes, liens, security interests or other encumbrances at
any time levied or placed on or threatened against the Collateral; (iv) to
demand, collect, receipt for, compromise, settle and sue for monies due in
respect of the Collateral; and (v) generally, to do, at the option of Lender,
and at Borrower’s expense, at any time, or from time to time, all acts and
things which Lender deems necessary to protect, preserve and realize upon the
Collateral and the Security Interest granted therein in order to effect the
intent of this Agreement and the Notes, all as fully and effectually as Borrower
might or could do; and Borrower hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof. This power of attorney is
coupled with an interest and shall be irrevocable for the term of this Agreement
and thereafter as long as any of the Obligations shall be outstanding.
 
(b)  On a continuing basis, Borrower will make, execute, acknowledge, deliver,
file and record, as the case may be, in the proper filing and recording places
in any jurisdiction, including, without limitation, the jurisdictions indicated
on Schedule B, attached hereto, all such instruments, and take all such action
as may reasonably be deemed necessary or advisable, or as reasonably requested
by Lender, to perfect the Security Interest granted hereunder and otherwise to
carry out the intent and purposes of this Agreement, or for assuring and
confirming to Lender the grant or perfection of a security interest in all the
Collateral.
 
(c)  Borrower each hereby irrevocably appoints Lender as its attorney-in-fact,
with full authority in their place and stead and in their name, from time to
time in a Lender’s discretion, to take any action and to execute any instrument
which Lender may deem necessary or advisable to accomplish the purposes of this
Agreement, including the filing, in its sole discretion, of one or more
financing or continuation statements and amendments thereto, relative to any of
the Collateral without the signature of Borrower where permitted by law.
 
13.    Notices. All notices, requests, demands and other communications
hereunder shall be in writing, with copies to all the other parties hereto, and
shall be deemed to have been duly given when (i) if delivered by hand, upon
receipt, (ii) if sent by facsimile, upon receipt of proof of sending thereof,
(iii) if sent by nationally recognized overnight delivery service (receipt
requested), the next business day or (iv) if mailed by first-class registered or
certified mail, return receipt requested, postage prepaid, four days after
posting in the U.S. mails, in each case if delivered to the following addresses:
 
 
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EXHIBIT E
STOCK PURCHASE AND LOAN OPTION AGREEMENT
 
If to Borrower:
MR3 Systems, Inc., a Delaware corporation

  435 Brannan Street Suite 200

  San Francisco, CA 94107

  Attention: William C. Tao, Ph.D., CEO

  Facsimile: (415) 947-1095

 
If to the Lender:
MRD Holdings Inc., a Delaware corporation

  The Naaman’s Building Suite 206

  305 Silverside Rd., DE 19810

  Wilmington, Delaware USA 

  Attention: Charles K. C. Chan

  Facsimile: (____)___________________

 
14.    Other Security. To the extent that the Obligations are now or hereafter
secured by property other than the Collateral or by the guarantee, endorsement
or property of any other person, firm, corporation or other entity, then Lender
shall have the right, in its sole discretion, to pursue, relinquish,
subordinate, modify or take any other action with respect thereto, without in
any way modifying or affecting any of such Lender’s rights and remedies
hereunder.
 
15.    Miscellaneous.
 
(a)  No course of dealing between the parties, nor any failure to exercise, nor
any delay in exercising, on the part of Lender, any right, power or privilege
hereunder or under the Notes shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder or
thereunder preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.
 
(b)  All of the rights and remedies of Lender with respect to the Collateral,
whether established hereby or by the Notes or by any other agreements,
instruments or documents or by law shall be cumulative and may be exercised
singly or concurrently.
 
(c)  This Agreement constitutes the entire agreement of the parties with respect
to the subject matter hereof and is intended to supersede all prior
negotiations, understandings and agreements with respect thereto. Except as
specifically set forth in this Agreement, no provision of this Agreement may be
modified or amended except by a written agreement specifically referring to this
Agreement and signed by the parties hereto.
 
(d)  In the event that any provision of this Agreement is held to be invalid,
prohibited or unenforceable in any jurisdiction for any reason, unless such
provision is narrowed by judicial construction, this Agreement shall, as to such
jurisdiction, be construed as if such invalid, prohibited or unenforceable
provision had been more narrowly drawn so as not to be invalid, prohibited or
unenforceable. If, notwithstanding the foregoing, any provision of this
Agreement is held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision, as to such jurisdiction, shall be ineffective to
the extent of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other provisions of
this Agreement and without affecting the validity or enforceability of such
provision or the other provisions of this Agreement in any other jurisdiction.
 
 
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EXHIBIT E
STOCK PURCHASE AND LOAN OPTION AGREEMENT
 
(e)  No waiver of any breach or default or any right under this Agreement shall
be considered valid unless in writing and signed by the party giving such
waiver, and no such waiver shall be deemed a waiver of any subsequent breach or
default or right, whether of the same or similar nature or otherwise.
 
(f)  This Agreement shall be binding upon and inure to the benefit of each party
hereto and its successors and assigns.
 
(g)  Each party shall take such further action and execute and deliver such
further documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.
 
(h)  This Agreement shall be construed in accordance with the laws of the State
of California, except to the extent the validity, perfection or enforcement of a
security interest hereunder in respect of any particular Collateral which are
governed by a jurisdiction other than the State of California in which case such
law shall govern. Each of the parties hereto irrevocably submit to the exclusive
jurisdiction of any California State or United States Federal court sitting in
the County of San Francisco over any action or proceeding arising out of or
relating to this Agreement, and the parties hereto hereby irrevocably agree that
all claims in respect of such action or proceeding may be heard and determined
in such California State or Federal court. The parties hereto agree that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. The parties hereto further waive any objection to venue in the
State of California and any objection to an action or proceeding in the State of
California on the basis of forum non conveniens. The parties further agree that
the successful or prevailing party in any proceeding shall be entitled to
recover reasonable attorneys’ fee and other costs incurred in such proceeding.
 
(i)  This Agreement may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.
 
 
(Signature page follows.)

 
-10-

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EXHIBIT E
STOCK PURCHASE AND LOAN OPTION AGREEMENT

 
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed on the day and year first above written.
 
MR3 Systems, Inc., a Delaware corporation
 
 
By:  /s/ William C. Tao

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Print: William C. Tao, Ph.D.
Its: Chief Executive Officer
 
 
MRD Holdings Inc., a Delaware corporation
 
 
By:  /s/ Charles K. C. Chan

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Print: Charles K. C. Chan
Its: Managing Director
 

 

 

 

 
-11-

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EXHIBIT E
STOCK PURCHASE AND LOAN OPTION AGREEMENT

 
SCHEDULE A

Principal Place of Business of Borrower:

Locations Where Collateral is Located or Stored:

List of subsidiaries of Borrower:

 
 

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EXHIBIT E
STOCK PURCHASE AND LOAN OPTION AGREEMENT

 
SCHEDULE B

Jurisdictions:
 

 

 
 

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EXHIBIT E
STOCK PURCHASE AND LOAN OPTION AGREEMENT

 
SCHEDULE C
 
None.
 
 
 
 
 
 

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