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MR3 Systems Inc – ‘10KSB’ for 12/31/02 – EX-10.5

On:  Tuesday, 8/19/03, at 9:49am ET   ·   For:  12/31/02   ·   Accession #:  1019056-3-812   ·   File #:  0-32343

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 8/19/03  MR3 Systems Inc                   10KSB      12/31/02   15:428K                                   Borer Fin’l Comms Inc

Annual Report — Small Business   —   Form 10-KSB
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10KSB       Annual Report -- Small Business                       77    377K 
 2: EX-10.1     Material Contract                                     10     42K 
11: EX-10.10    Material Contract                                      1      9K 
 3: EX-10.2     Material Contract                                      9     43K 
 4: EX-10.3     Material Contract                                     10     48K 
 5: EX-10.4     Material Contract                                     11     45K 
 6: EX-10.5     Material Contract                                     17     77K 
 7: EX-10.6     Material Contract                                      2±    12K 
 8: EX-10.7     Material Contract                                      8     37K 
 9: EX-10.8     Material Contract                                      2     11K 
10: EX-10.9     Material Contract                                     16     67K 
12: EX-21.1     Subsidiaries of the Registrant                         1      6K 
13: EX-23.1     Consent of Experts or Counsel                          1      8K 
14: EX-99.1     Miscellaneous Exhibit                                  2±    11K 
15: EX-99.2     Miscellaneous Exhibit                                  2±    11K 


EX-10.5   —   Material Contract
Exhibit Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
31. Definitions and Interpretation
62. Grant of Exclusive Processing Rights
"3. Mining, Concentration and Processing of Gold
84. Obligations of the Parties
"5. Expenses and Disbursements
96. Reporting, Books, Records and Banking
"7. Government Approvals
108. Limitations of Liability
"9. Taxes
"10. Assignment and Sub-Contracting
"11. Duration and Termination
1112. Force Majeure, Liability for Non-Performance and Cause of Generation Deficiency
1213. Confidentiality
1414. General Provisions
1515. Governing Law
"16. Arbitration
"17. Entire Agreement
"18. Representations and Warranties
1619. Good Faith
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Exhibit 10.5 ------------ MR3 SYSTEM METALS EXTRACTION AGREEMENT between MR3 SYSTEMS, INC. and CONSOLIDATED EMPIRE GOLD, INC. TRANSCONTINENTAL MINERALS, INC. CONSOLIDATED EMPIRE MINES, LTD. EMPIRE GOLD LLC OCTOBER 23, 2002
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TABLE OF CONTENTS 1. DEFINITIONS AND INTERPRETATION.......................................... 2 2. GRANT OF EXCLUSIVE PROCESSING RIGHTS.................................... 5 3. MINING, CONCENTRATION AND PROCESSING OF GOLD............................ 5 4. OBLIGATIONS OF THE PARTIES.............................................. 7 5. EXPENSES AND DISBURSEMENTS.............................................. 7 6. REPORTING, BOOKS, RECORDS AND BANKING................................... 8 7. GOVERNMENT APPROVALS.................................................... 8 8. LIMITATIONS OF LIABILITY................................................ 9 9. TAXES................................................................... 9 10. ASSIGNMENT AND SUB-CONTRACTING.......................................... 9 11. DURATION AND TERMINATION................................................ 9 12. FORCE MAJEURE, LIABILITY FOR NON-PERFORMANCE AND CAUSE OF GENERATION DEFICIENCY................................................... 10 13. CONFIDENTIALITY......................................................... 11 14. GENERAL PROVISIONS...................................................... 13 15. GOVERNING LAW........................................................... 14 16. ARBITRATION............................................................. 14 17. ENTIRE AGREEMENT........................................................ 14 18. REPRESENTATIONS AND WARRANTIES.......................................... 14 19. GOOD FAITH.............................................................. 15 1
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THIS AGREEMENT is made this 23rd day of October, 2002 BETWEEN MR3 Systems, Inc., a Delaware corporation, whose address is 435 Brannan Street, Suite 200, San Francisco, California 94107 ("MR3"); and Transcontinental Minerals, Inc., a Colorado C-Type corporation; Consolidated Empire Mines, Ltd.; a Colorado Limited Partnership; Empire Gold LLC., a Vermont Limited Liability Company; and Consolidated Empire Gold, Inc., a Colorado corporation, each of whose address is 31587 Broadmoore Drive, Evergreen, Colorado 80439 (all entities collectively referred to herein as "CEG"). The CEG and the MR3 are at times referred to herein individually as a "party", or collectively as the "parties" hereto. RECITALS WHEREAS, MR3 is the exclusive owner and developer of, and will continue to develop, the MR3 Technology which extracts individual metals from industrial wastes and other complex metal sources for conversion into pure metals and specialty chemical products; and WHEREAS, MR3 designs, manufactures, installs and operates facilities utilizing the MR3 Technology to extract and recover metals; and WHEREAS, CEG owns and operates the Grace Gold Mining Complex located near Empire, Colorado, containing valuable gold deposits; and WHEREAS, MR3 and CEG entered into an agreement, dated June 18, 2002, under the terms of which CEG agreed to engage MR3 to build and operate a MR3 Facility on its site to process certain source materials into gold dore bars for sale by MR3, with MR3 and CEG sharing the net proceeds from such sales on a 50/50 basis. WHEREAS, the parties wish to replace that prior agreement with this Agreement and expand their joint activities on the Property to include the concentration of gold ore on the Property and the MR3 processing of such concentrates off the Property. NOW THEREFORE, in consideration of the premises, terms and conditions set forth herein, and for other good and valuable consideration, the parties agree as follows: 1. DEFINITIONS AND INTERPRETATION For purposes of this Agreement, the following terms shall have the following meanings: 1.1 "Agreement" shall mean this Agreement, including all schedules, exhibits, and attachments hereto, as it may be amended by the parties hereto from time to time. 1.2 "Building" means any building or structure housing a Facility and located either on or off the Property. 2
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1.3 "CEG Office Expenses" means starting November 1, 2002, a monthly payment to CEG of $9,500 payable semi-monthly at the rate of $4,750 on the 1st and 15th of each month, payable to the "Norma R. Heon - Grace Mine Account", to cover CEG's expenses and supervisory services under Section 3.5 below, and to be increased at the rate of 10% per contract anniversary year. These Expenses are to be paid until such time as CEG begins receiving cash or in-kind payments under Section 5 below exceeding $20,000 per month. 1.4 "Concentrates" means the resulting concentrates from the gravity concentration of the gold Source Material manufactured in a Knelson-type centrifugal concentrator and then run across a Gemini-type table. 1.5 "Confidential Information" means as defined in Section 13 of this Agreement. 1.6 "Facility" means all the equipment, material and infrastructure housed in a Building necessary to process Concentrates utilizing the MR3 System. 1.7 "Government Authorizations" means all authorizations, consents, permits, waivers, privileges, approvals from, and filings with, all Governmental Instrumentalities necessary for the performance of this Agreement 1.8 "Grade Control Program" means a program to delineate the mineralization of the Source Material and is expected to include re-establishing a rectangular coordinate system, which will provide the survey control required for re-excavating various trenches and excavating new trenches along the strike of various ore zones, re-opening and pumping air into several adits, etc.. Underground maps of various workings indicate that ores grading 2.0 to 4.0 oz. of gold per ton can be exposed in some of the trenches proposed to be excavated at the surface. These ore zones persist across widths of 8 to 15 feet and along strike for substantial distances, i.e. 600 to 800 feet. The program is estimated to cost $100,000 to $125,000 and take 6 to 9 weeks to complete. 1.9 "Governmental Instrumentality" means the government of any country, state, county or other political subdivision and any ministry, department, political sub-division, instrumentality, agency, corporation commission, or the like, under the direct or indirect control of that government. 3
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1.10 "Gross Revenue" means the gross receipts collected by MR3 from the sale of gold and other output from a Facility. 1.11 "Legal Requirements" means all published laws, statutes, orders, decrees, regulations, or the like, of any Governmental Instrumentality having jurisdiction over the matter in question. 1.12 "Month" means a calendar month. 1.13 "MR3 System" shall mean all the MR3 primary and secondary equipment, modules, media, facility controls including, without limitation, instrumentation, primary and secondary control elements, shared display(s), control algorithms or any software based functions necessary and required to operate a MR3 facility which selectively removes targeted metals from metals streams to produce metals and specialty chemical products. 1.14 "MR3 Technology" means the proprietary high affinity metals extraction and metals separation technology owned by MR3 and embodied in the MR3 System, and all of the know-how, show-how, Confidential Information, copyrights, trademarks, service marks and information of any nature whatsoever which relates to the MR3 System, developed, possessed, conceived and/or used by MR3, including any modifications, improvements and translations thereof in respect of commercial and industrial uses. 1.15 "On-Site Operating Expense" means all expenses necessary for, and incurred on the Property in connection with, the joint performance of the parties under Section 3.1 below, including (without limitation) the cost of all buildings, labor, equipment acquisition and operation, crushing and concentration expenses, utilities, Section 1.3 CEG Office Expenses, Grade Control Program expenses, security, 55 gallon drums, B.L.M Maintenance fees and re-filing fees, permits, bonds, payroll taxes, property taxes, and other taxes, and the like. 1.16 "MR3 Operating Expenses" means all the expenses of operating, maintaining and managing a Building, Facility and the MR3 System to process gold hereunder. 4
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1.17 "Net Revenue" means the Gross Revenue, less (i) the sales commissions and selling expenses, (ii) any taxes other charges related to such sales, and (iii) each party's share of the On-Site Operating Expenses as determined under Section 3.3 below. 1.18 "Property" means the property of CEG described as the Grace Gold Mining Complex, where lies the Source Material to be processed, located at the sites indicated on the attached Exhibit A. 1.19 "Source Material" means those gold bearing mineral resources known as the Grace Dump Reserves and described on attached Exhibit B, plus the extension of the Minnesota Zone (the "Upper Placer" area), to a depth of 300 feet, absent the area of the Minnesota Mines workings; and the Silver Mountain Zone to a depth of 500 feet (see Map No. 1). 1.20 "Term" means the term of this Agreement, being the period commencing on the date of this Agreement and continuing for ten years from the date processing reaches the rate under Section 3.1(e) hereunder, unless extended by the mutual consent of the parties or earlier terminated in accordance with this Agreement. 2. GRANT OF EXCLUSIVE PROCESSING RIGHTS Subject to Section 5.3 below, CEG hereby grants to MR3 the exclusive right to process the Source Material located on the Property into gold dore bars under the terms and conditions of this Agreement. 3. MINING, CONCENTRATION AND PROCESSING OF GOLD 3.1 MR3 and CEG agrees to jointly: a. mine, crush and concentrate gold from the Source Material, loading the concentrates into 55 gallon drums to be delivered to an MR3 Facility for processing into dore bars; and b. conduct a Grade Control Program on the Property to be funded by MR3 on or before December 31, 2002; and c. obtain all water rights, bonds and permits necessary to perform hereunder; and d. lease or otherwise acquire all the equipment necessary to mine and concentrate the gold on the Property (including a 3,000 ton per day gravity circuit to be constructed and installed in a building on the Property on or before March 31, 2003); and 5
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e. reach a processing rate of 3,000 tons of Source Material per day on or before December 31, 2003, or within 9 months of completion at the Grade Control Program, whichever shall last occur. 3.2 MR3 agrees to advance all the funds necessary to pay all On-Site Operating Expenses incurred under this Section 3, including all CEG Office Expenses, and will be reimbursed by CEG for CEG's share of said expenses pursuant to Section 5.4 below. On or before November 1, 2002, MR3 will pay to CEG $21,930 in prior CEG Office Expenses incurred after June 18, 2002. 3.3 MR3 shall pay 75% of all On-Site Operating Expenses and CEG shall pay 25% of such Expenses: provided, however, that once CEG has received a total of $15,000,000 under Section 5 below, thereafter the parties shall each pay 50% of all On-Site Operating Expenses. 3.4 MR3 agrees to: a. manufacture, deliver and install a complete MR3 System and Facility in a Building located in Golden, Colorado; and b. operate, maintain and manage all aspects and activities of the Facility necessary to (i) prepare and process in the Facility all Concentrates into gold dore bars, (ii) dispose of any residue, and (iii) otherwise perform its obligations hereunder, in accordance with the terms and conditions hereof. The parties acknowledge and agree that the MR3 shall at all times be the sole and exclusive owner and operator of the Facility, and shall (i) have such access, power and authority as necessary to exercise its rights and perform its obligations hereunder, and (ii) independently determine the method, means, and technical details for performing the same. MR3 is an independent contractor and is not, and shall not be construed to be, an employee, partner, joint venturer or holder of any position with or as agent of CEG, except where the MR3 has authority to act on behalf of CEG in the circumstances described hereunder. d. pay all MR3 Operating Expenses and any other costs of MR3's performance of its duties and obligations under this Section 3.4 out of MR3's share of Net Revenue. Under no circumstances will CEG be responsible for the payment of such expenses. e. obtain all operating, building, use and other permits required to operate the MR3 System in the Building to process the Concentrates into gold. f. transport and off-load at the Building all Concentrates to be processed in the Facility, and MR3 shall have the right to move the Building and Facility. g. commence operation of the Facility within 60 days of receipt of all permits required to do so, and begin processing the Concentrates within 90 days of the date of commencing such operation. 3.5 CEG agrees to supervise the activities on the Property described in Section 3.1 above. 3.6 CEG shall have reasonable access to any deep-seated ore bodies that are intersected consequent to drilling to depth, i.e., more than 500 vertical feet in the Silver Mountain Zone and more than 300 vertical feet in the "Upper Placer" area. 6
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4. OBLIGATIONS OF THE PARTIES 4.1 MR3 and CEG shall, in performing their duties hereunder: (i) do so in a manner that does not cause the Property or Facility to be in violation of any applicable Legal Requirements or Government Authorizations known to either party; and (ii) do so in a good, workmanlike and diligent manner, in good faith, and in the best commercial interests of both parties. 4.2 The parties shall be responsible for complying with all conditions and requirements imposed by all Government Authorizations for the operation and maintenance of the Facility and other activities conducted on the Property. 4.3 The parties shall perform their respective duties hereunder in accordance with the Government Approvals and Legal Requirements relating to pollution control and environmental standards applicable to the Facility and the Property. 4.4 MR3 shall restrict access to any Facility by all persons, except for (i) those persons authorized by MR3, and (ii) the employees and agents of he CEG (approved by MR3) to the extent that such access is reasonably required in connection with the operation, maintenance or repair of the Facility. 4.5 MR3 shall be responsible for the provision of all reasonable and customary measures required to ensure the protection and security of any Facility. 4.6 The parties shall share responsibility for the sale or other disposition of the Facility's output and metals products, either directly or through brokers and/or sales agents, including without limitation, the sale of gold dore bars. 4.7 In accordance with Section 7, MR3 shall apply for, obtain, and maintain in effect all Government Authorizations that are required by either MR3 or CEG in connection with the construction, operation, maintenance and repair of a Building and a Facility. 5. EXPENSES AND DISBURSEMENTS 5.1 MR3 shall collect all gross receipts from the sale of output and metals products produced in any Facility, and pay all shared expenses listed in Sections 1.17 (i), (ii) and (iii) above, including reimbursement to MR3 for any Section 3.2 advances made for On-Site Operating Expenses, subject to CEG's rights under Section 5.4 below. 5.2 Within five (5) days after the end of each semi-monthly period, after deduction of all Section 1.17 expenses, (including deduction of all On Site Operating Expenses for that period at the rate of 25% of such Expenses from CEG's share and 75% of such Expenses from MR3's share), MR3 shall disburse fifty percent (50%) of the Net Revenue received (if any) for such period to CEG and the remaining fifty percent (50%) of such Net Revenue (if any) shall be paid to MR3. For any such month, CEG shall have the right to receive all or a portion of its share of such Net Revenue in gold dore bars valued at the spot price received by MR3 for that bi-weekly period's sales under Section 5.1 above. 7
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5.3 CEG shall have the option to acquire its 50% of the Concentrates without MR3 processing. CEG shall thereafter pay 100% of any expenses incurred in shipping, storing and processing the Concentrates it receives upon exercising such option. 5.4 Pursuant to Section 3.2 above, MR3 has agreed to advance all the funds necessary to pay all On-Site Operating Expenses, including advancing CEG's 25% share of such Expenses. CEG agrees that MR3 may reimburse itself for any outstanding amounts advanced by MR3 on behalf of CEG at the rate of 20% of any disbursements due CEG under Section 5.2 above until such time as MR3 has been paid in full for all such advances. 6. REPORTING, BOOKS, RECORDS AND BANKING 6.1 MR3 shall provide CEG with Monthly reports on the operation and performance of a Facility in a format to be agreed to with CEG. 6.2 To the extent consistent with applicable Government Authorizations and Legal Requirements, MR3 shall keep accurate records of any accident or other occurrence at the Facility that results in injury to persons or damage to property. MR3 shall provide to CEG reasonable access to these records subject to requirements of confidentiality. 6.3 MR3 shall keep a daily operation log for a Facility, which shall include information on any significant events relating to the operation of the Facility. 6.4 MR3 shall maintain the financial books and records recording a Facility's operations and sales of its output in accordance with U.S. Generally Accepted Accounting Principles ("US GAAP") and other applicable Legal Requirements. 6.5 An audit of each Facility's financial records and accounts shall be performed annually at the end of each calendar year (and upon termination of this Agreement if not coincident with a calendar year's end) by MR3's independent accounting firm, at MR3's expense. The results of such audit shall be binding upon the parties with respect to all matters arising under or in connection with this Agreement. 6.6 The financial books and records maintained by MR3 for the operation of a Facility and sale of its output, and specific to the Facility, shall be the property of MR3. The accounting firm of CEG or such other person authorized by CEG shall have the right to examine such financial books and records at any time. 7. GOVERNMENT APPROVALS 7.1 Pursuant to Section 3.2, MR3 shall be responsible for obtaining and maintaining all Government Authorizations necessary for the construction and operation of a Facility. CEG shall provide all reasonable assistance to MR3 in obtaining and maintaining all such Government Authorizations. CEG shall review MR3's application for such other Government Authorizations for the purpose of assisting MR3 in ensuring that all information pertaining the CEG contained therein is accurate. 7.2 CEG shall notify MR3 of the need at any time to apply for Government Authorizations in addition to those in effect at that time or of the need to apply for any changes in Government Authorizations in effect at that time. 8
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8. LIMITATIONS OF LIABILITY Neither party shall be liable to the other, whether for breach of contract or for any negligent act or omission or otherwise, for any loss of profit, loss of use, loss of production, loss of contracts or for any other special, incidental, punitive, indirect or consequential loss or damage that may be suffered by the other, except for liability under Section 13. 9. TAXES Each party shall be responsible for the handling and payment of all taxes and levies imposed upon such party or its subcontractors or their respective agents or employees as a result of this Agreement and any services performed pursuant hereto. 10. ASSIGNMENT AND SUB-CONTRACTING This Agreement shall be binding on all successors and assigns of either party. 11. DURATION AND TERMINATION 11.1 This Agreement shall remain in full force and effect throughout the Term, unless terminated earlier by written notice from one party to the other party upon the occurrence of any of the following: 11.1.1 an order is made or an effective resolution is passed for the liquidation or winding up of either party and such order or resolution is not revoked within ninety (90) days after issuance thereof; or 11.1.2 either party commits a material breach of this Agreement and fails to remedy such breach within a period of ninety (90) days from the provision of a written notice from the other party requiring the remedy of such breach; or 11.1.3 either party contravenes any applicable Government Authorization or Legal Requirement in relation to its obligations hereunder which has a material adverse effect on the other party and is not caused or contributed to by any act or omission of such other party; or 11.1.4 a change in Legal Requirements renders the continued performance of this Agreement for a reasonable period of time by the other party; or 11.1.5 upon notice from MR3 to CEG if the amount of Net Revenue realized by MR3 over any six-month period during the Term is less than 125 % of the MR3 Operating Expenses plus its share of the On-Site Operating Expenses, and other expenses incurred by MR3 to perform hereunder. 11.1.6 any exercise of the option granted under Section 12.3 (iii) below. 11.1.7 the failure of the events described in Sections 3.1 (b), (d) or (e) to take place on or before the dates set forth in each respective section; provided, however, that neither party 9
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shall have the right to terminate this Agreement pursuant to this Section 11.1.7 if (i) the terminating party caused such failure to occur, (ii) such failure was caused for reasons beyond the control of the non-terminating party, or (iii) such failure was caused by delays in obtaining any item listed under Section 3 (c). 11.2 Upon any termination of this Agreement, MR3 shall remove any Building or Facility housing the MR3 System from the Property, including all improvements thereto and the accommodations, furnishings, fixtures and other equipment at the Facility, within 90 days of such termination. However, CEG shall have the option to purchase from MR3 any gravity circuit located on the Property, at MR3's cost, less depreciation, and/or continue MR3's lease of such gravity circuit with the consent of the lessor. 11.3 The termination of this Agreement shall not prejudice or affect any rights or remedies of the parties to this Agreement, which have already accrued. 11.4 The provisions of Sections 5, 6, 8, 13, 16, and 18 shall survive any termination of this Agreement. 12. FORCE MAJEURE, LIABILITY FOR NON-PERFORMANCE AND CAUSE OF GENERATION DEFICIENCY 12.1 For the purposes of this Agreement, "Force Majeure" means any of the following events or circumstances (i) not within the reasonable control of either party, (ii) which event or circumstance, despite the exercise of reasonable diligence, cannot be or be caused to be prevented, avoided or removed by either party, and (iii) does not arise out of particular circumstances which are within the knowledge of either party at the time of entering into this Agreement: (i) acts of war or the public enemy whether war be declared or not; (ii) public disorder, insurrection, rebellion, sabotage, riots or violent demonstrations; (iii) earthquakes, floods, typhoons, drought, storms, other natural calamities and acts of God, or the discovery of hazardous materials or historical artifacts at the Property; (iv) strikes or lockouts or other industrial action; (v) for the purposes of Force Majeure affecting MR3's performance, acts of CEG affecting the operation or maintenance of the Facility; and (vi) any shortfall in utilities or other necessaries for the operation of the Facility (except to the extent that such failure is caused by or contributed to by an act or omission on the part of MR3 or CEG). 12.2 A party shall be excused from performance and shall not be construed to be in default of any obligation hereunder so long as failure to perform such obligation is due to an event of Force Majeure. 12.3 As soon as possible following the date of commencement of any Force Majeure, if either party desires to invoke such Force Majeure as a cause for delay in the performance of any obligation (other than 10
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payment of money) hereunder, it shall advise the other party in writing of such date and the nature and expected duration of such Force Majeure. As soon as possible and in any event within three (3) days following the termination of such Force Majeure, the party having invoked such Force Majeure as a cause for such delay shall submit to the other party reasonable proof of the nature of such delay and its effect upon the time of performance. MR3 and CEG: (i) shall make all reasonable efforts to prevent and reduce to a minimum and mitigate the effect of any delay occasioned by any Force Majeure; and (ii) shall use their best efforts to ensure resumption of normal performance of this Agreement after the termination of any Force Majeure and shall perform their obligations to the maximum extent practicable as agreed between CEG and MR3. (iii) shall each have the option to terminate this Agreement should such Force Majeure continue for a period of 90 days. Any CEG Office Expenses due under Section 1.3 above shall be advanced by MR3 during such 90 day period. 13. CONFIDENTIALITY Unless waived in whole or in part by a written document signed by MR3 and received by fax of mail to CEG, CEG agrees to abide by the confidentiality obligations set forth below: 13.1 Proprietary and Confidential Information - CEG agrees that any proprietary and confidential information ("Confidential Information") that is or has been disclosed by or under the authorization of MR3, or results from prior discussions pertaining to such disclosures, shall be subject to the terms of this Agreement. "Confidential Information" includes all MR3 business and technical information whether disclosed in writing, orally, or in any other form, tangible or intangible, including information of all kinds concerning any: information concerning inventions, discoveries, concepts, ideas, techniques, uses, methods, raw materials, compounds, formulations, test results, lab books, and reports, formulas, software in various stages of development, source codes, object codes, research and development procedures and work in progress, trade secrets, know-how, inventions, technical reports, scientific, engineering, manufacturing and processing information, processes, designs, specifications, drawings, diagrams, models, samples, flow charts, prototypes, tooling, computer programs, algorithms, data, databases, studies, mathematical calculations, finances and plans, customer lists, business plans, contracts, sales, marketing and pricing plans and techniques, production plans, distribution plans, system implementation plans, business concepts, supplier information, personnel matters, business procedures and operations, present or future products, research, processes and technology development programs and investor information, whether in oral, graphic, electronic or any other media or form, and all materials related thereto: 13.2 Exceptions - Confidential Information does not include that information which: a) is available to the public at the time it is disclosed or thereafter becomes available to the public; or 11
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b) is known to the CEG at the time of disclosure; or c) is received by CEG from independent sources having the right to such information without an obligation of confidence or non-disclosure, and without the information having been solicited or obtained by any use of the Confidential Information; or 13.3 Non-Disclosure to Third Parties - CEG shall keep the Confidential Information strictly confidential and in trust for MR3. CEG shall use its best efforts to safeguard the Confidential Information, taking at least the same strict precautions it would take to safeguard its own most valuable proprietary and confidential information. a) CEG shall not disclose any portion of the Confidential Information to any third party (that is not an employee provided for below), unless MR3 specifically agrees in writing in advance and the third party agrees in writing to be bound to MR3 as CEG is bound by this Agreement (in its entirety) or by terms substantially similar which are agreed upon by the third party and MR3. b) CEG shall immediately notify MR3 upon receiving any request made by any non-authorized third party to disclose any Confidential Information and shall cooperate with MR3 in its efforts to protect the Confidential Information from disclosure. Should any third party make any unauthorized use of any Confidential Information provided hereunder, CEG shall notify MR3 and cooperate in taking steps to protect the Confidential Information from further unauthorized use. c) CEG may disclose material to the extent required to be disclosed pursuant to any governmental application or pursuant to any final court order, provided however that CEG shall: I) promptly notify MR3 upon its receipt of any pleading, discovery request, interrogatory, motion or other paper that requests or demands disclosure of the Confidential Information, II) oppose any request for disclosure, and that failing, seek to have access and use limited by a protective order; and III) provide MR3 all reasonable opportunity and assist MR3 in its efforts to contest any requirement of disclosure, seek judicial protection against the disclosure and have such disclosure as is required made under a protective secrecy order. 13.4 Employee Access and Control of the Information - CEG agrees that only those CEG employees who need to know the Confidential Information will have access to same, and then only to the extent necessary to carry out their respective tasks. As part of its obligation to safeguard the Confidential Information, CEG agrees that prior to and as a condition of his or her access to the Confidential Information, each employee shall sign a Confidentiality Agreement. CEG shall keep copies of all such acknowledgments, and provide copies to MR3 immediately. Upon any termination of the Agreement between MR3 and CEG or at any time upon MR3's request, CEG agrees to stop use of the Confidential Information hereunder and to: a) Return promptly all documents and other tangible materials provided by or under authorization of MR3 that contain evidence, record, derive from or reveal any of the Confidential Information; and 12
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b) Destroy all documents and other tangible materials generated by CEG or its employees that evidence, record, derive from or reveal any of the Confidential Information. Upon request, CEG shall certify in writing that such materials have been so returned or destroyed. 13.5 Ownership of the Confidential Information - All Confidential Information, and all information that derives from it, is, shall be and will remain the exclusive property of MR3 until and unless some other agreement is made regarding that Confidential Information. This Agreement does not transfer any license or other right to use the Confidential Information other than pursuant to the Agreement, and does not obligate MR3 to provide any such rights in the future. If CEG either directly or indirectly through a third party makes, develops or contributes to any invention, application, technique, process, specification or work of authorship that is based on, improves upon, is derivative of or results from any use of the Confidential Information, CEG agrees to assign all rights therein to MR3, until or unless the parties enter into some other written agreement regarding the Confidential Information. CEG agrees to do what is reasonably necessary to perfect this assignment. 14. GENERAL PROVISIONS 14.1 Notices. All notices, reports and other communications between the parties shall be in writing and shall be sent by air courier, or by facsimile, with a confirmation copy sent by air courier, addressed as follows: If to MR3: MR3 Systems Inc. 435 Brannan Street, Suite 200 San Francisco, CA 94107 Attn: Randall S. Reis, Chairman and CEO Fax: 415-947-1095 If to CEG: Consolidated Empire Gold, Inc. 31587 Broadmoore Drive Evergreen, CO 80439 Attn: Raymond Heon, President Fax: 303-679-1626 All notices, reports and other communications given in accordance with this Section shall be deemed received (i) if sent by air courier, three (3) days after the date of dispatch, and (ii) if sent by facsimile: twenty-four (24) hours after the time and date of transmission. 14.2 Headings. The subject headings of this Agreement are included for purposes of convenience only, and shall not affect the construction or interpretation of any provision of this Agreement. 14.3 Counterparts. This Agreement may be executed in several duplicate originals, each one of which shall be deemed an original, but all of which together shall constitute one and the same instrument. If a party signs this Agreement and transmits an electronic facsimile of the signature page to the other party, the party who receives the transmission may rely upon the electronic facsimile as a signed original of this Agreement. 13
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14.4 Waivers. If either party fails to enforce any provision of this Agreement, or exercise any of its rights hereunder, such failure shall not be construed as constituting a waiver of that Party's right thereafter to enforce each and every provision of this Agreement in accordance with its terms. 14.5 Severability. If any of the terms and provisions hereof shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any of the other terms or provisions hereof. 15. GOVERNING LAW This Agreement shall be governed by, and interpreted in accordance with, the laws of the State of Colorado, U.S.A., excluding any conflicts of laws rules. 16. ARBITRATION All disputes, differences, or questions arising out of or relating to this Agreement, or the validity, interpretation, breach, violation or termination thereof, shall be settled by arbitration at Denver, Colorado, in accordance with American Arbitration Association Rules which the parties declare to be known to them. The parties also agree that: (a) the appointing authority shall be the American Arbitration Association; (b) the number of arbitrators shall be three (3); (c) the language to be used in the arbitral proceedings shall be English. In any such arbitration proceeding, the arbitrators shall adopt and apply the provisions of the Federal Rules of Civil Procedure relating to discovery so that each party shall allow and obtain discovery of any matter not privileged which is relevant to the subject matter involved in the arbitration to the same extent as if such arbitration were a civil action pending in a United States District Court. The decision of a majority of the arbitrators shall be final and binding on all of the parties. The attorney's fees, arbitrators' fees, costs, expenses, and other disbursements in connection with such arbitration proceedings shall be assessed or apportioned as the arbitrators shall determine. Judgment upon any arbitration award may be entered and enforced in any court of competent jurisdiction. 17. ENTIRE AGREEMENT This Agreement constitutes the entire agreement between the parties concerning the subject matter hereof and supercedes and replaces the agreement entered into between the parties on June 18, 2002. If any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. If, moreover, any one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to time, duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law as it shall then exist. 18. REPRESENTATIONS AND WARRANTIES To the best of each party's knowledge, after due inquiry, each of MR3 and CEG hereby represents, warrants and covenants to the other as follows: 18.1 Right, Power and Authority. Each party has full right, power and authority to enter into this Agreement and there is nothing which would prevent it from performing its obligations under the terms and conditions imposed on it by this Agreement. 14
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18.2 Binding Obligation. This Agreement has been duly authorized by all necessary corporate or legal action of MR3 and CEG, respectively, and constitutes a valid and binding obligation on MR3 and CEG, respectively, enforceable in accordance with the terms hereof. 18.3 Good Standing. MR3 or CEG, as the case may be, is a corporation or partnership duly organized and validly existing and in good standing under the laws of its jurisdiction of formation and is duly qualified and authorized to do business wherever the nature of its activities or properties requires such qualification or authorization. 18.4 No Provisions Contravened. There is no provision in its partnership, company or corporate charter, articles of incorporation, By-Laws or equivalent governing documents, and no provision in any existing mortgage, indenture, contract or agreement binding on it which would be contravened by the execution, delivery or performance by it of this Agreement. 18.5 No Consent of Third Parties Needed. No consent of any third party or holder of any of its indebtedness is or shall be required as a condition to the validity of this Agreement. 18.6 No Law Contravened. Neither its execution nor its delivery of this Agreement nor its fulfillment of or compliance with the terms and provisions hereto shall contravene any provision of the laws of any jurisdiction, including, without limitation, any statute, rule, regulation, judgment, decree, order, franchise or permit applicable to it. 18.7 Continued Effect of Representations and Warranties. It covenants and agrees that its representations and warranties contained in this Agreement shall remain true in all respects for the Term hereof with the same effect as though such representations and warranties had been made on and as of any subsequent date during such Term. 18.8 CEG collectively includes the operator and all the owners of the Property and has the right to grant the exclusive processing rights to MR3 hereunder, and CEG has not, and shall not in the future during the Term of this Agreement, grant such rights to any other person or entity. 19. GOOD FAITH Each party diligently and in the utmost good faith agrees to perform its respective duties and obligations under this Agreement and to undertake all actions reasonably required to promote the intent of this Agreement. The parties each agree to provide all further information, and to execute, acknowledge and deliver all further documents and instruments, reasonably required to consummate the transactions contemplated hereunder. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the date first written above by their duly authorized representatives. MR3 Systems, Inc. By: /s/ RANDALL S. REIS -------------------------------------------- Randall S. Reis Chairman and CEO 15
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Consolidated Empire Gold, Inc. Operator - Grace Mining Project By: /s/ RAYMOND P. HEON -------------------------------------------- Raymond P. Heon President Transcontinental Minerals, Inc. By: /s/ RAYMOND P. HEON -------------------------------------------- Raymond P. Heon President Consolidated Empire Mines, Ltd. By: /s/ RAYMOND P. HEON -------------------------------------------- Raymond P. Heon President, Marquette Minerals, Inc. General Partner Empire Gold LLC By: Consolidated Empire Gold, Inc., its Operator /s/ RAYMOND P. HEON -------------------------------------------- Raymond P. Heon, President 16

Dates Referenced Herein   and   Documents Incorporated by Reference

Referenced-On Page
This ‘10KSB’ Filing    Date First  Last      Other Filings
12/31/03710KSB
Filed on:8/19/033/A,  4
3/31/03610QSB,  10QSB/A
For Period End:12/31/02610KSB/A
11/1/0247
10/23/021
6/18/02315
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