Document:

Unassociated Document

IPEC HOLDINGS INC.

INCENTIVE STOCK OPTION AGREEMENT

UNDER THE 2002 STOCK OPTION PLAN

THIS AGREEMENT is made as of _____________, between IPEC HOLDINGS INC., a Nevada corporation (the “Company”), and ___________ (the "Optionee").

THE PARTIES AGREE AS FOLLOWS:

	1.  	Option Grant. The Company hereby grants to the Optionee an option (the “Option”) to purchase the number of shares of the Company's common stock (the “Shares”), for an exercise price per share (the “Option Price”) and based upon a Grant Date, all as set forth below:

 

	 	Shares under option: 	______ 	 
	 	Option Price per Share: 	______ 	 
	 	Grant Date: 	______ 	 
	 	Vesting and Expiration: 	______ 	 

   

The Option will be subject to all of the terms and conditions set forth herein and in the Company’s Amended and Restated 2002 Stock Option Plan (the “Option Plan”), a copy of which is attached hereto and incorporated by reference. The Option granted hereunder will be a incentive stock option.

	2. 	Stockholder Rights. No rights or privileges of a stockholder in the Company are conferred by reason of the granting of the Option. Optionee will not become a stockholder in the Company with respect to the Shares unless and until the Option has been properly exercised and the Option Price fully paid as to the portion of the Option exercised.

	3. 	Termination. Subject to earlier termination as provided in the Option Plan, this Option will expire, unless previously exercised in full, on the dates set forth above in Section 1.

	4. 	Terms of the Option Plan. The Optionee understands that the Option Plan includes important terms and conditions that apply to this Option. Those terms include (without limitation): important conditions to the right of the Optionee to exercise the Option; important restrictions on the ability of the Optionee to transfer the Option or to transfer Shares received upon exercise of the Option; and early termination of the Option following the occurrence of certain events, including the Optionee no longer being an employee, director, consultant or independent contractor to or of the Company or its subsidiaries. The Optionee acknowledges that he or she has read the Option Plan, agrees to be bound by its terms, and makes each of the
representations required to be made by the Optionee under it.

	5. 	Miscellaneous. This Agreement (together with the Option Plan) sets forth the complete agreement of the parties concerning the subject matter hereof, superseding all prior agreements, negotiations and understandings. This Agreement will be governed by the substantive law of the State of Nevada, and may be executed in counterparts.

The parties hereby have entered into this Agreement as of the date set forth above.

	 	 	IPEC HOLDINGS INC. 	 
	 	 	 	 
	 	 	By:____________________________ 	 
	 	 	                Company Officer	 
	 	 	 	 
	 	 	“Optionee” 	 
	 	 	 	 
	 	 	____________________________ 	 
	 	 	“Optionee” 	 

 

                        

 

 

OptioneeUnassociated Document

IPEC HOLDINGS INC.

NON-QUALIFIED STOCK OPTION AGREEMENT

UNDER THE 2002 STOCK OPTION PLAN

THIS AGREEMENT is made as of _____________, between IPEC HOLDINGS INC., a Nevada corporation (the “Company”), and ___________ (the "Optionee").

THE PARTIES AGREE AS FOLLOWS:

	1.  	Option Grant. The Company hereby grants to the Optionee an option (the “Option”) to purchase the number of shares of the Company's common stock (the “Shares”), for an exercise price per share (the “Option Price”) and based upon a Grant Date, all as set forth below:

 

	 	Shares under option: 	______ 	 
	 	Option Price per Share: 	______ 	 
	 	Grant Date: 	______ 	 
	 	Vesting and Expiration: 	______ 	 

The Option will be subject to all of the terms and conditions set forth herein and in the Company’s Amended and Restated 2002 Stock Option Plan (the “Option Plan”), a copy of which is attached hereto and incorporated by reference. The Option granted hereunder will be a non-qualified stock option.

	2. 	Stockholder Rights. No rights or privileges of a stockholder in the Company are conferred by reason of the granting of the Option. Optionee will not become a stockholder in the Company with respect to the Shares unless and until the Option has been properly exercised and the Option Price fully paid as to the portion of the Option exercised.

	3. 	Termination. Subject to earlier termination as provided in the Option Plan, this Option will expire, unless previously exercised in full, on the dates set forth above in Section 1.

	4. 	Terms of the Option Plan. The Optionee understands that the Option Plan includes important terms and conditions that apply to this Option. Those terms include (without limitation): important conditions to the right of the Optionee to exercise the Option; important restrictions on the ability of the Optionee to transfer the Option or to transfer Shares received upon exercise of the Option; and early termination of the Option following the occurrence of certain events, including the Optionee no longer being an employee, director, consultant or independent contractor to or of the Company or its subsidiaries. The Optionee acknowledges that he or she has read the Option Plan, agrees to be bound by its terms, and makes each of the
representations required to be made by the Optionee under it.

	5. 	Miscellaneous. This Agreement (together with the Option Plan) sets forth the complete agreement of the parties concerning the subject matter hereof, superseding all prior agreements, negotiations and understandings. This Agreement will be governed by the substantive law of the State of Nevada, and may be executed in counterparts.

The parties hereby have entered into this Agreement as of the date set forth above.

	 	 	
IPEC HOLDINGS INC.
	 
	 	 	 	 
	 	 	By:__________________________ 	 
	 	 	               Company Officer	 
	 	 	 	 
	 	 	“Optionee” 	 
	 	 	 	 
	 	 	__________________________ 	 
	 	 	“Optionee” 	 
	 	 	 	 

                        

 

 

Optionee[LOGO] MR3 SYSTEMS

                STRATEGIC ALLIANCE AND PROJECT VENTURE AGREEMENT

This STRATEGIC ALLIANCE AND PROJECT VENTURE AGREEMENT (the "Agreement") is
effective as of August 23, 2004 (the "Effective Date"), by and between MR3
SYSTEMS, INC., a Delaware corporation with its corporate address at 435 Brannan
Street, Suite 200, San Francisco, California, 94107-1780, (hereinafter referred
to as "MR3"), and CADDELL & ASSOCIATES, LLC, a Wyoming corporation with a
corporate address at 3042 South Macon Circle, Aurora, CO 80014-3054 (hereinafter
referred to as "CDL").

WHEREAS, MR3, a publicly traded company, whose proprietary technologies and
intellectual property associated with the extraction, separation, recovery, and
purification of precious and base metals are applied in commercial operations in
vertical Markets involving, but not limited to, ore deposits, ore tailings,
hazardous waste, oil and geothermal fluids, groundwater and soil contaminated
with metals, desires to form a strategic alliance for project ventures with CDL
to jointly promote the application of unique metals recovery technologies in the
vertical Markets already established by MR3 described on the attached EXHIBIT A,
which is made a part hereof by this reference (the "Markets"), as well as new
markets; and

WHEREAS, CDL, the owner and developer of the Caddell Reactor using a technology
involving a metals recovery process that has become known as "The Caddell
Process" (all as described in the attached EXHIBIT B), which has passed the
scrutiny of several scientists/experts in this field, and the Process has been
proven to work through the operation of three prototype systems in Nevada,
desires to form a strategic alliance and project venture with MR3. MR3 is the
owner and developer of proven selective metals recovery systems to strip
solutions of precious metals and other metals from solutions to produce
reasonably pure metals, which are known as the MR3 Systems. The solutions
produced by the Caddell Reactor are amenable to processing through "The MR3
System", and the parties further desire to jointly promote the application of
the unique metals recovery technologies, subject to the terms and conditions
hereof; and

WHEREAS, MR3 and CDL, (collectively the "Parties") herein desire to set forth in
writing the terms and conditions of their understandings and agreements.

NOW THEREFORE, in consideration of the foregoing, of the mutual promises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereby agree as
follows:

1.    DEFINITIONS.

Capitalized terms used in this Agreement are defined throughout the Agreement.
Terms not defined therein shall be given their plain English meaning; provided,
however, that those terms, acronyms and phrases known in the international trade
and business development industry, which are not defined, shall be interpreted
in accordance with their generally accepted industry meaning.

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2.    INTENT AND PURPOSE OF STRATEGIC ALLIANCE AND PROJECT VENTURE.

      2.1.  INTENT AND PURPOSE. This Agreement contemplates the grant of
            exclusive rights from CDL to MR3 for all projects involving (a) the
            evaluation and commercialization by MR3 of the Caddell Process and
            the Caddell Reactor as described in the attached EXHIBIT B
            (hereinafter collectively referred to as the "CDL Technology") and
            (b) the alliance between CDL and MR3 for projects involving the
            marketing of a consolidated technology package combining both the
            CDL Technology and the MR3 metals separation and refining technology
            (hereinafter referred to as the "MR3 Technology"). Pursuant to the
            foregoing, it is the current intent of the Parties to undertake the
            development and integration of the aforesaid projects as specified
            in Section 4 below (the "Projects").

      2.2.  PROJECT PLANS. Notwithstanding the provisions of Section 2.1 above,
            the Parties understand that the commercial feasibility of the
            Projects has not been established. It is further understood and
            agreed that each Project undertaken pursuant to this Agreement will
            be subject to the execution and delivery by the Parties of a
            separate project plan for each Project undertaken (each, a "Project
            Plan"). When executed, each Project Plan will be attached to and
            incorporated by reference into this Agreement, and the terms and
            conditions of the Project Plan shall control to the extent
            consistent with the terms contained herein. The Parties agree that
            each Project Plan will set forth, among other things as the Parties
            shall deem appropriate, the following:

            2.2.1.  A detailed description of the project including the
                    participants in the projects and a description of the
                    working interests of Parties herein and other interest
                    holders;

            2.2.2.  A budget for the project together with a plan for
                    disbursements of expenses, pre-profit cash flows and the
                    management for cash calls due to possible cash overruns;

            2.2.3.  Any design documents or specifications (unless the project
                    contemplates creation or development of the same);

            2.2.4.  Project deliverables, if any, that either or both Parties
                    will be responsible for creating and developing;

            2.2.5.  Tasks, responsibilities, covenants and agreements of each
                    Party relating to the project;

            2.2.6.  Deadlines, interim milestones, and other matters relating to
                    timing and delivery or performance under the project;

            2.2.7.  Decision periods for ongoing business plan modifications due
                    to contingencies for unexpected demands of the Parties;

            2.2.8.  Intellectual property rights or licenses to the extent
                    different from the terms of this Agreement;

            2.2.9.  Termination rights of the Parties relating to the project;

            2.2.10. Obligations of the Parties to market and implement the
                    project; and

            2.2.11. Any other terms or conditions that vary from the terms and
                    conditions set forth in this Agreement.

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3.    GRANT OF EXCLUSIVE RIGHTS.

CDL hereby grants to MR3 exclusive, worldwide rights to fund, market, operate,
license and commercialize the CDL Technology, on a right of first refusal basis
as described in Section 4.4 below.

4.    AGREEMENTS AND DUTIES OF THE PARTIES.

      4.1.  CDL AGREES TO:

            4.1.1.  refer all inquiries, negotiations and agreements regarding
                    the CDL Technology to MR3; and

            4.1.2.  test any ore volumes that can be processed within the
                    ability of its laboratory, or future commercial sites, at a
                    mutually agreed upon toll basis paid for in advance by MR3;
                    and

            4.1.3.  submit to MR3 any and all project proposals for development,
                    which are being negotiated at this time or in the future, on
                    an individual project-by-project basis for MR3 to join into
                    the negotiations, or for MR3 to decline pursuant to Section
                    4.4 below; and

            4.1.4.  provide MR3 with all the support, documentation and
                    information necessary for MR3 to perform under this
                    Agreement.

      4.2.  MR3 AGREES TO:

            4.2.1.  use its best efforts to fund, market, operate, license and
                    commercialize all Projects utilizing the CDL Technology on a
                    worldwide basis; and

            4.2.2.  CDL having the exclusive rights to fund and operate a single
                    Caddell Reactor operation for its own account to process its
                    own ores, customers ores and concentrates on a toll basis
                    for third parties as an assay pilot plant facility with a
                    capacity not to exceed 21 tons per day in conjunction with
                    the MR3 Technology, and to share profits with MR3 on the
                    basis of 85% to CDL and 15 % to MR3; and

            4.2.3.  MR3 will process in a timely manner volumes of metal
                    pregnant liquor, charging processing cost plus 10% (net 30
                    days), and

            4.2.4.  If MR3 wishes, CDL will process up to 21 tons per day of
                    MR3's "special project" ores in CDL's assay pilot plant
                    facility referenced in Section 4.2.2, charging processing
                    cost plus 10% (net 30 days). MR3 agrees to give 15% of its
                    profits to CDL on all ores so processed; and

            4.2.5.  under Section 4.2.2 and Section 4.2.4 to allow CDL to take
                    its profit share as reasonably refined metals in kind; and

            4.2.6.  allow an authorized CDL representative to be present to
                    observe the stripping and reduction to metal for it's
                    account.

      4.3.  CDL AND MR3 JOINTLY AGREE TO:

            4.3.1.  determine the budgets, baseline economics and value
                    proposition for each Project; and

            4.3.2.  write proposals and cost analyses for all Projects.

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      4.4.  MR3 RIGHT OF FIRST REFUSAL AND VETO RIGHTS OF THE PARTIES.

            4.4.1.  CDL shall present to MR3 all potential projects for the CDL
                    Technology, together with all pertinent information and
                    documentation necessary for MR3 to evaluate the
                    commercialization potential of each such project.

            4.4.2.  MR3 shall present to CDL all potential projects for the MR3
                    Technology, together with all pertinent information and
                    documentation necessary for CDL to evaluate the
                    commercialization potential of each such project.

            4.4.3.  MR3 shall have 14 days from receipt of all such Section
                    4.4.1 information and documentation to complete its
                    evaluation and determine whether or not it wishes to accept
                    the project and shall immediately notify CDL, in writing, of
                    its decision to accept or decline.

            4.4.4.  Should MR3 decline to accept any such project under Section
                    4.4.1, CDL shall have the right to pursue the project on its
                    own utilizing the MR3 Technology on a licensed basis
                    pursuant to licensing terms mutually agreed upon by the
                    Parties.

            4.4.5.  CDL shall have 14 days from receipt of all such Section
                    4.4.2 information and documentation to complete its
                    evaluation and determine whether or not it wishes to accept
                    the project and shall immediately notify MR3, in writing, of
                    its decision to accept or decline.

      4.5.  PROFIT SHARING SHALL BE AS FOLLOWS.

            4.5.1.  if MR3 introduces the project into the venture utilizing
                    both CDL and MR3 technologies, MR3 will receive 60% and CDL
                    will receive 40%, after operating costs; and

            4.5.2.  if CDL introduces the project to such venture, CDL will
                    receive 60% and MR3 will receive 40%, all after operating
                    costs; and

            4.5.3.  otherwise it is 50/50 sharing, all after operating costs;
                    and

            4.5.4.  project development costs are paid through project financing
                    after the parties submit and agree on a budget for each
                    project.

      4.6.  PATENTING TECHNOLOGY. CDL has had no intentions of patenting its
            reactor technologies; however, there may be a benefit to these
            technologies being patented for the purposes of this Agreement to
            enhance the rights for MR3 herein. MR3, at its own expense, may
            elect to patent several CDL reactor technologies as well as
            modifications to those technologies and MR3 may patent technologies
            related to MR3 Technology. The rights to those technologies when
            patented or discovered, prior to submission to patent and during the
            period of patent examination, and when patented, shall remain
            covered by this Agreement unless otherwise agreed to by both
            Parties.

      4.7.  PRIVATE LABELING AND BRANDING OF PRODUCTS. CDL grants MR3 the right
            to select and apply private labeling and trademarks on all CDL
            Technology commercialized under this Agreement.

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      4.8.  ACCOUNTABILITY AND PROJECT MANAGEMENT. Each of the Parties agrees to
            appoint and keep in place during the term of this Agreement one or
            more project managers (individually, a "Project Manager") who will
            allocate such portion of his or her working time as may be
            reasonably necessary to facilitate the performance, on a timely
            basis and in accordance with any particular Project Plan, of such
            Party's obligations under this Agreement or any particular Project
            Plan, design or development specification or other document
            contemplated hereby. The Project Manager will: (i) be the central
            point of contact for all matters arising under this Agreement; (ii)
            oversee Project Management and the resource allocations hereunder;
            and (iii) have overall responsibility for the facilitation of the
            performance of the obligations of the parties contemplated hereby.

            Upon the signing and execution of this Agreement, CDL shall
            designate Robert Caddell as its Project Manager with Mike Wendell as
            the alternate Project Manager; MR3 shall designate Peter Odintsov as
            its Project Manager with Jody Sitkoski as the alternate Project
            Manager. Either Party may change its Project Manager and appoint a
            substitute Project Manager for project.

5.    ADDITIONAL AGREEMENTS OF THE PARTIES

      5.1.  TRADEMARK AND LOGO USAGE. CDL hereby grants to MR3 the right to use
            CDL's logo and trademarks, subject to logo and trademarks usage
            guidelines to be provided by CDL to MR3. During the term of this
            Agreement, MR3 further agrees that it shall not misuse CDL's logo
            and trademarks for any purpose not authorized by CDL.

      5.2.  PUBLICITY; PRESS RELEASES. The Parties may by mutual consent agree
            to issue a joint press release describing the collaboration of the
            Parties. In addition, each of CDL and MR3 may, at such Party's
            discretion: (a) identify the other as a strategic partner; (b)
            hyperlink from an appropriate area within its website to the other's
            home page; and (c) display the other Party's logo on the its web
            site (in accordance with such Party's guidelines for the use of such
            mark). The Parties shall also consult regularly during the term of
            the Agreement and issue, as and when appropriate, such further press
            releases and/or other publicity materials as may be appropriate. The
            contents of the any press releases issued by the parties shall be
            subject to the approval of each Party, which approval shall not be
            unreasonably withheld or delayed.

      5.3.  USE OF NAME IN PROMOTIONAL MATERIALS. Each Party shall, with prior
            approval of the other Party (which will not be unreasonably withheld
            or delayed), be permitted to identify the other Party as a strategic
            partner, to use the other Party's name in connection with proposals
            to prospective customers, and to refer to the other Party in print
            or electronic form for marketing or reference purposes, provided
            however that such proposals and marketing and reference materials
            are for projects that both Parties have agreed to pursue.

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      5.4.  MARKETING, DISTRIBUTION AND SUPPORT EFFORTS; PROMOTIONAL ACTIVITIES.
            To the extent agreed upon by the Parties pursuant to the applicable
            Project Plan or otherwise, CDL agrees to participate with and
            support MR3 an active marketing and promotion effort for each of the
            projects pursuant to this Agreement. Each Party agrees to serve as a
            reference in the other Party's proposals for a reasonable number of
            contacts by prospective customers of the other Party. Under the
            direction of the Project Managers, the Parties may by mutual
            agreement or plan undertake joint-marketing or co-marketing programs
            or activities as appropriate to further the intent of this Agreement
            and the alliance created hereby.

      5.5.  INDEPENDENT AGENTS. Either Party shall have the option to utilize
            Agents in order to satisfy its obligation to supply personnel
            resources to the projects contemplated hereunder, but only to the
            extent and insofar as reasonably required in connection with the
            performance of the obligations of the Party retaining the Agents
            under this Agreement, and subject to the further requirements and
            limitations set forth herein.

6.    TERM OF AGREEMENT.

This Agreement shall be for a ten (10) year term commencing on August 23, 2004
("Initial Term"), and continuing thereafter on a year-to-year basis ("Extended
Term"), unless terminated earlier as provided in Section 8. This Agreement will
continue to remain in full force and effect during the Extended Term as long as
revenues are being produced by both Parties from business operations developed
under this Agreement.

7.    RELATIONSHIP BETWEEN PARTIES.

Each Party's relationship with the other Party is strictly that of an
independent business corporations participating in a strategic alliance and
project venture under this Agreement. It is explicitly understood and agreed
that no other relationship is intended, including partnership, franchise,
agency, employer/employee, fiduciary, master/servant relationship, or other
special relationship. Neither Party shall act in a manner that expresses or
implies a relationship other than that stated in Section 7 herein.

8.    TERMINATION.

This Agreement may be terminated by any one of the following:

      8.1.  The end of Term of this Agreement as specified in Section 6.

      8.2.  A written termination signed by both MR3 and CDL.

      8.3.  The failure of the Parties to execute successfully and profitably
            the projects outlined in Section 2.

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      8.4.  The financial insolvency, liquidation, or dissolution of one of the
            Parties.

      8.5.  The failure of either the CDL Technology or the MR3 Technology to
            operate in either an economically profitable or technically feasible
            manner. Should either party claim such a failure by the other party,
            the claimant shall so notify the other party, in writing, of the
            reasons for and details of the claimed failure. The other party
            shall have ninety (90) days to refute or cure such a claimed failure
            prior to any termination under this Section 8.5.

9.    CONSEQUENCES OF TERMINATION.

Upon termination of this Agreement by CDL under either Section 8.1 or 8.4 above,
CDL hereby grants to MR3, as of the date of such termination, a perpetual,
royalty-free license to use and commercialize the CDL Technology. Upon
termination of this Agreement by MR3 under either Section 8.1 or 8.4 above, MR3
hereby grants to CDL, as of the date of such termination, a perpetual,
royalty-free license to commercialize the MR3 Technology.

10.   NO ASSIGNMENTS.

Neither Party may assign its rights or delegate its obligations hereunder,
either in whole or in part, whether by operation of law or otherwise, without
the prior written consent of the other Party. Any attempted assignment or
delegation without consent will be void. The rights and liabilities of the
Parties under this Agreement will bind and inure to the benefit of the Parties'
respective successors and permitted assigns; such as personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees, legatees and permitted assignees of the Parties hereto.

11.   NOTICE.

For the purpose of this Agreement, any notice required or permitted to be given
by either Party under this Agreement shall be in writing and shall be personally
delivered or sent by a reputable overnight mail service (e.g., Federal Express),
or by first class mail (certified or registered), or by facsimile or email
confirmed by first class mail (registered or certified), to the Project Manager
of other Party. Notices will be deemed effective (I) three (3) working days
after deposit, postage prepaid, if mailed, (II) the next day if sent by
overnight mail, or (III) the same day if sent by facsimile or email and
confirmed as set forth above. A copy of any notice shall be sent to the
following:

      11.1. MR3 Systems, Inc., 435 Brannan Street, Suite 200, San Francisco, CA
            94107-1780; Attn: William C. Tao, Ph.D., CEO; Fax: (415) 947-1095.

      11.2. Caddell & Associates, LLC, 3042 South Macon Circle, Aurora, CO
            80014-3054, Attn: Robert I. Caddell, Fax: (303) 750-8463.

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      11.3. Michael Wendell, 6631 South Abilene Way, Centennial, CO 80111-6601,
            Fax: (303) 693-1164.

12.   RESTRICTIVE COVENANTS.

      12.1. CONFIDENTIALITY. Each Party acknowledges that in forming this
            strategic alliance and venture hereunder, each Party will occupy a
            position of extreme trust and confidence with respect to the other
            Party's business information, organizational goals, and corporate
            strategy. The Parties have entered into a separate Confidentiality
            Agreement that sets forth the obligations and rights of the Parties
            concerning confidentiality. A copy of the Confidentiality Agreement
            is attached hereto as EXHIBIT C and is hereby incorporated by this
            reference.

      12.2. NON-SOLICITATION OF CUSTOMERS AND CONTRACTORS. During the term of
            this Agreement and for a period of two (2) years after termination,
            each Party shall not, directly or indirectly, influence or attempt
            to influence customers or contractors of the other Party or any of
            its subsidiaries or affiliates.

      12.3. NON-SOLICITATION OF EMPLOYEES. Each Party recognizes that it may
            obtain confidential information about the other Party's consultants
            and employees. Each Party recognizes that this information is not
            generally known, and is of substantial value in developing and
            maintaining the other Party's business. Each Party agrees that
            during the term of this Agreement and for a period of two (2) years
            after termination, each Party will not, directly or indirectly,
            solicit or recruit any consultant or employee of the other Party for
            any other employment or consultancy.

      12.4. NON-COMPETITION OF BUSINESS AND PROJECTS. During the term of this
            Agreement and for a period of two (2) years after termination, each
            Party shall not, directly or indirectly, pursue the projects
            initiated and implemented under this Agreement with a third Party
            without the written consent of CDL and MR3. Each Party agrees that
            it will not reverse engineer the concepts, strategies,
            implementation plans of the projects outlined in Section 2 so as to
            reproduce the projects under a different name or venue for the
            purpose of independent operation or venture with a third Party
            outside of this Agreement.

      12.5. SURVIVAL OF PROVISIONS. The obligations contained in this Section 12
            shall survive the termination or expiration of this Agreement and
            shall be fully enforceable thereafter in accordance with the terms
            contained in Section 12. If it is determined by a court of competent
            jurisdiction in any state that any restriction in this Section 12 is
            excessive in duration or scope or extends for too long a period of
            time or over too great a range of activities or in too broad a
            geographic area or is unreasonable or unenforceable under the laws
            of that state, it is the intention of the parties that such
            restriction may be modified or amended by the court to render it
            enforceable to the maximum extent permitted by the law of that
            state.

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13.   SEVERABILITY.

The provisions of this Agreement shall be deemed severable and the invalidity or
unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof. If for any reason a court of
competent jurisdiction finds any provision of this Agreement to be
unenforceable, that provision of the Agreement will be enforced to the maximum
extent permissible so as to affect the intent of the Parties, and the remainder
of this Agreement will continue in full force and effect.

14.   COUNTERPARTS.

This Agreement may be executed in several counterparts and transmitted via
facsimile, each of which shall be deemed to be an original but all of which
together will constitute one and the same instruments.

15.   WAIVER.

No provision of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing and signed by the
Project Managers of both Parties. No waiver by either Party hereto at any time
of any breach by the other Party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other Party shall be deemed
a waiver or similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time.

16.   GOVERNING LAW AND DISPUTE RESOLUTION.

This Agreement shall be governed by and construed in accordance with the laws of
the State of Colorado. This Agreement shall not be construed against one Party
or the other as the drafter. Any disputes arising under or to interpret the
terms of this Agreement shall be resolved in the following manner:

      16.1. INITIAL CONSULTATION AND NEGOTIATION. In the event a dispute between
            the Parties arises under the Agreement or a Party's performance
            thereunder, the matter shall first be escalated to CDL's Project
            Manager and MR3's Project Manager in an attempt to settle such
            dispute through consultation and negotiation in good faith and a
            spirit of mutual cooperation.

      16.2. ESCALATION. If the Project Managers are unable to resolve the
            dispute, the Parties shall submit the dispute for binding
            arbitration before the American Arbitration Association in Denver,
            CO. If any arbitration or any action at law or in equity is begun to
            enforce or interpret the rights arising out of or relating to this
            Agreement, the prevailing Party shall recover from the other Party
            its reasonable attorney's fees incurred and costs (including
            arbitrator fees) in addition to any other relief to which the Party
            may be entitled.

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      16.3. CONTINUED PERFORMANCE. Except where prevented from doing so by the
            matter in dispute, the Parties agree to continue performing their
            obligations under this Agreement while any good faith dispute is
            being resolved unless and until such obligations are terminated by
            the termination or expiration of any project or this Agreement.

17.   FINAL AGREEMENT.

This Agreement terminates and supersedes all prior understandings or agreements
on the subject matter hereof excluding specifically the Confidentiality
Agreement attached as Exhibit "C". Only a writing that is duly executed by both
the Parties may modify this Agreement. This Agreement constitutes the entire
Agreement between the Parties with respect to the subject matter hereof. Each
person who signs this Agreement represents and warrants that he or she does so
after full opportunity to consult with counsel and with the full and legal
authority to execute this Agreement on behalf of the respective Parties to this
Agreement.

18.   INSURANCE.

Each Party shall maintain liability and other insurance typical of the industry
for this type of Agreement for their respective employees, consultants, and
contractors.

19.   INDEMNIFICATION.

To the fullest extent allowed by law, each Party shall indemnify and hold the
other Party's officers, directors, employees, shareholders, agents, and his
heirs, personal representatives, successors and assigns harmless against any
loss, expense, damage, claim, or injury suffered or sustained by either Party by
reason of any acts, errors, omissions, or alleged acts or omissions related to
this Agreement. Each Party's duty to indemnify will include any judgment, award,
settlement, reasonable legal fees, and other costs and expenses related to the
defense of any actual or threatened action, proceeding, or claim. The
indemnification herein provided shall apply also in respect of any amount paid
in compromise of any such action, suit, proceeding or claim asserted (including
expenses, counsel fees and costs reasonably incurred in connection therewith),
provided each Party shall have first approved such proposed compromise
settlement, which approval shall not be unreasonably withheld.

 THIS AGREEMENT MUST BE EXECUTED WITH THE ATTACHMENT OF ALL THE SIGNATORY PAGES.

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      IN WITNESS WHEREOF, the Parties consisting of CDL and MR3, by and through
its duly authorized officer, have executed this Agreement as of the date first
written above.

CADDELL & ASSOCIATES, LLC

By: /S/ ROBERT I. CADDELL                    Date: August 23, 2004
    ---------------------------------              -----------------------------
    Robert I. Caddell

MR3 SYSTEMS, INC.

By: /S/ WILLIAM C. TAO, PH.D.                Date: August 23, 2004
    ---------------------------------              -----------------------------
    William C. Tao, Ph.D.
    Chief Executive Officer

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                                    EXHIBIT A

                                   The Markets

            Addressable Commercial Markets identified by MR3 and CDL

Extraction of metals contamination of surface and groundwater in municipal,
state, and federal sites currently under the Federal Superfund Program, EPA
oversight, Department of Justice Record of Decision for remediation, and owned
and operated by Federal agencies such as Department of Energy, Department of
Defense, Environmental Protection Agency, Bureau of Land Management, Department
of Interior, and Department of State.

Extraction of base and precious metals from conventional mines, rock ores,
tailings, tailing ponds, intermediate processed fluids and solids, and from any
appropriate points in the process flow sheet from direct mining to sale to
refinery.

Extraction of base and precious metals from unconventional mines, black sands,
clay deposit ores, tailings, tailing ponds, intermediate processed fluids and
solids, and from any appropriate points in the process flow sheet from direct
surface mining to sale to refinery.

Extraction of hazardous metals and contaminated metals from uranium and
radioactive nuclide mining from recovered fluids, processed fluids, spent
fluids, and to be disposed of tailings and solutions. The metals involve
arsenic, selenium, radium, uranium, lead, cobalt, and rare earth elements.

Extraction of base, precious, and rare earth metals from all fluids emanating
from oil, gas, and geothermal wells.

Extraction of metals from contaminated soil, unprocessed waste, processed waste,
sludge, and other mixtures of materials emanating from municipalities in the
form of developed real estate, undeveloped real estate, municipal waste
processing facilities, recycled waste processing facilities.

Extraction of mercury from coal flue gas.

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