NOTE PAYMENT AGREEMENT
This Note payment Agreement (the "Agreement") dated as of June 30, 2005,
is made by and among MR3 Systems, Inc. (the "Company") and High Stakes Capital
LLC ("HSC").
Whereas, the Company and HSC wish to settle disputes relating to the Loan
Agreement ("Loan Agreement") and Note ("Note"), each between the Company and
HSC, dated as of October 7, 2003;
Whereas, the Company and HSC acknowledge that the Note became convertible
into shares of common stock of the Company on or before April 30, 2004;
Whereas, in order to settle the dispute among the parties HSC has agreed
to accept freely tradable shares of common stock of the Company as payments
under the Note, as provided below;
NOW THEREFORE, it is hereby agreed as follows:
1. As of June 30, 2005, the outstanding balance of principal and
interest on the Note is $914,619.51.
2. Beginning July 1, 2005, principal and interest on the Note shall be
paid in twenty (20) equal monthly installments, of principal and
interest, commencing on July 1, 2005 and continuing on the same day
of each month thereafter. All payments by the Company under the Note
shall be made, at the option of the Company, (a) in United States
dollars in immediately available funds to an account specified by
HSC, or (b) in shares of Common Stock of the Company valued at a per
share conversion rate equal to the median closing price of MR3
common stock for the pervious month; provided that the Company shall
only be entitled to make such payments in common stock if (a) the
issuance of the shares to HSC has first been registered with the
Securities and Exchange Commission ("SEC") and such registration
statement has been declared, and remains, effective, or, (b) HSC can
sell such shares pursuant to Rule 144. Notwithstanding anything
contained herein to the contrary, the Company shall not be entitled
to make payments to HSC hereunder if the issuance of shares of
Common Stock to HSC would exceed the difference between (i) 9.99% of
the outstanding shares of Common Stock of the Company and (ii) the
number of shares of Common Stock beneficially owned by the HSC. For
purposes of the immediately preceding sentence, beneficial ownership
shall be determined in accordance with Section 13(d) of the Exchange
Act and Regulation 13d-3 thereunder. The Conversion Shares
limitation described in this Section 3.2 shall automatically become
null and void without any notice to the Company upon the occurrence
and during the continuance of an Event of Default, or upon 75 days
prior notice to the Company
3. If the Company exercises its option to pay the monthly installment
in common stock of the Company as set forth in paragraph 2 above,
HSC will deposit the shares received as payment under the Note into
a mutually agreed brokerage account for orderly liquidation. Sales
shall be made out of the account as directed by HSC, in an amount
not to exceed the Rule 144 volume limitations. If the dollar amount
received by HSC from sales of common stock over any 30 day period is
less than the amount of the monthly installment due as set forth in
paragraph 2 above, the Company shall deliver to HSC, within three
(3) business days of receipt of notice to such effect, such
difference in cash or additional shares of common stock (valued at a
per share conversion rate equal to the median closing price of MR3
common stock for the pervious month), at the Company's option. The
Company shall have the right to review the activity in such account
on a monthly basis to verify sales amounts. In addition, if at the
end of the payment schedule contemplated herein, the Note has not
been paid in full, the Company shall deliver to HSC, either in cash,
or shares, at its option, the amount of any shortfall in principal
and interest paid on the outstanding balance of the Note.
4. Upon issuance of any shares of common stock of the Company as
payment of the Note as set forth above, such shares will have been,
prior to issuance, duly and validly authorized, and will be validly
issued, fully paid and nonassessable, and shall be free and clear of
all encumbrances and restrictions.
5. The Company shall (i) maintain its status as a reporting company
under the 1934 Act, (ii) file with the SEC in a timely manner all
reports and other documents required of the Company under the 1934
Act, and (iii) furnish to HSC upon request (A) a written statement
by the Company that it has complied with the reporting requirements
of the 1934 Act, (B) a copy of the Company's most recent Annual
Report on Form 10-KSB or Quarterly Report on Form 10-QSB, and (C)
such other information as may be reasonably requested in order to
avail HSC of any rule or regulation of the SEC and of any other
securities authority that permits the selling of restricted
securities without registration.
6. Beginning July 1, 2005, the interest rate on the Note will be 5%,
provided that the Company is current in its payments and other
obligations as set forth in paragraph 1 above, and in the Note and
Loan Agreement. If the Company is delinquent in any payment or fails
to meet any other condition in this agreement, Note or Loan
Agreement, such event will constitute a default under the Note and
Loan Agreement, and the penalty interest rate will apply as set
forth the Note.
7. If for any reason HSC is precluded from selling shares as
contemplated by this Agreement because the shares are required to be
registered under any state or federal law, rule or regulation,
including the Securities Act of 1933 and any applicable Blue Sky
Laws, the Company and HSC will enter into the Registration
Agreement, in substantially the form attached hereto as Exhibit A,
and register the shares for re-sale as provided in such agreement.
8. All corporate action on the part of the Company, its officers,
directors and stockholders necessary for the authorization,
execution and delivery of this Agreement and the Registration
Agreement, and the performance of all obligations of the Company
hereunder and thereunder, has been taken, and this Agreement and the
Registration Agreement constitute the valid and legally binding
obligations of the Company, enforceable in accordance with their
terms.
9. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
10. The Note and Loan Agreement are hereby amended as set forth above.
Except as amended by the terms of this Agreement, all other terms of
the Note and Loan Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the day and year first above written.
MR3 SYSTEMS, INC.
By /s/ Xxxxxxx X. Xxxx
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Xxxxxxx X. Xxxx
Chairman
Address: 000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
High Stakes Capital LLC
/S/ XXXXXXXX XXXXXXXXX
----------------------
Address: 00000 Xxxxx Xxxx 0xx Xxxxxx
Xxxx 000
Xxxxxxxx, XX 00000
