EXHIBIT 10
MUTUAL RELEASE AND SETTLEMENT AGREEMENT
This Mutual Release and Settlement Agreement (this "AGREEMENT") is
entered into effective as of the last date of execution below (the "EFFECTIVE
DATE") by and between Medical Discoveries, Inc., a Utah corporation ("MDI") and
Harvest Group, L.L.C., a Utah limited liability company ("HARVEST"),
Hydromedics, Inc., a Utah corporation (formerly known as Advance Sales Company)
("HYDROMEDICS").
R E C I T A L S
A. MDI, MDI Healthcare Systems, Inc., a Nevada corporation and a
wholly-owned subsidiary of MDI ("MHSI"), and Hydromedics entered into that
certain Exclusive Sales Agency Agreement dated as of December 14, 1999 (the
"SALES AGREEMENT"), pursuant to which Hydromedics was to market certain skincare
products of MDI and MHSI.
B. MDI borrowed certain sums of money from Harvest as evidenced by those
certain Promissory Notes dated as of October 27, 1999, December 12, 1999,
January 24, 2000, March 29, 2000, and June 19, 2000 (collectively, the "NOTES"),
copies of which are attached hereto as EXHIBIT A.
C. Harvest and Hydromedics contend that the parties entered into that
certain JV Agreement originally dated as of June 28, 2000 and later dated as of
July 12, 2000 (the "JV AGREEMENT").
D. MDI contends that the JV Agreement was never consummated and the
parties have a dispute as to the relative rights and obligations of each of the
parties thereunder.
E. On December 26, 2000, Harvest filed a demand for arbitration seeking
specific performance of the JV Agreement or damages.
F. MDI has threatened to bring certain counterclaims against Harvest,
Hydromedics and the principals of each. Harvest and Hydromedics maintain MDI has
no basis for any counterclaims.
G. MDI, Harvest and Hydromedics now desire to terminate all obligations
of all parties under the Sales Agreement, the Notes, and the JV Agreement and
enter into a full and final settlement of any and all claims which either of
them has made, could have made, or may in the future make arising out of or in
any way connected with the Sales Agreement, the Notes or the JV Agreement and
all related matters, as well as settle any other existing or potential claims
between them.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, MDI, Harvest and Hydromedics hereby agree as
follows:
1. Convertible Note. Upon receipt of an executed original of this
Agreement, MDI shall deliver to Harvest a convertible promissory note in the
principal sum of Five Hundred Thousand Dollars ($500,000) in the form attached
hereto as EXHIBIT B (the "CONVERTIBLE NOTE").
2. Inventory. Within five (5) business days of the Effective Date,
Harvest will make available for pick-up by MDI all inventories held by Harvest
and Hydromedics (or either of them) of products developed by MDI or MHSI, and
Harvest shall cooperate reasonably with MDI to arrange for a specific time and
location for such pick-up by MDI.
3. Furnishings. Within five (5) business days of the Effective Date,
Harvest will make available for pick-up by MDI all office furniture, equipment
and furnishings held by Harvest and Hydromedics (or either of them) that were
contributed by MDI toward the joint
effort of the parties to consummate the JV Agreement, and Harvest shall
cooperate reasonably with MDI to arrange for a specific time and location for
such pick-up by MDI.
4. Termination of Agreements. The parties hereby terminate the Sales
Agreement, the JV Agreement and any and all other agreements, licenses,
understandings and commitments between them, written or oral, including
specifically, but without limitation, any and all licenses for the sale of
products developed by MDI or its subsidiaries. All such agreements, licenses,
understandings and commitments are of no further force and effect as of the
Effective Date. Notwithstanding any terms to the contrary in any such agreement,
license, understanding or commitment, no provisions, terms or conditions of any
such agreement, license, understanding or commitment shall survive the Effective
Date and neither party shall have any further obligations or liability to the
other thereunder.
5. Satisfaction of Notes. The Notes are hereby deemed satisfied in full
and MDI shall have no further obligations or liability under the Notes or under
any other loans, advances or borrowings from Harvest or Hydromedics, whether or
not documented with promissory notes. Within five (5) business days of the
Effective Date, Harvest shall deliver the original Notes to MDI.
6. Stock Certificates. The parties acknowledge that representatives of
Harvest and/or Hydromedics may have inadvertently included one or more stock
certificates of Hydromedics (the "CERTIFICATES") in file materials delivered to
MDI. MDI hereby represents and warrants to Hydromedics that (i) MDI has made a
diligent search for the Certificates and has been unable to find or recover the
Certificates; (ii) assuming the Certificates were ever in MDI's possession, MDI
believes the Certificates are now lost, stolen or destroyed; and (iii) MDI has
not sold, assigned, transferred, hypothecated, pledged, deposited under any
agreement, or otherwise disposed of the Certificates in whole or in part, or
endorsed or delivered the Certificates to any
person. If MDI ever finds any of the Certificates, MDI shall immediately deliver
the same to Hydromedics.
7. Further Assurances. In case at any time after the Effective Date any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of assignments, bills of sale, instruments and documents)
as the other party reasonably may request.
8. Release by MDI and MHSI. On its own behalf and on behalf of MHSI and
each of their respective successors and assigns, MDI hereby releases, acquits
and forever discharges Harvest, Hydromedics and each of their respective present
and former assigns, predecessors, successors, parents, subsidiaries, affiliates,
partners, members, shareholders, directors, officers, servants, employees
(whether presently employed or formerly employed), attorneys, insurers, agents,
and all other persons, firms, corporations, or organizations to whom and for
whose conduct the parties released hereby are or may be liable, obligated or
responsible, directly or indirectly (collectively referred to hereinafter as the
"HARVEST RELEASEES") from and of any and all actions, causes of action, claims,
demands, rights, damages, costs, losses, expenses, compensation and liabilities
of any kind or nature whatsoever (whether in contract or in tort; whether at law
or equity; whether known or unknown; whether suspected or unsuspected; whether
accrued or unaccrued; whether alleged or unclaimed) for, on account of, or in
any way arising, in whole or in part, from any and all events from the beginning
of time to the Effective Date including, without limitation, the following:
A. Any claim arising from, in any way connected with, or
relating to, either directly or indirectly, the claims asserted,
assertable or which may become assertable in the future related to the
Sales Agreement or the JV Agreement; and
B. Any other claims arising from or relating to, either directly
or indirectly, any acts or omissions of any of the Harvest Releasees,
whether intentional or unintentional, whether related or unrelated,
which MDI contends or may contend have caused it injury, damage and/or
loss of any kind or nature whatsoever, including both personal injury
and property damage.
9. Release by Harvest. On its own behalf and on behalf of its respective
successors and assigns, Harvest hereby releases, acquits and forever discharges
MDI, MHSI and each of their respective present and former assigns, predecessors,
successors, parents, subsidiaries, affiliates, partners, members, shareholders,
directors, officers, servants, employees (whether presently employed or formerly
employed), attorneys, insurers, agents, and all other persons, firms,
corporations, or organizations to whom and for whose conduct the parties
released hereby are or may be liable, obligated or responsible, directly or
indirectly (collectively referred to hereinafter as the "MDI RELEASEES") from
and of any and all actions, causes of action, claims, demands, rights, damages,
costs, losses, expenses, compensation and liabilities of any kind or nature
whatsoever (whether in contract or in tort; whether at law or equity; whether
known or unknown; whether suspected or unsuspected; whether accrued or
unaccrued; whether alleged or unclaimed) for, on account of, or in any way
arising, in whole or in part, from any and all events from the beginning of time
to the Effective Date including, without limitation, the following:
A. Any claim arising from, in any way connected with, or
relating to, either directly or indirectly, the claims asserted,
assertable or which may become assertable in the future related to the
Sales Agreement, the JV Agreement or any of the Notes; and
B. Any other claims arising from or relating to, either directly
or indirectly, any acts or omissions of any of the MDI Releasees,
whether intentional or unintentional, whether related or unrelated,
which Harvest contends or may contend have caused it
injury, damage and/or loss of any kind or nature whatsoever, including
both personal injury and property damage.
10. Release by Hydromedics. On its own behalf and on behalf of its
respective successors and assigns, Hydromedics hereby releases, acquits and
forever discharges the MDI Releasees from and of any and all actions, causes of
action, claims, demands, rights, damages, costs, losses, expenses, compensation
and liabilities of any kind or nature whatsoever (whether in contract or in
tort; whether at law or equity; whether known or unknown; whether suspected or
unsuspected; whether accrued or unaccrued; whether alleged or unclaimed) for, on
account of, or in any way arising, in whole or in part, from any and all events
from the beginning of time to the Effective Date including, without limitation,
the following:
A. Any claim arising from, in any way connected with, or relating
to, either directly or indirectly, the claims asserted, assertable or
which may become assertable in the future related to the Sales
Agreement, the JV Agreement or any of the Notes; and
B. Any other claims arising from or relating to, either directly
or indirectly, any acts or omissions of any of the MDI Releasees,
whether intentional or unintentional, whether related or unrelated,
which Hydromedics contends or may contend have caused it injury, damage
and/or loss of any kind or nature whatsoever, including both personal
injury and property damage.
11. Unknown Matters. MDI, Harvest and Hydromedics understand and agree
that there may be claims and damages with respect to the matters released
herein, the existence of which and the consequences of which are presently
unknown, but which may become known in the future, and which if known at present
may have materially affected their respective decisions to enter into this
Agreement. MDI, Harvest and Hydromedics, nevertheless, intend to and do hereby
release the MDI Releasees and the Harvest Releasees from any and all claims, for
any and
all injuries and damages, whether known or unknown, whether now in existence or
hereinafter to arise, and whether if known at present such claims may have
materially affected their respective decisions to execute this Agreement;
provided, however, that this Agreement does not release claims arising
specifically out of this Agreement or the Convertible Note.
12. Comprehensive Release of Claims. This Agreement is a full release of
each, every and all claims of every kind and nature which MDI, Harvest and
Hydromedics ever had or now have, or may have, which arose, accrued or which may
arise or accrue, from the beginning of time to the present against the MDI
Releasees or the Harvest Releasees. MDI, Harvest and Hydromedics each hereby
represent and warrant, one to the other, that no claim, right, cause of action
or demand is reserved, and the release provided herein waives and releases any
and all claims, damages, demands, costs, expenses, causes of action,
compensation and liability of every kind and nature which MDI, Harvest or
Hydromedics, respectively, may be entitled to or have in the future as a result
of any events which have occurred from the beginning of time to the Effective
Date against the MDI Releasees and the Harvest Releasees.
13. Settlement of Disputed Claims. This Agreement is a compromise of
disputed claims, and the consideration provided for in paragraphs 1-5 above, the
releases provided for in paragraphs 8-10 above, and the other promises set forth
herein, are not intended to, nor should they be, construed as an admission of
liability on the part of any party hereto, both of whom expressly deny liability
to one another. MDI, Harvest and Hydromedics each understand that each is making
the promises to the other set forth herein in lieu of and to avoid the expense
and uncertainty of litigation.
14. Mutual Representations, Warranties, Covenants and Indemnities. MDI
on the one hand and Harvest and Hydromedics on the other hand each hereby
represent, warrant, covenant and indemnify one another as follows:
A. That each of them is the sole holder and owner of the claims
and matters released herein; that no other person or entity has any
interest in the claims and matters released pursuant to this Agreement;
and that neither has, nor will it, assign to any person or party any
claim or matter within the scope of the releases contained herein;
B. That neither has, nor will it, individually or with any other
person or entity, or in any way, file, make, otherwise commence, aid in
any way, prosecute, cause or permit to be prosecuted against the MDI
Releasees or the Harvest Releasees any complaint, lawsuit, charge,
claim, demand, cause of action, obligation, damage or liability
(hereinafter collectively referred to as a "CLAIM") which is the subject
of the releases provided for in this Agreement;
C. That in the event of a breach of the covenants set forth in
subparagraph B of this paragraph, each hereby agrees and consents to the
dismissal or withdrawal, with prejudice, of any such Claim that has been
or may in the future be filed by either or on its behalf. In the event
that either files any Claim within the scope of those matters described
in subparagraph B above, it shall be liable to the other party or
parties against whom the Claim is wrongfully filed and shall indemnify
and save each such party harmless from all costs and expenses,
including, without limitation, attorneys' fees incurred by such party or
its officers, agents, employees, directors and/or any other person
affiliated or associated with such parties, if any, in defending or
responding to any such Claim, regardless of whether such defense or
response is before a local, state, or federal court or administrative
agency, and regardless of who might ultimately be deemed to be the
prevailing party as to any such Claim;
D. That each relies wholly upon its own judgment, belief and
knowledge of the nature, extent and duration of the claims released
herein, and that neither has been
influenced to any extent whatsoever in making this Agreement by any
representation or statement regarding damages or deficiencies, or
regarding any other matters, made by the other, any person or persons
representing the other, or by any attorney or expert employed by the
other.
E. That each has carefully read this Agreement, and all of its
provisions, has received and accepted the advice of its own independent
legal counsel with respect hereto, and has entered into this Agreement
freely and voluntarily intending that it and the parties for whom its
acts be legally bound hereby;
F. That each is a corporation or limited liability company, as
applicable, duly formed and in good standing under the laws of the State
of Utah;
G. That the execution, delivery and performance of this Agreement
by each, and the consummation of the releases and transactions
contemplated hereby, have been duly authorized by all necessary entity
action;
H. That this Agreement has been duly and validly executed and
delivered by each and constitutes the legal, valid and binding
obligation of each; and,
I. That each of the covenants and warranties set forth in this
paragraph are material terms of this Agreement without which the parties
would not have made the promises set forth herein.
15. Enforcement of Release. In any action brought to enforce, construe
or seek damages for breach of this Agreement, or to rescind this Agreement, the
prevailing party shall be entitled to recover its reasonable attorneys' fees,
costs, and expenses of litigation in addition to any other monetary relief or
other amount to which it may be entitled, regardless of whether legal action is
actually commenced or not. The amount recoverable includes, without limitation,
the
preparation of any affirmative claims or defenses, counterclaims, cross-claims
or third-party complaints.
16. Governing Law and Forum Selection. This Agreement shall be governed
by and construed in accordance with the laws of the State of Utah without
reference to any of its conflicts of law provisions. Any action brought to
enforce, construe or seek damages for breach of this Agreement, or to rescind
this agreement, shall be brought exclusively in the state courts of the State of
Utah or in the United States District Court for the District of Utah. Each party
hereto consents to the personal jurisdiction of such courts for the limited
purposes set forth herein.
17. Attorneys' Fees and Costs. Each party hereto shall bear its own
attorneys' fees and costs arising from the actions of its counsel in connection
with this Agreement and all matters and documents referred to herein. This
provision does not, however, apply to attorneys' fees and costs that may be
awarded upon a breach or other violation of this Agreement as specifically
provided for herein. Attorneys' fees and costs may be awarded to the prevailing
party, as provided in paragraph 15 above, notwithstanding a rescission of this
Agreement, and this provision shall be severed from the remainder of this
Agreement in such event.
18. Severability. Any provision of this Agreement, or any portion of any
provision, that is deemed to be illegal or unenforceable or both shall be
severed from this Agreement, without affecting the validity of the remainder of
this Agreement. In such event, all other provisions or parts of provisions of
this Agreement shall remain in full force and effect.
19. Entire Agreement; Successors in Interest. This Agreement and the
Convertible Note and other documents as may be required hereby constitute the
final written expression of all of the terms of the settlement of the claims of
MDI, Harvest and Hydromedics against the MDI Releasees and the Harvest
Releasees, and it is the complete and exclusive statement of the terms of such
settlement. MDI, Harvest and Hydromedics hereby acknowledge this Agreement and
the
Convertible Note and other documents required hereby shall be binding upon and
inure to the benefit of the executors, administrators, personal representatives,
heirs, successors, agents and assigns of each party hereto and each party
released hereby.
20. Counterpart Originals. This Agreement may be executed in counterpart
originals and shall be deemed to be final once each party hereto has executed an
original of this Agreement.
Dated this 28th day of November, 2001.
MEDICAL DISCOVERIES, INC.
By: /s/ Xxxx Xxxxxxxx
--------------------------------
Its: CEO
----------------------------
Dated this 29th day of November, 2001.
HARVEST GROUP, L.L.C.
By: /s/ Xxxxxx Xxxxxx
--------------------------------
Its:
----------------------------
Dated this 29th day of November, 2001.
HYDROMEDICS, INC.
By: /s/ Xxxxxx Xxxxxx
--------------------------------
Its:
----------------------------
EXHIBIT A
[TO BE PROVIDED UPON REQUEST]
EXHIBIT B
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (the "ACT"), OR QUALIFIED UNDER ANY STATE
SECURITIES LAWS AND HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT WITH
A VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF. THE
SECURITIES MAY NOT BE SOLD, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS THEY ARE
REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE COMPANY
RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER CONCURRED IN BY COUNSEL FOR THE
COMPANY THAT REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
MEDICAL DISCOVERIES, INC.
CONVERTIBLE NOTE
$500,000 Salt Lake City, Utah
November ________, 2001
Medical Discoveries, Inc., a Utah corporation (the "Company"), for value
received, hereby promises to pay to Harvest Group, L.L.C., a Utah limited
liability company (the "Holder"), the principal amount of $500,000, without
interest, in accordance with the following terms and conditions:
1. Due Date. The outstanding principal balance will be due and payable
on July 8, 2002, (the "Due Date") unless converted in accordance with the terms
of Section 4.
2. Prepayment. This Convertible Note may be prepaid in whole or in part
by the Company at any time without penalty. Any prepayment of this Convertible
Note shall be made upon no less than three days' prior written notice from the
Company to the Holder, which notice shall indicate the place designated and the
date fixed for such prepayment. At such place and on such date, the Company
shall make payment to the Holder of the principal amount of this Convertible
Note intended to be prepaid and, in the case of a prepayment in full, the Holder
shall surrender this Convertible Note to the Company.
3. Prohibition on Certain Transfers of Patented Technologies. Until the
earlier to occur of (i) the date the Company pays in full the principal sum due
hereunder or (ii) the Due Date, the Company shall not sell, assign, encumber,
hypothecate or otherwise transfer (any such sale, assignment, encumbrance,
hypothecation or transfer herein a "Transfer") any of the Company's patented
technologies unless, pursuant to such Transfer, the Company receives
consideration sufficient to repay any principal balance then outstanding on this
Convertible Note and does so repay such balance simultaneously with and as a
condition of closing such Transfer. Notwithstanding the foregoing, the Company
is permitted to license any and all of its technologies (any such license herein
a "License Transaction"), at any time, on any terms satisfactory to the Company,
in its sole and absolute discretion, so long as all of the net profits (as
determined by the Company in its reasonable discretion) to the Company of such
License Transaction are applied toward this Convertible Note simultaneously with
and as a condition of closing such License Transaction; provided, however, that
the Company must obtain the written consent of the Holder, which consent shall
not be unreasonably withheld or delayed, prior to agreeing to any License
Transaction that (y) is for a duration of longer than one year and cannot be
terminated by the Company within one years' notice to the licensee; or (z) is
exclusive to the licensee and is for a duration of longer than one year.
4. Conversion.
(a) If the principal sum due hereunder is not paid in full on or
before the Due Date, then, subject to the procedures of Section 4(c), the
principal sum outstanding shall convert to a number of shares of the Company's
common stock equal to a percentage of the total number of shares then issued and
outstanding (taking into account the issuance of shares pursuant to this Section
4(a)), on a fully-diluted basis (including any unexercised, outstanding stock
options or other rights to acquire stock), as follows:
Principal Sum Percentage of Common
Outstanding Stock Issued and Outstanding
-------------- ----------------------------
$1-- 400,000 20%
$400,001-- 450,000 25%
$450,001-- 500,000 30%
For example, if , as of the Due Date, the Company has 33,000,000 shares
of common stock issued and outstanding, 2,000,000 options outstanding and not
yet exercised, and the principal sum of $410,000 remains unpaid as of the
expiration of the Due Date, this Convertible Note will convert to 11,666,666
([35,000,000/(1- 0.25)] - 35,000,000) shares of common stock of the Company.
(b) Notwithstanding the foregoing, the Holder may, in its sole and
absolute discretion, suspend the automatic conversion of this Convertible Note
beyond the Due Date by providing written notice to the Company of such election
no fewer than thirty (30) days prior to the Due Date. If the Holder suspends the
conversion of this Convertible Note, the conversion shall remain suspended
indefinitely unless and until the Holder elects to convert this Convertible Note
by giving the Company at least thirty (30) days' prior written notice of such
election. During any such period of suspension of the automatic conversion of
this Convertible Note, the Company may pay the principal sum due hereunder in
whole or in part.
(c) Upon conversion of this Convertible Note, the outstanding
principal balance will be converted automatically into the right to receive
shares of common stock of the Company without any further action by the Holder
and whether or not this Convertible Note is surrendered to the Company or its
transfer agent. The Company will not be obligated to issue certificates
evidencing the shares of common stock unless this Convertible Note is either
delivered to the Company or the Holder notifies the Company that this
Convertible Note has been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with this Convertible Note. The Company will, as soon as
practicable after such delivery or execution, as applicable, issue and deliver
to the Holder a certificate or certificates for such common stock to which the
Holder shall be entitled and a check payable to the Holder in the amount of any
cash amounts payable as the result of a conversion into fractional shares of
common stock.
5. Assignment. This Convertible Note is not assignable, negotiable, or
transferable by the Holder.
6. Defaults and Remedies.
(a) Failure by the Company to pay the amount due hereunder shall not
constitute an event of default and the Holder's sole remedy upon such failure to
pay shall be the right to receive common stock under the terms of the conversion
described in Section 4.
(b) If the Company violates Section 3, the Holder shall have the
right to convert this Convertible Note into common stock of the Company pursuant
to the terms of Section 4 by giving notice thereof to the Company. Such
conversion shall be effective as of the date of such notice; provided, however,
that such conversion shall not be effective later than the Due Date. Such right
of conversion shall be the Holder's sole remedy upon a violation by the Company
of Section 3.
(c) If the Company fails to timely issue stock certificates to the
Holder upon conversion of this Convertible Note and if the Holder obtains a
judgment against the Company for damages resulting from such breach, the Company
shall consent to an award of prejudgment interest on any such damages at the
rate of eighteen percent (18%) per annum.
7. Representations and Warranties of the Holder. The Holder represents
and warrants to the Company as follows:
(a) Investment Intent. The Holder is acquiring this Convertible Note
and any securities acquired hereunder for investment for the Holder's own
account and not with a view to, or for resale in connection with, any
distribution thereof. The Holder understands that the Securities have not been,
and will not be, registered under the Securities Act of 1933, as amended (the
"Act"). The Holder understands that the Securities have not been registered
under the Act by reason of a specific exemption from the registration provisions
of the Act that depends upon, among other things, the bona fide nature of the
investment intent as expressed herein. The Holder understandings and agrees that
the Securities shall not be sold, pledged, hypothecated or otherwise transferred
unless registered under the Act and applicable state securities laws or an
exemption from registration is available and that each certificate or other
document evidencing or representing the Securities shall be stamped or otherwise
imprinted with a legend in substantially the following form:
THE SECURITIES OF THE COMPANY EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
VARIOUS APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR ASSIGNED OR A SECURITY INTEREST CREATED
THEREIN, UNLESS THE PURCHASER, TRANSFEREE, ASSIGNEE, PLEDGEE OR HOLDER
OF SUCH SECURITY INTEREST COMPLIES WITH ALL STATE AND FEDERAL SECURITIES
LAWS (I.E., SUCH SHARES ARE REGISTERED UNDER SUCH LAWS OR AN EXEMPTION
FROM REGISTRATION IS AVAILABLE THEREUNDER) AND UNLESS THE SELLER,
TRANSFEROR, ASSIGNOR, PLEDGOR OR GRANTOR OF SUCH SECURITY INTEREST
PROVIDES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY
THAT THE TRANSACTION CONTEMPLATED WOULD NOT BE IN VIOLATION OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.
(b) Rule 144. The Holder acknowledges that the Securities must be
held indefinitely unless subsequently registered under the Act, or unless an
exemption from such registration is available. The Holder is aware of the
provisions of Rules 144 and 144A promulgated under the Act that permit limited
resale of securities purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, in most
circumstances (i) the availability of certain current public information about
the Company, (ii) the resale occurring not less than one (1) year after a party
has purchased and fully paid for the shares, (iii) the sale being effected
through a "broker's transaction" or in transactions directly with a "market
maker" (as provided by Rule 144(f)), and (iv) the number of shares being sold
during any three month period not exceeding specified limitations.
(c) Receipt of Public Filings. The Holder acknowledges receipt of the
Company's Annual Report on Form 10-KSB for the year ending December 31, 2000,
and its Quarterly Reports on Form 10-QSB for the periods ending March 31, 2001,
June 30, 2001 and September 30, 2001.
(d) Brokers or Finders. The Holder has not incurred, and will not
incur, directly or indirectly, as a result of any action taken by Holder, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Convertible Note or any transactions
contemplated hereby.
(e) Speculative Investment. The Holder is aware that an investment in
the Securities is highly speculative and subject to substantial risks. The
Holder has adequate means of providing for its current needs and possible
contingencies, and is able to bear the high degree of economic risk of this
investment, including, but not limited to, the possibility of the complete loss
of the Holder's entire investment, and the limited transferability of the
Securities, which may make the liquidation of this investment impossible for the
indefinite future.
(f) State of Residence. The Holder has its principal place of
business in and is domiciled in the State of Utah and has no present intention
of relocating to any other state or jurisdiction.
8. Governing Law. This Convertible Note shall be governed by and
construed according to the laws of the State of Utah.
9. Notices. All notices required or permitted to be given under this
Convertible Note shall be in writing. Notices may be served by certified or
registered mail, postage paid with return receipt requested; by private courier,
prepaid; by telex, facsimile, or other telecommunication device capable of
transmitting or creating a written record; or personally. Mailed notices shall
be deemed delivered five days after mailing, properly addressed and return
receipt requested. Couriered notices shall be deemed delivered when delivered as
addressed, or if the addressee refuses delivery, when delivery is refused. Telex
or telecommunicated notices shall be deemed delivered when receipt is either
confirmed by confirming transmission equipment or acknowledged by the addressee
or its office. Personal delivery shall be effective when accomplished. Unless a
party changes its address by giving notice to the other party as provided
herein, notices shall be delivered to the parties at the following addresses:
If to the Company:
Medical Discoveries, Inc.
000 Xxxxxxxxx Xxxx
Xxxx Xxxxx, XX 00000
Attn: Xxxx Xxxxxxxx, CEO
Fax: (000) 000-0000
with a copy to:
Xxxxxxx X. Xxxxx
Stoel Rives LLP
000 X. Xxxxxxx Xxxx., Xxxxx 0000
Xxxxx, XX 00000
Fax: (000) 000-0000
If to the Holder:
Harvest Group, L.L.C.
c/o Xxxxxx Xxxxxx
00 Xxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
with a copy to:
Xxxxxxx X. Xxxxxxxxxxx
Cohne, Xxxxxxxxx & Xxxxx
000 Xxxx 000 Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000
Fax: (000) 000-0000
10. Attorneys' Fees. If any legal action or other proceeding is brought
for the enforcement of this Convertible Note, the prevailing party or parties
shall be entitled to recover reasonable attorneys' fees or other costs incurred
in connection with such action or proceeding and in any petition for appeal or
appeal therefrom, in addition to any other relief to which it or they may be
entitled.
IN WITNESS WHEREOF, the Company has caused this Convertible Note to be
issued as of the date first written above.
COMPANY:
MEDICAL DISCOVERIES, INC.
By:_________________________________
Its:________________________________
Accepted and Agreed:
HOLDER:
HARVEST GROUP, L.L.C.
By:_________________________________
Its:________________________________
