RELEASE AND SETTLEMENT AGREEMENT
EXHIBIT
10.1
THIS
RELEASE AND SETTLEMENT AGREEMENT (this “Agreement”)
is
entered into as of October 19, 2007 by and between MEDICAL DISCOVERIES, INC.,
a
Utah corporation (the “Company”),
and
MERCATOR MOMENTUM FUND, LP, MONARCH POINTE FUND, LTD., and MERCATOR MOMENTUM
FUND III, LP, each a private investment entity (the foregoing three investment
funds are hereinafter collectively referred
to as “MAG”).
RECITALS
WHEREAS,
on or about October 2004, the board of directors of the Company (the
“Board”)
adopted a resolution establishing the rights, preferences, privileges and
restrictions of the Company’s Series A Convertible Preferred Stock (the
“Series
A Preferred Stock”);
WHEREAS,
the Company thereafter filed with the Secretary of State of the State of Utah
(the “Utah
SOS”)
a
Certificate of Designations of Preferences and Rights of the Series A Preferred
Stock (the “Certificate”),
which
Certificate designated the rights of the holders of the Series A Preferred
Stock
with respect to such preferred stock;
WHEREAS,
in connection with an initial round of preferred equity financing, the Company
issued to MAG shares of the Series A Preferred Stock pursuant to the terms
and
conditions of Subscription Agreements each dated October 18, 2004 (the
“Subscription
Agreements”);
WHEREAS,
pursuant to the Certificate, MAG had the right to convert shares of the Series
A
Preferred Stock at a Conversion Price (as defined in the Certificate) equal
to
85% of the Market Price (as defined in the Certificate) except that if an Event
of Default (as defined in the Subscription Agreements) occurs, the conversion
price is reduced to 75% of the Market Price, subject to a Floor Price (as
defined in the Certificate) of $0.05 per share;
WHEREAS,
on or around March 2005, in connection with a subsequent round of equity
financing pursuant to which the Company issued to MAG additional shares of
the
Series A Preferred Stock, the Company and MAG agreed to amend the Certificate
(the “Amendment”)
to
delete all references therein to a Floor Price, which Amendment was to be filed
with the Utah SOS in accordance with Utah general corporate law;
WHEREAS,
the Company failed to file the Amendment with the Utah SOS and, accordingly,
the
Series A Preferred Stock conversion price is still limited to the $0.05 per
share Floor Price;
WHEREAS,
the Company is in default of the Subscription Agreements for failing to keep
the
Registration Statement (as defined in the Subscription Agreements)
effective;
WHEREAS,
the parties hereto desire to reach an agreement in settlement of any and all
past, present, future, actual, potential and unknown losses, costs, expenses
and
damages that MAG may have suffered as result of the Company’s failure to file
the Amendment and to keep the Registration Statement effective (all such losses,
expenses and damages, the “Losses”);
WHEREAS,
MAG owns all of the issued and outstanding shares of the Series A Preferred
Stock; and,
WHEREAS,
the parties hereto now desire to enter into a full and complete release and
settlement with respect of the Losses, subject to the terms and conditions
of
this Agreement.
Agreement
NOW,
THEREFORE, upon these premises, which are incorporated herein by reference,
and
for and in consideration of the mutual promises and covenants set forth herein
and other good and valuable consideration, the receipt and adequacy of which
are
hereby acknowledged, it is hereby agreed as follows:
1. Release
of Claims.
Each of
the MAG entities, for themselves, their future, present, and former employees,
agents, representatives, consultants, attorneys, fiduciaries, officers,
directors, successors, assigns and subsidiary entities (together, the
“MAG
Parties”)
do
hereby irrevocably release, remise, acquit, and forever discharge the Company,
including all of its future, present, and former employees, agents,
representatives, consultants, attorneys, fiduciaries, servants, officers,
directors, managers, partners, predecessors, successors and assigns, subsidiary
and parent entities (together, the “Company
Parties”),
from
any and all actions and causes of action, judgments, execution, suits, debts,
past, present, future and unknown claims, demands, liabilities, obligations,
damages that could be brought by the MAG Parties, and expenses of any and every
character, known or unknown, direct and/or indirect, at law or in equity, or
whatsoever kind or nature, in connection with, relating to or otherwise arising
out of the Losses and the Company’s failure to file the Amendment. The Company
acknowledges that the releases and agreements in this paragraph are limited
to
the Losses and to damages and other causes of actions related to the Company’s
failure to file the Amendment.
2. Covenant
Not to Xxx.
MAG
hereby
covenants and agrees that neither of them will at any time, directly or
indirectly, initiate, maintain, or prosecute, or in any way knowingly aid in
the
initiation, maintenance, or prosecution, of any past,
present, future and unknown claim,
demand, or cause of action, at law, in equity, or otherwise, against the Company
Parties related to the Losses or the
Company’s failure to file the Amendment.
3. Consideration.
In
consideration of the releases, promises and covenants of MAG set forth herein,
the Company hereby issues to MAG warrants (the “Warrants”)
to
purchase 17 million shares of the Company’s common stock, no par value, at an
exercise price of $0.01 per share for a term of 10 years from the date of
issuance of the Warrants. Warrants to purchase the 17 million shares of common
stock shall be allocated as follows: Warrants for 5,122,100 shares of Common
Stock to Mercator Momentum Fund, L.P.; Warrants for 6,050,300 shares of Common
Stock to Mercator Momentum Fund III, L.P.; Warrants for 5,827,600
shares
of
Common Stock to Monarch Pointe Fund, Ltd. The form of the Warrants is attached
hereto as Exhibit
A.
4. No
Admission of Liability.
By
entering into this Agreement, neither party hereto admits the allegations or
contentions of the other party with respect to the Losses, the Company’s failure
to file the Amendment, and related matters, and each party is entering into
this
Agreement for the sole purpose of resolving this matter and avoiding the time
and expense incident to protracted litigation.
5. Entire
Agreement.
This
Agreement constitutes the sole, complete and entire agreement and understanding
of the parties concerning the matters contained herein and may not be altered,
modified, or changed in any manner except by a writing duly executed by the
parties. No conditions precedent to the effectiveness of this Agreement exist,
other than as expressly provided for herein. There are no oral or written
collateral agreements. All prior discussions and negotiations have been and
are
merged, integrated into and superseded by this Agreement.
6. Severability.
The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provisions of this Agreement,
which shall remain in full force and effect. If any covenants or provisions
of
this Agreement are determined to be unenforceable by reason of their extent,
duration, scope, or otherwise, then the parties contemplate that the court
making such determination shall reduce such extent, duration, scope, or other
provision and enforce them in their reduced form for all purposes contemplated
by this Agreement.
7. Survival.
The
representations, warranties, covenants, and agreements of the respective parties
set forth herein shall survive the date of the consummation of the transaction
contemplated in this Agreement.
8. Notices.
Any
notice, demand, request, or other communication under this Agreement shall
be in
writing and shall be deemed to have been given on the date of service if
personally served or by facsimile transmission (if receipt is confirmed by
the
facsimile operator of the recipient), or delivered by overnight courier service,
or on the third day after mailing if mailed by certified mail, return receipt
requested, addressed as follows:
| If to the Company, as follows: | Medical Discoveries, Inc. | |||
|
0000
X. Xxxxxxx Xxxx, Xxxxx 0000,
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
|
||||
| If to MAG, as follows: | Mercator Momentum Fund LP | |||
|
Mercator
Momentum Fund III, LP
Monarch
Pointe Fund, Ltd.
c/o
MAG Capital LLC
000
Xxxxxx Xxxxxx, Xxxxx 0000
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
|
||||
or
such
other addresses and facsimile numbers as shall be furnished in writing by any
party in the manner for giving notices hereunder, and any such notice, demand,
request, or other communication shall be deemed to have been given as of the
date so delivered or sent by facsimile transmission (if receipt is confirmed
by
the facsimile operator of the recipient), three days after the date so mailed,
or one day after the date so sent by overnight delivery.
9. Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
10. Relief.
Any
party’s breach or threatened breach of any covenant contained in this Agreement
will cause such damage to the other party as will be irreparable, and for that
reason, each party agrees that the other shall be entitled as a matter of right
to an injunction from any court of competent jurisdiction restraining any
further violation of such covenants by such other party. The right to injunctive
relief shall be cumulative and in addition to all other remedies, including,
specifically, recovery of damages.
11. Attorneys’
Fees.
In the
event that any party institutes any action or suit to enforce this Agreement
or
to secure relief from any default hereunder or breach hereof, the non-prevailing
party shall reimburse the prevailing party for all costs, including reasonable
attorneys’ fees, incurred in connection therewith and in enforcing or collecting
any judgment rendered therein, including such costs which are incurred in any
bankruptcy or appellate proceeding.
12. Jurisdiction
and Venue.
Any
judicial proceeding brought against any of the parties hereto, with respect
to
the Agreement, shall be brought in any court of competent jurisdiction in Los
Angeles, California, irrespective of where such party may be located at the
time
of such proceeding, and by execution and delivery of the Agreement, each of
the
parties hereto hereby consents to the jurisdiction and venue of such court
and
waives any defense or opposition to such jurisdiction and venue.
13. Governing
Law.
This
Agreement shall be governed by and construed under and in accordance with the
laws of the State of California, excluding the laws respecting choice or
conflicts of law.
14. Additional
Documents.
Each
party shall, at any time and from time to time, execute and deliver to the
other
party all other and further instruments necessary or convenient to effectuate
the purpose and intent of this Agreement.
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed,
individually or by their respective officers, hereunto duly authorized.
MEDICAL
DISCOVERIES, INC.
By:/s/
_________________________
Xxxxx
X.
Xxxxxx, Chairman of the Board
| MERCATOR MOMENTUM FUND, LP | ||
| |
|
|
| By:/s/ | ||
|
Xxxxx Xxxxxxxxx, General Partner & Manager |
||
| MERCATOR MOMENTUM FUND III, LP | ||
| |
|
|
| By:/s/ | ||
|
Xxxxx Xxxxxxxxx, General Partner & Manager |
||
| MONARCH POINTE FUND, LTD. | ||
| |
|
|
| By:/s/ | ||
|
Xxxxx Xxxxxxxxx, General Partner & Manager |
||
