LOAN AND SECURITY AGREEMENT By and Between MERCATOR MOMENTUM FUND III, LP As Lender And MEDICAL DISCOVERIES, INC., As Borrower Dated as of September 7, 2007
Exhibit
10.1
By
and
Between
MERCATOR
MOMENTUM FUND III, LP
As
Lender
And
MEDICAL
DISCOVERIES, INC.,
As
Borrower
Dated
as
of September 7, 2007
This
LOAN
AND SECURITY AGREEMENT is made as of September 7, 2007 (the "Loan
Agreement"),
by
and Mercator Momentum Fund III, LP, a California limited partnership (together
with each of its successors, assigns and designees, the "Lender"),
as
lender, and MEDICAL DISCOVERIES, INC., a Utah corporation ("Borrower"),
as
borrower, with reference to the following facts and circumstances:
RECITALS
A. Borrower
desires that Lender make available to Borrower a secured term credit facility
(the "Loan")
in the
amount of One Million Dollars ($1,000,000) (the "Loan
Amount").
B. The
Loan
shall be evidenced by, among other things, secured promissory notes, in
the form
of Exhibit
A
attached
hereto, in the aggregate principal amount not to exceed One Million Dollars
($1,000,000) and executed by Borrower in favor of Lender (together with
all
renewals, rearrangements, replacements, modifications, substitutions, and
extensions thereof, each, a “Note”
and,
collectively, the “Notes”).
C. Borrower
may draw on the Loan at such times as specified in the draw-down schedule
attached hereto as Exhibit
C
in
accordance with that certain letter agreement entitled the Permitted Payments
by
Medical Discoveries, Inc., dated of even date herewith (the “Letter
Agreement”)
attached hereto as Exhibit
B
among
Lender, Borrower and the Emmes Group Consulting LLC, a California limited
liability company (the “Advisors”).
D. As
a
condition precedent to making the Loan to Borrower, Lender requires, among
other
things, that Borrower grant to Lender a first priority fully perfected
security
interest in the Collateral (as defined in Section 6) of Borrower.
E. Lender
has agreed to advance the Loan Amount to Borrower, and Borrower has agreed
to
borrow the Loan Amount from Lender, on the terms and conditions contained
in
this Loan Agreement, the Note and the Letter Agreement (collectively, the
“Loan
Documents”).
AGREEMENT
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged by the parties, the parties agree as
follows:
Section
1. The
Loan.
1.1 Agreement
to Lend.
In
reliance upon the representations and warranties contained herein and subject
to
compliance by Borrower with the terms and conditions of this Loan Agreement,
Lender hereby agrees to loan to Borrower an amount not to exceed the Loan
Amount, evidenced by the Notes, on the terms and conditions set forth
herein.
1.2 Interest
on the Principal Indebtedness.
Interest on the outstanding principal indebtedness of the Loan shall accrue
at
the rate and be payable in the manner and at the times set forth in the
Notes.
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1.3 Manner
of Payment.
All
payments hereunder or any other Loan Document shall be made in accordance
with
the provisions hereof or thereof without setoff or counterclaim as against
the
Lender, in lawful money of the United States of America,
free and clear of and without deduction for any taxes, fees or other charges
of
any nature whatsoever imposed by any taxing authority.
1.4
Consideration
for Loan.
Lender
and two affiliated investment funds currently own warrants to purchase
the
following number of shares of Common Stock: (i) Lender owns warrants to
purchase
9,360,701 shares of Common Stock; (ii) Mercator Momentum Fund, L.P. owns
warrants to purchase up to 13,516,777 shares of Common Stock; and (iii)
Monarch
Pointe Fund, Ltd. owns warrants to purchase up to 4,575,495 shares of Common
Stock (the foregoing warrants are herein collectively referred to as the
“Outstanding Warrants”). Each of the Outstanding Warrants has an exercise price
of $0.1967 per share. In consideration for agreeing to make the Loan and
for the
other agreements made by Lender hereunder, Borrower and Lender agree that,
concurrently with the execution of this Agreement and the funding of the
first
$250,000 advance under the Loan, (a) all of the Outstanding Warrants are
being
returned to Borrower and cancelled by Borrower, and (b) Borrower is issuing
to
the holders of the Outstanding Warrants new warrants (the “New Warrants”) to
purchase the same number of shares as the Outstanding Warrants. The New
Warrants
have an exercise price of $0.01 per share, permit the holder to exercise
the New
Warrants on a “cash-less” exercise basis, and have an expiration date of
September 30, 2013. The form of the New Warrants is attached hereto as
Exhibit
D.
Section
2. Disbursement
of Loan Proceeds.
2.1 Funding
of Disbursement. Upon
the
fulfillment of all the conditions set forth in this Section 2 to the
disbursement of the proceeds of the Loan, or the waiver of any such conditions
in writing, and the delivery of an executed Borrowing Certificate (as defined
in
and pursuant to the terms of the Letter Agreement) and executed Note in
conformity with the draw-down limit amounts set forth in Exhibit B,
Lender shall make disbursements to or at the direction of Borrower up to
the
Loan Amount.
2.2 Conditions
Precedent to Disbursement of Loan Proceeds.
The
obligation of Lender to disburse to Borrower the proceeds of the Loan pursuant
to the terms hereof shall be subject to the fulfillment of the following
conditions precedent:
(a) The
representations and warranties contained in Section 3 of this Agreement
or
otherwise made on behalf of Borrower in connection with the Loan shall
be true
and correct in all material respects.
(b) A
Note,
duly executed and delivered by Borrower;
(c) A
Borrowing Certificate, duly executed and delivered by Borrower, and approved
in
accordance with the Letter Agreement;
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(d) One
or
more UCC-1 Financing Statements covering the Collateral duly executed by
Borrower, and the assignment and delivery of such Collateral as Lender
may
reasonably request;
and
(e) Such
other documents, instruments and assurances as Lender may request in its
reasonable discretion in order to effect fully the purposes of this Loan
Agreement.
(f) Trading
in Borrower’s common stock (the “Common
Stock”)
shall
not have been suspended by the Securities and Exchange Commission (the
“Commission”),
the
Common Stock shall be listed for trading on a public securities trading
system
or exchange, including the Pink Sheets, the Over-the-Counter Bulletin Board
(the
“OTCBB”),
the
Nasdaq Capital Market, the Nasdaq Global Market, or any exchange.
(g) The
warrants issued in 2004 to the purchasers of Borrower’s currently issued and
outstanding shares of Series A Convertible Preferred Stock Offering (the
“2004
PIPE Investors”)
shall
have received from Borrower duly executed amended warrants to purchase
shares of
Common Stock, which amended warrants lower the exercise price to $0.01
per share
and extend the expiration date to September 30, 2013.
(h) Lender
shall have received from Borrower (i) a copy of the executed certain Share
Exchange Agreement between Borrower, ▇▇▇▇▇▇▇
▇▇▇▇▇▇, and Mobius Risk Group LLC, regarding the purchase by Borrower of
all of
the outstanding equity interests of Global Clean Energy Holdings, LLC,
a
Delaware limited liability company (“Global”),
(ii)
written confirmation that the transactions contemplated by the Share Exchange
Agreement have been consummated, (iii) written confirmation that Borrower
has
commenced a
financial audit by its certified public accountant for the fiscal year
ended
December 31, 2006 and the preparation of Borrower’s financial statements for the
fiscal year ended December 31, 2006 in accordance with general accepted
accounting principles (“GAAP”),
and
(iv) written confirmation that Borrower has commenced the preparation of
the
delinquent annual and quarterly reports required to be filed by it under
the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”),
including pursuant to Sections 13(a) or 15(d) of the Exchange Act (the
“SEC
Reports”).
Section
3. Representations
and Warranties of Borrower.
As an
inducement to the Lender to enter into the Loan Documents and to make the
Loan
as provided herein, Borrower represents and warrants to the Lender that
as of
the Closing Date, each of the following representations and warranties
shall be
true and correct in all material respects:
3.1 Due
Authorization; Organizational Documents.
(a) Borrower
(i) is a corporation duly formed, validly existing, in good standing and
qualified to do business under the laws of the State of Utah, and is duly
qualified and in good standing in each jurisdiction in which the character
of
its business makes such qualification necessary, or, if not so qualified,
the
failure to so qualify will not have a materially adverse effect upon its
financial condition, operation
or business (a “Material
Adverse Effect”);
(ii)
Borrower has the requisite corporate power and authority to own its properties
and to carry on its businesses as now conducted; and (iii) Borrower has
the
requisite corporate power and authority to make and carry out this Loan
Agreement, and each of the Loan Documents.
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(b) True,
correct and complete copies of the organizational documents of Borrower,
including any and all amendments thereto, have been delivered by Borrower
to
Lender.
3.2 Loan
Agreement, Note and Loan Documents Authorized.
The
execution, delivery and performance of the Loan Documents by Borrower,
are duly
authorized and do not require the consent or approval of any governmental
body
or other regulatory authority; are not in contravention of or conflict
with any
law or regulation or any term or provision of its organizational documents;
and
the Loan Documents are valid and binding obligations of Borrower enforceable
in
accordance with their terms.
3.3 Collateral.
(a) Borrower
is the sole owner of its rights in the Collateral, free and clear of any
liens
and is fully authorized to grant the Security Interest in and to pledge
the
Collateral. There is not on file in any governmental or regulatory authority,
agency or recording office an effective financing statement, security agreement
or transfer or any notice of any of the foregoing covering or affecting
any of
the Collateral. So long as this Loan Agreement and Note shall be in effect,
Borrower shall not execute and shall not authorize the filing of in any
such
office or agency any such financing statement or other document or instrument
(except to the extent filed or recorded in favor of Lender pursuant to
the terms
of this Loan Agreement) without the prior written consent of
Lender.
(b) Borrower
represents and warrants that it has no place of business or offices where
its
respective books of account and records are kept (other than temporarily
at the
offices of its attorneys or accountants) or places where the Collateral
is
stored or located, other than at its offices at (i) ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇,
#▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and (ii) ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
(c) Borrower
shall at all times maintain its books of account and records relating to
the
Collateral at its principal place of business in Utah and may not relocate
such
books of account and records unless it delivers to Lender at least 30 days
prior
to such relocation (i) written notice of such relocation and the new location
thereof (which must be within the United States) and (ii) evidence that
appropriate financing statements and other necessary documents have been
filed
and recorded and other steps have been taken to perfect the Security Interest
to
create in favor of each of Lender a valid, perfected and continuing first
priority lien in the Collateral.
(d) Borrower
has no knowledge of any claim that any of the Collateral or Borrower’s use of
any Collateral violates the rights of any third party. There has been no
adverse
decision of which Borrower is aware as to Borrower’s exclusive (or nonexclusive,
as the case may be) rights to use the Collateral in any jurisdiction, and,
to
the knowledge of Borrower there is no proceeding involving said rights
pending
or threatened before any court, judicial body, administrative or regulatory
agency, arbitrator or other governmental authority.
(e) This
Loan
Agreement creates in favor of the Lender a valid security interest in the
Collateral, securing the payment and satisfaction of the Obligations (as
defined
in Section 6), and, upon making all applicable filings,
a
perfected first priority security interest in the Collateral. No
authorization or approval of or filing (other than the filings referred
to in
the immediately preceding sentence) with or notice to any governmental
authority
or regulatory body is required either: (i) for the grant by Borrower of,
or the
effectiveness of, the Security Interest granted hereby or for the execution,
delivery and performance of this Loan Agreement by Borrower or (ii) for
the
perfection of or exercise by Lender of its rights and remedies
hereunder.
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(f) On
the
date of execution of this Loan Agreement, Borrower authorizes each Lender
to
file one or more financing statements under the UCC with respect to the
Security
Interest for filing in the States of Utah, Washington and Texas, and in
such
other jurisdictions as Lender deem necessary.
(g) Borrower
shall at all times maintain the Security Interest provided for hereunder
as a
valid and perfected first priority security interest in the Collateral
in favor
of Lender and insure that such Security Interest remains senior to all
existing
and hereafter created security interests and liens. Borrower shall safeguard
and
protect all Collateral. Borrower hereby agrees to defend the same against
any
and all persons.
(h) Borrower
will not
sell, transfer, lease or otherwise dispose of any of the Collateral without
the
prior written consent of Lender. Notwithstanding the foregoing, Lender
here
authorize Borrower to complete the sale of its rights to that certain topical
aromatase inhibitor cream that is has agreed to sell Eucodis Pharmaceuticals
Forschungs - und Entwicklungs GmbH, an Austrian company, pursuant to the
July 6,
2007 Sale and Asset Purchase Agreement (the “Eucodis
Sale”).
(i) Borrower
shall keep and preserve the tangible Collateral in good condition, repair
and
order, and shall not knowingly operate or locate any such Collateral (or
cause
to be operated or located) in any area excluded from insurance coverage
unless,
in each case, where the failure to comply with the foregoing provisions
does not
result in an adverse
effect on the value of the Collateral or on Lender’s security interest
therein.
(j) Borrower
shall, within 10 days of obtaining knowledge thereof, advise Lender, in
sufficient detail, of any substantial change in all or any material portion
of
the Collateral, and of the occurrence of any event which would have a material
adverse effect on the value of the Collateral or on Lender’s security interest
therein.
(k) Borrower
shall permit Lender and its representatives and agents upon prior written
consent to inspect the Collateral at any time during normal business hours,
and
to make copies of records pertaining to any material item of Collateral
as may
be reasonably requested by Lender from time to time.
(l) Borrower
shall promptly notify Lender in sufficient detail upon becoming aware of
any
attachment, garnishment, execution or other legal process levied against
any
Collateral and of any other information received by Borrower that reasonably
would be expected to have an adverse effect on the value of the Collateral,
the
Security Interest or the rights and remedies of Lender hereunder.
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(m) Borrower
shall not use or permit any Collateral to be used unlawfully or in violation
of
any provision of this Agreement or
any
applicable statute, regulation or ordinance or any policy of insurance
covering
the Collateral where violation is reasonably likely to have a material
adverse
effect on Lender’s rights in the Collateral or Lender’s ability to foreclose on
the Collateral.
(n) Borrower
shall not grant to any person or entity any rights or interest in or to
any of
the Collateral.
3.4 Change
in Name.
Borrower shall notify Lender of any change in Borrower’s name or identity within
30 days of such change.
3.5 No
Conflict.
The
execution, delivery and performance of the Loan Documents will not breach
or
constitute a default under any agreement, indenture, undertaking or other
instrument to which Borrower is a party or by which it or any of its properties
may be bound or affected, and, other than in favor of Lender, such execution,
delivery and performance will not result in the creation or imposition of (or
the obligation to create or impose) any lien, charge or encumbrance on,
or
security interest in, any of its properties pursuant to any of the
foregoing.
3.6 No
Litigation.
Except
as
disclosed to Lender in writing, there is no litigation or other proceedings
pending or, to the knowledge of Borrower, threatened against or
affecting it, or its properties or the Collateral and
Borrower is not in default with respect to any order, writ, injunction,
decree
or demand of any court or other governmental or regulatory
authority.
3.7 Consents.
Except
for the filing of the UCC-1 Financing Statements, no consents, approvals,
filings, permits or notices of, from,
with or to any person or entity are required on the part of Borrower in
connection with the execution
of this Loan Agreement or any of the transactions contemplated hereby that
have
not been duly obtained, made or given, as the case may be.
3.8 Solvency.
None of
the transactions contemplated hereby or by any other Loan Document will
be or
have been made with an actual intent to hinder, delay or defraud any present
or
future creditors of Borrower. After giving effect to the transactions
contemplated hereby and by each of the Loan Documents, Borrower will not
be
left with an unreasonably small capital for the business or transactions
in
which it is engaged or about to be engaged.
3.9 No
Bankruptcy Filing.
Borrower is not contemplating either the filing of a petition by it under
any
state or federal bankruptcy or insolvency laws or the liquidation of all
or a
major portion of its assets or property, and Borrower has no knowledge
of any
person or entity contemplating the filing of any such petition against
it.
3.10 Tax
Filing.
Borrower has paid or made adequate provision for the payment of all federal,
state and local taxes, charges and assessments payable by Borrower, if
any.
Borrower believes that its tax returns properly reflect the income and
credits
and losses of Borrower for the periods covered thereby, subject only to
reasonable adjustments required by the Internal Revenue Service or other
applicable tax authority upon audit.
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3.11 Defenses.
The
Loan Documents are not subject to any valid right of rescission, setoff,
abatement, diminution, counterclaim or defense as against the Lender and
its
successors and assigns in interest, including the defense of usury, and
the
operation of any of the terms of the Loan Documents, or the exercise of
any
right thereunder, will not render
the Loan unenforceable, in whole or in part, or subject to any right of
rescission, setoff, abatement, diminution, counterclaim or defense, including
the defense of usury, and Borrower has not taken any action which would
give
rise to the assertion of any of the foregoing and no such right of rescission,
setoff, abatement, diminution, counterclaim or defense, including the defense
of
usury, has been asserted with respect thereto.
3.12 Enforceability.
The
Loan Documents executed by Borrower have been duly and validly authorized,
executed and delivered by Borrower, and are valid, legal,
binding and enforceable obligations of Borrower, subject as to enforcement
to
bankruptcy, insolvency or other similar laws of general application affecting
the enforcement of creditor's rights and to general principles of equity
limiting the availability of equitable remedies, to the extent the effect
of
such laws and principles are not waivable under law or in equity.
3.13 ERISA.
(a) Borrower
is not an employee benefit plan subject to Title IV of the Employee Retirement
Income Security Act of 1974 (as amended from time to time,
"ERISA");
(b) Neither
Borrower nor any ERISA Affiliate (as hereinafter defined) of Borrower maintains,
sponsors, contributes to or is obligated to contribute to, or during the
5 years
ending on the date of the execution and delivery of this Loan Agreement
has
maintained, sponsored, contributed to or was obligated to contribute to,
any
employee pension benefit plan (as defined in Section 3(2) of ERISA) (a
"Plan")
which
is subject to Title IV of ERISA or section 302 of ERISA or section 412
of the
Internal Revenue Code of 1986, as amended (the “Code”).
"ERISA
Affiliate"
means
Borrower and all other entities (whether or not incorporated) which, together
with Borrower, would be treated as a single employer under any or all of
Sections 414(b), (c) or (m) of the Code; and
(c) No
employee welfare benefit plan (as defined in Section 3(1) of ERISA
("Welfare
Plan"))
which
Borrower or any ERISA Affiliate maintains, sponsors, contributes to or
is
obligated to contribute to, provides benefits, including, without limitation,
death or medical benefits (whether or not insured), with respect to any
current
or former employee of Borrower beyond their retirement or other termination
of
service other than (a) coverage mandated by applicable law, (b) retirement
or
death benefits under any Plan or (c) disability benefits under any Welfare
Plan
that have been fully provided for by insurance or otherwise.
3.14 Investment
Company.
Borrower
is not now required and will not be required to register under the Investment
Company Act of 1940, as amended.
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3.15 Financial
Information.
The
historical financial data concerning Borrower that has been delivered by
Borrower to the Lender,
consisting of the unaudited, internally prepared balance sheet and income
statement for the period ending September 30, 2006, is true, complete and
correct in all material respects and fairly presents the financial condition
of
the persons or entities covered thereby as of the date of such reports.
Since
the delivery of such data, except as otherwise disclosed in writing to
the
Lender, there has been no material adverse change in the assets, liabilities
or
financial position of Borrower or in the results of operations of Borrower.
Borrower has not incurred any obligation or liability, contingent or otherwise,
not reflected in such financial data which could reasonably be expected
to cause
a Material Adverse Effect.
3.16 Use
of
Funds. The
Loan
Amount is to be used by Borrower as set forth on that certain Use of Proceeds
Plan, attached hereto as Schedule 3.16, and for no other
purpose.
Section
4. Affirmative
Covenants.
Borrower hereby covenants and agrees that, so long as any portion of the
Loan
Amount remains unpaid or any other amount is owing to the Lender under
any of
the Loan Documents:
4.1 Maintenance
of Existence and Properties.
Borrower shall preserve and maintain its existence and all rights, privileges
and franchises necessary in the normal conduct of its business, except
those
rights, privileges and franchises the failure of which to maintain will
not
result in a Material Adverse Effect, and keep
the
property that is useful or necessary in its business in good working order
and
condition, and from time to time make or cause to be made all needed repairs,
renewals and replacements thereto. Borrower shall at all times comply in
all
material respects with, and shall cause Borrower’s properties to comply in all
material respects with applicable law.
4.2 SEC
Reports; Financial Statements. Borrower will file
all
delinquent SEC Reports by October 31, 2007. Borrower will file
all
other SEC Reports on a timely basis or will timely file a valid extension
of
such time of filing and will file any such SEC Reports prior to the expiration
of any such extension. All of the financial statements included in the
delinquent SEC Reports and any registration statement will be prepared
in
accordance with GAAP applied on a consistent basis during the periods involved,
except as may be otherwise specified in such financial statements or the
notes
thereto, and will fairly present in all material respects the financial
position
of Borrower as of and for the dates thereof and the results of operations
and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments.
4.3 Registration
Statement. Within
30
days after filing all delinquent SEC Reports, Borrower will file a
post-effective amendment Registration Statement on Form SB-2 (Registration
No.
0333-121635) that registers for
the
resale certain shares of Common Stock issuable upon conversion of the Series
A
Convertible Preferred Stock (the “Registrable
Securities”)
on a
continuous basis pursuant to Rule 415 (the “Registration
Statement”),
and
after such post-effective amendment has been declared effective, will until
the
earlier of (i) the date that all of the Registrable Securities have been
sold,
or (ii) the date that Borrower receives an opinion of counsel to Borrower
that
all of the Registrable Securities may be freely traded without registration
under the Securities Act, under Rule 144 promulgated under the Securities
Act or
otherwise, shall amend the Registration Statement or supplement the prospectus
to the Registration Statement, as may be required, to cause the Registration
Statement to include sufficient Registrable Securities.
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4.4 Proxy
Statement; Amendment of Articles of Incorporation. By no later than October
30, 2007, Borrower shall
prepare and mail to the shareholders of Borrower proxy materials or other
applicable materials requesting authorization to amend Borrower’s articles of
incorporation or other organizational document to increase
the
number of shares of Common Stock which Borrower is authorized to issue
to
350,000,000 shares of Common Stock in order to have available a sufficient
number of authorized but unissued shares of Common Stock to comply with
its
obligations to issue shares of Common Stock upon the conversion of the
outstanding shares of Series A Convertible Preferred Stock and upon the
exercise
of the Warrants owned by the 2004 PIPE Investors. In connection therewith,
Borrower’s board of directors shall (a) adopt proper resolutions authorizing
such increase, (b) recommend to and otherwise use its best efforts to promptly
and duly obtain shareholder approval to carry out such resolutions (and
hold a
special meeting of the shareholders as soon as practicable, but in any
event not
later than the 60th
day
after delivery of the proxy or other applicable materials relating to such
meeting) and (c) within five business days of obtaining such shareholder
authorization, file an appropriate amendment to Borrower’s articles of
incorporation or other organizational document to evidence such
increase.
4.5 OTCBB.
Within 10 business days after Borrower has filed all delinquent SEC Reports,
Borrower will apply to be quoted on the OTCBB, and after such listing is
granted, will comply with all rules of, and satisfy all requirements to
maintain
quotation on, the OTCBB.
4.6 Inspection
of Financial Records; Discussions.
Borrower shall (i) keep proper books of records and accounts in which full,
true
and correct entries in conformity with GAAP or as otherwise required under
any
Loan Document and under all applicable law shall be made of all dealings
and
transactions in relation to its business and activities, and (ii) upon
reasonable notice to permit representatives of the Lender and its agents
and
regulatory authorities to examine
and make copies of, or abstracts from, any of its financial records at
any
reasonable time during normal business hours and as often as may reasonably
be
desired by the Lender and to discuss the business, operations, properties
and financial and other conditions of Borrower with officers of Borrower
and
with its independent
certified public accountants. After the occurrence and during the continuance
of
an Event of Default, Borrower shall pay any reasonable costs and expenses
incurred by the Lender to examine Borrower's accounting records, as the
Lender
shall reasonably determine to be necessary or appropriate in the protection
of
the Lender’s interest.
4.7 Notices.
Promptly upon becoming aware thereof, Borrower shall give written notice
to the
Lender of (i) any claims, proceedings or disputes (whether or not purportedly
on
behalf of Borrower) against, or to Borrower's knowledge, threatened or
affecting
Borrower which, if adversely determined, could reasonably be expected to
have a
Material Adverse Effect or which involve in the aggregate monetary amounts
in excess
of
$50,000, (ii) the occurrence of any Event of Default hereunder, or (iii)
any
Material Adverse Effect. If requested by the Lender, Borrower shall deliver
an
Officer's Certificate of Borrower specifying the nature and details of
any of
the foregoing
matters and the actions taken and proposed to be taken by Borrower in response
thereto.
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4.8 Expenses.
Borrower shall pay, indemnify and save harmless the Lender with respect
to all
taxes (other than income or franchise taxes or taxes caused by actions
or elections of the Lender) and all reasonable out-of-pocket expenses
(including, without limitation, reasonable fees and disbursements of counsel
and
special local counsel) incident to enforcement and administration of the
Loan
Documents and the negotiation and preparation of any amendments, waivers
and
renewals relating to any thereof and the protection
of the rights of the Lender under the Loan Documents whether by judicial
proceedings or otherwise, including, without limitation, in connection
with
bankruptcy, insolvency, liquidation, reorganization, moratorium or other
similar
proceedings involving Borrower or a "workout" of the Loan. The Loan shall
not be
considered to have been paid in full unless all obligations under this
Section
4.8 shall have been fully performed (except for contingent indemnification
obligations for which no claim has actually been made). Reasonable expenses
incurred by Lender in connection with considering any request by Borrower
for
approval, modification or waiver shall be paid or reimbursed to Lender
by
Borrower regardless of whether approved by Lender.
4.9 Loan
Documents.
Borrower shall comply with and observe all terms and conditions of the
Loan
Documents.
4.10 Taxes.
Borrower shall promptly pay or cause to be paid all lawful taxes and
governmental charges or levies imposed upon Borrower or upon any property,
either real, personal or mixed, except for those which are immaterial in
amount
or are being contested in good faith by appropriate proceedings and as
to which
contested charges or levies Borrower has notified the Lender and as to
which, if
required by the Lender in its reasonable discretion, Borrower has posted
good
and sufficient security without recourse to the Collateral.
4.11 Qualification
to do Business.
Borrower will continue to be in good standing and qualified to do business
in
Utah and in each jurisdiction where it is required to be qualified in order
to
conduct its business, except where failure to be so qualified would not
have a
Material Adverse Effect.
4.12 ERISA.
Borrower shall comply with any applicable provisions of ERISA, the noncompliance
with which would have a Material Adverse Effect, and not be an "employee
benefit
plan" as defined in ERISA or a "plan" as defined in Section 4975 of the
Code,
nor will Borrower hold "plan assets" as that term is defined in the Regulation
issued by the United States Department of Labor at 29 C.F.R.
2510.3-101.
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11
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4.13 Further
Assurances.
Borrower shall at Borrower's sole cost and expense:
(a) furnish
to the Lender all instruments, documents, certificates, and agreements
required
to be furnished pursuant to the terms of the Loan Documents or reasonably
requested by the Lender in connection therewith;
(b) execute
and deliver to the Lender such documents, instruments, certificates, assignments
and other writings, and do such other acts necessary or desirable, to evidence,
preserve and/or protect the Collateral at any time securing or intended
to
secure the Note, as the Lender may reasonably require; and
(c) do
and
execute all and such further lawful and reasonable acts, documents, conveyances
and assurances for the better and more effective carrying out of the intents
and
purposes of this Loan Agreement and the other Loan Documents, as the Lender
shall reasonably require from time to time including, without limitation,
timely
filing or refiling continuations and any assignments of any UCC-1 Financing
Statements in the appropriate filing offices.
Section
5. Negative
Covenants. Borrower
hereby agrees that, so long as the Loan remains unpaid, Borrower has any
Obligation to Lender or any other amount is owing to the Lender under any
of the
Loan Documents, Borrower shall not, without Lender’s written consent, directly
or indirectly:
5.1 Pay
declare or set apart for such payment, any dividend or other
distribution;
5.2 Redeem,
repurchase or otherwise acquire capital stock of Borrower;
5.3 Create,
incur, assume or suffer to exist any liability for borrowed money (other
than
trade creditors in the ordinary course of business);
5.4 Lend
money, give credit or make advances to any person, firm, joint venture
or
corporation, including, without limitation, officers, directors, employees,
subsidiaries and affiliates of Borrower (except for in the ordinary course
of
business);
5.5 Assume,
guarantee, endorse, contingently agree to purchase or otherwise become
liable
upon the obligation of any person, firm, partnership, joint venture or
corporation, except by the endorsement of negotiable instruments for deposit
or
collection;
5.6 Use
any
of the proceeds received form this Loan Agreement in a manner other than
as set
forth in the Use of Proceeds Plan or to repay debt obligations owed to
current
or former officers, directors, employees, or shareholders of Borrower (except
that Borrower may pay ▇▇▇▇ ▇▇▇▇▇▇ his accrued directors’ fee of $30,000 and
$90,000 of accrued fees of Advisors, the consulting company affiliated
with
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇);
5.7 Liquidate
or dissolve or enter into any consolidation, merger, partnership, joint
venture,
syndicate or other combination;
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5.8 Purchase,
acquire or lease any property from, or sell, transfer or lease any property
to,
or lend or advance any money to, or borrow any money from, or guarantee
any
obligation of, or acquire any stock, obligations or securities of, or enter
into
any merger or consolidation agreement, or any management or similar
agreement with, any affiliate of Borrower, or enter into any other transaction
or arrangement or make any payment to (including, without limitation, on
account
of any management fees, service fees, office charges, consulting fees,
technical
services charges or tax sharing charges) or otherwise deal with, in the
ordinary
course of business or otherwise, any
affiliate of Borrower;
5.9 Without
the consent of Lender, conduct any business activity that would violate
any of
the provisions of Borrower's organizational documents, or amend Borrower's
organizational documents in a manner which would cause
any
representation set forth in the Loan Agreement to become untrue;
or
5.10 Change
its fiscal year.
Section
6. Security
Agreement.
As
security for the payment or performance, as the case may be, in full of
the
Obligations (as defined herein), Borrower hereby bargains, sells, conveys,
assigns, sets over, mortgages, pledges, hypothecates and transfers to Lender,
its successors and assigns, and hereby grants to Lender, its successors
and
assigns, a security interest in and lien on (the “Security
Interest”),
all of
Borrower’s right, title and interest in, to and under the Collateral (as defined
herein). As used herein, the term “Obligations”
shall
mean and refer to (a) the due and punctual payment by Borrower of (i) the
principal of and interest (including interest accruing during the pendency
of
any bankruptcy, insolvency, receivership or other similar proceeding, regardless
of whether such interest is allowed or allowable as a claim in such proceeding)
on the Loan, when and as due, whether at maturity, by acceleration, upon
one or
more dates set for prepayment or otherwise, (ii) all other monetary obligations,
including fees, costs, expenses and indemnities, whether primary, secondary,
direct, contingent, fixed or otherwise (including monetary obligations
incurred
during the pendency of any bankruptcy, insolvency, receivership or other
similar
proceeding, regardless of whether such monetary obligations are allowed
or
allowable as a claim in such proceeding), of Borrower to the Lender under
the
Loan Documents, and (b) the due and punctual performance of all covenants,
agreements, obligations and liabilities of Borrower under or pursuant to
the
Loan Documents. As used herein, the term “Collateral”
shall
mean and refer to Borrower’s right, title and interest in, to and under all of
the following (a) accounts,
(b) chattel paper, (c) documents, (d) equipment, (e) general intangibles,
(f)
goods, (g) instruments, (h) insurance relating to the Collateral, (i)
intellectual property (including all inventions, designs, patents, copyrights
and trademarks), (j) inventory, (k) other goods and other personal property
of
Borrower, whether tangible or intangible, (l) records, and (m) proceeds,
products, substitutions, accessions, rents and profits of or in respect
of any
of the foregoing,
in each
case as
defined under the Uniform Commercial Code, as in effect in any relevant
jurisdiction (the “UCC”),
and
whether
now owned or hereafter created or acquired and wherever located.
6.1 Duty
To Hold In Trust.
Upon
the occurrence and during the continuation of any Event of Default, Borrower
shall, upon receipt by it of any revenue, income or other sums subject
to the
Security Interest, or of any check, draft, note, trade acceptance or other
instrument evidencing an obligation to pay any such sum, hold the same
in trust
for Lender and shall upon request by Lender forthwith endorse and transfer
any
such sums or instruments, or both, to Lender for application to the satisfaction
of the Obligations.
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6.2 Rights
and Remedies Upon Default. Upon the occurrence and during the continuation
of any Event of Default, Lender shall have the right to exercise all of
the
remedies conferred hereunder and under the Notes, and Lender shall have
all the
rights and remedies of a secured party under the UCC. Without limitation,
Lender
shall have the following rights and powers upon and during the continuance
of an
Event of Default:
(a) Lender
shall have the right to take possession of all tangible manifestations
or
embodiments of the Collateral and, for that purpose, without breaching
the peace
enter, with the aid and assistance of any person previously identified
to, and
approved in writing by, Borrower, any premises where the Collateral, or
any part
thereof, is placed and remove the same, and Borrower shall assemble the
Collateral and make it available to Lender at Borrower’s premises.
(b) Lender
shall have the right to assign, sell, or otherwise dispose of and deliver
all or
any part of the Collateral, at public or private sale or otherwise, either
with
or without special conditions or stipulations, for cash or on credit (for
United
States Dollars or such other currency as it may choose) or for future delivery,
in such parcel or parcels and at such time or times and at such place or
places,
and upon such terms and conditions as Lender may deem commercially reasonable,
all without (except as shall be required by applicable statute and cannot
be
waived) advertisement or demand upon or notice to Borrower or right of
redemption of Borrower, which are hereby expressly waived. Upon each such
sale,
assignment or other transfer of Collateral, Lender may, unless prohibited
by
applicable law which cannot be waived, purchase all or any part of the
Collateral being sold, free from and discharged of all trusts, claims,
right of
redemption and equities of Borrower, which are hereby waived and
released.
(c) Lender
may sublicense, to the same extent Borrower is permitted by law and contract
to
do so, whether on an exclusive or non-exclusive basis, any of the Collateral
throughout the world for such period, on such conditions and in such manner
as
Lender shall, in its reasonable discretion, determine.
(d) Lender
may (without assuming any obligations or liabilities thereunder), at any
time,
enforce (and shall have the exclusive right to enforce) against licensee
or
sublicensee all rights and remedies of Borrower in, to and under any license
agreement with respect to such Collateral, and take or refrain from taking
any
action thereunder.
(e) Lender
may, in order to implement the assignment, license, sale or other disposition
of
any of the Collateral pursuant to this Section, execute and deliver on
behalf of
Borrower one or more instruments of assignment of the Collateral in form
suitable for filing, recording or registration in any jurisdictions as
Lender
may determine advisable.
(f) In
the
event that any Lender shall recover from Borrower or the Collateral more
than
its pro rata share of the Obligations owed to all Lender hereunder, whether
by
agreement, understanding or arrangement with Borrower or any other person,
set
off or other means, such Lender shall immediately deliver or pay over to
the
other Lender its pro rata portion of any such recovery in the form
received.
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6.3 Applications
of Proceeds; Expenses.
(a) The
proceeds of any such sale, sublicense or other disposition of the Collateral
hereunder shall be applied first, to the expenses of retaking, holding,
storing,
processing and preparing for sale, selling, and the like (including, without
limitation, any taxes, fees and other costs incurred in connection therewith)
of
the Collateral, to the reasonable attorneys’ fees and expenses incurred by
Lender in enforcing its rights hereunder and in connection with collecting,
storing and disposing of the Collateral, and then to satisfaction of the
Obligations, and to the payment of any other amounts required by applicable
law,
after which Lender shall pay to Borrower any surplus proceeds. If, upon
the
sale, license or other disposition of the Collateral, the proceeds thereof
are
insufficient to pay all amounts to which Lender is legally entitled, Borrower
will be liable for the deficiency. To the extent permitted by applicable
law,
Borrower waives all claims, damages and demands against Lender arising
out of
the repossession, removal, retention or sale of the Collateral, unless
due to
the gross negligence or willful misconduct of Lender.
(b) Borrower
agrees to pay all out-of-pocket fees, costs and expenses reasonably incurred
in
connection with any filing required hereunder, including, without limitation,
any financing statements, continuation statements, partial releases and/or
termination statements related thereto or any expenses of any searches
reasonably required by Lender. Borrower shall also pay all other claims
and
charges which in the reasonable opinion of Lender would reasonably be expected
to prejudice, imperil or otherwise affect the Collateral or the Security
Interest therein. Borrower will also, upon demand, pay to the Lender the
amount
of any and all reasonable expenses, including the reasonable fees and expenses
of counsel and of any experts and agents, which Lender may incur in connection
with the custody or preservation of, or the sale of, collection from, or
other
realization upon, any of the Collateral.
6.4 Responsibility
for Collateral.
Borrower assumes all liabilities and responsibility in connection with
all
Collateral, and the obligations of Borrower hereunder or under the Notes
shall
in no way be affected or diminished by reason of the loss, destruction,
damage
or theft of any of the Collateral or its unenforceability or unavailability
for
any reason.
6.5 Security
Interest Absolute. In the event that at any time any transfer of any
Collateral or any payment received by Lender hereunder shall be deemed
by final
order of a court of competent jurisdiction to have been a voidable preference
or
fraudulent conveyance under the bankruptcy or insolvency laws of the United
States, or shall be deemed to be otherwise due to any party other than
Lender,
then, in any such event, Borrower’s obligations hereunder shall survive, and
shall not be discharged or satisfied by any prior payment thereof, but
shall
remain a valid and binding obligation enforceable in accordance with the
terms
and provisions hereof. Borrower waives all right to require Lender to proceed
against any other person or to apply any Collateral which Lender may hold
at any
time, or to marshal assets, or to pursue any other remedy. To the extent
permitted by applicable law, Borrower waives any defense arising by reason
of
the application of the statute of limitations to any obligation secured
hereby.
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6.6 Term
of Security Interest. The Security Interest shall terminate on the date on
which all payments under the Notes have been made in full and all other
Obligations have been paid or discharged in full. Upon such termination,
Lender,
at the request and at the expense of Borrower, will join in executing any
termination statement and other filings with respect to any financing statement
executed and filed pursuant to this Agreement or required for evidencing
termination of the Security Interest.
6.7 Power
of Attorney; Further Assurances. Borrower
authorizes Lender, and does hereby make, constitute and appoint the Lender,
and
its officers, agents, successors or assigns with full power of substitution,
as
Borrower’s true and lawful attorney-in-fact, with power, in its own name or in
the name of Borrower, to, after the occurrence and during the continuance
of an
Event of Default, (i) endorse any notes, checks, drafts, money orders,
or other
instruments of payment (including payments payable under or in respect
of any
policy of insurance) in respect of the Collateral that may come into possession
of Lender; (ii) to sign and endorse any UCC financing statement or any
invoice,
freight or express ▇▇▇▇, ▇▇▇▇ of lading, storage or warehouse receipts,
drafts
against Borrower, assignments, verifications and notices in connection
with
accounts, and other documents relating to the Collateral; (iii) to pay
or
discharge taxes, liens, security interests or other encumbrances at any
time
levied or placed on or threatened against the Collateral; (iv) to demand,
collect, receipt for, compromise, settle and ▇▇▇ for monies due in respect
of
the Collateral; and (v) generally, to do, at the option of Lender, and
at
Borrower’s expense, at any time, or from time to time, all acts and things which
Lender deem necessary to protect, preserve and realize upon the Collateral
and
the Security Interest granted therein, in order to effect the intent of
this
Loan Agreement and the Notes, all as fully and effectually as Borrower
might or
could do; and Borrower hereby ratifies all that said attorney shall lawfully
do
or cause to be done by virtue hereof. This power of attorney is coupled
with an
interest and shall be irrevocable for the term of this Loan
Agreement.
(a) On
a
continuing basis, Borrower will make, execute, acknowledge, deliver, file
and
record, as the case may be, with the proper filing and recording places
in any
jurisdiction, including, without limitation, the State of Utah, all such
instruments, and take all such action as necessary to perfect the Security
Interest granted hereunder and otherwise to carry out the intent and purposes
of
this Loan Agreement, or for assuring and confirming to Lender the grant
or
perfection of a first priority security interest in all the
Collateral.
(b) Borrower
hereby irrevocably appoints Lender as Borrower’s attorney-in-fact, with full
authority in the place and stead of Borrower and in the name of Borrower,
from
time to time in Lender’s discretion, to file, in its sole discretion, one or
more financing or continuation statements and amendments thereto, relative
to
any of the Collateral.
6.8 Termination
and Release.
The
Security Interest shall terminate when all Obligations have been finally
and
indefeasibly paid in full. Upon the effectiveness of any written consent
to the
release of the Security Interest in any Collateral, the Security Interest
in
such Collateral shall be automatically released. Upon any sale, transfer
or
other disposition of Collateral permitted by the Loan Documents and Section
3(j)
hereof, the Security Interest in such Collateral shall be automatically
released
(other than to the extent any such sale, transfer or other disposition
of such
Collateral would, immediately after giving effect thereto, result in the
receipt
by Borrower of any other property (whether in the form of Proceeds or otherwise)
that would, but for the release of the Security Interest therein pursuant
to
this clause, constitute Collateral, in which event the Lien created hereunder
shall continue in such property). In connection with any termination or
release
pursuant to this Section, Lender shall execute and deliver to Borrower,
at
Borrower’s own cost and expense, all UCC termination statements and similar
documents that Borrower may reasonably request to evidence such termination
or
release. Any execution and delivery of documents pursuant to this Section
shall be without recourse to or warranty by Lender.
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Section
7. Defaults
and Remedies.
7.1 Events
of Default.
The
occurrence of any of the following events shall be an “Event of Default”
hereunder:
(a) Borrower
fails to make any payment to Lender of principal, interest or any other
amount
due under the Note, this Loan Agreement, or any other Loan Document (other
than
payments described in (b) below), or fails to deliver or deposit funds
with
Lender as required under the Note, this Loan Agreement, or any other Loan
Document, and any such failure remains uncured for three (3) business days
following delivery to Borrower by Lender of written notice thereof.
(b) The
occurrence of an Event of Default (subject to any applicable notice or
cure
periods set forth therein) under the Note or any other Loan Document (as
“Event
of Default” is defined in the Note).
(c) Lender
fails to have a legal, valid, binding and enforceable first priority lien
on the
Collateral or any portion thereof.
(d) Any
written representation, warranty, certification, declaration or disclosure
made
to Lender by Borrower was intentionally false or misleading on the date
as of
which made, whether or not that representation, warranty, certification,
declaration or disclosure appears in this Loan Agreement or any other Loan
Document; or any such written representation,
warranty, certification, declaration or disclosure made to Lender proves
to be
false or misleading on the date on which made, and such false or misleading
representation, warranty, certification, declaration or disclosure involves,
concerns or results in acts, circumstances or the change of circumstances
constituting a Material Adverse Effect.
(e) Borrower
fails to perform, observe or comply with any obligation, covenant or agreement
of Borrower under this Loan Agreement or under any other Loan Document
and such
failure remains uncured 5 business days following delivery to
Borrower of written notice of such failure from Lender.
(f) Any
one
or more of the following occurs:
(i) A
general
assignment for the benefit of creditors by Borrower; or
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17
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(ii) The
filing of a voluntary petition by Borrower in bankruptcy, insolvency,
reorganization or liquidation, or any other petition under any section
or
chapter of the Bankruptcy Code or any similar law, whether state, federal,
foreign, or otherwise, for the relief of debtors; or
(iii) The
filing of any involuntary petition or any other petition against Borrower
under
any section or chapter of the Bankruptcy Code, or any similar law, whether
state, federal or otherwise, relating to insolvency, reorganization, or
liquidation, or for the relief of debtors, by the creditors of Borrower,
said
petition remaining undischarged for a period of sixty (60) days; or
(iv) The
application by Borrower or the consent or acquiescence by Borrower to an
application for the appointment of a custodian, receiver, conservator,
trustee,
or similar official for Borrower or for a substantial part of the property
or
business of Borrower; or
(v) Attachment,
execution or judicial seizure (whether by enforcement of money judgment,
by writ
or warrant of attachment, or by any other process) of all or any part of
the
assets of Borrower, such attachment, execution or other seizure remaining
undismissed or undischarged for a period of sixty (60) days after the levy
thereof, or, in any event, later than five days prior to the date of any
proposed sale thereunder; or
(vi) The
admission in writing by Borrower of its inability to pay its debts or perform
its obligations as they become due.
(g) Borrower
fails to own good title to the Collateral
or any
portion thereof.
7.2 Remedies.
At any
time after the occurrence of an Event of Default, Lender shall, in addition
to
the rights and remedies set forth in Section 7,
have
the right to
declare
any or all of the outstanding Loan Amount to be due and payable
immediately.
7.3 Remedies
are Cumulative. All remedies contained in the Loan Documents are cumulative
and not exclusive, and Lender shall also have all other remedies provided
by law
or in any other agreement between Borrower and Lender. No delay or failure
by
Lender to exercise any right or remedy will be construed to be a waiver
of that
right or remedy or of any default or Event of Default by Borrower. Lender
may
exercise any
one
or more of its rights and remedies at its option without regard to the
adequacy
of its security.
Section
8. Miscellaneous
Provisions.
8.1 Assignment.
This
Loan Agreement shall inure to the benefit of and be binding upon Borrower,
Lender and its respective successors, assigns and designees. Borrower may
not
assign its rights or interest hereunder or under the other Loan Documents.
Any
Lender may assign any or all of its rights under this Loan Agreement to
any
person to whom such Lender assigns or transfers any Notes.
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8.2 Agents.
The
Lender may use one or more agents or servicers to perform its obligations
hereunder or under the other Loan Documents.
8.3 Cumulative
Rights; No Waiver.
The
rights, powers and remedies of the Lender hereunder are cumulative and
in
addition to all rights, powers and remedies provided under any and all
agreements between Borrower and the Lender relating hereto, at law, in
equity or
otherwise. Any delay or failure by Lender to exercise any right, power
or remedy
shall not constitute a waiver thereof by the Lender, and no single or partial
exercise by the Lender of any right, power or remedy shall preclude other
or
further exercise thereof or any exercise of any other rights, powers or
remedies. No delay or omission of the Lender to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy
or
constitute a waiver of any such Event of Default or an acquiescence therein.
In
particular, and not by way of limitation, by accepting payment after the
due
date of any amount payable under this Loan Agreement, the Note or any other
Loan
Document, the Lender shall not be deemed to have waived any right either
to
require prompt payment when due of all other amounts due under this Loan
Agreement, the Note or the other Loan Documents, or to declare a default
for
failure to effect prompt payment of any such other amount. Every right
and
remedy given by this Section or by law to the Lender may be exercised from
time
to time, and as often as may be deemed expedient by the Lender and may
be
pursued singly, concurrently or otherwise, at such time and in such order
as the
Lender may determine in the Lender's sole discretion.
8.4 Survival
of Representations.
Borrower agrees that all of the representations and warranties, covenants
and
agreements of Borrower set forth herein and in the other Loan Documents
are made
as of the date hereof (except as expressly otherwise provided) and shall
survive
the delivery of the Note and the making of the Loan and continue for as
long as
any amount remains owing to the Lender under any Loan Documents. All
representations, warranties, covenants and agreements made in the Loan
Documents shall
be
deemed to have been relied upon by the Lender notwithstanding any investigation
heretofore or hereafter made by the Lender or on its behalf.
8.5 Notices
to Parties.
All
notices or other communications hereunder or under any other Loan Document
by
any
party to any other party shall be in writing unless otherwise provided
for
herein and shall be served by hand, certified or registered mail, postage
prepaid, return receipt requested, or facsimile transmission confirmed
by
certified or registered
mail. All such notices or other communications shall be deemed to have
been
sufficiently given for all purposes hereof on the date of receipt or refusal
to
accept delivery. Addresses for notices are as listed below. Any party may
change
the address to which notices are to be sent by notice of such change to
the
other parties given as provided herein.
(i) if
to
Lender:
Mercator
Momentum Fund III, LP
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Telecopier:
(▇▇▇) ▇▇▇-▇▇▇▇
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with
a
copy to:
▇▇▇▇▇
Winner ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇ Winner ▇▇▇▇▇▇▇, Esq.
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Telecopier:
(▇▇▇) ▇▇▇-▇▇▇▇
(ii) if
to
Borrower:
Medical
Discoveries, Inc.
c/o
Sunhaven Farms
▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Telecopier:
(▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy to:
▇▇▇▇
▇▇▇▇▇ PC
▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Telecopier:
(310) 789-142
8.6 Jurisdiction.
Any
legal suit, action or proceeding against the Lender or Borrower arising
out of
or relating to this Agreement or the other Loan Documents shall be instituted
in
any federal or state court in Los Angeles County, California.
Borrower hereby
waives any objection which it may now or hereafter have to the laying of
venue
of any such suit, action or proceeding, and Borrower hereby irrevocably
submits
to the jurisdiction of any such court in any suit, action or
proceeding.
8.7 Headings.
The
Section headings used in this agreement are for convenience of reference
only
and shall not affect the construction of this Loan Agreement.
8.8 Modifications
in Writing.
No
amendment, modification, supplement, termination or waiver of or to any
provision of this Loan Agreement, or consent to any departure by the Lender
therefrom, shall be effective unless in writing and signed by the Lender
and
Borrower. Any amendment, modification or supplement of or to any provision
of
this Loan Agreement, any waiver of any provision of this Loan Agreement,
and any
consent to any departure by the Lender from the terms of any provision
of this
Loan Agreement shall be effective only in the specific instance and for
the
specific purpose for which made or given.
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20
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8.9 Execution
in Counterparts.
This
Loan Agreement and any amendments, waivers, consents or supplements hereto
may
be executed in any number of counterparts and by different parties hereto
in
separate counterparts, each of which when so executed
and delivered shall be deemed to be an original, but all such counterparts
shall
constitute one and the same agreement.
8.10 Severability
of Provisions.
Any
provision of this Loan Agreement which is prohibited or unenforceable shall
be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof.
8.11 WAIVER
OF JURY TRIAL.
THE
PARTIES HERETO HEREBY WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR
PROCEEDING BASED UPON, OR RELATED TO, THIS LOAN AGREEMENT, ANY OTHER
LOAN DOCUMENT,
OR THE TRANSACTIONS. NO PARTY SHALL SEEK TO CONSOLIDATE ANY SUCH ACTION
IN WHICH
A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL
CANNOT
OR HAS NOT BEEN WAIVED. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY
MADE BY THE PARTIES, AND EACH PARTY ACKNOWLEDGES THAT NEITHER THE OTHER
PARTY
NOR ANY PERSON ACTING ON BEHALF OF THE OTHER PARTY HAS MADE ANY REPRESENTATIONS
OF FACT TO INDUCE THIS WAIVER OF JURY TRIAL. EACH PARTY HERETO ACKNOWLEDGES
THAT
(1) IT BARGAINED AT ARM'S LENGTH AND IN GOOD FAITH, WITHOUT DURESS, (2)
THAT THE
PROVISIONS HEREOF SHALL BE SUBJECT TO NO EXCEPTIONS WHATEVER, (3) THAT
IT HAS
BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE
SIGNING
OF THIS LOAN AGREEMENT, THE OTHER LOAN DOCUMENTS AND IN THE MAKING OF THIS
WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL AND
(4) THAT
IT HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. EACH PARTY
HERETO
SPECIFICALLY ACKNOWLEDGES THAT NO OTHER PARTY
HAS
IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS
OF
THIS SECTION 6.11 WILL NOT BE FULLY ENFORCED
IN ALL INSTANCES. EACH PARTY HERETO FURTHER
ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS THE MEANING AND RAMIFICATIONS
OF
THIS WAIVER PROVISION AND AS EVIDENCE OF THIS FACT SIGNS ITS INITIALS BELOW.
THE
PARTIES AGREE THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH OF THEM
TO ENTER
INTO THE TRANSACTIONS AND THAT THIS WAIVER SHALL BE EFFECTIVE AS TO ALL
OF THE
LOAN DOCUMENTS AND THE ENVIRONMENTAL INDEMNITIES AS IF FULLY INCORPORATED
THEREIN.
INITIALS:
_______BORROWER:
______LENDER:
______
8.12 Governing
Law.
This
Loan Agreement, the other Loan Documents and the obligations arising hereunder
and thereunder shall be governed by, and construed in accordance with,
the laws
of the State of California applicable to contracts made and performed in
such
state; specifically, without limitation, the law of the State of California
shall govern with respect to usury, the charging or collection of interest,
and
the contracting for or receipt of interest or any other sums for the use,
loan
or forbearance of the Loan or any other money as provided herein or in
any other
Loan Documents.
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21
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8.13 Brokers
and Financial Advisors.
Borrower and the Lender hereby represent that they have dealt with no financial
advisors, brokers, underwriters, placement agents, agents or finders in
connection with the transactions contemplated by this Loan Agreement. Borrower
and the Lender hereby agree to indemnify and hold the other harmless from
and
against any and all claims, liabilities, costs and expenses of any kind
in any
way relating to or arising from a claim by any person or entity of the
type
specified above that such person or entity acted on behalf of the indemnifying
party in connection with the transactions contemplated herein. The provisions
of
this Section 8.13 shall survive the expiration and termination of this
Loan
Agreement and the repayment of the Loan Amount.
8.14 No
Joint Venture or Partnership.
Borrower and the Lender intend that the relationship created hereunder
be solely
that of borrower and lender. Nothing herein is intended to create a joint
venture, partnership, tenancy-in-common, or joint tenancy relationship
between Borrower and the Lender.
8.15 Conflict;
Construction of Documents; Entire Agreement.
The
parties hereto acknowledge that they were each represented by counsel in
connection with the negotiation and drafting of the Loan Documents and
that the
Loan Documents shall not be subject to the principle of construing their
meaning
against the party which drafted the same. This
Loan
Agreement, the Note, the other Loan Documents, including any attachments,
exhibits and schedules referred to therein, constitute the entire agreement
between the parties pertaining to the subject matter
thereof and supersede any and all prior agreements, representations and
understandings of the parties, written or oral. Except as otherwise expressly
provided in any Loan Document, to the extent of any conflict or inconsistency
between the terms of this Loan Agreement and the terms of any other Loan
Document, the terms hereof shall prevail.
8.16 Waiver
of Notice.
Borrower shall not be entitled to any notices of any nature whatsoever
from the
Lender except with respect to matters for which this Loan Agreement or
the other
Loan Documents specifically and expressly provide for the giving of notice
by
the Lender to Borrower and except with respect to matters for which Borrower
is
not, pursuant to applicable law, permitted to waive the giving of
notice.
8.17 Fee
and Expense Reimbursement and Direct Payment.
(a) Upon
execution of this Loan Agreement, in accordance with the Letter Agreement,
Lender shall deposit $250,000 (the “Initial
Draw-Down”)
into
Advisors’ client trust account. Advisors shall pay the following from the
Initial Draw-Down: legal fees to ▇▇▇▇▇ Winner ▇▇▇▇▇▇▇, Esq., consulting
fees to
the Advisors, and legal fees to ▇▇▇▇ ▇▇▇▇▇ PC, as reimbursement in full
of
Lender’s costs and expenses incurred in connection with the Loan and other
transactions related to Borrower. The remaining Initial Draw-Down amount
shall
be delivered to Borrower,
less any customary bank charges.
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22
-
(b) Following
the execution of this Loan Agreement, Borrower shall from time to time,
on
demand, reimburse Lender for, and hereby agrees to indemnify Lender against,
all
liabilities, claims, debts, losses, demands, actions, suits,
charges, reasonable
attorneys' fees, reasonable consultants' fees and other expenses incurred
by
Lender in the exercise of its powers, rights and duties hereunder and in
enforcement and administration of the Loan, including, without limitation,
protecting Lender's security for the Loan, and payment of obligations of
Borrower which Lender may make, and in connection with any refinancing
of or
restructuring of the Loan, including, but not limited to, extensions, renewals,
revisions or “workouts,” or if any bankruptcy, insolvency or debtor-relief
proceeding is commenced by or against Borrower, the fees and expenses of
legal
counsel for Lender incurred in connection therewith, including, but not
limited
to, attendance of such counsel at meetings of creditors for the consideration
of
such proceedings, shall be recoverable from Borrower upon demand; provided,
however,
that
Borrower shall be under no obligation to indemnify Lender against any
liabilities, claims, debts,
losses, demands, actions, suits, charges, attorneys' fees, consultant's
fees,
and other expenses resulting from gross negligence or willful misconduct
on the
part of the Lender.
(c) In
the
event that Borrower fails, within thirty (30) days after Lender's demand
to pay
to Lender any sum advanced or expenses incurred by Lender pursuant this
Loan
Agreement or under the other Loan Documents which is reimbursable by Borrower
under the terms of this Loan Agreement or any other Loan Document, the
amount of
such advance or expense shall bear interest from the 31st day after such
Lender's demand at the Default Rate (as defined in the Note); provided,
however,
that this provision shall be in addition to all other rights and remedies
of
Lender hereunder and under the other Loan Documents and shall not be deemed
to
limit Lender's right to compel prompt performance hereunder or
thereunder.
IN
WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to
be
executed by their duly authorized representatives, as of the date first
above
written.
|
LENDER:
|
||
|
MERCATOR
MOMENTUM FUND III, LP,
|
||
|
a
California limited partnership
|
||
|
By:
|
|
|
|
Name:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
|
||
| Title: General Partner | ||
|
BORROWER:
|
||
|
MEDICAL
DISCOVERIES, INC.,
|
||
|
a
Utah corporation
|
||
|
|
||
|
Name:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
|
||
| Title: Chairman of the Board of Directors | ||
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23
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EXHIBIT
A
FORM
OF SECURED PROMISSORY NOTE
|
$[xxxx.00]
|
SEPTEMBER
__, 2007
|
FOR
VALUE RECEIVED,
the
undersigned, MEDICAL
DISCOVERIES, INC.,
a Utah
corporation, having its place of business at ("Maker"),
hereby promises to pay to the order of Mercator
Momentum Fund III LP,
a
California limited liability partnership, having its principal place of business
at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (together with
their successors, assigns and designees, the "Payee"),
the
principal sum of _____________ DOLLARS ($xxxx.00) or the lesser amount advanced
pursuant hereto, together with interest accrued thereon, on or before December
14, 2007 (the "Maturity
Date").
Unless otherwise defined herein, capitalized terms used herein shall have the
meanings ascribed to such terms in that certain Loan and Security Agreement
of
even date herewith between Maker and Payee (the "Loan Agreement").
Section
1.
RATE
OF
INTEREST AND REPAYMENT TERMS
| 1.1 |
Payments
During Term.
|
(a) Interest
accruing under this Note shall become payable on a monthly basis, and the
principal shall be due on the on the Maturity Date.
(b) Unless
Maker shall prepay the entire outstanding balance of this Note in the manner
permitted by Section 1.03 below, then on or before 5:00PM. Pacific Time on
the
Maturity Date, the entire outstanding balance of principal, all accrued interest
and all other amounts owed and unpaid hereunder shall be due and
payable.
| 1.2 |
Rate
of Interest.
|
The
principal balance of this Secured Promissory Note (this "Note")
from
time to time outstanding shall bear interest at a per annum rate of twelve
percent (12%) (the "Contract
Rate").
| 1.3 |
Prepayment
During Term.
|
Maker
may, from time to time, repay or prepay this Note, in whole or in part, without
penalty. Any prepayment of principal of this Note shall include accrued
interest. Any prepayment shall be applied first to satisfaction of any accrued
and unpaid interest and the balance shall be applied against the principal
balance hereof. Notwithstanding the stated Maturity Date, upon Payee’s written
request therefor, Maker shall prepay this Note on and as of the date of the
closing of the Eucodis Sale.
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24
-
| 1.4 |
Payments
and Computations.
|
(a) Maker
shall make payment under this Note by bank wire transfer of immediately
available funds for the amount of such payment in lawful money of the United
States to Payee in accordance with the instructions given on Schedule
I,
attached, or in such other manner and to such other address as Payee may from
time to time designate to Maker in writing.
(b) Interest
on the principal sum of the Note shall be computed on the basis of a year of
three hundred sixty (360) days and a month of thirty (30) days.
(c) Whenever
any payment to be made hereunder is stated to be due on a day other than a
Business Day (as hereinafter defined), such payment shall be made on the next
succeeding Business Day, and there shall be no additional charge for such
extension of time, which shall be deemed to be included in the computation
of
interest at the Contract Rate. "Business
Day"
means a
day other than a Saturday or Sunday or a public or bank holiday on which state
chartered banks generally are closed in the State of California.
| 1.5 |
Default
Rate of Interest.
|
Following
the maturity of the indebtedness evidenced hereby, whether by acceleration
or
otherwise, and following any Event of Default hereunder or under any other
Loan
Document, after the delivery of any required notices and the expiration of
any
applicable cure period, the unpaid principal amount hereof, all unpaid interest
thereon and other charges shall thereafter bear interest at a rate equal to
the
lesser of the Contract Rate plus six percent (6%) per annum, or the maximum
rate
permitted by law (hereafter referred to as the "Default
Rate").
The
Default Rate shall also accrue upon any sums which Payee advances hereunder
or
under the terms of the Loan Documents to protect its security for this Note
or
otherwise assert or protect any of its rights and benefits under the Loan
Agreement. Interest at the Default Rate will be due from and including the
due
date for such amounts and to, but excluding, the date Payee receives the past
due amount, any late charges and Default Rate interest in immediately available
funds. For purposes of this Note, the term "Event
of Default"
shall
have the same meaning ascribed to such term in, and shall include any event
which would constitute an Event of Default under, the Loan Agreement, and shall
include, without limitation, a breach under this Note, subject to any applicable
notice requirements and cure periods specified in the Loan
Agreement.
Section
2.
SECURITY
| 2.1 |
Loan
Documents.
|
This
Note
and Maker's obligations hereunder are secured by the Collateral (as defined
in
the Loan Agreement). The Loan Agreement and all documents, certificates, and
instruments supporting, securing, evidencing or relating to the indebtedness
evidenced by this Note may be referred to herein collectively as the
"Loan
Documents"
and
individually as a "Loan
Document."
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25
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Section
3.
GENERAL
PROVISIONS
| 3.1 |
Acceleration
on Default.
|
Following
an Event of Default, the entire outstanding principal balance, all accrued
but
unpaid interest hereunder, and all late charges and other amounts owing
hereunder but unpaid shall, at the option of Payee, become immediately due
and
payable. Failure by the Payee to exercise such option shall not be a waiver
of
the right to do so at any future time for the certain Event of Default giving
rise to Payee's right to accelerate or for any other Event of
Default.
| 3.2 |
No
Offset; Waiver of Notice, Etc.
|
All
payments under this Note shall be made by Maker without deduction, offset,
abatement, suspension, deferment, diminution or reduction of any kind
whatsoever. Maker and all other persons, partnerships, corporations or other
legal entities liable now or at any time for the payment of the indebtedness
evidenced hereby expressly waive all notice, demand for payment, presentment
for
payment, protest and notice of protest, notice of intent to accelerate, notice
of acceleration and diligence in collection and agree that the time of said
payment or any part thereof may be extended by Payee, and further agree that
the
real or personal property security or any part thereof may be released by Payee
without in any way modifying, altering, releasing, affecting or limiting any
liens or security interests arising under any of the Loan Documents. The
nonexercise by Payee of any of the rights under this Note in any particular
instance shall not constitute a waiver of such rights in that or in any
subsequent instances.
| 3.3 |
Compliance
with Usury Laws.
|
All
agreements in this Note and in the Loan Documents are expressly limited so
that
in no contingency or event whatsoever, whether by reason of advancement or
acceleration of maturity of the indebtedness evidenced hereby, or otherwise,
shall the amount paid or agreed to be paid hereunder or under the Loan Documents
for the use, forbearance or detention of money exceed the highest lawful rate
permitted under applicable usury laws. If, from any circumstance whatsoever,
fulfillment of any provisions of this Note or of any of the Loan Documents,
at
the time performance of such provision shall be due, shall involve transcending
the limit of validity prescribed by law which a court of competent jurisdiction
may deem applicable to the indebtedness evidenced hereby, then, the obligation
to be fulfilled shall be reduced to the limit of such validity and if, from
any
circumstance whatsoever, Payee or any holder of this Note shall ever receive
as
interest an amount which would exceed the highest lawful rate, the receipt
of
such excess shall be credited against the principal amount of the indebtedness
evidenced hereby to which the same may lawfully be credited, and any portion
of
such excess not capable of being so credited shall be rebated to
Maker.
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26
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| 3.4 |
Governing
Law.
|
This
Note
is to be governed by and construed in accordance with the laws of the State
of
California applicable
to agreements made and to be performed wholly within the State of
California.
| 3.5 |
Waiver
of Jury Trial.
|
Maker
hereby waives the right to a trial by jury in any action or proceeding based
upon, or related to, the subject matter of this Note. Maker shall not seek
to
consolidate any such action in which a jury trial has been waived, with any
other action in which a jury trial cannot or has not been waived. This waiver
is
knowingly, intentionally and voluntarily made by Maker, and Maker acknowledges
that neither Payee nor any person acting on behalf of Payee has made any
representations of fact to induce this waiver of jury trial. Maker acknowledges
that 1) it bargained at arm's length and in good faith, without duress, 2)
that
the provisions hereof shall be subject to no exceptions whatever, 3) that it
has
been represented (or has had the opportunity to be represented) in the signing
of this Note and in the making of this waiver by independent legal counsel,
selected of its own free will and 4) that it had the opportunity to discuss
this
waiver with counsel. Maker specifically acknowledges that no party has in any
way agreed with or represented to any other party that the provisions of this
Section 3.05 will not be fully enforced in all instances. Maker further
acknowledges that it has read and understands the meaning and ramifications
of
this waiver provision and as evidence of this fact signs its
initials.
______
______ ______
Maker's
Initials
| 3.6 |
Payee.
|
All
references to "Payee"
in this
Note shall be deemed to refer to and include the original Payee under this
Note,
and any heirs, administrators or assigns, other successors in interest to the
original Payee or any other holder of this Note, which successors and assigns
are permitted pursuant to the terms of the Agreement.
| 3.7 |
Costs
of Enforcement.
|
On
demand, Maker shall pay or reimburse Payee for the payment of any costs or
expenses (including in-house and reasonable outside attorneys' fees and
disbursements) incurred or expended by Payee in connection with or incidental
to
(i) any Event of Default by Maker, or (ii) the exercise or enforcement by or
on
behalf of Payee of any of its rights or remedies or Maker's obligations under
this Note, the Agreement or the other Loan Documents, including (x) the
enforcement, compromise or settlement of the obligations of this Note, (y)
if
prompted by an act or omission of Maker, all actions taken by Payee to protect
its security under this Note, the Agreement and the other Loan Documents,
including but not limited to consultation with an attorney whether or not the
matter prompting such consultation is eventually involved in litigation, and
(z)
the defense or assertion of the rights or claims of any Payee hereunder, whether
by litigation (including litigation in a United States Bankruptcy Court) or
otherwise.
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27
-
| 3.8 |
Assignment
of this Note.
|
Maker
hereby acknowledges and agrees that Payee may assign or otherwise transfer
all
or any portion of its rights under this Note to one or more institutional
investors or the affiliates thereof or to one or more of its affiliates or
wholly-owned subsidiaries. Any assignee shall have the same rights and
privileges under this Note as if said assignee were the original payee
hereof.
| 3.9 |
No
Oral Modification.
|
This
Note
may not be amended, cancelled, discharged, extended or modified except in
writing.
| MAKER: | ||
| MEDICAL DISCOVERIES, INC., a Utah corporation | ||
| By: |
|
|
| Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | ||
| Title: Chairman of the Board of Directors | ||
****************************
SCHEDULE
I
PAYEE
PAYMENT INSTRUCTIONS
-
28
-
EXHIBIT
B
LETTER
AGREEMENT
Dated
as
of September __, 2007
Emmes
Group Consulting LLC
▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: PERMITTED
PAYMENTS BY MEDICAL DISCOVERIES, INC. UNDER $1,000,000 CREDIT FACILITY
Ladies
and Gentlemen:
Reference
hereby is made to (i) that certain credit facility (the “Loan
Agreement”)
and
corresponding promissory note dated as of the date hereof (the “Note”),
made
by Medical Discoveries, Inc., a Utah corporation (hereinafter “Borrower”),
payable to the order of Mercator Momentum Fund III, LP, a California limited
partnership (together with its successors, assigns, and designees, hereinafter
“Lender”).
Capitalized terms used herein, and not otherwise defined herein, have their
respective meanings given them in the Note.
Whereas,
(i) in accordance with the terms and conditions of the Loan Agreement and Note,
the Lender wishes to advance certain amounts in favor of Borrower to the Emmes
Group’s client trust account established at Bank of America NT&SA,
Market-New ▇▇▇▇▇▇▇▇▇▇ Branch, San Francisco, California, (ii) in accordance
with
such terms and conditions, in order to obtain a loan advance under the Loan
Agreement and Note, Borrower shall from time to time deliver a borrowing
certificate (each a “Borrowing
Certificate”),
and
(iii) the Lender and Borrower wish to engage Emmes Group Consulting LLC, a
California limited liability company (“Advisors”),
to
receive each such Borrowing Certificate and such information and to disburse
the
loan advances in the manner set forth in this Letter Agreement (this
“Agreement”),
and
Advisors wish to accept such engagement. Each Borrowing Certificate shall
contain the following information and statements: (a) The amount of the advance
that Borrower desires to borrow under the Loan; (ii) The purpose for which
the
advances will be used; (iii) A representation that the Borrower is not in
default under the Note and that all of the representations and warranties in
the
Loan Agreement are, as of the date of the Borrowing Certificate, true and
correct.
NOW,
THEREFORE, for and in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agrees as follows:
1. Term.
The
term of this Agreement (the “Term”)
shall
commence on the date hereof under the Note and shall continue thereafter until
10 calendar days following the Maturity Date of the Note, unless terminated
earlier by (a) Advisors upon written notice to Lender and Borrower, or (b)
by
mutual agreement by and among Advisors and the Lender and Borrower.
2. Engagement
and Duties.
The
Lender and Borrower hereby engages Advisors to perform the following services
(the “Services”):
(a)
Lender agrees to deliver to Advisors a total of $1,000,000 (the “Loan
Amount”),
to be
delivered on the schedule set forth in Exhibit C of the Loan Agreement; (b)
Advisors shall deposit all funds received from the Lender hereunder in the
Emmes
Group’s client trust account established at Bank of America NT&SA,
Market-New ▇▇▇▇▇▇▇▇▇▇ Branch, San Francisco, California; (c) Advisors shall
take
delivery of each Borrowing Certificate delivered, from time to time, pursuant
to
the Note from Borrower and any other information delivered in connection
therewith; (d) Advisors shall review each such Borrowing Certificate and such
information and, if the Release Conditions are met, shall thereafter promptly
release the amount loan proceeds specified under the Borrowing Certificate
to
the Borrower; and (e) on December 15, 2007, Advisors shall return to Lender
any
portion of the Loan Amount that has not been disbursed to Borrower prior to
that
date. For the purposes hereof, the “Release
Conditions”
shall
mean the satisfaction of both of the following conditions: (i) The amounts
requested under the Borrowing Certificate matches or is less than, in the
aggregate, the amounts set forth in the Use of Proceeds Plan attached to the
Loan Agreement as Schedule 3.16; and (ii) the Borrower’s intended use of
proceeds as described in the Borrowing Certificate is listed on Schedule 3.16
as
an approved use of the Loan advances. Advisor’s duties under this Agreement
shall be performed in such manner as Advisors deem necessary or appropriate
in
their reasonable judgment. In providing this service, the Lender and Borrower
both agree that Advisor is in no way serving as an executive officer of the
Borrower or in any way managing the business of the Borrower.
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29
-
3. Expenses
and Indemnification.
During
the Term, the Borrower, shall reimburse Advisors for all reasonable business
expenses incurred in connection with the provision of the Services in accordance
herewith. The Lender and Borrower, jointly and severally, shall indemnify and
hold Advisors, its principals, officers, shareholders, members, employees,
consultants, and agents harmless from and against any and all liability,
demands, claims, actions, losses, interest, costs of defense and expenses
(including, without limitation, reasonable attorneys’ fees and any claims by the
Borrower or the Lender) (collectively, the “Liabilities”), which arise out of or
in connection with this Agreement or any of the Note, including without
limitation the acceptance of this Agreement and Advisor’s performance of any of
the Services or any other duties hereunder, except such Liabilities as may
directly result from the willful misconduct or gross negligence of Advisors.
Promptly after receipt by Advisors of notice of any demand or claim or the
commencement of any action, suit or proceeding relating to this Agreement,
Advisors shall promptly notify Lender and Borrower thereof in writing. IT IS
EXPRESSLY THE INTENT OF THE LENDER AND BORROWER TO JOINTLY AND SEVERALLY
INDEMNIFY ADVISORS AND ITS PRINCIPALS, DIRECTORS, OFFICERS, SHAREHOLDERS,
MEMBERS AND EMPLOYEES AND CONSULTANTS AND AGENTS FROM ERRORS IN JUDGMENT OR
OTHER ACTS OR OMISSIONS NOT AMOUNTING TO WILLFUL MISCONDUCT OR GROSS
NEGLIGENCE.
4. Representations
and Warranties.
Each
party to this Agreement represents and warrants to the other party as follows:
(a) it is a legal entity duly organized and validly existing under the laws
of
the jurisdiction in which it was organized and has all requisite corporate
or
limited liability company power to enter into this Agreement; (b) neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated herein nor compliance by it with any of the provisions
hereof will: (i) violate any order, writ, injunction, decree, law, statute,
rule
or regulation applicable to it or (ii) require the consent, approval, permission
or other authorization of, or qualification or filing with or notice to, any
court, arbitrator or other tribunal or any governmental, administrative,
regulatory or self-regulatory agency or any other third party; (c) this
Agreement has been duly authorized, executed and delivered by it and constitutes
its legal, valid and binding agreement.
5. Survival
of Agreement.
The
Lender’s and Borrower’s obligations set forth in this Agreement shall survive
the expiration, termination, or supersession of this Agreement.
6. Choice
of Law; Counterparts.
THE
VALIDITY OF THIS AGREEMENT, THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT
HEREOF, AND THE RIGHTS OF LENDER AND ADVISORS WITH RESPECT TO ALL MATTERS
ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY,
AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT
REFERENCE TO CONFLICTS OF LAW PRINCIPLES EXCEPT TO THE EXTENT NECESSARY TO
ENFORCE THIS CHOICE OF LAW PROVISION.
This
Agreement may be executed in any number of counterparts and by different parties
on separate counterparts. Each of such counterparts shall be deemed to be an
original, and all of such counterparts, taken together, shall constitute but
one
and the same agreement. Delivery of an executed counterpart of this letter
by
telefacsimile shall be equally effective as delivery of a manually executed
counterpart.
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30
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7. Assignment;
Entire Agreement.
Except
as specifically stated in this Agreement, neither this Agreement nor any of
the
rights, interests or obligations of any party hereunder shall be assigned or
delegated by either party without the prior written consent of the other party,
not to be unreasonably withheld. Any unauthorized assignment or delegation
shall
be null and void. This Agreement constitutes the full and entire understanding
and agreement among the parties hereto with regard to the subjects hereof and
thereof and no party shall be liable or bound to any other in any manner by
any
representations, warranties, covenants and agreements except as specifically
set
forth herein and therein
Please
acknowledge your acceptance and agreement to the terms of this Agreement by
returning a duly executed counterpart of this Agreement to us.
Very
truly yours,
| MERCATOR MOMENTUM FUND III, LP, as a Lender | ||
| By: |
|
|
| Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | ||
|
Title:
General Partner
|
||
| MEDICAL DISCOVERIES, INC., as a Borrower | ||
| By: |
|
|
| Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | ||
|
Title:
Chairman of the Board of
Directors
|
||
Accepted
and agreed to, as Advisors
as
of the
date first above written:
EMMES
GROUP CONSULTING LLC
|
By:
|
||
|
Name:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
|
||
|
Title:
EVP & Managing Director
|
||
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31
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EXHIBIT
C
DRAW-DOWN
SCHEDULE
-
32
-
WARRANT
TO PURCHASE COMMON STOCK
EXHIBIT
D
FORM
OF NEW WARRANT
THIS
WARRANT AND THE SECURITIES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY
NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER
SUCH
ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT
TO PURCHASE COMMON STOCK
|
Number
of Shares:
|
Up
to _____ shares (subject to adjustment)
|
|
Warrant
Price:
|
$0.01
per share
|
|
Issuance
Date:
|
September
7, 2007
|
|
Expiration
Date:
|
September
30, 2013
|
THIS
WARRANT CERTIFIES THAT
for
value received, _______________ or its registered assigns (hereinafter called
the “Holder”)
is
entitled to purchase from Medical Discoveris, Inc., a Utah corporation
(hereinafter called the “Company”),
the
above referenced number of fully paid and nonassessable shares (the
“Shares”)
of
common stock, par value $0.01 per share (the “Common
Stock”)
of
Company, at the Warrant Price per Share referenced above; the number of shares
purchasable upon exercise of this Warrant referenced above being subject to
adjustment from time to time as described herein. This Warrant is issued in
connection with that certain Loan Agreement dated as of September 7, 2007,
by
and among the Company, Holder and the other parties therein named (the
“Loan
Agreement”).
The
exercise of this Warrant shall be subject to the provisions, limitations and
restrictions contained herein.
Section
1. Term
and Exercise.
1.1 Term.
This
Warrant is exercisable in whole or in part (but not as to any fractional share
of Common Stock), at any time and from time to time after the date hereof prior
to 6:00 p.m. on the Expiration Date set forth above.
1.2 Warrant
Price. The
Warrant shall be exercisable at the Warrant Price described above.
1.3 Maximum
Number of Shares.
The
maximum number of Shares of Common Stock exercisable pursuant to this Warrant
is
______________ Shares. However, notwithstanding anything herein to the contrary,
in no event shall the Holder be permitted to exercise this Warrant for a number
of Shares greater than the number that would cause the aggregate beneficial
ownership of the Company’s Common Stock (calculated pursuant to Rule 13d-3 of
the Securities Exchange Act of 1934, as amended) of the Holder and all persons
affiliated with the Holder to equal 9.99% of
the
Company’s Common Stock then outstanding.
1.4 Procedure
for Exercise of Warrant.
Holder
may exercise this Warrant by delivering the following to the principal office
of
the Company in accordance with Section 5.1 hereof: (i) a duly executed
Notice of Exercise in substantially the form attached as Schedule A,
(ii) payment of the Warrant Price then in effect for each of the Shares
being purchased, as designated in the Notice of Exercise, and (iii) this
Warrant. Payment of the Warrant Price may be in cash, certified or official
bank
check payable to the order of the Company, or wire transfer of funds to the
Company’s account (or any combination of any of the foregoing) in the amount of
the Warrant Price for each share being purchased.
1.5 Delivery
of Certificate and New Warrant.
In the
event of any exercise of the rights represented by this Warrant, a certificate
or certificates for the shares of Common Stock so purchased, registered in
the
name of the Holder or such other name or names as may be designated by the
Holder, together with any other securities or other property which the Holder
is
entitled to receive upon exercise of this Warrant, shall be delivered to the
Holder hereof, at the Company’s expense, within a reasonable time, not exceeding
fifteen (15) calendar days, after the rights represented by this Warrant shall
have been so exercised; and, unless this Warrant has expired, a new Warrant
representing the number of Shares (except a remaining fractional share), if
any,
with respect to which this Warrant shall not then have been exercised shall
also
be issued to the Holder hereof within such time. The person in whose name any
certificate for shares of Common Stock is issued upon exercise of this Warrant
shall for all purposes be deemed to have become the holder of record of such
shares on the date on which the Warrant was surrendered and payment of the
Warrant Price was received by the Company, irrespective of the date of delivery
of such certificate, except that, if the date of such surrender and payment
is
on a date when the stock transfer books of the Company are closed, such person
shall be deemed to have become the holder of such Shares at the close of
business on the next succeeding date on which the stock transfer books are
open.
1.6 Restrictive
Legend.
Each
certificate for Shares shall bear a restrictive legend in substantially the
form
as follows, together with any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon
which such Shares may, at the time of such exercise, be listed:
“The
shares of stock evidenced by this certificate have not been registered under
the
U.S. Securities Act of 1933, as amended, and may not be offered, sold, pledged
or otherwise transferred ("transferred") in the absence of such registration
or
an applicable exemption therefrom. In the absence of such registration, such
shares may not be transferred unless, if the Company requests, the Company
has
received a written opinion from counsel in form and substance satisfactory
to
the Company stating that such transfer is being made in compliance with all
applicable federal and state securities laws.”
Any
certificate issued at any time in exchange or substitution for any certificate
bearing such legend shall also bear such legend unless, in the opinion of
counsel for the Holder thereof (which counsel shall be reasonably satisfactory
to the Company), the securities represented thereby are not, at such time,
required by law to bear such legend.
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33
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1.7 Fractional
Shares.
No
fractional Shares shall be issuable upon exercise or conversion of the Warrant
and the number of Shares to be issued shall be rounded down to the nearest
whole
Share. If a fractional share interest arises upon any exercise or conversion
of
the Warrant, the Company shall eliminate such fractional share interest by
paying to Holder an amount computed by multiplying the fractional interest
by
the Warrant Price of a full Share then in effect.
1.8 Cashless
Exercise.
(a) Holder
may, at its option, in lieu of paying the Warrant Price upon exercise of this
Warrant pursuant to Section 1.4 hereof, elect to instead to receive a number
of
Shares computed using the following formula:
X=Y(A-B)
A
Where
X=
the number of Shares issuable to Holder upon exercise of this Warrant under
this
Section 1.8, Y=the number of Shares issuable to Holder upon exercise of this
Warrant under Section 1.4 herof, A=the Fair Market Value (as defined below)
of
one Share of Common Stock as of the exercise date; and B=the Warrant Price
of
one Share of Common Stock.
(b) For
purposes of this Section 1.8, "Fair
Market Value"
of one
Share of Common Stock as of a particular date shall be determined as follows:
(i) if traded on a national securities exchange or through the Nasdaq Stock
Market, the Fair Market Value shall be deemed to be the volume weighted average
closing price of the Common Stock on such exchange as of five business days
immediately prior to such date (or if no reported sales took place on such
day,
the last date on which any such sales took place prior to the date of exercise);
(ii) if
traded
over-the-counter or the Pink Sheets but not on the Nasdaq Stock Market, the
"Fair Market Value" shall be deemed to be the average of the closing price
as of
five business days immediately prior to such date;
and
(iii) if there is no active market public market, the "Fair Market Value' shall
the fair market, as mutually determined by the Holder and the Company or, if
the
Holder and the Company are unable to reach such agreement, as determined by
a
nationally recognized independent investment banker or valuation consultant
(which has not been retained by the Company or any of its affiliates for the
past two years preceding such determination) mutually acceptable to Holder
and
Company.
Section
2. Representations,
Warranties and Covenants.
2.1 Representations
and Warranties.
(a) The
Company is a corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation and has all necessary power and
authority to perform its obligations under this Warrant;
(b) The
execution, delivery and performance of this Warrant has been duly authorized
by
all necessary actions on the part of the Company and constitutes the legal,
valid and binding obligation of the Company, enforceable against the Company
in
accordance with its terms; and
(c) This
Warrant does not violate and is not in conflict with any of the provisions
of
the Company’s Articles of Incorporation, Bylaws and any resolutions of the
Company’s Board of Directors or stockholders, or any agreement of the Company,
and no event has occurred and no condition or circumstance exists that might
(with or without notice or lapse of time) constitute or result directly or
indirectly in such a violation or conflict.
2.2 Issuance
of Shares.
The
Company covenants and agrees that all shares of Common Stock that may be issued
upon the exercise of the rights represented by this Warrant will, upon issuance,
be validly issued, fully paid and nonassessable, and free from all taxes, liens
and charges with respect to the issue thereof. The Company further covenants
and
agrees that it will pay when due and payable any and all federal and state
taxes
which may be payable in respect of the issue of this Warrant or any Common
Stock
or certificates therefor issuable upon the exercise of this Warrant excluding
the Holder's income and other taxes not directly relating to the issuance of
the
Warrant or Common Stock. The Company further covenants and agrees that the
Company will at all times have authorized and reserved, free from preemptive
rights, a sufficient number of shares of Common Stock to provide for the
exercise in full of the rights represented by this Warrant. If at any time
the
number of authorized but unissued shares of Common Stock of the Company shall
not be sufficient to effect the exercise of the Warrant in full, subject to
the
limitations set forth in Section 1.3 hereto, then the Company will take all
such
corporate action as may, in the opinion of counsel to the Company, be necessary
or advisable to increase the number of its authorized shares of Common Stock
as
shall be sufficient to permit the exercise of the Warrant in full, subject
to
the limitations set forth in Section 1.3 hereto, including without limitation,
using its best efforts to obtain any necessary stockholder approval of such
increase. The Company further covenants and agrees that if any shares of capital
stock to be reserved for the purpose of the issuance of shares upon the exercise
of this Warrant require registration with or approval of any governmental
authority under any federal or state law before such shares may be validly
issued or delivered upon exercise, then the Company will in good faith and
as
expeditiously as possible endeavor to secure such registration or approval,
as
the case may be. If and so long as the Common Stock issuable upon the exercise
of this Warrant is listed on any national securities exchange or the Nasdaq
Stock Market, the Company will, if permitted by the rules of such exchange
or
market, list and keep listed on such exchange or market, upon official notice
of
issuance, all shares of such Common Stock issuable upon exercise of this
Warrant.
Section
3. Other
Adjustments.
3.1 Subdivision
or Combination of Shares.
In case
the Company shall at any time subdivide its outstanding Common Stock into a
greater number of shares, the Warrant Price in effect immediately prior to
such
subdivision shall be proportionately reduced, and the number of Shares subject
to this Warrant shall be proportionately increased, and conversely, in case
the
outstanding Common Stock of the Company shall be combined into a smaller number
of shares, the Warrant Price in effect immediately prior to such combination
shall be proportionately increased, and the number of Shares subject to this
Warrant shall be proportionately decreased.
3.2 Dividends
in Common Stock, Other Stock or Property.
If at
any time or from time to time the holders of Common Stock (or any shares of
stock or other securities at the time receivable upon the exercise of this
Warrant) shall have received or become entitled to receive, without payment
therefor:
(a) Common
Stock, Options or any shares or other securities which are at any time directly
or indirectly convertible into or exchangeable for Common Stock, or any rights
or options to subscribe for, purchase or otherwise acquire any of the foregoing
by way of dividend or other distribution;
(b) any
cash
paid or payable otherwise than as a regular cash dividend; or
(c) Common
Stock or additional shares or other securities or property (including cash)
by
way of spin-off, split-up, reclassification, combination of shares or similar
corporate rearrangement (other than Common Stock issued as a stock split or
adjustments in respect of which shall be covered by the terms of Section 3.1
above) or additional shares, other securities or property issued in connection
with a Change (as defined below) (which shall be covered by the terms of Section
3.3 below), then and in each such case, the Holder hereof shall, upon the
exercise of this Warrant, be entitled to receive, in addition to the number
of
shares of Common Stock receivable thereupon, and without payment of any
additional consideration therefor, the amount of stock and other securities
and
property (including cash in the cases referred to in clause (b) above and this
clause (c)) which such Holder would hold on the date of such exercise had such
Holder been the holder of record of such Common Stock as of the date on which
holders of Common Stock received or became entitled to receive such shares
or
all other additional stock and other securities and property.
3.3 Reorganization,
Reclassification, Consolidation, Merger or Sale. If
any
recapitalization, reclassification or reorganization of the share capital of
the
Company, or any consolidation or merger of the Company with another corporation,
or the sale of all or substantially all of its shares and/or assets or other
transaction (including, without limitation, a sale of substantially all of
its
assets followed by a liquidation) shall be effected in such a way that holders
of Common Stock shall be entitled to receive shares, securities or other assets
or property (a “Change”),
then,
as a condition of such Change, lawful and adequate provisions shall be made
by
the Company whereby the Holder hereof shall thereafter have the right to
purchase and receive (in lieu of the Common Stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby) such shares, securities or other assets or property as
may
be issued or payable with respect to or in exchange for the number of
outstanding Common Stock which such Holder would have been entitled to receive
had such Holder exercised this Warrant immediately prior to the consummation
of
such Change. The Company or its successor shall promptly issue to Holder a
new
Warrant for such new securities or other property. The new Warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to
give effect to the adjustments provided for in this Section 3 including, without
limitation, adjustments to the Warrant Price and to the number of securities
or
property issuable upon exercise of the new Warrant. The provisions of this
Section 3.3 shall similarly apply to successive Changes.
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34
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Section
4. Ownership
and Transfer.
4.1 Ownership
of This Warrant.
The
Company may deem and treat the person in whose name this Warrant is registered
as the holder and owner hereof (notwithstanding any notations of ownership
or
writing hereon made by anyone other than the Company) for all purposes and
shall
not be affected by any notice to the contrary until presentation of this Warrant
for registration of transfer as provided in this Section 4.
4.2 Transfer
and Replacement.
This
Warrant and all rights hereunder are transferable in whole or in part upon
the
books of the Company by the Holder hereof in person or by duly authorized
attorney, and a new Warrant or Warrants, of the same tenor as this Warrant
but
registered in the name of the transferee or transferees (and in the name of
the
Holder, if a partial transfer is effected) shall be made and delivered by the
Company upon surrender of this Warrant duly endorsed, at the office of the
Company in accordance with Section 5.1 hereof. Upon receipt by the Company
of
evidence reasonably satisfactory to it of the loss, theft or destruction, and,
in such case, of indemnity or security reasonably satisfactory to it, and upon
surrender of this Warrant if mutilated, the Company will make and deliver a
new
Warrant of like tenor, in lieu of this Warrant; provided that if the Holder
hereof is an instrumentality of a state or local government or an institutional
holder or a nominee for such an instrumentality or institutional holder an
irrevocable agreement of indemnity by such Holder shall be sufficient for all
purposes of this Warrant, and no evidence of loss or theft or destruction shall
be necessary. This Warrant shall be promptly cancelled by the Company upon
the
surrender hereof in connection with any transfer or replacement. Except as
otherwise provided above, in the case of the loss, theft or destruction of
a
Warrant, the Company shall pay all expenses, taxes and other charges payable
in
connection with any transfer or replacement of this Warrant, other than income
taxes and stock transfer taxes (if any) payable in connection with a transfer
of
this Warrant, which shall be payable by the Holder. Holder will not transfer
this Warrant and the rights hereunder except in compliance with federal and
state securities laws and except after providing evidence of such compliance
reasonably satisfactory to the Company.
Section
5. Miscellaneous
Provisions.
5.1 Notices.
Any
notice or other document required or permitted to be given or delivered to
the
Holder shall be delivered or forwarded to the Holder at c/o M.A.G. Capital,
LLC,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (Facsimile No. 213/553-8285), or to such other address
or number as shall have been furnished to the Company in writing by the Holder,
with a copy to ▇▇▇▇▇ Winner ▇▇▇▇▇▇▇, Esq., ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(Facsimile No. 818/743-7491). Any notice or other document required or permitted
to be given or delivered to the Company shall be delivered or forwarded to
the
Company at Medical Discoveries, Inc. c/o Sunhaven Farms ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (Facsimile No. 509/786-2010), or to such other address or
number as shall have been furnished to Holder in writing by the Company or
to
the Company by Holder, with copy to ▇▇▇▇ ▇▇▇▇▇ PC, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Esq. (Facsimile No.
310/789-1426).
5.2 All
notices, requests and approvals required by this Warrant shall be in writing
and
shall be conclusively deemed to be given (i) when hand-delivered to the other
party, (ii) when received if sent by facsimile at the address and number set
forth above; provided that notices given by facsimile shall not be effective,
unless either (a) a duplicate copy of such facsimile notice is promptly given
by
depositing the same in the mail, postage prepaid and addressed to the party
as
set forth below or (b) the receiving party delivers a written confirmation
of
receipt for such notice by any other method permitted under this paragraph;
and
further provided that any notice given by facsimile received after 5:00 p.m.
(recipient’s time) or on a non-business day shall be deemed received on the next
business day; (iii) five (5) business days after deposit in the United States
mail, certified, return receipt requested, postage prepaid, and addressed to
the
party as set forth below; or (iv) the next business day after deposit with
an
international overnight delivery service, postage prepaid, addressed to the
party as set forth below with next business day delivery guaranteed; provided
that the sending party receives confirmation of delivery from the delivery
service provider.
5.3 No
Rights as Shareholder; Limitation of Liability.
This
Warrant shall not entitle the Holder to any of the rights of a shareholder
of
the Company except upon exercise in accordance with the terms hereof. No
provision hereof, in the absence of affirmative action by the Holder to purchase
shares of Common Stock, and no mere enumeration herein of the rights or
privileges of the Holder, shall give rise to any liability of the Holder for
the
Warrant Price hereunder or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the
Company.
5.4 Governing
Law.
This
Warrant shall be governed by and construed in accordance with the laws of the
State of California as applied to agreements among California residents made
and
to be performed entirely within the State of California, without giving effect
to the conflict of law principles thereof.
5.5 Binding
Effect on Successors.
This
Warrant shall be binding upon any corporation succeeding the Company by merger,
consolidation or acquisition of all or substantially all of the Company’s assets
and/or securities. All of the obligations of the Company relating to the Shares
issuable upon the exercise of this Warrant shall survive the exercise and
termination of this Warrant. All of the covenants and agreements of the Company
shall inure to the benefit of the successors and assigns of the
Holder.
5.6 Waiver,
Amendments and Headings.
This
Warrant and any provision hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by both parties (either
generally or in a particular instance and either retroactively or
prospectively). The headings in this Warrant are for purposes of reference
only
and shall not affect the meaning or construction of any of the provisions
hereof.
5.7 Jurisdiction.
Each of
the parties irrevocably agrees that any and all suits or proceedings based
on or
arising under this Agreement may be brought only in and shall be resolved in
the
federal or state courts located in the City of Los Angeles, California and
consents to the jurisdiction of such courts for such purpose. Each of the
parties irrevocably waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding in any such court. Each of the parties
further agrees that service of process upon such party mailed by first class
mail to the address set forth in Section 5.1 shall be deemed in every respect
effective service of process upon such party in any such suit or proceeding.
Nothing herein shall affect the right of a Holder to serve process in any other
manner permitted by law. Each of the parties agrees that a final non-appealable
judgment in any such suit or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on such judgment or in any other lawful
manner.
5.8 Attorneys'
Fees and Disbursements.
If any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement, the prevailing party or parties shall be entitled to receive
from the other party or parties reasonable attorneys’ fees and disbursements in
addition to any other relief to which the prevailing party or parties may be
entitled.
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35
-
IN
WITNESS WHEREOF,
the
Company has caused this Warrant to be signed by its duly authorized officer
this
7th
day of
September, 2007.
|
COMPANY:
|
||
| MEDICAL DISCOVERIES, INC. | ||
| By |
|
|
| Print Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | ||
|
Title:
Chairman of the Board of
Directors
|
||
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36
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SCHEDULE
A
FORM
OF NOTICE OF EXERCISE
[To
be signed only upon exercise of the Warrant]
TO
BE EXECUTED BY THE REGISTERED HOLDER
TO
EXERCISE THE WITHIN WARRANT
The
undersigned hereby elects to purchase _____________ shares of Common Stock
(the
“Shares”)
of
MultiCell Technologies, Inc. under the Warrant to Purchase Common Stock dated
September 7, 2007, which the undersigned is entitled to purchase pursuant to
the
terms of such Warrant. The undersigned has delivered $________________, the
aggregate Warrant Price for _____________ Shares purchased herewith, in full
in
cash or by certified or official bank check or wire transfer.
Please
issue a certificate or certificates representing such shares of Common Stock
in
the name of the undersigned or in such other name as is specified below and
in
the denominations as is set forth below:
|
[Type
Name of Holder as it should appear on the stock
certificate]
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[Requested
Denominations - if no denomination is specified, a single certificate
will
be issued]
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The
initial address of such Holder to be entered on the books of Company
shall
be:
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||
The
undersigned hereby represents and warrants that the undersigned is acquiring
such shares for his own account for investment purposes only, and not for resale
or with a view to distribution of such shares or any part thereof.
|
By:
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|||
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Print Name:
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|||
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Title:
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Dated:
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|||
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37
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FORM
OF ASSIGNMENT
(ENTIRE)
[To
be signed only upon transfer of entire Warrant]
TO
BE EXECUTED BY THE REGISTERED HOLDER
TO
TRANSFER THE WITHIN WARRANT
FOR
VALUE RECEIVED
___________________________ hereby sells, assigns and transfers unto
_______________________________ all rights of the undersigned under and pursuant
to the within Warrant, and the undersigned does hereby irrevocably constitute
and appoint _____________________ Attorney to transfer the said Warrant on
the
books of ________ _________, with full power of substitution.
[Type
Name of Holder]
|
By:
|
|
|
|
Title:
|
|
|
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Dated:
|
NOTICE
The
signature to the foregoing Assignment must correspond exactly to the name as
written upon the face of the within Warrant, without alteration or enlargement
or any change whatsoever.
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38
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