EXHIBIT 10.1
RELEASE AND SETTLEMENT AGREEMENT
THIS
RELEASE AND SETTLEMENT AGREEMENT (this “
Agreement ”)
is entered into as of October 19, 2007 by and between MEDICAL
DISCOVERIES, INC., a Utah corporation (the “
Company ”),
and MERCATOR MOMENTUM FUND, LP, MONARCH POINTE FUND, LTD., and
MERCATOR MOMENTUM FUND III, LP, each a private investment entity
(the foregoing three investment funds are hereinafter
collectively referred
to as “
MAG ”).
RECITALS
WHEREAS,
on or about October 2004, the board of directors of the
Company (the “
Board ”)
adopted a resolution establishing the rights, preferences,
privileges and restrictions of the Company’s Series A
Convertible Preferred Stock (the “
Series A Preferred Stock ”);
WHEREAS,
the Company thereafter filed with the Secretary of State of
the State of Utah (the “
Utah SOS ”)
a Certificate of Designations of Preferences and Rights of the
Series A Preferred Stock (the “
Certificate ”),
which Certificate designated the rights of the holders of the
Series A Preferred Stock with respect to such preferred
stock;
WHEREAS,
in connection with an initial round of preferred equity
financing, the Company issued to MAG shares of the Series A
Preferred Stock pursuant to the terms and conditions of
Subscription Agreements each dated October 18, 2004 (the
“
Subscription Agreements ”);
WHEREAS,
pursuant to the Certificate, MAG had the right to convert
shares of the Series A Preferred Stock at a Conversion Price
(as defined in the Certificate) equal to 85% of the Market
Price (as defined in the Certificate) except that if an Event
of Default (as defined in the Subscription Agreements) occurs,
the conversion price is reduced to 75% of the Market Price,
subject to a Floor Price (as defined in the Certificate) of
$0.05 per share;
WHEREAS,
on or around March 2005, in connection with a subsequent round
of equity financing pursuant to which the Company issued to
MAG additional shares of the Series A Preferred Stock, the
Company and MAG agreed to amend the Certificate (the
“
Amendment ”)
to delete all references therein to a Floor Price, which Amendment
was to be filed with the Utah SOS in accordance with Utah general
corporate law;
WHEREAS,
the Company failed to file the Amendment with the Utah SOS
and, accordingly, the Series A Preferred Stock conversion
price is still limited to the $0.05 per share Floor
Price;
WHEREAS,
the Company is in default of the Subscription Agreements for
failing to keep the Registration Statement (as defined in the
Subscription Agreements) effective;
WHEREAS,
the parties hereto desire to reach an agreement in settlement
of any and all past, present, future, actual, potential and
unknown losses, costs, expenses and damages that MAG may have
suffered as result of the Company’s failure to file the
Amendment and to keep the Registration Statement effective
(all such losses, expenses and damages, the “
Losses ”);
WHEREAS,
MAG owns all of the issued and outstanding shares of the
Series A Preferred Stock; and,
WHEREAS,
the parties hereto now desire to enter into a full and
complete release and settlement with respect of the Losses,
subject to the terms and conditions of this
Agreement.
Agreement
NOW,
THEREFORE, upon these premises, which are incorporated herein
by reference, and for and in consideration of the mutual
promises and covenants set forth herein and other good and
valuable consideration, the receipt and adequacy of which are
hereby acknowledged, it is hereby agreed as
follows:
1.
Release of Claims .
Each of the MAG entities, for themselves, their future, present,
and former employees, agents, representatives, consultants,
attorneys, fiduciaries, officers, directors, successors, assigns
and subsidiary entities (together, the “
MAG Parties ”)
do hereby irrevocably release, remise, acquit, and forever
discharge the Company, including all of its future, present, and
former employees, agents, representatives, consultants, attorneys,
fiduciaries, servants, officers, directors, managers, partners,
predecessors, successors and assigns, subsidiary and parent
entities (together, the “
Company Parties ”),
from any and all actions and causes of action, judgments,
execution, suits, debts, past, present, future and unknown claims,
demands, liabilities, obligations, damages that could be brought by
the MAG Parties, and expenses of any and every character, known or
unknown, direct and/or indirect, at law or in equity, or whatsoever
kind or nature, in connection with, relating to or otherwise
arising out of the Losses and the Company’s failure to file
the Amendment. The Company acknowledges that the rel
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