LOAN AND SECURITY AGREEMENT
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.
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;
(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, Richard Palmer, 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.
(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) 1388 South Foothill Drive, #266 Salt Lake City, Utah 84108 and (ii) 30103 West Gwinn Road Prosser, Washington 99350.
(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.
(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.
(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.
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.
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.
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.
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.
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 Dave Walker his accrued directors’ fee of $30,000 and $90,000 of accrued fees of Advisors, the consulting company affiliated with Martin Schroeder);
5.7 Liquidate or dissolve or enter into any consolidation, merger, partnership, joint venture, syndicate or other combination;
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.
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.
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.
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 bill, bill 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 sue 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.
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
(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.
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
555 South Flower Street, Suite 4200
Los Angeles, CA 90071
Attention: David F. Firestone
Telephone: (213) 533-8288
Telecopier: (213) 533-8285
with a copy to:
Paula Winner Barnett, Esq.
17967 Boris Drive
Encino, CA 91316
Attention: Paula Winner Barnett, Esq.
Telephone: (818) 776-9881
Telecopier: (818) 743-7491
(ii) if to Borrower:
Medical Discoveries, Inc.
c/o Sunhaven Farms
30103 West Gwinn Road
Prosser, WA 99350
Attention: David R. Walker
Telephone: (509) 786-1013
Telecopier: (509) 786-1020
with a copy to:
Troy Gould PC
1801 Century Park East, Suite 1600
Los Angeles, CA 90067
Attention: Istvan Benko, Esq.
Telephone: (310) 789-1226
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.
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.
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 Paula Winner Barnett, Esq., consulting fees to the Advisors, and legal fees to Troy Gould 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.
(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: David Firestone |
| | Title: General Partner |
| | | |
| | BORROWER: |
| | MEDICAL DISCOVERIES, INC., |
| | a Utah corporation |
| | | |
| | |
|
| | Name: David R. Walker |
| | Title: Chairman of the Board of Directors |
