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
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Number
of Shares:
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Up
to _____________ shares (subject to adjustment)
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Warrant
Price:
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$0.01
per share
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Issuance
Date:
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October
17, 2007
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Expiration
Date:
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October
17, 2017
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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, no par value (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 Release and Settlement Agreement dated as of
October 17, 2007, by and among the Company, Holder and the other parties
therein
named (the “Settlement
Agreement”).
The
exercise of this Warrant shall be subject to the provisions, limitations
and
restrictions contained herein.
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, 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, or as set forth in Section
1.8
hereof.
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.
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.
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.
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.
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.
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,
555 South Flower Street, Suite 4200, Los Angeles, California 90071, Attention:
David F. Firestone (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 Paula Winner Barnett, Esq., 17967 Boris Drive, Encino, CA
91316
(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 30103 West Gwinn
Road,
Prosser, WA 99350 (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 Troy Gould PC, 1801 Century Park East,
Suite
1600, Los Angeles, CA 90067, Attention: Istvan Benko, 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.
IN
WITNESS WHEREOF,
the
Company has caused this Warrant to be signed by its duly authorized officer
this
17th
day of
October, 2007.
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COMPANY:
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MEDICAL
DISCOVERIES, INC. |
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By: |
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Print Name: David
R.
Walker |
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Title:
Chairman of the Board of
Directors
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