This Mutual Release and Settlement Agreement (this "AGREEMENT") is
entered into effective as of the last date of execution below (the "EFFECTIVE
DATE") by and between Medical Discoveries, Inc., a Utah corporation ("MDI") and
Harvest Group, L.L.C., a Utah limited liability company ("HARVEST"),
Hydromedics, Inc., a Utah corporation (formerly known as Advance Sales Company)
("HYDROMEDICS").
R E C I T A L S
A. MDI, MDI Healthcare Systems, Inc., a Nevada corporation and a
wholly-owned subsidiary of MDI ("MHSI"), and Hydromedics entered into that
certain Exclusive Sales Agency Agreement dated as of December 14, 1999 (the
"SALES AGREEMENT"), pursuant to which Hydromedics was to market certain skincare
products of MDI and MHSI.
B. MDI borrowed certain sums of money from Harvest as evidenced by those
certain Promissory Notes dated as of October 27, 1999, December 12, 1999,
January 24, 2000, March 29, 2000, and June 19, 2000 (collectively, the "NOTES"),
copies of which are attached hereto as EXHIBIT A.
C. Harvest and Hydromedics contend that the parties entered into that
certain JV Agreement originally dated as of June 28, 2000 and later dated as of
July 12, 2000 (the "JV AGREEMENT").
D. MDI contends that the JV Agreement was never consummated and the
parties have a dispute as to the relative rights and obligations of each of the
parties thereunder.
E. On December 26, 2000, Harvest filed a demand for arbitration seeking
specific performance of the JV Agreement or damages.
F. MDI has threatened to bring certain counterclaims against Harvest,
Hydromedics and the principals of each. Harvest and Hydromedics maintain MDI has
no basis for any counterclaims.
G. MDI, Harvest and Hydromedics now desire to terminate all obligations
of all parties under the Sales Agreement, the Notes, and the JV Agreement and
enter into a full and final settlement of any and all claims which either of
them has made, could have made, or may in the future make arising out of or in
any way connected with the Sales Agreement, the Notes or the JV Agreement and
all related matters, as well as settle any other existing or potential claims
between them.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, MDI, Harvest and Hydromedics hereby agree as
follows:
1. Convertible Note. Upon receipt of an executed original of this
Agreement, MDI shall deliver to Harvest a convertible promissory note in the
principal sum of Five Hundred Thousand Dollars ($500,000) in the form attached
hereto as EXHIBIT B (the "CONVERTIBLE NOTE").
2. Inventory. Within five (5) business days of the Effective Date,
Harvest will make available for pick-up by MDI all inventories held by Harvest
and Hydromedics (or either of them) of products developed by MDI or MHSI, and
Harvest shall cooperate reasonably with MDI to arrange for a specific time and
location for such pick-up by MDI.
3. Furnishings. Within five (5) business days of the Effective Date,
Harvest will make available for pick-up by MDI all office furniture, equipment
and furnishings held by Harvest and Hydromedics (or either of them) that were
contributed by MDI toward the joint
effort of the parties to consummate the JV Agreement, and Harvest shall
cooperate reasonably with MDI to arrange for a specific time and location for
such pick-up by MDI.
4. Termination of Agreements. The parties hereby terminate the Sales
Agreement, the JV Agreement and any and all other agreements, licenses,
understandings and commitments between them, written or oral, including
specifically, but without limitation, any and all licenses for the sale of
products developed by MDI or its subsidiaries. All such agreements, licenses,
understandings and commitments are of no further force and effect as of the
Effective Date. Notwithstanding any terms to the contrary in any such agreement,
license, understanding or commitment, no provisions, terms or conditions of any
such agreement, license, understanding or commitment shall survive the Effective
Date and neither party shall have any further obligations or liability to the
other thereunder.
5. Satisfaction of Notes. The Notes are hereby deemed satisfied in full
and MDI shall have no further obligations or liability under the Notes or under
any other loans, advances or borrowings from Harvest or Hydromedics, whether or
not documented with promissory notes. Within five (5) business days of the
Effective Date, Harvest shall deliver the original Notes to MDI.
6. Stock Certificates. The parties acknowledge that representatives of
Harvest and/or Hydromedics may have inadvertently included one or more stock
certificates of Hydromedics (the "CERTIFICATES") in file materials delivered to
MDI. MDI hereby represents and warrants to Hydromedics that (i) MDI has made a
diligent search for the Certificates and has been unable to find or recover the
Certificates; (ii) assuming the Certificates were ever in MDI's possession, MDI
believes the Certificates are now lost, stolen or destroyed; and (iii) MDI has
not sold, assigned, transferred, hypothecated, pledged, deposited under any
agreement, or otherwise disposed of the Certificates in whole or in part, or
endorsed or delivered the Certificates to any
person. If MDI ever finds any of the Certificates, MDI shall immediately deliver
the same to Hydromedics.
7. Further Assurances. In case at any time after the Effective Date any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of assignments, bills of sale, instruments and documents)
as the other party reasonably may request.
8. Release by MDI and MHSI. On its own behalf and on behalf of MHSI and
each of their respective successors and assigns, MDI hereby releases, acquits
and forever discharges Harvest, Hydromedics and each of their respective present
and former assigns, predecessors, successors, parents, subsidiaries, affiliates,
partners, members, shareholders, directors, officers, servants, employees
(whether presently employed or formerly employed), attorneys, insurers, agents,
and all other persons, firms, corporations, or organizations to whom and for
whose conduct the parties released hereby are or may be liable, obligated or
responsible, directly or indirectly (collectively referred to hereinafter as the
"HARVEST RELEASEES") from and of any and all actions, causes of action, claims,
demands, rights, damages, costs, losses, expenses, compensation and liabilities
of any kind or nature whatsoever (whether in contract or in tort; whether at law
or equity; whether known or unknown; whether suspected or unsuspected; whether
accrued or unaccrued; whether alleged or unclaimed) for, on account of, or in
any way arising, in whole or in part, from any and all events from the beginning
of time to the Effective Date including, without limitation, the following:
A. Any claim arising from, in any way connected with, or
relating to, either directly or indirectly, the claims asserted,
assertable or which may become assertable in the future related to the
Sales Agreement or the JV Agreement; and
B. Any other claims arising from or relating to, either directly
or indirectly, any acts or omissions of any of the Harvest Releasees,
whether intentional or unintentional, whether related or unrelated,