SUBSCRIPTION AGREEMENT BETWEEN ELECTRIC AQUAGENICS UNLIMITED INC. AND THE INVESTOR NAMED HEREIN MAY 1, 2006
BETWEEN
AND
THE
INVESTOR NAMED HEREIN
MAY
1, 2006
Table
of Contents
|
1.
|
Purchase
and Sale of the Shares.
|
1
|
|
|
1.1
|
Sale
and Issuance of the Shares.
|
||
|
1.2
|
Closing
|
1
|
|
|
1.3
|
Use
of Proceeds
|
2
|
|
|
2.
|
Representations and Warranties of the Company |
2
|
|
|
2.1
|
Organization,
Good Standing and Qualification
|
2
|
|
|
2.2
|
Capitalization
|
3
|
|
|
2.3
|
Subsidiaries;
Joint Ventures
|
3
|
|
|
2.4
|
Authorization
|
3
|
|
|
2.5
|
Governmental
Consents
|
3
|
|
|
2.6
|
Offering
|
3
|
|
|
2.7
|
Litigation
|
3
|
|
|
2.8
|
Absence
of Certain Developments
|
4
|
|
|
2.9
|
Proprietary
Information Agreements
|
4
|
|
|
2.10
|
Patents
and Trademarks
|
5
|
|
|
2.11
|
Compliance
with Other Instruments
|
5
|
|
|
2.12
|
Related-Party
Transactions
|
5
|
|
|
2.13
|
Business
Plan
|
6
|
|
|
2.14
|
Tax
Returns
|
6
|
|
|
2.15
|
Permits
|
6
|
|
|
2.16
|
Environmental
and Safety Laws
|
6
|
|
|
2.17
|
Registration
Rights
|
6
|
|
|
2.18
|
Corporate
Documents; Minute Books
|
6
|
|
|
2.19
|
Title
to Property and Assets
|
6
|
|
|
2.20
|
Insurance
|
6
|
|
|
2.21
|
Labor
Agreements and Actions
|
6
|
|
|
2.22
|
Obligations
of Management
|
7
|
|
|
2.23
|
Disclosure
|
7
|
|
|
2.24
|
No
Brokerage.
|
7
|
|
|
3.
|
Representations and Warranties of the Investor |
7
|
|
|
3.1
|
Authorization
|
7
|
|
|
3.2
|
Purchase
Entirely for Own Account
|
7
|
|
|
3.3
|
Accredited
Investor
|
8
|
|
|
3.4
|
Restricted
Securities
|
8
|
|
|
3.5
|
Legends
|
8
|
|
|
4.
|
Conditions of Investor’s Obligations at Closing |
8
|
|
|
4.1
|
Representations
and Warranties
|
8
|
|
|
4.2
|
Performance
|
8
|
|
|
4.3
|
Proceedings
and Documents
|
8
|
|
i
|
4.4
|
|
Fees
of Counsel
|
8
|
|
4.5
|
|
Warrant
Agreement
|
9
|
|
4.6
|
|
Share
Certificate
|
9
|
|
4.7
|
|
Registration
Rights Agreement
|
9
|
|
4.8
|
|
Amended
and Restated License and Distribution Agreement
|
9
|
|
5.
|
Conditions of the Company’s Obligations at Closing |
9
|
|
|
5.1
|
Representations
and Warranties
|
9
|
|
|
5.2
|
Payment
of Purchase Price
|
9
|
|
|
6.
|
Miscellaneous. |
9
|
|
|
6.1
|
Indemnification
|
9
|
|
|
6.2
|
SEC
Filings
|
10
|
|
|
6.3
|
Pre-emptive
Rights
|
10
|
|
|
6.4
|
Survival
|
10
|
|
|
6.5
|
Successors
and Assigns
|
10
|
|
|
6.6
|
Governing
Law
|
10
|
|
|
6.7
|
Arbitration
|
11
|
|
|
6.8
|
Titles
and Subtitles
|
11
|
|
|
6.9
|
Notices
|
11
|
|
|
6.10
|
No
Brokers
|
12
|
|
|
6.11
|
Expenses
|
12
|
|
|
6.12
|
Amendments
and Waivers
|
12
|
|
|
6.13
|
Severability
|
12
|
|
|
6.14
|
Entire
Agreement
|
12
|
|
|
6.15
|
Further
Assurances
|
12
|
|
|
6.16
|
Counterparts
|
12
|
|
|
6.17
|
Construction
|
13
|
|
Exhibits:
|
Exhibit
A -
|
Warrant
Agreement
|
|
Exhibit
B -
|
Capitalization
|
|
Exhibit
C -
|
Registration
Rights Agreement
|
|
Exhibit
D -
|
Amended
and Restated License and Distribution
Agreement
|
Schedules:
|
Schedule
2.3 -
|
Subsidiaries
and Joint Ventures
|
|
Schedule
2.9 -
|
Non-Proprietary
Information
|
|
Schedule
2.13 -
|
Business
Plan
|
|
Schedule
2.17 -
|
Registration
Rights
|
|
Schedule
2.21 -
|
Employment
Agreements
|
ii
This
Subscription Agreement (this “Agreement”)
is
made as of May 1, 2006, by and among Electric Aquagenics Unlimited Inc.,
a
Delaware corporation (the “Company”),
Water
Science, LLC, a Florida limited liability company (the “Investor”).
WITNESSETH:
WHEREAS,
the Investor desires to purchase, and the Company desires to sell, 1,600,000
shares of common stock of the Company (the “Shares”)
at the
price and on the terms and conditions set forth herein;
WHEREAS,
the Company is willing to make the representations and warranties and to
undertake the obligations hereinafter set forth in connection with such
investment;
WHEREAS,
as a further incentive for Purchaser to purchase the Shares, Seller shall
deliver to Purchaser a warrant to purchase 6,400,000 shares of its common
stock
(the “Warrants”)
at an
exercise price of $2.76 per share, in accordance with the terms and conditions
of the Warrant Agreement between the parties, a copy of which is attached
hereto
as Exhibit A
and
incorporated herein by reference.
NOW,
THEREFORE, in consideration of the premises and the mutual agreements herein
contained, the parties hereto agree as follows:
1. Purchase
and Sale of the Shares.
1.1 Sale
and
Issuance of the Shares.
(a)
Subject
to the terms and conditions of this Agreement, the Investor agrees to purchase,
and the Company agrees to sell and issue to the Investor, [1,600,000] Shares
for
an aggregate purchase price of Four Million and 00/100 U.S. Dollars (U.S.
$4,000,000) (the “Purchase
Price”).
The
Shares represent ______ of the Company’s common stock par value $.001 per share
(the “Common
Stock”)
on a
fully-diluted basis.
(b)
Subject
to the terms and conditions of this Agreement, the Investor agrees to purchase,
and the Company agrees to sell and issue to the Investor, a warrant to purchase
up to 6,400,000 shares of Common Stock in the form attached hereto as
Exhibit A
(the
“Warrant”).
The
Warrant, upon exercise on the Effective Date, would represent, ____% of the
Company’s Common Stock on a fully-diluted basis. The Shares and the Warrant are
collectively referred to herein as the “Securities.”
1.2 Closing.
The
purchase and sale of the Securities shall take place at the offices of ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, P.A., ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ the date hereof,
at
10:00 a.m., or at such other place and time as the Company, and the Investor
mutually agree (which time and place are designated herein as the “Closing”).
At
the Closing, the parties shall deliver the following:
(a)
the
Investor shall pay the Purchase Price by interbank wire transfer of immediately
available funds to such account of the Company as the Company shall designate
prior to the Closing;
(b)
the
Company shall deliver each of an original executed certificate representing
the
Shares and the Warrant to the Investor;
(c)
the
Company shall have amended and restated the License and Distribution Agreement
by and between the Company and the Investor, dated as of September 16, 2005
(the “Amended
License and Distribution Agreement”);
(d)
the
Company shall have entered into the Registration Rights Agreement by and
between
the Company and the Investor, dated as of September 16, 2005 (the
“Registration
Rights Agreement”);
(e)
the
respective parties to this Agreement, the Amended and Restated License and
Distribution Agreement and the Registration Rights Agreement (collectively,
the
“Related
Agreements”)
shall
have executed and delivered each such agreement;
(f)
the
Company shall have reimbursed the Investor for fifty percent (50%) of the
costs
and fees associated with the Initial Investment; and
(g)
the
Company shall have paid the Investor fifty percent (50%) of the costs and
fees
incurred as a result of this Agreement.
1.3 Use
of
Proceeds.
The
proceeds from the sale of the Shares shall be used by the Company (i) in
accordance with the agreed-upon budget of the Company, as approved by the
Board
of Directors of the Company, as amended from time to time by the Board of
Directors (the “Budget”) and (ii) for the payment of fees and expenses incurred
in connection with the consummation of the transactions contemplated by the
Related Documents. In addition to such other limitations that are contained
herein, the Company’s officers shall make no disbursement in an amount greater
than $10,000 in one disbursement (or series of related disbursements with
a sum
greater than $20,000) and shall enter into no binding agreement obligating
the
Company to make payments in excess of $20,000 over the life of such agreement
without the prior approval of the majority of the members of the Board of
Directors, if such disbursement or binding agreement would be inconsistent
with
(or in light of the available facts and circumstances would likely be
inconsistent with) the approved budgetary items set forth in the
Budget.
2. Representations
and Warranties of the Company.
The
Company, hereby represents and warrants to the Investor as follows:
2.1 Organization,
Good Standing and Qualification.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Company and each of its
subsidiaries is duly qualified to transact business and is in good standing
in
each jurisdiction in which the nature of its business or its ownership of
property requires it to be so qualified except for those jurisdictions in
which
the failure to be so qualified would not, individually or in the aggregate,
have
a material adverse effect on the Company’s business, assets, properties,
prospects, operations or conditions (financial or otherwise) (a “Material
Adverse Effect”).
2.2 Capitalization.
The
capitalization of the Company is as described in its public filings and as
set
forth on Exhibit B
attached
hereto.
Except
as set forth on Exhibit B,
there
is no option, warrant, call subscription, convertible security, right (including
preemptive right) or contract of any character to which the Company is a
party
or by which it is bound obligating the Company to issue, exchange, transfer,
sell, repurchase, redeem or otherwise acquire any capital stock of the Company
or obligating the Company to grant, extend, accelerate the vesting of or
enter
into any such option, warrant, call, subscription, convertible security or
right
to contract. There are no outstanding or authorized stock appreciation, phantom
stock or similar rights with respect to the Company.
2.3 Subsidiaries;
Joint Ventures.
Except
as set forth or par of Schedule 2.3,
the
Company does not own or control, directly or indirectly, any interest in
any
other corporation, association, or other entity (each, a “Subsidiary”).
For
each Subsidiary, Schedule
2.3
sets
forth the equity interest owned by the Company and the percentage of the
outstanding equity interest so owned. The Company is not a participant in
any
joint venture, partnership, or similar arrangement.
2.4 Authorization.
The
Related Agreements constitute valid and legally binding obligations of the
Company, enforceable in accordance with their respective terms, except
(i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally, and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies.
2.5 Governmental
Consents.
No
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any federal, state or local
governmental authority on the part of the Company is required in connection
with
the consummation of the transactions contemplated by this Agreement, except
for
such filings as are required pursuant to applicable federal and state securities
laws and blue sky laws, which filings will be effected within the required
statutory period.
2.6 Offering.
Subject
in part to the truth and accuracy of the Investor’s representations set forth in
Section 4
of this
Agreement, the offer, sale and issuance of the Securities as contemplated
by
this Agreement are exempt from the registration requirements of the Securities
Act of 1933, as amended (the “Act”),
and
the qualification or registration requirements of applicable blue sky laws.
Neither the Company nor any authorized agent acting on its behalf will take
any
action hereafter that would cause the loss of such exemptions.
2.7 Litigation.
There
is no action, suit, proceeding or investigation pending, or to the Company’s
knowledge, currently threatened against the Company that questions the validity
of this Agreement or the right of the Company to enter into such agreement
or to
consummate the transactions contemplated hereby. The Company is not a party
or
subject to the provisions of any order, writ, injunction, judgment or decree
of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or that the
Company
intends to initiate.
2.8 Absence
of Certain Developments.
Since
September 30, 2005, there has not been any Material Adverse Effect
and:
(a)
neither
the Company nor any Subsidiary has sold, leased, transferred or assigned
any of
its assets, tangible or intangible, other than for a fair consideration in
the
ordinary course of business;
(b)
neither
the Company nor any Subsidiary has entered into any contract (or series of
related contracts) either involving more than $10,000 or outside the ordinary
course of business;
(c)
no
party
(including the Company or any Subsidiary) has accelerated, suspended, terminated
modified or canceled any contract (or series of related contracts) involving
more than $10,000 to which the Company or any Subsidiary is a party or by
which
any of them is bound;
(d)
no
encumbrance has been imposed on any assets of the Company or any
Subsidiary;
(e)
neither
the Company nor any Subsidiary has made any capital expenditure (or series
of
related capital expenditures) either involving more than $10,000 or outside
the
ordinary course of business;
(f)
neither
the Company nor any Subsidiary has made any capital investment in, any loan
to,
or any acquisition of the securities or assets of, any other person (or series
of related capital investments, loans and acquisitions) or acquired (by merger,
exchange, consolidation, acquisition of stock or assets or otherwise) any
person;
(g)
neither
the Company nor any Subsidiary has granted any license or sublicense of any
rights under or with respect to any intellectual property;
(h)
there
has
been no change made or authorized in the organizational documents of the
Company
or any Subsidiary, except as set forth in the definitive proxy statement
on
Schedule 14A filed with the Securities and Exchange Commission on February
8,
2006, and approved by the shareholders at a special meeting on March 15,
2006;
and
(i)
neither
the Company nor any Subsidiary has issued, sold or otherwise disposed of
any of
its capital stock or equity interests, or granted any options, warrants or
other
rights to purchase or obtain (including upon conversion, exchange or exercise)
any of its capital stock, except as set forth on Exhibit
B.
2.9 Proprietary
Information Agreements.
Each
current and former employee, officer and consultant of the Company has executed
a proprietary information and inventions assignment agreement in forms adequate
to protect the Company’s intellectual property, including, without limitation,
any patents, patent rights, trademarks, trademark rights, service marks,
service
▇▇▇▇ rights, trade names, trade name rights and copyrights (collectively,
“Intellectual
Property”),
and
Proprietary Information (as defined below). No former or current employee,
officer or consultant of the Company has excluded works or inventions made
prior
to his or her employment with the Company from such employee’s, officer’s or
consultant’s proprietary information and inventions assignment agreement, except
for such works or inventions as set forth on Schedule 2.9. The Company does
not
believe it is or will be necessary to utilize any inventions, trade secrets
or
proprietary information of any of its employees made prior to their employment
by the Company, except for inventions, trade secrets or proprietary information
that have been assigned to the Company. The Company, after reasonable
investigation, is not aware that any of its employees, officers or consultants
are in violation of such agreements, and the Company will use its best efforts
to prevent any such violation.
2.10 Patents
and Trademarks.
The
Company possesses all Intellectual Property necessary for its business without
any conflict with or infringement of the valid rights of others, and the
Company
has not received any notice of infringement upon or conflict with the asserted
rights of others. The Company has a valuable body of trade secrets, including
know-how, concepts, computer programs and other technical data for the
development, launch and operation of its business. The Company is not aware
that
any of its employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to
any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of his or her best efforts to promote the interests
of
the Company or that would conflict with the Company’s business.
2.11 Compliance
with Other Instruments
(a)
. The
Company is not in violation of any provision of its Certificate or its bylaws
or, to its knowledge, of any instrument, judgment, order, writ, decree or
contract, statute, rule or regulation to which the Company is subject. The
execution, delivery and performance of this Agreement and the consummation
of
the transactions contemplated hereby will not result in any such violation,
or
(i)
be in
conflict with or constitute, with or without the passage of time and giving
of
notice, either a default under any such provision or an event that results
in
the creation of any lien, charge or encumbrance upon any assets of the Company
or the suspension, revocation, impairment, forfeiture or non-renewal of any
material permit, license, authorization or approval applicable to the Company,
its business or operations or any of its assets or properties, or (ii) require
the consent or other action by any person under, constitute a default under,
or
give rise to termination, cancellation or acceleration of any right or
obligation of the Company or to a loss of any benefit to which the Company
is
entitled under any provision of any agreement or other instrument binding
upon
the Company.
2.12 Related-Party
Transactions.
Except
as set forth on Schedule 2.12,
no
employee, officer or director of the Company or member of his or her immediate
family is indebted to the Company, nor is the Company indebted (or committed
to
make loans or extend or guarantee credit) to any of them. None of such persons
has any direct or indirect ownership interest in any firm or corporation
with
which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company,
except
that employees, officers or directors of the Company and members of their
immediate families may own stock in publicly traded companies that may compete
with the Company. No member of the immediate family of any officer or director
of the Company is directly or indirectly interested in any material contract
with the Company.
2.13 Business
Plan.
Attached hereto as Schedule 2.13
is a
preliminary detailed budget for the Company’s 2006 and 2007 fiscal
years.
The
business plan and of the Company for its 2006 and 2007 fiscal years will
be
provided to the Investor within sixty (60) days of the date
hereof.
2.14 Tax
Returns.
The
Company has timely filed all tax returns (federal, state and local) required
to
be filed by it. The Company has not been advised that any of its returns
have
been or are being audited.
2.15 Permits.
The
Company has all franchises, permits, licenses and any similar authority
necessary for the operation of its business. The Company is not in default
under
any of such franchises, permits, licenses or other similar
authority.
2.16 Environmental
and Safety Laws.
To its
knowledge, the Company is not in violation of any applicable statute, law
or
regulation relating to the environment or occupational health and safety,
and to
its knowledge, no material expenditures are or will be required in order
to
comply with any such existing statute, law or regulation.
2.17 Registration
Rights.
Except
as set forth in the Schedule
2.17
or the
Related Agreements, the Company has not granted or agreed to grant any
registration rights, including piggyback rights, to any person or
entity.
2.18 Corporate
Documents; Minute Books.
The
Certificate and bylaws of the Company are in the form previously provided
to the
Investor. The minute books of the Company provided to the Investor contain
a
complete summary of all meetings of directors and stockholders since the
time of
incorporation and reflect all transactions referred to in such minutes
accurately in all material respects.
2.19 Title
to
Property and Assets.
The
property and assets the Company owns are owned by the Company free and clear
of
all mortgages, liens, loans and encumbrances, except (i)
for
statutory liens for the payment of current taxes that are not yet delinquent,
and (ii) for
liens, encumbrances and security interests that arise in the ordinary course
of
business, and minor defects in title, none of which, individually or in the
aggregate, materially impair the Company’s ownership or use of such property or
assets. With respect to the property and assets it leases, the Company is
in
material compliance with such leases and, to its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances, subject to
clauses
(i) and (ii).
2.20 Insurance.
The
Company has insurance policies with such coverages in amounts (subject to
reasonable deductibles) customary for similarly situated companies. Copies
of
such policies have been delivered to the Investor along with summary
descriptions of the coverages thereunder.
2.21 Labor
Agreements and Actions.
The
Company is not aware that any officer or employee, or that any group of key
employees, intends to terminate their employment with the Company, nor does
the
Company have a present intention to terminate the employment of any of the
foregoing. Except as described on Schedule
2.21,
the
Company is not a party to or bound by any currently effective employment
contract, deferred compensation agreement, bonus plan, incentive plan, profit
sharing plan, retirement agreement or other employee compensation agreement.
The
Company has complied in all material respects with all applicable state and
federal equal employment opportunity and other laws related to employment.
No
executive officer of the Company (i) has been convicted in a criminal proceeding
or is a named subject of a pending criminal proceeding (excluding minor traffic
violations) or (ii) is or has been subject to any judgment or order of, or
the
subject of any pending civil or administrative action by, the Securities
and
Exchange Commission or any self-regulatory organization.
2.22 Obligations
of Management.
Each
executive officer and key employee of the Company is currently devoting
substantially all of his or her business time to the conduct of the business
of
the Company. The Company is not aware that any executive officer or key employee
of the Company is planning to work less than full time at the Company in
the
future. No executive officer or key employee is currently working or, to
the
Company’s knowledge, plans to work or consult for a competitive enterprise,
whether or not such officer or key employee is or will be compensated by
such
enterprise.
2.23 Disclosure.
Neither
this Agreement (including all the exhibits and schedules hereto) nor any
other
statements or certificates made or delivered in connection herewith contains
any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements herein or therein not misleading in light of the
circumstances under which they were made. There is no fact known to the Company
(other than facts known to the general public) that the Company has not
disclosed to the Investor that has had or which could reasonably be expected
to
have a Material Adverse Effect. The information and financial projections
relating to the Company delivered to the Investor (the “Investor
Materials”),
were
made in good faith based upon reasonable assumptions, and the Company is
not
aware of any fact or set of circumstances that would lead it to believe that
such information and assumptions were not reasonable. As of the date hereof
and
immediately prior to the Closing, no facts have come to the attention of
the
Company that would, in its opinion, require the Company to revise in any
material respect the Investor Materials or the assumptions underlying the
projections or any other information contained therein.
2.24 No
Brokerage. No
Person
will be entitled to receive any brokerage commission, finder’s fee, fee for
financial advisory services or similar compensation in connection with the
transaction contemplated by this Agreement.
3. Representations
and Warranties of the Investor.
The
Investor hereby represents, warrants and covenants that:
3.1 Authorization.
The
Investor has full power and authority to enter into the Related Agreements
to
which it is a party, and each such agreement when executed will constitute
a
valid and legally binding obligation of the Investor, enforceable in accordance
with its terms.
3.2 Purchase
Entirely for Own Account.
The
Securities to be received by the Investor will be acquired for investment
for
the Investor’s own account, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, and the Investor has no present
intention of selling, granting any participation in or otherwise distributing
the same, except that the Investor may transfer, including, without limitation,
to the Investor’s employees, officers and directors, in accordance with the
Related Agreements and applicable law. The Investor further represents that
it
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any
third
person, with respect to any of the Restricted Securities.
3.3 Accredited
Investor.
The
Investor is an “accredited investor” within the meaning of Securities and
Exchange Commission (“SEC”)
Rule
501 of Regulation D, as presently in effect.
3.4 Restricted
Securities.
The
Investor understands that the Securities are characterized as “restricted
securities” under federal securities laws inasmuch as the Securities being
acquired from the Company in a transaction not involving a public offering
and
that under such laws and applicable regulations the Restricted Securities
may be
resold without registration under the Act only in certain limited
circumstances.
3.5 Legends.
It is
understood that each of the certificates evidencing the Securities may bear
one
or all of the following legends:
(a)
“These
securities have not been registered under the Securities Act of 1933, as
amended. They may not be sold, offered for sale, pledged or hypothecated
in the
absence of a registration statement in effect with respect to the securities
under such Act or an opinion of counsel satisfactory to the Company that
such
registration is not required or unless sold pursuant to Rule 144 of such
Act.”
(b)
Any
other
legends required to properly reflect the restrictions contained in the Related
Agreements.
4. Conditions
of Investor’s Obligations at Closing.
The
obligations of the Investor under this Agreement are subject to the fulfillment
on or before the Closing of each of the following conditions:
4.1 Representations
and Warranties.
The
representations and warranties of the Company contained in Section 2
shall be
true on and as of the Closing.
4.2 Performance.
The
Company shall have performed and complied with all agreements, obligations
and
conditions contained in this Agreement that are required to be performed
or
complied with by them on or before the Closing.
4.3 Proceedings
and Documents.
All
corporate and other proceedings in connection with the transactions contemplated
at the Closing, and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Investor, and it shall have received
all such counterpart original and certified or other copies of such documents
as
they may reasonably request.
4.4 Fees
of
Counsel.
The
Company shall have paid the fifty percent (50%) fees, expenses and disbursements
of counsel to the Investor invoiced at the Closing.
4.5 Warrant
Agreement.
The
Company shall have entered into the Warrant in the form attached hereto as
Exhibit A.
4.6 Share
Certificate.
The
Company shall have notified its transfer agent to prepare and deliver, and
such
transfer agent shall deliver, an originally executed share certificate
evidencing the Shares subscribed for hereby.
4.7 Registration
Rights Agreement.
The
Company shall have entered into the Registration Rights Agreement in the
form
attached hereto as Exhibit C.
4.8 Amended
and Restated License and Distribution Agreement
The
Company and the Investor shall have entered into the Amended and Restated
License and Distribution Agreement
in the
form attached hereto as Exhibit
D.
5. Conditions
of the Company’s Obligations at Closing.
The
obligations of the Company to the Investor under this Agreement are subject
to
the fulfillment on or before the Closing of each of the following conditions
by
the Investor:
5.1 Representations
and Warranties.
The
representations and warranties of the Investor contained in
Section 3
shall be
true on and as of the Closing.
5.2 Payment
of Purchase Price.
The
Investor shall have delivered the Purchase Price as specified in
Section 1.2
and
Schedule
I
(minus
the amounts payable by the Company pursuant to Section 4.4).
6. Miscellaneous.
(a)
Subject
to Section 6.4
below,
the Company agrees to indemnify, defend and hold harmless the Investor and
the
Investor’s members, directors, managers, officers, employees, agents and
affiliates (collectively, “Investor
Indemnitees”)
from
and against any and all losses, claims, damages, liabilities and expenses,
including, without limitation, reasonable attorneys’ fees and disbursements and
other expenses incurred in connection with investigating, preparing, settling
or
defending any action, claim or proceeding, pending or threatened and the
costs
of enforcement hereof (collectively, “Losses”),
that
such Investor Indemnitee may suffer or become subject to (i)
as a
result of any breach of representation, warranty, covenant or agreement made
by
or to be performed on the part of the Company under this Agreement or any
other
Related Agreement, or (ii)
that
otherwise arise from any action, claim or proceeding (whether related to
the
Company or otherwise) arising out of the matters or transactions contemplated
by
this Agreement or any other Related Agreement, and in each case to reimburse
such Investor Indemnitee for all such amounts as they are incurred by the
Investor. The existence of any breach of any representation, warranty, covenant
or agreement and the amount of Losses incurred or suffered arising out of
such
breach shall be determined without regard to any qualification or exception
relating to materiality.
(b)
Promptly
after receipt by any Investor Indemnitee of notice of any demand, claim or
circumstance that would or might give rise to a claim or the commencement
of any
suit, action, proceeding or investigation in respect of which indemnity may
be
sought pursuant to Section 6.1(a),
such
Investor Indemnitee shall give notice thereof to the Company. Notwithstanding
the foregoing, the failure to give prompt notice to the Company will not
relieve
the Company from liability, except to the extent such failure or delay
materially prejudices the Company. The Company may, at the request of the
Investor Indemnitee, participate in and control the defense of any such suit,
action or proceeding at its own expense. It is understood that in any such
suit,
action or proceeding, the Investor Indemnitee has the right to retain its
own
counsel but that the Company shall not be liable for the fees and expenses
of
more than one separate law firm (in addition to any local counsel) for all
Investor Indemnitees; provided,
that any
Investor Indemnitee seeking indemnification under Section 6.1(a)(ii)
may
assume the defense of any such suit, action or proceeding thereunder if the
Investor Indemnitee reasonably determines that the Company is not adequately
representing or, because of a potential or actual conflict of interest, may
not
adequately represent, the interests of the Investor Indemnitee.
6.2 SEC
Filings.
The
Investor shall be responsible for the preparation and filing of a Form 3
and a
Schedule 13D within the applicable time periods following the Closing, pursuant
to the regulations promulgated by the Securities and Exchange
Commission.
6.3 Pre-emptive
Rights.
The
Investor shall have the right, but not the obligation, on an as-converted
basis,
to participate in all future offerings of shares of capital stock or other
securities of the Company on the same terms and conditions of the particular
offer being considered by the Company, to the extent necessary to maintain
its
percentage ownership of the Company’s outstanding capital stock (on a
fully-diluted basis).
6.4 Survival.
The
warranties, representations and covenants contained in or made pursuant to
this
Agreement shall survive the execution and delivery of this Agreement and
the
Closing for a period of twenty-four (24) months following the Closing;
provided,
however,
that any
warranty, representation or covenant relating to tax or environmental matters
shall survive until the expiration of the statute of limitations for such
matters under applicable law. The warranties, representations and covenants
contained in or made pursuant to this Agreement shall in no way be affected
by
any investigation of the subject matter thereof made by or on behalf of the
Investor, the Company or the Founders.
6.5 Successors
and Assigns.
Except
as otherwise provided herein, the terms and conditions of this Agreement
shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties (including transferees of any Investor membership
interests). Nothing in this Agreement, express or implied, is intended to
confer
upon any party, other than the parties hereto or their respective successors
and
assigns, any rights, remedies, obligations or liabilities under or by reason
of
this Agreement, except as expressly provided in this Agreement.
6.6 Governing
Law.
This
Agreement shall be governed by and construed under the laws of the State
of
Delaware, without regard to the conflicts of laws rules of such
state.
6.7 Arbitration
(a)
Any
dispute, controversy or claim arising out of, relating to or in connection
with
this Agreement or any Related Agreement, including any question regarding
its
existence, validity or termination, or regarding a breach thereof (hereafter,
“dispute”)
shall
be submitted to a representative of each of the parties involved to attempt
to
reach an amicable resolution. A party wishing to initiate consideration of
a
dispute by such representative shall give written notice to the other parties
hereto of the existence of such dispute and of the party’s desire to have such
representative consider the dispute. Such notice shall set forth a brief
description of the nature of the dispute to be considered.
(b)
If
a
dispute is not settled within fifteen (15) days after the notice is given
to the
other parties seeking representative consideration of a dispute, such dispute
shall be submitted to arbitration administered by the American Arbitration
Association in accordance with its Commercial Arbitration Rules, in effect
on
the date of this Agreement (the “Rules”).
A
party wishing to submit a dispute to arbitration shall give written notice
to
such effect to the other parties hereto. The arbitration shall be before
a sole
arbitrator appointed in accordance with the Rules and this
Agreement.
(c)
The
site
of the arbitration shall be Miami, Florida, or such other location as the
parties may mutually agree in writing, and any award shall be deemed to have
been made there. The decision of the arbitrator shall be rendered within
180
days from its appointment, and shall be final and binding upon all parties.
The
award may be made public only with the written consent of all parties to
the
arbitration, provided,
however,
that
any
ruling or award, final or otherwise, may be cited in any subsequent dispute
or
proceeding to enforce such ruling. The arbitrator shall neither have nor
exercise any power to award special, exemplary, indirect, consequential or
punitive damages.
(d)
It
is the
intent of the parties that the arbitration proceeding shall be conducted
expeditiously, without initial recourse to the courts and without interlocutory
appeals of the award to the courts. However, if a disputing party refuses
to
honor its obligations under this Agreement to arbitrate, any other disputing
party may obtain appropriate relief compelling arbitration in any court having
jurisdiction over the disputing parties; the order compelling arbitration
shall
require that the arbitration proceedings take place in Miami, Florida as
specified above. The disputing parties may apply to any court having
jurisdiction for orders requiring witnesses to obey subpoenas issued by the
arbitrator. Moreover, the arbitrator’s orders and decisions may be enforced if
necessary by any court having jurisdiction. The award may be confirmed in,
and
judgment upon the award entered by, any court having jurisdiction.
6.8 Titles
and Subtitles.
The
titles and subtitles used in this Agreement are used for convenience only
and
are not to be considered in construing or interpreting this
Agreement.
6.9 Notices.
All
notices required or permitted hereunder shall be in writing and shall be
deemed
effectively given: (i) upon
personal delivery to the party to be notified, (ii)
when
sent by confirmed facsimile if sent during the normal business hours of the
recipient (if not sent during the normal business hours of the recipient,
then
on the next business day); (iii)
three
(3) days after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (iv) one
(1) day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. All communications
shall be sent to the address as set forth on the signature page hereof or
at
such other address as such party may designate by ten days advance written
notice to the other parties hereto.
6.10 No
Brokers.
Each
party represents that it neither is nor will be obligated for any finders’ fee
or commission in connection with this transaction. The Company agrees to
indemnify and hold harmless the Investor from any liability for any commission
or compensation in the nature of a finders’ fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company
or
any of its officers, employees or representatives (including any Founder)
is
responsible.
6.11 Expenses.
The
Company shall pay all of its costs and expenses incurred with respect to
the
negotiation, execution, delivery and performance of the Related Agreements
and
one-half of the Investor’s costs and expenses incurred with respect to the
negotiation, execution, delivery and performance of the Related Agreement
(including any costs and expenses of the Investor to be paid by the Company
in
connection with any previous transaction). If any action at law or in equity
is
necessary to enforce or interpret the terms of the Related Agreements or
the
Certificate, the prevailing party shall be entitled to reasonable attorney’s
fees, costs and necessary disbursements in addition to any other relief to
which
such party may be entitled.
6.12 Amendments
and Waivers.
Any
term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and
either
retroactively or prospectively), only with the written consent of the Company,
each Founder and the Investor. Any amendment or waiver effected in accordance
with this paragraph shall be binding upon the Investor, each transferee of
the
Investor Limited Partnership Interests, each Founder and the
Company.
6.13 Severability.
If one
or more provisions of this Agreement are held to be unenforceable under
applicable law, such provision shall be excluded from this Agreement and
the
balance of the Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
6.14 Entire
Agreement.
The
Related Agreements constitute the entire agreement among the parties and
no
party shall be liable or bound to any other party in any manner by any
warranties, representations or covenants except as specifically set forth
herein
or therein.
6.15 Further
Assurances.
Each
party shall perform such other acts and execute and deliver such other documents
as may be necessary or appropriate to give effect to the purposes and intent
of
this Agreement.
6.16 Counterparts.
This
Agreement may be executed in two or more counterparts and the signatures
delivered by telecopy, each of which shall be deemed an original, with the
same
effect as if the signatures were upon the same instrument and delivered in
person.
6.17 Construction.
This
Agreement was negotiated by the parties with the benefit of legal
representation, and any rule of construction or interpretation otherwise
requiring this Agreement to be construed or interpreted against any party
shall
not apply to any construction or interpretation hereof.
REMAINDER
OF PAGE LEFT INTENTIONALLY BLANK
IN
WITNESS WHEREOF,
the
parties hereto have executed this Subscription Agreement as of the day and
year
hereinabove first written.
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Title:
Chief Executive Officer
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for notices:
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INVESTOR:
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WATER
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Title:
Sole Member
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Address
for notices:
Water
Science, LLC
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Subscription
Agreement Signature Page