SHARE EXCHANGE AGREEMENT
THIS
SHARE EXCHANGE AGREEMENT (the "Agreement") is made and entered into as of this
22nd day of October, 2008 (the "Effective Date") by and between Cavitation
Technologies, Inc., a Nevada corporation (the "Company") and the shareholders
listed on Exhibit A to this Agreement (each the "Shareholder").
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2
(c)
Capitalization.
The authorized capitalization of Hydro Dynamic Technology, Inc. consists of
50,000,000 shares of common stock, par value $0.001, and 10,000,000 shares
of
Preferred Stock, par value $0.001. Of the Common Stock, 25,575,000 shares of
Common Stock are issued and outstanding. Of the Preferred Stock, 2,050,000
shares of Series A-1 Preferred Stock are issued and outstanding. There are
warrants outstanding to purchase 410,000 shares of Common Stock and stock
options outstanding to purchase 675,000 shares of Common Stock
(e)
Brokers' Fees.
Hydro Dynamic Technology, Inc. has no liability or obligation to pay any fees
or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which the Company could become liable or
obligated.
(f)
Intellectual
Property and Tangible and Intangible Assets. Hydro Dynamic Technology, Inc.
owns
or possesses all right, title and interest (or holds valid licenses) to use,
whether or not registered, all Intellectual Property and Tangible and Intangible
Assets . Schedules 1.2 (b) and (c) set forth a complete and accurate list of
all
such Intellectual Property and Tangible and Intangible Assets (identifying
those
owned and those licensed), including all United States, state and foreign
registrations or applications for registration thereof and all agreements
(including, without limitation, agreements pursuant to which the Shareholder
has
granted licenses to third parties to use any Intellectual Property or Intangible
Asset) relating thereto. All actions reasonably necessary to maintain the
registered Intellectual Property and Tangible and Intangible Assets have been
taken by Hydro Dynamic Technology, Inc. Hydro Dynamic Technology, Inc. is not
required to pay any royalty, license fee or similar compensation with respect
to
the Assets in connection with the current or prior conduct of its business.
The
use by Hydro Dynamic Technology, Inc. of any of the Intellectual Property or
Tangible and Intangible Assets does not violate the proprietary rights of any
other person and no claims have been asserted by any person with respect to
the
use of the Assets by Hydro Dynamic Technology, Inc. No person is infringing
upon
the Assets. Hydro Dynamic Technology, Inc. has taken reasonable security
measures to protect the secrecy, confidentiality and value of the Intellectual
Property. Except as set forth in Schedule 3.1(i), no person, other than Hydro
Dynamic Technology, Inc., owns or has any proprietary, financial or other
interest, direct or indirect, in whole or in part, in the Assets. Hydro Dynamic
Technology, Inc. is not a party to any confidentiality, secrecy or similar
agreements with third parties.
3
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4.1
Conditions to the Company's Obligations. The obligations of the Company under
this Agreement, (including, without limitation, the obligation to consummate
and
effect the exchange of shares), shall be subject to satisfaction of the
following conditions, unless waived by the Company:
(a)
The Shareholder
shall have performed in all material respects all agreements, and satisfied
in
all material respects all conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date.
(b)
All
representations and warranties of the Shareholder herein shall have been true
and correct in all material respects when made (or will have been made true
and
correct by the Closing Date), shall have continued to have been true and correct
in all material respects at all times subsequent thereto, and shall be true
and
correct in all material respects on and as of the Closing Date as though made
on, as of and with reference to such Closing Date.
4
(c)
There shall not
have occurred any material adverse change with respect to Hydro Dynamic
Technology, Inc.
(d)
The Shareholder
shall have executed and delivered to the Company all documents necessary to
transfer all issued and outstanding shares of common stock of Hydro Dynamic
Technology, Inc. owned by the Shareholder to the Company, as contemplated by
this Agreement.
4.2
Conditions to the Shareholder's Obligations. The obligations of the Shareholder
under this Agreement, (including, without limitation, the obligation to
consummate and effect the share exchange) shall be subject to satisfaction
of
the following conditions, unless waived by the Shareholder:
(a)
The Company shall
have performed in all material respects all agreements, and satisfied in all
material respects all conditions on its part to be performed or satisfied
hereunder, at or prior to the Closing Date.
(b)
All of the
representations and warranties of the Company herein shall have been true and
correct in all material respects when made, shall have continued to have been
true and correct in all material respects at all times subsequent thereto,
and
shall be true and correct in all material respects on and as of the Closing
Date
as though made on, as of, and with reference to such Closing Date.
A
certificate
evidencing the issued Hydro Dynamic Technology, Inc. outstanding shares of
common stock of Hydro Dynamic Technology, Inc., registered in the name of the
Company.
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5.1
Survival
of Representations and Warranties and Covenants. The representations,
warranties, covenants, and obligations of the Company and the Shareholder set
forth in this Agreement and in any certificate, agreement, or instrument
delivered in connection with the transactions contemplated hereby, shall survive
the Closing for a period of one year.
5
(a)
any inaccuracy or
misrepresentation in or breach of any of the representations, warranties,
covenants or agreements made by the Shareholder in this Agreement or in any
document, certificate or affidavit delivered by the Shareholder pursuant to
the
provisions of this Agreement;
(b)
any obligation,
liability, debt or commitment of Hydro Dynamic Technology, Inc. which is not
disclosed herein, whether or not paid by the Company; and
(c)
any other matter
related to the use or ownership of the Assets prior to the Closing (including,
but not limited to, all acts, omissions and conditions existing or occurring
prior to the Closing for which any of the Company Indemnitees is alleged to
be
liable pursuant to any successor or similar theory of liability).
(a)
Notice to the
indemnifying party shall be given promptly after receipt by the Shareholder
or
the Company Indemnitee of actual knowledge of the commencement of any action
or
the assertion of any claim that will likely result in a claim by it for
indemnity pursuant to this Agreement. Such notice shall set forth in reasonable
detail the nature of such action or claim to the extent known, and include
copies of any written correspondence or pleadings from the party asserting
such
claim or initiating such action. The indemnified party shall be entitled, at
its
own expense, to assume or participate in the defense of such action or claim.
If
the indemnifying party assumes the defense of such action or claim, it shall
be
conducted by counsel chosen by such party and approved by the party seeking
indemnification, which approval shall not be unreasonably withheld.
6
(b)
For actions where
the indemnifying party does not exercise its right to assume the defense, the
party seeking indemnification shall assume and control the defense of and
contest such action with counsel chosen by it and approved by the indemnifying
party, which approval shall not be unreasonably withheld. The indemnifying
party
shall be entitled to participate in the defense of such action, the cost of
such
participation to be at its own expense. The indemnifying party shall pay the
reasonable attorneys' fees and expenses of the party seeking indemnification
to
the extent that such fees and expenses relate to claims as to which
indemnification is payable under Sections 5.2 or 5.3, as such expenses are
incurred.
(c)
Both the
indemnifying party and the indemnified party shall cooperate fully with one
another in connection with the defense, compromise, or settlement of any such
claim or action, including, without limitation, by making available to the
other
all pertinent information and witnesses within its control.
(d)
No indemnified
party shall have the right to settle any action brought against it without
the
consent of the indemnifying party. The indemnifying party shall have the right
to settle any action brought against an indemnified party as long as the
indemnified party has been delivered a complete release as a condition of the
settlement.
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6.1
No Third
Party Beneficiaries. Nothing in this Agreement shall it be construed, to confer
any rights or benefits upon any person (including, but not limited to, any
employee or former employee of the Shareholder) other than the parties hereto,
and solely to the extent provided in Section 6, the Shareholder and the Company
Indemnitees, and no other person ,shall have any rights or remedies
hereunder.
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6.2
Specific
Performance. Each of the parties acknowledges and agrees that the other parties
would be damaged irreparably if any of the provisions of this Agreement are
not
performed in accordance with their specific terms or otherwise are breached.
Accordingly, each party agrees that the other party shall be entitled, without
the necessity of pleading or proving irreparable harm or lack of an adequate
remedy at law or posting any bond or other security, to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof. Any
such claim for specific performance shall be brought and determined in the
appropriate federal or state court, in the State of California and in no other
forum. The parties hereby irrevocably submit to the jurisdiction of any such
California state court or federal court in California, in connection with such
claim for a specific performance.
6.8
Governing
Law. This Agreement and any dispute, disagreement, or issue of construction
or
interpretation arising hereunder whether relating to its execution, its
validity, the obligations provided herein or performance shall be governed
or
interpreted according to the internal laws of the State of California without
regard to choice of law considerations.
6.9
Arbitration. Any controversy, dispute or claim arising out of or relating to
this Agreement, or its interpretation, application, implementation, breach
or
enforcement which the parties are unable to resolve by mutual agreement, shall
be settled by submission by either party of the controversy, claim or dispute
to
binding arbitration in Los Angeles County, California (unless the parties agree
in writing to a different location), before a single arbitrator in accordance
with the rules of the American Arbitration Association then in effect. In any
such arbitration proceeding the parties agree to provide all discovery deemed
necessary by the arbitrator. The decision and award made by the arbitrator
shall
be final, binding and conclusive on all parties hereto for all purposes, and
judgment may be entered thereon in any court having jurisdiction
thereof.
8
CAVITATION TECHNOLOGIES, Inc. | ||
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By: | /s/ Xxxxx Xxxxxx, CEO | |
Xxxxx Xxxxxx CEO |
SHAREHOLDERS | ||
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|
Name of Shareholder | ||
Number of Shares |
9
EXHIBIT
A
SHAREHOLDER
LIST
NAME
|
#
OF HYDRO SHARES
|
#
OF COMPANY SHARES
|
Xxxxx
Xxxxxx
|
8,950,000
|
6,107,825
|
Xxxx
Xxxxxxxxxxx
|
8,950,000
|
6,107,825
|
Star
Tech Electric
|
2,075,000
|
1,416,060
|
BioWorld
Management Technology
|
2,000,000
|
1,364,877
|
Xxxxxxx
Xxxxxxx
|
1,650,000
Series A
|
1,126,024
|
Xxxxx
Xxxxxxxxxx
|
750,000
|
511,829
|
Xxxxxxxx
Xxxxxx
|
750,000
|
511,829
|
Xxxx
Xxxx
|
500,000
|
341,219
|
Lymilla
Yeschenko
|
400,000
Series A
|
272,975
|
Xxxxxx
Jobs
|
275,000
|
187,671
|
Xxxxxxx
Xxxxxxxxxxx
|
275,000
|
187,671
|
Xxxxxx
Xxxxxxx
|
250,000
|
170,610
|
Xxxxxx
Xxxx
|
150,000
|
102,366
|
Xxxxxxx
X. Xxxxxxxx
|
125,000
|
85,305
|
Xxxx
Xxxxxxx
|
125,000
|
85,305
|
Xxxxx
Xxxxxxx
|
100,000
|
68,244
|
X.X.
Xxxxxxxxx
|
50,000
|
34,122
|
Xxxxxx
Xxxxxx
|
50,000
|
34,122
|
Maxim
A. Promtov
|
25,000
|
17,061
|
Xxxxxxx
Xxxxxxx
|
25,000
|
17,061
|
Total
|
27,325,000
|
18,750,000
|
10
EXHIBIT
A
- CONTINUED
Warrants
and Stock Options Assumed
Name
|
Security
|
#
of Hydro Shrs
|
#
Cmpny Shrs
|
Exercise
Price
|
Xxxxxxx
Xxxxxxx
|
Common
Stock Warrant
|
330,000
|
225,205
|
$0.75
|
Lymilla
Yeschenko
|
Common
Stock Warrant
|
80,000
|
54,595
|
$0.75
|
X.X.
Xxxxxxxxx
|
Stock
Option
|
35,000
|
23,855
|
$1.00
|
X.X.
Xxxxxxxxx
|
Stock
Option
|
50,000
|
34,122
|
$2.00
|
Xxxxx
Xxxxxxx
|
Stock
Option
|
35,000
|
23,855
|
$1.00
|
Xxxxx
Xxxxxxx
|
Stock
Option
|
50,000
|
34,122
|
$2.00
|
Xxxx
X. Xxxxx
|
Stock
Option
|
35,000
|
23,855
|
$1.00
|
Xxxx
X. Xxxxx
|
Stock
Option
|
50,000
|
34,122
|
$2.00
|
Xxxxxx
Xxxxxx
|
Stock
Option
|
35,000
|
23,855
|
$1.00
|
Xxxxxx
Xxxxxx
|
Stock
Option
|
50,000
|
34,122
|
$2.00
|
Xxxxxx
Xxxxxxx
|
Stock
Option
|
35,000
|
23,855
|
$1.00
|
Xxxxxx
Xxxxxxx
|
Stock
Option
|
100,000
|
68,244
|
$2.00
|
Xxxx
Xxxxxxxxxx
|
Stock
Option
|
35,000
|
23,855
|
$1.00
|
Xxxx
Xxxxxxxxxx
|
Stock
Option
|
50,000
|
34,122
|
$2.00
|
Maxim
A. Promtov
|
Stock
Option
|
50,000
|
34,122
|
$2.00
|
Xxxxxx
Xxxx
|
Stock
Option
|
50,000
|
34,122
|
$2.00
|
Xxxxxxx
Xxxxxx
|
Stock
Option
|
15,000
|
10,237
|
$1.00
|