Contract
THIS
SECURITY HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933
(THE “ACT”) OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED OR SOLD
UNLESS REGISTERED AND QUALIFIED PURSUANT TO THE APPLICABLE PROVISIONS OF FEDERAL
AND STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION OR
QUALIFICATION APPLIES. THEREFORE, NO SALE OR TRANSFER OF THIS SECURITY SHALL
BE
MADE, NO ATTEMPTED SALE OR TRANSFER SHALL BE VALID, AND THE ISSUER SHALL NOT
BE
REQUIRED TO GIVE ANY EFFECT TO ANY SUCH TRANSACTION UNLESS (A) SUCH TRANSACTION
HAS BEEN DULY REGISTERED UNDER THE ACT AND QUALIFIED OR APPROVED UNDER
APPROPRIATE STATE SECURITIES LAWS, OR (B) THE ISSUER HAS FIRST
RECEIVED
AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH REGISTRATION,
QUALIFICATION OR APPROVAL IS NOT REQUIRED.
WARRANT
For
the
Purchase of Shares of Common Stock of
ELECTRIC
AQUAGENICS UNLIMITED, INC.
Void
After 5 P.M. September 16, 2008
No.
11 Date: September
16, 2005
Warrant
to Purchase Two Million Shares of Common Stock
THIS
IS TO CERTIFY,
that,
for value received, Water Science, LLC, a Florida limited liability company
or
registered assigns (the “Holder”), is entitled, subject to the terms and
conditions hereinafter set forth, on or after the date hereof, and at any time
prior to 5 P.M., Mountain Time (“PST”), on September 16, 2008 but not
thereafter, to purchase such number of shares of Common Stock, par value $0.000l
(“Common Stock” or the “Shares”), of Electric Aquagenics Unlimited, Inc. (the
“Company”), from the Company as set forth above and upon payment to the Company
of an amount per Share of $2.76 (the “Purchase Price”), or conversion pursuant
to Section 1.3 hereof, if and to the extent this Warrant is exercised, in whole
or in part, during the period this Warrant remains in force, subject in all
cases to adjustment as provided in Section 2 hereof, and to receive a
certificate or certificates representing the Shares so purchased, upon
presentation and surrender to the Company of this Warrant, with the form of
Subscription Agreement attached hereto, including changes thereto reasonably
requested by the Company, duly executed and accompanied by payment of the
Purchase Price of each Share.
SECTION
1
Terms
of this Warrant
1.1 Time
of
Exercise.
This
Warrant may be exercised at any time and from time to time after 9:00 A.M.
Mountain Time, as the case may be, on the date hereof (the “Exercise
Commencement Date”), but no later than 5:00 P.M., Mountain Time, September 16,
2008 (the “Expiration Time”) at which time this Warrant shall become void and
all rights hereunder shall cease.
1.2 Manner
of
Exercise.
1.2.1 The
Holder may exercise this Warrant, in whole or in part, upon surrender of this
Warrant, with the form of Subscription Agreement attached hereto duly executed,
to the Company at its corporate office in Lindon, Utah, and upon payment to
the
Company of the full Purchase Price for each Share to be purchased in lawful
money of the United States, or by certified or cashier’s check, or wired funds,
and upon compliance with and subject to the conditions set forth
herein.
1.2.2 Upon
receipt of this Warrant with the form of Subscription Agreement duly executed
and accompanied by payment of the aggregate Purchase Price for the Shares for
which this Warrant is then being exercised, the Company shall cause to be issued
certificates for the total number of whole Shares for which this Warrant is
being exercised in such denominations as are required for delivery to the
Holder, and the Company shall thereupon deliver such certificates to the Holder
or its nominee.
1.2.3 In
case
the Holder shall exercise this Warrant with respect to less than all of the
Shares that may be purchased under this Warrant, the Company shall execute
a new
Warrant for the balance of the Shares that may be purchased upon exercise of
this Warrant and deliver such new Warrant to the Holder.
1.2.4 The
Company covenants and agrees that it will pay when due and payable any and
all
taxes which may be payable in respect of the issue of this Warrant, or the
issue
of any Shares upon the exercise of this Warrant. The Company shall not, however,
be required to pay any tax which may be payable in respect of any transfer
involved in the issuance or delivery of this Warrant or of the Shares in a
name
other than that of the Holder at the time of surrender, and until the payment
of
such tax the Company shall not be required to issue such Shares.
1.3 Conversion
Right.
In lieu
of exercising this Warrant as specified in Section 1.2, Holder may from time
to
time convert this Warrant, in whole or in part, into a number of Shares
determined by dividing (a) the aggregate fair market value of the Shares or
other securities otherwise issuable upon exercise of this Warrant minus the
aggregate Purchase Price of such Shares by (b) the fair market value of one
Share. The fair market value of the Shares shall be determined pursuant to
Section 1.4.
1.4 Fair
Market Value.
If the
Shares are traded in a public market, the fair market value of the Shares shall
be the closing price of the Shares (or the closing price of the Company’s stock
into which the Shares are convertible) reported for the business day immediately
before Holder delivers its Notice of Exercise to the Company. If the Shares
are
not traded in a public market, the Board of Directors of the Company shall
determine fair market value in its reasonable good faith judgment. The foregoing
notwithstanding, if Xxxxxx advises the Board of Directors in writing that Xxxxxx
disagrees with such determination, then the Company and Holder shall promptly
agree upon a reputable investment banking firm to undertake such valuation.
If
the valuation of such investment banking firm is greater than that determined
by
the Board of Directors, then all fees and expenses of such investment banking
firm shall be paid by the Company. In all other circumstances, such fees and
expenses shall be paid by Xxxxxx.
2
1.5 Exchange
of Warrant.
This
Warrant may be divided into, combined with or exchanged for another Warrant
or
Warrants of like tenor to purchase a like aggregate number of Shares. If the
Holder desires to divide, combine or exchange this Warrant, he shall make such
request in writing delivered to the Company at its corporate office and shall
surrender this Warrant and any other Warrants to be so divided, combined or
exchanged. The Company shall execute and deliver to the person entitled thereto
a Warrant or Warrants, as the case may be, as so requested. The Company shall
not be required to effect any division, combination or exchange which will
result in the issuance of a Warrant entitling the Holder to purchase upon
exercise a fraction of a Share. The Company may require the Holder to pay a
sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any division, combination or exchange of Warrants.
1.6 Holder
as
Owner.
Prior
to surrender of this Warrant in accordance with Section for registration of
assignment, the Company may deem and treat the Holder as the absolute owner
of
this Warrant (notwithstanding any notation of ownership or other writing hereon)
for the purpose of any exercise hereof and for all other purposes, and the
Company shall not be affected by any notice to the contrary.
1.7 Method
of
Assignment.
Any
assignment or transfer of any portion or all of this Warrant shall be made
by
surrender of this Warrant to the Company at its principal office with the form
of assignment attached hereto duly executed and accompanied by funds sufficient
to pay any transfer tax. In such event, the Company shall, without charge,
execute and deliver a new Warrant in the name of the assignee named in such
instrument of assignment and this Warrant shall promptly be
canceled.
1.8 Rights
of
Holder.
Nothing
contained in this Warrant shall be construed as conferring upon the Holder
the
right to vote, consent or receive notice as a shareholder in respect of any
meetings of shareholders for the election of directors or any other matter,
or
as having any rights whatsoever as a shareholder of the Company.
1.9 Lost
Certificates.
If this
Warrant is lost, stolen, mutilated or destroyed, the Company shall, on such
reasonable terms as to indemnity or otherwise as it may impose (which shall,
in
the case of a mutilated Warrant, include the surrender thereof), issue a new
Warrant of like denomination and tenor as, and in substitution for, this
Warrant, which shall thereupon become void. Any such new Warrant shall
constitute an additional contractual obligation of the Company, whether or
not
the Warrant so lost, stolen, destroyed or mutilated shall be at any time
enforceable by anyone.
3
1.9.1 At
all
times the Company shall reserve and keep available for the exercise of this
Warrant such number of authorized shares of Common Stock as are sufficient
to
permit the exercise in full of this Warrant.
1.9.2 The
Company covenants that all Shares when issued upon the exercise of this Warrant
will be validly issued, fully paid, nonassessable and free of preemptive
rights.
SECTION
2
Adjustment
of Purchase Price and Number of Shares Purchasable upon
Exercise
2.1 Stock
Splits.
If the
Company at any time or from time to time after the issuance date of this Warrant
effects a subdivision of the outstanding Common Stock, the Purchase Price then
in effect immediately before that subdivision shall be proportionately
decreased, and conversely, if the Company at any time or from time to time
after
the issuance date of this Warrant combines the outstanding shares of Common
Stock, the Purchase Price then in effect immediately before the combination
shall be proportionately increased. Any adjustment under this subsection 2.1
shall become effective at the close of business on the date the subdivision
or
combination becomes effective.
2.2 Dividends
and Distributions.
In the
event the Company at any time, or from time to time after the issuance date
of
this Warrant makes, or fixes a record date for the determination of holders
of
Common Stock entitled to receive, a dividend or other distribution payable
in
additional shares of Common Stock, then and in each such event the Purchase
Price then in effect shall be decreased as of the time of such issuance or,
in
the event such a record date is fixed, as of the close of business on such
record date, by multiplying the Purchase Price then in effect by a fraction
(i)
the numerator of which is the total number of shares of Common Stock issued
and
outstanding immediately prior to the time of such issuance or the close of
business on such record date, and (ii) the denominator of which shall be the
total number of shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such record date plus
the number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the
date
fixed therefor, the Purchase Price shall be recomputed accordingly as of the
close of business on such record date and thereafter the Purchase Price shall
be
adjusted pursuant to this subsection 2.2 as of the time of actual payment of
such dividends or distributions.
2.3 Recapitalization
or Reclassification.
If the
Shares issuable upon the exercise of the Warrant are changed into the same
or a
different number of shares of any class or classes of stock, whether by
recapitalization, reclassification or otherwise (other than a subdivision or
combination of shares or stock dividend or a reorganization, merger,
consolidation or sale of assets, provided for elsewhere in this Section 2),
then, and in any such event, the Holder shall thereafter be entitled to receive
upon exercise of this Warrant such number and kind of stock or other securities
or property of the Company to which a holder of Shares deliverable upon exercise
of this Warrant would have been entitled on such reclassification or other
change, subject to further adjustment as provided herein.
4
2.4 Subsequent
Equity Sales. If the Company or any Subsidiary thereof, as applicable, at any
time while this Warrant is outstanding, shall offer, sell, grant any option
to
purchase or offer, sell or grant any right to re-price its securities, or
otherwise dispose of or issue (or announce any offer, sale, grant or any option
to purchase or other disposition) any Common Stock or any securities convertible
into or exchangeable for shares of Common Stock, or the issuance of any
warrants, options, subscription or purchase rights with respect to such
convertible or exchangeable securities (“Common Stock Equivalents”) entitling
any Person to acquire shares of Common Stock, at an effective price per share
less than the then Purchase Price (such lower price, the “Base Purchase Price”
and such issuances collectively, a “Dilutive Issuance”), as adjusted hereunder
(if the holder of the Common Stock or Common Stock Equivalents so issued shall
at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise,
or
due to warrants, options or rights per share which is issued in connection
with
such issuance, be entitled to receive shares of Common Stock at an effective
price per share which is less than the Purchase Price, such issuance shall
be
deemed to have occurred for less than the Purchase Price on such date of the
Dilutive Issuance), then the Purchase Price shall be reduced to equal the Base
Purchase Price. The Company shall notify the Holder in writing, no later than
the Business Day following the issuance of any Common Stock or Common Stock
Equivalents subject to this section, indicating therein the applicable issuance
price, or of applicable reset price, exchange price, conversion price and other
pricing terms (such notice the “Dilutive Issuance Notice”). For purposes of
clarification, whether or not the Company provides a Dilutive Issuance Notice
pursuant to this Section 2.4, upon the occurrence of any Dilutive Issuance
the
Purchase Price shall be reduced to equal the Base Purchase Price.
2.5 Subsequent
Rights Offerings. If the Company, at any time while the Warrant is outstanding,
shall issue rights, options or warrants to all holders of Common Stock (and
not
to the Holder) entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the Purchase Price at the record date
mentioned below, then the Purchase Price shall be multiplied by a fraction,
of
which the denominator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of additional shares of Common Stock offered for subscription or purchase,
and
of which the numerator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of shares which the aggregate offering price of the total number of shares
so
offered (assuming receipt by the Company in full of all consideration payable
upon exercise of such rights, options or warrants) would purchase at such lesser
price. Such adjustment shall be made whenever such rights or warrants are
issued, and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights, options or
warrant.
2.6 No
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least 1% in such price; provided, however,
that any adjustments which by reason of this Section 2.6 are not required to
be
made shall be carried forward and taken into account in any subsequent
adjustment; and provided, further, that any adjustment required in order to
preserve the tax-free nature of a distribution to the holders of shares of
Common Stock shall be made when so required. All
calculations under this Section 2 shall be made to the nearest cent (with $.005
being rounded upward). Anything in this Section 2 to the contrary
notwithstanding, the Company shall be entitled, to the extent permitted by
law,
to make such reductions in the Purchase Price, in addition to those required
by
this Section 2, as it in its discretion shall determine to be advisable in
order
that any stock dividends, subdivision or combination of shares, distribution
of
capital stock or rights or warrants to purchase stock or securities,
distribution of evidences of indebtedness or assets or any other transaction
which could be treated as any of the foregoing transactions pursuant to Section
305 of the Internal Revenue Code of 1986, as amended (and any successor
provision), hereafter made by the Company to its shareholders shall not be
taxable to such shareholders.
5
SECTION
3
Status
Under the Securities Act of 1933
This
Warrant and the Shares issuable upon exercise of this Warrant have not been
registered under the Securities Act of 1933, as amended (“the Act”). Upon
exercise, in whole or in part, of this Warrant, the certificates representing
the Shares shall bear the legend first above written.
SECTION
4
Other
Matters
4.1 Binding
Effect.
All the
covenants and provisions of this Warrant by or for the benefit of the Company
shall bind and inure to the benefit of its successors and assigns
hereunder.
4.2 Notices.
Notices
or demands pursuant to this Warrant to be given or made by the Holder to or
on
the Company shall be sufficiently given or made if sent by certified or
registered mail, return receipt requested, postage prepaid, or facsimile and
addressed, until another address is designated in writing by the Company, as
follows:
Electric
Aquagenics Unlimited, Inc.
0000
X.
00 Xxxxx, Xxxxx 000
Lindon,
Utah 84042
Telephone
No.: (000) 000-0000
Attention: Xxxxxxx
Xxxxxx, President
Notices
to the Holder provided for in this Warrant shall be deemed given or made by
the
Company if sent by certified or registered mail, return receipt requested,
postage prepaid, and addressed to the Holder at his last known address as it
shall appear on the books of the Company.
6
4.3 Governing
Law.
The
validity, interpretation and performance of this Warrant shall be governed
by
the laws of the State of Delaware.
4.4 Parties
Bound and Benefited.
Nothing
in this Warrant expressed and nothing that may be implied from any of the
provisions hereof is intended, or shall be construed, to confer upon, or give
to, any person or corporation other than the Company and the Holder any right,
remedy or claim under any promise or agreement hereof, and all covenants,
conditions, stipulations, promises and agreements contained in this Warrant
shall be for the sole and exclusive benefit of the Company and its successors
and of the Holder, its successors and permitted assigns.
4.5 Headings.
The
Section headings herein are for convenience only and are not part of this
Warrant and shall not affect the interpretation thereof.
(Remainder
Of Page Intentionally Left Blank)
7
IN,
WITNESS WHEREOF,
this
Warrant has been duly executed by the Company as of September 16
,2005.
| ELECTRIC AQUAGENICS UNLIMITED, INC. | ||
| |
|
|
| By: | ||
|
Xxxxxxx Xxxxxx, President |
||
8
ASSIGNMENT
OF WARRANT
FOR
VALUE RECEIVED,
___________________________ hereby sells, assigns and transfers unto
________________________ the within Warrant and the rights represented thereby,
and does hereby irrevocably constitute and appoint _______________________
Attorney, to transfer said Warrant on the books of the Company, with full power
of substitution.
Dated:
_____________________________
Signed:
____________________________
Signature
guaranteed:
__________________________________
9
SUBSCRIPTION
AGREEMENT
FOR
THE EXERCISE OF WARRANTS
The
undersigned hereby irrevocably subscribes for the purchase of _____________
Shares pursuant to and in accordance with the terms and conditions of this
Warrant, which Shares should be delivered to the undersigned at the address
stated below. If said number of Shares are not all of the Shares purchasable
hereunder, a new Warrant of like tenor for the balance of the remaining Shares
purchasable hereunder should be delivered to the undersigned at the address
stated below.
The
undersigned elects to pay the aggregate Purchase Price for such Shares in the
following manner:
[
]
by
the
enclosed cash or check made payable to the Company in the amount of
$ ;
[
]
by
wire
transfer of United States funds to the account of the Company in the amount
of
$__________, which transfer has been made before or simultaneously with the
delivery of this Notice pursuant to the instructions of the Company;
or
[
] by
conversion of the Warrant into Shares in the manner specified in Section 1.3
of
the Warrant.
The
undersigned agrees that: (1) the undersigned will not offer, sell, transfer
or
otherwise dispose of any Shares unless either (a) a registration statement,
or
post-effective amendment thereto, covering the Shares has been filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933,
as
amended (the “Act”), such sale, transfer or other disposition is accompanied by
a prospectus meeting the requirements of Section 10 of the Act forming a part
of
such registration statement, or post-effective amendment thereto, which is
in
effect under the Act covering the Shares to be so sold, transferred or otherwise
disposed of, and all applicable state securities laws have been complied with,
or (b) counsel reasonably satisfactory to Electric Aquagenics Unlimited, Inc.
has rendered an opinion in writing and addressed to Electric Aquagenics
Unlimited, Inc. that such proposed offer, sale, transfer or other disposition
of
the Shares is exempt from the provisions of Section 5 of the Act in view of
the
circumstances of such proposed offer, sale, transfer or other disposition;
(2)
Electric Aquagenics Unlimited, Inc. may notify the transfer agent for the Shares
that the certificates for the Shares acquired by the undersigned are not to
be
transferred unless the transfer agent receives advice from Electric Aquagenics
Unlimited, Inc. that one or both of the conditions referred to in (1)(a) and
(1)(b) above have been satisfied; and (3) Electric Aquagenics Unlimited, Inc.
may affix the legend set forth in Section 3.1 of this Warrant to the
certificates for the Shares hereby subscribed for, if such legend is
applicable.
| Dated: ____________________________________________ | Signed: _________________________________ |
| Signature guaranteed: ________________________________ | Address: ________________________________ |
10
