THIS LOAN
AGREEMENT AND THE SECURITIES ISSUABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS THE SECURITIES HAVE BEEN REGISTERED UNDER SUCH
ACT AND ALL SUCH OTHER APPLICABLE LAWS OR AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
$600,000 LOAN
AGREEMENT
This Loan Agreement (the
“Agreement”) is made this 27th day of August, 2009, by
and between EAU Technologies, Inc., a Delaware corporation (the
“ Company ”), and Peter F. Ullrich, a resident
of Florida (“Lender”).
WHEREAS, the Company and Lender
desire to enter into this Agreement whereby Lender will lend
$600,000 to the Company on the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of
the mutual covenants and agreements herein contained, and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as
follows:
1.
Definitions . For purposes of this
Agreement (as defined below), the following capitalized terms have
the following meanings:
“
Agreement ” means this Loan Agreement.
“ Base
Conversion Price ” shall have the meaning set forth in
Section 7(a)(iv) .
“ Business Day ” means any
day other than (a) Saturday or Sunday or (b) any other day on which
banks in the State of New York are permitted or required to be
closed.
“ Common Stock ” means the
shares of the Company’s common stock, par value $.0001 per
share.
“ Common Stock Equivalent ”
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.
“ Control ” means the
possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or
otherwise, and the terms “ Controlling ” and
“ Controlled ” (and the lower-case versions of
the same) shall have meanings correlative thereto.
“ Conversion Price ” shall
have the meaning set forth in Section 5(a) , subject to
adjustment per the terms and conditions set forth in this
Agreement.
“
Dilutive Issuance ” shall have the meaning set forth
in Section 7(a)(iv) .
“ Dilutive Issuance Notice ”
shall have the meaning set forth in Section 7(a)(iv)
.
“
Interest Rate ” shall have the meaning set forth in
Section 3(a) .
“ Maturity Date ” shall have
the meaning set forth in Section 4(a) .
“ Person ” means an
individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity
or any department, agency or political subdivision
thereof.
“ Subsidiary ” means, with
respect to any Person (herein referred to as the “
parent ”), any corporation, partnership, association
or other business entity (i) of which securities or other ownership
interests representing more than fifty percent (50%) of the equity
or more than fifty percent (50%) of the ordinary voting power or
more than fifty percent (50%) of the general partnership interests
are, at the time any determination is being made, owned, controlled
or held by the parent, or (ii) that is, at the time any
determination is made, otherwise Controlled by, the parent or one
or more Subsidiaries of the parent or by the parent and one or more
Subsidiaries of the parent.
2.
Agreement to Lend . Lender hereby agrees
to lend to the Company the sum of $600,000.00 (the “Loan
Amount”). The Loan Amount shall be funded in three
installments, as follows.
The funds will be delivered by Lender to the
Company by wire transfer of immediately available funds.
3.
Interest . Simple interest shall accrue
(computed on the basis of actual days elapsed and a year of 360
days) at the rate of ten percent (10%) per annum on the unpaid
principal amount of this Agreement outstanding (such interest rate
being referred to as the “ Interest Rate
”).
4.
Payment .
(a)
Maturity Date . Accrued interest and the
outstanding principal balance shall be due and payable in a single
lump-sum payment on November 1, 2010 (the “ Maturity
Date ”).
(b)
Prepayment . Accrued interest and the outstanding
principal balance can be prepaid, in whole or in part, at any time
prior to the Maturity Date without premium or penalty of any kind
whatsoever.
5.
Conversion .
(a)
Optional Conversion Right . Until such time as
all of the obligations under this Agreement are paid in full,
Lender shall have the option, exercisable in its sole discretion,
to convert all or any portion of the outstanding principal and
interest due pursuant to this Agreement into shares of Common Stock
at a price per share equal to $1.00 per share (subject to the
adjustments as set forth in Section 7 hereof) (the “
Conversion Price ”).
(b)
Effect of Breach upon Conversion Price . If
Lender fails to lend the amounts on the dates set forth in
Section 2 of this Agreement, then, in addition to any other
remedies, the Conversion Price shall be, and shall be deemed to be,
$3.00 per share.
(c)
Conversion Procedure .
(i) Prior
to the conversion in accordance with this Section 5 , the
Company shall take all necessary steps to ensure that such number
of shares of Common Stock as are issuable upon conversion are
available for such issuance.
(ii) Any
such conversion shall be deemed to have been effected as of the
close of business on the date on which a written conversion request
is delivered from Lender to the Company specifying the amount of
principal, or principal and interest, to be converted. At such time
as such conversion has been effected, the rights of Lender as such
Lender to the extent of the conversion shall cease, and Lender
shall be deemed to have become the holder of record of the shares
of Common Stock represented thereby.
(iii) As
soon as possible after a conversion has been effected (but in any
event within thirty (30) business days), the Company shall deliver
to Lender, a certificate or certificates representing the number of
shares of Common Stock (excluding any fractional share) issuable by
reason of such conversion in such name or names and such
denomination or denominations as Lender has specified to the
Company in writing.
(iv) If
any fractional Common Share would, except for the provisions
hereof, be deliverable upon conversion, the Company, in lieu of
delivering such fractional share, shall pay an amount equal to the
value of such fractional share.
(v) The
issuance of certificates for the shares of Common Stock upon
conversion shall be made without charge to Lender for any issuance
tax in respect thereof or other cost incurred by the Company in
connection with such conversion and the related issuance of the
Shares of Common Stock. Upon conversion, the Company
shall take all such actions as are necessary in order to ensure
that the shares of Common Stock issuable with respect to such
conversion shall be validly issued, fully paid and
nonassessable.
(vi) The
Company shall not close its books against the transfer of the
shares of Common Stock issued or issuable upon conversion in any
manner which interferes with the timely
conversion. Lender, upon the request of the Company,
shall assist and cooperate with the Company in making any required
governmental filings or in obtaining any government approval prior
to or in connection with the conversion (including, without
limitation, making any filings required to be made by the
Company).
(vii) The
Company shall take all such actions as may be necessary to assure
that all such shares of Common Stock may be so issued without
violation of any applicable law or governmental regula
