8-K/A

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

DATE OF REPORT: September 16, 2005

(Date of earliest event reported)

Electric Aquagenics Unlimited, Inc.

(Exact name of registrant as specified in its charter)

UTAH	333-86830	87-0654478
(State or other jurisdiction of	Commission File Number	(I.R.S. Employer
incorporation)		Identification Number)

1464 West 40 South, Suite 200

Lindon, Utah84042

(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (801) 443-1031

N/A

(Former Name or Former Address, if Changed Since Last Report)

Item 1.01Entry into a Material Definitive Agreement.

On September 16, 2005, the Company entered into an Exclusive License and Distribution Agreement (the “Agreement”) with Water Science, LLC, a Florida limited liability company (“Water Science”). Pursuant to the Agreement, Water Sciences paid to the Company a license fee of $1 million in exchange for (a) an exclusive license to commercialize and exploit the Company’s technology in the Latin America countries of Mexico, Guatemala, Bolivia, Paraguay, Chile, Honduras, El Salvador, Nicaragua, Brazil, Costa Rica, Suriname, Panama, Colombia, Venezuela, Guyana, French Guyana, Ecuador, Peru, Uruguay, Argentina and Belize (the “Territory”), (b) the exclusive right and license to use the Company’s trademarks in connection with the promotion, marketing and sale of products within the Territory, and (c) the appointment of Water Science as the Company’s exclusive distributor of the Company’s products within the Territory.

Item 3.02Unregistered Sales of Equity Securities

On September 16, 2005, the Company issued to Water Science, LLC, a Florida limited liability company (“Water Science”), a senior secured convertible promissory note in the principal amount of $3 million (the “Note”). The maturity date of the Note is September 16, 2008, and the Note is secured by a senior lien upon all of the Company’s assets. The Note is convertible into shares of the Company’s $0.0001 par value common stock at an initial conversion price of $3.00 per share.

In connection with the issuance of the Note, the Company granted to Water Science a three year warrant to purchase up to 2 million shares of the Company’s $0.0001 par value common stock for a purchase price of $2.76 per share.

Item 9.01Financial Statements and Exhibits

The following are filed as exhibits to this report:

(c) Exhibits

Exhibit No. Exhibit

10.1 Subscription Agreement dated September 16, 2005

10.2 Senior Secured Convertible Promissory Note dated September 16, 2005

10.3 Security Agreement dated September 16, 2005

10.4 Exclusive License and Distribution Agreement dated September 16, 2005

10.5 Registration Rights Agreement dated September 16, 2005

10.6 Warrant dated September 16, 2005

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amended report to be signed on its behalf by the undersigned hereunto duly authorized.

	ELECTRIC AQUAGENICS UNLIMTED, INC.
Date: October 10, 2005	By:	/s/ Gaylord M. Karren
		Name: Gaylord M. Karren
		Title: Chief Executive Officer

EX-10.1

SUBSCRIPTION AGREEMENT

BETWEEN

ELECTRIC AQUAGENICS UNLIMITED INC.

AND

THE INVESTOR NAMED HEREIN

SEPTEMBER 16, 2005

Table of Contents

1.	Purchase and Sale of the Convertible Note.	1
1.1	Sale and Issuance of the Convertible Note.	1
1.2	Closing	1
2.	Representations and Warranties of the Company	2
2.1	Organization, Good Standing and Qualification	2
2.2	Capitalization	2
2.3	Subsidiaries; Joint Ventures	2
2.4	Authorization	2
2.5	Governmental Consents	2
2.6	Offering	3
2.7	Litigation	3
2.8	Absence of Certain Developments	3
2.9	Proprietary Information Agreements	4
2.10	Patents and Trademarks	4
2.11	Compliance with Other Instruments	4
2.12	Related-Party Transactions	5
2.13	Business Plan	5
2.14	Tax Returns	5
2.15	Permits	5
2.16	Environmental and Safety Laws	5
2.17	Registration Rights	5
2.18	Corporate Documents; Minute Books	5
2.19	Title to Property and Assets	5
2.20	Insurance	6
2.21	Labor Agreements and Actions	6
2.22	Obligations of Management	6
2.23	Disclosure	6
2.24	No Brokerage.	6
3.	Representations and Warranties of the Investor	6
3.1	Authorization	7
3.2	Purchase Entirely for Own Account	7
3.3	Accredited Investor	7
3.4	Restricted Securities	7
3.5	Legends	7
4.	Conditions of Investor’s Obligations at Closing	7
4.1	Representations and Warranties	7
4.2	Performance	7
4.3	Proceedings and Documents	8
4.4	Fees of Counsel	8
4.5	Registration Rights Agreement	8

4.6	Securities Agreement	8
4.7	Warrant	8
4.8	License and Distribution Agreement	8
5.	Conditions of the Company’s Obligations at Closing	8
5.1	Representations and Warranties	8
5.2	Payment of Purchase Price	8
6.	Miscellaneous.	8
6.1	Indemnification	8
6.2	Survival	9
6.3	Successors and Assigns	9
6.4	Governing Law	9
6.5	Arbitration	9
6.6	Titles and Subtitles	10
6.7	Notices	10
6.8	No Brokers	11
6.9	Expenses	11
6.10	Amendments and Waivers	11
6.11	Severability	11
6.12	Entire Agreement	11
6.13	Further Assurances	11
6.14	Counterparts	11
6.15	Construction	11

Exhibits:

Exhibit A-Convertible Note

Exhibit B-Warrant Agreement

Exhibit C-Capitalization

Exhibit D-Registration Rights Agreement

Exhibit E-Security Agreement

Exhibit F-Warrant

Exhibit G-License and Distribution Agreement

SUBSCRIPTION AGREEMENT

This Subscription Agreement (this “Agreement”) is made as of September 16, 2005, by and among Electric Aquagenics Unlimited Inc., a Delaware corporation (the “Company”), Water Science, LLC, a Florida limited liability company (the “Investor”).

W I T N E S S E T H:

WHEREAS, the Investor desires to purchase a senior secured convertible promissory note from the Company;

WHEREAS, the Company is willing to make the representations and warranties and to undertake the obligations hereinafter set forth in connection with such investment.

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 Convertible Note.

1.1Sale and Issuance of the Convertible Note.

(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, a senior secured convertible promissory note for an aggregate purchase price of Three Million and 00/100 U.S. Dollars (U.S. $3,000,000) (the “Purchase Price”) in the form attached hereto as Exhibit A (the “Convertible Note”). The Convertible Note, if converted in accordance with its terms on the Effective Date, would represent 8.9% 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 2,000,000 shares of Common Stock in the form attached hereto as Exhibit B (the “Warrant”). The Warrant, upon exercise on the Effective Date, would represent, 14.2% of the Company’s Common Stock on a fully-diluted basis. The Convertible Note and the Warrant are collectively referred to herein as the “Securities.”

1.2Closing. The purchase and sale of the Securities shall take place at the offices of Greenberg Traurig, P.A., 1221 Brickell Avenue, Miami, Florida, on 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 Convertible Note and a Warrant to the Investor; and

(c) the Company shall have terminated or amended each license or distribution agreement which grants, or purports to grant any license, distribution or other intellectual property right over the Products (as defined in the License and Distribution Agreement) of the Company in the Territories (as defined in the License and Distribution Agreement), except for the consent required by the License Agreement dated April 8, 2004 by and between Innovative Oyster Processing System and the Company, which consent will be obtained by the Company within sixty (60) days of the date hereof

(d)the respective parties to this Agreement, the Security Agreement, the License and Distribution Agreement and the Registration Rights Agreement (collectively, the “Related Agreements”) shall have executed and delivered each such agreement.

2.Representations and Warranties of the Company. The Company, hereby represents and warrants to the Investor as follows:

2.1Organization, 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”).

2.2Capitalization. The capitalization of the Company is as described in its public filings and as set forth on Exhibit C 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.

2.3Subsidiaries; 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.

2.4Authorization. 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.

2.5Governmental 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.

2.6Offering. 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.

2.7Litigation. 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.

2.8Absence of Certain Developments. Since June 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; 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.

2.9Proprietary 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 mark 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. 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.

2.10Patents 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.

2.11Compliance with Other Instruments. 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.

2.12Related-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.

2.13Business Plan. Attached hereto as Schedule 2.13 is a true, complete and correct copy of the Company’s business plan and detailed budget for the Company’s 2005 and 2006 fiscal years.

2.14Tax 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.

2.15Permits. 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.

2.16Environmental 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.

2.17Registration Rights. Except as set forth in the Related Agreements, the Company has not granted or agreed to grant any registration rights, including piggyback rights, to any person or entity.

2.18Corporate 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.

2.19Title 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).

2.20Insurance. 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.

2.21Labor 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.

2.22Obligations 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.

2.23Disclosure. 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.

2.24No 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:

3.1Authorization. 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.

3.2Purchase 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.

3.3Accredited 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.

3.4Restricted 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.

3.5Legends. 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:

4.1Representations and Warranties. The representations and warranties of the Company contained in Section 2 shall be true on and as of the Closing.

4.2Performance. 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.

4.3Proceedings 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.

4.4Fees of Counsel. The Company shall have paid the fifty percent (50%) fees, expenses and disbursements of counsel to the Investor invoiced at the Closing.

4.5Registration Rights Agreement. The Company shall have entered into a registration rights agreement in the form attached hereto as Exhibit D (the “Registration Rights Agreement”).

4.6Securities Agreement. The Company shall have entered into a security agreement in the form attached hereto as Exhibit E (the “Security Agreement”).

4.7Warrant. The Company shall have the warrant in the form attached hereto as Exhibit F (the “Warrant”).

4.8License and Distribution AgreementThe Company and the Investor shall have entered into the license and distribution agreement in the form attached hereto as Exhibit G (the “License and Distribution Agreement”).

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:

5.1Representations and Warranties. The representations and warranties of the Investor contained in Section 3 shall be true on and as of the Closing.

5.2Payment of Purchase Price. The Investor shall have delivered the Purchase Price as specified in Section 1.2 and Schedule I.

6.Miscellaneous.

6.1Indemnification.

(a)Subject to Section 6.2 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 or 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.

6.2Survival. 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.

6.3Successors 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 Limited Partnership 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.

6.4Governing 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.

6.5Arbitration.

(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, 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.

6.6Titles 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.

6.7Notices. 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.

6.8No 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.

6.9Expenses. The Company shall pay all of the costs and expenses incurred with respect to the negotiation, execution, delivery and performance of the Related Agreements. 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.

6.10Amendments 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.

6.11Severability. 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.

6.12Entire 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.

6.13Further 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

6.14Counterparts. 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.

6.15Construction. 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.

	COMPANY: ELECTRIC AQUAGENICS UNLIMITED INC.
Date:	By:
		Name:
		Title:
	Address for notices: 1464 West 40 South Lindon, UT 84042 Attention: Gaylord Karren Facsimile: (801) 443-1029

	INVESTOR: WATER SCIENCE, LLC
Date:	By:
		Name: Peter Ullrich
		Title: Sole Member
	Address for notices: Water Science, LLC 1800 N.W. 89th Place Miami, FL 33172 Attention: Peter Ullrich Email: peteru@esmaraldainc.com

Subscription Agreement Signature Page

EXHIBIT A

Convertible Note

A-1

EXHIBIT B

Warrant Agreement

B-1

EXHIBIT C

Capitalization

Common Stockholders	No. of Shares
Founding Principal		1,600,000
Restricted Stock		6,122,601
Public Float		1,200,000
Stock Option Plan		0
Warrants		1,079,052
Options		1,275,000
Purchase Rights		0
Other Convertible Securities		0
Total Common Stock (fully diluted)		11,326,653
Option Shares Reserved for Issuance		500,000 grants under the Stock Option Plan

C-1

EXHIBIT D

Registration Rights Agreement

D-1

EXHIBIT E

Security Agreement

E-1

EXHIBIT F

Warrant

F-1

EXHIBIT G

License and Distribution Agreement

G-1

SCHEDULE 2.3

Subsidiaries and Joint Ventures

SCHEDULE 2.13

Business Plan and Pro Forma

SCHEDULE 2.21

List of Employment Contracts and Relevant Data as to Each Contract

Employment Agreement Schedule

EX-10.2

THIS SECURED CONVERTIBLE PROMISSORY NOTE AND THE SECURITIES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 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.

SENIOR SECURED CONVERTIBLE PROMISSORY NOTE

September 16, 2005 $3,000,000

FOR VALUE RECEIVED, Electric Aquagenics Unlimited, Inc., a Delaware corporation (the “Company”), hereby promises to pay to the order of Water Science, LLC, a Florida limited liability company (“Holder”), the principal amount of Three Million Dollars ($3,000,000), together with all other amounts due and owing hereunder including interest on the unpaid principal balance hereof outstanding from time to time, from and including the date hereof until and including the date the principal amount hereof is paid in full, at the rate and at the times set forth in Section 2.

1.Definitions. For purposes of this Note, the following capitalized terms have the following meanings:

“Affiliate” means with respect to any Person, any other Person (i) which directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, (ii) which beneficially owns or holds ten percent (10%) or more of any class of the voting stock of such first Person, or (iii) whereby ten percent (10%) or more of the voting stock (or in the case of a Person which is not a corporation, ten percent (10%) or more of the equity interest) of such other Person is beneficially owned or held by such first Person or by a Subsidiary of such first Person.

“Base Conversion Price” shall have the meaning set forth in Section 9(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.

“Collateral” shall have the meaning provided therefor in the Security Agreement.

“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 7(a).

“Debt” means: (i) indebtedness or liability for borrowed money, or for the deferred purchase price of property or services (including trade accounts payable); (ii) obligations as lessee under capital leases categorized as such in accordance with GAAP; (iii) obligations under letters of credit issued for the account of any Person; (iv) all obligations arising under bankers’ acceptance facilities; (v) all guaranties, endorsements (other than for collection or deposit in the ordinary course of business), and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any Person, or otherwise to assure a creditor against loss; and (vi) obligations secured by any Lien on property owned by the Person, whether or not the obligations have been assumed.

“Default Rate” means eight percent (8%) per annum.

“Dilutive Issuance” shall have the meaning set forth in Section 9(a)(iv).

“Dilutive Issuance Notice” shall have the meaning set forth in Section 9(a)(iv).

“Event of Default” shall have the meaning set forth in Section 6(a).

“GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied.

“Governmental Approval” means any authorization, consent, approval, license, franchise, concession, lease, ruling, permit, certification, exemption, filing or registration by or with any Governmental Authority or legal or administrative body material and necessary for the authority of the Company to conduct its business, the execution and delivery of this Note, the Subscription Agreement or the Security Agreement, or the creation and perfection of the Liens contemplated thereby.

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative authority or functions of or pertaining to government.

“License and Distribution Agreement” means the License and Distribution Agreement between the Company and the Holder entered into on the date hereof.

“Lien” means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), claim or other priority or preferential arrangement of any kind or nature whatsoever.

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“Material Adverse Effect” means any event or action or lack thereof which would cause a material adverse effect (i) on the business, prospects, operations or financial condition of the Company, (ii) the Collateral or Holder’s Lien thereon, or (iii) the Company’s ability to perform the Obligations.

“Maturity Date” shall have the meaning set forth in Section 3(a).

“Note” means this Secured Convertible Promissory Note.

“Obligations” means all obligations of the Company to Holder or any of Holder’s Subsidiaries howsoever created, arising or evidenced, whether direct or indirect, joint or several, absolute or contingent, or now or hereafter existing, or due or to become due, which arise out of or in connection with this Note, the Subscription Agreement or the Security Agreement and each other related document, including, without limitation, all reasonable costs incurred by Holder in connection with the enforcement of this Note.

“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.

“Representation Default” shall have the meaning set forth in 6(a)(iv)

“Restructuring” shall have the meaning set forth in Section 7(b)(viii).

“Security Agreement” shall have the meaning set forth in Section 3(c)

“Subscription Agreement” means the Subscription Agreement between the Company and the Holder entered into on the date hereof.

“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.

“Trigger Event” shall have the meaning set forth in Section 9(a)(vi).

2.Payment of Interest.

(a)Calculation. Except as otherwise expressly provided in Section (a)(b)(i) hereof, interest shall accrue (computed on the basis of actual days elapsed and a year of 360 days) at the rate of three percent (3%) per annum on the unpaid principal amount of this Note outstanding.

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(b)Payment and Compounding. Interest on the Note shall compound annually until the Note is repaid in full. Interest on the Note shall be payable in full on the Maturity Date.

3.Payment of Principal on Note and Security.

(a)Maturity Date. The Company shall pay the principal amount outstanding hereunder together with accrued and unpaid interest thereon and any other amounts payable to Holder in respect of this Note on the earlier of (i) September 16, 2008, and (ii) the acceleration of the maturity of this Note by Holder pursuant to Section (a)(b)(i), (the earlier of such dates, the “Maturity Date”), unless otherwise converted into Common Stock in accordance with Section 7.

(b)Principal Payments. Except as otherwise expressly provided in Section (a)(b)(i) hereof, the Company shall pay the principal amount of this Note, together will all interest accrued thereon on the Maturity Date.

(c)Security Agreement. The Company’s obligations hereunder shall be secured by that certain Security Agreement, between the Company and Holder, dated as of the date hereof (the “Security Agreement”).

4.Affirmative Covenants. So long as this Note shall remain outstanding or any Obligations shall remain unpaid, the Company shall:

(a)Compliance with Laws. Comply in all material respects with applicable laws, rules, regulations, and orders, such compliance to include, without limitation, paying before the same become delinquent all taxes, assessments, and governmental charges imposed upon it or upon its property except for good faith contests for which adequate reserves are being maintained;

(b)Information Rights: The Company will provide Holder any and all information and reports as it may reasonably request from time to time;

(c)Notice of Litigation. Provide to Holder promptly after the commencement thereof, notice of all material actions, suits, and proceedings before any court or governmental entity, affecting the Company;

(d)Notice of Defaults and Events of Default. Provide to Holder, as soon as possible and in any event within three (3) Business Days after the occurrence of each event which either (i) is an Event of Default, or (ii) with the giving of notice or lapse of time or both would constitute an Event of Default, a written notice setting forth the details of such event and the action which is proposed to be taken by the Company with respect thereto;

(e)Governmental Approvals. Promptly obtain and maintain all Governmental Approvals as necessary for the operation of its business, except to the extent any failure to obtain or maintain such Government Approvals would not reasonably be expected to result in a Material Adverse Effect;

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(f)Insurance. Maintain in full force and effect at all times with reputable insurance companies, such insurance of its material properties, in such amounts and against such risks and with such deductibles as a Person conducting a similar business under similar conditions as the Company would customarily maintain;

(g)Continuance of Business. Maintain its corporate existence and materiallicenses in good standing under and in compliance with all applicable laws and continue in operation in the business currently conducted by the Company; and

(h)Maintenance. Conduct its business in a prudent manner, keeping its material assets and properties in good working order and condition and making all needful and proper repairs, replacements and improvements thereof so that such business may be properly and prudently conducted at all times.

5.Negative Covenants. So long as this Note shall remain outstanding or any Obligations shall remain unpaid, the Company shall not, without the prior written consent of the Holder, which consent shall not be unreasonably withheld:

(a)create or suffer to exist any Lien on the Collateral;

(b)grant any rights to any other party with respect to any intellectual property of the Company (except in the ordinary course of business consistent with prior practice and not in violation of, or inconsistent with the grants of licenses or other rights under the License and Distribution Agreement);

(c)merge or consolidate into another entity;

(d)sell or dispose of any material assets of the Company (except in the ordinary course of business consistent with prior practice);

(e)sell or dispose all, or substantially all, assets of the Company;

(f)establish or acquire any Affiliate (except in the ordinary course of business) or merge or spin off any Affiliate; or

(g)amend the Company’s Certificate of Incorporation in a manner which would impair or otherwise adversely affect the rights of the Investor hereunder.

6.Events of Default.

(a)Definition. For purposes of this Note, an “Event of Default” shall be deemed to have occurred if:

(i)all or any part of the principal of this Note is not paid when and as the same shall become due and payable, whether at maturity, by acceleration or otherwise;

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(ii)all or any part of the interest on this Note is not paid when and as the same shall become due and payable, whether at maturity, by acceleration, or otherwise, or any other amount payable hereunder is not paid;

(iii)a default shall occur in the observance or performance in any of the other obligation, affirmative or negative covenants or agreements of the Company contained herein, in the Subscription Agreement, the License and Distribution Agreement or in the Security Agreement after applicable cure periods provided for therein have elapsed;

(iv)any representation, warranty or certification made by the Company herein or in any certificate, report or other instrument or agreement delivered pursuant to any provision hereof shall prove to have been false or incorrect in any material respect on the date or dates as of which made (any such falsity being a “Representation Default”);

(v)any improper use of the proceeds of this Note pursuant to Section 8 hereof;

(vi)the Company makes an assignment for the benefit of creditors or admits in writing its inability to pay its debts generally as they become due; or an order, judgment or decree is entered adjudicating the Company bankrupt or insolvent; or any order for relief with respect to the Company is entered under the Federal Bankruptcy Code; or the Company petitions or applies to any tribunal for the appointment of a custodian, trustee, receiver or liquidator of the Company, or of any substantial part of the assets of the Company, or commences any proceeding relating to the Company under any bankruptcy reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction; or any such petition or application is filed, or any such proceeding is commenced, against the Company and either (x) the Company by any act indicates its approval thereof, consent thereto or acquiescence therein or (y) such petition, application or proceeding is not dismissed within sixty (60) days;

(vii)the Company shall have failed to pay money due under any other agreement or document evidencing, securing or otherwise relating to Debt of the Company outstanding in an aggregate principal amount greater than Five Hundred Thousand Dollars ($500,000) or there shall have occurred any other material default or event of default by the Company under any such agreement, the effect of which is, after the expiration of any cure periods provided for in the documentation evidencing such Debt, to accelerate or permit the acceleration of the maturity of such Debt;

(viii)a final judgment for the payment of money in excess of One Hundred Thousand Dollars ($100,000)shall be rendered by a court of record against the Company, and the Company does not (x) discharge the same or provide for its discharge in accordance with its terms or (y) procure a stay of execution thereof, within twenty (20) days from the date of entry thereof and within said period of twenty (20) days, or such longer period during which execution of such judgment shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal including, but not limited to, by providing adequate bond for such judgment; or

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(ix)the Company shall assert that the Security Agreement is invalid or unenforceable, in whole or in part, or Holder shall cease to have a perfected first priority security interest in any of the Collateral having a fair market value, in the aggregate for all such collateral, in excess of Twenty Five Thousand Dollars ($25,000), other than Permitted Liens.

(b)Consequences of Events of Default.

(i)If an Event of Default of the type described in Section (a)(a)(vi) has occurred, the aggregate principal amount of the Note (together with all accrued interest thereon and all other Obligations) shall become immediately due and payable without any action on the part of Holder, and the Company shall immediately pay to Holder all such amounts. In all other cases, when any Event of Default has occurred and shall be continuing, the principal of this Note and the interest accrued hereon will, upon written notice from Holder (provided no further notice shall be required for clauses (a)(a)(i) and (ii)), forthwith become and be due and payable, if not already due and payable. If payment of this Note is accelerated, then the outstanding principal balance thereof shall bear interest at the Default Rate from and after the date of notice by the Company to Holder of the Event of Default. The Company agrees to pay to Holder all reasonable out-of-pocket costs and expenses incurred by Holder in any effort to enforce the Company’s obligations under this Note and pay interest at the Default Rate on such costs and expenses to the extent not paid when demanded.

(ii)Holder shall also have any other rights which Holder may have been afforded under any contract or agreement at any time and any other rights which Holder may have pursuant to applicable law. Holder may exercise any and all of its remedies under the Subscription Agreement or the Security Agreement contemporaneously or separately from the exercise of any other remedies hereunder or under applicable law.

(iii)The Company hereby waives diligence, presentment, protest and demand and notice of protest and demand, dishonor and nonpayment of this Note, and expressly agrees that this Note, or any payment hereunder, may be extended from time to time and that Holder may accept security for this Note or release security for this Note, all without in any way affecting the liability of the Company hereunder.

7.Conversion.

(a)Optional Conversion Right. Until such time as all of the Obligations under this Note are paid in full, Holder shall have the option, exercisable in its sole discretion, to convert all or any portion of the outstanding principal and interest due on this Note into shares of Common Stock at a price per share equal to $3.00 per share (subject to the adjustments as set forth in Section 9 hereof) (the “Conversion Price”).

(b)Conversion Procedure.

(i)Prior to the conversion of this Note in accordance with this Section 7, the Company shall take all necessary steps to ensure that such number of shares of Common Stock as are issuable upon conversion of this Note are available for such issuance.

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(ii)Any such conversion of this Note shall be deemed to have been effected as of the close of business on the date on which this Note was surrendered at the principal office of the Company accompanied by a written conversion request specifying the amount of principal, or principal and interest, to be converted. At such time as such conversion has been effected, the rights of Holder as such holder to the extent of the conversion shall cease, and Holder 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 five (5) business days), the Company shall deliver to Holder, 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 Holder has specified to the Company in writing.

(iv)If any fractional Common Share would, except for the provisions hereof, be deliverable upon conversion of this Note, 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 of this Note shall be made without charge to Holder 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 of this Note, 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 of this Note in any manner which interferes with the timely conversion of this Note. Holder, upon the request of the Company, at the Company’s sole expense, 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 of this Note (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 regulation or any requirements of any domestic securities exchange upon which shares of Common Stock may be listed (except for official notice of issuance which shall be immediately delivered by the Company upon each issuance).

(viii)In case of any recapitalization, reclassification or change of the outstanding securities of the Company or of any reorganization of the Company or any similar corporate reorganization on or after the date hereof (a “Restructuring”), then lawful and adequate provisions shall be made so that in each such case the holder, upon conversion of this Note at any time after the consummation of such Restructuring, shall be entitled to receive, in lieu of the shares or other securities and property receivable upon conversion of this Note prior to such Restructuring, the shares or other securities or property (including cash) to which such holder would have been entitled upon such consummation if such holder had converted the principal and interest due under this Note immediately prior thereto, all subject to further adjustment as provided hereunder; and in each such case, the terms of this Section 7 shall be applicable to the shares or other securities properly receivable upon conversion of the principal and interest due under this Note, as applicable, after the consummation of such Restructuring.

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(ix)If (A) the Company shall take a record of the holders of its shares of Common Stock (or other securities at the time receivable upon the conversion of the Note) for the purpose of entitling them to receive any dividend or other distribution, or any right to subscribe for or purchase any securities, or to receive any other right or otherwise proposes to make a dividend or distribution; (B) there is proposed any capital reorganization of the Company, any reclassification of the equity interests of the Company, any consolidation or merger of the Company with or into another entity, or any conveyance of all or substantially all of the assets of the Company to another entity; (C) any voluntary dissolution, liquidation or winding-up of the Company; or (D) any redemption or conversion of outstanding shares of Common Stock into any other type of securities then, and in each such case, the Company will mail or cause to be mailed to Holder a notice in accordance with Section 15 specifying, as the case may be, (A) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (B) the date on which such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation, winding up, redemption or conversion is to take place, and the time, if any is to be fixed, as of which the holders of record of the shares of Common Stock (or at the time receivable upon the conversion of this Note) shall be entitled to exchange their shares of Common Stock (or such other securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding up. Such written notice shall be given at least 30 days prior to the transaction in question and not less than 10 days prior to the record date in respect thereof.

(c)Partial Exercise. Upon conversion of this Note, Holder shall be entitled to receive a new Note covering the portion of principal and interest hereunder of which this Note shall not have been converted.

8.Use of Proceeds.

(a)The proceeds from this Note shall be used by the Company primarily for:

(i)research and development, marketing, working capital, operating expenses in the ordinary course of business, manufacturing and purchase of manufacturing components, each as related to the production and manufacturing of generators and other products, of the type and nature contemplated by the License and Distribution Agreement; and

(ii)the payment of fees and expenses incurred in connection with the consummation of the transactions between the Holder and the Company.

(b)The proceeds from this Note may not be used by the Company to repay existing indebtedness (other than trade payables incurred in the ordinary course of business), redeem outstanding equity interests or convertible securities, or pay compensation.

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9.Adjustment of Conversion Price. The Conversion Price with respect to the shares of Common Stock shall be subject to adjustment from time to time as follows:

(a)The Conversion Price shall be adjusted from time to time by the Company as follows:

(i)Stock Splits. If the Company at any time or from time to time after the date of this Note effects a subdivision of the outstanding Common Stock, the Conversion 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 date of this Note combines the outstanding shares of Common Stock, the Conversion Price then in effect immediately before the combination shall be proportionately increased. Any adjustment under this subsection (i) shall become effective at the close of business on the date the subdivision or combination becomes effective.

(ii)Dividends and Distributions. In the event the Company at any time, or from time to time after the date of this Note 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 Conversion Price then in effect shall be proportionally 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.

(iii)Recapitalization or Reclassification. If the shares of Common Stock issuable upon the conversion of this Note 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 9), then, and in any such event, the Holder shall thereafter be entitled to receive upon conversion of this Note such number and kind of stock or other securities or property of the Company to which a holder of shares deliverable upon conversion of this Note would have been entitled on such reclassification or other change, subject to further adjustment as provided herein.

(iv)Subsequent Equity Sales. If the Company or any Subsidiary thereof, as applicable, at any time while this Note 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 Common Stock Equivalents entitling any Person to acquire shares of Common Stock, at an effective price per share less than the then Conversion Price (such lower price, the “Base Conversion 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 Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced to equal the Base Conversion Price. The Company shall notify the Holder in writing, no later than three (3) Business Days 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 subsection (iv), upon the occurrence of any Dilutive Issuance, the Conversion Price shall be reduced to equal the Base Conversion Price.

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(v)Subsequent Rights Offerings. If the Company, at any time while the Note 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 Conversion Price at the record date mentioned below, then the Conversion 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 warrants.

(vi)No adjustment in the Conversion 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 subparagraph (viii) 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 9 shall be made to the nearest cent (with $.005 being rounded upward). Anything in this Section 9(a) to the contrary notwithstanding, the Company shall be entitled, to the extent permitted by law, to make such reductions in the Conversion Price, in addition to those required by this Section 9(a), 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.

10.Lost, Stolen, Destroyed or Mutilated Notes. In case this Note shall be mutilated, lost, stolen or destroyed, the Company shall issue a new Note of like date, tenor and denomination and deliver the same in exchange and substitution for and upon surrender and cancellation of such mutilated Note, or in lieu of this Note being lost, stolen or destroyed, upon receipt of evidence satisfactory to the Company, including an executed affidavit of an authorized Holder officer, of the loss, theft or destruction of such Note.

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11.Amendment. Except as otherwise expressly provided herein, the provisions of this Note may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the prior written consent of Holder.

12.Waiver. The failure of the Holder to insist on full compliance with any provision of this Note in a particular instance shall not result in a waiver or relinquishment of any right or obligation herein, and shall not preclude the Holder from requiring full compliance with any provision of this Note thereafter.

13.Cancellation. After all principal and accrued interest, and any other Obligations, at any time owed with respect to this Note has been paid in full or this Note has been converted in its entirety in accordance with its terms, this Note shall immediately be surrendered to the Company for cancellation and shall not be reissued.

14.Interpretation. For the purposes of this Note, all dollar amounts and references to “$” or “Dollar” shall be deemed to refer to United States of America dollars. Whenever the context of this Note permits, the masculine gender shall include the feminine and neuter genders, and any reference to the singular or plural shall be interchangeable with the other.

15.Place of Payment. Payments of principal and interest are to be paid to Holder by wire transfer in accordance with the following instructions:

Water Science, LLC

1800 N.W. 89th Place

Miami, FL 33172

Attention: Peter Ullrich

Email: peteru@esmaraldainc.com

or to such other address or to the attention of such other person as specified by prior written notice to the Company.

16.Governing Law. This Note shall be governed by and construed in accordance with, the laws of the State of Delaware.

17.Notices. All notices and other communications provided for under this Note shall be in writing (including by facsimile) and addressed, delivered or transmitted in accordance with Section 6.7 of the Subscription Agreement, made and entered into as of the date hereof, by and among the Company and Holder .

(Remainder Of Page Intentionally Left Blank)

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IN WITNESS WHEREOF, the Company has executed and delivered this Note as of the date first set forth above.

ELECTRIC AQUAGENICS UNLIMITED, INC.
By:	/s/
	Name:
	Title:

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EX-10.3

SECURITY AGREEMENT

THIS SECURITY AGREEMENT (this “Agreement”) is entered into as of September 16, 2005 and is made by and among Electric Aquagenics Unlimited, Inc., a Delaware corporation (“Aquagenics”), Aquagen International, Inc., a Nevada corporation (“Aquagen International” and together with Aquagenics, the “Grantors”) and Water Source, LLC, a Florida limited liability company (“Secured Party”).

RECITALS

WHEREAS, Aquagenics has executed in favor of Secured Party a Senior Secured Convertible Promissory Note dated as of even date herewith (the “Note”), pursuant to which Aquagenics borrowed an aggregate of $3,000,000 (the “Loan”) from Secured Party, subject to the terms and conditions thereof;

WHEREAS, each of the Grantors has determined that (i) its execution, delivery and performance of this Agreement directly and indirectly benefit, and are within the corporate purses and in the best interests of the Grantors; and (ii) the granting of this security interest to the Secured Party will strengthen the Grantors and other members of the group; and

WHEREAS, it is a condition to the obligation of Secured Party under the Note that the Grantors enter into this Agreement to grant to Secured Party a security interest in all of the Grantors’ personal property now owned or hereafter acquired.

NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to induce Secured Party to make the Loan under the Note, each of the parties hereto hereby agrees as follows:

AGREEMENT

ARTICLE I

SECURITY INTEREST

1.1Defined Terms. All terms used in this Agreement and the recitals hereto which are defined in the Note or in Article 9 of the UCC (as such term is defined below) and which are not otherwise defined herein shall have the same meaning herein as set forth therein; provided that terms used herein which are defined in the UCC as in effect in the State of Delaware as of the date hereof shall continue to have the same meaning notwithstanding any replacement or amendment of such statute except as Secured Party may otherwise determine in its sole discretion. In this Agreement the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding.” Except as otherwise explicitly specified to the contrary or unless the context clearly requires otherwise (a) the capitalized term “Section” refers to sections of this Agreement; (b) references to a particular Section include all subsections thereof; (c) the word “including” shall be construed as “including without limitation”; and (d) references to a particular Person include such Person’s successors and assigns to the extent not prohibited by this Agreement:

(a)“Account Debtor” shall mean any “account debtor,” as such term is defined in Section 9-102(3) of the UCC.

(b)“Accounts” shall mean any “accounts,” as such term is defined in Section 9-102(2) of the UCC, and, in any event, shall include, without limitation, all accounts receivable, book debts and other forms of obligations, now owned or hereafter received or acquired by or belonging or owing to the Grantors (including, without limitation, under any trade names, styles or divisions thereof) arising out of Inventory sold by the Grantors and all of the Grantors’ rights in, to and under all purchase orders or receipts now owned or hereafter acquired by it for Inventory, and all of the Grantors’ rights to any goods represented by any of the foregoing (including, without limitation, unpaid seller’s rights of rescission, replevin, reclamation and stoppage in transit and rights to returned, reclaimed or repossessed goods), and all moneys due or to become due to the Grantors under all contracts for the sale of Inventory by the Grantors (whether or not yet earned by performance on the part of the Grantors), now in existence or hereafter occurring, including, without limitation, the right to receive the proceeds of said purchase orders and contracts, and all collateral security and guarantees of any kind given by any Person with respect to any of the foregoing.

(c)“Collateral” shall have the meaning assigned to such term in Section 1.2 of this Agreement.

(d)“Copyrights” shall mean all right title and interest of the Grantors, in and to all copyrights, whether domestic or foreign or registered or unregistered, as well as all Licenses, the right to sue for past, present and future infringements of any thereof, all rights corresponding thereto throughout the world, all extensions and renewals of any thereof and all proceeds of the foregoing, including licenses, royalties, income, payments, claims, damages and proceeds of suit.

(e)“Copyright License” shall mean any written agreement of the Grantors in which the Grantors now have or hereafter acquire any rights granting any right to use any work covered by any Copyright or Copyright registration.

(f)“Equipment” shall mean any “equipment,” as such term is defined in Section 9-102(33) of the UCC, now owned or hereafter acquired manufactured, developed, marketed, sold, transferred, commercialized or distributed by the Grantors wherever located, and, in any event, shall include, without limitation, all machinery, equipment, molds, furnishings, fixtures, motor vehicles and computers and other electronic data-processing and other office equipment now owned or hereafter acquired manufactured, developed, marketed, sold, transferred, commercialized or distributed by the Grantors and wherever located, and any and all additions, substitutions and replacements of any of the foregoing, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto.

(g)“Event of Default” shall have the meaning assigned to such term in Article V of this Agreement.

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(h)“General Intangibles” shall mean any “general intangibles,” as such term is defined in Section 9-102(42) of the UCC, now owned or hereafter acquired by the Grantors, to or under any Account, Inventory, causes of action, franchises, tax refund claims, customer lists, Trademarks, Patents, rights in intellectual property, Licenses, permits, copyrights, trade secrets, proprietary or confidential information, inventions and discoveries (whether patented or patentable or not) and technical information, procedures, designs, knowledge, know-how, software, data bases, business records data, skill, expertise, experience, processes, models, drawings, materials and records, goodwill, all claims under guarantees, security interests or other security held by or granted to the Grantors to secure payment of the Accounts by an account debtor obligated thereon, all rights of indemnification and all other intangible property of any kind and nature.

(i)“Inventory” shall mean any “inventory,” as such term is defined in Section 9-102(48) of the UCC, now owned or hereafter acquired manufactured, developed, marketed, sold, transferred, commercialized or distributed by the Grantors or other inventory now owned or hereafter acquired by the Grantors wherever located, and which include such products held for sale by the Grantors, or lease or are furnished or are to be furnished under a contact of service, or the processing, packaging, delivery or shipping of the same.

(j)“License” shall mean any Patent License, Trademark License, Copyright License or other license as to which a security interest has been granted hereunder.

(k)“License Agreement” means the Licence Agreement dated June 18, 2002 by and between the University of Georgia Research Foundation, Inc. and Aquagenics.

(l)“License and Distribution Agreement” means the License and Distribution Agreement dated as of even date herewith by and between Aquagenics and Secured Party.

(m)“Patent License” shall mean any written agreement of the Grantors in which the Grantors now have or hereafter acquire any rights to make, use, sell and/or practice any invention or discovery that is the subject matter of a Patent.

(n)“Patent” or “Patents” shall mean all right, title and interest of the Grantors, to and under (i) all letters patent of the United States or any other country and all applications for letters patent of the United States or any other country, (ii) all reissues, continuations, continuations-in-part, divisions, reexaminations or extensions of any of the foregoing and (iii) all inventions disclosed in and claimed in the Patents and any and all trade secrets and know how related thereto.

(o)“Person” shall mean an individual, partnership, corporation, limited liability company, joint venture, trust, unincorporated organization, or a government or agency or political subdivision thereof.

(p)“Proceeds” shall mean “proceeds,” as such term is defined in Section 9-102(64) of the UCC, and, in any event, shall include, without limitation, (i) any and all proceeds from the sale, transfer or disposition by the Grantors of the Inventory, or any insurance indemnity, warranty or guaranty payable to the Grantors from time to time with respect to any of the Collateral, (ii) any and all payments (in any form whatsoever) made or due and payable to the Grantors from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental body, authority, bureau or agency (or any person acting under color of governmental authority), (iii) any claim of the Grantors against third parties (a) for past, present or future infringement of any Copyright or Copyright License, (b) for past, present or future infringement of any Patent or Patent License or (c) for past, present or future infringement or dilution of any Trademark or Trademark License or for injury to the goodwill associated with any Trademark, Trademark registration or Trademark licensed under any Trademark License, (iv) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral and (v) the following types of property acquired with cash proceeds: Accounts, Documents, General Intangibles, Equipment and Inventory.

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(q)“Subscription Agreement” shall mean the Subscription Agreement dated as of even date herewith by and between Aquagenics and Secured Party.

(r)“Trademark License” shall mean any written agreement of the Grantors in which the Grantors now have or hereafter acquire any rights to use any Trademark or Trademark registration.

(s)“Trademark” or “Trademarks” shall mean all right, title and interests of the Grantors in, to and under (i) all trademarks, trade names, corporate names, business names, trade styles, Internet domain names, service marks, logos, other source or business identifiers, prints and labels on which any of the foregoing have appeared or appear, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, including all common law rights and all registrations and recordings thereof, and all applications in connection therewith, including, without limitation, registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of any State of the United States or any other country or any political subdivision thereof, (ii) all extensions or renewals thereof and (iii) the goodwill symbolized by any of the foregoing.

(t)“Trade Secrets” shall mean all right, title and interest of the Grantors in, to and under all common law and statutory trade secrets and all other confidential or proprietary or useful information and all know-how, whether or not such Trade Secret has been reduced to a writing or other tangible form, including all documents and things embodying, incorporating or referring in any way to such Trade Secret, all Trade Secret licenses and including the right to sue for and to enjoin and to collect damages for the actual or threatened misappropriation of any Trade Secret and for the breach or enforcement of any such Trade Secret license.

(u)“UCC” shall mean the Uniform Commercial Code as the same may, from time to time, be in effect in the State of Delaware; provided, however, in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of Secured Party’s security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of Delaware, the term “UCC” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such attachment, perfection or priority and for purposes of definitions related to such provisions.

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1.2Collateral. To secure the prompt and complete payment to Secured Party of all indebtedness and liabilities evidenced by the Note and the prompt and complete performance and observance of all obligations of the Grantors to Secured Party, due or to become due, direct or indirect, absolute or contingent, joint or several, howsoever created, arising or evidenced, now existing under, or hereafter at any time created pursuant to the Note and this Agreement (the “Secured Obligations”), the Grantors hereby grant, assign, convey, mortgage, pledge, hypothecate and transfer to Secured Party a security interest in and lien on all of their rights, title and interest in, to and under all personal property of the Grantors as follows, whether now owned or owing to, or hereafter acquired by or arising in favor of, the Grantors and regardless of where located (the “Collateral”):

i) all Accounts;

ii) all Chattel Paper (whether tangible or electronic);

iii) all Copyrights and any Copyright License;

iv) all Commercial Tort Claims;

v) all Deposit Accounts;

vi) all Documents;

vii) all Equipment;

viii) all Fixtures;

ix) all General Intangibles;

x) all Goods;

xi) all Instruments;

xii) all Inventory;

xiii) all Letter-of-Credit Rights (whether or not the Letter of Credit is evidenced in writing);

xiv) all Patents and any Patent License;

xv) all Trademarks and any Trademark License;

xvi) all Licenses;

xvii) all Supporting Obligations and any other contract rights or rights to the payment of money;

xviii) all Trade Secrets;

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xix) all other tangible and intangible personal property of the Grantors (whether or not subject to the UCC);

xx) all bank and other accounts and all cash and all investments therein, all proceeds, products, offspring, accessions, rents, profits, income, benefits, substitutions and replacements of and to any of the property of the Grantors described in the preceding clauses of this Section 1.2 (including proceeds of insurance thereon and all causes of action, claims and warranties now held by the Grantors in respect of any of the items listed above), and all books, correspondence, files and other Records, including all tapes, desk, cards, Software, data and computer programs in the possession or under the control of the Grantors or any other Person from time to time acting for the Grantors that at any time evidence or contain information relating to any of the property described in the preceding clauses of this Section 1.2 or are otherwise necessary or helpful in the collection or realization thereof; and

xxi) all Proceeds, including Cash Proceeds and Noncash Proceeds, and products of any and all of the Collateral; in each case howsoever the Grantors’ interest therein may arise or appear (whether by ownership, security interest, claim or otherwise).

ARTICLE II

REPRESENTATIONS AND COVENANTS OF GRANTORS

The Grantors hereby represent warrants and covenants that:

2.1Representations and Warranties.

(a)Incorporation; Authorization. Each of the Grantors is a corporation duly incorporated, validly existing and in good standing under the laws of its state of incorporation with corporate power and authority to conduct its business as now being conducted, and to own or use its properties or assets that it purports to own or use. The execution, delivery and performance by the Grantors of this Agreement (as amended, modified or supplemented, from time to time) has been duly authorized by all necessary action and do not and will not (a) require any additional consent or approval of the stockholders or partners of any entity, or the consent of any governmental entity or others, (b) violate any provision of any charter, bylaws, law, governmental regulation, court decree, indenture, contract, agreement or instrument to which the Grantors is a party or by which the Grantors is bound, or (c) result in the imposition or creation of any lien or encumbrance upon or with respect to any assets or properties owned by the Grantors. This Agreement is a legal, valid and binding obligation of the Grantors, enforceable in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

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(b)Title to Collateral. The Grantors have good and marketable title to all of the Collateral owned by it and a valid license with respect to Collateral licensed by it, and none of the Collateral is subject to any liens, except for the security interests created under this Agreement and Permitted Liens.

(c)No Financing Statements. No effective security agreement, financing statement, equivalent security or lien instrument or continuation statement covering all or any part of the Collateral is on file or of record in any public office, except such as may have been filed in favor of Secured Party pursuant to this Agreement.

(d)Validity of Security Interest. This Agreement is effective to create a valid and continuing security interest in and, upon the filing of the appropriate financing statements or mortgages, a perfected security interest in favor of Secured Party in the Collateral with respect to which a security interest may be perfected by filing pursuant to the UCC.

(e)Locations of Business. The Grantors’ chief executive office, principal place of business, corporate offices, and premises where Collateral is stored or located (except for those items of Inventory that are being moved from time to time in the ordinary course of business), and the locations of all of their books and records concerning the Collateral are located at 1464 W. 40 St. Suite #200, Lindon, Utah, 84042.

2.2Covenants.

(a)Disposition or Encumbrance of Collateral. The Grantors will not encumber, sell or otherwise transfer or dispose of the Collateral other than purchase money liens (but only to the extent of the assets secured by thereby) (the “Permitted Liens”) or the sale of Inventory in the ordinary course of business, without the prior written consent of Secured Party.

(b)Maintenance of Equipment and Inventory; Location. The Grantors will maintain the Equipment and Inventory or cause the Equipment and Inventory to be maintained in good condition and repair in all respects, reasonable wear and tear excepted. At the time of attachment and perfection of the security interest granted pursuant hereto and thereafter, all Inventory and Equipment will be located and will be maintained only at the Grantors’ principal executive offices or as otherwise authorized by the Security Party in writing. Other than in the ordinary course of business of the Grantors, such Collateral will not be removed from such location unless, prior to any such removal, Secured Party has given its written consent, and the Grantors have delivered to Secured Party acknowledgment copies of financing statements filed where appropriate to continue the perfection of Secured Party’s security interest in the Collateral prior to all other interests. The security interest of Secured Party attaches to all of the Collateral wherever located and the Grantors’ failure to inform Secured Party of the location of any item or items of Collateral shall not impair Secured Party’s security interest therein.

(c)Protection of Collateral. All expenses of protecting, storing, warehousing, insuring, handling and shipping the Collateral, all costs of keeping the Collateral free of any liens prohibited by this Agreement and of removing the same if they should arise, and any and all excise, property, sales and use taxes imposed by any state, federal or local authority on any of the Collateral or in respect of the sale thereof, shall be borne and paid by the Grantors. In the event that the Grantors fail to promptly pay such expenses when due, Secured Party may at its option, but shall not be required to, pay such expenses, whereupon Secured Party shall be entitled to reimbursement thereof.

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(d)Insurance. The Grantors shall, and shall cause each of their subsidiaries to, procure and maintain, as to its properties and business, insurance issued by responsible insurance companies against damage and loss by theft, fire, collision (in the case of motor vehicles), public and product liability, larceny, embezzlement, other criminal misappropriation and such other casualties and contingencies, and in such amounts, as are usually carried by comparable companies similarly situated, of similar size, scope and financial condition or as may be requested by Secured Party. The Grantors will add Secured Party as an additional insured and as a notice party to any such policies and shall use their best efforts to cause the issuer of such policies to provide Secured Party with ten (10) days’ notice before such policies are terminated (for failure to pay premiums or otherwise) or assigned or before any change is made in the beneficiary thereof. The Grantors shall deliver evidence of such insurance and the policies of insurance or copies thereof to Secured Party upon request. Secured Party may, but shall not be obligated to, purchase such insurance on behalf of the Grantors at the Grantors’ expense, if the Grantors fails to keep such insurance in fall force and effect.

(e)Compliance with Law. The Grantors will not use the Collateral, or permit the Collateral to be used, for any unlawful purpose or in violation of any federal, state or municipal law.

(f)Notice of Default. Immediately upon becoming aware of the existence of any Event of Default or the existence of circumstances which, through the passage of time, is likely to become an Event of Default, the Grantors will give written notice to Secured Party that such circumstances or such Event of Default exist, stating the nature thereof, the period of existence thereof, and what action the Grantors propose to take with respect thereto.

(g)Additional Documentation. The Grantors will execute, from time to time, such financing statements, assignments, and other documents covering the Collateral and relating to the Secured Obligations, including Proceeds, as Secured Party may request in order to create, evidence, perfect, maintain or continue its security interest in the Collateral as a first priority interest as to all other interests (including additional Collateral acquired by the Grantors after the date hereof), and the Grantors will pay the cost of filing the same or reimburse Secured Party for filing costs in all public offices in which Secured Party may deem filing to be appropriate as well as the costs of any lien searches which Secured Party may request. Upon the occurrence and during the continuance of an Event of Default, the Grantors shall provide Secured Party with originals of all documentary evidence, including but not limited to negotiable warehouse receipts and negotiable bills of lading, as applicable, reflecting the Grantors’ ownership of or interest in any of the Collateral sufficient to secure and perfect Secured Party’s security interest therein, and the acknowledgment and agreement of any person holding Inventory or other assets of the Grantors of Secured Party’s security interest in such assets.

(h)Notices. As soon as possible, but in no event later than five business days after obtaining knowledge thereof, the Grantors shall give written notice to Secured Party of:

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(i)The commencement of any litigation relating to the Grantors;

(ii)The commencement of any arbitration or governmental proceeding or investigation which has been instituted or is threatened against the Grantors or their property; and

(iii)Any actual or threatened Event of Default under this Agreement, the Subscription Agreement, the License and Distribution Agreement, the License Agreement or the Note, or the occurrence of circumstances reasonably likely to create an Event of Default (provided, however, that such notice shall in no event be construed as delaying the occurrence of any Event of Default or changing the rights and remedies of Secured Party with respect thereto).

(i)Maintain Property. The Grantors shall maintain and keep their assets, property and equipment in good repair, working order and condition in all respects (reasonable wear and tear excepted) and from time to time make or cause to be made all needed renewals, replacements and repairs.

(j)Prompt Performance. The Grantors shall promptly perform in all respects each and every term and condition of this Agreement and of each document delivered in connection herewith, time being of the essence.

(k)Maintenance of Records. The Grantors shall keep and maintain, at their principal executive offices or at such other location as authorized by Secured Party in writing, at their own cost and expense, satisfactory and complete records of the Collateral, including a record of any and all payments received and any and all credits granted with respect to the Collateral and all other dealings with the Collateral. The Grantors shall mark their general ledger books pertaining to the Collateral to evidence this Agreement and the security interests granted hereby.

(l)Indemnification. In any suit, proceeding or action brought by Secured Party relating to any Collateral for any sum owing thereunder or to enforce any provision of any Collateral, the Grantors will save, indemnify and hold Secured Party harmless from and against each and every expense (including attorneys’ fees and expenses), loss or damage suffered by reason of any defense, setoff, counterclaim, recoupment or reduction of liability whatsoever of the obligor thereunder, arising out of a breach by the Grantors of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to, or in favor of, such obligor or its successors from the Grantors, except to the extent such expense, loss, or damage is attributable solely to the gross negligence or willful misconduct of Secured Party as finally determined by a court of competent jurisdiction. All such obligations of the Grantors shall be and remain enforceable against and only against the Grantors and shall not be enforceable against Secured Party.

(m)Compliance with Terms of Accounts, etc. In all material respects, the Grantors will perform and comply with all obligations in respect of their Accounts and all agreements to which it is a party or by which it is bound relating to the Collateral.

(n)Limitation on Liens on Collateral. The Grantors will not create, permit or suffer to exist, and will defend the Collateral against, and take such other action as is necessary to remove, any security interest, lien or other form of encumbrance on or against the Collateral except the security interests provided for hereunder, and will defend the right, title and interest of Secured Party in and to any of the Grantors’ rights under the Collateral against the claims and demands of all Persons whomsoever.

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(o)Survival of Provisions. All representations, covenants and warranties contained in this Article II shall survive the delivery of the Note and any investigation at any time made by or on behalf of Secured Party shall not diminish its right to rely thereon.

ARTICLE III

COLLECTION OF RECEIVABLES

Except as otherwise provided in this Article III, the Grantors shall continue to collect, at their own expense, all amounts due or to become due to the Grantors under the Accounts. In connection with such collections, the Grantors may take (and, at Secured Party’s direction, shall take) such action as the Grantors or Secured Party may deem necessary or advisable to enforce collection of the Accounts; provided, however, that Secured Party shall have the right, after the occurrence and during the continuation of an Event of Default, upon written notice to the Grantors of its intention to do so, to notify such Account Debtors of the assignment of the Accounts to Secured Party and to direct such Account Debtors to make payment of all amounts due or to become due to the Grantors thereunder directly to Secured Party. Upon such notification and at the expense of the Grantors, Secured Party shall have the right to enforce collection of such Accounts and to adjust, settle, or compromise the amount of payment thereof in the same manner and to the same extent as the Grantors might have done.

ARTICLE IV

ASSIGNMENT OF INSURANCE

The Grantors hereby assign to Secured Party, as additional security for payment of the Secured Obligations, any and all monies due or to become due under, and any and all of the Grantors’ other rights with respect to, any and all policies of insurance covering the Collateral, and the Grantors hereby direct the issuer of any such policy to pay any such monies directly to Secured Party; provided, however, that prior to the occurrence and continuation of an Event of Default, the Grantors shall have the right to use the proceeds received from such policies of insurance to repair or repurchase any destroyed or damaged Collateral. After the occurrence and during the continuance of an Event of Default, Secured Party may (but need not) in its own name or in the Grantors’ names execute and deliver proofs of claim, receive such monies, endorse checks and the instruments representing such monies and settle or litigate any claim against the issuer of any such policy.

ARTICLE V

EVENTS OF DEFAULT

The term “Event of Default” shall mean any of the following:

5.1Cross Defaults. The occurrence of any default in the due payment or performance of any of the obligations or covenants contained in the Subscription Agreement, the License and Distribution Agreement, the License Agreement or the Note.

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5.2Breach of Covenants. The Grantors shall default in the due performance or observance of any of the obligations or covenants contained in this Agreement.

5.3Misrepresentation. Any material representation or warranty set forth in this Agreement shall have been untrue in any material respect when made.

ARTICLE VI

RIGHTS AND REMEDIES ON DEFAULT

Upon the occurrence of an Event of Default, and at any time thereafter until such Event of Default is cured to the satisfaction of Secured Party, and in addition to the rights granted to Secured Party under Articles II, III and IV hereof, Secured Party may exercise any one or more of the following rights and remedies, at the same or different times (the right to take such actions shall be cumulative and may be exercised successively or concurrently):

6.1Management Control. Secured Party or its designee may take any or all of the following actions:

(a)In the name of the Grantors or otherwise, demand, collect, receive and receipt for, compound, compromise, settle and give acquaintance for and prosecute and discontinue any suits or proceedings in respect of any assets or interest of the Grantors, including any or all of the Collateral.

(b)Take any action which Secured Party may deem necessary or desirable in order to manage and realize on the Collateral, including, without limitation, the power to perform any contract, and to endorse in the name of the Grantors any checks, drafts, notes, or other instruments or documents received in payment or on account of the Collateral.

(c)Enter upon and into and take possession of all or such part or parts of the assets and properties of the Grantors as may be necessary or appropriate in the judgment of Secured Party, to permit or enable Secured Party to store, lease, sell or otherwise dispose of or collect all or any part of the Collateral, and use and operate such properties for such purposes and for such length of time as Secured Party may deem necessary or appropriate for such purposes.

(d)The Grantors shall, and shall cause their officers, personnel and agents to, cooperate fully with Secured Party and provide Secured Party with all information, support and assistance requested by Secured Party to facilitate the foregoing, including full and complete access to their properties, books and records.

(e)Exercise any and all other rights and remedies available to it by law, in equity or by agreement, including rights and remedies under the UCC or any other applicable law, or under the Subscription Agreement, the License and Distribution Agreement or the Note or any other agreements in existence between the parties.

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6.2Exercise of Self-Help Remedies. Without limiting the generality of the foregoing, the Grantors expressly agree that, upon any Event of Default, Secured Party, without demand of performance or other demand, advertisement or notice of any kind (except the notice specified below of time and place of public or private sale) to or upon the Grantors or any other Person (all and each of which demands, advertisements and notices are hereby expressly waived to the maximum extent permitted by the UCC and other applicable law), may forthwith enter upon the premises of the Grantors where any Collateral is located through self help, without judicial process, without first obtaining a final judgment or giving the Grantors or any other Person notice and opportunity for a hearing on Secured Party’s claim or action, and may collect, receive, assemble, process, appropriate and realize upon the Collateral, or any part thereof, and may forthwith sell, lease, assign, give an option or options to purchase, or sell or otherwise dispose of and deliver such Collateral (or contract to do so), or any part thereof, in one or more parcels at a public or private sale or sales, at any exchange at such prices as it may deem acceptable, for cash or on credit or for future delivery without assumption of any credit risk. Secured Party shall have the right upon any such public sale or sales and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of such Collateral so sold, free of any right or equity of redemption, which equity of redemption the Grantors hereby release. Such sales may be adjourned and continued from time to time with or without notice. Secured Party shall have the right to conduct such sales on the Grantors’ premises or elsewhere and shall have the right to use such premises without charge for such time or times as Secured Party deems necessary or advisable. The Grantors further agree, at Secured Party’s request, to assemble the Collateral and make it available to Secured Party at places which Secured Party shall select, whether at the Grantors’ premises or elsewhere. Until Secured Party is able to effect a sale, lease, or other disposition of Collateral, Secured Party shall have the right to hold or use Collateral, or any part thereof, to the extent that it deems appropriate for the purpose of preserving Collateral or its value or for any other purpose deemed appropriate by Secured Party. Secured Party shall have no obligation to the Grantors to maintain or preserve the rights of the Grantors as against third parties with respect to Collateral while Collateral is in the possession of Secured Party. Secured Party may, if it so elects, seek the appointment of a receiver or keeper to take possession of Collateral and to enforce any of Secured Party’s remedies with respect to such appointment without prior notice or hearing as to such appointment. Secured Party shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale to the obligations underlying the Note, and only after so paying over such net proceeds, and after the payment by Secured Party of any other amount required by any provision of law or otherwise owing pursuant to the Subscription Agreement, the License and Distribution Agreement, the Note or this Agreement, shall Secured Party account for and pay the surplus, if any, to the Grantors. To the maximum extent permitted by applicable law, the Grantors hereby waive all claims, damages, and demands against Secured Party arising out of the repossession, retention or sale of the Collateral except such as arise solely out of the gross negligence or willful misconduct of Secured Party as finally determined by a court of competent jurisdiction. the Grantors hereby agrees that ten (10) days’ prior written notice by Secured Party of the time and place of any public sale or of the time after which a private sale may take place is reasonable notification of such matters. The Grantors shall remain liable for any deficiency if the proceeds of any sale or disposition of the Collateral are insufficient to pay all Secured Obligations, including any attorneys’ fees and other expenses incurred by Secured Party to collect such deficiency.

6.3Acceleration of Obligations. Upon the occurrence of any of the Events of Default, in addition to the aforementioned remedies, Secured Party may declare any and all Secured Obligations to be immediately due and payable, and the same shall thereupon become immediately due and payable without further notice, demand, presentment or protest, all of which are expressly waived by the Grantors.

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6.4Power of Attorney. After the occurrence and during the continuance of an Event of Default, the Grantors hereby appoint Secured Party or any other person whom Secured Party may from time to time designate, as its attorney with power, to endorse its name on any checks, notes, acceptances, drafts, or other forms of payment or security that may come into Secured Party’s possession, to sign its name on any invoice, billing memorandum, bill of lading or warehouse receipt relating to any Collateral, on drafts against clients or customers, on schedules and confirmatory assignments of Accounts or other Collateral, on notices of assignment, financing statements under the UCC and other public records, on verifications of Accounts and on notices to clients and customers, to notify the post office authorities to change the address for delivery of the Grantors’ mail to an address designated by Secured Party to receive and open all mail addressed to the Grantors, to send requests for verification of Collateral to customers and to do all things necessary to carry out the intent of this Security Agreement. The Grantors hereby ratify and approve all acts of the attorney taken within the scope of the authority granted hereunder. Neither Secured Party nor the attorney will be liable for any acts of commission or omission or for any error in judgment or mistake of fact or law. This power, being coupled with an interest, is irrevocable so long as any Secured Obligation remains unpaid. The Grantors waive presentment and protest of all instruments and notice thereof, notice of default and dishonor and all other notices to which it may otherwise be entitled.

ARTICLE VII

MISCELLANEOUS

7.1Limited Liability. It is understood that Secured Party does not in any way assume any of the Grantors’ obligations under any of the Collateral or any liability with respect to the operation of the Grantors’ business. The Grantors hereby agrees to indemnify Secured Party against all liability arising in connection with or on account of the foregoing.

7.2No Waiver. Secured Party shall not be deemed to have waived any of its rights hereunder or under any other agreements, instrument or paper signed by the Grantors unless such waiver is in writing and signed by Secured Party. No delay or omission on the part of Secured Party in exercising any right shall operate as a waiver of such right or any other right. A waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion.

7.3Remedies Cumulative. All rights and remedies of Secured Party shall be cumulative and may be exercised singularly or concurrently, at its option, and the exercise or enforcement of any one such right or remedy shall not bar or be a condition to the exercise or enforcement of any other.

7.4Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of the State of Delaware without giving effect to the conflicts of laws principles thereof and, except as otherwise provided herein, shall be binding upon the heirs, personal representatives, executors, administrators, successors and assigns of the parties.

7.5Expenses. The Grantors shall pay or reimburse Secured Party for all of its legal, accounting and other costs and expenses of enforcing any of its rights hereunder (including, without limitation, reasonable attorney’s fees and related expenses incurred in connection with any appeal of a lower court’s order or judgment) in the event any suit or other legal proceeding is brought for such enforcement, upon final judgment on the merits in favor of Secured Party.

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7.6Amendment and Waiver. Neither this Agreement nor any provision hereof may be amended, modified, waived, discharged, or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of the amendment, modification, waiver, discharge or termination is sought.

7.7Severability. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law. If, however, any provision of this Agreement shall be determined by a court of competent jurisdiction to be invalid or unenforceable, such provisions shall be ineffective to the extent of such invalidity or unenforceability, without invalidating the remainder of such provision or the remaining provisions of this Agreement, unless the remaining provisions do not reflect the intent of the parties in entering into this Agreement.

7.8Headings. The headings of sections of this Agreement have been inserted for reference only and shall not be a part of this Agreement.

7.9Addresses. Any notices, requests, demands and other communications required or permitted to be given hereunder must be in writing and, except as otherwise specified in writing, will be deemed to have been duly given when personally delivered, telexed or facsimile transmitted (with receipt confirmed, and a copy also sent by United States mail, first class, postage pre-paid), or three (3) days after deposit in the United States mail, by certified mail, postage prepaid, return receipt requested. The address of the Grantors and Secured Party, unless subsequently changed in accordance with the provisions of this Agreement, is as follows:

To the Grantors:	1464 W. 40 St. Suite #200 Lindon, Utah, 84042-1629 Attention: Gaylord Karren, President Facsimile: 801-443-1029
To Secured Party:	Water Science, LLC 1800 N.W. 89th Place Miami, FL 33172 Attention: Peter Ullrich Email: peteru@esmaraldainc.com
	With a copy (which shall not constitute notice) to: Greenberg Traurig, P.A. 1221 Brickell Avenue Miami, Florida 33131 Attention: Joseph Fleming Facsimile: (305) 579-0717

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Any party may change its address for the purposes of this Agreement by giving notice of such change of address to the other parties in the manner herein provided for giving notice.

7.10Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Grantors and Secured Party.

7.11Waiver of Ju1y Trial. To the fullest extent permitted by Law, each of the parties hereto hereby knowingly, voluntarily and intentionally waives its respective rights to a jury trial of any claim or cause of action based upon or arising out of this Agreement or in any of the agreements mentioned herein or any dealings between them relating to the subject matter of this Agreement. Each party hereto (a) certifies that none of its respective representatives, agents or attorneys has represented, expressly or otherwise, that such party would not, in the event of litigation, seek to enforce the foregoing waivers and (b) acknowledges that it has been induced to enter into this Agreement by, among other things, the mutual waivers and certifications herein.

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IN WITNESS WHEREOF, the parties have caused the execution of this Agreement by their duly authorized representatives as of the day and the year first above written.

ELECTRIC AQUAGENICS, INC.
By:
	Name:
	Title:

AQUAGEN INTERNATIONAL, INC.
By:
	Name:
	Title:

WATER SCIENCE, LLC
By:
	Name: Peter Ullrich
	Title: Sole Member

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EX-10.4

EXCLUSIVE LICENSE AND DISTRIBUTION AGREEMENT

THIS EXCLUSIVE LICENSE AND DISTRIBUTION AGREEMENT (the “Agreement”) is entered into this 16 day of September, 2005 (the “Effective Date”) by and between Electric Aquagenics Unlimited, Inc., a Delaware corporation having its principal offices located at 1464 West 40 South, Lindon, UT 84042 (“Licensor”), and Water Science, LLC, a limited liability company having its principal offices located at 1800 N.W. 89^th Place, Miami, Florida 33172 (the “Licensee”).

RECITALS

Licensor is the owner or exclusive licensee of all intellectual property and other rights, title and interest in and to certain technology that changes the molecular composition of tap water to produce low-cost, non-toxic electrolyzed oxidative fluids used for cleaning, disinfection, remediation and hydration (collectively, the “Technology”), including the products utilizing or embodying the Technology listed on Schedule A and any other products developed in the future utilizing or embodying the Technology (collectively, the “Products”), and is the owner of all rights, title and interest in and to the trademarks as used in connection with the Products including those listed on Schedule B (collectively, the “Trademarks”).

Licensee desires to obtain an exclusive license from Licensor to exploit the Technology, to make, use, distribute and sell the Products and to use the Trademark in connection therewith and Licensor desires to grant such license to Licensee on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration for the mutual covenants and promises contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. GRANT OF EXCLUSIVE RIGHTS; CONSIDERATION

(a)Exclusive Technology and Product License. Subject to the other terms and conditions set forth in this Agreement, Licensor hereby grants to Licensee the exclusive right and license to commercialize and exploit the Technology (including any and all future modifications, enhancements, improvements or other developments with respect thereto developed, licensed or otherwise acquired by Licensor) as Licensee deems appropriate and to manufacture or have manufactured, use, distribute, license and sell the Products and to offer related services, as well as sublicense others to do the same, including under the claims of any patents owned or licensed by Licensor, in the territories listed on Schedule C (collectively, the “Territories” or the “Territory”).

(b)Exclusive Trademark License. Subject to the other terms and conditions set forth in this Agreement, Licensor hereby grants to Licensee the exclusive right and license to use the Trademark in connection with the promotion, marketing and sale of the Products in the Territories.

(c)Exclusive Product Distribution Rights. Subject to the other terms and conditions set forth in this Agreement, Licensor hereby appoints Licensee, and Licensee accepts such appointment, as Licensor’s exclusive distributor in the Territories with respect to the Products that are manufactured or caused to be manufactured by Licensor. Licensor agrees that it shall only manufacture or cause to be manufactured the Products for sale and further distribution by Licensee in the Territories. Licensee shall have the right to engage subcontractors to manufacture and/or distribute part or all of the Products, provided that such subcontractors comply with all applicable terms under this Agreement with respect to activities they may undertake relating to the Products in the Territories. Licensee shall be responsible for all warehousing, distribution, order processing and fulfillment, billing and collection activities with respect to sales of the Products by Licensee in the Territories.

(d)Product Orders. All purchase orders submitted by Licensee and accepted by Licensor for the Products are and shall be subject to this Agreement and shall be deemed to incorporate the terms and conditions of this Agreement, whether or not so specified in such purchase orders. Licensor’s acceptances of orders shall be evidenced by Licensor signing and returning the acknowledgment copy of the order within three (3) days after receipt of the order, together with a pro-forma invoice for the Products covered by that order. All orders shall contain the information necessary for Licensor to fulfill the order, which information shall include the following:

(i) A reference to this Agreement and Licensee’s purchase order number;

(ii) A description and quantity of each of the Products required;

(iii) The address to which Products are to be directed and the address to which Licensor’s invoice is to be sent; and

(iv) The requested delivery date.

(c)Product Returns. Licensor shall accept any returns of or replace any of the Products under the following conditions:

(i) Licensee shall inspect all of the Products as soon as it is practicable after shipment thereof and shall notify Licensor in writing, within thirty (30) days of inspection thereof, if any such Products do not conform to the applicable specifications. Licensee shall give written notice to Licensor of hidden non-conformities, which cannot be ascertained upon an initial examination, within twenty (20) days from the discovery of such hidden non-conformities; and

(ii) Any defect in any of the Products to be returned shall have resulted from the manufacture or packaging of the Products prior to shipment thereof.

Licensor shall issue a credit to Licensee for the purchase price paid by Licensee for the Products found to be defective or replace any Products found to be defective with the same quantity of products in good and salable condition, shipping such replacement Products to Licensee’s designated shipping destination at Licensor’s expense; provided that Licensor reserves the right to require Licensee, at Licensor’s expense, to return to Licensor all or part of the Products found to be defective or sell it for salvage, destroy it, or otherwise dispose of it pursuant to Licensor’s instructions.

(d)Product Training and Promotional Assistance. Licensor shall provide Licensee with all necessary information concerning Product function and use and will conduct training sessions as well as provide promotional and advertising material to be used in the Territory for use by Licensee. Licensor shall keep Licensee informed of marketing and promotional efforts regarding the Products undertaken by Licensor, and shall collaborate with Licensee in the marketing of the Products within the Territory.

(e)Manufacturing Option; Escrow of Manufacturing Specifications and Related Information. In the event that Licensee desires to manufacture the Products or cause the Products to be manufactured by third parties for distribution within the Territory, Licensor shall cooperate with Licensee in doing so. Within thirty (30) days after the Effective Date, Licensor shall, deposit with an independent third party escrow agent mutually acceptable to Licensor and Licensee, a complete set of the specifications, processes, formulas, recipes, parameters, instructions and requirements, including all know-how, trade secrets and other information necessary to manufacture the Products currently manufactured by Licensor, (collectively, the “Deposit Materials”) and will supplement the Deposit Materials to include all such information with respect to Products developed and manufactured by Licensor in the future. The Deposit Materials shall be released to Licensee upon Licensee’s request in the event that Licensee decides to manufacture the Products or cause the Products to be manufactured by a third party. Licensor shall bear all expenses incurred in connection with establishing and maintaining such escrow while this Agreement is in effect.

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(f)Order of Precedence. The terms and conditions of this Agreement shall take precedence over and govern in the event of conflict between the terms and conditions of this Agreement the terms and conditions of any other documents and forms of the parties, including, without limitation, Licensee’s quotation request and purchase order forms, Licensor’s quotation form, and any confirmation, acknowledgment or other similar document. Any provision or data in any order, any subordinate document such as shipping releases, or any other document originated by either party, or contained in any documents or forms attached to or referenced in any of the above documents, which modifies, supplements or conflicts with the terms of this Agreement shall not be binding unless agreed to in writing by the parties.

(g)Purchase Prices. Licensee shall be charged and agrees to pay the rates set forth on Schedule D hereto, for its purchase of the Products. Such prices shall remain in effect for not less than twelve (1) months from the Effective Date. Thereafter, Licensor shall present any proposed changes to the rates no less than one hundred eighty (180) days prior to such rates becoming effective, unless the modification of such pricing is commercially mandated based upon a significant increase in the Products’ materials, parts and/or manufacturing labor costs, and Licensor provides Licensee ninety (90) days prior written notice of such modification, and the reasons therefor. If the parties are not able to reach an agreement within such period, Licensor shall be able to set such rates as it deems appropriate, with such rates taking effect thirty (30) days thereafter, in which event Licensee shall have the right to manufacture the Products itself or through others and/or terminate this Agreement immediately by providing written notice thereof to Licensor. The purchase prices shall be expressed in U.S. Dollars.

(h)Taxes and Other Charges. In addition to the applicable purchase prices, Licensor shall separately invoice for, and Licensee shall pay, all sales, use, excise, value added, gross receipts, turnover and other taxes and charges imposed by law or required by any government to be paid or collected by Licensor in connection with the purchase, delivery, sale or use of the Products pursuant to this Agreement (other than taxes imposed on Licensor’s income).

(i)Payment Terms. All payments due to Licensor from Licensee under this Agreement shall be paid to the applicable Licensor by check or wire transfer. Invoices may be rendered by the Licensor at any time after the date of Delivery, as defined below. Payment shall be made in U.S. Dollars, no later than ninety (90) days following the date of Delivery. Each shipment shall constitute an independent transaction and Licensee shall pay the invoice for each such transaction strictly in accordance with these payment terms.

(j)Delivery. Products will be considered delivered by Licensor for purposes of this Agreement when delivered to Licensee’s designated location or designated carrier FOB. Licensor shall: (a) contract for carriage of the Products to such destination and pay the freight, and (b) pay any loading costs to the extent they are not included in the freight. Licensee shall pay all other costs incurred in connection with shipment of the Products to the ultimate destination and unloading.

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(k)Risk of Loss and Passage of Title. Risk of loss and title shall pass to Licensee at the time of delivery of the Products to Licensee’s designated location or carrier.

(l)Technical Information and Training Regarding the Technology and the Products. Within twenty (20) business days after the Effective Date of this Agreement, Licensor shall disclose to Licensee any and all technical information and know-how then within the knowledge or possession of Licensor which was not already disclosed to Licensee and which would be helpful to Licensee regarding the Technology and the manufacture, use or sale of the Products, and the parties shall formulate a training program and schedule for Licensor to provide training to Licensee’s personnel. Training, know-how and information transfer shall take place either at Licensee’s offices or telephonically. Licensor shall, throughout the term of this Agreement, cause its employees and any third parties who are employed or engaged to do research, development or other inventive work to disclose to Licensor all improvements, refinements and modifications to the Products and new Products developed by them utilizing or embodying the Technology and Licensor shall disclose same to Licensee and inform Licensee promptly of any new developments, all of which shall be covered by the licensed rights granted to Licensee hereunder.

(m)Consideration. In consideration of the rights granted to Licensee hereunder and Licensor’s performance of its obligations hereunder, Licensee agrees to pay to Licensor a license fee of One Million Dollars (US$1,000,000), to be paid by Licensee in one lump sum payment upon execution and delivery of this Agreement.

(n)Royalty Payments. In addition to the License Fee payable pursuant to Section 1(m) hereof, Licenses shall pay to Licensor a royalty fee (the “Royalty Fee”) for every “net” Product sold in accordance with the following royalty fee payment schedule: a four percent (4%) Royalty Fee on all annual net sales up to $5,000,000; three percent (3%) Royalty Fee on all net sales from $5,000,001 to $10,000,000; and a two percent (2%) Royalty Fee on all net sales in excess of $10,000,0000. For purposes of this Agreement, “net” is defined as gross units of the Products sold, less returns, charge backs and any units associated with uncollectible monies.

2. MUTUAL OBLIGATIONS

(a)Quality Control. Each party agrees that it shall maintain a high standard of quality with respect to the use of the Trademark and with respect to the Products and packaging for the Products, as well as in all depictions, marketing and advertising of Products.

(b)Regulatory Compliance. Licensee acknowledges that certain licenses and label and packaging approvals not previously obtained by Licensor may be required to be obtained with respect to the Products from appropriate government authorities in the Territory from time to time during the term of the Agreement. Licensor will obtain and maintain all such licenses and approvals at its own expense and will provide assistance to Licensee in obtaining whatever licenses and approvals Licensee may be required to obtain in order for Licensee to manufacture the Products or cause the Products to be manufactured by third parties. Licensor and Licensee will make available to each other information and assistance necessary to complete all applications and requests for approval.

(c)Reporting of Negative Events. Each party has the overriding interest in protecting the reputation of the Products and the Trademark. Accordingly, if either party, at any time, has a reasonable basis to believe that any act or occurrence related to the Products or the Trademark presents or has presented any threat to public health or safety or otherwise are likely to draw negative attention from any governmental agency, consumer or environmental group, media or other organization or any individual (any of such occurrences being an “Event”), such party will immediately notify the other party of the facts giving rise to such belief or suspicion. In all such cases, the parties will closely coordinate with each other with respect to any actions they might take or permit and in respect to all public statements either party might make regarding the Event, and shall, after consultation with each other, follow all agreed plans with respect thereto.

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(d)Maintenance of Product Complaint Records. Each party agrees to maintain all records relating to consumer complaints and litigation relating to the Products and shall make such records available to the other party for inspection upon the other party’s reasonable request. Such records (other than records relating to consumer complaints) shall be maintained for at least two (2) years after the matter to which they pertain is closed or for the period required by the retaining party’s document retention policy therefor, whichever is longer. Records relating to consumer complaints shall be maintained for at least one (1) year after the complaint is received or for the period required by the retaining party’s document retention policy therefor, whichever is longer. All records provided under this Section shall be considered to be confidential information subject to the provisions of Section 13(k) of this Agreement.

3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF LICENSOR

(a)Representations and Warranties. Licensor represents and warrants to Licensee that: (i) it is the sole owner of all rights, title and interest, including all intellectual property rights in and to the Technology and the Products except for the portions thereof licensed from third parties as specified in Schedule A attached hereto; (ii) its entering into this Agreement does not require any third party consent or approval that has not already been obtained, except for the consent required by the License Agreement dated April 8, 2004 by and between Innovative Oyster Processing System and the Company, which consent will be obtained by the Company within sixty (60) days of the date hereof; (iii) it has sufficient right, power and authority to grant the rights and licenses to Licensee as set forth in this Agreement, (iv) that neither the Technology nor the Products infringe any third party intellectual property or other rights; and (v) that the Products sold by or through Licensor to Licensee shall be merchantable and fit for their intended purposes. Licensor has not made and will not make any commitments to others inconsistent with or in derogation of Licensee’s rights.

(b)Maintenance of Exclusivity. Licensor represents and warrants to Licensee that it has not, and covenants to Licensee that during the term of this Agreement, it will not, grant any other license with respect to the Technology or for sale, use or manufacturing of the Products or for use of the Trademark in the Territories.

(c)Provision of Information, Know-How and Training. Licensor shall provide to Licensee all pertinent and necessary information in order for Licensee to apply for and obtain any required safety or other regulatory approvals to commercially market and sell the Products, as well as all know-how and training reasonably required for Licensee to use and market the Technology and the Products.

(d)Maintenance of Product Approvals and Intellectual Property Rights. Licensor shall pursue, undertake its best efforts to obtain and maintain all required approvals, license, permits and other regulatory registrations for the Products in the Territories as well as all patent and other intellectual property rights in and to the Products and all trademark rights in and to the Trademark and all of its registrations therefor, and Licensor will not abandon or permit the expiration of any registration, unless so directed by a court of law. Should Licensor determine that it is no longer desirable in the conduct of its business, or otherwise determines that it is unable to maintain said rights, Licensor shall notify Licensee in writing of such determination prior to abandoning same. Licensor agrees to take all reasonably necessary steps, including, without limitation, making of all necessary filings in the U.S. Patent and Trademark Office and in the trademark office of any country or in any court to maintain such rights. Licensor agrees to take corresponding steps with respect to each new application for patent protection of the Technology and/or the Products and/or application for registration of the Trademark. Any and all expenses incurred in connection with such activities shall be borne by Licensor.

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(e)Marketing and Promotional Efforts; References to Licensee or Use of Licensee Name. Licensor shall coordinate its press, marketing and promotional efforts with respect to the Technology and the Products with Licensee and shall provide to Licensee a copy of all proposed press releases, advertisements and promotional materials for approval prior to publication or use. Licensor shall not use any disapproved materials. Licensor shall not refer to Licensee or use Licensee’s name or trademarks in any press release, product endorsement, marketing or other written materials, public filing or any other publication or statement without the prior written approval by Licensee.

4. INFRINGEMENT BY THIRD PARTIES

(a)Notification of Infringements. Should Licensor or Licensee become aware of any infringement or alleged infringement of any patents covering any portion of the Technology or the Products, or any other infringement or violation of the intellectual property rights (including moral rights) or trade secrets relating to the Technology or the Products, that party shall immediately notify the other party in writing of the name and address of alleged infringer, the alleged acts of infringement, and any available evidence of infringement.

(b)Enforcement of Rights. Licensor shall have primary responsibility for enforcing any patent rights or other intellectual property rights (including moral rights), or trade secret rights relating to the Technology or the Products against any third parties and shall bring legal action against such third parties to enforce such rights. If Licensor fails to take action against any such third parties within thirty (30) days of such notification, Licensee may, at its option, bring legal action against such third parties in the name of Licensee and/or Licensor to enforce such rights. In the event that such litigation results in a damage award favoring the party bringing action to enforce any such rights, such a damage award shall be the property of the party that pursued such litigation.

5. INDEMNIFICATION

(a)Indemnification by Licensee. Licensee shall, at its expense, indemnify, defend and hold harmless Licensor, its employees, officers and agents (each, a "Licensor Indemnified Party" and collectively, the "Licensor Indemnified Parties") from and against any and all claims and causes of action of any nature made or lawsuits or other proceedings filed or otherwise instituted against any of the Licensor Indemnified Parties arising from or relating to any breach by Licensee of any of its representations, warranties or obligations hereunder. Licensee shall be responsible for and shall pay all costs and expenses related to such claims and lawsuits for which it shall indemnify the Licensor Indemnified Parties, including, but not limited to, the payment of all attorneys' fees and costs of litigation, defense and/or settlement of same.

(b)Indemnification by Licensor. Licensor shall, at its expense, indemnify, defend and hold harmless Licensee, its employees, officers and agents (each, a “Licensee Indemnified Party” and collectively, the “Licensee Indemnified Parties”) from and against any and all claims and causes of action of any nature made or lawsuits or other proceedings filed or otherwise instituted against any of the Licensee Indemnified Parties arising from or relating to any breach by Licensor of any of its representations, warranties or obligations hereunder. Licensor shall be responsible for and shall pay all costs and expenses related to such claims and lawsuits for which it shall indemnify the Licensee Indemnified Parties, including, but not limited to, the payment of all attorney’s fees and costs of litigation, defense and/or settlement of same.

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(c)Indemnification Procedures. In claiming any indemnification hereunder, the indemnified party shall promptly provide the indemnifying party with written notice of any claim that the indemnified party believes falls within the scope of the foregoing paragraph. The indemnified party may, at its own expense, assist in the defense if it so chooses, provided that the indemnifying party shall control such defense and all negotiations relative to the settlement of any such claim and further provided that any settlement intended to bind the indemnified party shall not be final without the indemnified party’s written consent, which shall not be unreasonably withheld.

6. TERM AND TERMINATION

(a)Term. The term of this Agreement shall commence on the Effective Date and continue in effect perpetually unless sooner terminated as provided below (the “Term”).

(b)Termination by Licensor. Licensor shall have the right to terminate this Agreement if Licensee materially defaults in performing any of its other obligations under this Agreement or if Licensee becomes insolvent or if a proceeding is commenced by or against Licensee seeking liquidation, rehabilitation, reorganization, conservatorship or other relief with respect to Licensee or its assets under any bankruptcy, insolvency or other similar law, or seeking the appointment of a trustee, receiver or other similar official with respect to Licensee and/or a substantial portion of its assets, and such material breach is not cured, or such proceeding is not dismissed, within sixty (60) days after Licensor has delivered to Licensee written notice of its intent to terminate the Agreement and specifying the reason for termination.

(c)Termination by Licensee. Licensee shall have the right to terminate this Agreement if Licensor materially defaults in performing any of its obligations hereunder, or if Licensor becomes insolvent or if a proceeding is commenced by or against Licensor seeking liquidation, rehabilitation, reorganization, conservatorship or other relief with respect to Licensor or its assets under any bankruptcy, insolvency or other similar law, or seeking the appointment of a trustee, receiver or other similar official with respect to Licensor and/or a substantial portion of its assets, and such material breach is not cured, or such proceeding is not dismissed, within sixty (60) days after Licensee has delivered written notice to Licensor of its intent to terminate this Agreement. Additionally, Licensee shall have the right to terminate this Agreement at any time for convenience by providing written notice thereof to Licensor not less than thirty (30) days prior to the effective date of such termination and specifying the reason for termination.

(d)Post-Termination Obligations; Phase-out Period. Subsequent to the termination of this Agreement for any reason, Licensee may, for up to one hundred eighty (180) days after the effective date of such termination, continue to sell its inventory of the Products and continue using the Technology and the Trademarks in connection therewith.

(e)Effect of Termination; Licensee’s Continued Rights in the Event of Licensor Default or Bankruptcy; Refund of License Fee. Nothing herein shall be construed to release either party of any obligation which matured prior to the effective date of such termination or which may continue beyond such termination. Licensor acknowledges and agrees that this Agreement and all rights and licenses granted under or pursuant to this Agreement by Licensor to Licensee are, and shall otherwise be deemed to be licenses to rights to intellectual property. Licensor agrees that Licensee, as a licensee of such rights under this Agreement, shall retain and may fully exercise all of its rights and elections under applicable bankruptcy, insolvency or other similar law, including specifically but without limitation, Section 362(n) of the U.S. Bankruptcy Code, as amended. Licensor further agrees that, in the event of a Licensor default, or a dissolution or other discontinuance of Licensor’s business operations or existence, or the commencement of a voluntary or involuntary proceeding against Licensor seeking liquidation, rehabilitation, reorganization, conservatorship or other relief with respect to it or its assets under any bankruptcy, insolvency or other similar law, Licensee, in addition to its right to terminate this Agreement, shall also have the right, at its election, to retain all of its rights under this Agreement. In such event, Licensee shall further have the right to either require Licensor to assign to Licensee any or all manufacturing, supply, license or other agreements with third parties to which Licensor is a party relating to the Technology and/or the Products (as well as all related product regulatory approvals, permits and licenses to the extent legally transferable or to enter into its own agreements with such third parties and obtain its own regulatory approvals, permits and licenses). Licensee shall also be entitled to release of the Deposit Materials from escrow in such event. Additionally, in the event that this Agreement is terminated by Licensee other than for convenience at any time within five (5) years after the Effective Date, Licensee shall be entitled to a refund of the license fee paid by Licensee to Licensor pursuant to this Agreement, pro-rated based on the ratio that the time elapsed as of such termination since the Effective Date bears to five (5) years.

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7. TAXES, GOVERNMENTAL APPROVALS AND LIABILITY

(a)Taxes. Licensee shall be solely responsible for the payment and discharge of any taxes, duties, or withholdings relating to any transaction of Licensee in connection with the manufacture, use, sale, licensing or other commercialization or exploitation of the Products. Licensor is solely responsible for any and all taxes, fees relating to its ownership of intellectual property rights in and to the Products, including but not limited to taxes on all amounts paid to Licensor hereunder.

(b)Government Approvals. Licensee shall, at its own expense, be responsible for applying for and obtaining any approvals, authorizations, or validations relative to the manufacture and sale of the Products not previously obtained by Licensor under the appropriate Territory laws or otherwise, including authorization for the remittances hereunder from the appropriate governmental authorities.

8. INDEPENDENCE OF THE PARTIES

This Agreement creates no relationship of partnership, joint venture, employment, franchise, or agency between the parties. This Agreement shall not constitute the designation of either party as the representative or agent of the other, nor shall either party to this Agreement have the right or authority to make any promise, guarantee, warranty, or representation, or to assume, create, or incur any liability or other obligation of any kind, express or implied, against or in the name of, or on behalf of, the other party, without the other party’s prior written consent and approval.

9. SUBLICENSE AND ASSIGNMENT

(a)Sublicensing. Licensor authorizes Licensee to grant sublicenses of the rights granted to it hereunder to its subdistributors, contractors and other third parties as reasonably necessary for Licensee to perform its obligations hereunder, upon Licensor’s prior written consent, which consent shall not be unreasonably withheld.

(b)Assignment. Any assignment of this Agreement by either party to a third party (except by Licensee to an affiliated entity or to a person or entity acquiring substantially all of Licensee’s assets or a controlling equity ownership interest in Licensee, which shall be permitted without the consent or approval of Licensor) shall be null and void unless consented to in advance in writing by the other party hereto, which consent shall not be withheld unreasonably.

10. NOTICES

Any notice or communication permitted or required under this Agreement shall be in writing and shall be delivered in person or by courier, or mailed by certified or registered mail, postage prepaid, return receipt requested, and addressed as set forth for the intended recipient in the first paragraph of this Agreement, attention: President, or to such other address as shall be given in accordance with this Section. If notice is given in person, by courier or facsimile, it shall be effective upon receipt; and if notice is given by mail, it shall be effective five (5) business days after deposit in the mail.

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11. ARBITRATION; LITIGATION; GOVERNING LAW; JURISDICTION AND VENUE

Except with respect to any claim by either party against the other party relating to this Agreement and seeking injunctive relief or specific performance, any dispute, controversy or claim arising out of or relating to this Agreement or the breach, termination or validity thereof, shall be finally settled in accordance with the commercial arbitration rules of the American Arbitration Association (the “AAA”) then in effect, by a panel of three (3) arbitrators. Each party shall have the right to appoint one (1) arbitrator from the list of arbitrators supplied to the parties by the AAA, and the two arbitrators so appointed shall appoint the third. The parties may alternately agree to a single arbitrator in lieu of a panel of three (3) arbitrators. The place of arbitration shall be Miami, Florida, U.S.A. and the parties agree to submit to personal jurisdiction exclusively in such venue for such arbitration and exclusively in the state courts located in such venue for any proceeding brought by either party seeking injunctive relief or specific performance. The internal procedural and substantive laws of Florida shall govern this Agreement and all questions of arbitral procedure, arbitral review, scope of arbitral authority, and arbitral enforcement as well as in any other legal proceedings brought by either party involving this Agreement. The parties agree that the award of the arbitrators shall be the sole and exclusive remedy between them regarding any claims, counterclaims, issues or accountings presented or pled to the arbitrators, that the award shall be made and shall be promptly payable in U.S. dollars without deduction or offset, and that any costs, fees or taxes incurred to enforcing the award shall, to the maximum extent permitted by law, be charged against the party resisting such enforcement. The award shall include interest accruing from the date of damages incurred for breach or other violation of this Agreement, and from the date of the award until paid in full, at a rate to be fixed by the arbitrators. The prevailing party in any proceeding relating to this Agreement shall be entitled to payment of its attorney’s fees and costs by the nonprevailing party.

12. IDENTIFICATION OF TECHNOLOGY AND PRODUCTS

(a)Marking. Licensee agrees to mark, as appropriate, the following with appropriate copyright notices, trademark notices, patent pending notices and/or patent numbers in conformity with applicable law:

1. all units of the Products made or sold by or for Licensee and/or its sublicensees;

2. all packaging of the Products, and

3. all brochures, manuals, and documents describing the Products.

(b)License Disclosure. Unless otherwise directed by Licensor, Licensee shall state in a manner acceptable to Licensor and approved by Licensor, in a prominent position on all materials and things specified in sub-Section 12(a) above, that the Products are manufactured and/or distributed by Licensee under license from Licensor.

13. GENERAL PROVISIONS

(a)Entire Agreement. The parties hereto have read this Agreement and agree to be bound by all its terms. The parties further agree that this Agreement constitutes the full, complete and exclusive statement of the Agreement between them and supersedes all proposals, oral or written, and all other communications between them relating to the subject matter of this Agreement.

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(b)Modifications. No agreement changing, modifying, amending, extending, superseding, discharging, or terminating this Agreement or any provisions hereof shall be valid unless it is in writing and is dated and signed by duly authorized representatives of each party.

(c)Severability. Should any term or provision of this Agreement be finally determined by an arbitration panel to be void, invalid, unenforceable or contrary to law or equity, the offending term or provision shall be modified and limited (or if strictly necessary, deleted) only to the extent required to conform to the requirements of law and the remainder of this Agreement (or, as the case may be, the application of such provisions to other circumstances) shall not be affected thereby but rather shall be enforced to the greatest extent permitted by law.

(d)Waiver. Failure of any of the parties hereto to enforce any of the provisions of this Agreement or any rights with respect thereto or to exercise any election provided for therein, shall in no way be considered a waiver of such provisions, rights, or election or in any way to affect the validity of this Agreement. No term or provision hereof shall be deemed waived and no breach excused, unless such waiver or consent shall be in writing and signed by the party claimed to have waived or consented. Any consent by any party to, or waiver of, a breach by the other, whether express or implied, shall not constitute a consent or waiver of, or excuse for any other, different or subsequent breach. All remedies herein conferred upon any party shall be cumulative and no one shall be exclusive of any other remedy conferred herein by law or equity.

(e)Time is of the Essence. Time is of the essence in the performance of each and every obligation and covenant imposed by this Agreement.

(f)Binding Agreement. This Agreement shall be binding not only upon the parties hereto, but also upon and without limitations thereto, their assignees, successors, divisions, subsidiaries, officers, directors, employees, and sublicensees.

(g)Force Majeure. Neither Licensor nor Licensee shall be responsible for any failure to fulfill its obligations due to causes beyond its reasonable control, including without limitation, acts or omissions of government or military authority, acts of God, acts of terrorism, materials shortages, transportation delays, fires, floods, labor disturbances, riots, wars, or inability to obtain any export or import license or other approval of authorization of any government authority.

(h)Expenses. Except as provided elsewhere in this Agreement, all of the legal, accounting, and other miscellaneous expenses incurred in connection with this Agreement and the performance of the various provisions of this Agreement shall be paid by the party who incurred the expense.

(i)Survival. All covenants, agreements, representations, warranties and provisions of this Agreement which by their nature survive the termination of this Agreement shall so survive after the effective date of termination of this Agreement.

(j)Disclaimer of Warranties; Limitation of Liability. EXCEPT FOR THE WARRANTIES EXPRESSLY PROVIDED HEREIN, NEITHER PARTY HERETO MAKES ANY WARRANTIES AND DISCLAIMS ANY IMPLIED WARRANTIES OF ANY KIND, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR AGAINST INFRINGEMENT WITH REGARD TO THE PRODUCTS OR THE PERFORMANCE OF ITS OBLIGATIONS HEREUNDER. NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY WITH RESPECT TO ANY PUNITIVE, SPECIAL, CONSEQUENTIAL, INCIDENTAL OR INDIRECT DAMAGES, INCLUDING WITHOUT LIMITATION, LOST PROFITS ARISING OUT OF THE PERFORMANCE OF NONPERFORMANCE OF THIS AGREEMENT, EVEN IF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

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(k)Confidentiality. The terms of this Agreement as well as any information disclosed by either party to the other pursuant to this Agreement, except as set forth below, shall be considered confidential to the disclosing party and shall not be disclosed or used by the receiving party other than as expressly authorized herein without the prior written consent of the disclosing party, which consent may be withheld by the disclosing party in its sole and absolute discretion. The foregoing obligation of confidentiality shall not apply to information which (a) was publicly available at the time of the disclosure to the receiving party; (b) subsequently becomes publicly available through no fault of the receiving party; (c) is rightfully acquired by the receiving party, subsequent to disclosure by the other party from a third party who is not in breach of a confidential relationship with regard to such information; (d) is independently developed by the receiving party solely through the efforts of individuals who did not have access to the confidential information, as evidenced by the receiving party’s written records; or (e) is required to be made public by court order, law or regulation, provided that the disclosing party is notified as soon as practicable prior to such compelled disclosure in order to contest same.

(l)Construction; Counterparts. The headings used in this Agreement are for reference purposes only and shall not be considered a part of this Agreement. This Agreement may be executed in counterparts, each of which shall be deemed to be an original and all of which shall constitute one and the same agreement.

[THE REMAINDER OF THIS PAGE IS LEFT BLANK INTENTIONALLY.

SIGNATURE PAGE FOLLOWS.]

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IN WITNESS WHEREOF, the parties hereto, by and through their respective undersigned duly authorized representatives, have caused this Agreement to be executed as of the Effective Date.

LICENSOR: Electric Aquagenics Unlimited, Inc., a Delaware corporation
By:
	Name:
	Title:

LICENSEE: Water Science, LLC
By:
	Name: Peter Ullrich
	Title: Sole Member

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SCHEDULE A

TECHNOLOGY/PRODUCTS

A-1

SCHEDULE B

TRADEMARKS

The Company’s Trademarks are as follows:

B-1

SCHEDULE C

TERRITORIES

C-1

SCHEDULE D

PRODUCT PRICES

D-1

EX-10.5

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this “Agreement”), is entered into as of September 16, 2005 by and between Electric Aquagenics Unlimited, Inc., a Delaware corporation (the “Company”), and Water Science, LLC, a Florida limited liability company (the “Investor”).

RECITALS

WHEREAS, the Investor is the holder of a $3,000,000 Senior Secured Convertible Preferred Note (the “Note”) convertible into shares of the Company’s common stock, par value $.0001 per share (the “Common Stock”);

WHEREAS, the Investor is the holder of a Warrant to purchase 2,000,000 shares of the Company’s Common Stock expiring on September 16, 2008 (the “Warrant”); and

WHEREAS, the Company and the Investor deem it to be in their respective best interests to set forth the rights of the Investor in connection with the sale of shares of Common Stock issuable upon conversion of the Note or upon exercise of the Warrant (the “Registrable Shares”) and are entering into this Agreement as a condition to and in connection with the Subscription Agreement entered into by and between the Investor and the Company on the date hereof (the “Subscription Agreement”).

NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the parties hereto hereby agrees as follows:

AGREEMENT

1.Registration Rights.

(a)Within 180 (but no later than 360 days) after the date hereof, the Company shall prepare and file with the Securities and Exchange Commission (the “SEC”), a registration statement and such other documents as may be necessary, and use its best efforts to have such registration statement declared effective as soon as reasonably practicable after such filing, so as to permit the registered resale of the Registrable Shares, for a period of two (2) years following the issuance of the last Registrable Share. The Company will include in such registration statement the information required under the Securities Act of 1933, as amended (the “Securities Act”) to be so included concerning the Investor, as provided by the Investor pursuant to this Agreement and any other agreements between the parties, including any changes in such information that may be provided by the Investor in writing to the Company from time to time.

(b)In the event that the Company does not file a registration statement to register the Registrable Shares with the SEC within 180 (but no later than 360 days) after the date hereof, or within such period as extended by such additional number of days as are solely and directly attributable to any delay caused by any act or failure to act by the Investor or its counsel, the Company will be required to pay a penalty to the Investor equal to one percent (1%) of the purchase price for the Investor’s Registrable Shares, and an additional one percent (1%) for each 30-day period during which such registration statement is not filed.

(c)Notwithstanding the foregoing provisions of this Section 1, the Company may voluntarily suspend the effectiveness of any such registration statement for a limited time, which in no event shall be longer than 60 days in any three-month period and no longer than 120 days in any twelve month period, if the Company has been advised in writing by counsel or underwriters to the Company that the offering of any Registrable Shares pursuant to the registration statement would materially adversely affect, or would be improper in view of (or improper without disclosure in a prospectus), a proposed financing, reorganization, recapitalization, merger, consolidation, or similar transaction involving the Company, in which case the Company shall keep such registration statement effective for an additional period of time beyond two (2) years following the last issuance of a Registrable Share equal to the number of days the effectiveness thereof is suspended pursuant to this provision. The Company shall notify the Investor to such effect, and, upon receipt of such notice, the Investor shall immediately discontinue any sales of Registrable Shares pursuant to such registration statement until the Investor has received copies of a supplemented or amended prospectus or until the Investor is advised in writing by the Company that the then current prospectus may be used and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in such prospectus.

(d)If any event occurs that would cause any such registration statement to contain a material misstatement or omission or not to be effective and usable during the period that such registration statement is required to be effective and usable, the Company shall promptly notify the Investor of such event and, if requested, the Investor shall immediately cease making offers of Registrable Shares and return all prospectuses to the Company. The Company shall promptly file an amendment to the registration statement to correct such misstatement or omission and use its commercially reasonable efforts to cause such amendment to be declared effective as soon as practicable thereafter. The Company shall promptly provide the Investor with revised prospectuses and, following receipt of the revised prospectuses, the Investor shall be free to resume making offers of the Registrable Shares. In the event of such an occurrence, the Company shall keep such registration statement effective for an additional period of time beyond two (2) years following the last issuance of a Registrable Share equal to the number of days the effectiveness thereof is suspended pursuant to this provision.

(e)Notwithstanding any provision contained herein to the contrary, the Company’s obligation to include, or continue to include, Registrable Shares in any such registration statement under this Section 1 shall terminate to the extent such shares are eligible for resale under Rule 144(k) promulgated under the Securities Act.

(f)If and whenever the Company is required by the provisions of this Agreement to use its commercially reasonable efforts to effect the registration of the Registrable Shares under the Securities Act for the account of the Investor, the Company will, as promptly as possible:

(i)prepare and file with the SEC a registration statement complying with applicable requirements under the Securities Act with respect to such securities and use its commercially reasonable efforts to cause such registration statement to become and remain effective;

(ii)prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the requirements of the Securities Act and the rules and regulations promulgated by the SEC thereunder relating to the sale or other disposition of the securities covered by such registration statement; and

(iii)furnish to the Investor such numbers of copies of a prospectus complying with the requirements of the Securities Act, and such other documents as the Investor may reasonably request in order to facilitate the public sale or other disposition of the Registrable Shares owned by the Investor, but the Investor shall not be entitled to use any selling materials other than a prospectus and such other materials as may be approved by the Company, which approval will not be unreasonably withheld.

(g)The expenses incurred by the Company in connection with action taken by the Company to comply with this Section 1, including, without limitation, all registration and filing fees, printing and delivery expenses, accounting fees, fees and disbursements of counsel to the Company, consultant and expert fees, and premiums for liability insurance, if the Company chooses to obtain such insurance, obtained in connection with a registration statement filed to effect such compliance and all expenses, including counsel fees, of complying with any state securities laws, shall be paid by the Company. All fees and disbursements of any counsel, experts, or consultants employed by the Investor shall be borne by the Investor. The Company shall not be obligated in any way in connection with any registration pursuant to this Section 1 for any selling commissions or discounts payable by the Investor to any underwriter or broker of securities to be sold by the Investor. The Investor agrees that any such selling commissions or discounts shall be borne by the Investor.

(h)The Company will indemnify and hold harmless the Investor, its officers, directors and each underwriter of such securities, and any person who controls the Investor or underwriter within the meaning of Section 15 of the Securities Act (each an “Investor Indemnified Party”), against all claims, actions, losses, damages, liabilities and expenses, joint or several, to which any of such persons may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and will reimburse such Investor Indemnified Party for any legal and any other expenses reasonably incurred by such Investor Indemnified Party in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises directly out of or is based primarily upon an untrue statement or omission made in said registration statement, said preliminary prospectus or said prospectus, or said amendment or supplement in reliance upon and in conformity with written information furnished to the Company by the Investor or such underwriter specifically for use in the preparation thereof.

(i)At any time when a prospectus relating to the Registrable Shares is required to be delivered under the Securities Act, the Company will notify the Investor of the happening of any event, upon the notification or awareness of such event by an executive officer of the Company, as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing.

(j)In the event of any registration of any securities under the Securities Act pursuant to this Section 1, the Investor agrees to indemnify and hold harmless the Company, its officers, directors and any person who controls the Company within the meaning of Section 15 of the Securities Act (each a “Company Indemnified Party”), against any losses, claims, damages, liabilities, or actions, joint or several, to which a Company Indemnified Party may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages, liabilities, or actions arise out of or are based upon any untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or arise out of or are based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent that any such loss, claim, damage, liability, or action arises out of or is based upon an untrue statement or omission made in said registration statement, preliminary prospectus or prospectus or amendment or supplement in reliance upon and in conformity with written information furnished to the Company by the Investor or any affiliate (as defined in the Securities Act) of the Investor specifically for use in the preparation thereof.

(k)Any party entitled to indemnification hereunder will (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification, and (ii) unless in such indemnified party’s reasonable judgment, based upon advise of counsel, a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnified party will not be subject to any liability for any settlement made by the indemnifying party without its consent (which consent may not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party, based upon advise of counsel, with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim.

(l)With a view to making available to the Investor the benefits of Rule 144 promulgated under the Securities Act, the Company agrees that it will use its commercially reasonable efforts to maintain registration of its Common Stock under Section 12 or 15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and to file with the SEC in a timely manner all reports and other documents required to be filed by an issuer of securities registered under the Exchange Act so as to maintain the availability of Rule 144. Upon the request of any record owner, the Company will deliver to such owner a written statement as to whether it has complied with the reporting requirements of Rule 144.

2.Representations and Warranties of the Investor. The Investor hereby represents and warrants to the Company as follows:

(a)The Investor is acquiring the Registrable Shares for its own account, for investment and not with a view to, or for resale in connection with, any distribution or public offering thereof within the meaning of the Securities Act, and applicable state securities laws.

(b)The Investor acknowledges that the certificate(s) representing the Registrable Shares acquired by the Investor shall bear a restrictive legend substantially as follows:

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.

(c)The Investor acknowledges that the Registrable Shares will be “restricted securities” within the meaning of Rule 144 under the Securities Act, are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act and applicable state securities laws, pursuant to registration or exemption therefrom. The Investor is aware that the Investor may be required to bear the financial risks of this investment for an indefinite period of time.

(d)The Investor further represents and warrants that the Investor is an “accredited investor” within the meaning of Rule 501(a) of Regulation D under the Securities Act, and the Investor has executed the Certificate of Accredited Investor Status, attached hereto as Exhibit A.

(e)The Investor has full power and authority to execute and deliver this Agreement, (ii) the execution and delivery by the Investor of this Agreement and the performance by it of its obligations hereunder have been authorized by all necessary action of the Investor, (iii) this Subscription Agreement has been duly and validly executed and delivered by the Investor and constitutes the legal, valid and binding obligation of the Investor, and (iv) this Agreement is enforceable against the Investor in accordance with its terms.

3.Representations and Warranties of the Company. The Company hereby represents and warrants to the Investor as follows:

(a)The Company is duly incorporated, validly existing and in good standing under the laws of its state of incorporation, and is duly qualified to do business as a foreign corporation in all jurisdictions in which the failure to be so qualified would materially and adversely affect the business or financial condition, properties or operations of the Company.

(b)The Company has duly authorized the issuance and sale of the Registrable Shares in accordance with the terms of this Agreement (as described herein) by all requisite corporate action, including the authorization of the Company’s Board of Directors of the issuance and sale of the Registrable Shares in accordance herewith, and the execution, delivery and performance of any other agreements and instruments executed in connection herewith. This Agreement constitutes a valid and legally binding obligation of the Company, enforceable in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies, and (iii) to the extent the indemnification provisions contained herein may be limited by applicable federal or state securities laws.

4.Survival; Indemnification. All representations, warranties, covenants and the indemnification obligations contained in this Agreement shall survive (i) the acceptance of this Agreement by the Company, (ii) changes in the transactions, documents and instruments described herein which are not material or which are to the benefit of the Investor, and (iii) the death or disability of the Investor. The Investor understands the meaning and legal consequences of the representations, warranties and covenants in Section 2 hereof and that the Company has relied upon such representations, warranties and covenants in determining the Investor’s qualification and suitability to purchase Registrable Shares. The Investor hereby agrees to indemnify, defend and hold harmless the Company and its respective officers, directors, employees, agents and controlling persons, from and against any and all losses, claims, damages, liabilities, expenses (including attorneys’ fees and disbursements), judgments or amounts paid in settlement of actions arising out of or resulting from the untruth of any representation of the Investor herein or the breach of any warranty or covenant of the Investor made herein. Notwithstanding the foregoing, no representation, warranty, covenant or acknowledgment made herein by the Investor shall in any manner be deemed to constitute a waiver of any rights granted to it under the Securities Act or state securities laws or otherwise.

5.Notices. All notices and other communications provided for under this Note shall be in writing (including by facsimile) and addressed, delivered or transmitted in accordance with Section 6.7 of the Subscription Agreement.

6.Assignability. This Agreement is not assignable by the Investor, and may not be modified, waived or terminated except by an instrument in writing signed by the party against whom enforcement of such modification, waiver or termination is sought.

7.Binding Effect. Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, executors, administrators, successors, legal representatives and permitted assigns, and the agreements, representations, warranties and acknowledgments contained herein shall be deemed to be made by and be binding upon such heirs, executors, administrators, successors, legal representatives and permitted assigns.

8.Obligations Irrevocable. The obligations of the Investor shall be irrevocable, except with the consent of the Company, until the issuance of the Registrable Shares; provided, however, that the Investor may revoke the subscription hereunder at any time prior to the Company’s acceptance of same.

9.Entire Agreement. This Agreement constitutes the entire agreement of the Investor and the Company relating to the matters contained herein, superseding all prior contracts or agreements, whether oral or written.

10.Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of law thereof that would require the application of the laws of any jurisdiction other than Delaware.

11.Severability. If any provision of this Agreement or the application thereof to the Investor or any circumstance shall be held invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provision to other subscriptions or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.

12.Headings. The headings in this Agreement are inserted for convenience and identification only and are not intended to describe, interpret, define, or limit the scope, extent or intent of this Agreement or any provision hereof.

13.Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which together shall be deemed to be one and the same agreement.

(Remainder of Page Intentionally Left Blank)

IN WITNESS WHEREOF, the parties have caused the execution of this Agreement by their duly authorized representatives as of the day and the year first above written.

ELECTRIC AQUAGENICS, INC.
By:	/s/
	Name:
	Title:

WATER SCIENCE, LLC
By:	/s/
	Name: Peter Ullrich
	Title: Sole Member

Exhibit A

CERTIFICATE OF ACCREDITED INVESTOR STATUS

The undersigned is an “accredited investor,” as that term is defined in Regulation D under the Securities Act of 1933, as amended (the “Securities Act”). The undersigned has checked the box below indicating the basis on which the undersigned is representing the undersigned’s status as an “accredited investor”:

o a bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity; a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended; an insurance company as defined in Section 2(13) of the Securities Act; an investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; a small business investment company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, and such plan has total assets in excess of $5,000,000; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are “accredited investors”;

o a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940;

o an organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000;

o a natural person whose individual net worth, or joint net worth with the undersigned’s spouse, at the time of this purchase exceeds $1,000,000;

o a natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with the undersigned’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;

o a trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a person who has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment;

o an entity in which all of the equity holders are “accredited investors” by virtue of their meeting one or more of the above standards; or

o an individual who is a director or executive officer of Electric Aquagenics Unlimited, Inc.

IN WITNESS WHEREOF, the undersigned has executed this Certificate of Accredited Investor Status effective as of the __ day of, 2005.

WATER SCIENCE, LLC
By:	/s/
	Name:
	Title:

EX-10.6

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. 11Date: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

1.1Time 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.

1.2Manner of Exercise.

1.2.1The 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.

1.2.2Upon 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.

1.2.3In 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.

1.2.4The 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.

1.3Conversion 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.

1.4Fair 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 Holder advises the Board of Directors in writing that Holder 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 Holder.

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1.5Exchange 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.

1.6Holder 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.

1.7Method 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.

1.8Rights 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.

1.9Lost 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.

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1.9.1At 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.

1.9.2The 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

2.1Stock 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.

2.2Dividends 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.

2.3Recapitalization 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.

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2.4Subsequent 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.

2.5Subsequent 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.

2.6No 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.

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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

4.1Binding 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.

4.2Notices. 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.

1464 W. 40 South, Suite 200

Lindon, Utah 84042

Telephone No.: (801) 443-1031

Attention:Gaylord Karren, 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.

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4.3Governing Law. The validity, interpretation and performance of this Warrant shall be governed by the laws of the State of Delaware.

4.4Parties 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.

4.5Headings. 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)

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IN, WITNESS WHEREOF, this Warrant has been duly executed by the Company as of September 16 ,2005.

ELECTRIC AQUAGENICS UNLIMITED, INC.
By:
	Gaylord Karren, 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:

__________________________________

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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: ________________________________

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