SUBSCRIPTION AGREEMENT
 
BETWEEN
 
ELECTRIC AQUAGENICS UNLIMITED INC.
 
AND
 
THE INVESTOR NAMED HEREIN
 
MAY 1, 2006

 

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Table of Contents

1.
 Purchase and Sale of the Shares.
1
1.1
 
Sale and Issuance of the Shares.
 
1.2
 
Closing
1
1.3
 
Use of Proceeds
2
2.
 Representations and Warranties of the Company
2
2.1
 
Organization, Good Standing and Qualification
2
2.2
 
Capitalization
3
2.3
 
Subsidiaries; Joint Ventures
3
2.4
 
Authorization
3
2.5
 
Governmental Consents
3
2.6
 
Offering
3
2.7
 
Litigation
3
2.8
 
Absence of Certain Developments
4
2.9
 
Proprietary Information Agreements
4
2.10
 
Patents and Trademarks
5
2.11
 
Compliance with Other Instruments
5
2.12
 
Related-Party Transactions
5
2.13
 
Business Plan
6
2.14
 
Tax Returns
6
2.15
 
Permits
6
2.16
 
Environmental and Safety Laws
6
2.17
 
Registration Rights
6
2.18
 
Corporate Documents; Minute Books
6
2.19
 
Title to Property and Assets
6
2.20
 
Insurance
6
2.21
 
Labor Agreements and Actions
6
2.22
 
Obligations of Management
7
2.23
 
Disclosure
7
2.24
 
No Brokerage.
7
3.
 Representations and Warranties of the Investor
7
3.1
 
Authorization
7
3.2
 
Purchase Entirely for Own Account
7
3.3
 
Accredited Investor
8
3.4
 
Restricted Securities
8
3.5
 
Legends
8
4.
 Conditions of Investor’s Obligations at Closing
8
4.1
 
Representations and Warranties
8
4.2
 
Performance
8
4.3
 
Proceedings and Documents
8

 
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4.4
 
Fees of Counsel
8
4.5
 
Warrant Agreement
9
4.6
 
Share Certificate
9
4.7
 
Registration Rights Agreement
9
4.8
 
Amended and Restated License and Distribution Agreement
9
5.
 Conditions of the Company’s Obligations at Closing
9
5.1
 
Representations and Warranties
9
5.2
 
Payment of Purchase Price
9
6.
 Miscellaneous.
9
6.1
 
Indemnification
9
6.2
 
SEC Filings
10
6.3
 
Pre-emptive Rights
10
6.4
 
Survival
10
6.5
 
Successors and Assigns
10
6.6
 
Governing Law
10
6.7
 
Arbitration
11
6.8
 
Titles and Subtitles
11
6.9
 
Notices
11
6.10
 
No Brokers
12
6.11
 
Expenses
12
6.12
 
Amendments and Waivers
12
6.13
 
Severability
12
6.14
 
Entire Agreement
12
6.15
 
Further Assurances
12
6.16
 
Counterparts
12
6.17
 
Construction
13

 
Exhibits:
 
Exhibit A -
Warrant Agreement
Exhibit B -
Capitalization
Exhibit C -
Registration Rights Agreement
Exhibit D -
Amended and Restated License and Distribution Agreement

 
Schedules:

Schedule 2.3 -
Subsidiaries and Joint Ventures
Schedule 2.9 -
Non-Proprietary Information
Schedule 2.13 -
Business Plan
Schedule 2.17 -
Registration Rights
Schedule 2.21 -
Employment Agreements

 
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SUBSCRIPTION AGREEMENT
 
This Subscription Agreement (this “Agreement”) is made as of May 1, 2006, by and
among Electric Aquagenics Unlimited Inc., a Delaware corporation (the
“Company”), Water Science, LLC, a Florida limited liability company (the
“Investor”).
 
WITNESSETH:
 
WHEREAS, the Investor desires to purchase, and the Company desires to sell,
1,600,000 shares of common stock of the Company (the “Shares”) at the price and
on the terms and conditions set forth herein;
 
WHEREAS, the Company is willing to make the representations and warranties and
to undertake the obligations hereinafter set forth in connection with such
investment;
 
WHEREAS, as a further incentive for Purchaser to purchase the Shares, Seller
shall deliver to Purchaser a warrant to purchase 6,400,000 shares of its common
stock (the “Warrants”) at an exercise price of $2.76 per share, in accordance
with the terms and conditions of the Warrant Agreement between the parties, a
copy of which is attached hereto as Exhibit A and incorporated herein by
reference.
 
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:
 
1. Purchase and Sale of the Shares.
 
1.1 Sale and Issuance of the Shares.
 
(a)  Subject to the terms and conditions of this Agreement, the Investor agrees
to purchase, and the Company agrees to sell and issue to the Investor,
[1,600,000] Shares for an aggregate purchase price of Four Million and 00/100
U.S. Dollars (U.S. $4,000,000) (the “Purchase Price”). The Shares represent
______ of the Company’s common stock par value $.001 per share (the “Common
Stock”) on a fully-diluted basis.
 
(b)  Subject to the terms and conditions of this Agreement, the Investor agrees
to purchase, and the Company agrees to sell and issue to the Investor, a warrant
to purchase up to 6,400,000 shares of Common Stock in the form attached hereto
as Exhibit A (the “Warrant”). The Warrant, upon exercise on the Effective Date,
would represent, ____% of the Company’s Common Stock on a fully-diluted basis.
The Shares and the Warrant are collectively referred to herein as the
“Securities.”
 
1.2 Closing. The purchase and sale of the Securities shall take place at the
offices of 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:
 

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(a)  the Investor shall pay the Purchase Price by interbank wire transfer of
immediately available funds to such account of the Company as the Company shall
designate prior to the Closing;
 
(b)  the Company shall deliver each of an original executed certificate
representing the Shares and the Warrant to the Investor;
 
(c)  the Company shall have amended and restated the License and Distribution
Agreement by and between the Company and the Investor, dated as of September 16,
2005 (the “Amended License and Distribution Agreement”);
 
(d)  the Company shall have entered into the Registration Rights Agreement by
and between the Company and the Investor, dated as of September 16, 2005 (the
“Registration Rights Agreement”);
 
(e)  the respective parties to this Agreement, the Amended and Restated License
and Distribution Agreement and the Registration Rights Agreement (collectively,
the “Related Agreements”) shall have executed and delivered each such agreement;
 
(f)  the Company shall have reimbursed the Investor for fifty percent (50%) of
the costs and fees associated with the Initial Investment; and
 
(g)  the Company shall have paid the Investor fifty percent (50%) of the costs
and fees incurred as a result of this Agreement.
 
1.3 Use of Proceeds. The proceeds from the sale of the Shares shall be used by
the Company (i) in accordance with the agreed-upon budget of the Company, as
approved by the Board of Directors of the Company, as amended from time to time
by the Board of Directors (the “Budget”) and (ii) for the payment of fees and
expenses incurred in connection with the consummation of the transactions
contemplated by the Related Documents. In addition to such other limitations
that are contained herein, the Company’s officers shall make no disbursement in
an amount greater than $10,000 in one disbursement (or series of related
disbursements with a sum greater than $20,000) and shall enter into no binding
agreement obligating the Company to make payments in excess of $20,000 over the
life of such agreement without the prior approval of the majority of the members
of the Board of Directors, if such disbursement or binding agreement would be
inconsistent with (or in light of the available facts and circumstances would
likely be inconsistent with) the approved budgetary items set forth in the
Budget.
 
2. Representations and Warranties of the Company. The Company, hereby represents
and warrants to the Investor as follows:
 
2.1 Organization, Good Standing and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Company and each of its subsidiaries is duly qualified to
transact business and is in good standing in each jurisdiction in which the
nature of its business or its ownership of property requires it to be so
qualified except for those jurisdictions in which the failure to be so qualified
would not, individually or in the aggregate, have a material adverse effect on
the Company’s business, assets, properties, prospects, operations or conditions
(financial or otherwise) (a “Material Adverse Effect”).
 

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2.2 Capitalization. The capitalization of the Company is as described in its
public filings and as set forth on Exhibit B attached hereto. Except as set
forth on Exhibit B, there is no option, warrant, call subscription, convertible
security, right (including preemptive right) or contract of any character to
which the Company is a party or by which it is bound obligating the Company to
issue, exchange, transfer, sell, repurchase, redeem or otherwise acquire any
capital stock of the Company or obligating the Company to grant, extend,
accelerate the vesting of or enter into any such option, warrant, call,
subscription, convertible security or right to contract. There are no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to the Company.
 
2.3 Subsidiaries; Joint Ventures. Except as set forth or par of Schedule 2.3,
the Company does not own or control, directly or indirectly, any interest in any
other corporation, association, or other entity (each, a “Subsidiary”). For each
Subsidiary, Schedule 2.3 sets forth the equity interest owned by the Company and
the percentage of the outstanding equity interest so owned. The Company is not a
participant in any joint venture, partnership, or similar arrangement.
 
2.4 Authorization. The Related Agreements constitute valid and legally binding
obligations of the Company, enforceable in accordance with their respective
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies.
 
2.5 Governmental Consents. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement, except for such filings as are required pursuant to applicable
federal and state securities laws and blue sky laws, which filings will be
effected within the required statutory period.
 
2.6 Offering. Subject in part to the truth and accuracy of the Investor’s
representations set forth in Section 4 of this Agreement, the offer, sale and
issuance of the Securities as contemplated by this Agreement are exempt from the
registration requirements of the Securities Act of 1933, as amended (the “Act”),
and the qualification or registration requirements of applicable blue sky laws.
Neither the Company nor any authorized agent acting on its behalf will take any
action hereafter that would cause the loss of such exemptions.
 
2.7 Litigation. There is no action, suit, proceeding or investigation pending,
or to the Company’s knowledge, currently threatened against the Company that
questions the validity of this Agreement or the right of the Company to enter
into such agreement or to consummate the transactions contemplated hereby. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or that the Company intends to initiate.
 

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2.8 Absence of Certain Developments. Since September 30, 2005, there has not
been any Material Adverse Effect and:
 
(a)  neither the Company nor any Subsidiary has sold, leased, transferred or
assigned any of its assets, tangible or intangible, other than for a fair
consideration in the ordinary course of business;
 
(b)  neither the Company nor any Subsidiary has entered into any contract (or
series of related contracts) either involving more than $10,000 or outside the
ordinary course of business;
 
(c)  no party (including the Company or any Subsidiary) has accelerated,
suspended, terminated modified or canceled any contract (or series of related
contracts) involving more than $10,000 to which the Company or any Subsidiary is
a party or by which any of them is bound;
 
(d)  no encumbrance has been imposed on any assets of the Company or any
Subsidiary;
 
(e)  neither the Company nor any Subsidiary has made any capital expenditure (or
series of related capital expenditures) either involving more than $10,000 or
outside the ordinary course of business;
 
(f)  neither the Company nor any Subsidiary has made any capital investment in,
any loan to, or any acquisition of the securities or assets of, any other person
(or series of related capital investments, loans and acquisitions) or acquired
(by merger, exchange, consolidation, acquisition of stock or assets or
otherwise) any person;
 
(g)  neither the Company nor any Subsidiary has granted any license or
sublicense of any rights under or with respect to any intellectual property;
 
(h)  there has been no change made or authorized in the organizational documents
of the Company or any Subsidiary, except as set forth in the definitive proxy
statement on Schedule 14A filed with the Securities and Exchange Commission on
February 8, 2006, and approved by the shareholders at a special meeting on March
15, 2006; and
 
(i)  neither the Company nor any Subsidiary has issued, sold or otherwise
disposed of any of its capital stock or equity interests, or granted any
options, warrants or other rights to purchase or obtain (including upon
conversion, exchange or exercise) any of its capital stock, except as set forth
on Exhibit B.
 
2.9 Proprietary Information Agreements. Each current and former employee,
officer and consultant of the Company has executed a proprietary information and
inventions assignment agreement in forms adequate to protect the Company’s
intellectual property, including, without limitation, any patents, patent
rights, trademarks, trademark rights, service marks, service 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, except
for such works or inventions as set forth on Schedule 2.9. The Company does not
believe it is or will be necessary to utilize any inventions, trade secrets or
proprietary information of any of its employees made prior to their employment
by the Company, except for inventions, trade secrets or proprietary information
that have been assigned to the Company. The Company, after reasonable
investigation, is not aware that any of its employees, officers or consultants
are in violation of such agreements, and the Company will use its best efforts
to prevent any such violation.
 

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2.10 Patents and Trademarks. The Company possesses all Intellectual Property
necessary for its business without any conflict with or infringement of the
valid rights of others, and the Company has not received any notice of
infringement upon or conflict with the asserted rights of others. The Company
has a valuable body of trade secrets, including know-how, concepts, computer
programs and other technical data for the development, launch and operation of
its business. The Company is not aware that any of its employees is obligated
under any contract (including licenses, covenants or commitments of any nature)
or other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of his or her best
efforts to promote the interests of the Company or that would conflict with the
Company’s business.
 
2.11 Compliance with Other Instruments
 
(a) . The Company is not in violation of any provision of its Certificate or its
bylaws or, to its knowledge, of any instrument, judgment, order, writ, decree or
contract, statute, rule or regulation to which the Company is subject. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not result in any such violation, or
(i) be in conflict with or constitute, with or without the passage of time and
giving of notice, either a default under any such provision or an event that
results in the creation of any lien, charge or encumbrance upon any assets of
the Company or the suspension, revocation, impairment, forfeiture or non-renewal
of any material permit, license, authorization or approval applicable to the
Company, its business or operations or any of its assets or properties, or
(ii) require the consent or other action by any person under, constitute a
default under, or give rise to termination, cancellation or acceleration of any
right or obligation of the Company or to a loss of any benefit to which the
Company is entitled under any provision of any agreement or other instrument
binding upon the Company.
 
2.12 Related-Party Transactions. Except as set forth on Schedule 2.12, no
employee, officer or director of the Company or member of his or her immediate
family is indebted to the Company, nor is the Company indebted (or committed to
make loans or extend or guarantee credit) to any of them. None of such persons
has any direct or indirect ownership interest in any firm or corporation with
which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company, except
that employees, officers or directors of the Company and members of their
immediate families may own stock in publicly traded companies that may compete
with the Company. No member of the immediate family of any officer or director
of the Company is directly or indirectly interested in any material contract
with the Company.
 

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2.13 Business Plan. Attached hereto as Schedule 2.13 is a preliminary detailed
budget for the Company’s 2006 and 2007 fiscal years. The business plan and of
the Company for its 2006 and 2007 fiscal years will be provided to the Investor
within sixty (60) days of the date hereof.
 
2.14 Tax Returns. The Company has timely filed all tax returns (federal, state
and local) required to be filed by it. The Company has not been advised that any
of its returns have been or are being audited.
 
2.15 Permits. The Company has all franchises, permits, licenses and any similar
authority necessary for the operation of its business. The Company is not in
default under any of such franchises, permits, licenses or other similar
authority.
 
2.16 Environmental and Safety Laws. To its knowledge, the Company is not in
violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation.
 
2.17 Registration Rights. Except as set forth in the Schedule 2.17 or the
Related Agreements, the Company has not granted or agreed to grant any
registration rights, including piggyback rights, to any person or entity.
 
2.18 Corporate Documents; Minute Books. The Certificate and bylaws of the
Company are in the form previously provided to the Investor. The minute books of
the Company provided to the Investor contain a complete summary of all meetings
of directors and stockholders since the time of incorporation and reflect all
transactions referred to in such minutes accurately in all material respects.
 
2.19 Title to Property and Assets. The property and assets the Company owns are
owned by the Company free and clear of all mortgages, liens, loans and
encumbrances, except (i) for statutory liens for the payment of current taxes
that are not yet delinquent, and (ii) for liens, encumbrances and security
interests that arise in the ordinary course of business, and minor defects in
title, none of which, individually or in the aggregate, materially impair the
Company’s ownership or use of such property or assets. With respect to the
property and assets it leases, the Company is in material compliance with such
leases and, to its knowledge, holds a valid leasehold interest free of any
liens, claims or encumbrances, subject to clauses (i) and (ii).
 
2.20 Insurance. The Company has insurance policies with such coverages in
amounts (subject to reasonable deductibles) customary for similarly situated
companies. Copies of such policies have been delivered to the Investor along
with summary descriptions of the coverages thereunder.
 
2.21 Labor Agreements and Actions. The Company is not aware that any officer or
employee, or that any group of key employees, intends to terminate their
employment with the Company, nor does the Company have a present intention to
terminate the employment of any of the foregoing. Except as described on
Schedule 2.21, the Company is not a party to or bound by any currently effective
employment contract, deferred compensation agreement, bonus plan, incentive
plan, profit sharing plan, retirement agreement or other employee compensation
agreement. The Company has complied in all material respects with all applicable
state and federal equal employment opportunity and other laws related to
employment. No executive officer of the Company (i) has been convicted in a
criminal proceeding or is a named subject of a pending criminal proceeding
(excluding minor traffic violations) or (ii) is or has been subject to any
judgment or order of, or the subject of any pending civil or administrative
action by, the Securities and Exchange Commission or any self-regulatory
organization.
 

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2.22 Obligations of Management. Each executive officer and key employee of the
Company is currently devoting substantially all of his or her business time to
the conduct of the business of the Company. The Company is not aware that any
executive officer or key employee of the Company is planning to work less than
full time at the Company in the future. No executive officer or key employee is
currently working or, to the Company’s knowledge, plans to work or consult for a
competitive enterprise, whether or not such officer or key employee is or will
be compensated by such enterprise.
 
2.23 Disclosure. Neither this Agreement (including all the exhibits and
schedules hereto) nor any other statements or certificates made or delivered in
connection herewith contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements herein or therein not
misleading in light of the circumstances under which they were made. There is no
fact known to the Company (other than facts known to the general public) that
the Company has not disclosed to the Investor that has had or which could
reasonably be expected to have a Material Adverse Effect. The information and
financial projections relating to the Company delivered to the Investor (the
“Investor Materials”), were made in good faith based upon reasonable
assumptions, and the Company is not aware of any fact or set of circumstances
that would lead it to believe that such information and assumptions were not
reasonable. As of the date hereof and immediately prior to the Closing, no facts
have come to the attention of the Company that would, in its opinion, require
the Company to revise in any material respect the Investor Materials or the
assumptions underlying the projections or any other information contained
therein.
 
2.24 No Brokerage. No Person will be entitled to receive any brokerage
commission, finder’s fee, fee for financial advisory services or similar
compensation in connection with the transaction contemplated by this Agreement.
 
3. Representations and Warranties of the Investor. The Investor hereby
represents, warrants and covenants that:
 
3.1 Authorization. The Investor has full power and authority to enter into the
Related Agreements to which it is a party, and each such agreement when executed
will constitute a valid and legally binding obligation of the Investor,
enforceable in accordance with its terms.
 
3.2 Purchase Entirely for Own Account. The Securities to be received by the
Investor will be acquired for investment for the Investor’s own account, not as
a nominee or agent, and not with a view to the resale or distribution of any
part thereof, and the Investor has no present intention of selling, granting any
participation in or otherwise distributing the same, except that the Investor
may transfer, including, without limitation, to the Investor’s employees,
officers and directors, in accordance with the Related Agreements and applicable
law. The Investor further represents that it does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Restricted Securities.
 

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3.3 Accredited Investor. The Investor is an “accredited investor” within the
meaning of Securities and Exchange Commission (“SEC”) Rule 501 of Regulation D,
as presently in effect.
 
3.4 Restricted Securities. The Investor understands that the Securities are
characterized as “restricted securities” under federal securities laws inasmuch
as the Securities being acquired from the Company in a transaction not involving
a public offering and that under such laws and applicable regulations the
Restricted Securities may be resold without registration under the Act only in
certain limited circumstances.
 
3.5 Legends. It is understood that each of the certificates evidencing the
Securities may bear one or all of the following legends:
 
(a)  “These securities have not been registered under the Securities Act of
1933, as amended. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with respect
to the securities under such Act or an opinion of counsel satisfactory to the
Company that such registration is not required or unless sold pursuant to Rule
144 of such Act.”
 
(b)  Any other legends required to properly reflect the restrictions contained
in the Related Agreements.
 
4. Conditions of Investor’s Obligations at Closing. The obligations of the
Investor under this Agreement are subject to the fulfillment on or before the
Closing of each of the following conditions:
 
4.1 Representations and Warranties. The representations and warranties of the
Company contained in Section 2 shall be true on and as of the Closing.
 
4.2 Performance. The Company shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by them on or before the Closing.
 
4.3 Proceedings and Documents. All corporate and other proceedings in connection
with the transactions contemplated at the Closing, and all documents incident
thereto shall be reasonably satisfactory in form and substance to the Investor,
and it shall have received all such counterpart original and certified or other
copies of such documents as they may reasonably request.
 
4.4 Fees of Counsel. The Company shall have paid the fifty percent (50%) fees,
expenses and disbursements of counsel to the Investor invoiced at the Closing.
 

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4.5 Warrant Agreement. The Company shall have entered into the Warrant in the
form attached hereto as Exhibit A.
 
4.6 Share Certificate. The Company shall have notified its transfer agent to
prepare and deliver, and such transfer agent shall deliver, an originally
executed share certificate evidencing the Shares subscribed for hereby.
 
4.7 Registration Rights Agreement. The Company shall have entered into the
Registration Rights Agreement in the form attached hereto as Exhibit C.
 
4.8 Amended and Restated License and Distribution Agreement
 
 The Company and the Investor shall have entered into the Amended and Restated
License and Distribution Agreement in the form attached hereto as Exhibit D.
 
5. Conditions of the Company’s Obligations at Closing. The obligations of the
Company to the Investor under this Agreement are subject to the fulfillment on
or before the Closing of each of the following conditions by the Investor:
 
5.1 Representations and Warranties. The representations and warranties of the
Investor contained in Section 3 shall be true on and as of the Closing.
 
5.2 Payment of Purchase Price. The Investor shall have delivered the Purchase
Price as specified in Section 1.2 and Schedule I (minus the amounts payable by
the Company pursuant to Section 4.4).
 
6. Miscellaneous.
 
6.1 Indemnification
 
(a)  Subject to Section 6.4 below, the Company agrees to indemnify, defend and
hold harmless the Investor and the Investor’s members, directors, managers,
officers, employees, agents and affiliates (collectively, “Investor
Indemnitees”) from and against any and all losses, claims, damages, liabilities
and expenses, including, without limitation, reasonable attorneys’ fees and
disbursements and other expenses incurred in connection with investigating,
preparing, settling or defending any action, claim or proceeding, pending or
threatened and the costs of enforcement hereof (collectively, “Losses”), that
such Investor Indemnitee may suffer or become subject to (i) as a result of any
breach of representation, warranty, covenant or agreement made by or to be
performed on the part of the Company under this Agreement or any other Related
Agreement, or (ii) that otherwise arise from any action, claim or proceeding
(whether related to the Company or otherwise) arising out of the matters or
transactions contemplated by this Agreement or any other Related Agreement, and
in each case to reimburse such Investor Indemnitee for all such amounts as they
are incurred by the Investor. The existence of any breach of any representation,
warranty, covenant or agreement and the amount of Losses incurred or suffered
arising out of such breach shall be determined without regard to any
qualification or exception relating to materiality.
 
(b)  Promptly after receipt by any Investor Indemnitee of notice of any demand,
claim or circumstance that would or might give rise to a claim or the
commencement of any suit, action, proceeding or investigation in respect of
which indemnity may be sought pursuant to Section 6.1(a), such Investor
Indemnitee shall give notice thereof to the Company. Notwithstanding the
foregoing, the failure to give prompt notice to the Company will not relieve the
Company from liability, except to the extent such failure or delay materially
prejudices the Company. The Company may, at the request of the Investor
Indemnitee, participate in and control the defense of any such suit, action or
proceeding at its own expense. It is understood that in any such suit, action or
proceeding, the Investor Indemnitee has the right to retain its own counsel but
that the Company shall not be liable for the fees and expenses of more than one
separate law firm (in addition to any local counsel) for all Investor
Indemnitees; provided, that any Investor Indemnitee seeking indemnification
under Section 6.1(a)(ii) may assume the defense of any such suit, action or
proceeding thereunder if the Investor Indemnitee reasonably determines that the
Company is not adequately representing or, because of a potential or actual
conflict of interest, may not adequately represent, the interests of the
Investor Indemnitee.
 

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6.2 SEC Filings. The Investor shall be responsible for the preparation and
filing of a Form 3 and a Schedule 13D within the applicable time periods
following the Closing, pursuant to the regulations promulgated by the Securities
and Exchange Commission.
 
6.3 Pre-emptive Rights. The Investor shall have the right, but not the
obligation, on an as-converted basis, to participate in all future offerings of
shares of capital stock or other securities of the Company on the same terms and
conditions of the particular offer being considered by the Company, to the
extent necessary to maintain its percentage ownership of the Company’s
outstanding capital stock (on a fully-diluted basis).
 
6.4 Survival. The warranties, representations and covenants contained in or made
pursuant to this Agreement shall survive the execution and delivery of this
Agreement and the Closing for a period of twenty-four (24) months following the
Closing; provided, however, that any warranty, representation or covenant
relating to tax or environmental matters shall survive until the expiration of
the statute of limitations for such matters under applicable law. The
warranties, representations and covenants contained in or made pursuant to this
Agreement shall in no way be affected by any investigation of the subject matter
thereof made by or on behalf of the Investor, the Company or the Founders.
 
6.5 Successors and Assigns. Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and assigns of the parties (including transferees of
any Investor membership interests). Nothing in this Agreement, express or
implied, is intended to confer upon any party, other than the parties hereto or
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
 
6.6 Governing Law. This Agreement shall be governed by and construed under the
laws of the State of Delaware, without regard to the conflicts of laws rules of
such state.
 

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6.7 Arbitration
 
(a)  Any dispute, controversy or claim arising out of, relating to or in
connection with this Agreement or any Related Agreement, including any question
regarding its existence, validity or termination, or regarding a breach thereof
(hereafter, “dispute”) shall be submitted to a representative of each of the
parties involved to attempt to reach an amicable resolution. A party wishing to
initiate consideration of a dispute by such representative shall give written
notice to the other parties hereto of the existence of such dispute and of the
party’s desire to have such representative consider the dispute. Such notice
shall set forth a brief description of the nature of the dispute to be
considered.
 
(b)  If a dispute is not settled within fifteen (15) days after the notice is
given to the other parties seeking representative consideration of a dispute,
such dispute shall be submitted to arbitration administered by the American
Arbitration Association in accordance with its Commercial Arbitration Rules, in
effect on the date of this Agreement (the “Rules”). A party wishing to submit a
dispute to arbitration shall give written notice to such effect to the other
parties hereto. The arbitration shall be before a sole arbitrator appointed in
accordance with the Rules and this Agreement.
 
(c)  The site of the arbitration shall be Miami, Florida, or such other location
as the parties may mutually agree in writing, and any award shall be deemed to
have been made there. The decision of the arbitrator shall be rendered within
180 days from its appointment, and shall be final and binding upon all parties.
The award may be made public only with the written consent of all parties to the
arbitration, provided, however, that any ruling or award, final or otherwise,
may be cited in any subsequent dispute or proceeding to enforce such ruling. The
arbitrator shall neither have nor exercise any power to award special,
exemplary, indirect, consequential or punitive damages.
 
(d)  It is the intent of the parties that the arbitration proceeding shall be
conducted expeditiously, without initial recourse to the courts and without
interlocutory appeals of the award to the courts. However, if a disputing party
refuses to honor its obligations under this Agreement to arbitrate, any other
disputing party may obtain appropriate relief compelling arbitration in any
court having jurisdiction over the disputing parties; the order compelling
arbitration shall require that the arbitration proceedings take place in Miami,
Florida as specified above. The disputing parties may apply to any court having
jurisdiction for orders requiring witnesses to obey subpoenas issued by the
arbitrator. Moreover, the arbitrator’s orders and decisions may be enforced if
necessary by any court having jurisdiction. The award may be confirmed in, and
judgment upon the award entered by, any court having jurisdiction.
 
6.8 Titles and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
 
6.9 Notices. All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given: (i) upon personal delivery to the party to be
notified, (ii) when sent by confirmed facsimile if sent during the normal
business hours of the recipient (if not sent during the normal business hours of
the recipient, then on the next business day); (iii) three (3) days after having
been sent by registered or certified mail, return receipt requested, postage
prepaid; or (iv) one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification of
receipt. All communications shall be sent to the address as set forth on the
signature page hereof or at such other address as such party may designate by
ten days advance written notice to the other parties hereto.
 

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6.10 No Brokers. Each party represents that it neither is nor will be obligated
for any finders’ fee or commission in connection with this transaction. The
Company agrees to indemnify and hold harmless the Investor from any liability
for any commission or compensation in the nature of a finders’ fee (and the
costs and expenses of defending against such liability or asserted liability)
for which the Company or any of its officers, employees or representatives
(including any Founder) is responsible.
 
6.11 Expenses. The Company shall pay all of its costs and expenses incurred with
respect to the negotiation, execution, delivery and performance of the Related
Agreements and one-half of the Investor’s costs and expenses incurred with
respect to the negotiation, execution, delivery and performance of the Related
Agreement (including any costs and expenses of the Investor to be paid by the
Company in connection with any previous transaction). If any action at law or in
equity is necessary to enforce or interpret the terms of the Related Agreements
or the Certificate, the prevailing party shall be entitled to reasonable
attorney’s fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.
 
6.12 Amendments and Waivers. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company, each Founder and the Investor. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon the
Investor, each transferee of the Investor Limited Partnership Interests, each
Founder and the Company.
 
6.13 Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
 
6.14 Entire Agreement. The Related Agreements constitute the entire agreement
among the parties and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein or therein.
 
6.15 Further Assurances. Each party shall perform such other acts and execute
and deliver such other documents as may be necessary or appropriate to give
effect to the purposes and intent of this Agreement.
 
6.16 Counterparts. This Agreement may be executed in two or more counterparts
and the signatures delivered by telecopy, each of which shall be deemed an
original, with the same effect as if the signatures were upon the same
instrument and delivered in person.
 

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6.17 Construction. This Agreement was negotiated by the parties with the benefit
of legal representation, and any rule of construction or interpretation
otherwise requiring this Agreement to be construed or interpreted against any
party shall not apply to any construction or interpretation hereof.
 
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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.
 
   
   
    By:   /s/ Gaylord M. Karren  

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Name: Gaylord M. Karren  
Title: Chief Executive Officer

               
Address for notices:
1464 West 40 South
Lindon, UT 84042
Attention: Gaylord Karren
Facsimile: (801) 443-1029
 
 
     
INVESTOR:
     
WATER SCIENCE, LLC
 
   
   
    By:   /s/ Peter Ullrich  

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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