Unassociated Document


     

    
      THIS LOAN
AGREEMENT AND THE SECURITIES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT
BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THE SECURITIES HAVE BEEN
REGISTERED UNDER SUCH ACT AND ALL SUCH OTHER APPLICABLE LAWS OR AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.

      


      $600,000
LOAN AGREEMENT

       

      This Loan Agreement (the “Agreement”)
is made this 27th day of August, 2009, by and between EAU Technologies, Inc., a
Delaware corporation (the “Company”), and Peter
F. Ullrich, a resident of Florida (“Lender”).

       

      WHEREAS,
the Company and Lender desire to enter into this Agreement whereby Lender will
lend $600,000 to the Company on the terms and conditions set forth in this
Agreement.

       

      NOW,
THEREFORE, in consideration of the mutual covenants and agreements herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

      


      1.           Definitions.  For purposes of
this Agreement (as defined below), the following capitalized terms have the
following meanings:

       

      “Agreement” means this
Loan Agreement.

      


      “Base Conversion
Price” shall have the meaning set forth in Section
7(a)(iv).

       

      “Business Day” means
any day other than (a) Saturday or Sunday or (b) any other day on which banks in
the State of New York are permitted or required to be closed.

      


      “Common Stock” means
the shares of the Company’s common stock, par value $.0001 per
share.

      


      “Common Stock
Equivalent” any securities convertible into or exchangeable for shares of
Common Stock, or the issuance of any warrants, options, subscription or purchase
rights with respect to such convertible or exchangeable securities.

      


      “Control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise, and the terms “Controlling” and
“Controlled”
(and the lower-case versions of the same) shall have meanings correlative
thereto.

      


      “Conversion Price”
shall have the meaning set forth in Section 5(a), subject
to adjustment per the terms and conditions set forth in this
Agreement.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      


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

       

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

      


      “Interest Rate” shall
have the meaning set forth in Section
3(a).

      


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

      


      “Person” means an
individual, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.

      


      “Subsidiary” means,
with respect to any Person (herein referred to as the “parent”), any
corporation, partnership, association or other business entity (i) of which
securities or other ownership interests representing more than fifty percent
(50%) of the equity or more than fifty percent (50%) of the ordinary voting
power or more than fifty percent (50%) of the general partnership interests are,
at the time any determination is being made, owned, controlled or held by the
parent, or (ii) that is, at the time any determination is made, otherwise
Controlled by, the parent or one or more Subsidiaries of the parent or by the
parent and one or more Subsidiaries of the parent.

      


      2.           Agreement
to Lend.  Lender hereby
agrees to lend to the Company the sum of $600,000.00 (the “Loan
Amount”).  The Loan Amount shall be funded in three installments, as
follows.

      


      
        	
                Payment
      Date

              	
                Funded
      Amount

              
	
                September
      15, 2009

              	
                $200,000.00

              
	
                October
      15, 2009

              	
                $200,000.00

              
	
                November
      15, 2009

              	
                $200,000.00

              


      

      


      The funds will be delivered by Lender
to the Company by wire transfer of immediately available funds.

       

      3.           Interest.  Simple interest
shall accrue (computed on the basis of actual days elapsed and a year of 360
days) at the rate of ten percent (10%) per annum on the unpaid principal amount
of this Agreement outstanding (such interest rate being referred to as the
“Interest
Rate”).

      


      4.           Payment.

      


      (a)           Maturity
Date.  Accrued interest and the outstanding principal balance
shall be due and payable in a single lump-sum payment on November 1, 2010 (the
“Maturity
Date”).

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      


      (b)           Prepayment.  Accrued
interest and the outstanding principal balance can be prepaid, in whole or in
part, at any time prior to the Maturity Date without premium or penalty of any
kind whatsoever.

      


      5.           Conversion.

      


      (a)           Optional Conversion
Right.  Until such time as all of the obligations under this
Agreement are paid in full, Lender shall have the option, exercisable in its
sole discretion, to convert all or any portion of the outstanding principal and
interest due pursuant to this Agreement into shares of Common Stock at a price
per share equal to $1.00 per share (subject to the adjustments as set forth in
Section 7
hereof) (the “Conversion
Price”).

      


      (b)           Effect of Breach upon
Conversion Price.  If Lender fails to lend the amounts on the
dates set forth in Section 2 of this
Agreement, then, in addition to any other remedies, the Conversion Price shall
be, and shall be deemed to be, $3.00 per share.

      


      (c)           Conversion
Procedure.

      


      (i)           Prior
to the conversion in accordance with this Section 5, the
Company shall take all necessary steps to ensure that such number of shares of
Common Stock as are issuable upon conversion are available for such
issuance.

      


      (ii)           Any
such conversion shall be deemed to have been effected as of the close of
business on the date on which a written conversion request is delivered from
Lender to the Company specifying the amount of principal, or principal and
interest, to be converted. At such time as such conversion has been effected,
the rights of Lender as such Lender to the extent of the conversion shall cease,
and Lender shall be deemed to have become the holder of record of the shares of
Common Stock represented thereby.

      


      (iii)           As
soon as possible after a conversion has been effected (but in any event within
thirty (30) business days), the Company shall deliver to Lender, a certificate
or certificates representing the number of shares of Common Stock (excluding any
fractional share) issuable by reason of such conversion in such name or names
and such denomination or denominations as Lender has specified to the Company in
writing.

      


      (iv)           If
any fractional Common Share would, except for the provisions hereof, be
deliverable upon conversion, the Company, in lieu of delivering such fractional
share, shall pay an amount equal to the value of such fractional
share.

      


      (v)           The
issuance of certificates for the shares of Common Stock upon conversion shall be
made without charge to Lender for any issuance tax in respect thereof or other
cost incurred by the Company in connection with such conversion and the related
issuance of the Shares of Common Stock.  Upon conversion, the Company
shall take all such actions as are necessary in order to ensure that the shares
of Common Stock issuable with respect to such conversion shall be validly
issued, fully paid and nonassessable.

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      


      (vi)           The
Company shall not close its books against the transfer of the shares of Common
Stock issued or issuable upon conversion in any manner which interferes with the
timely conversion.  Lender, upon the request of the Company, shall
assist and cooperate with the Company in making any required governmental
filings or in obtaining any government approval prior to or in connection with
the conversion (including, without limitation, making any filings required to be
made by the Company).

      


      (vii)           The
Company shall take all such actions as may be necessary to assure that all such
shares of Common Stock may be so issued without violation of any applicable law
or governmental 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)    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) 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 Lender a notice in
accordance with Section 13
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) 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.

       

      (d)           Partial
Exercise.  Upon conversion, the portion of principal and
interest hereunder that has not have been converted shall remain due and payable
by the Company according to the terms and conditions set forth
Agreement.

      


      6.           Use of
Proceeds.  The proceeds from
this Agreement shall be used by the Company in any manner determined by the
Company.

      


      7.           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:

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

       

      (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 Agreement
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 Agreement 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 the Agreement 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 the Agreement 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 7), then, and
in any such event, Lender shall thereafter be entitled to receive upon
conversion of the Agreement such number and kind of stock or other securities or
property of the Company to which a holder of shares deliverable upon conversion
of the Agreement 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 the Agreement 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 Lender
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.

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

       

      (v)           Subsequent Rights
Offerings.  If the Company, at any time while this Agreement is
in effect, shall issue rights, options or warrants to all holders of Common
Stock (and not to Lender) 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 (vi) 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 7 shall be
made to the nearest cent (with $.005 being rounded upward).  Anything
in this Section
7(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 7(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.

       

      8.           Amendment.  Except as
otherwise expressly provided herein, the provisions of this Agreement 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 Lender.

       

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

       

      
        
           

        

        
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      10.           Interpretation.  For
the purposes of this Agreement, all dollar amounts and references to “$” or
“Dollar” shall be deemed to refer to United States of America
dollars.  Whenever the context of this Agreement 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.

       

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

      


      Peter F.
Ullrich

      1800 N.W.
89th
Place

      Miami, FL
33172

      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.

      


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

      


      13.           Notices. All notices, consents and
other communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand or by Federal Express or a similar
overnight courier to the party for whom intended, at the address for such party
set forth below (or at such other address for a party as shall be specified by
like notice, provided, however, that any
notice of change of address shall be effective only upon receipt):

       

      
        
          	
                  if
      to Lender:

                	
                  Peter
      F. Ullrich

                
	 
      	
                  1800
      NW 89th
      Place

                
	 
      	
                  Miami,
      Florida  33172

                
	 
      	 
      
	
                  if
      to the Company:

                	
                  EAU
      Technologies, Inc.

                
	 
      	
                  1890
      Cobb International Blvd., Suite A

                
	 
      	
                  Kennesaw,
      Georgia  30152

                
	 
      	
                  Attention:
      Wade R. Bradley, President and
CEO

                


        

      

       

      The
parties hereto agree that notices or other communications that are sent in
accordance herewith (i) by personal delivery will be deemed received on the day
sent or on the first business day thereafter if not sent on a business day, (ii)
by overnight delivery, will be deemed received on the first business day
immediately following the date sent, and (iii) by U.S. mail, will be deemed
received three (3) business days immediately following the date
sent.

      .

      


      


      (Remainder
Of Page Intentionally Left Blank)

       

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

       

      IN WITNESS WHEREOF, the
parties have executed and delivered this Agreement on the date first written
above.

       

      
        
          	 	COMPANY:	 
	 	 	 
	 	EAU
      TECHNOLOGIES, INC. 	 
	 	 	 	 
	 	 	 	 
	
                   

                	
                  By:
      

                	/s/
      Wade R. Bradley 	 
	 	 	Wade
      R. Bradley 	 
	 	 	Chief
      Executive Officer 	 
	 	 	 	 


        

      

      
         

         

        
          
            	 	LENDER:	 
	 	 	 
	 	PETER
      F. ULLRICH 	 
	 	 	 	 
	 	 	 	 
	
                     

                  	
                    By:
      

                  	/s/
      Peter F. Ullrich 	 
	 	 	      
                    Peter
      F. Ullrich

                  	 
	 	 	 	 


          

        

         

        
          
             

          

          
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