Arbor Malone Loan Agreement LOAN AGREEMENT
Exhibit
4.12
Arbor
▇▇▇▇▇▇ Loan Agreement
THIS
LOAN
AGREEMENT (this "Agreement"),
is
executed as of August ____, 2006, by and between Itec Environmental Group,
Inc.,
a Delaware corporation (the "Company"),
and
Arbor ▇▇▇▇▇▇, LLC, a Delaware limited liability company (the "Lender").
WHEREAS,
the Company wishes to borrow and the Lender wishes to lend $2.0 million as
a
short term bridge loan; and
WHEREAS,
the Lender is willing to provide such financing on terms and conditions as
set
forth herein.
NOW,
THEREFORE, in consideration of the mutual covenants and agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Lender,
intending to be legally bound, agree as follows:
ARTICLE
1
DEFINITIONS
1.1
Defined
terms.
Certain
capitalized terms used in this Agreement shall have the specific meanings
defined below:
“Business
Day”
shall
mean a day other than a Saturday, Sunday, or other day on which commercial
banks
are authorized or required by law to close.
“Closing
Date”
shall
mean the date upon which the Loan is received by the Company.
"Encumbrance"
means
any lien, charge, security interest, mortgage, deed of trust, pledge or other
encumbrance of any nature whatsoever.
“Interest
Rate”
shall
mean ten percent (10%) per annum.
"Proprietary
Rights"
means
all patents, trademarks, service marks, copyrights, trade names and all
registrations and applications and renewals for any of the foregoing and all
goodwill associated therewith.
ARTICLE
2
THE
LOAN
2.1
Loan.
According to the terms and subject to the conditions of this Agreement, the
Lender shall loan to the Company the aggregate amount of Two Million Dollars
($2,000,000.00) (the "Loan").
One
half of the Loan amount shall be funded on the initial closing date that will
occur as soon as the conditions to close specified in Section 2.4 below are
satisfied (the “First Closing Date”) and the balance of the Loan amount shall be
funded on the second closing date (the “Second
Closing Date”
and
the
First Closing Date and Second Closing Date are each referred to herein as a
“Closing
Date”)
that
will occur as soon as reasonably practicable after the Effective Date set forth
in the Employment Agreement between ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and the Company dated as
of
July 31, 2006 (the “Rougelot
Employment Agreement”).
The
Loan shall be evidenced by one or more convertible promissory notes in the
form
attached hereto as Exhibit
A
(each a
"Note"),
duly
executed on behalf of the Company and dated as of the Closing Date.
2.2
Interest.
(a)
Interest
Rate.
The
Loan shall bear interest ("Interest")
from
the First Closing Date until the Maturity Date at the Interest Rate (calculated
on the basis of the actual number of days elapsed over a year of 360 days).
Interest is payable by the Company on a monthly basis in arrears on the first
Business Day of the month.
(b)
Default
Interest.
Upon
the occurrence of an Event of Default and for so long as such Event of Default
continues, Interest shall accrue on the outstanding Loan amount at the rate
per
annum equal to the lower of eighteen percent (18%) or the maximum rate of
interest permissible under applicable law at any time (the "Default
Interest Rate").
The
term "Interest"
shall
include both the interest rate described in Section 2.2(a) and the Default
Interest Rate, if applicable.
2.3
Maturity
Date.
Unless
the Loan is earlier accelerated pursuant to the terms hereof or converted
pursuant to the provisions of Section 4.1 hereof, the Loan and all accrued
Interest thereon shall be due and payable in full on the date that is one (1)
year following the Second Closing Date (the “Maturity
Date”).
The
Lender may, at the Lender's option, extend the Maturity Date on such terms
and
conditions as determined by the Lender in their sole discretion.
2.4 Conditions
Precedent to the Loan.
The
obligation of the Lender to make the Loan pursuant to Section 2.1 shall be
subject to the satisfaction, on or before the applicable Closing Date, of the
conditions set forth in this Section. If the conditions set forth in this
Section are not met on or prior to the applicable Closing Date, the Lender
shall
have no obligation to fund the amount of the Loan required on the applicable
Closing Date.
(a)
The
Company shall have duly executed and delivered to the Lender the Note
representing the Loan in the amount funded on the applicable Closing
Date.
(b)
The
Company shall have duly authorized, executed, and delivered to the Lender a
security agreement in the form attached hereto as Exhibit
B
(the
“Security
Agreement”)
to
secure the repayment of the Loan and granting the Lender a continuing security
interest in all presently existing and hereafter acquired assets and property
of
the Company of whatever nature and wherever located which such Security Interest
shall be senior to all other security interests or Encumbrances against the
assets and property of the Company other than Senior Debt (as hereafter
defined). Lender shall be entitled to a security interest pari
passu on
a
pro-rata basis with the investors participating in private placement pursuant
to
the 2006 Private Placement Memorandum (the “PPM”)
of the
Company and, except as set forth above, Lender’s security interest shall be
senior to any other indebtedness of the Company, whether now existing or created
or incurred in the future. “Senior
Debt” shall mean all indebtedness for all principal,
fees, expenses, interest, penalties, post-bankruptcy petition interest, and
all
other amounts payable for money borrowed from banking or other financial
institutions or governmental lending facilities that is not convertible into
equity securities of the Company, including, but not limited to the $2,000,000
loan from the California Integrated Waste Management Board (the “CIWMB
Loan”)
and
the remaining amount due and owing under the forbearance agreement by and
between the Company and the Elevation Fund, LLC (the “Forbearance
Agreement”).
(c)
On
each Closing Date, the Company shall have caused its counsel to deliver to
the
Lender a legal opinion dated as of the applicable Closing Date in form and
substance acceptable to Lender. With respect to the Second Closing Date, the
Effective Date under the Rougelot Employment Agreement shall have occurred.
ARTICLE
3
REPRESENTATIONS,
WARRANTIES AND COVENANTS
3.1
Organization,
qualification and Authority.
The
Company is a corporation duly organized and validly existing under the laws
of
the State of Delaware, and is in good standing and duly qualified to do business
as a foreign corporation in all jurisdictions where the operation of its
business or the ownership of its properties make such qualification necessary.
The Company has the requisite corporate power and authority to own, lease and
operate its facilities and assets as presently owned, leased and operated,
and
to carry on its respective business as it is now being conducted. The Company
has the requisite or individual right, power and authority to execute, deliver
and carry out the terms of this Agreement and all documents and agreements
contemplated hereby or necessary to give effect to the provisions of this
Agreement and to consummate the transactions contemplated hereunder and
thereunder. The execution, delivery and consummation of this Agreement, and
all
other agreements and documents executed in connection herewith by the Company,
have been duly authorized by all necessary action on the part of the Company.
No
other action, consent or approval on the part of the Company or any other person
or entity, is necessary to authorize the Company's due and valid execution,
delivery and consummation of this Agreement and all other agreements and
documents executed in connection hereto. This Agreement and all other agreements
and documents executed in connection herewith by the Company, upon due execution
and delivery thereof, shall constitute the valid and binding obligations of
the
Company, enforceable in accordance with its terms, except as enforcement may
be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and by general principles of equity.
3.2
Compliance
with Laws.
The
nature and transaction of the Company's business and operations and the use
of
its properties and assets do not, and during the term of this Agreement shall
not, violate or conflict with in any material respect any applicable law,
statute, ordinance, rule, regulation or order of any kind or
nature.
3.3
Absence
of Conflicts.
The
execution, delivery and performance by the Company of this Agreement and all
other agreements and documents executed in connection herewith by the Company,
and the transactions contemplated hereby, do not constitute a breach or default,
or require consents under, any agreement, permit, contract or other instrument
to which the Company is a party, or by which the Company is bound or to which
any of the assets of the Company is subject, or any judgment, order, writ,
decree, authorization, license, rule, regulation, or statute to which the
Company is subject, and will not result in the creation of any lien upon any
of
the assets of the Company.
3.4
Litigation
and Taxes.
There
is no
litigation or governmental proceeding pending, or to the best knowledge of
the
Company after due inquiry, threatened, against the Company other than as
disclosed in the Company SEC Reports (as defined below). The Company has duly
filed all applicable income or other tax returns and has paid all material
income or other taxes when due. There is no controversy or objection pending,
or
to the best knowledge of the Company after due inquiry, threatened in respect
of
any tax returns of the Company.
3.5
Intellectual
Property.
No
proceedings have been instituted or are pending or, to the Company’s knowledge,
threatened which challenge the validity of the ownership by the Company of
any
Proprietary Rights of the Company. The Company has not licensed anyone to use
any such Proprietary Rights and, to the Company’s knowledge, there has been no
use or infringement of any of such Proprietary Rights by any other
person.
3.6
Company's
SEC Reports.
The
Company is current in regards to all filings with the Securities and Exchange
Commission (the “SEC”)
of all
forms, reports, definitive proxy statements, schedules and registration
statements (the “ Company
SEC Reports”)
required to be filed by it with the SEC pursuant to the Securities Act of 1933,
as amended (the “Securities
Act”),
and
the Securities Exchange Act of 1934, as amended (the “Exchange
Act”),
and
the respective rules and regulations of the SEC thereunder. As of their
respective filing dates or, if amended prior to the date hereof, as of the
date
of the last amendment, none of the Company SEC Reports contained any untrue
statement of a material fact or omitted to state any material fact required
to
be stated therein or necessary to make the statements made therein, in the
light
of the circumstances under which they were made, not misleading. The Company’s
SEC Reports (including, without limitation, any financial statements and
schedules included therein) when filed or, if amended prior to the date hereof,
as of the date of the last amendment, complied in all material respects with
the
applicable requirements of the Securities Act and the Exchange Act, and the
respective rules and regulations of the SEC thereunder.
3.7
No
Omissions or Misstatements.
None of
the information included in this Agreement, other documents or information
furnished to the Lender by the Company, or any of its representations, contains
any untrue statement of a material fact or is misleading in any material respect
or omits to state any material fact. Copies of all documents referred to in
herein have been delivered or made available to the Lender and constitute true
and complete copies thereof and include all amendments, schedules, appendices,
supplements or modifications thereto or waivers thereunder.
3.8
Other
Indebtedness.
On and
as of the date hereof and on and as of each Closing Date, the Company does
not
and will not have any outstanding Senior Indebtedness other than the CIWMB
Loan
and the amount due and owning pursuant to the Forbearance Agreement. For so
long
as the Note (or any note issued upon transfer of the Note, in whole or in part)
remains outstanding, the Company shall not incur, create or enter into any
agreement to incur or create indebtedness ranking on a parity or parri
passu
with the
Notes (“Parity
Indebtedness”),
other
than the investors participating in the current financing under the Company’s
2006 Private Placement Memorandum and certain other lenders, identified in
Schedule
A
to the
Security Agreement, as defined below, without the prior written consent of
the
Lender, which consent shall not be unreasonably withheld.
3.9
Lender
Board Representation.
Effective at the Closing of the Loan, the Company shall appoint ▇▇. ▇▇▇▇▇▇
▇.
▇▇▇▇▇▇▇▇ (or his designee) to the Company’s Board of Directors. For so long as
(i) the Note (or any note issued upon transfer of the Note, in whole or in
part)
remains outstanding, or if later (ii) one year from the First Closing Date,
the
Company shall nominate ▇▇. ▇▇▇▇▇▇▇▇ (or his designee) for election to the Board
at any and all times that the stockholders of the Company take action (whether
by meeting or written consent) to elect members of the Board of Directors and
shall use best efforts to secure ▇▇. ▇▇▇▇▇▇▇▇’▇ (or his designee’s) election to
the Board.
ARTICLE
4
CONVERSION
4.1
Conversion
Right.
Lender
in its sole discretion may convert, via written notice to the Company, the
full
amount of the principal plus any interest payable under the Note and the Loan
Agreement into shares of common stock of the Company at a conversion price
of
$0.0975 per share (the “Conversion
Right”).
Further, in the event that the Lender elects to exercise the Conversion Right,
the Company will issue to Lender a warrant, exclusive of the warrant referenced
in Article 6, with coverage equal to sixty-five percent (65%) of the value
of
the Loan, exercisable at Twelve Cents ($0.12) per share (the “Conversion
Warrant”).
All
conversion and exercise prices in this Loan Agreement shall be subject to
appropriate adjustment in the case of stock splits, stock dividends,
recapitalizations and the like. The form of warrant evidencing the Conversion
Warrant shall be identical to the form attached as Exhibit
C
hereto.
ARTICLE
5
DEFAULT
5.1
Events
of Default.
The
occurrence of any of the following events (each an “Event
of Default”),
not
cured in the applicable cure period, if any, shall constitute and Event of
Default of the Company:
(a)
a
breach of any representation, warranty, covenant or other provision of this
Agreement or the Note, which, if capable of being cured, is not cured within
ten
days following notice thereof to the Company;
(b)
the
failure to make when due any payment described in this Agreement or the Note,
whether on or after the Maturity Date, by acceleration or otherwise;
(c)
the
failure to make when due any payment on any Senior Indebtedness or Parity
Indebtedness, whether on or after the maturity date, by acceleration or
otherwise;
(d)
The
removal of ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (or his designee) from the Company’s Board of
Directors or the failure of ▇▇. ▇▇▇▇▇▇▇▇ (or his designee) to continue to serve
on the Board of Directors of the Company for any reason other than his death
or
voluntary resignation;
(e)
The
Effective Date under the Rougelot Employment Agreement shall not have occurred
on or prior to August 25, 2006 or ▇▇. ▇▇▇▇▇▇▇▇ shall no longer serve as the
Chief Executive Officer of the Company for any reason other than his death
or
disability, Voluntary departure or removal for Cause (as such terms are defined
in the Rougelot Employment Agreement); and
(f)(i)
the application for the appointment of a receiver or custodian for the Company
or the property of the Company, (ii) the entry of an order for relief or the
filing of a petition by or against the Company under the provisions of any
bankruptcy or insolvency law, (iii) any assignment for the benefit of creditors
by or against the Company, or (iv) the Company becomes insolvent.
5.2
Effect
of Default.
Upon
the occurrence of any Event of Default that is not cured within any applicable
cure period, the Lender may elect, by written notice delivered to the Company,
to take any or all of the following actions: (i) declare the outstanding amounts
under the Note to be forthwith due and payable, whereupon the entire unpaid
Loan, together with accrued and unpaid Interest thereon (including the Default
Interest Rate), and all other cash obligations hereunder, shall become forthwith
due and payable, without presentment, demand, protest or any other notice of
any
kind, all of which are hereby expressly waived by the Company, anything
contained herein or in any of the Note to the contrary notwithstanding, and
(ii)
exercise any and all other remedies provided hereunder or available at law
or in
equity upon the occurrence and continuation of an Event of Default.
ARTICLE
6
ISSUANCE
OF STOCK
6.1 Issuance
of Warrants.
The
Company shall issue to the Lender one (1) warrant to purchase a combined total
of twenty million (20,000,000) shares of common stock of the Company in the
form
attached hereto as Exhibit
C
(the
“Warrant”).
The
Warrant shall be immediately exercisable by the Lender (or its assigns) on
the
Closing Date and at an exercise price of Twelve Cents ($0.12) per share. The
Warrant shall be exercisable for a period of four (4) years following the
Closing Date. The number of shares purchasable upon Exercise of the Warrant
and
the exercise price thereof shall be subject to appropriate adjustment in the
case of stock splits, stock dividends, recapitalizations and will contain
antidilution protection identical to those contained in the Note.
6.2 Registration
of Registrable Securities.
Within
nine (9) months after the First Closing Date,
the
Company, at its expense, shall have registered pursuant to one or more effective
registration statements filed with the SEC under
the
Securities Act the
resale by Lender or any successor thereto any and all Company shares issued
or
issuable (x) pursuant to the Conversion Right or otherwise with respect to
the
Loan and (y) upon exercise or conversion of the Warrants and the Additional
Warrant (collectively, the “Registrable Securities”), and the Company agrees to
maintain the effectiveness
and currency
of each such
registration statement, including any related prospectus until the earlier
to
occur of (i) the resale of the Registrable Securities by Lender or any successor
thereto in the manner contemplated by such registration statement or (ii) such
time as all of the Registrable Securities may be sold by Lender or any successor
thereto pursuant to Rule 144(k) under the Securities Act (or any successor
provision thereto); and the Company shall take all such further action
(including, without limitation, any registration of such shares under applicable
state securities laws
and the
listing of such shares on any and all trading markets or stock exchanges as
the
Company’s Common Shares may trade from time to time)
as
shall permit the resale of such shares, or any portion thereof, as aforesaid.
The Company agrees to amend such registration statements from time to time
upon
request of the Lender to reflect any successors of Lender’s rights hereunder.
The Company shall from time to time furnish to Lender or any successor thereto
sufficient copies of any such prospectus, and any supplements thereto, so as
to
permit the resale of such Registrable Securities, or any portion thereof, in
the
manner prescribed by Lender or any successor thereto. If,
at any
time prior to nine (9) months after the First Closing Date, the Company files
a
registration statement with the SEC for the purpose of registering the sale
of
its equity securities under the Securities Act (other than on Form S-4 or Form
S-8), the Company agrees to include the registration of the resale of the
Registrable Securities in such registration statement and the other applicable
covenants and agreements of the Company set forth in this Section 6.2 shall
apply to such registration statement. The
Company shall pay all costs and expenses of any such registration contemplated
by this Section 6.2, including the reasonable legal fees and expenses (up to
a
maximum of $15,000) that Lender or any successor thereto may incur in connection
therewith.
ARTICLE
7
MISCELLANEOUS
7.1
Successors
and Assigns; Third Party Beneficiary.
Subject
to the exceptions specifically set forth in this Agreement, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective executors, administrators, heirs, successors and permitted
assigns of the parties. This Agreement may not be assigned (whether by operation
of law or otherwise) by the Company without the prior written consent of the
Lender. Lender’s rights under this Agreement and the related agreements of the
Company contemplated hereby (including the Note and the Security Agreement)
may
be assigned, in whole or in part, by the Lender without the consent of the
Company.
7.2
Titles
and Subtitles.
The
titles and subtitles of the Sections of this Agreement are used for convenience
only and shall not be considered in construing or interpreting this agreement.
7.3
Notices.
Any
notice, request or other communication required or permitted hereunder shall
be
in writing and shall be delivered personally or by facsimile (receipt confirmed
electronically) or shall be sent by a reputable express delivery service or
by
certified mail, postage prepaid with return receipt requested, addressed as
follows:
if
to
the Company, to:
Itec
Environmental Group, Inc.
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇
▇.
De Laurentiis
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
with
a
copy to:
The
▇▇▇▇
Law Group, PLLC
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇
▇.
▇▇▇▇
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
if
to
the Lender, to:
Arbor
▇▇▇▇▇▇, LLC
_______________________
_______________________
_______________________
With
a
copy to:
▇▇▇▇
▇.
▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Either
party hereto may change the above specified recipient or mailing address by
notice to the other party given in the manner herein prescribed. All notices
shall be deemed given on the day when actually delivered as provided above
(if
delivered personally or by facsimile, provided that any such facsimile is
received during regular business hours at the recipient's location) or on the
day shown on the return receipt (if delivered by mail or delivery
service).
7.4
Governing
Law.
This
Agreement shall be governed by and construed in accordance with the domestic
laws of the State of California without giving effect to any choice of law
or
conflict of law provision or rule (whether of the State of California or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of California.
7.5
Waiver
and Amendment.
Any
term of this Agreement may be amended, waived or modified with the written
consent of the Company and the Lender.
7.6
Remedies.
No
delay or omission by the Lender in exercising any of its rights, remedies,
powers or privileges hereunder or at law or in equity and no course of dealing
between the Lender and the undersigned or any other person shall be deemed
a
waiver by the Lender of any such rights, remedies, powers or privileges, even
if
such delay or omission is continuous or repeated, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other
or
further exercise thereof by the Lender or the exercise of any other right,
remedy, power or privilege by the Lender. The rights and remedies of the Lender
described herein shall be cumulative and not restrictive of any other rights
or
remedies available under any other instrument, at law or in equity.
7.7
Expenses.
The
Company agrees to reimburse Lender for fees and expenses incurred by Lender
in
connection with the preparation of this Agreement and the transactions
contemplated hereby, including reasonable attorneys fess, up to a maximum amount
of Twenty Thousand Dollars ($20,000.00).
7.8
Enforcement.
In the
event an action is instituted to enforce or interpret any of the terms of this
Agreement including but not limited to any action or participation by Lender
in,
or in connection with, a case or proceeding under the Bankruptcy Code or any
successor statute, the prevailing party shall be entitled to recover all
expenses reasonably incurred at, before and after trial and on appeal or review,
whether or not taxable as costs, including, without limitation, attorney fees,
witness fees (expert and otherwise), deposition costs, copying charges and
other
expenses.
IN
WITNESS WHEREOF, the Company has caused this Loan Agreement to be signed in
its
name on the date first set forth above.
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ITEC
ENVIRONMENTAL GROUP, INC.
|
||
| |
|
|
| By: | ||
|
▇▇▇▇
▇. De Laurentiis
Chief
Executive Officer
|
||
IN
WITNESS WHEREOF, the Lender has caused this Loan Agreement to be signed in
its
name on the date first set forth above.
|
ARBOR
▇▇▇▇▇▇, LLC
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||
| |
|
|
| By: | ||
|
Name: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
Title:
Manager
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||
Exhibit
A
Form
of Note
ITEC
ENVIRONMENTAL GROUP, INC.
10%
CONVERTIBLE NOTE
|
$__
|
August___,
2006
|
|
RIVERBANK,
CALIFORNIA
|
ITEC
ENVIRONMENTAL GROUP, INC., a Delaware corporation (“Maker” or the “Company”),
hereby promises to pay to the order of Arbor ▇▇▇▇▇▇, LLC, a Delaware limited
liability company or its assigns (“Holder”), the sum of ___ Dollars ($__), with
interest at the rate of ten percent (10%) per annum accruing on and as of August
___, 2006 [date of the First Closing] until paid. All outstanding principal
and
accrued and unpaid interest shall become due August __, 2007 (the “Maturity
Date”). All payments due and owning under this 10% Convertible Note (“Note”)
shall be subject to the terms and conditions set forth herein.
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1.
|
Agreement.
|
The
Note
is issued pursuant to that certain Loan Agreement (the “Agreement”), dated
August __, 2006, by and between Maker and Holder, which is hereby incorporated
by reference. Capitalized terms used but not defined in this Note have the
meanings assigned to them in the Agreement.
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2.
|
Register.
|
The
Company shall keep at its principal office a register in which the Company
shall
provide for the registration of the Holder of the Note or for the registration
of a transfer of the Note to a different Holder.
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3.
|
Loss
Theft, Destruction or Mutilation of the
Note.
|
Upon
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of the Note and, in the case of any such loss, theft
or destruction, upon receipt of an indemnity bond in such reasonable amount
as
the Company may determine (or if such Note is held by the original Holder,
of an
unsecured indemnity agreement reasonably satisfactory to the Company) or, in
the
case of any such mutilation, upon surrender and cancellation of such Note,
the
Company will make and deliver, in lieu of such lost, stolen, destroyed or
mutilated Note, a new Note of like tenor and unpaid principal amount and dated
as of the date to which interest has been paid on the Note so lost, stolen,
destroyed or mutilated.
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4.
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Registered
Holder.
|
The
Company may deem and treat the person in whose name any Note is registered
as
the absolute owner and Holder of such Note for the purpose of receiving payment
of the principal of and interest on such Note and for the purpose of any
notices, waivers or consents thereunder, whether or not such Note shall be
overdue, and the Company shall not be affected by notice to the contrary.
Payments with respect to any Note shall be made only to the registered Holder
thereof.
|
5.
|
Surrender
of the Note.
|
The
Company may, as a condition of payment of all or any of the principal of, and
interest on, the Note, or its conversion, require Holder to present the Note
for
notation of such payment and, if the Note be paid in full or converted at the
election of Holder as herein provided, require the surrender
hereof.
|
6.
|
Security
and Subordination.
|
The
Company’s obligations under this Note are subject to a
security agreement in the form attached as Exhibit
B
to the
Agreement which secures the repayment of the Loan and grants Holder a continuing
security interest in all presently existing and hereafter acquired assets and
property of the Company of whatever nature and wherever located which such
Security Interest is senior to all other security interests or Encumbrances
against the assets and property of the Company other than Senior Indebtedness
and Parity Indebtedness. The
Company, in its sole discretion, may subordinate this Note to any Senior
Indebtedness of the Company. .
|
7.
|
Conversion.
|
At
any
time prior to or at the Maturity Date, at the option of the Holder, all
principal and accrued interest due on this Note (the “Convertible Amount”) may
be converted at $0.0975 per share (the “Conversion Price”). The Conversion Price
shall be adjusted downward in the event the Company issues common stock (or
securities exercisable for or convertible into or exchangeable for common stock)
at a price below the Conversion Price, to a price equal to such issue price.
The
preceding adjustments shall be effective immediately at the time of the issuance
of any security issued (or of any reduction in effective price of any security)
on or before the Maturity Date. In addition, the Conversion Price shall be
appropriately adjusted in the case of stock splits, stock dividends,
recapitalizations and the like.
In
the
event that the Holder elects to exercise the conversion right set forth above,
the Company shall issue to Holder to a warrant, exclusive of the warrant
referenced in Article 6, with coverage equal to sixty-five percent (65%) of
the
value of the Convertible Amount, exercisable at Twelve Cents ($0.12) per share
(subject to appropriate adjustment in the case of stock splits, stock dividends,
recapitalizations and the like). The form of warrant shall be identical to
the
form attached as Exhibit
C
to the
Agreement.
If,
on or
prior to the Maturity Date, Holder has not elected to convert this Note, all
outstanding principal and accrued and unpaid interest shall become due and
payable.
|
8.
|
Mechanics
of Conversion.
|
Upon
the
Company’s receipt of written notice of Holder’s election to convert the Note,
the principal amount of this Note plus any accrued interest shall be deemed
converted into such number of shares of the Company’s Common Stock as determined
pursuant to Section 7, and no further payments shall thereafter accrue or be
owing under the Note. The entire balance due and owing under the Note must
be
converted to Common Stock; no partial conversions will be allowed. Holder shall
return this Note to the Company at the address set forth below, or such other
place as the Company may require in writing. Within ten (10) days after receipt
of this Note, the Company shall cause to be issued in the name of and delivered
to Holder at the address set forth above, or to such other address as to which
Holder shall have notified the Company in writing, a certificate and a warrant
evidencing the securities to which Holder is entitled. No fractional securities
will be issued upon conversion of the Note. If on conversion of the Note a
fraction of a security results, the Company shall round up the total number
of
securities to be issued to Holder to the nearest whole number.
|
9.
|
Notice.
|
Any
notice required or desired to be given under this Agreement shall be in writing
and shall be deemed given when personally delivered, one business day after
deposit with a reputable overnight courier service for next business day
delivery, or three days after being sent by certified or registered mail postage
prepaid to the addresses set forth below, or such other address as to which
one
party may have notified the other in such manner.
|
10.
|
Default.
|
Upon
an
Event of Default (as defined in the Agreement) that is not cured within any
applicable cure period set forth in the Agreement, and
at
the option of Holder, or Holder’s successors or assigns, Holder
may (i) accelerate all amounts due and owing under this Note and demand payment
immediately and/or (ii) declare the right to exercise any and all remedies
available to Holder under applicable law.
|
11.
|
Miscellaneous.
|
(a) Interest
hereunder shall be calculated based on ten percent (10%)
per
annum calculated using a 360-day year composed of 12 30-day months, payable
in
full, unless otherwise converted to common stock in the Company, at maturity
or
conversion.
(b) The
Company agrees that all Conversion Shares at the time of issuance will be fully
paid and non-assessable. Maker shall pay upon demand any and all expenses,
including reasonable attorney fees, incurred or paid by Holder of this Note
without suit or action in attempting to collect funds due under this Note or
in
connection with the issuance of the Conversion Shares. In the event an action
is
instituted to enforce or interpret any of the terms of this Note including
but
not limited to any action or participation by Maker in, or in connection with,
a
case or proceeding under the Bankruptcy Code or any successor statute, the
prevailing party shall be entitled to recover all expenses reasonably incurred
at, before and after trial and on appeal or review, whether or not taxable
as
costs, including, without limitation, attorney fees, witness fees (expert and
otherwise), deposition costs, copying charges and other expenses.
(c) All
parties to this Note hereby waive presentment, dishonor, notice of dishonor
and
protest. All parties hereto consent to, and Holder is hereby expressly
authorized to make, without notice, any and all renewals, extensions,
modifications or waivers of the time for or the terms of payment of any sum
or
sums due hereunder, or under any documents or instruments relating to or
securing this Note, or of the performance of any covenants, conditions or
agreements hereof or thereof or the taking or release of collateral securing
this Note. Any such action taken by Holder shall not discharge the liability
of
any party to this Note.
(d) The
Company may not prepay the amount due and owing under this Note.
(e) This
Note
shall be governed by and construed in accordance with the laws of the State
of
California without regard to conflict of law principles.
(f) All
payments due and owing under this Note shall be delivered to Holder at the
address set forth below unless Holder provides the Company with written notice
of a change of such instructions.
IN
WITNESS WHEREOF, the parties hereto execute this Convertible Note as of this
____ day of August, 2006.
| Maker: |
ITEC
ENVIRONMENTAL GROUP, INC.
|
|
| |
|
|
|
By:
Its:
|
||
|
Holder:
|
Arbor
▇▇▇▇▇▇, LLC
|
|
Holder’s
address:
|
_______________________
|
|
_______________________
|
|
|
_______________________
|
|
|
With
a copy to:
|
▇▇▇▇▇▇▇
▇▇▇▇▇ & ▇▇▇▇▇ LLP
|
|
▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
|
|
|
▇▇▇▇▇
▇▇▇▇
|
|
|
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
|
|
Attn:
▇▇▇▇ ▇. ▇▇▇▇▇▇
|
|
|
Maker’s
address:
|
Itec
Environmental Group, Inc.
|
|
Attn:
▇▇▇▇ De Laurentiis
|
|
|
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
|
|
|
▇.▇.
▇▇▇ ▇▇▇
|
|
|
▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
|
|
|
With
a copy to:
|
The
▇▇▇▇ Law Group, PLLC
|
|
Attn:
▇▇▇▇▇ ▇. ▇▇▇▇
|
|
|
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
|
|
|
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
|
Exhibit
B
Form
of Security Agreement
SECURITY
AGREEMENT
This
SECURITY AGREEMENT ("Security
Agreement")
is
dated as of September __, 2006 (the
"Effective
Date"),
by and
among
Itec
Environmental Group, Inc., a Delaware corporation (the
"Company"),
and the
parties listed in Schedule
A and B,
attached hereto (the “Secured
Parties”).
WHEREAS,
on the Effective Date, the Company received funds pursuant to certain loans
(collectively, the “Loans”
and
each individually, a “Loan”)
by the
Secured Parties; and
WHEREAS,
in order to induce Secured Parties to provide the Loans to the Company, the
Company agreed to grant to the Secured Parties a security interest in all of
the
Company’s assets to secure the amounts currently owing, and any additional
amounts which may be owing, by the Company pursuant to the agreements between
each of the Secured Parties and the Company that evidence the Loans (the
“Loan
Documents”).
NOW,
THEREFORE, for good and valuable consideration, the receipt of which is hereby
acknowledged, the Company and parties listed
in
Schedule
A and B
attached
hereto, agree as follows:
1.
Defined
Terms.
The
following terms shall have the following meanings, unless the context otherwise
requires:
“Arbor
▇▇▇▇▇▇ Notes”
shall
mean the Secured Convertible Promissory Notes dated August 14, 2006 and
September __, 2006 issued by the Company to Arbor ▇▇▇▇▇▇, LLC (“Arbor
▇▇▇▇▇▇”)
in the
aggregate principal amount of $2,300,000.00.
“Baek
Note”
means
the Secured Convertible Promissory Note dated August 29, 2006 issued by the
Company to ▇▇ ▇. ▇▇▇▇ (“▇▇▇▇”)
in the
aggregate principal amount of $202,000.00.
"Code"
shall
mean the Uniform Commercial Code as in effect in the State of California on
the
Loan Closing Date.
"Collateral"
shall
have the meaning given such term in Section 2.
"Event
of Default"
shall
have the meaning given such term in each Note.
“Goldman
Note”
shall
mean the Secured Convertible Promissory Note dated July 27, 2006 issued by
the
Company to ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇ (“▇▇▇▇▇▇▇”)
in the
aggregate principal amount of $500,000.00.
“Itec
Capital Group Notes”
shall
mean the Secured Convertible Promissory Note issued by the Company to each
of
investors participating in the offering described in the Company’s 2006 Private
Placement Memorandum as set forth on Schedule
B
hereto,
in the aggregate principal amount of $3,022,500.00.
“Note”
and
“Notes”
shall
mean the Arbor ▇▇▇▇▇▇ Notes, the Baek Note, the Goldman Note and the Itec
Capital Group Notes, individually and collectively, as the case may be.
"Obligations"
shall
mean the obligations of the Company under the Notes and the Loan Documents,
including all costs of collection.
“Senior
Debt”
shall
mean all
indebtedness for all principal,
fees, expenses, interest, penalties, post-bankruptcy petition interest, and
all
other amounts payable for money borrowed from banking or other financial
institutions or governmental lending facilities that is not convertible into
equity securities of the Company, including, but not limited to the $2,000,000
loan from the California Integrated Waste Management Board (the “CIWMB
Loan”).
2.
Grant
of Security Interest.
As
collateral security for the prompt and complete payment and performance when
due
of all the Obligations, the Company hereby grants to the Secured Parties a
security interest in all of the Company's right, title and interest in, to
and
under the following, whether now existing or hereafter acquired (all of which
collateral being hereinafter collectively called the “Collateral”);
provided, however, that the security interest granted hereby shall be
subordinate to the security interest to be granted or granted (as the case
may
be) by the Company in connection any Senior Debt. Secured Parties shall be
entitled to a security interest in the following:
ACCOUNTS
All
present and future accounts owned by the Company, including and together with
any and all contract rights, accounts receivable, security deposits (where
not
otherwise prohibited by law or agreement), and other rights of any kind to
receive payments for services rendered and goods supplied by the Company,
together with agreements, customer lists, client lists, and accounts, invoices,
agings, verification reports and other records relating in any way to such
accounts.
CONTRACTS
All
contracts, contract rights, royalties, license rights, leases, instruments,
undertakings, documents or other agreements in or under which the Company may
now or hereafter have any right, title or interest whether now existing or
hereinafter created and all forms of obligations owing to the Company arising
out of the sale or lease of goods, the licensing of technology or the rendering
of services by the Company, whether or not earned by performance, and any and
all credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by the Company.
EQUIPMENT,
FURNISHINGS AND MISCELLANEOUS PERSONAL PROPERTY
All
presently owned and hereafter acquired furniture, furnishings, equipment,
machinery, vehicles (including motor vehicles and trailers) computer hardware
and software, accounting or bookkeeping systems, client or customer lists and
information, data sheets and other records of any kind, wherever located, stored
or inventoried, which are used or which may be used in the Company’s business;
FIXTURES
All
materials used by the Company in connection with its business operations,
including, but not limited to, supplies, trade equipment, appliances, apparatus
and any other items, now owned or hereafter acquired by the Company, and now
or
hereafter attached to, or installed in (temporarily or permanently) any real
property now or in the future owned or leased by the Company;
GENERAL
INTANGIBLES
All
general intangibles and other personal property of the Company, now owned or
hereinafter acquired, including, without limitation, the following: (a) permits,
authorizations and approvals presently and hereafter issued by any federal,
state, municipal or local governmental or regulatory authority in favor of
the
Company; (b) all plans, specifications, renderings and other similar materials
presently owned or hereafter acquired by the Company; (c) all presently existing
and hereafter created contracts, leases, licenses and agreements to which the
Company is a party; (d) all presently and hereafter existing policies and
agreements of insurance in favor of the Company; (e) all presently and hereafter
existing equity contribution agreements and other equity financing arrangements
in favor of the Company; (f) all copyrights, chattel paper, electronic chattel
paper, licenses, money, insurance proceeds, contract rights, subscription lists,
mailing lists, licensing agreements, patents, trademarks, service marks, trade
styles, patents, patent applications, franchise agreements, blueprints,
drawings, purchase orders, customer lists, route lists, infringements, claims,
computer programs, computer discs, computer tapes, literature, reports,
catalogs, design rights, income tax refunds, payments of insurance and rights
to
payment of any kinds, trade names, refundable, returnable or reimbursable fees,
deposits or other funds or evidences of credit or indebtedness deposited by
or
on behalf of the Company with any governmental agencies, boards, corporations,
providers of utility services, public or private; (g) all presently existing
and
hereafter acquired computer programs, computer software and other electronic
systems and materials of any kind of the Company; (h) goodwill; and (i) all
other presently existing and hereafter acquired documents, accounts, general
intangibles and intangible personal property of any kind.
DOCUMENTS
All
documents, cash, deposit accounts, securities, securities entitlements,
securities accounts, investment property, financial assets, letters of credit,
certificates of deposit, instruments, chattel paper, and electronic chattel
paper now owned or hereafter acquired and the Company’s books relating to the
foregoing.
COPYRIGHTS
All
copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; all trade secret
rights, including all rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; all mask work or similar rights available for the
protection of semiconductor chips, now owned or hereafter acquired; all claims
for damages by way of any past, present and future infringement of any of the
foregoing.
PROCEEDS
All
of
the Company’s books and records relating to the foregoing and any and all
present and future accounts, general intangibles, chattel paper, electronic
chattel paper, products, accessions, replacements, betterments and substitutions
for any of the foregoing described property, and all proceeds arising from
or by
virtue of, or from the sale or disposition of, or collections with respect
to,
or insurance proceeds payable with respect to, or claims against any other
persons, corporations or other entities with respect to, all or any part of
the
foregoing described property and interests.
3.
Pro
Rata Distributions among Secured Parties.
It is
expressly agreed by the Secured Parties that all payments received by the
Company under or in connection with the any sale or liquidation of the
Collateral, subject to any Senior Debt, shall be divided among the Secured
Parties pari
passu
on a
pro-rata basis equal to the quotient of: (x) the unpaid principal amount of
the
Note held by each of the respective Secured Parties (without regard to
interest); divided by (y) the aggregate unpaid principal amount of all Notes
(without regard to interest).
4.
Rights
of Secured Parties; Limitations on Secured Parties’ Obligations.
It is
expressly agreed by the Company that, anything herein to the contrary
notwithstanding, the Company shall remain liable under each of its contracts
and
documents to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with and pursuant
to
the terms and provisions of its contracts and documents. Secured Parties shall
have no obligation or liability under any of the Company’s contracts and
documents by reason of or arising out of this Security Agreement or the granting
to Secured Parties of a security interest therein or the receipt by Secured
Parties of any payment relating to any of the Company’s contracts and documents
pursuant hereto, nor shall Secured Parties be required or obligated in any
manner to perform or fulfill any of the obligations of the Company under or
pursuant to any of its contracts and documents, or to make any payment, or
to
make any inquiry as to the nature or the sufficiency of any payment received
by
it or the sufficiency of any performance by any party under any of its contracts
and documents, or to present or file any claim, or to take any action to collect
or enforce any performance or the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
5.
Representations
and Warranties.
The
Company hereby represents and warrants that the chief executive office and
chief
place of business of the Company is ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, and
the Company will not change such chief executive office and chief place of
business or remove such records unless the Company shall have given the Secured
Parties at least 10 days' prior written notice thereof.
6.
Covenants.
The
Company covenants and agrees with the Secured Parties that from and after the
date of this Security Agreement and until the Obligations are fully
satisfied:
(a)
Further
Documentation.
At any
time and from time to time, upon the written request of the Secured Parties,
and
at the sole expense of the Company, the Company will promptly and duly execute
and deliver any and all such further documents and take such further action
as
any Secured Party may reasonably request in carrying out the terms and
conditions of this Security Agreement and the rights and powers herein granted,
including, without limitation, the filing of any financing or continuation
statements under the Uniform Commercial Code in effect in any jurisdiction
with
respect to the security interests granted hereby.
(b)
Continuous
Perfection.
The
Company will not change its name, identity or corporate structure in any manner
unless the Company shall have given the Secured Parties at least 10 days' prior
written notice thereof and shall have taken all action (or made arrangements
to
take such action substantially simultaneously with such change if it is
impossible to take such action in advance) necessary or reasonably requested
by
any Secured Party to amend any financing statement or continuation statement
filed with respect to the Collateral so that it is not misleading.
(c)
Insurance.
The
Company will insure the Collateral against such risks and hazards as other
companies similarly situated insure against, in amounts and under policies
which
it currently holds and under such additional or substituted amounts or policies
as it may from time to time determine, which shall be reasonably acceptable
to
the Secured Parties (providing that no cancellation of such insurance shall
be
effective without 30 days written notice to the Secured Parties and containing
loss payable clauses to the Secured Parties as their interest may appear) and
all premiums thereon shall be paid by the Company.
6.
Remedies,
Rights Upon Default.
(a)
In
addition to any other rights given to the Secured Parties hereunder, if an
Event
of Default shall occur and be continuing and any Secured Party shall have
declared the amounts owing under the Note(s) to be due and payable (or such
amounts shall have automatically, become due and payable), all payments received
by the Company under or in connection with any of the Collateral shall be
subject to the subordination provisions contained in the preceding Section
2,
held by the Company in trust for the Secured Parties, shall be segregated from
other funds of the Company and shall, if requested by any Secured Party
forthwith upon receipt by the Company be turned over to the Secured Parties,
in
the same form as received by the Company (duly endorsed by the Company to the
Secured Parties, if required).
If
any
Event of Default shall occur and be continuing and subject to the subordination
provisions of the preceding Section 2, any Secured Party may exercise in
addition to all other rights and remedies granted to it in this Security
Agreement or in any other instrument or agreement securing, evidencing or
relating to the Obligations or at law or in equity, all rights and remedies
of a
secured party under the Code. Without limiting the generality of the foregoing,
the Company expressly agrees that in any such event, the Secured Parties,
without demand of performance or other demand, (except the notice specified
below of time and place of public or private sale) to or upon the Company or
any
other person may forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign,
give
option or options to purchase, or sell or otherwise dispose of and deliver
said
Collateral (or contract to do so), or any part thereof, in one or more parcels
at public or private sale or sales, at any exchange broker's board or at any
of
the Secured Parties’ offices or elsewhere at such prices as it may deem best,
for cash or on credit or for future delivery without assumption of any credit
risk. Each 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 said Collateral so sold, free of any right
or equity of redemption, which equity of redemption the Company hereby releases.
The Company further agrees, at any Secured Party’s request, to assemble the
Collateral, make it available to one or more of the Secured Parties at places
which a Secured Party shall reasonably select, whether at the Company's premises
or elsewhere. The Secured Parties shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred therein
or
incidental to the care, safe keeping or otherwise of any or all of the
Collateral or in any way relating to the rights of the Secured Parties
hereunder, including reasonable attorneys' fees and legal expenses, to the
payment in whole or in part of the Obligations, the Company remaining liable
for
any deficiency remaining unpaid after the application, and only after so paying
over such net proceeds and after the payment by the Secured Parties of any
other
amount required by any provision of law. To the extent permitted by applicable
law, the Company waives all claims, damages, and demands against the Secured
Parties arising out of the repossession, retention or sale of the Collateral.
The Company agrees that a Secured Party need not give more than 10 days notice
of the time and place of any public sale or of the time after which a private
sale may take place and that such notice is reasonable notification of such
matters. The Company shall remain liable for any deficiency if the proceeds
of
any sale or disposition of the Collateral are insufficient to pay all amounts
to
which a Secured Party is entitled.
The
Company hereby waives presentment, demand, protest or any notice (to the extent
permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.
8.
Application
of Proceeds.
Subject
to the subordination provisions contained in the preceding Section 2, the
Proceeds of all sales and collections in respect of any Collateral shall be
applied as follows:
(a)
First, to the payment of the costs and expenses of such sales and collections,
the expenses of Secured Parties and the reasonable fees and expenses of counsel
to the Secured Parties;
(b)
Second, any surplus then remaining to the payment of the Obligations in such
order and manner consistent with the provisions of Section 3 above as the
Secured Parties may in their sole discretion determine; and
(c)
Third, any surplus then remaining shall be paid to the Company.
9.
Limitation
on Secured Parties’ Duty in Respect of Collateral.
Beyond
the use of reasonable care in the custody thereof, no Secured Party shall have
any duty as to any Collateral in their possession or control or in the
possession or control of any agent or nominee of it or any income thereon or
as
to the preservation of rights against prior Secured Parties or any other rights
pertaining thereto.
10.
Notices.
Any
notice, request or other communication required or permitted hereunder shall
be
in writing and shall be delivered personally or by facsimile (receipt confirmed
electronically) or shall be sent by a reputable express delivery service or
by
certified mail, postage prepaid with return receipt requested, addressed as
follows:
if
to
the Company, to:
Itec
Environmental Group, Inc.
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇
▇.
De Laurentiis
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
if
to
Arbor ▇▇▇▇▇▇, to:
Arbor
▇▇▇▇▇▇, LLC
_______________________
_______________________
_______________________
if
to
the Baek, to:
▇▇
▇.
▇▇▇▇
_______________________
_______________________
if
to
the Goldman, to:
▇▇▇▇▇
and
▇▇▇▇ ▇▇▇▇▇▇▇
_______________________
_______________________
if
to
Itec Capital Group, to:
See
Schedule
B.
A
party
hereto may change the above specified recipient or mailing address by notice
to
the other party given in the manner herein prescribed. All notices shall be
deemed given on the day when actually delivered as provided above (if delivered
personally or by facsimile, provided that any such facsimile is received during
regular business hours at the recipient's location) or on the day shown on
the
return receipt (if delivered by mail or delivery service).
11.
Severability.
Any
provision of this Security Agreement which is prohibited or unenforceable in
any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in
any
other jurisdiction.
12.
No
Waiver; Cumulative Remedies.
No
Secured Parties shall by any act, delay, omission or otherwise be deemed to
have
waived any of their rights or remedies hereunder and no waiver shall be valid
unless in writing, signed by the Secured Party, and then only to the extent
therein set forth. A waiver by a Secured Party of any right or remedy hereunder
on any one occasion shall not be construed as a bar to any right or remedy
which
the Secured Parties would otherwise have had on any future occasion and shall
not apply to any other Secured Party. No failure to exercise nor any delay
in
exercising on the part of a Secured Party, any right, power or privilege
hereunder, shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or future
exercise thereof or the exercise or any other right, power or privilege. The
rights and remedies hereunder provided are cumulative and may be exercised
singly or concurrently, and are not exclusive of any rights and remedies
provided by law.
13.
Successors
and Assigns.
This
Security Agreement and all obligations of the Company hereunder shall be binding
upon the successors and permitted assigns of the Company, and shall, together
with the rights and remedies of the Secured Parties hereunder, inure to the
benefit of each of the Secured Parties and their successors and permitted
assigns; provided that the Company may not assign any of its rights or
obligations hereunder without the prior written consent of each of the Secured
Parties.
14.
Waiver
and Amendment.
None of
the terms or provisions of this Security Agreement may be waived, altered,
modified or amended except by an instrument in writing, duly executed by the
Company and the Secured Party against whom such waiver, alteration, modification
or amendment is sought to be enforced.
15.
Governing
Law.
This
Security Agreement shall be governed by and construed in accordance with the
domestic laws of the State of California without giving effect to any choice
of
law or conflict of law provision or rule (whether of the State of California
or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of California.
16.
Counterparts.
This
Security Agreement may be executed in separate counterparts each of which will
be an original and all of which taken together will constitute one and the
same
agreement.
17.
Facsimile.
This
Security Agreement may be executed using facsimiles of signatures, and a
facsimile of a signature shall be deemed to be the same, and equally
enforceable, as an original of such signature.
18.
Termination.
At such
time as the Obligations have been fully paid in cash, the security interest
created hereby shall automatically terminate, the Secured Parties shall take
all
such actions as may be requested by the Company to evidence such termination
and
to release the liens created hereby, at the Company's expense.
IN
WITNESS WHEREOF, each of the Secured Parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer as of
Effective Date.
|
ITEC
ENVIRONMENTAL GROUP, INC.
|
||
| |
|
|
| By: | ||
|
▇▇▇▇
▇. De Laurentiis
Chief
Executive Officer
|
||
|
SECURED
PARTY:
|
||
| |
|
|
| By: | ||
|
Its:
|
||
SCHEDULE
A
|
Secured
Party
|
Aggregate
Principal Amount of Note(s)
|
|||
|
Itec
Capital Group, LLC
|
$
|
3,022,500.00
|
||
|
Arbor
▇▇▇▇▇▇, LLC
|
$
|
2,300,000.00
|
||
|
▇▇▇▇▇
and ▇▇▇▇ ▇▇▇▇▇▇▇
|
$
|
500,000.00
|
||
|
▇▇
▇. ▇▇▇▇
|
$
|
202,000.00
|
||
|
Total
|
$
|
6,024,500.00
|
||
SCHEDULE
B
Itec
Capital Group, LLC Investors
|
Name
|
Address
|
City
|
State
|
Zip
Code
|
||||
|
▇▇▇▇▇
and ▇▇▇▇ ▇▇▇▇▇ Trust
|
||||||||
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
||||||||
|
▇▇
▇. ▇▇▇▇
|
||||||||
|
▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
||||||||
|
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
|
||||||||
|
▇▇▇▇▇▇
▇▇▇▇▇
|
||||||||
|
Benetti
Trust
|
||||||||
|
▇▇▇
▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
|
||||||||
|
▇▇▇▇▇▇▇
& ▇▇▇▇▇ ▇▇▇▇▇▇
|
||||||||
|
▇▇▇
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ ▇▇▇▇▇
|
||||||||
|
▇▇▇▇▇▇
▇▇▇ & ▇▇▇▇ ▇▇▇▇▇
|
||||||||
|
▇▇▇▇
▇▇▇▇▇▇
|
||||||||
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇
|
||||||||
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇ & ▇▇▇▇ ▇. ▇▇▇▇▇▇
|
||||||||
|
▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇
|
||||||||
|
▇▇▇▇
▇▇▇▇▇▇▇▇▇
|
||||||||
|
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
|
||||||||
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
|
||||||||
|
▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
|
||||||||
|
▇▇▇▇
▇▇▇▇▇▇ Trust
|
||||||||
|
▇▇▇▇▇▇▇
▇▇▇▇▇▇
|
||||||||
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
|
||||||||
|
▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ & ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
|
||||||||
|
▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇
|
||||||||
|
▇▇▇▇
Trust
|
||||||||
|
▇▇▇▇▇▇
Family Trust
|
||||||||
|
▇▇▇▇▇▇▇
Family Trust
|
||||||||
|
Itec
Alaska Partnership
|
||||||||
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
|
||||||||
|
▇▇▇▇▇
▇. ▇▇▇▇
|
||||||||
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
||||||||
|
▇▇▇▇▇▇
and ▇▇▇▇▇▇▇▇ Loft
|
||||||||
|
▇▇▇▇▇▇
Family Revocable Trust
|
||||||||
|
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇
|
||||||||
|
▇▇▇▇
& ▇▇▇▇ ▇▇▇▇▇
|
||||||||
|
▇▇▇▇
▇▇▇▇▇▇
|
||||||||
|
▇▇▇▇
Family Trust
|
||||||||
|
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
|
||||||||
|
▇▇▇▇▇▇
▇▇▇▇ ▇▇▇
|
||||||||
|
▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
|
||||||||
|
▇▇▇
▇▇▇▇
|
||||||||
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
|
||||||||
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇
|
||||||||
|
Saratoga
Capital Partners
|
||||||||
|
▇▇▇
▇. ▇▇▇▇▇▇▇▇
|
||||||||
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇
|
||||||||
|
▇▇▇▇▇
▇▇▇▇▇▇▇
|
||||||||
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇, DDS, ▇▇
|
||||||||
|
▇▇▇▇▇▇▇
Family Trust
|
||||||||
|
▇▇▇▇▇▇▇▇
▇▇▇▇▇
|
||||||||
|
Sirott
Family Trust
|
||||||||
|
▇▇▇▇
▇▇▇▇▇▇▇
|
||||||||
|
▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
||||||||
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇
|
||||||||
|
▇▇▇▇▇▇▇▇▇
Family Trust
|
||||||||
|
▇▇▇▇
Family Trust
|
||||||||
|
▇▇▇▇▇▇
▇▇▇▇▇▇▇
|
Exhibit
C
Form
of Warrant
THE
SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933 (THE “ACT”) OR APPLICABLE STATE SECURITIES LAWS, AND THE TRANSFER
THEREOF IS PROHIBITED EXCEPT PURSUANT TO REGISTRATION UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM
SUCH REGISTRATION. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT
BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.
Warrant
To Purchase 20,000,000 Shares of Common Stock
Itec
Environmental Group, inc.
Date
of
Issuance: August 14, 2006
No.
93
THIS
CERTIFIES that, for value received, Arbor ▇▇▇▇▇▇, LLC, or its assigns (in either
case, the “Holder”) is entitled to purchase, subject to the provisions of this
Warrant, from Itec Environmental Group, Inc., a Delaware corporation (the
“Company”), at the price per share set forth in Section 8 hereof, that number of
shares of the Company’s common stock (the “Common Stock”) set forth in Section 7
hereof. This Warrant is referred to herein as the “Warrant” and the shares of
Common Stock issuable pursuant to the terms hereof are sometimes referred to
herein as “Warrant Shares.”
1. Holder
Exercise of Warrant.
This
Warrant shall only be exercisable in whole. All shares of Common Stock issued
upon the exercise of this Warrant at the time of issuance will be validly
issued, fully paid, and nonassessable. To exercise this Warrant in whole, the
Holder shall deliver to the Company at its principal office, (a) a written
notice, in substantially the form of the exercise notice attached hereto as
Exhibit
A
(the
“Exercise Notice”), of the Holder’s election to exercise this Warrant, which
notice shall specify the number of shares of Common Stock to be purchased and
be
accompanied by a check for the full amount of the aggregate Exercise Price
(as
defined in Section 8(a) below) for the Warrant Shares so purchased and (b)
this
Warrant. The Company shall as promptly as practicable, and in any event within
twenty (20) days after delivery to the Company of (i) the Exercise Notice
together with payment of the Exercise Price, (ii) and this Warrant, execute
and
deliver or cause to be executed and delivered, in accordance with such notice,
a
certificate or certificates representing the aggregate number of Warrant Shares
specified in such notice. Each certificate representing Warrant Shares shall
bear the legend or legends required by applicable securities laws. The Company
shall pay all expenses and other charges payable in connection with the
preparation, issuance and delivery of such stock certificates except that,
in
case such stock certificates shall be registered in a name or names other than
the name of the Holder, funds sufficient to pay all stock transfer taxes, if
any, that are payable upon the issuance of such stock certificate or
certificates shall be paid by the Holder at the time of delivering the Exercise
Notice.
The
Holder shall also have the right to convert this Warrant or any portion thereof
(the "Conversion Right"), without payment by the Holder of the Exercise Price
in
cash or any other consideration (other than the surrender of rights to receive
Warrant Shares hereunder), into shares of Common Stock as provided in this
Section 1. Upon receipt by the Company of a duly executed and completed
Conversion Notice in the form attached hereto as Exhibit
B
for the
exercise of the Conversion Right with respect to a particular number of Warrant
Shares (the "Converted Warrant Shares"), the Company shall deliver to the Holder
(without payment by the Holder of the Exercise Price in cash or any other
consideration (other than the surrender of rights to receive Warrant Shares
hereunder)) that number of shares of Common Stock equal to the quotient obtained
by dividing: (x) the difference between (i) the product of (A) the Current
Market Price of a share of Common Stock multiplied by (B) the number of
Converted Warrant Shares and (ii) the product of (A) the Exercise Price
multiplied by (B) the number of the Converted Warrant Shares, in each case
as of
the Conversion Date, by (y) the Current Market Price of a share of Common Stock
on the Conversion Date. The term “Conversion Date” shall be the date a duly
executed and completed Conversion Notice is received by the Company. No
fractional Warrant Shares shall be issuable upon exercise of the Conversion
Right, and if the number of Warrant Shares to be issued determined in accordance
with the following formula is other than a whole number, the Company shall,
at
its election, pay to the Holder an amount in cash equal to the Current Market
Price of the resulting fractional Warrant Share on the Conversion Date or round
up to the next nearest whole share.
The
term
"Current Market Price" for the shares of Common Stock as of a specified date
shall mean: (i) if the shares of Common Stock are publicly traded on such date,
the average closing price per share over the preceding 10 trading days as
reported on the principal stock exchange or quotation system on which the shares
of Common Stock are then listed or quoted; (ii) if the shares of Common Stock
are not so publicly traded on such date, the value determined in good faith
by
the Board of Directors of the Company; provided, that if Holder shall dispute
such value determined by the Board of Directors the value shall be the appraised
value per share of Common Stock as of such date determined by an investment
banking firm of recognized standing selected by the Company and reasonably
satisfactory to the Holder. In the event the appraised value is greater than
120% of the value of determined by the Board of Directors, the cost of such
appraisal shall be borne by the Company and in all other circumstances, the
cost
of such appraisal shall be borne by the Holder.
The
Warrant shall expire on August 14, 2010 (the “Expiration Date”). The Holder may
exercise the warrant at any time prior to the Expiration Date.
2. Reservation
of Shares.
The
Company hereby covenants that at all times during the term of this Warrant
there
shall be reserved for issuance such number of shares of its Common Stock as
shall be required to be issued upon exercise of this Warrant.
3.
Fractional
Shares.
This
Warrant may be exercised only for a whole number of shares of Common Stock,
and
no fractional shares or scrip representing fractional shares shall be issuable
upon the exercise of this Warrant.
4.
Transfer
of Warrant and Warrant Shares.
The
Holder may sell, pledge, hypothecate, or otherwise transfer (“Transfer”) this
Warrant, in whole or in part, only if such sale, pledge, hypothecation, or
transfer is made in compliance with the Act or pursuant to an available
exemption from registration under the Act relating to the disposition of
securities. Subject to the preceding sentence, the Company agrees to issue
to
any successor or transferee of Holder a new Warrant or Warrants of like tenor
promptly upon receipt of Holder’s notice of any such Transfer and shall issue to
Holder a new Warrant representing any portion hereof that is not so Transferred.
5.
Loss
of Warrant.
Upon
receipt by the Company of evidence satisfactory to it of the loss, theft, or
destruction of this Warrant, and of indemnification satisfactory to it, or
upon
surrender and cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new warrant of like tenor.
6.
Rights
of the Holder.
No
provision of this Warrant shall be construed as conferring upon the Holder
the
right to vote, consent, receive dividends or receive notice other than as
expressly provided herein. Prior to exercise, no provision hereof, in the
absence of affirmative action by the Holder to exercise this Warrant, and no
enumeration herein of the rights or privileges of the Holder, shall give rise
to
any liability of the holder for the purchase price of any warrant shares or
as a
stockholder of the Company, whether such liability is asserted by the Company
or
by creditors of the Company.
7.
Number
of Warrant Shares.
This
Warrant shall be exercisable for 20,000,000 shares of the Company’s Common
Stock, as adjusted from time to time in accordance with this Agreement.
8.
Exercise
Price; Adjustment of Warrants.
a.
Exercise
Price.
The per
share purchase price (the “Exercise Price”) for each of the Warrant Shares
purchasable under this Warrant shall be equal to $0.12, as adjusted from time
to
time in accordance with this Agreement.
b. Adjustment
for Mergers or Reorganization, etc.
In case
of any consolidation or merger of the Company with or into another corporation
or the conveyance of all or substantially all of the assets of the Company
to
another corporation, this Warrant shall be exercisable into the number of shares
of stock or other securities or property to which a holder of the number of
shares of Common Stock of the Company deliverable upon exercise of this Warrant
would have been entitled upon such consolidation, merger or conveyance; and,
in
any such case, appropriate adjustment (as determined by the Board of Directors
of the Company) shall be made in the application of the provisions herein set
forth with respect to the rights and interest thereafter of the holder of this
Warrant, to the end that the provisions set forth herein shall thereafter be
applicable, as nearly as reasonable may be, in relation to any shares of stock
or other property thereafter deliverable upon the exercise of this Warrant.
c. Adjustment
in the Case of Certain Transactions or Events.
The Exercise Price shall be adjusted downward in the event the Company issues
Common Stock (or securities exercisable for or convertible into or exchangeable
for common stock) at a price below the Exercise Price, to a price equal to
such
issue price. The preceding adjustment shall be effective immediately at the
time
of the issuance of any security issued (or of any reduction in effective price
of any security). In addition, the Exercise Price and the number of Warrant
Shares issuable upon exercise hereof shall be appropriately adjusted in the
case
of stock splits, stock dividends, recapitalizations and the like.
d.
NO
IMPAIRMENT.
THE
COMPANY WILL NOT, THROUGH ANY REORGANIZATION, TRANSFER OF ASSETS, CONSOLIDATION,
MERGER, DISSOLUTION, ISSUE OR SALE OF SECURITIES OR ANY OTHER VOLUNTARY ACTION,
AVOID OR SEEK TO AVOID THE OBSERVANCE OR PERFORMANCE OF ANY OF THE TERMS TO
BE
OBSERVED OR PERFORMED HEREUNDER BY THE COMPANY, BUT WILL AT ALL TIMES IN GOOD
FAITH ASSIST IN THE CARRYING OUT OF ALL THE PROVISIONS OF THIS SECTION AND
IN
THE TAKING OF ALL SUCH ACTION AS MAY BE NECESSARY OR APPROPRIATE IN ORDER TO
PROTECT THE EXERCISE RIGHTS OF THE HOLDER OF THIS WARRANT AGAINST IMPAIRMENT.
e. Issue
Taxes.
The
Company shall pay issue taxes that may be payable in respect of any issue or
delivery of shares of Common Stock on exercise of this Warrant, in whole;
provided, however, that the Company shall not be obligated to pay any transfer
taxes resulting from any transfer requested by any holder in connection with
any
such exercise.
f.
Reservation
of Stock Issuable Upon Conversion.
The
Company shall at all times reserve and keep available out of its authorized
but
unissued shares of common stock, solely for the purpose of effecting the
exercise of this Warrant, such number of its shares of common stock as shall
from time to time be sufficient to effect the exercise of this Warrant; and
if
at any time the number of authorized but unissued shares of common stock shall
not be sufficient to effect the exercise of this Warrant, the Company will
take
all appropriate corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of common stock to
such
number of shares as shall be sufficient for such purpose.
9. Certain
Distributions.
In case
the Company shall, at any time, prior to the Expiration Date, declare any
distribution of its assets to holders of its common stock as a partial
liquidation, distribution or by way of return of capital, other than as a
dividend payable out of earnings or any surplus legally available for dividends,
then the Holder shall be entitled, upon the proper exercise of this Warrant
in
whole prior to the effecting of such declaration, to receive, in addition to
the
shares of common stock issuable on such exercise, the amount of such assets
(or
at the option of the Company a sum equal to the value thereof at the time of
such distribution to holders of common stock as such value is determined by
the
Board of Directors of the Company in good faith), which would have been payable
to the Holder had it been a holder of record of such shares of common stock
on
the record date for the determination of those holders of Common Stock entitled
to such distribution.
10. Dissolution
or Liquidation.
In case
the Company shall, at any time prior to the Expiration Date, dissolve, liquidate
or wind up its affairs, the Holder shall be entitled, upon the proper exercise
of this Warrant in whole and prior to any distribution associated with such
dissolution, liquidation, or winding up, to receive on such exercise, in lieu
of
the shares of Common Stock to which the Holder would have been entitled, the
same kind and amount of assets as would have been distributed or paid to the
Holder upon any such dissolution, liquidation or winding up, with respect to
such shares of Common Stock had the Holder been a holder of record of such
share
of Common Stock on the record date for the determination of those holders of
Common Stock entitled to receive any such dissolution, liquidation, or winding
up distribution.
11.
Reclassification
or Reorganization.
In case
of any reclassification, capital reorganization or other change of outstanding
shares of common stock of the Company (other than a change in par value, or
from
par value to no par value, or from no par value to par value, or as a result
of
an issuance of common stock by way of dividend or other distribution or of
a
subdivision or combination), the Company shall cause effective provision to
be
made so that the Holder shall have the right thereafter by exercising this
Warrant, to receive the kind and amount of shares of stock and other securities
and property
receivable upon such reclassification, capital reorganization or other change,
that a holder of the number of shares of common stock which might have been
purchased upon exercise of this warrant immediately prior to such
reclassification or change would have received. Any such provision shall include
provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this warrant. The foregoing
provisions of this Section 11 shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of common
stock. in the event that in any such capital reorganization, reclassification,
or other change, additional shares of common stock shall be issued in exchange,
conversion, substitution or payment, in whole, for or of a security of the
company other than common stock, any amount of the consideration received upon
the issue thereof being determined by the board of directors of the company
shall be final and binding on the holder.
12.
Miscellaneous.
a.
Successors
and Assigns.
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, except
to
the extent otherwise provided herein. 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.
b.
Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of California without regard to the principles of conflict of laws
thereof.
c. Counterparts;
Delivery by Facsimile.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument. Delivery of this Agreement may be effected by facsimile.
d.
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.
e.
Notices.
Unless
otherwise provided, any notice required or permitted hereunder shall be given
by
personal service upon the party to be notified by certified mail, return receipt
requested and: (i) if to the Company, addressed to Itec Environmental Group,
Inc., ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other address
as
the Company may designate by notice to the Holder in accordance with the
provisions of this Section; and (ii) if to the Holder, at the address indicated
on the signature page hereof, or at such other addresses as the Holder may
designate by notice to the Company in accordance with the provisions of this
Section.
f.
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
prospectively or retroactively), only with the written consent of the Company
and the Holder.
IN
WITNESS WHEREOF, the undersigned hereby sets is hand and seal this
14th
day of
August, 2006.
Itec
Environmental Group, Inc.
By:
Name:
▇▇▇▇ De Laurentiis
Title:
President and Chief Executive Officer
Holder
Name: ____________________________________
Holder
Address: __________________________________
_________________________________________________
_________________________________________________
EXHIBIT
A
NOTICE
OF EXERCISE
(To
be
signed only upon exercise of the Warrant)
TO:
Itec
Environmental Group, Inc.
The
undersigned, hereby irrevocably elects to exercise the purchase rights
represented by the Warrant granted to the undersigned on ______________ and
to
purchase thereunder __________* shares of Common Stock of Itec Environmental
Group, Inc. (the “Company”).
Dated:
________________
_________________________________________
(Signature
must conform in all respects to name
of
holder
as specified on the face of the Warrant)
_________________________________________
(Please
Print Name)
_________________________________________
(Address)
*
Insert
here the number of shares being exercised, without making any adjustment for
additional Common Stock of the Company, other securities or property which,
pursuant to the adjustment provisions of the Warrant, may be deliverable upon
exercise.
EXHIBIT
B
(FORM
OF
CONVERSION NOTICE TO BE EXECUTED
UPON
EXERCISE OF WARRANT)
CONVERSION
NOTICE
The
undersigned, the registered holder of Warrant No. _______ (the "Warrant"),
issued Itec Environmental Group, Inc. (the "Company"), hereby (1) irrevocably
elects to convert the Warrant into such number of shares of Common Stock of
the
Company as is determined pursuant to Section 1 of the Warrant, which conversion
shall be effected pursuant to the terms and conditions of the Warrant, and
(2)
directs that the certificates for such shares of Common Stock issuable upon
exercise of the Warrant be issued in the name of and
delivered
to:
_________________________________________________________________
whose
address is
_____________________________________________________________.
The
undersigned represents that the aforesaid shares of Common Stock are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with the distribution thereof and that the
undersigned has no present intention of distributing or reselling such
shares.
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(Name)
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SIGNATURE:
Dated:
________________.
NOTICE:
The signature on this Conversion Notice must correspond with the name as written
upon the face of the Warrant, or upon an assignment form attached
hereto.
AMENDMENT
NO. 1 TO LOAN AGREEMENT
THIS
AMENDMENT NO. 1 TO LOAN AGREEMENT (this "Amendment"),
is
executed as of September 7, 2006, by and between Itec Environmental Group,
Inc.,
a Delaware corporation (the "Company"),
and
Arbor ▇▇▇▇▇▇, LLC, a Delaware limited liability company (the "Lender").
WHEREAS,
the Company and the Lender entered into a Loan Agreement on August 14, 2006
(the
“Loan
Agreement”)
pursuant to which the parties effected the First Closing thereunder at which
time Lender advanced an initial Loan in the amount of $1,000,000;
and
WHEREAS,
the Lender is willing to increase its loan commitment under the Loan Agreement
to an aggregate of $2,300,000; and
WHEREAS,
the Lender is willing to provide such additional financing on terms and
conditions as set forth herein.
NOW,
THEREFORE, in consideration of the mutual covenants and agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Lender,
intending to be legally bound, hereby amend the Loan Agreement as follows:
1.
Amendment to Section 2.1. The parties agree that the first sentence of Section
2.1 of the Loan Agreement is amended to read as follows:
“According
to the terms and subject to the conditions of this Agreement, the Lender shall
loan to the Company the aggregate amount of Two Million Three Hundred Thousand
Dollars ($2,300,000.00) (the "Loan").”
2.
Conditions
Precedent to the Loan.
Section
2.4 (b) of the Loan Agreement shall be amended to read as follows:
(b)
The
Company shall have duly authorized, executed, and delivered to the Lender a
security agreement in the form attached hereto as Exhibit
B
(the
“Security
Agreement”)
to
secure the repayment of the Loan and granting the Lender a continuing security
interest in all presently existing and hereafter acquired assets and property
of
the Company of whatever nature and wherever located which such Security Interest
shall be senior to all other security interests or Encumbrances against the
assets and property of the Company other than Senior Debt (as hereafter
defined). Lender shall be entitled to a security interest pari
passu on
a
pro-rata basis with the investors participating in private placement pursuant
to
the 2006 Private Placement Memorandum (the “PPM”)
of the
Company and, except as set forth above, Lender’s security interest shall be
senior to any other indebtedness of the Company, whether now existing or created
or incurred in the future. “Senior
Debt”
shall
mean all indebtedness for all principal,
fees, expenses, interest, penalties, post-bankruptcy petition interest, and
all
other amounts payable for money borrowed from banking or other financial
institutions or governmental lending facilities that is not convertible into
equity securities of the Company, including, but not limited to the $2,000,000
loan from the California Integrated Waste Management Board (the “CIWMB
Loan”)
and
the remaining amount due and owing under the forbearance agreement by and
between the Company and the Elevation Fund, LLC (the “Forbearance
Agreement”).
3.
Other
Indebtedness.
Section
3.8 of the Loan Agreement shall be amended to read as follows:
“3.8.
Other
Indebtedness.
On and
as of the date hereof and on and as of each Closing Date, the Company does
not
and will not have any outstanding Senior Debt other than the CIWMB Loan and
the
amount due and owning pursuant to the Forbearance Agreement. For so long as
the
Note (or any note issued upon transfer of the Note, in whole or in part) remains
outstanding, the Company shall not incur, create or enter into any agreement
to
incur or create indebtedness ranking on a parity or parri
passu
with the
Notes (“Parity
Indebtedness”),
other
than the investors participating in the financing under the Company’s 2006
Private Placement Memorandum and certain other lenders, identified in
Schedule
A
to the
Security Agreement, as defined below, without the prior written consent of
the
Lender, which consent shall not be unreasonably withheld.”
4.
Events
of Default.
Section
5.1(e) shall be amended to read as follows:
“(e)
The
Effective
Date
under the Rougelot Employment Agreement shall not have occurred on or prior
to
September 15, 2006 or ▇▇. ▇▇▇▇▇▇▇▇ shall no longer serve as the Chief Executive
Officer of the Company for any reason other than his death or disability,
Voluntary departure or removal for Cause (as such terms are defined in the
Rougelot Employment Agreement); and”
5.
Issuance
of Warrants.
The
first sentence of Section 6.1 shall be amended to read as follows:
“The
Company shall issue to the Lender one or more warrants to purchase a combined
total of twenty-three million (23,000,000) shares of common stock of the Company
in the form attached hereto as Exhibit
C
(referred to herein collectively as the “Warrant”).”
6.
Effect
of Amendment.
Except
as specifically amended hereby, the Loan Agreement shall remain in full force
and effect as originally written. This Amendment shall be deemed to be
incorporate in and a part of the Loan Agreement.
7.
Titles
and Subtitles; Defined Terms.
The
titles and subtitles of the Sections of this Amendment are used for convenience
only and shall not be considered in construing or interpreting this agreement.
Capitalized terms used but not otherwise defined in this Amendment shall have
the specific meanings set forth in the Loan Agreement.
IN
WITNESS WHEREOF, each of the parties has caused this Amendment No. 1 to Loan
Agreement to be signed in its name on the date first set forth
above.
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ITEC
ENVIRONMENTAL GROUP, INC.
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▇▇▇▇
▇. De Laurentiis
Chief
Executive Officer
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ARBOR
▇▇▇▇▇▇, LLC
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Name: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
Title:
Manager
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