MUTUAL SETTLEMENT AND RELEASE AGREEMENT AMONG EXCIPIO, S.A., ITEC ENVIRONMENTAL GROUP, INC., AND ITEC CAPITAL GROUP, LLC
Exhibit
10.3
AMONG
EXCIPIO,
S.A.,
ITEC ENVIRONMENTAL GROUP, INC.,
AND
ITEC CAPITAL GROUP, LLC
This
Mutual Settlement and Release Agreement is entered into this 6th
day of
November 2006 (the “Agreement”)
by and
among Excipio S.A., a corporation created under the laws of the British Virgin
Islands (“Excipio”),
Itec
Environmental Group, Inc., a Delaware corporation (“Itec”)
and
Itec Capital Group, LLC, a Washington limited liability company (“ICG”)
(collectively referred to at times herein as the “Parties”
and
individually as “Party”).
This
Agreement is entered into for the express purpose of resolving all of the
differences among the Parties.
WHEREAS,
the Parties agree that the consulting agreement by and between Excipio and
ICG
(the “Consulting
Agreement”),
dated
February 6, 2006, contains terms relevant to this Agreement, a copy of which
is
attached hereto as Exhibit
A;
WHEREAS,
the Parties agree that the funding agreement by and between ICG and Itec (the
“Funding
Agreement”),
dated
February 6, 2006, contain terms relevant to this Agreement, a copy of which
is
attached hereto as Exhibit
B;
NOW,
THEREFORE, it is the desire of the Parties to state in writing the details
of
their Agreement. For good and valuable consideration between the Parties, the
receipt of which is hereby acknowledged, it is mutually agreed as
follows:
| 1. |
Itec
Cash Payments to Excipio.
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A. The
Parties hereby acknowledge that, as of the date of this Agreement, Excipio
has
received Three Hundred Eleven Thousand, Three Hundred Dollars ($311,300) for
fees and expenses under the Funding Agreement and Consulting
Agreement.
B. Upon
execution of this Agreement, Itec agrees to pay to Excipio, in settlement of
all
remaining fees and expenses owed to Excipio, the cash payments in the total
sum
of Four Hundred Twenty-Eight Thousand, Seven Hundred Dollars ($428,700) (the
“Settlement
Amount”)
in
accordance with the following schedule:
| i. |
Two
Hundred Thousand Dollars ($200,000) shall be paid within twenty-four
(24)
hours of the execution of this Agreement;
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| ii. |
Eighty
Thousand Dollars ($80,000) shall be paid within forty-eight (48) hours
of
Itec receiving an additional One Million Dollars ($1,000,000) in
additional financing; and
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| iii. |
the
remaining One Hundred Forty-Eight Thousand, Seven Hundred Dollars
($148,700) shall be paid in four (4) equal monthly installments of
Thirty-Seven Thousand, One Hundred Seventy-Five Dollars ($37,175) and
due
upon the first day of each month beginning on the earlier of:
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1
| 1. |
Itec
receiving One Million Five Hundred Thousand Dollars ($1,500,000) in
financing in addition to the One Million Dollars ($1,000,000) in financing
described in Subsection 1(B)(ii) above; or
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| 2. |
February
1, 2007.
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| 2. |
Warrant
Shares.
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A. The
Parties hereby acknowledge that, as of the date of this Agreement, Excipio
has
not been issued any warrant shares in connection with the Funding Agreement
and
Consulting Agreement.
B. Upon
execution of this Agreement, Itec shall issue to Excipio the following
warrants:
| i. |
a
warrant to purchase one million four hundred forty thousand (1,440,000)
shares of common stock with a strike price of Six Cents ($0.06) per
share.
A copy of this warrant is attached hereto as Exhibit
C;
and
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| ii. |
a
warrant to purchase three million seven hundred forty-eight thousand
(3,748,000) shares of common stock with a strike price of Twelve Cents
($0.12) per share. A copy of this warrant is attached hereto as
Exhibit
D.
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3. Itec
Shares of Common Stock. Itec
shall deliver to Excipio additional shares of Itec’s common stock forthwith
pursuant to any Convertible Debt, as defined below, which converts on or before
February 6, 2007 in an amount equal to the percentage of the Convertible Debt
that converts during this period, multiplied by and up to a maximum of seven
million three hundred eight-four thousand, six hundred fifteen (7,384,615).
These shares shall be delivered with piggyback registration rights. For purposes
of clarification, if one hundred percent (100%) of Convertible Debt is converted
on or before February 6, 2007, Itec shall issue to Excipio seven million three
hundred eight-four thousand, six hundred fifteen (7,384,615) shares to Excipio.
If none of the Convertible Debt holders convert on or before February 6, 2007,
Excipio shall receive zero (0) shares.
For
purposes of this Agreement, “Convertible
Debt”
shall
mean the dollar amount of all of the convertible debentures that have been
issued pursuant to (i) Itec’s 2006 private placement memorandum and (ii) certain
short term bridge loans effected by Itec and totaling Three Million Dollars
($3,000,000).
2
4. Public
Statements - No Disparagement.
No Party
hereto shall make any disparaging statements regarding any other Party hereto
with regard to the matters leading up to and at anytime after this
Agreement.
5. Mutual
Release. Upon
fulfillment of Sections 1, 2 and 3 of this Agreement, the
Parties hereto agree to release and discharge each other, and each of their
respective partners, agents, employees, attorneys, representatives, and the
successors, heirs and assigns of any of the preceding, from all sums of money,
claims, demands, contracts, actions, debts, controversies, agreements, damages
and causes of action whatsoever, whether known or unknown, suspected or
unsuspected by them, which they now own, hold, have or claim to have or at
any
time heretofore owned, held or claimed to have held against each other, by
reason of any matter or thing alleged or referred to, or in any way connected
with, arising out of or related to any of the matters, acts, events or
occurrences alleged or referred to in the
Agreement including, but not limited to the Consulting Agreement and the Funding
Agreement.
6. Cancellation
and Amendment of Agreements.
Upon
fulfillment of Sections 1, 2 and 3 of the Agreement, the Parties hereto agree
that:
| A. |
the
Consulting Agreement shall be cancelled in its entirety and any further
remaining obligations existing under this Consulting Agreement shall
be
waived and dismissed; and
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| B. |
the
Funding Agreement shall be amended to reflect the settlement of fees
and
expenses due, owed and paid pursuant to this Agreement. Upon execution
of
this Agreement, no additional fees or expenses shall accrue or become
due
in accordance with the Funding Agreement.
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7. Release
of Known and Unknown Claims.
The
Parties acknowledge that there is risk that subsequent to the execution of
this
Agreement, one or more of the Parties will incur or suffer loss, damage or
injury which is in some way caused by the matters referred to above, but which
is unknown and unanswered at the time this Agreement is signed. Accordingly,
the
Parties hereby assume the above-mentioned risks and this Agreement shall apply
to all unknown or unanticipated results of the transactions and occurrences
hereinabove described, as well as those known and anticipated, and the parties
do hereby waive any and all rights under California Civil Code Section 1542,
which section reads as follows:
"A
general release does not extend to claims which the creditor does not know
or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the
debtor."
8. Mutual
Consideration. Each
of
the agreements, releases, and other provisions of this Agreement is executed
and
entered into in consideration for and in reliance upon the due execution and
enforceability of all other agreements, releases, and other provisions of this
Agreement. The effectiveness and the validity of each agreement or other
provision hereof is conditioned upon the effectiveness and validity of each
of
the other agreements, releases, and other provisions hereof.
3
9. Exclusive
Representations. The
Parties hereto represent, warrant, and agree that upon executing and entering
into this Agreement that they, and each of them, are not relying upon and have
not relied upon any representation, promise, or statement made by anyone which
is not recited, contained, or embodied in this Agreement. The parties, and
each
of them, understand, agree, and expressly assume the risk that any fact not
recited, contained, or embodied in this Agreement may turn out hereafter to
be
other than, different from, or contrary to the facts now known to them or
believed by them to be true, and further agree that this Agreement shall be
effective in all respects notwithstanding, and shall not be subject to
termination, modification, or rescission by reason of, any such difference
in
facts.
10. Reliance
Upon Separate Legal Counsel. The
Parties to this Agreement are represented by counsel or have had the opportunity
to seek legal advice with respect to the terms of this Agreement.
11. No
Admission of Liability.
The
Parties hereto understand and agree that by execution of this Agreement there
is
no admission of any liability of any nature whatsoever and that this settlement
is made entirely as a compromise and for the purpose of settlement of a disputed
claim.
12. Mutual
Settlement Cooperation. The
Parties agree to execute and deliver all such other and additional instruments,
notices, consents or other documents and to do all such other acts and things
as
may be reasonably necessary to carry out the terms of this
Agreement.
13. Applicable
Law.
This
Agreement shall be governed and interpreted in accordance with the laws of
the
State of California.
14. Warranty
and Indemnity.
Each
Party represents and warrants that it has not assigned or transferred and will
not assign or transfer to any other persons, firm, or corporation, in any
manner, by way of subrogation or operation of law, or otherwise, any portion
of
any claim, right, demand action, or cause of action that it has or might have
arising out of any of the matters referred to in this Agreement, nor any portion
of any recovery or settlement to which it might be entitled. In the event that
claim, demand, or suit should be made or instituted against any party or parties
because of any such purported assignment, subrogation, or transfer, the Party
from whom such purported assignment, subrogation, or transfer was alleged to
have occurred agrees to indemnify and hold harmless the other party against
such
claim, suit, or demand, including necessary expenses of investigation,
attorneys' fees and costs.
4
15.
Attorneys’
Fees and Costs for Enforcement.
The
Parties hereto agree that, if any action or dispute arises regarding enforcement
of this Agreement, or any of the terms, covenants, or conditions hereof, whether
the same shall proceed to judgment or not, the prevailing party shall be
reimbursed for all reasonable expenses incurred in resolving such dispute,
including attorneys' fees.
16. Binding
Upon Successors.
This
Agreement shall be binding upon the heirs, administrators, executors,
successors, and assigns of the respective parties hereto, and any parent,
subsidiary and affiliated entity of each Party.
17. Entire
Agreement.
This
Agreement supersedes any and all prior agreements, understandings or
arrangements, whether written or oral, between the Parties. This Agreement
contains the entire agreement between the Parties with respect to the subject
matter hereof. There are no promises, agreements, conditions, undertakings,
understandings, warranties, covenants or representa-tions, oral or written,
express or implied, between them with respect to this Agreement or the matters
described in this Agreement, except as set forth in this Agreement. Any such
negotiations, promises, or understandings shall not be used to interpret or
constitute this Agreement.
18. Events
of Default. The
occurrence of any of the following events (each an “Event
of Default”)
not
cured within the Cure Period (defined below), and results in any Party failing
to fulfill its obligations under this Agreement, if any, shall constitute and
Event of Default:
| A. |
a
breach of any provision, representation, warranty, understanding or
other
covenant of this Agreement, which is not cured within thirty (30) days
following written notice thereof (the “Cure
Period”)
and
|
| B. |
(i)
the application for the appointment of a receiver or custodian for
Itec or
the property of Itec, (ii) the entry of an order for relief or the
filing
of a petition by or against Itec under the provisions of any bankruptcy
or
insolvency law, (iii) any assignment for the benefit of creditors by
or
against Itec, or (iv) Itec becomes
insolvent.
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Effect
of Default.
Upon the
occurrence of any Event of Default that is not cured within the Cure Period,
Excipio may elect, by written notice delivered to Itec, to take any or all
of
the following actions: (i) declare the outstanding amounts under the Agreement
to be forthwith due and payable, whereupon the entire unpaid Settlement Amount
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 Itec,
anything contained herein or in any of the Agreement 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.
19. Counterparts
and Facsimiles.
This
Agreement may be executed in any number of counterparts, each of which shall
constitute a duplicate original hereof. The Parties agree to accept facsimile
copies of signatures as if originals.
20. Authority
to Bind Corporate Parties. The
undersigned represent and warrant their authority to bind by their signature
the
corporate parties to this Agreement.
5
21. Consultation.
The
Parties acknowledge that each has been advised to seek legal consultation
regarding this Agreement and has either retained or had sufficient opportunity
to retain such legal representation and hereby waives insufficiency of legal
consultation or representation as a claim or defense in any action arising
out
of this Agreement.
22. Miscellaneous.
| A. |
If
any term or provision of this Agreement or any application thereof
shall
be invalid or unenforceable, such term or provision shall be deemed
to be
severed and the remainder of this Agreement and any other application
of
such term or provision shall not be affected or invalidated
thereby.
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| B. |
Except
as otherwise provided in this Agreement, each Party will bear its own
attorneys’ fees and costs incurred in this matter through the date of
execution of this Agreement. Should any of the Parties institute any
action or proceeding to enforce any provision of this Agreement, or
for
damages by reason of any alleged breach of any provision of this
Agreement, or for a declaration of any party’s rights or obligations
hereunder, or for any other judicial remedy, the prevailing party in
such
action or proceeding shall recover from the losing party all reasonable
attorneys’ fees, costs and expenses incurred by the prevailing party in
such action or proceeding.
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| C. |
All
notices, demands and communications hereunder shall be in writing and
personally delivered or sent by first class mail, certified or registered,
postage prepaid, return receipt requested, addressed to the parties
at the
addresses below set forth, or at such other address as any Party shall
have furnished to the other party in writing, or shall be given by
telegram, telex, facsimile transmission, overnight courier or hand
delivery, in any case to be effective when received, provided that
actual
receipt shall constitute notice regardless of method of
delivery.
|
|
If
to Excipio:
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Excipio
Group, S.A.
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▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
|
|
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▇▇▇▇▇▇
▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇
|
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|
:
|
Attn
▇▇▇▇▇ Coloris
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Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
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If
to Itec:
|
Itec
Environmental Group
|
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▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇
|
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Attn:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, CEO
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Fax:
(209) 881-352
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6
|
If
to ICG:
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Itec
Capital Group, LLC
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c/o
The ▇▇▇▇ Law Group, PLLC
|
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▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
|
|
|
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
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Attn:
▇▇▇▇▇ ▇. ▇▇▇▇, Manager
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Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
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[Remainder
of page intentionally left blank]
7
IN
WITNESS WHEREOF,
the
Parties have executed this Agreement on the date first above
written.
EXCIPIO
GROUP, S.A.
_____________________________
By:
▇▇▇▇▇
Coloris
Its:
Secretary
ITEC
ENVIRONMENTAL GROUP, INC.
_____________________________
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its:
Director & CEO
ITEC
CAPITAL GROUP, LLC
_____________________________
By:
▇▇▇▇▇
▇. ▇▇▇▇
Its:
Manager
8
Exhibit
A
Consulting
Agreement
9
Exhibit
B
Funding
Agreement
10
Exhibit
C
Form
of Warrant
11
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 IN ACCORDANCE WITH THE PROVISIONS OF REGULATION
S
UNDER THE ACT, 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 1,440,000 Shares
of
Common Stock
Itec
Environmental Group, inc.
Date
of
Issuance: November 6, 2006
No.
148
THIS
CERTIFIES that, for value received, Excipio Group, S.A., 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. 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
(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, (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 shares of Common Stock specified in such
notice, provided this Warrant has vested on or prior to the date such notice
is
delivered. Each certificate representing Warrant Shares shall bear the legend
or
legends required by applicable securities laws as well as such other legend(s)
the Company requires to be included on certificates for its Common Stock. 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 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. All shares
of
Common Stock issued upon the exercise of this Warrant shall be validly issued,
fully paid, and nonassessable.
The
Warrant shall expire on April 15, 2015 (the “Expiration Date”). The Investor may
exercise the warrant at any time prior to the Expiration Date. The Company
has
no restriction on the sale or transfer of the Warrant or Warrant Shares;
however, the Investor is required to comply with all state and U.S. laws and
regulations relating to security sales and transfers.
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.
12
4.
Transfer
of Warrant and Warrant Shares.
The
Holder may sell, pledge, hypothecate, or otherwise transfer this Warrant, in
whole, in accordance with and subject to the terms and conditions set forth
in
the Subscription Agreement and then 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.
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 1,440,000 shares
of
the Company’s Common Stock, as adjusted in accordance with this Agreement.
8.
Exercise
Price; Adjustment of Warrants.
a.
Determination
of Exercise Price.
The per
share purchase price (the “Exercise Price”) for each of the Warrant Shares
purchasable under this Warrant shall be equal to $0.06.
b. Net
Issue Exercise.
In lieu
of exercising this Warrant, the Holder may elect to receive Shares equal to
the
value of this Warrant (or the portion thereof being canceled) by surrender
of
this Warrant at the principal office of the Company together with notice of
such
election, in which event the Company shall issue to the Holder a number of
Shares computed using the following formula:
X
= Y
(A-B)
-------
A
Where
X
=
the
number of the Shares to be issued to the Holder.
Y
=
the
number of the Shares purchasable under this Warrant.
A
=
the
fair market value of one Share on the date of determination.
B
=
the per
share Exercise Price (as adjusted to the date of such calculation).
Fair
Market Value.
For
purposes of this section, the per share fair market value of the Shares shall
mean:
(i)
If
the
Company's Common Stock is publicly traded, the per share fair market value
of
the Shares shall be the average of the closing prices of the Common Stock as
quoted on the Nasdaq National Market or the principal exchange on which the
Common Stock is listed, or if not so listed then the fair market value shall
be
the average of the closing bid prices of the Common Stock as published in The
Wall Street Journal, in each case for the fifteen (15) trading days ending
five
(5) trading days prior to the date of determination of fair market
value;
(ii)
If
the
Company's Common Stock is not so publicly traded, the per share fair market
value of the Shares shall be such fair market value as is determined in good
faith by the Board of Directors of the Company after taking into consideration
factors it deems appropriate, including, without limitation, recent sale and
offer prices of the capital stock of the Company in private transactions
negotiated at arm's length.
13
c. 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.
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.
g.
Ratchet
Protection.
In the
event that the Company sells any shares of common stock, grants options or
warrants to purchase any shares of its common stock, issues securities
convertible into shares of its common stock or enters into any agreement to
do
any of the same (other than as compensation for employment or consulting
services) at a price (the “Lower Price”) which is lower than the then Exercise
Price, the Exercise Price shall be adjusted downward to the Lower Price. Any
such adjustment shall apply for all such issuances.
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.
14
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 purchase the kind and amount of shares of stock and other securities
and PROPERTY RECEIVABLE UPON SUCH RECLASSIFICATION, CAPITAL REORGANIZATION
OR
OTHER CHANGE, BY 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. 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 12 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 each of the Investors in accordance
with
the provisions of this Section; and (ii) if to the Warrant holder, at the
address indicated on the signature page hereof, or at such other addresses
as
such 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 a majority in interest of the Holders.
g.
Entire
Agreement.
This
Agreement, the Memorandum (including the appendices and schedules thereto)
by
and between the Company and the Holder, constitute the entire agreement among
the parties hereto with respect to the subject matter hereof and thereof and
supersede all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties hereto.
15
IN
WITNESS WHEREOF, the undersigned hereby sets is hand and seal this 6th
day of
November, 2006.
Itec
Environmental Group, Inc.
By:
____________________________________
Name:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title:
Chief Executive Officer
Investor
Name: ____________________________________
Investor
Address: __________________________________
_________________________________________________
_________________________________________________
16
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.
17
Exhibit
D
Form
of Warrant
18
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 IN ACCORDANCE WITH THE PROVISIONS OF REGULATION
S
UNDER THE ACT, 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 3,748,000 Shares of Common Stock
Itec
Environmental Group, inc.
Date
of
Issuance: November 6, 2006
No.
149
THIS
CERTIFIES that, for value received, Excipio Group, S.A., 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. 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
(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, (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 shares of Common Stock specified in such
notice, provided this Warrant has vested on or prior to the date such notice
is
delivered. Each certificate representing Warrant Shares shall bear the legend
or
legends required by applicable securities laws as well as such other legend(s)
the Company requires to be included on certificates for its Common Stock. 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 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. All shares
of
Common Stock issued upon the exercise of this Warrant shall be validly issued,
fully paid, and nonassessable.
The
Warrant shall expire on April 15, 2010 (the “Expiration Date”). The Investor may
exercise the warrant at any time prior to the Expiration Date. The Company
has
no restriction on the sale or transfer of the Warrant or Warrant Shares;
however, the Investor is required to comply with all state and U.S. laws and
regulations relating to security sales and transfers.
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.
19
4.
Transfer
of Warrant and Warrant Shares.
The
Holder may sell, pledge, hypothecate, or otherwise transfer this Warrant, in
whole, in accordance with and subject to the terms and conditions set forth
in
the Subscription Agreement and then 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.
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 3,748,000 shares of the Company’s Common Stock,
as adjusted in accordance with this Agreement.
8.
Exercise
Price; Adjustment of Warrants.
a.
Determination
of 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.
b. Net
Issue Exercise.
In lieu
of exercising this Warrant, the Holder may elect to receive Shares equal to
the
value of this Warrant (or the portion thereof being canceled) by surrender
of
this Warrant at the principal office of the Company together with notice of
such
election, in which event the Company shall issue to the Holder a number of
Shares computed using the following formula:
X
= Y
(A-B)
-------
A
Where
X
=
the
number of the Shares to be issued to the Holder.
Y
=
the
number of the Shares purchasable under this Warrant.
A
=
the
fair market value of one Share on the date of determination.
B
=
the per
share Exercise Price (as adjusted to the date of such calculation).
Fair
Market Value.
For
purposes of this section, the per share fair market value of the Shares shall
mean:
(i)
If
the
Company's Common Stock is publicly traded, the per share fair market value
of
the Shares shall be the average of the closing prices of the Common Stock as
quoted on the Nasdaq National Market or the principal exchange on which the
Common Stock is listed, or if not so listed then the fair market value shall
be
the average of the closing bid prices of the Common Stock as published in The
Wall Street Journal, in each case for the fifteen (15) trading days ending
five
(5) trading days prior to the date of determination of fair market
value;
(ii)
If
the
Company's Common Stock is not so publicly traded, the per share fair market
value of the Shares shall be such fair market value as is determined in good
faith by the Board of Directors of the Company after taking into consideration
factors it deems appropriate, including, without limitation, recent sale and
offer prices of the capital stock of the Company in private transactions
negotiated at arm's length.
20
c. 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.
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.
g.
Ratchet
Protection.
In the
event that the Company sells any shares of common stock, grants options or
warrants to purchase any shares of its common stock, issues securities
convertible into shares of its common stock or enters into any agreement to
do
any of the same (other than as compensation for employment or consulting
services) at a price (the “Lower Price”) which is lower than the then Exercise
Price, the Exercise Price shall be adjusted downward to the Lower Price. Any
such adjustment shall apply for all such issuances.
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.
21
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 purchase the kind and amount of shares of stock and other securities
and PROPERTY RECEIVABLE UPON SUCH RECLASSIFICATION, CAPITAL REORGANIZATION
OR
OTHER CHANGE, BY 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. 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 12 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 each of the Investors in accordance
with
the provisions of this Section; and (ii) if to the Warrant holder, at the
address indicated on the signature page hereof, or at such other addresses
as
such 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 a majority in interest of the Holders.
g.
Entire
Agreement.
This
Agreement, the Memorandum (including the appendices and schedules thereto)
by
and between the Company and the Holder, constitute the entire agreement among
the parties hereto with respect to the subject matter hereof and thereof and
supersede all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties hereto.
22
IN
WITNESS WHEREOF, the undersigned hereby sets is hand and seal this 6th
day of
November, 2006.
Itec
Environmental Group, Inc.
By:
____________________________________
Name:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title:
Chief Executive Officer
Investor
Name: ____________________________________
Investor
Address: __________________________________
_________________________________________________
_________________________________________________
23
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.
24