Rodney S. Rougelot Employment Agreement EMPLOYMENT AGREEMENT
Exhibit
10.6
▇▇▇▇▇▇
▇.
▇▇▇▇▇▇▇▇ Employment Agreement
This
Employment Agreement dated as of July 31, 2006 (“Agreement”)
is
made by and between Itec
Environmental Group, Inc.,
a
corporation duly organized and existing under the laws of the State of Delaware
(the “Company”),
and
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
(“Executive”)
(referred to collectively herein as the “Parties”).
RECITALS
WHEREAS,
the
Company desires to hire Executive and Executive desires to become employed
by
the Company; and
WHEREAS,
the
Company and Executive have determined that it is in their respective best
interest to enter into this Agreement on the terms and conditions as set forth
herein;
NOW,
THEREFORE,
in
consideration of the premises and the mutual covenants and promises contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as
follows:
1. Nature
of Agreement.
Any
and
all prior oral understandings, offers, and/or representations (if any) with
respect to the employment of Executive are deemed by the parties to be either
canceled and void and/or are deemed to be superseded by this final written
Agreement.
2. Employment
Terms and Duties.
2.1. Term
of Employment.
The
employment of Executive under this Agreement shall be deemed to have commenced
on August 1, 2006 or such later date as the company satisfied to the reasonable
satisfaction of Executive the conditions set for on Schedule 2.1 hereto (the
“Effective
Date”),
and
shall continue until terminated in accordance with Section 6 hereof (the
“Employment
Term”).
2.2. Location.
Executive agrees that he shall carry out his duties and obligations under the
terms of this Agreement at: (a) such reasonably configured premises within
the
State of California as shall be identified by Executive (which shall, during
the
Employment Term, be rented by the Company for use hereunder by Executive),
or
(b) the Company’s principal office in Riverbank, California, as reasonably
required by the Company from time to time.
2.3. Position
and Primary Responsibility.
(a) It
is
understood that Executive shall serve as (i) President and Chief Executive
Officer, and (ii) as a Director of the Company. Contemporaneously with the
execution and delivery of this Agreement, the Company shall effectuate all
such
action as shall be required to procure the appointment of Executive as President
and Chief Executive Officer, and as a member of the Board of Directors, of
the
Company.
1
(b) Executive,
as Chief Executive Officer, shall have general supervision, direction and
control of the business and affairs of the Company. Accordingly, all officers
of
the Company other than the Chief Executive Officer shall perform their duties
under the direction of, and subject to, the authority of the Chief Executive
Officer.
(c) In
connection with the employment of Executive, Executive
shall have all of the powers and duties of the Chief Executive Officer, as
prescribed by the Bylaws of the Company in effect on the date hereof; and,
without limitation, shall have general supervision, direction and control of
the
business and affairs of the Company, and of each and every subsidiary of the
Company, and discretionary power, subject to board approval, to hire officers
of
the Company
and its
subsidiaries.
The
Company agrees that, during the Employment Term, neither the Restated
Certificate of Incorporation, nor the Bylaws, of the Company shall at any time
be amended in a manner inconsistent with the foregoing or the additional
provisions of this Agreement.
2.4. Exclusivity.
Executive agrees to devote his full time, attention, energies, solely and
exclusively in the performance of his duties under the terms of this Agreement.
However, the expenditure of reasonable amounts of time for educational,
charitable, or professional activities shall not be deemed a breach of this
Agreement if those activities do not materially interfere with the services
required under this Agreement, and shall not require the prior written consent
of the Company’s Board of Directors. This Agreement shall not be interpreted to
prohibit Executive from making passive personal investments or conducting
private business affairs, or serving on the boards of directors of other
companies or other entities, if those activities do not materially interfere
with the services required under this Agreement and do not violate Sections
5.1,
9
and
11
of this
Agreement.
3. Compensation.
3.1. Base
Salary.
In
consideration for the services rendered to the Company hereunder by Executive,
the Company shall, during his employment, pay Executive a salary at the annual
rate of Three Hundred Thousand Dollars ($300,000.00) (as may be adjusted
pursuant to section 3.5, the “Base
Salary”),
less
statutory deductions and withholdings, payable to Executive on a bi-monthly
basis. In the event that the Company hires a chief operating officer
(“COO”)
with
an annual base salary that exceeds Two Hundred Seventy Three Thousand Dollars
($273,000.00), Executive’s Base Salary shall be increased to be at least 10%
more than the COO’s base salary. For purposes of clarity, in no event shall
Executive’s Base Salary be decreased pursuant to the preceding sentence.
3.2. Payment.
All
compensation payable to Executive hereunder shall be subject to all applicable
state and federal employment law(s); it being understood that Executive shall
be
responsible for the payment of all taxes resulting from a determination that
any
portion of the compensation and/or benefits paid/received hereunder is a taxable
event to Executive; it being further understood that Executive shall hold the
Company harmless from any governmental claim(s) for Executive’s personal tax
liabilities, including interest or penalties, arising from any failure by
Executive to pay his individual taxes when due.
2
3.3. Reimbursement
of Expenses.
During
the Employment Term, the Company shall reimburse Executive
for all reasonable and necessary expenses incurred by Executive
while performing his duties under this Agreement in accordance with the
Company’s customary practices for its executive employees, subject to provision
by Executive
of documentation reasonably satisfactory to the Board
of
Directors. The Company further agrees to provide Executive with a laptop
computer and such other further technological tools and services as Executive
may reasonably request in performing his duties under this Agreement.
3.4. Cash
Bonuses.
Executive
shall have a bonus entitlement during each calendar year (or portion thereof)
of
the Employment Term of up to one hundred percent (100%) of his Base Salary
for
such year (or portion thereof). Within thirty (30) days of the Effective Date,
the Company and Executive
shall concur, within their respective reasonable discretion, on the criteria
and
procedures applicable to establishment of Executive’s entitlement to such amount
for the then current calendar year; and, thereafter, within thirty (30) days
prior to the commencement of each calendar year of the Employment Term, the
Company and Executive
shall concur, within their respective reasonable discretion, on the criteria
and
procedures applicable to establishment of Executive’s entitlement to such amount
for the ensuing calendar year. Such criteria shall include, without limitation:
(i) specified revenue targets for the Company during the applicable period;
(ii)
specified EBITDA targets for the Company during the applicable period (as
defined pursuant to consensus between the Company and Executive);
and (iii) such
additional
specified targets as
the
Company and Executive
mutually
determine.
Any
such cash bonuses shall be paid by the Company no later than March 15 of the
taxable year commencing after the year in which the Executive’s right to such
payment becomes vested.
3.5. Compensation
Review.
It is
understood and agreed that Executive’s performance will be reviewed by the
Company’s Board of Directors at
the end
of each calendar year
during
which this
Agreement is in force for the purpose of determining whether or not Executive’s
Base Salary and/or cash bonuses should be increased; it being further understood
that the decision to increase Executive’s compensation shall be at the sole and
exclusive option of the Board of Directors.
3.6. Equity
Awards.
(a) The
Executive shall be entitled to a combination of (x) restricted grants of common
stock, $.0.001 par value (“Common
Stock”),
of
the Company and (y) grants of “incentive
stock options” (as defined under Section 422 of the Internal Revenue Code of
1986, as amended (the
“Code”)),
exercisable over a period of ten (10) years after grant with respect to shares
of Common Stock, in the aggregate covering the lower of (i) eight percent (8%)
of the Common Stock Equivalents (as defined below) or (ii) twenty eight million
(28,000,000) shares of Common Stock (the “Executive
Shares”)
(such
number of shares appropriately adjusted for any subsequent stock dividends,
stock splits, combinations, reclassifications and the like), as required by
this
Section 3.6 and subject to adjustment as set forth in Section 3.6(d) below
on
the first anniversary of the Effective Date (the “True
Up Date”).
Executive
shall
be
entitled to
receive
additional equity awards (the “Additional
Equity Awards”)
in
accordance with Schedule
A,
attached
hereto and incorporated herein. Any Additional Equity Awards shall be
disregarded for all purposes under this Section 3.6, including, but not limited
to any adjustments to the number of Executive Shares issued or issuable to
Executive hereunder. For purposes hereof, “Common
Stock Equivalents”
shall mean the number of shares of Common Stock then outstanding,
plus the
total
maximum aggregate number of shares that are issuable pursuant to any
rights to subscribe for or purchase, and any options or
warrants for
the
purchase of, shares of Common Stock, plus the
total
maximum aggregate number of shares that are issuable pursuant to any
stock
or securities convertible into or exchangeable for shares of Common Stock and
any options
or
warrants
therefor
(all of the foregoing calculated after giving effect to the operation of any
and
all provisions designed to protect against dilution contained in securities
theretofore issued and other obligations theretofore entered into by the Company
directly or indirectly triggered as a result of consummation of the transactions
contemplated hereunder or any other event or circumstance).
3
(b) Promptly
after the execution and delivery of this Agreement, the Company, at its expense,
shall engage an independent appraiser mutually satisfactory to the Company
and
Executive,
in their respective reasonable discretion, to determine the fair market value
per share (the “Appraised
Value”)
of
Common Stock issuable to Executive under this Section 3.6, as at the respective
dates of issuance of, respectively, of the Restricted Shares, the Initial
Options and the Additional Options (as those terms are defined below). As soon
as practicable after determination of the initial Appraised Value, but in any
event within thirty (30) days of the date of this Agreement (such date of
issuance, the “Original
Issue Date”)
, the
Company shall issue and deliver to Executive the following equity
awards:
(x) A
number
of shares of Common Stock (the “Restricted
Shares”),
as
determined by Executive with an aggregate Appraised Value of up to
Seven
Hundred Fifty Thousand ($750,000.00),
such
shares to be subject
to repurchase
by the Company at a purchase price per share equal to the Taxable Amount Per
Share (as defined below). ;
“Taxable
Amount Per Share”
shall
mean the quotient obtained by dividing (i) product of (1) the aggregate amount
of income tax that Executive realizes pursuant to applicable federal, state
and
local tax laws as a result of receipt of the Restricted Shares multiplied by
(2)
Executive’s marginal tax rate with respect to such income under applicable
federal, state and local tax laws, divided by (ii) the total number of
Restricted Shares issued to Executive (as appropriately adjusted to reflect
stock splits, stock dividends and the like).
(y) If
the
Restricted Shares do not equal eight percent (8%) of the Common Stock
Equivalents outstanding on the Original Issue Date, then the Company shall
issue
incentive stock options (the “Initial
Options”)
exercisable, over a period of ten years after grant at a price per share equal
to the Appraised Value per share of Common Stock on the date of grant,
determined by such appraiser as aforesaid, exercisable for that number of shares
of Common Stock (the “Initial
Option Shares”)
equal
to the difference obtained by subtracting (i) the number of Restricted Shares
from (ii) that
number of shares equal to eight percent (8%) of the Common Stock Equivalents
outstanding on the Original Issue Date.
The
Initial Options
shall
also be subject to such additional terms and conditions (without, however,
any
additional conditions to exercisability as aforesaid) as shall be mutually
acceptable to the Company and Executive, in their respective reasonable
discretion.
4
(z) The
Restricted Shares and Initial Options (if any) shall vest on the following
schedule (i) the number of Restricted Shares equal to two percent (2%) of the
total number of Common Stock Equivalents
outstanding
on the
Original Issue Date shall vest immediately upon issuance (the “Initially
Vested Shares”);
(ii)
if the Financing (as defined below) is completed prior to the True Up Date,
then
that number of Restricted Shares (or all of the remaining unvested Restricted
Shares that Executive then holds if such number is less than two percent (2%)
of
the total number of Common Stock Equivalents
outstanding on such date)
plus
Initial Options (if the remaining unvested Restricted Shares that Executive
then
holds is less than two percent (2%) of the total number of Common Stock
Equivalents
outstanding on such date),
in the
aggregate, equaling two percent (2%) of the total number of Common Stock
Equivalents
outstanding
on and
as of the closing date of the Financing shall vest on such date; (iii) the
number of Restricted Shares (or all of the remaining unvested Restricted Shares
that Executive then holds if such number is less than two percent (2%) of the
total number of Common Stock Equivalents
outstanding on such date)
plus
Initial Options (if the remaining unvested Restricted Shares that Executive
then
holds is less than two percent (2%) of the total number of Common Stock
Equivalents
outstanding on such date),
in the
aggregate, equaling two percent (2%) of the total number of Common Stock
Equivalents
outstanding
on and
as of the True Up Date shall vest on such date and (iv) any remaining unvested
Restricted Shares and Initial Options as of the True Up Date shall vest ratably
on a monthly basis such that all of the remaining unvested Restricted Shares
and
Initial Options shall be fully vested
on the
second anniversary of the Effective Date (provided that all of the unvested
Restricted Shares and Initial Options shall become fully vested upon a
“Change-of-Control” (as
defined below).
(c) In
the
event that the Company does not complete a Financing (as defined below) prior
to
the True Up Date, Executive shall forfeit (in accordance with Section 3.6(d)(y)
below) rights to that number of Executive Shares , if any, necessary to reduce
the total amount of Executive Shares subject to this Agreement to six percent
(6%) of the Common Stock Equivalents on the True Up Date. “Financing”
shall
mean any transaction or series of transactions that close on or prior to the
True Up Date in which the Company receives at least Eight Million Dollars
($8,000,000) (or such other amount as mutually agreed upon dollar amount by
the
Parties). In addition, the Restricted Shares other than the Initially Vested
Shares shall be subject to an irrevocable proxy exercisable by the Board of
Directors of the Company (with Executive abstaining) until the earlier to occur
of (i) the closing of the Financing, or (ii) the True Up Date.
(d) Subject
to Section 3.6(c) above, on the True Up Date the total number of Executive
Shares shall be adjusted pursuant to this Section 3.6(d) (the “True
Up”)
so
that after giving effect to the True Up the Executive Shares shall represent
either (i) eight percent (8%) of the Common Stock Equivalents outstanding on
the
True Up Date if the Financing has closed by such date or (ii) six percent (6%)
of the Common Stock Equivalents outstanding on the True Up Date if the Financing
has not closed by such date.
5
(x) In
the
event that Executive is entitled to receive additional Executive Shares pursuant
to the True Up, the Company shall grant Executive additional
incentive
stock options (the “Additional
Options”) exercisable,
over a period of ten (10) years after grant at a price per share equal to the
fair market value per share of Common Stock on the date of grant determined
by
the appraiser as aforesaid, with respect to a number of shares of Common Stock
(the “Additional
Option Shares”)
equal
to the difference,
if
any,
obtained
by subtracting (x) the sum of the number of Restricted Shares plus the Initial
Option Shares from (y) a number of shares that equals eight percent (8%) of
the
Common Stock Equivalents outstanding on the True Up Date if the Financing has
closed by such date or six percent (6%) of the Common Stock Equivalents
outstanding on the True Up Date if the Financing has not closed by such
date.
The
Additional Options shall vest and become exercisable on a
monthly
basis such that the Additional Options shall be fully vested
on the
second anniversary of the Effective Date (provided that all such options shall
become immediately exercisable upon a Change-of Control),
such
options to be subject to such additional terms and conditions as heretofore
determined with respect to the Initial Options, applied mutatis mutandis.
(y) In
the
event that number of Executive Shares are to be reduced pursuant to the True
Up,
Executive shall forfeit Initial Options and/or Restricted Shares representing
the right to purchase the difference obtained from subtracting (x) a number
of
shares that equals eight percent (8%) of the Common Stock Equivalents
outstanding on the True Up Date if the Financing has closed by such date or
six
percent (6%) of the Common Stock Equivalents outstanding on such date if the
Financing has not closed by such date from (y) the sum of the number of
Restricted Shares plus the Initial Option Shares. In the event Executive must
forfeit Initial Options or Restricted Shares pursuant to clause (c) or (d)
of
this Section 3.6, Executive shall first forfeit unexercised Initial Options
(pro
rata across vested and unvested Initial Options), then, to the extent additional
shares must be forfeited by the Executive to reach the applicable percentage,
the Company shall have the right to repurchase from Executive any shares issued
upon exercise of the Initial Options at a purchase price equal to the exercise
price paid by Executive or Restricted Shares at the Taxable Amount Per Share,
as
applicable, and the Executive shall forfeit, waive or forego any claim of right,
title or interest to such shares.
(e) The
Company shall cooperate with the appraiser selected hereunder in all reasonable
respects and furnish to such appraiser all information and data reasonably
requested thereby. The Company shall further cooperate with Executive in the
making by Executive of a timely election under Section 83(b) of the Code with
respect to the Restricted Shares. Executive shall submit a copy to the Company
of any such election if made.
6
(f) On
or
prior to the first anniversary of the date hereof
(or as
soon as reasonably practicable following a termination for Good Reason or
Without Cause),
the
Company shall, at its expense, register with the Securities and Exchange
Commission pursuant to one
or
more effective registration statements under the
Securities Act of 1933, as amended, in
the
manner prescribed by Executive, any and all shares now owned or hereafter
acquired by Executive (the “Registrable
Securities”),
including all Restricted Shares, Initial Option Shares,
Additional Option Shares, and
shall
maintain the effectiveness
and currency
of each
such
registration statement, including any related prospectus until the resale of
such shares by Executive or any successor thereof; and 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 shall from
time
to
time furnish to Executive sufficient copies of any such prospectus, and any
supplements thereto, so as to permit the resale of such shares, or any portion
thereof, in the manner prescribed by Executive. In addition, prior to the grant
of the Initial Options, the Company shall enter into an additional agreement
with Executive extending to Executive incidental registration rights covering
the resale of the Registrable Securities on terms no less favorable to Executive
than have then been extended to any other stockholder of the
Company.
The
Company shall pay the costs and expenses incurred by Executive in connection
with any such registration, including the reasonable legal fees and expenses
that Executive may incur in connection therewith. The obligations of the Company
pursuant to this Section 3.6(f) are referred to herein as the “Registration
Obligations.”
(g) On
or
prior to the True Up Date, the Company and Executive shall have concurred,
in
their respective reasonable discretion, on the terms and conditions of a
long-term equity incentive award program pursuant to which Executive and the
other members of executive management of the Company shall be entitled to grants
of shares of Common Stock based upon achievement of specified performance
objectives.
(h) Prior
to
the issuance of the Executive Shares, the Company shall adopt a new equity
incentive plan (the “Equity
Plan”),
the
terms and scope of which shall be approved by the shareholders of the Company
and sufficient to provide for the issuance to the Executive Shares, the
additional equity awards contemplated by Schedule A hereto and the Additional
Options.
(i) The
Restricted Shares shall be issued pursuant to a Restricted Stock Agreement,
a
form of which is attached hereto as Exhibit
C.
4. Benefits.
Within
sixty (60) days of the date of this Agreement, the Company and Executive shall
determine, in their respective reasonable discretion, the terms of the “Welfare
Benefits” (as hereinafter defined) to which
Executive shall be entitled. For purposes hereof, “Welfare
Benefits”
shall
mean medical, prescription and dental plans, in no event less favorable than
those applicable to any other executive of the Company, and in all events
extending to (x) paid vacation per annum equal to four (4) weeks (accruing
ratably each year) and eleven (11) paid holidays and (y) a non-accountable
monthly allowance of Fifteen Hundred Dollars ($1,500) (the“Monthly
Allowance”).
5. Representations.
5.1. Executive
Representations.
Executive hereby represents and warrants that:
7
(a) His
employment with the Company under the terms of this Agreement will not conflict
with any continuing duty(ies) or obligation(s) Executive has with any other
person(s), firm(s) and/or entity(ies). Executive also represents that he has
not
brought to the Company (during the period before or after the Effective Date
of
this Agreement) any confidential material(s) and/or document(s) of any former
employer(s), or any confidential information or property belonging to
other(s).
(b) During
the Employment Term, he will promptly disclose to the Board of Directors of
the
Company any direct interest (greater than five percent (5%)) he
holds
in any
business that
provides
service(s) and/or product(s) to the Company (whether as a principal,
stockholder, lender, employee, director, officer, partner, venturer, consultant
or otherwise).
5.2. Company
Representations.
The
Company hereby represents and warrants that:
(a) The
execution and delivery by the Company of this Agreement, the performance by
the
Company of its covenants and agreements under this Agreement, and the
consummation by the Company of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate action. When
executed and delivered by the Company, this Agreement shall constitute the
valid
and legally binding obligation of the Company enforceable against the Company
in
accordance with its terms.
(b) Neither
the execution and delivery of this Agreement by the Company nor the consummation
by the Company of the transactions contemplated in this Agreement will violate
any provision of the Restated Certificate of Incorporation or By-laws of the
Company or
any
law, rule regulation, writ, judgment, injunction, decree, determination, award
or other order of any court, governmental agency or instrumentality binding
upon
the Company, or conflict with or result in any breach of or event of termination
or right of acceleration under any of the terms of, or the creation or
imposition of any mortgage, deed of trust, pledge, lien, security interest
or
other charge or encumbrance of any nature pursuant to, the terms of any contract
or agreement to which the Company is a party or by which the Company or any
of
its properties or assets is bound. No consent, approval, notice to or other
authorization of any governmental body, agency or instrumentality, or any other
person or entity, is required for the execution, delivery and performance of
this Agreement by the Company (other than notices heretofore timely delivered).
(c) The
Restricted Shares, Initial Option Shares and Additional Option Shares, when
issued and delivered in accordance with the terms of this Agreement, shall
be
validly issued, fully paid and non-assessable shares of Common Stock, free
and
clear of any mortgages, deeds of trust, pledges, liens, security interests
or
any charges or encumbrances of any nature (other than the restrictions on the
Restricted Shares expressly contemplated hereunder). There are no preemptive
rights
with regard to the issuance of the Restricted Shares, Initial Option Shares
and
Additional Option Shares to the Executive.
8
(d) The
number of shares and type of all authorized, issued and outstanding capital
stock, options and other securities of the Company (whether or not presently
convertible into or exercisable or exchangeable for shares of capital stock
of
the Company) is set forth in the SEC Reports (as defined below). All of the
outstanding shares of capital stock of the Company are duly authorized,
validly issued, fully paid and non-assessable, have been issued in compliance
in
all material respects with all applicable federal and state securities laws,
and
none of such outstanding shares was issued in violation of any preemptive
rights
or similar rights to subscribe for or purchase any capital stock of the Company.
Except as specified in the SEC Reports and Schedule
B,
attached hereto and incorporated herein, there are no outstanding options,
warrants or other rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible
into or
exchangeable for, or giving any person or entity any right to subscribe for
or
acquire, any shares of the Company’s capital stock, or contracts, commitments,
understandings or arrangements by which the Company or any subsidiary is
or may
become bound to issue additional shares of capital stock of the Company,
or
options, securities or rights convertible or exchangeable into shares of
capital
stock of the Company. Except for customary adjustments as a result of stock
dividends, stock splits, combination of shares, reorganizations,
recapitalizations, reclassifications or other similar events, there are no
anti-dilution or price adjustment provisions contained in any security issued
by
the Company (or in any agreement providing rights to security holders of
the
Company) and the issuance of the Restricted Shares, Initial Option Shares
and
Additional Option Shares will not, immediately or with the passage of time,
obligate the Company to issue shares of Common Stock or other securities
to any
person or entity and will not, result in a right of any holder of securities
to
adjust the exercise, conversion, exchange or reset price under such securities.
(e) The
Company has filed all reports required to be filed by it under the Securities
Exchange Act of 1934, as amended (the “Exchange
Act”),
including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (the foregoing materials being collectively referred
to herein as the “SEC
Reports”)
on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such extension. As
of
the date hereof, the Company is not aware of any event (other than the
transactions contemplated by this Agreement) that requires the filing of a
Form
8-K after the Effective Date. As of their respective dates, or to the extent
corrected by a subsequent restatement, the SEC Reports complied in all material
respects with the requirements of the Securities Act and the Exchange Act and
the rules and regulations of the Commission promulgated thereunder, and none
of
the SEC Reports, when filed, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(f) The
financial statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time
of
filing (or to the extent corrected by a subsequent restatement). Such financial
statements have been prepared in accordance with generally accepted accounting
principles in the United States (“GAAP”)
applied on a consistent basis during the periods involved, except as may be
otherwise specified in such financial statements or the notes thereto and except
that unaudited financial statements may not contain all footnotes required
by
GAAP, and fairly present in all material respects the financial position of
the
Company and its consolidated subsidiaries taken as a whole as of and for the
dates thereof and the results of operations and cash flows for the periods
then
ended, subject, in the case of unaudited statements, to normal, year-end audit
adjustments.
9
6. Termination.
Executive’s employment and this Agreement (except as otherwise provided
hereunder) shall terminate upon the occurrence of any of the following, at
the
time set forth therefor (the “Termination
Date”):
6.1. Death
or Disability.
Immediately upon the death of Executive or after six (6) months of Executive’s
inability to perform the essential functions of his duties, with or without
reasonable accommodation (defined under
applicable law),
due to
a mental or physical illness or incapacity (“Disability”)
(termination pursuant to this Section 6.1 being referred to herein as
termination for “Death
or Disability”);
6.2. Termination
for Good Reason.
Immediately following notice of termination for “Good Reason” (as defined
below), specifying such Good Reason, given by Executive (termination pursuant
to
this Section 6.2 being referred to as termination for “Good
Reason”).
As
used herein, “Good
Reason”
means
(i) any reduction in Base Salary
or other
benefits specified hereunder;
(ii) a
substantial diminution
or dilution
of the responsibilities, functions and duties attached to the position with
the
Company held by Executive; (iii) the Company fails to provide any of the
compensation or other benefits required hereunder; (iv) any
representation made by the Company herein is materially untrue or the
Company otherwise is in material breach of this Agreement; or (v) the Company
and Executive
fail to effectuate the matters contemplated by Sections 3.4, 3.6 or 4 within
the
respective periods contemplated thereunder.
6.3. Voluntary
Termination.
Thirty
(30) days following Executive’s written notice to the Company of voluntary
termination of employment other
than
for Good
Reason;
provided, however, that the Company may suspend,
with no reduction in pay or benefits (including, without limitation, bonuses,
options and vesting), Executive from his duties as set forth herein (including,
without limitation, Executive’s position as a representative and agent of the
Company) until the 30th
day
following Notice of Voluntary termination)
(termination pursuant to this Section 6.3 being referred to herein as
“Voluntary”
termination).
6.4. Termination
For Cause.
Immediately following notice of termination for “Cause” (as defined below),
specifying such Cause, given by the Company (termination pursuant to this
Section 6.4 being referred to herein as termination for “Cause”).
As
used herein, “Cause”
means
(i) termination based on Executive’s conviction or plea of “guilty” or “no
contest” to any crime constituting a felony in the jurisdiction in which the
crime constituting a felony is committed, or
any
other conviction
by a court of competent jurisdiction for a violation
of criminal law involving dishonesty that
materially injures the Company (whether or not a felony); (ii) Executive’s
substance abuse that in any manner
that
materially
interferes with the performance of his duties; (iii) Executive’s failure to
perform at all or in a reasonably acceptable manner the
responsibilities, functions and duties attached to his position with the
Company, including, but not limited to helping to complete a
Financing;
or
(iv)
Executive’s material breach of this Agreement.
The
Board of
Directors shall
provide Executive
thirty
(30) days written notice of
any
determination
to
terminate Executive for Cause
and
shall
afforded
Executive the opportunity to be heard by the full Board of Directors.
Notwithstanding any other provision in this Agreement, if Executive is
terminated pursuant to subsections
(ii), (iii) or
(iv)
of this Section 6.4, excluding refusal to perform his duties at all, Executive
shall have sixty (60) days (thirty (30) days in the case of subsection (iii)
of
this Section 6.4) to cure the behavior upon which the threatened termination
is
based.
10
6.5. Termination
Without Cause.
Notwithstanding any other provisions contained herein, the Company may terminate
Executive’s employment thirty (30) days following notice of termination without
Cause given by the Company; provided, however, that during any such thirty
(30)
day notice period, the Company may suspend, with no reduction in pay or
benefits
(including, without limitation, bonuses, options and vesting),
Executive from his duties as set forth herein (including, without limitation,
Executive’s position as a representative and agent of the Company) (termination
pursuant to this Section 6.5 being referred to herein as termination
“Without
Cause”).
6.6. Other
Remedies.
Termination pursuant to Section 6.2 above shall be in addition to and without
prejudice to any other right or remedy to which Executive may be entitled at
law, in equity, or under this Agreement. Termination pursuant to Section 6.4
above shall be in addition to and without prejudice to any other right or remedy
to which the Company may be entitled at law, in equity, or under this
Agreement.
6.7. Salary
Continuation During Disability.
Notwithstanding Section 6.1 above, if Executive suffers any physical or mental
disability that would prevent the performance of his essential job duties,
the
Company agrees to pay Executive one hundred percent (100%) of Executive’s
salary
and
other benefits (including, without limitation, bonuses, options and
vesting),
payable
in the same manner as provided for the payment of salary
and
benefits (including, without limitation, bonuses, options and
vesting)
herein,
for the duration of the disability, or six (6) months, whichever is less.
6.8. Forfeiture
of Unvested Shares upon Termination.
In the
event that this Agreement is terminated pursuant to the provisions of Sections
6.3 or 6.4, the Executive shall forfeit, waive or forego any claim to right,
title or interest in any unvested shares issued pursuant the Agreement, subject
to any repurchase requirement set forth in Section 3.6 and immediately remit
any
issued, forfeited shares to the Company for immediate cancellation (against
payment of the purchase price therefore in the case of Restricted Shares).
7. Severance
and Termination.
7.1. Voluntary
Termination, Termination for Cause, Termination for Death or
Disability.
In the
case of a termination of Executive’s employment hereunder for Death in
accordance with Section 6.1 above, or Executive’s Voluntary termination of
employment hereunder in accordance with Section 6.3 above, or a termination
of
Executive’s employment hereunder for Cause in accordance with Section 6.4 above,
(i) Executive shall not be entitled to receive payment of, and the Company
shall
have no obligation to pay, any severance or similar compensation attributable
to
such termination, other than Base Salary earned but unpaid, accrued but unused
vacation to the extent required by the Company’s policies and any non-reimbursed
expenses pursuant to Section 4 hereof incurred by Executive as of the
termination date, and (ii) the Company’s obligations under this Agreement shall
immediately cease except (x)
as
required by law
and (y)
as provided in Section 16.1 below.
Provided further, in the event of
a
termination of Executive’s employment hereunder for Cause in accordance with
Section 6.4 above, Executive shall tender back to the Company all unexercised
options granted to Executive by the Company in connection with Executive’s
employment.
11
7.2. Termination
for Good Reason, Termination Without Cause.
(a) In
the
case of a termination of Executive’s employment hereunder for Good Reason in
accordance with Section 6.2 above, or Without Cause in accordance with Section
6.4 above, the Company shall, within thirty (30) days of the Termination Date,
pay Executive, in a lump-sum, cash in the amount (the “Severance
Payment”)
of the
sum of fifty percent (50%) of his annual Base Salary; provided, however, that,
in the event such termination of Executive’s employment follows a
“Change-of-Control” (as defined below), the Severance Payment shall be an amount
equal to the sum of one hundred and fifty percent (150%) of his annual Base
Salary. As used herein, “Change-of-Control”
means:
(i) the
acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) under the Exchange
Act)
of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of twenty percent (20%) or more of the combined voting power
of
the outstanding voting securities of the Company entitled to vote generally
in
the election of directors; provided, however, that the following acquisitions
shall not constitute a Change-of-Control: (w) any original
issuance by
the
Company, (x) any acquisition by the Company
after
which the holders of the Company’s voting securities entitled to vote generally
in the election of directors of the Company (the “Voting
Stock”)
outstanding immediately prior to consummation of such acquisition continue
to
hold at least fifty percent (50%) of the Company’s Voting Stock after such
acquisition,
(y) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company, or (z) any acquisition by any corporation pursuant
to
a transaction which complies with clauses (w), (x) and (y) immediately
preceding; or
(ii) individuals
who, as of the date hereof, constitute the Board of Directors of the Company
(the “Incumbent
Board”)
cease
for any reason to constitute at least a majority of the Board of Directors
of
the Company unless they are replaced with a slate nominated by at least a
majority of the Incumbent Board and further provided that any individual
becoming a director subsequent to the date hereof whose election, or nomination
for election by the Company's stockholders, was approved by a vote of at least
a
majority of the directors then comprising the Incumbent Board shall, for
purposes of this sub-paragraph (ii), be considered as though such individual
were a member of the Incumbent Board, but excluding, for this purpose, any
such
individual whose initial assumption of office occurs as a result of an actual
or
threatened election contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or consents by or on
behalf of an individual, entity or group other than the Board of Directors
of
the Company acting by at least a majority thereof; or
12
(iii) consummation
of a reorganization, merger or consolidation or sale or disposition of all
or
substantially all of the assets of the Company (a “Business
Combination”),
in
each case, unless, following such transaction: (x) all or substantially all
of
the individuals and entities who were the beneficial owners, respectively,
of
the outstanding voting securities of the Company entitled to vote generally
in
the election of directors immediately prior to such Business Combination
beneficially own, directly or indirectly, more than fifty percent (50%) (20%
in
the case of any Business Combinationbeing proposed and implemented by at
least a majority of the Incumbent Board) of the Voting
Stock
of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the Company
or all or substantially all of the Company's assets either directly or through
one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination, of the outstanding
Voting
Stock,
(y) no
individual, entity or group beneficially owns, directly or indirectly, twenty
percent (20%) or more of the Voting
Stock
of such
corporation except to the extent that such ownership existed prior to the
Business Combination, and (z) at least a majority of the members of the board
of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board, or were nominated by at least a majority of
the
members of the Incumbent Board, at the time of the execution of the initial
agreement, or by the action of the Board providing for such Business
Combination; or
(iv) approval
by the stockholders of the Company of a complete liquidation or dissolution
of
the Company.
(b) In
addition, in the event Paragraph (a) immediately preceding applies, for six
months after the Termination Date (or such longer period as may be provided
by
the terms of the appropriate plan, program, practice or policy), the Company
shall continue Welfare Benefits to Executive
and/or his family at least equal to those which would have been provided
if
Executive’s employment had not been terminated (provided, however, that such
period shall be eighteen months in the event such Paragraph (a) applies
following a Change-of-Control).
Notwithstanding
the foregoing, in the event Executive is a “specified employee” as defined in
Section 409A(a)(2)(B)(i) of the Code, the payment of the Severance Payment
under
this Section 7.2 shall be made no earlier than six months after the Termination
Date.
8. Severance
Not
Conditioned
on Release of Claims. The
Company’s obligation to provide Executive with the Severance Payment set forth
in Section 7.2 is not contingent upon Executive’s execution of a release of
claims in favor of the Company.
9. Non-competition,
Non-solicitation.
9.1 Non-Competition.
Executive agrees that he shall not, during the Employment Term and for
twelve
(12) months
subsequent thereto, without both the disclosure to and the written approval
of
the Board of Directors of the Company, directly or indirectly, engage or be
interested in (whether as a principal, lender, employee, officer, director,
partner, venturer, consultant or otherwise) any business(es) that is
competitive
with the business
being
conducted by the Company through the Termination Date, without the express
written approval of the Board of Directors.
9.2 Non-Solicitation.
Executive agrees that he will not, without the prior written consent of the
Company’s Board of Directors, for a period of twelve
(12) months
after the Termination Date, directly or indirectly disturb, entice, or in any
other manner persuade, any employee(s) or consultant(s) of the Company to
discontinue that person’s or firm’s relationship with
the
Company if the employee(s) and/or consultant(s) were employed by the Company
at
any time during the twelve (12) month period prior to the Termination
Date.
13
9.3 Customers.
Executive agrees that he will not, for a period of twelve
(12)
months
following the Termination Date, contact or solicit orders, sales or business
from any customer of the Company so as to induce or attempt to induce such
customer to cease doing business with the Company.
9.4 Public
Investments.
The
provisions of Section 9.1 through 9.3, inclusive, shall not be deemed breached
by reason of Executive’s ownership of five percent (5%) or less of the equities
of any entity with a class of publicly traded securities.
10. Inventions,
Discoveries and Improvements.
Any and
all invention(s), discovery(ies) and improvement(s), whether protectible or
unprotectible by patent, trademark, copyright or trade secret, made, devised,
or
discovered by Executive, whether by Executive alone or jointly with others,
from
the time of entering the Company’s employ until the earlier of the Termination
Date of this Agreement or the actual date of termination of employment, relating
or pertaining in any way to Executive’s employment with the Company, shall be
promptly disclosed in writing to the Board of Directors of the Company, and
become and remain the sole and exclusive property of the Company. Executive
agrees to execute any assignments to the Company, or its nominee, of
Executive’s
entire right, title, and interest in and to any such inventions, discoveries
and
improvements and to execute any other instruments and documents requisite or
desirable in applying for and obtaining patents, trademarks or copyrights at
the
cost of the Company, with respect thereto in the United States and in all
foreign countries, that may be requested by the Company. Executive further
agrees, whether or not then in the employment of the Company, to cooperate
to
the fullest extent and in the manner that may be reasonably requested by the
Company in the prosecution and/or defense of any suit(s) involving claim(s)
of
infringement and/or misappropriation of proprietary rights relevant to
patent(s), trademark(s), copyright(s), trade secret(s), processes, and/or
discoveries involving the Company’s product(s); it being understood that all
reasonable costs and expenses thereof shall be paid by the Company. The Company
shall have the sole right to determine the treatment of disclosures received
from Executive, including the right to keep the same as a trade secret, to
use
and disclose the same without a prior patent application, to file and prosecute
United States and foreign patent application(s) thereon, or to follow any other
procedure which the Company may deem appropriate. In accordance with this
provision, Executive understands and is hereby further notified that this
Agreement does not apply to an invention which the employee developed entirely
on his own time without using the Company’s equipment, supplies, facilities, or
trade secret information.
11. Confidential
Information and Trade Secrets.
14
11.1
Non-Disclosure.
Executive hereby acknowledges that all confidential or proprietary trade,
engineering, production, and technical data, information or “know-how”
including, but not limited to, customer lists, sales and marketing techniques,
vendor names, purchasing information, processes, methods, investigations,
ideas,
equipment, tools, programs, costs, product profitability, plans, specifications,
patent application(s), drawings, blueprints, sketches, layouts, formulas,
inventions, processes and data, whether or not reduced to writing, used
in the development and manufacture of the Company’s products and/or the
performance of services, or in research or development, are the exclusive
property of the Company, and shall be at all times, whether after the Effective
Date or after the Termination Date, be kept strictly confidential and secret
by
Executive; it being understood, however, that information which was publicly
known, or which is in the public domain, or which is generally known, shall
not
be subject to this restriction (and Executive’s duties of non-disclosure shall
further not extend to (i) disclosures to other employees, executives, officers
and/or directors of the Company, or as may be required or appropriate in
connection with performance hereunder, and (ii) the requirements of legal
process, subpoena or other court order).
11.2 Return
of Property.
Executive agrees not to remove from the Company’s office or copy any of the
Company’s confidential information, trade secrets, books, records, documents or
customer or supplier lists, or any copies of such documents, without the express
written permission of the Board of Directors of the Company or as may be
required or appropriate in connection with performance hereunder. Executive
agrees, at the Termination Date, to return any property belonging to the
Company, including, but not limited to, any and all records, notes, drawings,
specifications, programs, data and other materials (or copies thereof)
pertaining to the Company’s businesses or its product(s) and service(s),
generated or received by Executive during the course of his employment with
the
Company.
12.
Information
of Others.
Executive agrees that the Company does not desire to acquire from Executive
any
secret or confidential information or “know-how” of others. Executive,
therefore, specifically represents to the Company that he will not bring to
the
Company any materials, documents, or writings containing any such information.
Executive represents and warrants that from the Effective Date of this Agreement
he is free to divulge to the Company, without any obligation to, or violation
of, the rights of others, information, practices and/or techniques which
Executive will describe, demonstrate or divulge or in any other manner make
known to the Company during Executive’s performance of services. Executive also
agrees to indemnify and hold the Company harmless from and against any and
all
liabilities, losses, costs, expenses, damages, claims or demands for any
violation of the rights of others as it relates to Executive’s misappropriation
of secrets, confidential information, or “know-how” of others. Such
indemnification will not apply in the event action by the Company is
unsuccessful.
13.
Indemnification.
The
Company shall indemnify Executive in his capacity as director, officer and
employee of the Company upon terms no less favorable to him than are contained
under Article 7 of the Restated Certificate of Incorporation of the Company,
and
Article VI of the By-laws of the Company, as in effect on the date hereof.
The
Company shall extend to Executive the benefits of directors’ and officers’
liability insurance upon terms no less favorable than are extended to any other
director or officer of the Company.
Upon
execution, the Company and Executive shall enter into an Indemnification
Agreement in form and substance acceptable to Executive providing for the
indemnification contemplated hereby.
14.
Notice.
All
notices and other communications under this Agreement shall be in writing and
shall be delivered personally or mailed by registered or certified mail, return
receipt requested, and shall be deemed given when so delivered or mailed, to
a
party at his or its address as follows (or at such other address as a party
may
designate by notice given hereunder):
15
| If to Executive: | ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ | ||
| ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ | |||
|
▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
|
|||
| With a copy to: | ▇▇▇▇ ▇. ▇▇▇▇▇▇ | ||
|
▇▇▇▇▇▇▇
▇▇▇▇▇ & ▇▇▇▇▇ LLP
|
|||
| ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ | |||
|
▇▇▇▇▇
▇▇▇▇
|
|||
|
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
|||
| If to the Company: | Itec Environmental Group, Inc. | ||
| ▇.▇. ▇▇▇ ▇▇▇ | |||
| ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ | |||
| With a copy to: | ▇▇▇▇▇ ▇. ▇▇▇▇ | ||
| The ▇▇▇▇ Law Group, PLLC | |||
| ▇▇▇ ▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇ | |||
| ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ |
15.
Suit,
Jurisdiction.
Any
controversy between the Company and Executive arising out of or relating to
any
of the terms, provisions or conditions of this Agreement shall be submitted
to
arbitration in accordance with the American Arbitration Association’s National
Arbitration Rules for the Resolution of Employment Disputes. On the written
request of either party for arbitration of such a claim pursuant to this
paragraph, the Company and Executive shall both be deemed to have waived the
right to litigate the claim in any federal or state court. To the extent that
any claim or controversy arising out of this Agreement cannot be submitted
to
arbitration as set forth above, each party hereby agrees that any suit, action
or proceeding with respect to this Agreement, and any transactions relating
hereto, may be brought in the State of California, County of San
Francisco,
and
each of the parties hereby irrevocably consents and submits to the jurisdiction
of such Court(s) for the purpose of any such suit, action or proceeding. Each
of
the parties hereby waives and agrees not to assert, by way of motion, as a
defense or otherwise, in any such suit, action or proceeding; any claim that
it
(he) is not personally subject to the jurisdiction of the above-named Court(s);
and, to the extent permitted by applicable law, any claim that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper or that this Agreement or any
replacements hereof or thereof may not be enforced in or by such Court(s).
The
Company shall pay any and all costs associated with arbitration or court
adjudication.
16.
Miscellaneous.
16.1 Post
Termination Obligations.
Notwithstanding the termination of Executive’s employment hereunder, the
provision(s) of Section(s) “3.6(f),”
“5,”
“7,”
“9,” “10,” “11,” “13” and “15” shall survive the Termination Date.
16
16.2 Assignment.
This
Agreement shall be assigned to and inure to the benefit of, and be binding
upon,
any successor to substantially all of the assets and business of the Company
as
a going concern, whether by merger, consolidation, liquidation or
sale of
substantially all of the assets of the Company or otherwise. The Company
will
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform this Agreement
in
the same manner and to the same extent that the Company would be required
to
perform it if no such succession had taken place; and, as used in this
Agreement, "Company"
shall
mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement
by
operation of law, or otherwise; provided that for purposes of Section 9 hereof,
the term “Company” shall mean the Company as hereinbefore defined and any such
transaction in which this Agreement is assigned to a successor may not expand
or
enlarge the scope of restrictions applicable to Executive pursuant to Section
9
hereof. Executive understands and agrees, however, that this Agreement is
exclusive and personal to him only, and, as such, he will neither assign
nor
subcontract all or part of his undertaking(s) or obligation(s) under the
terms
of this Agreement.
16.3 Severability.
In the
event that any provision of this Agreement shall be determined to be
unenforceable or otherwise invalid, the balance of the provision(s) shall be
deemed to be enforceable and valid; it being understood that all provision(s)
of
this Agreement are deemed to be severable, so that unenforceability or
invalidity of any single provision will not affect the remaining
provision(s).
16.4 Headings.
The
Section(s) and paragraph heading(s) in this Agreement are deemed to be for
convenience only, and shall not be deemed to alter or affect any provision
herein.
16.5 Interpretation
of Agreement.
This
Agreement shall be interpreted in accordance plain meaning of its terms and
under the laws of the State of California.
16.6 Variation.
Subject
to Section 16.8, any changes in the Sections relating to salary, bonus, or
other
material condition(s) after the Effective Date of this Agreement shall not
be
deemed to constitute a new Agreement. All unchanged terms are to remain in
force
and effect.
16.7 Collateral
Documents.
Each
party hereto shall make, execute and deliver such other instrument(s) or
document(s) as may be reasonably required in order to effectuate the purposes
of
this Agreement.
16.8 Non-Impairment.
This
Agreement may not be amended or supplemented at any time unless reduced to
a
writing executed by each party hereto. No amendment, supplement or termination
of this Agreement shall affect or impair any of the rights or obligations which
may have matured thereunder.
16.9 Execution.
This
Agreement may be executed in one or more counterpart(s), and each executed
counterpart(s) shall be considered by the parties as an original.
16.10 Legal
Counsel.
Executive represents to the Company that he has retained legal counsel of his
own choosing, and was given sufficient opportunity to obtain legal counsel
prior
to executing this Agreement. Executive also represents that he has read each
provision of this Agreement and understands its meaning.
17
16.11 Transition.
In the
event that Executive’s employment with the Company terminates, Executive shall,
through the last day of employment, and at the Company’s request, use
Executive’s reasonable efforts (at the Company’s expense) to assist the Company
in transitioning Executive’s duties and responsibility responsibilities to
Executive’s successor and maintaining the Company’s professional relationship
with all customers, suppliers, etc. Without limiting the generality of the
foregoing, Executive shall cooperate and assist the Company, at the Company’s
direction and instruction, during the transition period between any receipt
of
or giving of notice of the termination of employment and the final day of
employment.
16.12 Expenses.
The
Company agrees to reimburse Executive for fees and expenses incurred by
Executive in connection with the preparation of this Agreement, including
reasonable attorneys fess, up to a maximum amount of Fifteen Thousand Dollars
($15,000).
16.13
Section
409A Matters.
It is
the intention of the parties that no payment or entitlement pursuant to this
Agreement will give rise to any adverse tax consequences to the Executive under
26 U.S.C. § 409A ("409A").
The
Agreement shall be interpreted to that end and, consistent with that objective
and notwithstanding any provision herein to the contrary, the Company shall
indemnify Executive from any adverse tax consequences, penalties and/or interest
thereon that may arise under 409A, and the Company may unilaterally take any
action it deems necessary or desirable to amend any provision herein to avoid
the application of 409A if such action will only benefit the Executive. Should
either party determine that there is a reasonable possibility that the text
of
this Agreement could give rise to such adverse tax consequences, the parties
agree to negotiate in good faith to amend the Agreement to obviate the
possibility of such consequences.
If,
at
any time, the Company (or its direct or indirect parent) has a class of stock
that is publicly traded on an established securities market or otherwise, the
Company shall from time to time compile a list of “Specified Employees” as
defined in, and pursuant to, Prop. Reg. § 1.409A-1(i) or any successor
regulation. Notwithstanding any other provision herein, if the Executive is
a
Specified Employee on the date of his termination of employment, no payment
of
compensation under this Agreement shall be made to the Executive during the
period lasting six months from the date of his termination of employment unless
the Executive determines that there is no reasonable basis for believing that
making such payment would cause the Executive to suffer any adverse tax
consequences pursuant to 409A. If any payment to the Executive is delayed
pursuant to the provisions of this paragraph, such payment instead shall be
made
on the first business day following the expiration of the six (6) month period
referred to in the prior sentence.
[Signature
page to follow]
18
IN
WITNESS WHEREOF,
the
parties hereto have set their hands and seals the day and year first above
written.
THE
COMPANY:
ITEC
ENVIRONMENTAL GROUP, INC.
_____________________________________
By:
Its:
EXECUTIVE:
▇▇▇▇▇▇
▇.
▇▇▇▇▇▇▇▇
_____________________________________
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
19
Schedule
2.1
|
·
|
Coloris
commission deal documented to reasonable satisfaction of
Executive
|
|
·
|
▇▇▇▇
▇. Contract written and detailed to reasonable satisfaction of Executive
to include, but not limited to, the following terms - cut options,
assume
title of CTO, salary, severance, duties, goals to remove guarantee
of
CIWMB Loan
|
|
·
|
Documentation
of term changes for KWS investors to Knight investor terms
|
|
·
|
Delivery
to Executive of detailed financial statements at and as of July 31
which
will reflect all accrued liabilities through such date, including
detailed
AP (including all legal fees incurred through such date), liabilities,
cap
table, off BS liabilities i.e., ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
etc...
|
|
·
|
Confirmation
from Coloris and KWS that they are not entitled to receive commission
for
Executive's funding contacts from date of Agreement forward.
|
|
·
|
Increase
in D&O policy in scope and amount reasonable acceptable to Executive.
|
|
·
|
Amendment
to the Certificate of Incorporation to provide for maximum indemnification
and limitation of liability to directors and officers under Delaware
law.
|
|
·
|
Completion
of the information on Schedule B hereto to include specific details
relating to the amounts and other details on the shares and other
securities issuable to the individuals and entities listed theron,
to the
reasonable satisfaction of Executive.
|
20
SCHEDULE
A
ADDITIONAL
EQUITY AWARDS
Capitalized
terms used but not defined in this Schedule A have the meanings assigned to
them
in the Employment Agreement to which this Schedule A is attached (the
“Agreement”).
Executive
shall be entitled to additional equity awards (the “Additional
Equity Awards”)
in the
event that the Company successfully receives new investment after the Effective
Date in one or a series of transactions from Executive, parties that Executive
introduced to the Company, and/or parties that were not stockholders of the
Company prior to the date of the Agreement (“New
Funding”).
In
the event such New Funding in the aggregate equals or exceeds $1.0 million
but
is less than $6.0 million, the Additional Equity Awards will equal one percent
(1.0%) of the number of Common Stock Equivalents outstanding on the date of
issuance (subject to adjustment as set forth below). In the event such New
Funding in the aggregate equals or exceeds $6.0 million, such additional equity
awards will equal, in the aggregate, two percent (2.0%) of the number of Common
Stock Equivalents outstanding on the date of issuance (subject to adjustment
as
set forth below). Such awards shall be issued by the Company at the time of
closing of the transaction that gives rise to the Company’s obligation hereunder
and shall be in the form of grants of incentive stock options exercisable over
a
period of ten (10) years after grant at
a
price per share equal to the fair market value per share of Common Stock on
the
date of grant determined by the appraiser as set forth in the
Agreement.
In the
event that, after the date of the issuance of any such Additional Equity Award
and on or prior to the True Up Date, the Company issues additional securities
such that the number of Common Stock Equivalents is increased, the amount of
shares subject to such Additional Equity Award(s) shall be increased so that
they reflect the specified percentage(s) on and as of the True Up Date. The
Company’s Registration Obligations shall apply to any shares issued as
Additional Equity Awards hereunder and the Company shall use best efforts to
register such shares in accordance with the provisions of Section 3.6(f) of
the
Agreement.
21
SCHEDULE
B
· Cambridge
Capital Partners promissory note, or its assigns.
· Settlement
with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
· EnviroPlastics
Hungary settlement.
· Forbearance
Agreement with the Elevation Fund.
· Forbearance
Agreement with Capital Growth Financial.
· ▇▇▇▇▇
Coloris consulting fees.
· KW
Securities fees related to the 2005 Private Placement Memorandum (“KW
PPM”).
· Investors
pursuant to the KW PPM.
· The
▇▇▇▇
Law Group, PLLC, or its assigns.
· Saratoga
Capital Partners, or its assigns.
22
SCHEDULE
C
RESTRICTED
STOCK AGREEMENT
Restricted
Stock Agreement
This
Restricted Stock Agreement (the "Agreement")
is
made and entered into as of August __, 2006 (the "Effective
Date")
by and
between Itec Environmental Group, Inc., a Delaware corporation (the
"Company"),
and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("Stockholder").
RECITALS
|
A.
|
The
Company’s Board of Directors (the "Board")
has authorized and approved the issuance of shares of the Company’s common
stock to Stockholder subject to the restrictions set forth herein
and
pursuant to the terms hereof.
|
|
B.
|
The
shares provided for in this Agreement are to be issued pursuant to
and in
connection with Stockholder’s Employment Agreement with the Company dated
as of July __, 2006 (the “Employment
Agreement”).
Capitalized terms used but not defined herein, have the meanings
assigned
to them in the Employment
Agreement.
|
NOW,
THEREFORE, in consideration of the mutual benefits hereinafter provided, and
each intending to be legally bound, the Company and Director hereby agree as
follows:
1. Issuance
of Shares.Subject
to the restrictions, terms and conditions of this Agreement, the Company hereby
issues to Stockholder [l]
([l])
shares
(the "Shares") of the Company’s common stock ("Common Stock"). As used in this
Agreement, the term "Shares" refers to the Shares issued hereunder and includes
all securities received (i) in replacement of the Shares, (ii) as a
result of stock dividends or stock splits in respect of the Shares, and
(iii) in replacement of the Shares in a recapitalization, merger,
reorganization or the like.
2. Delivery.
2.1 Deliveries
by Stockholder.
Stockholder
hereby delivers to the Company (i) this Agreement; and (ii) four (4)
copies of a blank Stock Power and Assignment of Uncertificated Securities in
the
form of Exhibit
1
attached
hereto (the "Stock
Powers"),
all of
which are executed by Stockholder (and Stockholder’s spouse or domestic partner,
if any).
2.2 Deliveries
by the Company.
Upon
its
receipt of all of the documents to be executed and delivered by Stockholder
to
the Company under Section 2.1, the Company will issue the Shares in the name
of
Stockholder on the books and records of the Company and send to Stockholder
any
notice required by the Delaware General Corporation Law for the issuance of
uncertificated shares. At such time as the Shares become Vested Shares (as
defined below), the Company shall issue certificates representing such
Shares.
23
3. Repurchase
and Vesting.
(a) 3.1 Repurchase
Right for Unvested Shares.
As
of the
Effective Date, all of the Shares are "Unvested
Shares",
and
shall be restricted and subject to repurchase at the Taxable Amount Per Share
(as
defined in the Employment Agreement) based
on
the following vesting schedule (shares
that have vested are referred to herein as “Vested
Shares”):
(i) the
number of Shares equal to two percent (2%) of the total number of Common Stock
Equivalents (as
defined in the Employment Agreement) outstanding
on the
Original Issue Date (as
defined in the Employment Agreement)
shall
vest immediately upon issuance (the “Initially
Vested Shares”);
(ii)
if the Financing (as
defined in the Employment Agreement) is
completed prior to the True Up Date (as
defined in the Employment Agreement),
then
that number of Shares (or all of the remaining unvested Shares that Executive
then holds if such number is less than two percent (2%) of the total number
of
Common Stock Equivalents
outstanding on such date)
equaling two percent (2%) of the total number of Common Stock
Equivalents
outstanding
on and
as of the closing date of the Financing shall vest on such date; (iii) the
number of Shares (or all of the remaining unvested Shares that Executive then
holds if such number is less than two percent (2%) of the total number of Common
Stock Equivalents
outstanding on such date)
equaling two percent (2%) of the total number of Common Stock
Equivalents
outstanding
on and
as of the True Up Date shall vest on such date and (iv) any remaining unvested
Shares as of the True Up Date shall vest ratably on a monthly basis such that
all of the remaining unvested Shares shall be fully vested
on the
second anniversary of the Effective Date (provided that all of the unvested
Shares shall
become
fully vested upon a “Change-of-Control”
(as
defined
in the Employment Agreement). Stockholder
agrees not to sell, assign, transfer, pledge, hypothecate, or otherwise dispose
of, by operation of law or otherwise, such Unvested Shares except as permitted
by this Agreement.
3.2 Adjustments.
The
number of Shares that are Vested Shares or Unvested Shares will be equitably
adjusted for any stock split, combination, stock dividend, merger,
consolidation, reorganization, recapitalization, or any other change in
corporate structure or other transaction not involving the receipt of
consideration by the Company occurring after the Effective Date.
4. Accelerated
Vesting.
Stockholder’s
Unvested Shares shall immediately vest upon the occurrence of a
Change-of-Control.
5. Restricted
Securities.
Stockholder
acknowledges and understands that Stockholder may not transfer any Shares unless
such Shares are registered under the Securities Act and qualified under
applicable state securities laws or unless, in the opinion of counsel to the
Company, exemptions from such registration and qualification requirements are
available. Stockholder understands that only the Company may file a registration
statement with the Securities and Exchange Commission (the "SEC")
and
that the Company is obligated under the Employment Agreement to do
so.
6. Restrictions
on Transfers.
Stockholder agrees not to voluntarily transfer, assign, ▇▇▇▇▇ ▇ ▇▇▇▇ or security
interest in, pledge, hypothecate, encumber or otherwise dispose of
(collectively, a "Transfer")
any of
the Unvested Shares.
24
7. Rights
as Stockholder; Proxy.
Subject
to the terms and conditions of this Agreement, Stockholder will have all of
the
rights of a holder of Common Stock with respect to the Shares from and after
the
date that Stockholder delivers an executed copy of this Agreement until such
time as Stockholder Transfers the Shares or they are repurchased by the Company.
All Unvested Shares shall be subject to an irrevocable proxy in the form
attached as Exhibit
2
hereto
exercisable by the Board of Directors of the Company (with Stockholder
abstaining) until such time as the shares become Vested Shares.
8. Tax
Consequences.
STOCKHOLDER
UNDERSTANDS THAT STOCKHOLDER MAY SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT
OF
STOCKHOLDER’S ACQUISITION OR DISPOSITION OF THE SHARES. Stockholder hereby
acknowledges that Stockholder has been informed that, unless an election is
filed by the Stockholder with the Internal Revenue Service (and, if necessary,
the proper state taxing authorities), within
30 days
of the
acquisition of the Shares, electing pursuant to Section 83(b) of the Internal
Revenue Code (and similar state tax provisions, if applicable) to be taxed
currently on the fair market value on the date of acquisition of the Shares,
there will be a recognition of taxable income to the Stockholder equal to the
fair market value of the Shares at the time they are considered transferable
or
no longer subject to substantial risk of forfeiture or repurchase for nominal
consideration. Stockholder
represents that he has consulted any tax adviser(s) that he deems advisable
in
connection with his acquisition of the Shares and the filing of the election
under Section 83(b) and similar tax provisions.
A
form of
Election under Section 83(b) is attached hereto as Exhibit
3
for
reference.
STOCKHOLDER HEREBY ASSUMES ALL RESPONSIBILITY FOR FILING OR NOT FILING SUCH
ELECTION AND PAYING ANY TAXES RESULTING FROM FILING OR FAILING TO FILE SUCH
ELECTION.
9. Compliance
with Laws and Regulations.
The
issuance and transfer of the Shares will be subject to and conditioned upon
compliance by the Company and Stockholder with all applicable state and federal
laws and regulations and with all applicable requirements of any stock exchange
or automated quotation system on which the Company’s securities may be listed or
quoted at the time of such issuance or transfer.
10. Successors
and Assigns.
The
Company may assign any of its rights under this Agreement. This Agreement shall
be binding upon and inure to the benefit of the successors and assigns of the
Company. Subject
to the restrictions on transfer herein set forth, this Agreement will be binding
upon Stockholder and Stockholder’s heirs, executors, administrators, successors
and assigns.
11. Governing
Law; Jurisdiction.
This
Agreement shall be interpreted in accordance plain meaning of its terms and
under the laws of the State of California. Any controversy between the Company
and Stockholder arising out of or relating to any of the terms, provisions
or
conditions of this Agreement shall be submitted to arbitration in accordance
with the American Arbitration Association’s National Arbitration Rules for the
Resolution of Employment Disputes. On the written request of either party for
arbitration of such a claim pursuant to this paragraph, the Company and
Stockholder shall both be deemed to have waived the right to litigate the claim
in any federal or state court. To the extent that any claim or controversy
arising out of this Agreement cannot be submitted to arbitration as set forth
above, each party hereby agrees that any suit, action or proceeding with respect
to this Agreement, and any transactions relating hereto, may be brought in
the
State of California, County of San Francisco, and each of the parties hereby
irrevocably consents and submits to the jurisdiction of such Court(s) for the
purpose of any such suit, action or proceeding. Each of the parties hereby
waives and agrees not to assert, by way of motion, as a defense or otherwise,
in
any such suit, action or proceeding; any claim that it (he) is not personally
subject to the jurisdiction of the above-named Court(s); and, to the extent
permitted by applicable law, any claim that such suit, action or proceeding
is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper or that this Agreement or any replacements hereof or
thereof may not be enforced in or by such Court(s). The Company shall pay any
and all costs associated with arbitration or court adjudication.
25
12. Notices.
Any
notice required to be given or delivered to the Company shall be in writing
and
addressed to the Corporate Secretary of the Company at its principal corporate
offices. Any notice required to be given or delivered to Stockholder hereunder
shall be in writing and addressed to Stockholder at the last address Stockholder
provided to the Company. All notices shall be deemed effectively given upon
personal delivery, three (3) days after deposit in the United States mail by
certified or registered mail (return receipt requested), one (1) business day
after its deposit with any return receipt express courier (prepaid), or on
the
business day that it is sent by fax to the fax number last provided by
Stockholder to the Company, but only if (A) the receiving fax device immediately
generates a message, printed by the sending fax device, that confirms receipt,
and (B) receipt of the fax is confirmed by a telephone call between sender
and
recipient.
13. Further
Instruments.
The
parties agree to execute such further instruments and to take such further
action as may be reasonably necessary to carry out the purposes and intent
of
this Agreement.
14. Headings.
The
captions and headings of this Agreement are included for ease of reference
only
and will be disregarded in interpreting or construing this
Agreement. All
references herein to Sections will refer to Sections of this
Agreement.
15. Entire
Agreement.
This
Agreement, the Employment Agreement and the other agreements specifically
referenced herein contain the entire understanding of the parties regarding
the
subject matter of this Agreement and such other agreements and supersede all
prior and contemporaneous negotiations and agreements, whether written or oral,
between the parties with respect to the subject matter of this Agreement and
such other agreements.
(the
remainder of this page left intentionally blank)
26
-
SIGNATURE PAGE -
RESTRICTED
STOCK AGREEMENT
IN
WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized representative and Stockholder has executed this Agreement
as of
the Effective Date.
| ITEC ENVIRONMENTAL GROUP, INC. | STOCKHOLDER | |||
| By: | ||||
| Its: |
Name:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
|
|||
27
LIST
OF EXHIBITS
Exhibit
1: Stock
Power and Assignment of Uncertificated Securities
Exhibit
2: Irrevocable
Proxy
Exhibit
3: Election
under Section 83(b) of the Internal Revenue Code
28
EXHIBIT
1
Stock
Power and Assignment
of
Uncertificated Securities
FOR
VALUE
RECEIVED and pursuant to that certain Restricted Stock Agreement dated as of
August l,
2006
(the "Agreement"),
the
undersigned hereby sells, assigns and transfers unto ITEC ENVIRONMENTAL GROUP,
INC., a Delaware corporation (the "Company"),
_______________ uncertificated shares of the Common Stock of the Company,
standing in the undersigned’s name on the books of the Company delivered
herewith, and does hereby irrevocably constitute and appoint the Secretary
of
the Company as the undersigned’s attorney-in-fact, with full power of
substitution, to transfer said stock on the books of the Company.
Dated:
_____________________
|
STOCKHOLDER
|
||
|
(Signature)
|
||
|
(Please
Print Name)
|
||
| (Spouse’s or Domestic | ||
|
Partner’s
Signature)
|
||
| (Please Print Spouse’s or | ||
|
Domestic
Partner’s Name)
|
Instruction:
Please
do
not
fill in
any blanks other than the signature line. The purpose of this Stock Power and
Assignment of Uncertificated Securities is to enable the Company and/or its
assignee(s) to acquire the shares upon repurchase by the Company as set forth
in
the Agreement without requiring additional signatures on the part of Stockholder
or Stockholder’s Spouse or Domestic Partner.
29
EXHIBIT
2
Irrevocable
Proxy
30
EXHIBIT
3
Section
83(b) Election
The
undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal
Revenue Code, to include in gross income for the taxpayer’s current taxable year
of the fair market value of the property described below at the time of transfer
as compensation for services.
|
(1)
|
The
taxpayer who performed the services to Itec Environmental Group,
Inc. (the
“Company”):
|
|
Name:
|
|
Address:
|
|
Social
Security No.:
|
|
(2)
|
The
property with respect to which the election is made is [l]
shares of the Common Stock (the “Shares”)
of the “Company.
|
|
(3)
|
The
property was transferred on
__________________.
|
|
(4)
|
The
taxable year for which the election is made is the calendar year
_____.
|
|
(5)
|
The
Shares are subject to the following restrictions: the shares are
subject
to vesting based upon continued service as an employee of the Company.
The
restrictions described herein are set forth in the Restricted Stock
Agreement between the Company and taxpayer dated
________________.
|
|
(6)
|
The
fair market value of a Share at the time of transfer (determined
without
regard to any restriction other than a restriction which by its terms
will
never lapse) was $____ per Share.
|
|
(7)
|
No
consideration was paid by the taxpayer for the
Shares.
|
|
(8)
|
A
copy of this statement was furnished to the Company for whom taxpayer
rendered the services underlying the transfer of such
shares.
|
|
(9)
|
This
statement is executed on
___________________.
|
_______________________________
___________________________________
Taxpayer
Spouse
or
Domestic Partner (if any)
This
election must be filed with the Internal Revenue Service Center with which
the
Stockholder files his or her federal income tax returns and must be filed within
30 days after the date of acquisition. This filing should be made by registered
or certified mail, return receipt requested. The Stockholder must retain two
copies of the completed form for filing with his or her federal and state tax
returns for the current tax year and an additional copy for his or her
records.
31