Baek Loan Agreement LOAN AGREEMENT
Exhibit
4.10
Baek
Loan Agreement
THIS
LOAN
AGREEMENT (this "Agreement"),
is
executed as of August ____, 2006, by and between Itec Environmental Group,
Inc.,
a Delaware corporation (the "Company"),
and
▇▇ ▇. ▇▇▇▇ (the "Lender").
WHEREAS,
the Company wishes to borrow and the Lender wishes to lend $202,000, together
with interest, as a short term bridge loan; and
WHEREAS,
the Lender is willing to provide such financing on terms and conditions as
set
forth herein.
NOW,
THEREFORE, in consideration of the mutual covenants and agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Lender,
intending to be legally bound, agree as follows:
ARTICLE
1
DEFINITIONS
1.1 Defined
terms.
Certain
capitalized terms used in this Agreement shall have the specific meanings
defined below:
“Business
Day”
shall
mean a day other than a Saturday, Sunday, or other day on which commercial
banks
are authorized or required by law to close.
“Closing
Date”
shall
mean the date upon which the Loan is received by the Company.
"Encumbrance"
means
any lien, charge, security interest, mortgage, deed of trust, pledge or other
encumbrance of any nature whatsoever.
“Interest
Rate”
shall
mean ten percent (10%) per annum.
"Proprietary
Rights"
means
all patents, trademarks, service marks, copyrights, trade names and all
registrations and applications and renewals for any of the foregoing and all
goodwill associated therewith.
ARTICLE
2
THE
LOAN
2.1 Loan.
According to the terms and subject to the conditions of this Agreement, the
Lender shall loan to the Company the aggregate amount of Two Hundred Two
Thousand Dollars ($202,000) (the "Loan").
The
Loan shall be evidenced by a convertible promissory note in the form attached
hereto as Exhibit
A
(the
“Note’),
duly
executed on behalf of the Company and dated as of the Closing Date.
1
2.2 Interest.
(a) Interest
Rate.
The
Loan shall bear interest ("Interest")
from
the First Closing Date until the Maturity Date at the Interest Rate (calculated
on the basis of the actual number of days elapsed over a year of 360 days).
Interest is payable by the Company on a monthly basis in arrears on the first
Business Day of the month.
(b) Default
Interest.
Upon
the occurrence of an Event of Default and for so long as such Event of Default
continues, Interest shall accrue on the outstanding Loan amount at the rate
per
annum equal to the lower of eighteen percent (18%) or the maximum rate of
interest permissible under applicable law at any time (the "Default
Interest Rate").
The
term "Interest"
shall
include both the interest rate described in Section 2.2(a) and the Default
Interest Rate, if applicable.
2.3 Maturity
Date.
Unless
the Loan is earlier accelerated pursuant to the terms hereof or converted
pursuant to the provisions of Section 4.1 hereof, the Loan and all accrued
Interest thereon shall be due and payable in full on the date that is one (1)
year following the Closing Date (the “Maturity
Date”).
The
Lender may, at the Lender's option, extend the Maturity Date on such terms
and
conditions as determined by the Lender in their sole discretion.
2.4 Conditions
Precedent to the Loan.
The
obligation of the Lender to make the Loan pursuant to Section 2.1 shall be
subject to the satisfaction, on or before the applicable Closing Date, of the
conditions set forth in this Section. If the conditions set forth in this
Section are not met on or prior to the applicable Closing Date, the Lender
shall
have no obligation to fund the amount of the Loan required on the applicable
Closing Date.
(a) The
Company shall have duly executed and delivered to the Lender the Note
representing the Loan in the amount funded on the applicable Closing
Date.
(b) The
Company shall have duly authorized, executed, and delivered to the Lender a
security agreement in the form attached hereto as Exhibit
B
(the
“Security
Agreement”)
to
secure the repayment of the Loan and granting the Lender a continuing security
interest in all presently existing and hereafter acquired assets and property
of
the Company of whatever nature and wherever located which such Security Interest
shall be senior to all other security interests or Encumbrances against the
assets and property of the Company other than Senior Debt (as hereafter
defined). Lender shall be entitled to a security interest pari
passu on
a
pro-rata basis with
the
investors participating in private placement pursuant to the 2006 Private
Placement Memorandum (the “PPM”)
of the
Company and, except as set forth above, Lender’s security interest shall be
senior to any other indebtedness of the Company, whether now existing or created
or incurred in the future. “Senior
Debt”
shall
mean all indebtedness for all principal,
fees, expenses, interest, penalties, post-bankruptcy petition interest, and
all
other amounts payable for money borrowed from banking or other financial
institutions or governmental lending facilities that is not convertible into
equity securities of the Company, including, but not limited to the $2,000,000
loan from the California Integrated Waste Management Board (the “CIWMB
Loan”).
2
ARTICLE
3
REPRESENTATIONS,
WARRANTIES AND COVENANTS
3.1 Organization,
qualification and Authority.
The
Company is a corporation duly organized and validly existing under the laws
of
the State of Delaware, and is in good standing and duly qualified to do business
as a foreign corporation in all jurisdictions where the operation of its
business or the ownership of its properties make such qualification necessary.
The Company has the requisite corporate power and authority to own, lease and
operate its facilities and assets as presently owned, leased and operated,
and
to carry on its respective business as it is now being conducted. The Company
has the requisite or individual right, power and authority to execute, deliver
and carry out the terms of this Agreement and all documents and agreements
contemplated hereby or necessary to give effect to the provisions of this
Agreement and to consummate the transactions contemplated hereunder and
thereunder. The execution, delivery and consummation of this Agreement, and
all
other agreements and documents executed in connection herewith by the Company,
have been duly authorized by all necessary action on the part of the Company.
No
other action, consent or approval on the part of the Company or any other person
or entity, is necessary to authorize the Company's due and valid execution,
delivery and consummation of this Agreement and all other agreements and
documents executed in connection hereto. This Agreement and all other agreements
and documents executed in connection herewith by the Company, upon due execution
and delivery thereof, shall constitute the valid and binding obligations of
the
Company, enforceable in accordance with its terms, except as enforcement may
be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and by general principles of equity.
3.2 Compliance
with Laws.
The
nature and transaction of the Company's business and operations and the use
of
its properties and assets do not, and during the term of this Agreement shall
not, violate or conflict with in any material respect any applicable law,
statute, ordinance, rule, regulation or order of any kind or
nature.
3.3 Absence
of Conflicts.
The
execution, delivery and performance by the Company of this Agreement and all
other agreements and documents executed in connection herewith by the Company,
and the transactions contemplated hereby, do not constitute a breach or default,
or require consents under, any agreement, permit, contract or other instrument
to which the Company is a party, or by which the Company is bound or to which
any of the assets of the Company is subject, or any judgment, order, writ,
decree, authorization, license, rule, regulation, or statute to which the
Company is subject, and will not result in the creation of any lien upon any
of
the assets of the Company.
3.4 Litigation
and Taxes.
There
is no
litigation or governmental proceeding pending, or to the best knowledge of
the
Company after due inquiry, threatened, against the Company other than as
disclosed in the Company SEC Reports (as defined below). The Company has duly
filed all applicable income or other tax returns and has paid all material
income or other taxes when due. There is no controversy or objection pending,
or
to the best knowledge of the Company after due inquiry, threatened in respect
of
any tax returns of the Company.
3.5 Intellectual
Property.
No
proceedings have been instituted or are pending or, to the Company’s knowledge,
threatened which challenge the validity of the ownership by the Company of
any
Proprietary Rights of the Company. The Company has not licensed anyone to use
any such Proprietary Rights and, to the Company’s knowledge, there has been no
use or infringement of any of such Proprietary Rights by any other
person.
3
3.6 Company's
SEC Reports.
The
Company is current in regards to all filings with the Securities and Exchange
Commission (the “SEC”)
of all
forms, reports, definitive proxy statements, schedules and registration
statements (the “ Company
SEC Reports”)
required to be filed by it with the SEC pursuant to the Securities Act of 1933,
as amended (the “Securities
Act”),
and
the Securities Exchange Act of 1934, as amended (the “Exchange
Act”),
and
the respective rules and regulations of the SEC thereunder. As of their
respective filing dates or, if amended prior to the date hereof, as of the
date
of the last amendment, none of the Company SEC Reports contained any untrue
statement of a material fact or omitted to state any material fact required
to
be stated therein or necessary to make the statements made therein, in the
light
of the circumstances under which they were made, not misleading. The
Company’s
SEC
Reports (including, without limitation, any financial statements and schedules
included therein) when filed or, if amended prior to the date hereof, as of
the
date of the last amendment, complied in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, and the
respective rules and regulations of the SEC thereunder.
3.7 No
Omissions or Misstatements.
None of
the information included in this Agreement, other documents or information
furnished to the Lender by the Company, or any of its representations, contains
any untrue statement of a material fact or is misleading in any material respect
or omits to state any material fact. Copies of all documents referred to in
herein have been delivered or made available to the Lender and constitute true
and complete copies thereof and include all amendments, schedules, appendices,
supplements or modifications thereto or waivers thereunder.
3.8 Other
Indebtedness.
On and
as of the date hereof and on and as of each Closing Date, the Company does
not
and will not have any outstanding Senior Indebtedness other than the CIWMB
Loan.
For so long as the Note (or any note issued upon transfer of the Note, in whole
or in part) remains outstanding, the Company shall not incur, create or enter
into any agreement to incur or create indebtedness ranking on a parity or
parri
passu
with the
Notes (“Parity
Indebtedness”),
other
than the investors participating in the current financing under the Company’s
2006 Private Placement Memorandum and certain other lenders, identified in
Schedule
A
to the
Security Agreement, as defined below, without the prior written consent of
the
Lender, which consent shall not be unreasonably withheld.
ARTICLE
4
CONVERSION
4.1 Conversion
Right.
Lender
in its sole discretion may convert, via written notice to the Company, the
full
amount of the principal plus any interest payable under the Note and the Loan
Agreement into shares of common stock of the Company at a conversion price
of
$0.0975 per share (the “Conversion
Right”).
Further, in the event that the Lender elects to exercise the Conversion Right,
the Company will issue to Lender a warrant, exclusive of the warrant referenced
in Article 6, with coverage equal to sixty-five percent (65%) of the value
of
the Loan, exercisable at Twelve Cents ($0.12) per share (the “Conversion
Warrant”).
All
conversion and exercise prices in this Loan Agreement shall be subject to
appropriate adjustment in the case of stock splits, stock dividends,
recapitalizations and the like. The form of warrant evidencing the Conversion
Warrant shall be identical to the form attached as Exhibit
C
hereto.
4
ARTICLE
5
DEFAULT
5.1 Events
of Default.
The
occurrence of any of the following events (each an “Event
of Default”),
not
cured in the applicable cure period, if any, shall constitute and Event of
Default of the Company:
(a) a
breach
of any representation, warranty, covenant or other provision of this Agreement
or the Note, which, if capable of being cured, is not cured within ten days
following notice thereof to the Company;
(b) the
failure to make when due any payment described in this Agreement or the Note,
whether on or after the Maturity Date, by acceleration or otherwise;
(c) the
failure to make when due any payment on any Senior Indebtedness or Parity
Indebtedness, whether on or after the maturity date, by acceleration or
otherwise; and
(d) the
application for the appointment of a receiver or custodian for the Company
or
the property of the Company, (ii) the entry of an order for relief or the filing
of a petition by or against the Company under the provisions of any bankruptcy
or insolvency law, (iii) any assignment for the benefit of creditors by or
against the Company, or (iv) the Company becomes insolvent.
5.2 Effect
of Default.
Upon
the occurrence of any Event of Default that is not cured within any applicable
cure period, the Lender may elect, by written notice delivered to the Company,
to take any or all of the following actions: (i) declare the outstanding amounts
under the Note to be forthwith due and payable, whereupon the entire unpaid
Loan, together with accrued and unpaid Interest thereon (including the Default
Interest Rate), and all other cash obligations hereunder, shall become forthwith
due and payable, without presentment, demand, protest or any other notice of
any
kind, all of which are hereby expressly waived by the Company, anything
contained herein or in any of the Note to the contrary notwithstanding, and
(ii)
exercise any and all other remedies provided hereunder or available at law
or in
equity upon the occurrence and continuation of an Event of Default.
ARTICLE
6
ISSUANCE
OF STOCK
6.1 Issuance
of Warrants.
The
Company shall issue to the Lender one (1) warrant to purchase a combined total
of two million twenty thousand (2,020,000) shares of common stock of the Company
in the form attached hereto as Exhibit
C
(the
“Warrant”).
The
Warrant shall be immediately exercisable by the Lender (or its assigns) on
the
Closing Date and at an exercise price of Twelve Cents ($0.12) per share. The
Warrant shall be exercisable for a period of four (4) years following the
Closing Date. The number of shares purchasable upon Exercise of the Warrant
and
the exercise price thereof shall be subject to appropriate adjustment in the
case of stock splits, stock dividends, recapitalizations and will contain
antidilution protection identical to those contained in the Note.
5
6.2 Registration
of Registrable Securities.
Within
nine (9) months after the First Closing Date,
the
Company, at its expense, shall have registered pursuant to one or more effective
registration statements filed with the SEC under
the
Securities Act the
resale by Lender or any successor thereto any and all Company shares issued
or
issuable (x) pursuant to the Conversion Right or otherwise with respect to
the
Loan and (y) upon exercise or conversion of the Warrants and the Additional
Warrant (collectively, the “Registrable
Securities”),
and
the Company agrees to maintain the effectiveness
and currency
of each
such
registration statement, including any related prospectus until the earlier
to
occur of (i) the resale of the Registrable Securities by Lender or any successor
thereto in the manner contemplated by such registration statement or (ii) such
time as all of the Registrable Securities may be sold by Lender or any successor
thereto pursuant to Rule 144(k) under the Securities Act (or any successor
provision thereto); and the Company shall take all such further action
(including, without limitation, any registration of such shares under applicable
state securities laws
and the
listing of such shares on any and all trading markets or stock exchanges as
the
Company’s Common Shares may trade from time to time)
as
shall permit the resale of such shares, or any portion thereof, as aforesaid.
The Company agrees to amend such registration statements from time to time
upon
request of the Lender to reflect any successors of Lender’s rights hereunder.
The Company shall from time to time furnish to Lender or any successor thereto
sufficient copies of any such prospectus, and any supplements thereto, so as
to
permit the resale of such Registrable Securities, or any portion thereof, in
the
manner prescribed by Lender or any successor thereto. If,
at any
time prior to nine (9) months after the First Closing Date, the Company files
a
registration statement with the SEC for the purpose of registering the sale
of
its equity securities under the Securities Act (other than on Form S-4 or Form
S-8), the Company agrees to include the registration of the resale of the
Registrable Securities in such registration statement and the other applicable
covenants and agreements of the Company set forth in this Section 6.2 shall
apply to such registration statement. The
Company shall pay all costs and expenses of any such registration contemplated
by this Section 6.2, including the reasonable legal fees and expenses (up to
a
maximum of $15,000) that Lender or any successor thereto may incur in connection
therewith.
ARTICLE
7
MISCELLANEOUS
7.1 Successors
and Assigns; Third Party Beneficiary.
Subject
to the exceptions specifically set forth in this Agreement, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective executors, administrators, heirs, successors and permitted
assigns of the parties. This Agreement may not be assigned (whether by operation
of law or otherwise) by the Company without the prior written consent of the
Lender. Lender’s rights under this Agreement and the related agreements of the
Company contemplated hereby (including the Note and the Security Agreement)
may
be assigned, in whole or in part, by the Lender without the consent of the
Company.
7.2 Titles
and Subtitles.
The
titles and subtitles of the Sections of this Agreement are used for convenience
only and shall not be considered in construing or interpreting this agreement.
6
7.3 Notices.
Any
notice, request or other communication required or permitted hereunder shall be
in writing and shall be delivered personally or by facsimile (receipt confirmed
electronically) or shall be sent by a reputable express delivery service or
by
certified mail, postage prepaid with return receipt requested, addressed as
follows:
if
to
the Company, to:
Itec
Environmental Group, Inc.
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇
▇.
De Laurentiis
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
with
a
copy to:
The
▇▇▇▇
Law Group, PLLC
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇
▇.
▇▇▇▇
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
if
to
the Lender, to:
▇▇
▇.
▇▇▇▇
_______________________
_______________________
With
a
copy to:
_______________________
_______________________
_______________________
_______________________
Either
party hereto may change the above specified recipient or mailing address by
notice to the other party given in the manner herein prescribed. All notices
shall be deemed given on the day when actually delivered as provided above
(if
delivered personally or by facsimile, provided that any such facsimile is
received during regular business hours at the recipient's location) or on the
day shown on the return receipt (if delivered by mail or delivery
service).
7.4 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the domestic
laws of the State of California without giving effect to any choice of law
or
conflict of law provision or rule (whether of the State of California or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of California.
7
7.5 Waiver
and Amendment.
Any
term of this Agreement may be amended, waived or modified with the written
consent of the Company and the Lender.
7.6 Remedies.
No
delay or omission by the Lender in exercising any of its rights, remedies,
powers or privileges hereunder or at law or in equity and no course of dealing
between the Lender and the undersigned or any other person shall be deemed
a
waiver by the Lender of any such rights, remedies, powers or privileges, even
if
such delay or omission is continuous or repeated, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other
or
further exercise thereof by the Lender or the exercise of any other right,
remedy, power or privilege by the Lender. The rights and remedies of the Lender
described herein shall be cumulative and not restrictive of any other rights
or
remedies available under any other instrument, at law or in equity.
7.7 Enforcement.
In the
event an action is instituted to enforce or interpret any of the terms of this
Agreement including but not limited to any action or participation by Lender
in,
or in connection with, a case or proceeding under the Bankruptcy Code or any
successor statute, the prevailing party shall be entitled to recover all
expenses reasonably incurred at, before and after trial and on appeal or review,
whether or not taxable as costs, including, without limitation, attorney fees,
witness fees (expert and otherwise), deposition costs, copying charges and
other
expenses.
[the
remainder of this page intentionally left blank]
8
IN
WITNESS WHEREOF, the Company has caused this Loan Agreement to be signed in
its
name on the date first set forth above.
|
ITEC
ENVIRONMENTAL GROUP, INC.
|
||
| |
|
|
| By: | ||
|
▇▇▇▇
▇. De Laurentiis
Chief
Executive Officer
|
||
9
IN
WITNESS WHEREOF, the Lender has caused this Loan Agreement to be signed in
its
name on the date first set forth above.
|
LENDER
|
||
| |
|
|
| By: | ||
|
Name: ▇▇
▇. ▇▇▇▇
|
||
10
Exhibit
A
Form
of Note
ITEC
ENVIRONMENTAL GROUP, INC.
10%
CONVERTIBLE DEBENTURE
| $202,000 |
August
___, 2006
|
|
RIVERBANK,
CALIFORNIA
|
ITEC
ENVIRONMENTAL GROUP, INC. (“Maker” or the “Company”) hereby promises to pay to
the order of ▇▇ ▇. ▇▇▇▇ (“Holder”), the sum of Two Hundred Two Thousand Dollars
($202,000), with interest at the rate of ten percent (10%) per annum until
paid.
All outstanding principal and accrued and unpaid interest shall become due
eighteen months from the date upon which this 10% Convertible Debenture
(“Debenture”) is executed (the “Maturity Date”). All payments due and owning
under this Debenture shall be subject to the terms and conditions set forth
herein.
| 1. |
Agreement.
|
The
Debenture is issued pursuant to that certain Subscription Agreement (the
“Agreement”), dated the same date as first set forth herein, by and between
Maker and Holder, which is hereby incorporated by reference.
| 2. |
Register.
|
The
Company shall keep at its principal office a register in which the Company
shall
provide for the registration of the Holder of the Debenture or for the
registration of a transfer of the Debenture to a different Holder.
| 3. |
Loss
Theft, Destruction or Mutilation of the
Debenture.
|
Upon
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of the Debenture and, in the case of any such loss,
theft or destruction, upon receipt of an indemnity bond in such reasonable
amount as the Company may determine (or if such Debenture is held by the
original Holder, of an unsecured indemnity agreement reasonably satisfactory
to
the Company) or, in the case of any such mutilation, upon surrender and
cancellation of such Debenture, the Company will make and deliver, in lieu
of
such lost, stolen, destroyed or mutilated Debenture, a new Debenture of like
tender and unpaid principal amount and dated as of the date to which interest
has been paid on the Debenture so lost, stolen, destroyed or
mutilated.
| 4. |
Registered
Holder.
|
The
Company may deem and treat the person in whose name any Debenture is registered
as the absolute owner and Holder of such Debenture for the purpose of receiving
payment of the principal of and interest on such Debenture and for the purpose
of any notices, waivers or consents thereunder, whether or not such Debenture
shall be overdue, and the Company shall not be affected by notice to the
contrary. Payments with respect to any Debenture shall be made only to the
registered Holder thereof.
| 5. |
Surrender
of the Debenture.
|
The
Company may, as a condition of payment of all or any of the principal of, and
interest on, the Debenture, or its conversion, require Holder to present the
Debenture for notation of such payment and, if the Debenture be paid in full
or
converted at the election of Holder as herein provided, require the surrender
hereof.
11
| 6. |
Subordination.
|
The
Company, in its sole discretion, may subordinate the Debenture to any Senior
Debt of the Company. For purposes of the Debenture, “Senior Debt” shall mean all
indebtedness for all principal,
fees, expenses, interest, penalties, post-bankruptcy petition interest, and
all
other amounts payable for money borrowed.
| 7. |
Conversion.
|
At
any
time prior to or at the Maturity Date, at the option of the Holder, all
principal and accrued interest due on this Debenture (the “Convertible Amount”)
may be converted at $0.0975 per share.
If,
upon
the expiration of the Maturity Date or the Listing, Holder elects NOT to convert
this Debenture, all outstanding principal and accrued and unpaid interest shall
become due and payable. Holder shall provide fifteen (15) days written notice
to
the Company of Holder’s election to convert the Debenture.
The
Conversion Amount shall be adjusted downward in the event the Company issues
common stock (or securities exercisable for convertible into or exchangeable
for
common stock) at a price below the Conversion Amount, to a price equal to such
issue price.
| 8. |
Mechanics
of Conversion.
|
Upon
the
Company’s receipt of written notice of Holder’s election to convert the
Debenture, the principal amount of this Debenture plus any accrued interest
shall be deemed converted into such number of shares of the Company’s Common
Stock as determined pursuant to Section 7, and no further payments shall
thereafter accrue or be owing under the Debenture. The entire balance due and
owing under the Debenture must be converted to Common Stock; no partial
conversions will be allowed. Holder shall return this Debenture to the Company
at the address set forth below, or such other place as the Company may require
in writing. Within ten (10) days after receipt of this Debenture, the Company
shall cause to be issued in the name of and delivered to Holder at the address
set forth above, or to such other address as to which Holder shall have notified
the Company in writing, a certificate evidencing the securities to which Holder
is entitled. No fractional securities will be issued upon conversion of the
Debenture. If on conversion of the Debenture a fraction of a security results,
the Company shall round up the total number of securities to be issued to Holder
to the nearest whole number.
| 9. |
Notice.
|
Any
notice required or desired to be given under this Agreement shall be in writing
and shall be deemed given when personally delivered, sent by an overnight
courier service, or sent by certified or registered mail to the addresses set
forth below, or such other address as to which one party may have notified
the
other in such manner.
| 10. |
Default.
|
The
following will be “Events of Default” under the Debenture: (a) the Company shall
default on the payment of principal or interest on the Debenture or on any
other
indebtedness of the Company when due; (b) the Company shall default on the
observance or performance of any other covenant set forth in the Debenture;
(c)
the Company shall issue any indebtedness senior to the Debenture or grant any
security for any other indebtedness (other than in connection with operating
leases such as stand-alone office equipment leases); (d) the Company shall
become insolvent or file a voluntary petition in bankruptcy (or have such a
petition filed against it) or have an assignment for the benefit of creditors
or
other creditor arrangement or similar event occur with respect to it or its
assets; or (e) failure to comply with any other term or condition of the
Debenture, which shall not have been cured within ten (10) business days receipt
of written notice to the Company.
12
Upon
Default, and
at
the option of Holder, or Holder’s successors or assigns, with
fifteen (15) days written notice to the Company, demand or presentment, Holder
may (i) accelerate all amounts due and owing under this Debenture and demand
payment immediately and/or (ii) declare the right to exercise any and all
remedies available to Holder under applicable law.
|
11.
|
Miscellaneous.
|
(a) 10%
per
annum calculated using a 360-day year composed of 12 30-day months, payable
in
full, unless otherwise converted to common stock in the Company, at maturity
or
conversion.
(b) The
Company agrees that all Conversion Shares shall be fully paid and
non-assessable. Maker shall pay upon demand any and all expenses, including
reasonable attorney fees, incurred or paid by Holder of this Debenture without
suit or action in attempting to collect funds due under this Debenture or in
connection with the issuance of the Conversion Shares. In the event an action
is
instituted to enforce or interpret any of the terms of this Debenture including
but not limited to any action or participation by Maker in, or in connection
with, a case or proceeding under the Bankruptcy Code or any successor statute,
the prevailing party shall be entitled to recover all expenses reasonably
incurred at, before and after trial and on appeal or review, whether or not
taxable as costs, including, without limitation, attorney fees, witness fees
(expert and otherwise), deposition costs, copying charges and other
expenses.
(c) All
parties to this Debenture hereby waive presentment, dishonor, notice of dishonor
and protest. All parties hereto consent to, and Holder is hereby expressly
authorized to make, without notice, any and all renewals, extensions,
modifications or waivers of the time for or the terms of payment of any sum
or
sums due hereunder, or under any documents or instruments relating to or
securing this Debenture, or of the performance of any covenants, conditions
or
agreements hereof or thereof or the taking or release of collateral securing
this Debenture. Any such action taken by Holder shall not discharge the
liability of any party to this Debenture.
(d) This
Debenture shall be governed by and construed in accordance with the laws of
the
state of California without regard to conflict of law principles.
(e) All
payments due and owing under this Debenture shall be delivered to the following:
___________________________
___________________________
___________________________
IN
WITNESS WHEREOF, the parties hereto execute this Convertible Debenture
as of
this ____ day of August, 2006.
|
Maker:
|
ITEC
ENVIRONMENTAL GROUP, INC.
|
||
|
By:
Its:
|
Holder:
___________________________
Holder’s
address: ___________________________
___________________________
___________________________
|
Maker’s
address:
|
Itec
Environmental Group
|
|
|
Attn:
▇▇▇▇ De Laurentiis
|
||
|
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
|
||
|
▇.▇.
▇▇▇ ▇▇▇
|
||
|
▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
|
13
|
With
a copy to:
|
The
▇▇▇▇ Law Group, PLLC
|
|
|
Attn:
▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
|
14
Exhibit
B
Form
of Security Agreement
SECURITY
AGREEMENT
This
SECURITY AGREEMENT ("Security
Agreement")
is
dated as of September __, 2006 (the
"Effective
Date"),
by and
among
Itec
Environmental Group, Inc., a Delaware corporation (the
"Company"),
and the
parties listed in Schedule
A and B,
attached hereto (the “Secured
Parties”).
WHEREAS,
on the Effective Date, the Company received funds pursuant to certain loans
(collectively, the “Loans”
and
each individually, a “Loan”)
by the
Secured Parties; and
WHEREAS,
in order to induce Secured Parties to provide the Loans to the Company, the
Company agreed to grant to the Secured Parties a security interest in all of
the
Company’s assets to secure the amounts currently owing, and any additional
amounts which may be owing, by the Company pursuant to the agreements between
each of the Secured Parties and the Company that evidence the Loans (the
“Loan
Documents”).
NOW,
THEREFORE, for good and valuable consideration, the receipt of which is hereby
acknowledged, the Company and parties listed
in
Schedule
A and B
attached
hereto, agree as follows:
1. Defined
Terms.
The
following terms shall have the following meanings, unless the context otherwise
requires:
“Arbor
▇▇▇▇▇▇ Notes”
shall
mean the Secured Convertible Promissory Notes dated August 14, 2006 and
September __, 2006 issued by the Company to Arbor ▇▇▇▇▇▇, LLC (“Arbor
▇▇▇▇▇▇”)
in the
aggregate principal amount of $2,300,000.00.
“Baek
Note”
means
the Secured Convertible Promissory Note dated August 29, 2006 issued by the
Company to ▇▇ ▇. ▇▇▇▇ (“▇▇▇▇”)
in the
aggregate principal amount of $202,000.00.
"Code"
shall
mean the Uniform Commercial Code as in effect in the State of California on
the
Loan Closing Date.
"Collateral"
shall
have the meaning given such term in Section 2.
"Event
of Default"
shall
have the meaning given such term in each Note.
“Goldman
Note”
shall
mean the Secured Convertible Promissory Note dated July 27, 2006 issued by
the
Company to ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇ (“▇▇▇▇▇▇▇”)
in the
aggregate principal amount of $500,000.00.
“Itec
Capital Group Notes”
shall
mean the Secured Convertible Promissory Note issued by the Company to each
of
investors participating in the offering described in the Company’s 2006 Private
Placement Memorandum as set forth on Schedule
B
hereto,
in the aggregate principal amount of $3,022,500.00.
15
“Note”
and
“Notes”
shall
mean the Arbor ▇▇▇▇▇▇ Notes, the Baek Note, the Goldman Note and the Itec
Capital Group Notes, individually and collectively, as the case may be.
"Obligations"
shall
mean the obligations of the Company under the Notes and the Loan Documents,
including all costs of collection.
“Senior
Debt”
shall
mean all
indebtedness for all principal,
fees, expenses, interest, penalties, post-bankruptcy petition interest, and
all
other amounts payable for money borrowed from banking or other financial
institutions or governmental lending facilities that is not convertible into
equity securities of the Company, including, but not limited to the $2,000,000
loan from the California Integrated Waste Management Board (the “CIWMB
Loan”).
2. Grant
of Security Interest.
As
collateral security for the prompt and complete payment and performance when
due
of all the Obligations, the Company hereby grants to the Secured Parties a
security interest in all of the Company's right, title and interest in, to
and
under the following, whether now existing or hereafter acquired (all of which
collateral being hereinafter collectively called the “Collateral”);
provided, however, that the security interest granted hereby shall be
subordinate to the security interest to be granted or granted (as the case
may
be) by the Company in connection any Senior Debt. Secured Parties shall be
entitled to a security interest in the following:
ACCOUNTS
All
present and future accounts owned by the Company, including and together with
any and all contract rights, accounts receivable, security deposits (where
not
otherwise prohibited by law or agreement), and other rights of any kind to
receive payments for services rendered and goods supplied by the Company,
together with agreements, customer lists, client lists, and accounts, invoices,
agings, verification reports and other records relating in any way to such
accounts.
CONTRACTS
All
contracts, contract rights, royalties, license rights, leases, instruments,
undertakings, documents or other agreements in or under which the Company may
now or hereafter have any right, title or interest whether now existing or
hereinafter created and all forms of obligations owing to the Company arising
out of the sale or lease of goods, the licensing of technology or the rendering
of services by the Company, whether or not earned by performance, and any and
all credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by the Company.
EQUIPMENT,
FURNISHINGS AND MISCELLANEOUS PERSONAL PROPERTY
All
presently owned and hereafter acquired furniture, furnishings, equipment,
machinery, vehicles (including motor vehicles and trailers) computer hardware
and software, accounting or bookkeeping systems, client or customer lists and
information, data sheets and other records of any kind, wherever located, stored
or inventoried, which are used or which may be used in the Company’s business;
16
FIXTURES
All
materials used by the Company in connection with its business operations,
including, but not limited to, supplies, trade equipment, appliances, apparatus
and any other items, now owned or hereafter acquired by the Company, and now
or
hereafter attached to, or installed in (temporarily or permanently) any real
property now or in the future owned or leased by the Company;
GENERAL
INTANGIBLES
All
general intangibles and other personal property of the Company, now owned or
hereinafter acquired, including, without limitation, the following: (a) permits,
authorizations and approvals presently and hereafter issued by any federal,
state, municipal or local governmental or regulatory authority in favor of
the
Company; (b) all plans, specifications, renderings and other similar materials
presently owned or hereafter acquired by the Company; (c) all presently existing
and hereafter created contracts, leases, licenses and agreements to which the
Company is a party; (d) all presently and hereafter existing policies and
agreements of insurance in favor of the Company; (e) all presently and hereafter
existing equity contribution agreements and other equity financing arrangements
in favor of the Company; (f) all copyrights, chattel paper, electronic chattel
paper, licenses, money, insurance proceeds, contract rights, subscription lists,
mailing lists, licensing agreements, patents, trademarks, service marks, trade
styles, patents, patent applications, franchise agreements, blueprints,
drawings, purchase orders, customer lists, route lists, infringements, claims,
computer programs, computer discs, computer tapes, literature, reports,
catalogs, design rights, income tax refunds, payments of insurance and rights
to
payment of any kinds, trade names, refundable, returnable or reimbursable fees,
deposits or other funds or evidences of credit or indebtedness deposited by
or
on behalf of the Company with any governmental agencies, boards, corporations,
providers of utility services, public or private; (g) all presently existing
and
hereafter acquired computer programs, computer software and other electronic
systems and materials of any kind of the Company; (h) goodwill; and (i) all
other presently existing and hereafter acquired documents, accounts, general
intangibles and intangible personal property of any kind.
DOCUMENTS
All
documents, cash, deposit accounts, securities, securities entitlements,
securities accounts, investment property, financial assets, letters of credit,
certificates of deposit, instruments, chattel paper, and electronic chattel
paper now owned or hereafter acquired and the Company’s books relating to the
foregoing.
COPYRIGHTS
All
copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; all trade secret
rights, including all rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; all mask work or similar rights available for the
protection of semiconductor chips, now owned or hereafter acquired; all claims
for damages by way of any past, present and future infringement of any of the
foregoing.
17
PROCEEDS
All
of
the Company’s books and records relating to the foregoing and any and all
present and future accounts, general intangibles, chattel paper, electronic
chattel paper, products, accessions, replacements, betterments and substitutions
for any of the foregoing described property, and all proceeds arising from
or by
virtue of, or from the sale or disposition of, or collections with respect
to,
or insurance proceeds payable with respect to, or claims against any other
persons, corporations or other entities with respect to, all or any part of
the
foregoing described property and interests.
3. Pro
Rata Distributions among Secured Parties.
It is
expressly agreed by the Secured Parties that all payments received by the
Company under or in connection with the any sale or liquidation of the
Collateral, subject to any Senior Debt, shall be divided among the Secured
Parties pari
passu
on a
pro-rata basis equal to the quotient of: (x) the unpaid principal amount of
the
Note held by each of the respective Secured Parties (without regard to
interest); divided by (y) the aggregate unpaid principal amount of all Notes
(without regard to interest).
4. Rights
of Secured Parties; Limitations on Secured Parties’ Obligations.
It is
expressly agreed by the Company that, anything herein to the contrary
notwithstanding, the Company shall remain liable under each of its contracts
and
documents to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with and pursuant
to
the terms and provisions of its contracts and documents. Secured Parties shall
have no obligation or liability under any of the Company’s contracts and
documents by reason of or arising out of this Security Agreement or the granting
to Secured Parties of a security interest therein or the receipt by Secured
Parties of any payment relating to any of the Company’s contracts and documents
pursuant hereto, nor shall Secured Parties be required or obligated in any
manner to perform or fulfill any of the obligations of the Company under or
pursuant to any of its contracts and documents, or to make any payment, or
to
make any inquiry as to the nature or the sufficiency of any payment received
by
it or the sufficiency of any performance by any party under any of its contracts
and documents, or to present or file any claim, or to take any action to collect
or enforce any performance or the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
5. Representations
and Warranties.
The
Company hereby represents and warrants that the chief executive office and
chief
place of business of the Company is ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, and
the Company will not change such chief executive office and chief place of
business or remove such records unless the Company shall have given the Secured
Parties at least 10 days' prior written notice thereof.
6. Covenants.
The
Company covenants and agrees with the Secured Parties that from and after the
date of this Security Agreement and until the Obligations are fully
satisfied:
18
(a)
Further
Documentation.
At any
time and from time to time, upon the written request of the Secured Parties,
and
at the sole expense of the Company, the Company will promptly and duly execute
and deliver any and all such further documents and take such further action
as
any Secured Party may reasonably request in carrying out the terms and
conditions of this Security Agreement and the rights and powers herein granted,
including, without limitation, the filing of any financing or continuation
statements under the Uniform Commercial Code in effect in any jurisdiction
with
respect to the security interests granted hereby.
(b)
Continuous
Perfection.
The
Company will not change its name, identity or corporate structure in any manner
unless the Company shall have given the Secured Parties at least 10 days' prior
written notice thereof and shall have taken all action (or made arrangements
to
take such action substantially simultaneously with such change if it is
impossible to take such action in advance) necessary or reasonably requested
by
any Secured Party to amend any financing statement or continuation statement
filed with respect to the Collateral so that it is not misleading.
(c)
Insurance.
The
Company will insure the Collateral against such risks and hazards as other
companies similarly situated insure against, in amounts and under policies
which
it currently holds and under such additional or substituted amounts or policies
as it may from time to time determine, which shall be reasonably acceptable
to
the Secured Parties (providing that no cancellation of such insurance shall
be
effective without 30 days written notice to the Secured Parties and containing
loss payable clauses to the Secured Parties as their interest may appear) and
all premiums thereon shall be paid by the Company.
7. Remedies,
Rights Upon Default.
(a)
In
addition to any other rights given to the Secured Parties hereunder, if an
Event
of Default shall occur and be continuing and any Secured Party shall have
declared the amounts owing under the Note(s) to be due and payable (or such
amounts shall have automatically, become due and payable), all payments received
by the Company under or in connection with any of the Collateral shall be
subject to the subordination provisions contained in the preceding Section
2,
held by the Company in trust for the Secured Parties, shall be segregated from
other funds of the Company and shall, if requested by any Secured Party
forthwith upon receipt by the Company be turned over to the Secured Parties,
in
the same form as received by the Company (duly endorsed by the Company to the
Secured Parties, if required).
(b)
If
any
Event of Default shall occur and be continuing and subject to the subordination
provisions of the preceding Section 2, any Secured Party may exercise in
addition to all other rights and remedies granted to it in this Security
Agreement or in any other instrument or agreement securing, evidencing or
relating to the Obligations or at law or in equity, all rights and remedies
of a
secured party under the Code. Without limiting the generality of the foregoing,
the Company expressly agrees that in any such event, the Secured Parties,
without demand of performance or other demand, (except the notice specified
below of time and place of public or private sale) to or upon the Company or
any
other person may forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign,
give
option or options to purchase, or sell or otherwise dispose of and deliver
said
Collateral (or contract to do so), or any part thereof, in one or more parcels
at public or private sale or sales, at any exchange broker's board or at any
of
the Secured Parties’ offices or elsewhere at such prices as it may deem best,
for cash or on credit or for future delivery without assumption of any credit
risk. Each Secured Party shall have the right upon any such public sale or
sales, and, to the extent permitted by law, upon any such private sale or sales,
to purchase the whole or any part of said Collateral so sold, free of any right
or equity of redemption, which equity of redemption the Company hereby releases.
The Company further agrees, at any Secured Party’s request, to assemble the
Collateral, make it available to one or more of the Secured Parties at places
which a Secured Party shall reasonably select, whether at the Company's premises
or elsewhere. The Secured Parties shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred therein
or
incidental to the care, safe keeping or otherwise of any or all of the
Collateral or in any way relating to the rights of the Secured Parties
hereunder, including reasonable attorneys' fees and legal expenses, to the
payment in whole or in part of the Obligations, the Company remaining liable
for
any deficiency remaining unpaid after the application, and only after so paying
over such net proceeds and after the payment by the Secured Parties of any
other
amount required by any provision of law. To the extent permitted by applicable
law, the Company waives all claims, damages, and demands against the Secured
Parties arising out of the repossession, retention or sale of the Collateral.
The Company agrees that a Secured Party need not give more than 10 days notice
of the time and place of any public sale or of the time after which a private
sale may take place and that such notice is reasonable notification of such
matters. The Company shall remain liable for any deficiency if the proceeds
of
any sale or disposition of the Collateral are insufficient to pay all amounts
to
which a Secured Party is entitled.
19
(c)
The
Company hereby waives presentment, demand, protest or any notice (to the extent
permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.
8. Application
of Proceeds.
Subject
to the subordination provisions contained in the preceding Section 2, the
Proceeds of all sales and collections in respect of any Collateral shall be
applied as follows:
(a)
First,
to
the payment of the costs and expenses of such sales and collections, the
expenses of Secured Parties and the reasonable fees and expenses of counsel
to
the Secured Parties;
(b)
Second,
any surplus then remaining to the payment of the Obligations in such order
and
manner consistent with the provisions of Section 3 above as the Secured Parties
may in their sole discretion determine; and
(c)
Third,
any surplus then remaining shall be paid to the Company.
9. Limitation
on Secured Parties’ Duty in Respect of Collateral.
Beyond
the use of reasonable care in the custody thereof, no Secured Party shall have
any duty as to any Collateral in their possession or control or in the
possession or control of any agent or nominee of it or any income thereon or
as
to the preservation of rights against prior Secured Parties or any other rights
pertaining thereto.
20
10. Notices.
Any
notice, request or other communication required or permitted hereunder shall
be
in writing and shall be delivered personally or by facsimile (receipt confirmed
electronically) or shall be sent by a reputable express delivery service or
by
certified mail, postage prepaid with return receipt requested, addressed as
follows:
if
to
the Company, to:
Itec
Environmental Group, Inc.
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇
▇.
De Laurentiis
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
if
to
Arbor ▇▇▇▇▇▇, to:
Arbor
▇▇▇▇▇▇, LLC
_______________________
_______________________
_______________________
if
to
the Baek, to:
▇▇
▇.
▇▇▇▇
_______________________
_______________________
if
to
the Goldman, to:
▇▇▇▇▇
and
▇▇▇▇ ▇▇▇▇▇▇▇
_______________________
_______________________
if
to
Itec Capital Group, to:
See
Schedule
B.
11. A
party
hereto may change the above specified recipient or mailing address by notice
to
the other party given in the manner herein prescribed. All notices shall be
deemed given on the day when actually delivered as provided above (if delivered
personally or by facsimile, provided that any such facsimile is received during
regular business hours at the recipient's location) or on the day shown on
the
return receipt (if delivered by mail or delivery service).
12. Severability.
Any
provision of this Security Agreement which is prohibited or unenforceable in
any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in
any
other jurisdiction.
21
13. No
Waiver; Cumulative Remedies.
No
Secured Parties shall by any act, delay, omission or otherwise be deemed to
have
waived any of their rights or remedies hereunder and no waiver shall be valid
unless in writing, signed by the Secured Party, and then only to the extent
therein set forth. A waiver by a Secured Party of any right or remedy hereunder
on any one occasion shall not be construed as a bar to any right or remedy
which
the Secured Parties would otherwise have had on any future occasion and shall
not apply to any other Secured Party. No failure to exercise nor any delay
in
exercising on the part of a Secured Party, any right, power or privilege
hereunder, shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or future
exercise thereof or the exercise or any other right, power or privilege. The
rights and remedies hereunder provided are cumulative and may be exercised
singly or concurrently, and are not exclusive of any rights and remedies
provided by law.
14. Successors
and Assigns.
This
Security Agreement and all obligations of the Company hereunder shall be binding
upon the successors and permitted assigns of the Company, and shall, together
with the rights and remedies of the Secured Parties hereunder, inure to the
benefit of each of the Secured Parties and their successors and permitted
assigns; provided that the Company may not assign any of its rights or
obligations hereunder without the prior written consent of each of the Secured
Parties.
15. Waiver
and Amendment.
None of
the terms or provisions of this Security Agreement may be waived, altered,
modified or amended except by an instrument in writing, duly executed by the
Company and the Secured Party against whom such waiver, alteration, modification
or amendment is sought to be enforced.
16. Governing
Law.
This
Security Agreement shall be governed by and construed in accordance with the
domestic laws of the State of California without giving effect to any choice
of
law or conflict of law provision or rule (whether of the State of California
or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of California.
17. Counterparts.
This
Security Agreement may be executed in separate counterparts each of which will
be an original and all of which taken together will constitute one and the
same
agreement.
18. Facsimile.
This
Security Agreement may be executed using facsimiles of signatures, and a
facsimile of a signature shall be deemed to be the same, and equally
enforceable, as an original of such signature.
19. Termination.
At such
time as the Obligations have been fully paid in cash, the security interest
created hereby shall automatically terminate, the Secured Parties shall take
all
such actions as may be requested by the Company to evidence such termination
and
to release the liens created hereby, at the Company's expense.
22
IN
WITNESS WHEREOF, each of the Secured Parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer as of
Effective Date.
|
ITEC
ENVIRONMENTAL GROUP, INC.
|
||
| |
|
|
| By: | ||
|
▇▇▇▇
▇. De Laurentiis
Chief
Executive Officer
|
||
|
SECURED
PARTY:
|
||
| |
|
|
|
By:
|
||
|
Its:
|
|
|
|
|
|
|
23
SCHEDULE
A
|
Secured
Party
|
Aggregate
Principal Amount of Note(s)
|
|
|
Itec
Capital Group, LLC
|
$3,022,500.00
|
|
|
Arbor
▇▇▇▇▇▇, LLC
|
$2,300,000.00
|
|
|
▇▇▇▇▇
and ▇▇▇▇ ▇▇▇▇▇▇▇
|
$500,000.00
|
|
|
▇▇
▇. ▇▇▇▇
|
$202,000.00
|
|
|
Total
|
$6,024,500.00
|
24
SCHEDULE
B
Itec
Capital Group, LLC Investors
|
Name
|
Address
|
City
|
State
|
Zip
Code
|
|||||
|
▇▇▇▇▇
and ▇▇▇▇ ▇▇▇▇▇ Trust
|
|||||||||
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
|||||||||
|
▇▇
▇. ▇▇▇▇
|
|||||||||
|
▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
|||||||||
|
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
|
|||||||||
|
▇▇▇▇▇▇
▇▇▇▇▇
|
|||||||||
|
Benetti
Trust
|
|||||||||
|
▇▇▇
▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
|
|||||||||
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▇▇▇▇▇▇▇
& ▇▇▇▇▇ ▇▇▇▇▇▇
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|||||||||
|
▇▇▇
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ ▇▇▇▇▇
|
|||||||||
|
▇▇▇▇▇▇
▇▇▇ & ▇▇▇▇ ▇▇▇▇▇
|
|||||||||
|
▇▇▇▇
▇▇▇▇▇▇
|
|||||||||
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇
|
|||||||||
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇ & ▇▇▇▇ ▇. ▇▇▇▇▇▇
|
|||||||||
|
▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇
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|||||||||
|
▇▇▇▇
▇▇▇▇▇▇▇▇▇
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|||||||||
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▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
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|||||||||
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▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
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|||||||||
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▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
|
|||||||||
|
▇▇▇▇
▇▇▇▇▇▇ Trust
|
|||||||||
|
▇▇▇▇▇▇▇
▇▇▇▇▇▇
|
|||||||||
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
|
|||||||||
|
▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ & ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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|||||||||
|
▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇
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|||||||||
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▇▇▇▇
Trust
|
|||||||||
|
▇▇▇▇▇▇
Family Trust
|
|||||||||
|
▇▇▇▇▇▇▇
Family Trust
|
|||||||||
|
Itec
Alaska Partnership
|
|||||||||
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
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|||||||||
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▇▇▇▇▇
▇. ▇▇▇▇
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|||||||||
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
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|||||||||
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▇▇▇▇▇▇
and ▇▇▇▇▇▇▇▇ Loft
|
|||||||||
|
▇▇▇▇▇▇
Family Revocable Trust
|
|||||||||
|
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇
|
|||||||||
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▇▇▇▇
& ▇▇▇▇ ▇▇▇▇▇
|
|||||||||
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▇▇▇▇
▇▇▇▇▇▇
|
|||||||||
|
▇▇▇▇
Family Trust
|
|||||||||
|
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
|
|||||||||
|
▇▇▇▇▇▇
▇▇▇▇ ▇▇▇
|
25
|
▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
|
|||||||||
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▇▇▇
▇▇▇▇
|
|||||||||
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
|
|||||||||
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇
|
|||||||||
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Saratoga
Capital Partners
|
|||||||||
|
▇▇▇
▇. ▇▇▇▇▇▇▇▇
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|||||||||
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇
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|||||||||
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▇▇▇▇▇
▇▇▇▇▇▇▇
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|||||||||
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇, DDS, ▇▇
|
|||||||||
|
▇▇▇▇▇▇▇
Family Trust
|
|||||||||
|
▇▇▇▇▇▇▇▇
▇▇▇▇▇
|
|||||||||
|
Sirott
Family Trust
|
|||||||||
|
▇▇▇▇
▇▇▇▇▇▇▇
|
|||||||||
|
▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
|||||||||
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▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇
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|||||||||
|
▇▇▇▇▇▇▇▇▇
Family Trust
|
|||||||||
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▇▇▇▇
Family Trust
|
|||||||||
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▇▇▇▇▇▇
▇▇▇▇▇▇▇
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26
Exhibit
C
Form
of
Warrant
THE
SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933 (THE “ACT”) OR APPLICABLE STATE SECURITIES LAWS, AND THE TRANSFER
THEREOF IS PROHIBITED EXCEPT 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 2,020,000 Shares of Common Stock
ITEC
ENVIRONMENTAL
GROUP,
INC.
Date
of
Issuance: August ___, 2006
No.
95
THIS
CERTIFIES that, for value received, ▇▇ ▇. ▇▇▇▇, or her 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 August ___, 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.
27
3.
Fractional
Shares.
This
Warrant may be exercised only for a whole number of shares of Common Stock,
and
no fractional shares or scrip representing fractional shares shall be issuable
upon the exercise of this Warrant.
4.
Transfer
of Warrant and Warrant Shares.
The
Holder may sell, pledge, hypothecate, or otherwise transfer 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 2,020,000 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. Adjustment
for Mergers or Reorganization, etc.
In case
of any consolidation or merger of the Company with or into another corporation
or the conveyance of all or substantially all of the assets of the Company
to
another corporation, this Warrant shall be exercisable into the number of shares
of stock or other securities or property to which a holder of the number of
shares of Common Stock of the Company deliverable upon exercise of this Warrant
would have been entitled upon such consolidation, merger or conveyance; and,
in
any such case, appropriate adjustment (as determined by the Board of Directors
of the Company) shall be made in the application of the provisions herein set
forth with respect to the rights and interest thereafter of the holder of this
Warrant, to the end that the provisions set forth herein shall thereafter be
applicable, as nearly as reasonable may be, in relation to any shares of stock
or other property thereafter deliverable upon the exercise of this Warrant.
c.
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.
d. 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.
e.
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.
28
9. Certain
Distributions.
In case
the Company shall, at any time, prior to the Expiration Date, declare any
distribution of its assets to holders of its common stock as a partial
liquidation, distribution or by way of return of capital, other than as a
dividend payable out of earnings or any surplus legally available for dividends,
then the Holder shall be entitled, upon the proper exercise of this Warrant
in
whole prior to the effecting of such declaration, to receive, in addition to
the
shares of common stock issuable on such exercise, the amount of such assets
(or
at the option of the Company a sum equal to the value thereof at the time of
such distribution to holders of common stock as such value is determined by
the
Board of Directors of the Company in good faith), which would have been payable
to the Holder had it been a holder of record of such shares of common stock
on
the record date for the determination of those holders of Common Stock entitled
to such distribution.
10. Dissolution
or Liquidation.
In case
the Company shall, at any time prior to the Expiration Date, dissolve, liquidate
or wind up its affairs, the Holder shall be entitled, upon the proper exercise
of this Warrant in whole and prior to any distribution associated with such
dissolution, liquidation, or winding up, to receive on such exercise, in lieu
of
the shares of Common Stock to which the Holder would have been entitled, the
same kind and amount of assets as would have been distributed or paid to the
Holder upon any such dissolution, liquidation or winding up, with respect to
such shares of Common Stock had the Holder been a holder of record of such
share
of Common Stock on the record date for the determination of those holders of
Common Stock entitled to receive any such dissolution, liquidation, or winding
up distribution.
11.
Reclassification
or Reorganization.
In case
of any reclassification, capital reorganization or other change of outstanding
shares of common stock of the Company (other than a change in par value, or
from
par value to no par value, or from no par value to par value, or as a result
of
an issuance of common stock by way of dividend or other distribution or of
a
subdivision or combination), the Company shall cause effective provision to
be
made so that the Holder shall have the right thereafter by exercising this
Warrant, to receive the kind and amount of shares of stock and other securities
and property receivable upon such reclassification, capital reorganization
or
other change, that a holder of the number of shares of common stock which might
have been purchased upon exercise of this warrant immediately prior to such
reclassification or change would have received. Any such provision shall include
provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this warrant. The foregoing
provisions of this Section 11 shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of common
stock. in the event that in any such capital reorganization, reclassification,
or other change, additional shares of common stock shall be issued in exchange,
conversion, substitution or payment, in whole, for or of a security of the
company other than common stock, any amount of the consideration received upon
the issue thereof being determined by the board of directors of the company
shall be final and binding on the holder.
12.
Miscellaneous.
a.
Successors
and Assigns.
The
terms and conditions of this Agreement shall inure to the benefit of, and be
binding upon, the respective successors and assigns of the parties, except
to
the extent otherwise provided herein. Nothing in this Agreement, express or
implied, is intended to confer upon any party, other than the parties hereto
or
their respective successors and assigns, any rights, remedies, obligations
or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
b.
Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of California without regard to the principles of conflict of laws
thereof.
c. Counterparts;
Delivery by Facsimile.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument. Delivery of this Agreement may be effected by facsimile.
d.
Titles
and Subtitles.
The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this Agreement.
29
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, that certain Loan Agreement (including the exhibits 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.
IN
WITNESS WHEREOF, the undersigned hereby sets is hand and seal this ___ day
of
August, 2006.
Itec
Environmental Group, Inc.
By:
Name:
▇▇▇▇ De Laurentiis
Title:
President and Chief Executive Officer
Investor
Name: _____________________________________
Investor
Address: ___________________________________
_________________________________________________
_________________________________________________
30
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.
31