Exhibit 10.1
EMPLOYMENT AGREEMENT

This Employment Agreement dated as of August 10, 2007 (“Agreement”) is made by
and between ECO2 Plastics, Inc., a corporation duly organized and existing under
the laws of the State of Delaware (the “Company”), and Craig D. Hardy
(“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 interests 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superseded by this final written Agreement.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 effective on the date first written above (the
“Effective Date”). Executive’s employment shall be deemed to have commenced on
or before August 27, 2007 and shall continue until terminated in accordance with
Section 5 hereof (the “Employment Term”). This Agreement shall be deemed
definitive upon the Effective Date.

2.2.         Position and Primary Responsibility.

(a)  The Executive shall serve as the Chief Financial Officer of the Company.

(b)   In connection with the employment of Executive, 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,
unless otherwise mutually agreed upon by the Parties.

2.3.         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 4, 8 and 10 of this Agreement.
 
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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 Two Hundred Fifty Thousand Dollars
($250,000.00) (as may be adjusted pursuant to this Section 3.1 and/or Section
3.5, the “Base Salary”), less statutory deductions and withholdings, payable to
Executive on a bi-monthly basis.

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.

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.

3.4.         Cash Bonuses. Executive shall be eligible for a bonus entitlement
during each calendar year (or portion thereof) of the Employment Term with a
target of fifty percent (50%) of his Base Salary for such year (or portion
thereof) (the “Bonus”). The Bonus shall be guaranteed at a minimum amount of
Twenty-Five Thousand Dollars ($25,000) for the first year of employment. Within
sixty (60) 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 15th of the taxable year commencing after the year in which
the Executive’s right to such payment becomes vested.

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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 Compensation
Committee with the Board of Directors approval.

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) a
common stock purchase warrant to acquire Common Stock of the Company, a form of
warrant is attached hereto as Exhibit B, exercisable over a period of four (4)
years after grant with respect to shares of Common Stock, in the aggregate
covering five million (5,000,000) shares (collectively, the “Executive Shares”).

(b)  The market price of the stock at close of market on the day preceding the
Effective Date will determine the fair market value per share (the “Market
Value”) of Common Stock issuable to Executive under this Section 3.6, at the
respective dates of issuance of the Executive Shares (as those terms are defined
below). As soon as practicable, but in any event within thirty (30) days of the
date of this Agreement, the Company shall issue and deliver to Executive the
following equity awards based upon the following vesting schedule:

(i) one million two hundred fifty thousand (1,250,000) shares of Common Stock
shall vest immediately upon issuance;
(ii) one million two hundred fifty thousand (1,250,000) shares of Common Stock
shall vest on the first anniversary of Effective Date;
(iii) one million two hundred fifty thousand (1,250,000) shares shall vest on
the second anniversary of the Effective Date; and
(iv) one million two hundred fifty thousand (1,250,000) shares shall vest on the
third anniversary of the Effective Date.

(c)  The Company shall cooperate with Executive in the making by Executive of a
timely election under Section 83(b) of the Internal Revenue Code of 1986 with
respect to any restricted share grant of Common Stock. Executive shall submit a
copy to the Company of any such election if made.
 
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(d)  In the event that the Company, at its expense, registers with the
Securities and Exchange Commission pursuant to one or more effective
registration statements under the Securities Act of 1933, as amended (the
“Securities Act”), (the “Registration Statement”) in the manner prescribed by
Executive, the Company shall include the Executive Shares (the “Registrable
Securities”) in the Registration Statement, 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 Executive Shares, 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.” The amount of Common Stock included in a Registration Statement
filed is, however, subject to the right of the Company and its underwriters to
reduce the number of shares proposed to be registered pro-rata in view of market
conditions or legal considerations, pursuant to Rule 415 of the Securities Act,
which may limit the total number of shares included on a Registration Statement
to thirty percent (30%) of the then issued and outstanding common stock of the
Company. In the event the total number of shares registered is required to be
adjusted to comply with Rule 415 of the Securities Act, the Executive agrees to
the allocation of such adjustment on a pro-rata basis.
 
(e)   On or prior to the first anniversary following the Effective 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.

(f)   Any restricted stock granted shall be granted and issued pursuant to a
Restricted Stock Agreement, a form of which is attached hereto as Exhibit A.

3.7          Relocation Expenses. In connection with the employment of
Executive, the Company shall provide relocation expenses in the amount of
Thirty-Five Thousand Dollars ($35,000) (the “Relocation Expenses”) in connection
with Executive’s move to a new permanent residence. The Relocation Expenses
shall be paid to Executive at the relocation occurs. Executive shall only
receive Relocation Expenses upon completion of Executive’s relocation to a new
permanent residence.
 
(a)  Executive may, at his discretion, elect to convert, via written notice to
the Company within thirty (30) days of the Effective Date, the full amount of
the Relocation Expenses into shares of common stock in an amount equivalent to
Seventy Thousand Dollars ($70,000) in value as determined by the closing price
of the stock on the date of election.

(b)  In the event that Executive is terminated pursuant to Section 5 prior to
the first anniversary of the Effective Date, the Relocation Expenses or the
conversion of the Relocation Expenses shall be subject to forfeiture.
 
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(c)  Executive shall be responsible for providing documentation of all expenses
associated with the relocation and the Company shall gross up compensation for
the Relocation Expenses to account for taxes paid on any additional income.
Compensation for taxes shall be made in accordance with the manner Executive
elects to receive payment for the Relocation Expenses of either cash or shares.

3.8          Travel Expenses. In connection with the employment of Executive,
the Company shall reimburse hotel expenses in an amount not to exceed Two
Thousand Dollars ($2,000) (the “Travel Expenses”) per month for Executive’s
costs of hotel rooms while traveling from Modesto, CA to the Company’s offices
in San Francisco, CA during the first four (4) months of the Employment Term.
Executive must provide receipts for reimbursement of travel expenses.

4.          Benefits. Within thirty (30) 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 three (3) weeks (accruing
ratably each year) and eleven (11) paid holidays and (y) a non-accountable
monthly allowance of Five Hundred Dollars ($500) (the “Monthly Allowance”).

5.          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”):

5.1.          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 5.1 being referred to
herein as termination for “Death or Disability”). Upon the Death of Executive,
Executive’s heirs or assigns shall be entitled to (i) fifty percent (50%) of the
annual Base Salary and (ii) on pro-rated amount of any and all outstanding
Executive Shares that Executive is entitled to receive from the Effective Date
to the date of Death (the “Earnings Entitlement”). In the event Executive
commits suicide, Executive’s heirs or assigns shall not be entitled to the
Earnings Entitlement.

5.2.          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 5.2 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.
 
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5.3.          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 5.3 being referred to herein as “Voluntary”
termination).

5.4.          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 5.4 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 in any material
respect the responsibilities, functions and duties attached to his position with
the Company or a refusal to perform his duties at all or in a reasonably
acceptable manner; and (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 5.4 for poor job performance,
excluding refusal to perform his duties, Executive shall have sixty (60) days to
cure the behavior upon which the threatened termination is based and during
which time Executive shall have no reduction in pay or benefits (including
without limitation, bonuses, options and vesting).

5.5.          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
5.5 being referred to herein as termination “Without Cause”).

5.6.          Other Remedies. Termination pursuant to Section 5.2 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 5.4 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.
 
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5.7.          Salary Continuation During Disability. Notwithstanding Section 5.1
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.          Severance and Termination.

6.1.         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 5.1 above, or Executive’s Voluntary
termination of employment hereunder in accordance with Section 5.3 above, or a
termination of Executive’s employment hereunder for Cause in accordance with
Section 5.4 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 the Earnings
Entitlement 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 15.1 below. Provided further, in
the event of a termination of Executive’s employment hereunder for Cause in
accordance with Section 5.4 above, Executive shall tender back to the Company
all unexercised options granted to Executive by the Company in connection with
Executive’s employment.

6.2.         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 5.2 above, or Without Cause in accordance with
Section 5.4 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 percent (100%) 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
 
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(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

(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 Combination being 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 (6) 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 the 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).
 
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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 6.2 shall be made no earlier than six (6) months
after the Termination Date.

7.          Severance Conditioned on Mutual Release of Claims. The Company’s
obligation to provide Executive with the Severance Payments set forth in Section
6.2 is contingent upon Executive’s execution of a release of mutual claims. Any
release of claims shall not include any independently verifiable criminal acts
or civil fraud committed by either the Company and/or its officers or directors.

8.          Non-competition, Non-solicitation.  

8.1.         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.

8.2.         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.

8.3.         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.

8.4.         Public Investments. The provisions of Section 8.1 through 8.3,
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.
 
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9.          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.

10.  
Confidential Information and Trade Secrets.

10.1.        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).

10.2.        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.
 
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11.         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.

12.        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 Bylaws 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.

13.         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):
 
If to Executive:
Craig D. Hardy
 
1813 Savoie Way
 
Modesto, CA 95356
   
With a copy to:
_______________________
 
_______________________
 
_______________________
 
_______________________
   
If to the Company:
ECO2 Plastics, Inc.
 
680 Second Street, Suite 200
 
San Francisco, CA 94107
   
With a copy to:
David M. Otto
 
The Otto Law Group, PLLC
 
601 Union St., Suite 4500
 
Seattle, WA 98101

 
11

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14.          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.

15.          Miscellaneous.

15.1.        Post Termination Obligations. Notwithstanding the termination of
Executive’s employment hereunder, the provision(s) of Section(s) “3.6(e),” “5,”
“6,” “7,” “9,” “10,” “12” and “14” shall survive the Termination Date.

15.2.        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 8 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.
 
12

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15.3.        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).

15.4.        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.

15.5.        Interpretation of Agreement. This Agreement shall be interpreted in
accordance plain meaning of its terms and under the laws of the State of
California. Each party has cooperated in the drafting of this Agreement.
Therefore, in the construction of this Agreement, the Agreement shall not be
interpreted for or against any party by virtue of having drafted the Agreement
and any such principle of interpretation shall be construed in a neutral manner.

15.6.        Variation. Subject to Section 15.8, 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.

15.7.        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.

15.8.        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.

15.9.        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.

15.10.      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.

15.11.      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.
 
13

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15.12.      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. Sec. 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. Sec. 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]

14

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IN WITNESS WHEREOF, the Parties hereto have set their hands and seals the day
and year first above written.
 
THE COMPANY:
             
ECO2 PLASTICS, INC.
              By:      

--------------------------------------------------------------------------------

Rodney S. Rougelot
   
Its:           Chief Executive Officer
Date:       August 10, 2007
             
EXECUTIVE:
             
CRAIG D. HARDY
             

--------------------------------------------------------------------------------

Craig D. Hardy
     
Date: August 10, 2007
     

 
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Exhibit A
Restricted Stock Agreement

This Restricted Stock Agreement dated as of August 10, 2007 (“Agreement”) is
made by and between ECO2 Plastics, Inc., a corporation duly organized and
existing under the laws of the State of Delaware (the “Company”), and Craig D.
Hardy (“Executive”) (referred to collectively herein as the “Parties”).

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
August 10, 2007 (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:

2.             Issuance of Shares.Subject to the restrictions, terms and
conditions of this Agreement, 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) a common stock purchase warrant to acquire Common Stock of
the Company, a form of warrant is attached to the Employment Agreement as
Exhibit B, exercisable over a period of four (4) years after grant with respect
to shares of Common Stock, in the aggregate covering five million (5,000,000)
shares (collectively, the “Executive Shares”). As used in this Agreement, the
term “Shares,” “Common Stock” and “Executive 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.

The market price of the stock at close of market on the day preceding the
Effective Date will determine the fair market value per share (the “Market
Value”) of Common Stock issuable to Executive under this Agreement and Section
3.6 of the Employment Agreement, at the respective dates of issuance of the
Executive Shares (as those terms are defined below). As soon as practicable, but
in any event within thirty (30) days of the date of this Agreement and the
Employment Agreement, the Company shall issue and deliver to Executive the
following equity awards based upon the following vesting schedule:

(i) one million two hundred fifty thousand (1,250,000) shares of Common Stock
shall vest immediately upon issuance;
(ii) one million two hundred fifty thousand (1,250,000) shares of Common Stock
shall vest on the first anniversary of Effective Date;
(iii) one million two hundred fifty thousand (1,250,000) shares shall vest on
the second anniversary of the Effective Date; and
(iv) one million two hundred fifty thousand (1,250,000) shares shall vest on the
third anniversary of the Effective Date.
 
16

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3.              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 A 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.

3.          Repurchase and Vesting.

3.1  Repurchase Right for Unvested Shares. Unless otherwise stated below, as of
the Effective Date, all of the Shares are “Unvested Shares” and shall be
restricted and based on the following vesting schedule (shares that have vested
are referred to herein as “Vested Shares”):

(i) An aggregate of five million (5,000,000) shares shall vest on the following
schedule (i) one million two hundred fifty thousand (1,250,000) shares of Common
Stock shall vest immediately upon issuance; (ii) one million two hundred fifty
thousand (1,250,000) shares of Common Stock shall vest on the first anniversary
of Effective Date; (iii) one million two hundred fifty thousand (1,250,000)
shares shall vest on the second anniversary of the Effective Date; and (iv) one
million two hundred fifty thousand (1,250,000) shares shall vest on the third
anniversary of the Effective Date.

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.
 
17

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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, grant a lien or security interest in, pledge, hypothecate,
encumber or otherwise dispose of (collectively, a “Transfer”) any of the
Unvested Shares.

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 B 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 C 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.
 
18

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11.            Governing Law; Jurisdiction. This Agreement shall be interpreted
in accordance with the 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.

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.
 
19

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- 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.
 
ECO2 PLASTICS, INC.
 
    STOCKHOLDER        

--------------------------------------------------------------------------------

By: Rodney S. Rougelot    

--------------------------------------------------------------------------------

Name: Craig D. Hardy
Its: Director and CEO
     

 
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LIST OF EXHIBITS

Exhibit A: Stock Power and Assignment of Uncertificated Securities

Exhibit B: Irrevocable Proxy

Exhibit C: Election under Section 83(b) of the Internal Revenue Code
 
21

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EXHIBIT A

Stock Power and Assignment
of Uncertificated Securities

FOR VALUE RECEIVED and pursuant to that certain Restricted Stock Agreement dated
as of _____________, 2007 (the “Agreement”), the undersigned hereby sells,
assigns and transfers unto ECO2 PLASTICS, 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)

 
Instructions: 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.
 
22

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EXHIBIT B

Irrevocable Proxy

THE UNDERSIGNED STOCKHOLDER, being the owner of _____________ shares of common
stock (the “Stock”) of ECO2 PLASTICS, INC. (the “Company”) does hereby grant
to _____________ an irrevocable and unlimited proxy (the “Proxy”) and hereby
appoints _____________ his attorney-in-fact to vote the Stock in connection with
any shareholder meeting of the Company.

IN WITNESS WHEREOF, I have executed this proxy this _____________ day of
_____________, 2007.

          STOCKHOLDER              

--------------------------------------------------------------------------------

(Signature)      

--------------------------------------------------------------------------------

(Please Print Name)

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EXHIBIT C

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 ECO2 PLASTICS, INC. (the “Company”):

 
Name:

 
Address:

 
Social Security No.:

(2)
The property with respect to which the election is made is _____________ 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.

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Exhibit B

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 _________ Shares of Common Stock

ECO2 PLASTICS, INC.
(f.k.a., Itec Environmental Group, Inc.)

Date of Issuance: _____________

No. _____

THIS CERTIFIES that, for value received, Craig D. Hardy, or his/her/its assigns
(in either case, the “Holder”) is entitled to purchase, subject to the
provisions of this Warrant, from ECO2 Plastics, 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 ___________ (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.
 
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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 this Warrant 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
__________ 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 $_____.
 
b. Net Issue Exercise. In lieu of exercising this Warrant, the Holder may elect
to receive Shares equal to the value of this Warrant (or the portion thereof
being canceled) by surrender of this Warrant at the principal office of the
Company together with notice of such election, in which event the Company shall
issue to the Holder a number of Shares computed using the following formula:

X = Y (A-B)
-------
A
 
Where X  = the number of the Shares to be issued to the Holder.

  Y   = the number of the Shares purchasable under this Warrant.

  A   = the fair market value of one Share on the date of determination.

  B   = the per share Exercise Price (as adjusted to the date of such
calculation).

Fair Market Value. For purposes of this section, the per share fair market value
of the Shares shall mean:

(i)  If the Company's Common Stock is publicly traded, the per share fair market
value of the Shares shall be the average of the closing prices of the Common
Stock as quoted on the Nasdaq National Market or the principal exchange on which
the Common Stock is listed, or if not so listed then the fair market value shall
be the average of the closing bid prices of the Common Stock as published in The
Wall Street Journal, in each case for the fifteen (15) trading days ending five
(5) trading days prior to the date of determination of fair market value;
 
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(ii)  If the Company's Common Stock is not so publicly traded, the per share
fair market value of the Shares shall be such fair market value as is determined
in good faith by the Board of Directors of the Company after taking into
consideration factors it deems appropriate, including, without limitation,
recent sale and offer prices of the capital stock of the Company in private
transactions negotiated at arm's length.

c.            Adjustment for Mergers or Reorganization, etc. In case of any
consolidation or merger of the Company with or into another corporation or the
conveyance of all or substantially all of the assets of the Company to another
corporation, this Warrant shall be exercisable into the number of shares of
stock or other securities or property to which a holder of the number of shares
of Common Stock of the Company deliverable upon exercise of this Warrant would
have been entitled upon such consolidation, merger or conveyance; and, in any
such case, appropriate adjustment (as determined by the Board of Directors of
the Company) shall be made in the application of the provisions herein set forth
with respect to the rights and interest thereafter of the holder of this
Warrant, to the end that the provisions set forth herein shall thereafter be
applicable, as nearly as reasonable may be, in relation to any shares of stock
or other property thereafter deliverable upon the exercise of this Warrant.

d.            NO IMPAIRMENT. THE COMPANY WILL NOT, THROUGH ANY REORGANIZATION,
TRANSFER OF ASSETS, CONSOLIDATION, MERGER, DISSOLUTION, ISSUE OR SALE OF
SECURITIES OR ANY OTHER VOLUNTARY ACTION, AVOID OR SEEK TO AVOID THE OBSERVANCE
OR PERFORMANCE OF ANY OF THE TERMS TO BE OBSERVED OR PERFORMED HEREUNDER BY THE
COMPANY, BUT WILL AT ALL TIMES IN GOOD FAITH ASSIST IN THE CARRYING OUT OF ALL
THE PROVISIONS OF THIS SECTION AND IN THE TAKING OF ALL SUCH ACTION AS MAY BE
NECESSARY OR APPROPRIATE IN ORDER TO PROTECT THE EXERCISE RIGHTS OF THE HOLDER
OF THIS WARRANT AGAINST IMPAIRMENT.

e.            Issue Taxes. The Company shall pay issue taxes that may be payable
in respect of any issue or delivery of shares of Common Stock on exercise of
this Warrant, in whole; provided, however, that the Company shall not be
obligated to pay any transfer taxes resulting from any transfer requested by any
holder in connection with any such exercise.

f.             Reservation of Stock Issuable Upon Conversion. The Company shall
at all times reserve and keep available out of its authorized but unissued
shares of common stock, solely for the purpose of effecting the exercise of this
Warrant, such number of its shares of common stock as shall from time to time be
sufficient to effect the exercise of this Warrant; and if at any time the number
of authorized but unissued shares of common stock shall not be sufficient to
effect the exercise of this Warrant, the Company will take all appropriate
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of common stock to such number of shares as
shall be sufficient for such purpose.

g.            Adjustment. The Exercise Price shall be adjusted downward in the
event the Company issues common stock (or securities exercisable for or
convertible into or exchangeable for common stock) at a price below the Exercise
Price, to a price equal to such issue price.

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.
 
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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 purchase
the kind and amount of shares of stock and other securities and PROPERTY
RECEIVABLE UPON SUCH RECLASSIFICATION, CAPITAL REORGANIZATION OR OTHER CHANGE,
BY A HOLDER OF THE NUMBER OF SHARES OF COMMON STOCK WHICH MIGHT HAVE BEEN
PURCHASED UPON EXERCISE OF THIS WARRANT IMMEDIATELY PRIOR TO SUCH
RECLASSIFICATION OR CHANGE. ANY SUCH PROVISION SHALL INCLUDE PROVISION FOR
ADJUSTMENTS WHICH SHALL BE AS NEARLY EQUIVALENT AS MAY BE PRACTICABLE TO THE
ADJUSTMENTS PROVIDED FOR IN THIS WARRANT. THE FOREGOING PROVISIONS OF THIS
SECTION 12 SHALL SIMILARLY APPLY TO SUCCESSIVE RECLASSIFICATIONS, CAPITAL
REORGANIZATIONS AND CHANGES OF SHARES OF COMMON STOCK. IN THE EVENT THAT IN ANY
SUCH CAPITAL REORGANIZATION, RECLASSIFICATION, OR OTHER CHANGE, ADDITIONAL
SHARES OF COMMON STOCK SHALL BE ISSUED IN EXCHANGE, CONVERSION, SUBSTITUTION OR
PAYMENT, IN WHOLE, FOR OR OF A SECURITY OF THE COMPANY OTHER THAN COMMON STOCK,
ANY AMOUNT OF THE CONSIDERATION RECEIVED UPON THE ISSUE THEREOF BEING DETERMINED
BY THE BOARD OF DIRECTORS OF THE COMPANY SHALL BE FINAL AND BINDING ON THE
HOLDER.

12.         Miscellaneous.

a.             Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of, and be binding upon, the respective
successors and assigns of the parties, except to the extent otherwise provided
herein. Nothing in this Agreement, express or implied, is intended to confer
upon any party, other than the parties hereto or their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.

b.             Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California without regard to the
principles of conflict of laws thereof.

c.             Counterparts; Delivery by Facsimile. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument. Delivery
of this Agreement may be effected by facsimile.

d.             Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

            e.             Notices. Unless otherwise provided, any notice
required or permitted hereunder shall be given by personal service upon the
party to be notified by certified mail, return receipt requested and: (i) if to
the Company, addressed to ECO2 Plastics, Inc., 680 Second Street, Suite 200 San
Francisco, California 94107, 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.
 
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g.             Entire Agreement. This Agreement, the Memorandum (including the
appendices and schedules thereto) by and between the Company and the Holder,
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof and supersede all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties hereto.

IN WITNESS WHEREOF, the undersigned hereby sets is hand and seal this ___ day of
___________, 2007.
 
ECO2 Plastics, Inc.
              By:      

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Name: Rodney Rougelot
   
Title: Chief Executive Officer
              Investor Name:      

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      Investor Address:      

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EXHIBIT A
 
NOTICE OF EXERCISE
 
(To be signed only upon exercise of the Warrant)
 
To: ECO2 Plastics, 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 ECO2 Plastics, Inc.
(the “Company”).
 

Dated: ________________            

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(Signature must conform in all respects to name of holder as specified on the
face of the Warrant)      

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(Please Print Name)      

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(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.
 
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