Exhibit 10.4
Amendment to Domingue Loan Agreement

AMENDMENT NO. 1 TO LOAN AGREEMENT

THIS AMENDMENT NO. 1 TO LOAN AGREEMENT (this "Amendment"), is executed as of
September 7, 2006, by and between Itec Environmental Group, Inc., a Delaware
corporation (the "Company"), and Arbor Malone, LLC, a Delaware limited liability
company (the "Lender").
 
WHEREAS, the Company and the Lender entered into a Loan Agreement on August 14,
2006 (the “Loan Agreement”) pursuant to which the parties effected the First
Closing thereunder at which time Lender advanced an initial Loan in the amount
of $1,000,000; and
 
WHEREAS, the Lender is willing to increase its loan commitment under the Loan
Agreement to an aggregate of $2,300,000; and
 
WHEREAS, the Lender is willing to provide such additional financing on terms and
conditions as set forth herein.
 
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Lender,
intending to be legally bound, hereby amend the Loan Agreement as follows:
 
1. Amendment to Section 2.1. The parties agree that the first sentence of
Section 2.1 of the Loan Agreement is amended to read as follows:
 
“According to the terms and subject to the conditions of this Agreement, the
Lender shall loan to the Company the aggregate amount of Two Million Three
Hundred Thousand Dollars ($2,300,000.00) (the "Loan").”
 
2. Conditions Precedent to the Loan. Section 2.4 (b) of the Loan Agreement shall
be amended to read as follows:
 
(b) The Company shall have duly authorized, executed, and delivered to the
Lender a security agreement in the form attached hereto as Exhibit B (the
“Security Agreement”) to secure the repayment of the Loan and granting the
Lender a continuing security interest in all presently existing and hereafter
acquired assets and property of the Company of whatever nature and wherever
located which such Security Interest shall be senior to all other security
interests or Encumbrances against the assets and property of the Company other
than Senior Debt (as hereafter defined). Lender shall be entitled to a security
interest pari passu on a pro-rata basis with the investors participating in
private placement pursuant to the 2006 Private Placement Memorandum (the “PPM”)
of the Company and, except as set forth above, Lender’s security interest shall
be senior to any other indebtedness of the Company, whether now existing or
created or incurred in the future. “Senior Debt” shall mean all indebtedness for
all principal, fees, expenses, interest, penalties, post-bankruptcy petition
interest, and all other amounts payable for money borrowed from banking or other
financial institutions or governmental lending facilities that is not
convertible into equity securities of the Company, including, but not limited to
the $2,000,000 loan from the California Integrated Waste Management Board (the
“CIWMB Loan”) and the remaining amount due and owing under the forbearance
agreement by and between the Company and the Elevation Fund, LLC (the
“Forbearance Agreement”).

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3. Other Indebtedness. Section 3.8 of the Loan Agreement shall be amended to
read as follows:
 
“3.8. Other Indebtedness. On and as of the date hereof and on and as of each
Closing Date, the Company does not and will not have any outstanding Senior Debt
other than the CIWMB Loan and the amount due and owning pursuant to the
Forbearance Agreement. For so long as the Note (or any note issued upon transfer
of the Note, in whole or in part) remains outstanding, the Company shall not
incur, create or enter into any agreement to incur or create indebtedness
ranking on a parity or parri passu with the Notes (“Parity Indebtedness”), other
than the investors participating in the financing under the Company’s 2006
Private Placement Memorandum and certain other lenders, identified in Schedule A
to the Security Agreement, as defined below, without the prior written consent
of the Lender, which consent shall not be unreasonably withheld.”
 
4. Events of Default. Section 5.1(e) shall be amended to read as follows:
 
“(e) The Effective Date under the Rougelot Employment Agreement shall not have
occurred on or prior to September 15, 2006 or Mr. Rougelot shall no longer serve
as the Chief Executive Officer of the Company for any reason other than his
death or disability, Voluntary departure or removal for Cause (as such terms are
defined in the Rougelot Employment Agreement); and”
 
5. Issuance of Warrants. The first sentence of Section 6.1 shall be amended to
read as follows:
 
“The Company shall issue to the Lender one or more warrants to purchase a
combined total of twenty-three million (23,000,000) shares of common stock of
the Company in the form attached hereto as Exhibit C (referred to herein
collectively as the “Warrant”).”
 
6. Effect of Amendment. Except as specifically amended hereby, the Loan
Agreement shall remain in full force and effect as originally written. This
Amendment shall be deemed to be incorporate in and a part of the Loan Agreement.
 
7. Titles and Subtitles; Defined Terms. The titles and subtitles of the Sections
of this Amendment are used for convenience only and shall not be considered in
construing or interpreting this agreement. Capitalized terms used but not
otherwise defined in this Amendment shall have the specific meanings set forth
in the Loan Agreement.

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IN WITNESS WHEREOF, each of the parties has caused this Amendment No. 1 to Loan
Agreement to be signed in its name on the date first set forth above.
 

       
ITEC ENVIRONMENTAL GROUP, INC.
 
   
   
    By:      

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Gary M. De Laurentiis    Chief Executive Officer 

       
ARBOR MALONE, LLC
 
   
   
    By:       Name: 

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Ronald M. Domingue   Title   Manager  

 
     

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Schedule A

Secured Party
Aggregate Principal Amount of Note(s)
Itec Capital Group, LLC
$3,022,500.00
Arbor Malone, LLC
$2,300,000.00
Leroy and Lois Goldman
$500,000.00
Ji Y. Baek
$202,000.00
   
Total
$6,024,500.00

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Exhibit B
 
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 Malone Notes” shall mean the Secured Convertible Promissory Notes dated
August 14, 2006 and September __, 2006 issued by the Company to Arbor Malone,
LLC (“Arbor Malone”) 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 Ji Y. Baek (“Baek”) 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 Leroy and Lois Goldman (“Goldman”) 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.

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“Note” and “Notes” shall mean the Arbor Malone 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;

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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.

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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
5300 Claus Road, Riverbank, CA 95367, and the Company will not change such chief
executive office and chief place of business or remove such records unless the
Company shall have given the Secured Parties at least 10 days' prior written
notice thereof.
 
6. Covenants. The Company covenants and agrees with the Secured Parties that
from and after the date of this Security Agreement and until the Obligations are
fully satisfied:
 
(a) Further Documentation. At any time and from time to time, upon the written
request of the Secured Parties, and at the sole expense of the Company, the
Company will promptly and duly execute and deliver any and all such further
documents and take such further action as any Secured Party may reasonably
request in carrying out the terms and conditions of this Security Agreement and
the rights and powers herein granted, including, without limitation, the filing
of any financing or continuation statements under the Uniform Commercial Code in
effect in any jurisdiction with respect to the security interests granted
hereby.

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(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).
 

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(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.
 
(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.
 
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:

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                if to the Company, to:

Itec Environmental Group, Inc.
5300 Claus Road, Box 760
Riverbank, CA 95367
Attn: Gary M. De Laurentiis
Fax: (209) 881-3529
 
if to Arbor Malone, to:

Arbor Malone, LLC
Attn: Mr. Ronald S. Domingue
600 Seminole Drive
Winter Park, FL 32789
 
if to the Baek, to:

Ji Y. Baek
13700 Marina Pointe Drive, Suite 1001
Marina Del Rey, CA 90292

if to the Goldman, to:

Leroy and Lois Goldman
23808 Ladrillo Street
Woodland Hills, CA 91376

if to Itec Capital Group, to:

See Schedule B.

A party hereto may change the above specified recipient or mailing address by
notice to the other party given in the manner herein prescribed. All notices
shall be deemed given on the day when actually delivered as provided above (if
delivered personally or by facsimile, provided that any such facsimile is
received during regular business hours at the recipient's location) or on the
day shown on the return receipt (if delivered by mail or delivery service).
11. Severability. Any provision of this Security Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
 

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12. No Waiver; Cumulative Remedies. No Secured Parties shall by any act, delay,
omission or otherwise be deemed to have waived any of their rights or remedies
hereunder and no waiver shall be valid unless in writing, signed by the Secured
Party, and then only to the extent therein set forth. A waiver by a Secured
Party of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Secured Parties would
otherwise have had on any future occasion and shall not apply to any other
Secured Party. No failure to exercise nor any delay in exercising on the part of
a Secured Party, any right, power or privilege hereunder, shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or future exercise thereof or the
exercise or any other right, power or privilege. The rights and remedies
hereunder provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights and remedies provided by law.
 
13.Successors and Assigns. This Security Agreement and all obligations of the
Company hereunder shall be binding upon the successors and permitted assigns of
the Company, and shall, together with the rights and remedies of the Secured
Parties hereunder, inure to the benefit of each of the Secured Parties and their
successors and permitted assigns; provided that the Company may not assign any
of its rights or obligations hereunder without the prior written consent of each
of the Secured Parties.
 
14. Waiver and Amendment. None of the terms or provisions of this Security
Agreement may be waived, altered, modified or amended except by an instrument in
writing, duly executed by the Company and the Secured Party against whom such
waiver, alteration, modification or amendment is sought to be enforced.
 
15. Governing Law. This Security Agreement shall be governed by and construed in
accordance with the domestic laws of the State of California without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of California or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of California.
 
16. Counterparts. This Security Agreement may be executed in separate
counterparts each of which will be an original and all of which taken together
will constitute one and the same agreement.
 
17. Facsimile. This Security Agreement may be executed using facsimiles of
signatures, and a facsimile of a signature shall be deemed to be the same, and
equally enforceable, as an original of such signature.
 
18. Termination. At such time as the Obligations have been fully paid in cash,
the security interest created hereby shall automatically terminate, the Secured
Parties shall take all such actions as may be requested by the Company to
evidence such termination and to release the liens created hereby, at the
Company's expense.

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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:      

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Gary M. De Laurentiis    Chief Executive Officer 

 

       
SECURED PARTY:
 
   
   
    By:       Its:

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SCHEDULE A

Secured Party
Aggregate Principal Amount of Note(s)
Itec Capital Group, LLC
$3,022,500.00
Arbor Malone, LLC
$2,300,000.00
Leroy and Lois Goldman
$500,000.00
Ji Y. Baek
$202,000.00
   
Total
$6,024,500.00

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SCHEDULE B

Itec Capital Group, LLC Investors

Name
Address
City
State
Zip Code
Allen and Judy Adler Trust
PO Box 3644
Rcho Santa Fe
CA
92067
Jeffrey D. Alpert
P.O. Box 528
Ross
CA
94957
Ji Y. Baek
13700 Marina Pointe Dr. #1001
Marina del Rey
CA
90292
Craig R. Barone
1645 W. School Unit 403
Chicago
IL
60657
Brandon Barrera
1149 Cole Ave
Los Angeles
CA
90038
Robert Belli
5655 Anza Street
San Francisco
CA
94121
Benetti Trust
80 Mount Vernon Ln.
Atherton
CA
94027
Gil Bensimon or Danielle Krause Simon
32 Union Park Street Apt. No. 2
Boston
MA
02118
Maurice & Paula Benard
15300 Ventura Blvd., Ste #315
Sherman Oaks
CA
91403
Amy Blanchard & Jerry Ivers
147 Normandy Ct
San Carlos
CA
94070
Jordan Lee & Judy Bloom
315 Barbara Way
Hillsborough
CA
94010
Phil Brodie
[Currently unknown]
 
CA
 
Thomas A. Brown
854 East Terrace Avenue
Fresno
CA
93704
Douglas R. Curtis & Mary P. Curtis
110 Highland Avenue
Los Gatos
CA
95030
Mark S. Devereaux
324 Bretano Way
Greenbrae
CA
94904
Paul Dittmeier
762 W. Mountain Rd.
Sparta
NJ
07871
Ronald Domingue
600 Seminole Drive
Winter Park
FL
32789
Michael J. Edwards
3439 North Greenview Avenue
Chicago
IL
60657
Douglas & Jennifer Flentge
378 Faas Ranch Road
New Castle
CO
81647
Joel Frazin Trust
2008 C West Willow
Chicago
IL
60647
Michael Frazin
395 Landis Lane
Deerfield
IL
60015
Clayton S. Friedman & Terri E. Friedman
38 Vernon
Newport Coast
CA
92657
Leroy H. Goldman & Lois H. Goldman
23808 Ladrillo Street
Woodland Hills
CA
91367
Todd S. Greenhalgh
112 Clifford Terrace
San Francisco
CA
94117
Hart Trust
25421 Via Alcira
Valencia
CA
91355
Hughes Family Trust
1543 Cole Street
San Francisco
CA
94117
Hurwich Family Trust
260 Sea View Avenue
Piedmont
CA
94610
Itec Alaska Partnership
10250 Jamestown Drive #21
Anchorage
AK
99507
Richard O. Johnson
PO Box 1448
Zanesville
OH
43702
Susan G. Kief
1012A Mission Street
S. Pasadena
CA
91030
Charles J. Lidman
4311 Vista De La Tierra
Del Mar
CA
92014
Andrew and Campbell Loft
37 Elm Avenue
San Anselmo
CA
94960
Losson Family Revocable Trust
90 Valley Hill Dr.
Moraga
CA
94556
Kelly Luthringshausen
323 The Lane
Hinsdale
IL
60521
Fred & Ruth Lynch
25 Cromwell Dr.
Chester
NJ
07930
Mark Miller
1698 Massachusetts Avenue
Cambridge
MA
02138
Nave Family Trust
P.O. Box 572529
Tarzana
CA
91357-2529
Johnathan Nicholas
1154 Washington Street #3
Boston
MA
02118
Andrew Paul IRA
216 Emerald Ave
San Carlos
CA
94070

 
 
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Carol A. Pochini
501 Portola Road, Box 8174
Portola Valley
CA
94028
Jim Rose
109 El Pinar
Los Gatos
CA
95032
Rodney S. Rougelot
542 46th Avenue
San Francisco
CA
94121
Arthur L. Ruoff
216 Texas Lane
Ithaca
NY
14850
Saratoga Capital Partners
601 Union Street, Suite 4500
Seattle
WA
98101
Lee S. Schwartz
458 N. Green Bay Rd.
Waukegan
IL
60085
Ronald E. Schweitzer
261 Roycroft Avenue
Long Beach
CA
90803
Barry Seidman
16631 Avenido Molino Viejo
Rancho Santa Fe
CA
92067
Charles M. Spitz, DDS, MS
50 South San Mateo Drive, Suite 160
San Mateo
CA
94401
Shamash Family Trust
1770 Forest View Avenue
Hillsborough
CA
94010
Danielle Simon
32 Union Park
Boston
MA
02118
Sirott Family Trust
20 Midvale Court
Walnut Creek
CA
94597
Dane Solomon
100 North Harper Avenue
Los Angeles
CA
90048
Norma L. Taylor
13200 Marina Pointe Drive #531
Marina del Rey
CA
90292
Elissa R. Wellikson
765 Campbell Ave
Los Altos
CA
94024
Whittaker Family Trust
8070 La Jolla Shores Dr. #508
La Jolla
CA
92037
Wong Family Trust
1119 Alomar Way
Belmont
CA
94002
Arnold Zousmer
P.O. Box 9906
Rancito Santa Fe
CA
92067

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Exhibit C

THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933 (THE “ACT”) OR APPLICABLE STATE SECURITIES LAWS, AND THE
TRANSFER THEREOF IS PROHIBITED EXCEPT PURSUANT TO REGISTRATION UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM
SUCH REGISTRATION. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.

Warrant To Purchase 3,000,000 Shares of Common Stock

Itec Environmental Group, inc.

Date of Issuance: August ___, 2006

No. 96

THIS CERTIFIES that, for value received, Arbor Malone, LLC, or its assigns (in
either case, the “Holder”) is entitled to purchase, subject to the provisions of
this Warrant, from Itec Environmental Group, Inc., a Delaware corporation (the
“Company”), at the price per share set forth in Section 8 hereof, that number of
shares of the Company’s common stock (the “Common Stock”) set forth in Section 7
hereof. This Warrant is referred to herein as the “Warrant” and the shares of
Common Stock issuable pursuant to the terms hereof are sometimes referred to
herein as “Warrant Shares.”

1. Holder Exercise of Warrant. This Warrant shall only be exercisable in whole.
All shares of Common Stock issued upon the exercise of this Warrant at the time
of issuance will be validly issued, fully paid, and nonassessable. To exercise
this Warrant in whole, the Holder shall deliver to the Company at its principal
office, (a) a written notice, in substantially the form of the exercise notice
attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election
to exercise this Warrant, which notice shall specify the number of shares of
Common Stock to be purchased and be accompanied by a check for the full amount
of the aggregate Exercise Price (as defined in Section 8(a) below) for the
Warrant Shares so purchased and (b) this Warrant. The Company shall as promptly
as practicable, and in any event within twenty (20) days after delivery to the
Company of (i) the Exercise Notice together with payment of the Exercise Price,
(ii) and this Warrant, execute and deliver or cause to be executed and
delivered, in accordance with such notice, a certificate or certificates
representing the aggregate number of Warrant Shares specified in such notice.
Each certificate representing Warrant Shares shall bear the legend or legends
required by applicable securities laws. The Company shall pay all expenses and
other charges payable in connection with the preparation, issuance and delivery
of such stock certificates except that, in case such stock certificates shall be
registered in a name or names other than the name of the Holder, funds
sufficient to pay all stock transfer taxes, if any, that are payable upon the
issuance of such stock certificate or certificates shall be paid by the Holder
at the time of delivering the Exercise Notice.

The Holder shall also have the right to convert this Warrant or any portion
thereof (the "Conversion Right"), without payment by the Holder of the Exercise
Price in cash or any other consideration (other than the surrender of rights to
receive Warrant Shares hereunder), into shares of Common Stock as provided in
this Section 1. Upon receipt by the Company of a duly executed and completed
Conversion Notice in the form attached hereto as Exhibit B for the exercise of
the Conversion Right with respect to a particular number of Warrant Shares (the
"Converted Warrant Shares"), the Company shall deliver to the Holder (without
payment by the Holder of the Exercise Price in cash or any other consideration
(other than the surrender of rights to receive Warrant Shares hereunder)) that
number of shares of Common Stock equal to the quotient obtained by dividing: (x)
the difference between (i) the product of (A) the Current Market Price of a
share of Common Stock multiplied by (B) the number of Converted Warrant Shares
and (ii) the product of (A) the Exercise Price multiplied by (B) the number of
the Converted Warrant Shares, in each case as of the Conversion Date, by (y) the
Current Market Price of a share of Common Stock on the Conversion Date. The term
“Conversion Date” shall be the date a duly executed and completed Conversion
Notice is received by the Company. No fractional Warrant Shares shall be
issuable upon exercise of the Conversion Right, and if the number of Warrant
Shares to be issued determined in accordance with the following formula is other
than a whole number, the Company shall, at its election, pay to the Holder an
amount in cash equal to the Current Market Price of the resulting fractional
Warrant Share on the Conversion Date or round up to the next nearest whole
share.

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The term "Current Market Price" for the shares of Common Stock as of a specified
date shall mean: (i) if the shares of Common Stock are publicly traded on such
date, the average closing price per share over the preceding 10 trading days as
reported on the principal stock exchange or quotation system on which the shares
of Common Stock are then listed or quoted; (ii) if the shares of Common Stock
are not so publicly traded on such date, the value determined in good faith by
the Board of Directors of the Company; provided, that if Holder shall dispute
such value determined by the Board of Directors the value shall be the appraised
value per share of Common Stock as of such date determined by an investment
banking firm of recognized standing selected by the Company and reasonably
satisfactory to the Holder. In the event the appraised value is greater than
120% of the value of determined by the Board of Directors, the cost of such
appraisal shall be borne by the Company and in all other circumstances, the cost
of such appraisal shall be borne by the Holder.

The Warrant shall expire on August ___, 2010 (the “Expiration Date”). The Holder
may exercise the warrant at any time prior to the Expiration Date.

2. Reservation of Shares. The Company hereby covenants that at all times during
the term of this Warrant there shall be reserved for issuance such number of
shares of its Common Stock as shall be required to be issued upon exercise of
this Warrant.

3.  Fractional Shares. This Warrant may be exercised only for a whole number of
shares of Common Stock, and no fractional shares or scrip representing
fractional shares shall be issuable upon the exercise of this Warrant.

4.  Transfer of Warrant and Warrant Shares. The Holder may sell, pledge,
hypothecate, or otherwise transfer (“Transfer”) this Warrant, in whole or in
part, only if such sale, pledge, hypothecation, or transfer is made in
compliance with the Act or pursuant to an available exemption from registration
under the Act relating to the disposition of securities. Subject to the
preceding sentence, the Company agrees to issue to any successor or transferee
of Holder a new Warrant or Warrants of like tenor promptly upon receipt of
Holder’s notice of any such Transfer and shall issue to Holder a new Warrant
representing any portion hereof that is not so Transferred.

5.  Loss of Warrant. Upon receipt by the Company of evidence satisfactory to it
of the loss, theft, or destruction of this Warrant, and of indemnification
satisfactory to it, or upon surrender and cancellation of this Warrant, if
mutilated, the Company will execute and deliver a new warrant of like tenor.

6.  Rights of the Holder. No provision of this Warrant shall be construed as
conferring upon the Holder the right to vote, consent, receive dividends or
receive notice other than as expressly provided herein. Prior to exercise, no
provision hereof, in the absence of affirmative action by the Holder to exercise
this Warrant, and no enumeration herein of the rights or privileges of the
Holder, shall give rise to any liability of the holder for the purchase price of
any warrant shares or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.

7.  Number of Warrant Shares. This Warrant shall be exercisable for 3,000,000
shares of the Company’s Common Stock, as adjusted from time to time in
accordance with this Agreement.

8.  Exercise Price; Adjustment of Warrants.

a.  Exercise Price. The per share purchase price (the “Exercise Price”) for each
of the Warrant Shares purchasable under this Warrant shall be equal to $0.12, as
adjusted from time to time in accordance with this Agreement.
 

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

c. Adjustment in the Case of Certain Transactions or Events. The Exercise Price
shall be adjusted downward in the event the Company issues Common Stock (or
securities exercisable for or convertible into or exchangeable for common stock)
at a price below the Exercise Price, to a price equal to such issue price. The
preceding adjustment shall be effective immediately at the time of the issuance
of any security issued (or of any reduction in effective price of any security).
In addition, the Exercise Price and the number of Warrant Shares issuable upon
exercise hereof shall be appropriately adjusted in the case of stock splits,
stock dividends, recapitalizations and the like.

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

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

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

9. Certain Distributions. In case the Company shall, at any time, prior to the
Expiration Date, declare any distribution of its assets to holders of its common
stock as a partial liquidation, distribution or by way of return of capital,
other than as a dividend payable out of earnings or any surplus legally
available for dividends, then the Holder shall be entitled, upon the proper
exercise of this Warrant in whole prior to the effecting of such declaration, to
receive, in addition to the shares of common stock issuable on such exercise,
the amount of such assets (or at the option of the Company a sum equal to the
value thereof at the time of such distribution to holders of common stock as
such value is determined by the Board of Directors of the Company in good
faith), which would have been payable to the Holder had it been a holder of
record of such shares of common stock on the record date for the determination
of those holders of Common Stock entitled to such distribution.

10. Dissolution or Liquidation. In case the Company shall, at any time prior to
the Expiration Date, dissolve, liquidate or wind up its affairs, the Holder
shall be entitled, upon the proper exercise of this Warrant in whole and prior
to any distribution associated with such dissolution, liquidation, or winding
up, to receive on such exercise, in lieu of the shares of Common Stock to which
the Holder would have been entitled, the same kind and amount of assets as would
have been distributed or paid to the Holder upon any such dissolution,
liquidation or winding up, with respect to such shares of Common Stock had the
Holder been a holder of record of such share of Common Stock on the record date
for the determination of those holders of Common Stock entitled to receive any
such dissolution, liquidation, or winding up distribution.

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11.  Reclassification or Reorganization. In case of any reclassification,
capital reorganization or other change of outstanding shares of common stock of
the Company (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of an issuance of
common stock by way of dividend or other distribution or of a subdivision or
combination), the Company shall cause effective provision to be made so that the
Holder shall have the right thereafter by exercising this Warrant, to receive
the kind and amount of shares of stock and other securities and property
receivable upon such reclassification, capital reorganization or other change,
that a holder of the number of shares of common stock which might have been
purchased upon exercise of this warrant immediately prior to such
reclassification or change would have received. Any such provision shall include
provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this warrant. The foregoing
provisions of this Section 11 shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of common
stock. in the event that in any such capital reorganization, reclassification,
or other change, additional shares of common stock shall be issued in exchange,
conversion, substitution or payment, in whole, for or of a security of the
company other than common stock, any amount of the consideration received upon
the issue thereof being determined by the board of directors of the company
shall be final and binding on the holder.

12.  Miscellaneous.

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

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

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

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

e. Notices. Unless otherwise provided, any notice required or permitted
hereunder shall be given by personal service upon the party to be notified by
certified mail, return receipt requested and: (i) if to the Company, addressed
to Itec Environmental Group, Inc., 5300 Claus Road, Riverbank, California 95367,
or at such other address as the Company may designate by notice to the Holder in
accordance with the provisions of this Section; and (ii) if to the Holder, at
the address indicated on the signature page hereof, or at such other addresses
as the Holder may designate by notice to the Company in accordance with the
provisions of this Section.

f.  Amendments and Waivers. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either prospectively or retroactively), only with the
written consent of the Company and the Holder.

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IN WITNESS WHEREOF, the undersigned hereby sets is hand and seal this ___ day of
August, 2006.

Itec Environmental Group, Inc.

By: ____________________________________
       Name: Gary De Laurentiis
       Title: President and Chief Executive Officer

Holder Name: ____________________________________

Holder Address: __________________________________

_________________________________________________

_________________________________________________

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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.

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EXHIBIT B

(FORM OF CONVERSION NOTICE TO BE EXECUTED
UPON EXERCISE OF WARRANT)

CONVERSION NOTICE

The undersigned, the registered holder of Warrant No. _______ (the "Warrant"),
issued Itec Environmental Group, Inc. (the "Company"), hereby (1) irrevocably
elects to convert the Warrant into such number of shares of Common Stock of the
Company as is determined pursuant to Section 1 of the Warrant, which conversion
shall be effected pursuant to the terms and conditions of the Warrant, and (2)
directs that the certificates for such shares of Common Stock issuable upon
exercise of the Warrant be issued in the name of and

delivered to: _________________________________________________________________

whose address is _____________________________________________________________.

The undersigned represents that the aforesaid shares of Common Stock are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
 
 

       
(Name)
         
(Address)
       

 
SIGNATURE:

Dated: ________________.

 

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NOTICE: The signature on this Conversion Notice must correspond with the name as
written upon the face of the Warrant, or upon an assignment form attached
hereto.

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