Document:

INVESTMENT
      AGREEMENT

     

    THIS
      INVESTMENT AGREEMENT
      (the
“Agreement”)
      is
      dated as of September 8, 2006, by and between the
      Investors listed on the signature pages hereto
      (the
“Buyers”),
      and
ADVANCED
      COMMUNICATIONS TECHNOLOGIES, INC.,
      a
      Florida corporation (the “Company”).

     

     

    Recitals:

     

    The
      parties have reached an agreement pursuant to which the Buyers shall make an
      investment in the Company, and the Company shall issue and sell to the Buyers
      shares of Series A-1 Convertible Preferred Stock, par value $0.01 per share
      (the
“Series
      A-1 Preferred Stock”),
      all
      in accordance with the terms hereof.

     

     

    Agreement:

     

    NOW,
      THEREFORE,
      in
      consideration of the mutual premises herein set forth and certain other good
      and
      valuable consideration, the receipt and sufficiency of which is hereby
      acknowledged, the parties hereto agree as follows:

     

    1.  ISSUANCE
      OF SHARES AND RELATED TRANSACTIONS.

     

    1.1.  Issuance
      of Shares.
      At
      Closing (as defined below), subject to the terms, restrictions and conditions
      of
      this Agreement, the Buyers shall acquire, and the Company shall sell, issue
      and
      deliver to each Buyer, the number shares of Series A-1 Preferred Stock set
      forth
      on the signature pages to this Agreement (the “Buyers’
      Stock”),
      which
      shall have the right and designations set forth on Exhibit
      “A”
      hereto.
      All Buyers’ Stock and the Common Stock into which such Buyers’ Stock is
      convertible shall be free and clear of all liens, claims, pledges, mortgages,
      restrictions, obligations, security interests and encumbrances of any kind,
      nature and description (collectively, “Encumbrances”).
      

     

    1.2.  Purchase
      Price.
      The
      purchase price (the “Purchase
      Price”)
      for
      the Buyer’s Stock shall be equal to $1,000 per share, which shall be paid to the
      Company in immediately available funds on the Closing Date (as set forth in
      Section
      1.3
      hereof.

     

    1.3.  Closing.
      The
      parties to this Agreement shall consummate the transactions contemplated by
      this
      Agreement at one or more closings (each a “Closing”)
      to be
      held on a date specified by the Company no later than September 13, 2006;
      provided, in no event shall the Closing occur prior to the satisfaction of
      the
      conditions precedent set forth in Sections
      6, 7 and 8
      hereof.
      The date of each Closing is referred to herein as the “Closing
      Date.”
The
      Closing shall take place at the offices of the Company, or at such other place
      as may be mutually agreed upon by the Buyer and the Company. At the Closing,
      the
      Company shall deliver to the Buyers certificates representing the Buyers’
Stock.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    2.  ADDITIONAL
      AGREEMENTS.

     

    2.1.  Agreement
      to Register the Common Stock.
      The
      Company shall notify all holders of the Buyers’ Stock at least 30 days prior to
      the filing of any registration statement under the Securities Act of 1933 for
      a
      public offering of the Common Stock of the Company (including, but not limited
      to, registration statements relating to secondary offerings of securities of
      the
      Company, but excluding registration statements relating to employee benefit
      plans or corporate reorganizations or other transactions under Rule 145 of
      the
      Securities Act) and will afford each such holder an opportunity to include
      in
      such registration statement all or part of the shares of common stock issued
      or
      issuable upon conversion of the Buyers’ Stock (“Registrable
      Securities”)
      held
      by such holder. Each holder desiring to include Registrable Securities in any
      such registration statement shall notify the Company within 15 days after the
      notice from the Company. Such notice shall state the intended method of
      disposition of the Registrable Securities by such Holder. If a Holder decides
      not to include all of its Registrable Securities in any registration statement
      filed by the Company, such Holder shall nevertheless continue to have the right
      to include any Registrable Securities in any subsequent registration statement
      or registration statements as may be filed by the Company, all upon the terms
      and conditions set forth herein. If the registration statement under which
      the
      Company gives notice under this Section is for an underwritten offering, the
      right of any holder to be included in a registration shall be conditioned upon
      the holder's participation in the underwriting (including the execution of
      underwriting agreements containing customary provisions).. Notwithstanding
      any
      other provision of this Agreement to the contrary, if the underwriter determines
      in good faith that marketing factors require a limitation of the number of
      shares to be underwritten, the number of shares that may be included in the
      underwriting shall be allocated, first, to the Company and any security holders
      exercising demand registration rights; second, to the holders of the Buyers’
stock and any other security holders exercising “piggyback” registration rights,
      pro rata based on the total number of shares of common stock entitled to be
      included in the registration statement held by each of the holders; and third,
      to any stockholder of the Company (other than a holder exercising registration
      rights) on a pro rata basis. If a registration statement does not relate to
      an
      underwritten offering, the holder’s right to participate shall be conditioned on
      the holder’s entering into a mutual indemnification agreement with the Company
      containing customary terms and executing such other documents, and following
      such other procedures, as the Company may reasonably require.

     

    2.2.  Access
      and Inspection, Etc.
      The
      Company shall allow the Buyers and their authorized representatives full access
      during normal business hours from and after the date hereof and prior to the
      Closing Date to all of the properties, books, contracts, commitments and records
      of the Company for the purpose of making such investigations as the Buyers
      may
      reasonably request in connection with the transactions contemplated hereby,
      and
      shall cause the Company to furnish Buyers such information concerning its
      affairs as Buyers may reasonably request. The Company has caused and shall
      cause
      its personnel to assist the Buyers in making such investigation and shall use
      their best efforts to cause the counsel, accountants, engineers and other
      non-employee representatives of the Company to be reasonably available to Buyers
      for such purposes. 

     

    
      
         

      

      
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    2.3.  Public
      Announcements.
      The
      parties will consult with each other before issuing any press releases or
      otherwise making any public statement with respect to this Agreement or any
      of
      the transactions contemplated hereby and no party will issue any such press
      release or make any such public statement without the prior written consent
      of
      the other parties, except as may be required by law or by the rules and
      regulations of any governmental authority or securities exchange.

     

    2.4.  Best
      Efforts.
      Subject
      to the terms and conditions provided in this Agreement, each of the parties
      shall use its best efforts in good faith to take or cause to be taken as
      promptly as practicable all reasonable actions that are within its power to
      cause to be fulfilled those conditions precedent to its obligations or the
      obligations of the other parties to consummate the transactions contemplated
      by
      this Agreement that are dependent upon its actions.

     

    2.5.  Further
      Assurances.
      The
      parties shall deliver any and all other instruments or documents required to
      be
      delivered pursuant to, or necessary or proper in order to give effect to, the
      provisions of this Agreement, including, without limitation, to issue the
      Buyers’ Stock and to consummate the transactions contemplated by this
      Agreement.

     

    3.  REPRESENTATIONS,
      COVENANTS AND WARRANTIES OF THE COMPANY.

     

    To
      induce
      Buyers to enter into this Agreement and to consummate the transactions
      contemplated hereby, the Company represents and warrants to and covenants with
      the Buyers as follows: 

     

    3.1.  Organization;
      Compliance.
      The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the State of Florida. The Company is: (a) entitled to own
      or
      lease its properties and to carry on its business as and in the places where
      such business is now conducted, and (b) duly licensed and qualified in all
      jurisdictions where the character of the property owned by it or the nature
      of
      the business transacted by it makes such license or qualification necessary,
      except where the failure to do so would not result in a material adverse effect
      on the Company. 

     

    3.2.  Capitalization
      and Related Matters.

     

    (a)  The
      Company has an authorized capital consisting of 5,000,000,000 shares of Common
      Stock and 25,000 shares of Preferred Stock, of which 4,597,302,006 shares of
      Common Stock, 3,270 shares of Series A Preferred Stock and 40 shares of Series
      B
      Preferred Stock are issued and outstanding as of the date hereof. All Common
      Stock is duly and validly issued, fully paid and nonassessable. No Common Stock
      (i) was issued in violation of the preemptive rights of any shareholder, or
      (ii)
      is held as treasury stock. 

     

    (b)  Except
      as
      set forth in the Company’s Form 10-QSB for the quarter ended March 31, 2006, the
      Company’s Form 10-KSB for the year ended June 30, 2005 and any Form 8-K filed
      since March 31, 2006 (the “SEC
      Documents”),
      there
      are no outstanding securities convertible into Common Stock or any other capital
      stock of the Company nor any rights to subscribe for or to purchase, or any
      options for the purchase of, or any agreements providing for the issuance
      (contingent or otherwise) of, or any calls, commitments or claims of any
      character relating to, such capital stock or securities convertible into such
      capital stock (collectively, “Securities
      Rights”).
      The
      Company: (i) is not subject to any obligation (contingent or otherwise) to
      repurchase or otherwise acquire or retire any of its capital stock; or (ii)
      has
      no liability for dividends or other distributions declared or accrued, but
      unpaid, with respect to any capital stock.

     

    
      
         

      

      
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    (c)  The
      Company is not a party to any agreement, understanding or arrangement, direct
      or
      indirect, relating to any class or series of the Company’s capital stock,
      including, without limitation, any voting agreement, restriction on resale,
      shareholder agreement or registration rights agreement.

     

    3.3.  Subsidiaries
      and Investments.
      

     

    (a)  The
      SEC
      Documents disclose with respect to each Subsidiary (as defined below)
      (i) its name, (ii) the jurisdiction of its organization,
      (iii) the number of its authorized shares or other equity interests,
      (iv) the number of its outstanding shares or other equity interests of each
      class or series, and (v) the name of the owner and the number and
      percentage of outstanding shares or other equity interests of each class or
      series of such Subsidiary owned of record and, if different, owned beneficially
      by the Company and any other person. All of the outstanding capital stock and
      other equity interests of each of the Subsidiaries is validly issued, fully
      paid
      and nonassessable and was issued in compliance with all applicable federal
      and
      state securities or “blue sky” laws and regulations. There are no Securities
      Rights relating to any shares of capital stock, other equity interests or other
      securities of any of the Subsidiaries. The Company and the Subsidiaries have
      good, marketable and exclusive title to the shares or other equity interests
      disclosed in the SEC Documents as being owned by each of them, free and clear
      of
      all Encumbrances. All rights and powers to vote such shares or other equity
      interests are held exclusively by the Company, directly or indirectly through
      one or more of the Subsidiaries, as the case may be. Each Subsidiary is a
      corporation duly organized, validly existing and in good standing under the
      laws
      of its jurisdiction of organization, and has the corporate power and authority
      to own or lease its properties and to carry on its business as now conducted.
      For the purposes hereof, a “Subsidiary”
means
      any corporation, limited liability company, partnership, joint venture or other
      entity in which the Company owns, directly or indirectly, more than 20% of
      the
      outstanding voting securities or equity interests.

     

    (b)  Except
      as
      disclosed in SEC Documents, the Company does not own, nor has it ever owned,
      any
      equity interest in any corporation, limited liability company, partnership,
      joint venture or other entity.

     

    3.4.  Execution;
      No Inconsistent Agreements; Etc.

     

    (a)  This
      Agreement is a valid and binding agreement of the Company, enforceable in
      accordance with its terms, except as such enforcement may be limited by
      bankruptcy or similar laws affecting the enforcement of creditors' rights
      generally, and the availability of equitable remedies. 

     

    (b)  The
      execution and delivery of this Agreement by the Company does not, and the
      consummation of the transactions contemplated hereby will not, constitute a
      breach or violation of the charter or bylaws of the Company, or a default under
      any of the terms, conditions or provisions of (or an act or omission that would
      give rise to any right of termination, cancellation or acceleration under)
      any
      note, bond, mortgage, lease, indenture, agreement or obligation to which the
      Company is a party, pursuant to which the Company otherwise receives benefits,
      or to which any of the properties of the Company is subject.

     

    
      
         

      

      
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    3.5.  Corporate
      Records.
      The
      statutory records, including the stock register and minute books of the Company,
      fully reflect all issuances, transfers and redemptions of its capital stock,
      correctly show and will correctly show the total number of shares of its capital
      stock issued and outstanding on the date hereof and on the Closing Date, the
      charter or other organizational documents and all amendments thereto, and bylaws
      as amended and currently in force.

     

    3.6.  Financial
      Statements.

     

    (a)  The
      SEC
      Documents contain (i) the consolidated audited balance sheet of the Company
      as
      of June 30, 2005, and the consolidated audited consolidated profit and loss
      statement of the Company for the fiscal year ended June 30, 2005 and (ii) the
      consolidated unaudited balance sheet of the Company as of March 31, 2006 and
      the
      consolidated unaudited profit and loss statement of the Company for the nine
      months ended March 31, 2006 (the balance sheet as of March 31, 2006 is
      hereinafter referred to as the “2006
      Company Balance Sheet”).
      All
      the foregoing financial statements, and any financial statements delivered
      pursuant to subsection (c) below, are referred to herein collectively as the
      “Company
      Financial Statements.”
      

     

    (b)  The
      Company Financial Statements have been and will be prepared in accordance with
      U.S. GAAP, applied on a consistent basis (except that the unaudited statements
      do not contain all the disclosures required by GAAP), and fairly reflect and
      will reflect in all material respects the financial condition of the Company
      as
      at the dates thereof and the results of the operations of the Company for the
      periods then ended. 

     

    3.7.  Liabilities.
      The
      Company has no material debt, liability or obligation of any kind, whether
      accrued, absolute, contingent or otherwise, except: (a) those reflected on
      the
      2006 Company Balance Sheet, including the notes thereto,(b) liabilities in
      respect of the Company’s settlement with the former officers of Pacific Magtron
      International Corp., as disclosed in the Company’s Current report on Form 8-K
      dated August 11, 2006, and (c) liabilities incurred in the ordinary course
      of
      business since March 31, 2006 none of which have or will have a material adverse
      effect on the financial condition of the Company.

     

    3.8.  Absence
      of Changes.
      Except
      as described in the SEC Documents and in the other Schedules to this Agreement,
      from March 31, 2006 to the date of this Agreement:

     

    (a)  there
      has
      not been any adverse change in the business, assets, liabilities, results of
      operations or financial condition of the Company or in its relationships with
      suppliers, customers, employees, lessors or others other than changes in the
      ordinary course of business, none of which, singularly or in the aggregate,
      have
      had or will have a material adverse effect on the business, properties or
      financial condition of the Company; and 

     

    
      
         

      

      
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    (b)  the
      Company has complied with the covenants and restrictions set forth in
Section
      5
      to the
      same extent as if this Agreement had been executed on, and had been in effect
      since, March 31, 2006.

     

    3.9.  Title
      to Properties.
      The
      Company has good and marketable title to all of its properties and assets,
      real
      and personal, including, but not limited to, those reflected in the 2006 Company
      Balance Sheet (except as since sold or otherwise disposed of in the ordinary
      course of business, or as expressly provided for in this Agreement), free and
      clear of all Encumbrances of any kind or character except: (a) those securing
      liabilities of the Company incurred in the ordinary course (with respect to
      which no material default exists); (b) liens of 2005 and 2006 real estate and
      personal property taxes; and (c) imperfections of title and Encumbrances, if
      any, which, in the aggregate (i) are not substantial in amount; (ii) do not
      detract from the value of the property subject thereto or impair the operations
      of the Company or; and (iii) do not have a material adverse effect on the
      business, properties or assets of the Company.

     

    3.10.  Compliance
      With Law.
      The
      business and activities of the Company has at all times been conducted in
      accordance with its articles of incorporation and bylaws and any applicable
      law,
      regulation, ordinance, order, License (defined below), permit, rule, injunction
      or other restriction or ruling of any court or administrative or governmental
      agency, ministry, or body, except where the failure to do so would not result
      in
      a material adverse effect on the Company.

     

    3.11.  Taxes.
      The
      Company has duly filed all material federal, state, local and foreign tax
      returns and reports, and all returns and reports of all other governmental
      units
      having jurisdiction with respect to taxes imposed on it or on its income,
      properties, sales, franchises, operations or employee benefit plans or trusts,
      all such returns were complete and accurate when filed, and all taxes and
      assessments payable by the Company have been paid to the extent that such taxes
      have become due. All taxes accrued or payable by the Company for all periods
      through June 30, 2005 have been accrued or paid in full, whether or not due
      and
      payable and whether or not disputed. The Company has withheld proper and
      accurate amounts from its employees for all periods in full compliance with
      the
      tax withholding provisions of applicable foreign, federal, state and local
      tax
      laws. There are no waivers or agreements by the Company for the extension of
      time for the assessment of any taxes. The tax returns of the Company have never
      been examined by any authority or other administrative body or court of any
      state or country. There are not now any examinations of the income tax returns
      of the Company pending, or any proposed deficiencies or assessments against
      the
      Company of additional taxes of any kind. The Company shall duly and timely
      prepare and file all material federal, state, local and foreign tax returns
      and
      reports for 2005, and all returns and reports of all other governmental units
      having jurisdiction with respect to taxes imposed on the Company or on its
      income, properties, sales, franchises, operations or employee benefit plans
      or
      trusts, and all such returns will be complete and accurate when filed.

     

    3.12.  Real
      Properties.
      The
      Company does not have an interest in any real property, except for the Leases
      (as defined below).

     

    
      
         

      

      
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    3.13.  Leases
      of Real Property.
      All
      leases pursuant to which the Company is lessee or lessor of any real property
      (the “Leases”)
      are
      listed in the SEC Documents and are valid and enforceable in accordance with
      their terms. There is not under any of such leases (a) any material default
      or
      any claimed material default by the Company or any event of default or event
      which with notice or lapse of time, or both, would constitute a material default
      by the Company and in respect to which the Company has not taken adequate steps
      to prevent a default on its part from occurring, or (b) to the knowledge of
      the
      Company, any material default by any lessee of the Company or any event of
      default or event which with notice or lapse of time, or both, would constitute
      a
      material default by any lessee. The copies of the Leases heretofore furnished
      to
      Buyer are true, correct and complete, and such Leases have not been modified
      in
      any respect since the date they were so furnished, and are in full force and
      effect in accordance with their terms. The Company is lawfully in possession
      of
      all real properties of which they are a lessee (the “Leased
      Properties”).
      

     

    3.14.  Contingencies.
      Except
      as disclosed in the SEC Documents, there are no actions, suits, claims or
      proceedings pending, or to the knowledge of the Company threatened against,
      by
      or affecting, the Company in any court or before any arbitrator or governmental
      agency that may have a material adverse effect on the Company or which could
      materially and adversely affect the right or ability of the Company to
      consummate the transactions contemplated hereby. To the knowledge of the
      Company, there is no valid basis upon which any such action, suit, claim, or
      proceeding may be commenced or asserted against it. There are no unsatisfied
      judgments against the Company and no consent decrees or similar agreements
      to
      which the Company is subject and which could have a material adverse effect
      on
      the Company.

     

    3.15.  Products
      Liability; Warranties; Insurance.
      The
      Company will have not loss, damage, liability, fine, penalty, cost and expense
      (each, a “Liability”)
      that
      is not fully covered by insurance relating to any product manufactured,
      distributed or sold by the Company prior to the Closing, whether or not such
      Liability is related to products that are defective or improperly designed
      or
      manufactured or are in breach of any express or implied product warranty.

     

    
      
         

      

      
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    3.16.  Intellectual
      Property Rights.
      

     

    (a)  The
      Company owns and possesses all right, title and interest in and to, or has
      a
      valid license to use, all of the Proprietary Rights (as defined below) necessary
      for the operation of its business as presently conducted and none of such
      Proprietary Rights have been abandoned;

     

    (b)  no
      claim
      by any third party contesting the validity, enforceability, use or ownership
      of
      any such Proprietary Rights has been made, is currently outstanding or, to
      the
      knowledge of the Company, is threatened, and to the knowledge of the Company
      there is no reasonable basis for any such claim; 

     

    (c)  neither
      the Company nor any registered agent of any of the foregoing has received any
      notice of, nor is the Company aware of any reasonable basis for an allegation
      of, any infringement or misappropriation by, or conflict with, any third party
      with respect to such Proprietary Rights, nor has the Company, or any registered
      agent of any of them received any claim of infringement or misappropriation
      of
      or other conflict with any Proprietary Rights of any third party; 

     

    (d)  the
      Company has not infringed, misappropriated or otherwise violated any Proprietary
      Rights of any third parties, and the Company is not aware of any infringement,
      misappropriation or conflict which will occur as a result of the continued
      operation of the Company as presently operated and as contemplated to be
      operated or as a result of the consummation of the transactions contemplated
      hereby; and 

     

    (e)  all
      employees who have contributed to or participated in the conception and/or
      development of all or any part of the Proprietary Rights which are not licensed
      to the Company from a third party either (i) have been party to a
      "work-for-hire" arrangement or agreement with the Company, in accordance with
      applicable federal and state law, that has accorded the Company full, effective,
      exclusive, and original ownership of all tangible and intangible property
      thereby arising, or (ii) have executed appropriate instruments of assignment
      in
      favor of the Company as assignee that have conveyed to the Company full,
      effective and exclusive ownership of all tangible and intangible property
      thereby arising.

     

    (f)  As
      used
      herein, the term “Proprietary
      Rights”
means
      all proprietary information of the Company, as the case may be, including all
      patents, patent applications, patent disclosures and inventions (whether or
      not
      patentable and whether or not reduced to practice), all trademarks, service
      marks, trade dress, trade names, corporate names, domain names, copyrights,
      all
      trade secrets, confidential information, ideas, formulae, compositions,
      know-how, processes and techniques, drawings, specifications, designs, logos,
      plans, improvements, proposals, technical and computer data, documentation
      and
      software, financial, business and marketing plans, and related information
      and
      all other proprietary, industrial or intellectual property rights relating
      to
      the business of the Company, including those proprietary, industrial or
      intellectual property rights found at the Company’s websites listed in the SEC
      Documents.

     

    
      
         

      

      
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    (g)  The
      consummation of the transactions contemplated by this Agreement will not
      adversely affect the right of the Company to continue to use the Proprietary
      Rights. To the extent that the registration of any Proprietary Right is required
      by law, such Proprietary Right has been duly and validly registered or filed,
      and any fees that are necessary to maintain in force any Proprietary Rights
      or
      registrations thereof have been paid. The SEC Documents sets forth a list and
      description of the copyrights, trademarks, service marks, trade dress, trade
      names and domain names used or held by the Company and, where appropriate,
      the
      date, serial or registration number, and place of any registration
      thereof.

     

    3.17.  Material
      Contracts.
      Except
      as disclosed in the SEC Documents: (a) the Company has performed all material
      obligations to be performed by them under all such contracts, and is not in
      material default thereof, and (b) no condition exists or has occurred which
      with
      the giving of notice or the lapse of time, or both, would constitute a material
      default by the Company or accelerate the maturity of, or otherwise modify,
      any
      such contract, and (c) all such contracts are in full force and effect. No
      material default by any other party to any of such contracts is known or claimed
      by the Company to exist.

     

    3.18.  Employee
      Benefit Matters.

     

    (a)  Except
      as
      disclosed in the SEC Documents, the Company does not provide, nor is it
      obligated to provide, directly or indirectly, any benefits for employees other
      than salaries, sales commissions and bonuses, including, but not limited to,
      any
      pension, profit sharing, stock option, retirement, bonus, hospitalization,
      insurance, severance, vacation or other employee benefits (including any housing
      or social fund contributions) under any practice, agreement or
      understanding.

     

    (b)  Each
      employee benefit plan maintained by or on behalf of the Company or any other
      party (including any terminated pension plans) which covers or covered any
      employees or former employees of the Company (collectively, the “Employee
      Benefit Plan”)
      is
      listed in the SEC Documents. The Company has delivered to Buyer true and
      complete copies of all such plans and any related documents. With respect to
      each such plan: (a) no litigation, administrative or other proceeding or claim
      is pending, or to the knowledge of the Company, threatened or anticipated
      involving such plan; (b) there are no outstanding requests for information
      by
      participants or beneficiaries of such plan; and (c) such plan has been
      administered in compliance in all material respects with all applicable laws
      and
      regulations. 

     

    (c)  The
      Company has timely made payment in full of all contributions to all of the
      Employee Benefit Plans which the Company was obligated to make prior to the
      date
      hereof; and there are no contributions declared or payable by the Company to
      any
      Employee Benefit Plan which, as of the date hereof, has not been paid in
      full.

     

    3.19.  Possession
      of Franchises, Licenses, Etc.
      The
      Company: (a) possesses all material franchises, certificates, licenses, permits
      and other authorizations (collectively, the “Licenses”)
      from
      governmental authorities, political subdivisions or regulatory authorities
      that
      are necessary for the ownership, maintenance and operation of its business
      in
      the manner presently conducted; (b) are not in violation of any provisions
      thereof; and (c) have maintained and amended, as necessary, all Licenses and
      duly completed all filings and notifications in connection
      therewith.

     

    
      
         

      

      
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    3.20.  Environmental
      Matters.
      Except
      as disclosed in the SEC Documents: (i) the Company is not in violation, in
      any
      material respect, of any Environmental Law (as defined below); (ii) the
      Company has received all permits and approvals with respect to emissions into
      the environment and the proper collection, storage, transport, distribution
      or
      disposal of Wastes (as defined below) and other materials required for the
      operation of its business at present operating levels; and (iii) the Company
      is
      not liable or responsible for any material clean up, fines, liability or expense
      arising under any Environmental Law, as a result of the disposal of Wastes
      or
      other materials in or on the property of the Company (whether owned or leased),
      or in or on any other property, including property no longer owned, leased
      or
      used by the Company. As used herein, (a) “Environmental
      Laws”
means,
      collectively, the Comprehensive Environmental Response, Compensation and
      Liability Act of 1980, as amended, the Superfund Amendments and Reauthorization
      Act of 1986, the Resource Conservation and Recovery Act, the Toxic Substances
      Control Act, as amended, the Clean Air Act, as amended, the Clean Water Act,
      as
      amended, any other “Superfund” or “Superlien” law or any other federal, or
      applicable state or local statute, law, ordinance, code, rule, regulation,
      order
      or decree (foreign or domestic) regulating, relating to, or imposing liability
      or standards of conduct concerning, Wastes, or the environment; and (b)
“Wastes”
means
      and includes any hazardous, toxic or dangerous waste, liquid, substance or
      material (including petroleum products and derivatives), the generation,
      handling, storage, disposal, treatment or emission of which is subject to any
      Environmental Law.

     

    3.21.  Agreements
      and Transactions with Related Parties.
      Except
      as disclosed on the SEC Documents, the Company is not, and since January 1,
      2006
      has not been, a party to any contract, agreement, lease or transaction with,
      or
      any other commitment to, (a) a shareholder, (b) any person related by blood,
      adoption or marriage to shareholder, (c) any director or officer of the Company,
      (d) any corporation or other entity in which any of the foregoing parties has,
      directly or indirectly, at least five percent (5.0%) beneficial interest in
      the
      capital stock or other type of equity interest in such corporation or other
      entity, or (e) any partnership in which any such party is a general partner
      or a
      limited partner having a five percent (5%) or more interest therein (any or
      all
      of the foregoing being herein referred to as a “Related
      Party”
and
      collectively as the “Related
      Parties”).
      Without limiting the generality of the foregoing, except as set forth in the
      SEC
      Documents, (a) no Related Party, directly or indirectly, owns or controls any
      assets or properties which are or have since January 1, 2006 been used in the
      business of the Company, and (b) no Related Party, directly or indirectly,
      engages in or has any significant interest in or connection with any business:
      (i) which is or which within the last two (2) years has been a competitor,
      customer or supplier of, or has done business with, the Company, or
      (ii) which as of the date hereof sells or distributes products or provides
      services which are similar or related to the products or services of the
      Company.

     

    3.22.  Business
      Practices.
      Except
      as disclosed in the SEC Documents, the Company has not, at any time, directly
      or
      indirectly, made any contributions or payment, or provided any compensation
      or
      benefit of any kind, to any municipal, county, state, federal or foreign
      governmental officer or official, or any other person charged with similar
      public or quasi-public duties, or any candidate for political office. The
      Company’s books, accounts and records (including, without limitation, customer
      files, product packaging and invoices) accurately describe and reflect, in
      all
      material respects, the nature and amount of the Company’s products, purchases,
      sales and other transactions. Without limiting the generality of the foregoing,
      the Company has not engaged, directly or indirectly, in: (a) the practice known
      as “double-invoicing” or the use or issuance of pro-forma or dummy invoices; or
      (b) the incorrect or misleading labeling, marketing or sale of refurbished
      goods
      as new goods.

     

    
      
         

      

      
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    3.23.  Shareholder
      Matters.
      None of
      the matters set forth in this Agreement require the approval of the Company’s
      shareholders.

     

    3.24.  Full
      Disclosure.
      No
      representation or warranty of the Company contained in this Agreement, and
      none
      of the statements or information concerning the Company contained in this
      Agreement and the Schedules, contains or will contain any untrue statement
      of a
      material fact nor will such representations, warranties, covenants or statements
      taken as a whole omit a material fact required to be stated therein or necessary
      in order to make the statements therein, in light of the circumstances under
      which they were made, not misleading.

     

    4.  REPRESENTATIONS
      AND WARRANTIES OF BUYER.

     

    To
      induce
      the Company to enter into this Agreement and to consummate the transactions
      contemplated hereby, each Buyer represents and warrants to and covenants with
      the Company as follows:

     

    4.1.  Organization.
      If
      Buyer is a limited liability company, corporation or partnership it is duly
      organized, validly existing and in good standing under the laws of its state
      of
      organization. The Buyer has all requisite power and authority to execute,
      deliver and carry out the terms of this Agreement and the consummation of the
      transactions contemplated herein.

     

    4.2.  Execution;
      No Inconsistent Agreements; Etc.

     

    (a)  The
      execution and delivery of this Agreement and the performance of the transactions
      contemplated hereby have been duly and validly authorized and approved by Buyer
      and this Agreement is a valid and binding agreement of Buyer, enforceable
      against Buyer in accordance with its terms, except as such enforcement may
      be
      limited by bankruptcy or similar laws affecting the enforcement of creditors'
      rights generally, and the availability of equitable remedies.

     

    (b)  The
      execution and delivery of this Agreement by Buyer does not, and the consummation
      of the transactions contemplated hereby will not, constitute a breach or
      violation of the charter or bylaws of Buyer, or a default under any of the
      terms, conditions or provisions of (or an act or omission that would give rise
      to any right of termination, cancellation or acceleration under) any material
      note, bond, mortgage, lease, indenture, agreement or obligation to which Buyer
      is a party, pursuant to which any of them otherwise receive benefits, or by
      which any of their properties may be bound. 

    

    
      
         

      

      
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    4.3.  Securities
      Laws.
      

     

    (a)  The
      Buyer
      is purchasing the Series A-1 Preferred Stock for investment purposes and not
      with a view to the sale or distribution, by public or private sale or other
      disposition, and the Buyer has no present intention of selling, granting any
      participation in or otherwise distributing or disposing of any of the Series
      A-1
      Preferred Stock.

     

    (b)  Investment
      Representations.
      The
      Buyer has been offered the opportunity to ask questions of, and receive answers
      from the Company’s management, and the Buyer has been given full and complete
      access to all available information and data relating to the business and assets
      of the Company and has obtained such additional information about the Company
      as
      the Buyer has deemed necessary in order to evaluate the opportunities, both
      financial and otherwise, with respect to the Company and, except as set forth
      herein, has not relied on any representation, warranty or other statement
      concerning the Company and its evaluation of the decision to consummate the
      transactions contemplated herein. In its judgment, the Buyer is sufficiently
      familiar with the Company to enable the Buyer to proceed with the transactions
      contemplated hereby.

     

    (c)  The
      Buyer
      is an “accredited investor,” as such term is defined in Rule 501 of Regulation D
      promulgated under the Securities Act of 1933, as amended (the “Securities
      Act”).

     

    (d)  If
      the
      Buyer has executed and delivered to the Company a Purchaser Questionnaire,
      the
      information contained in such Purchaser Questionnaire is true and complete
      in
      all material respects. 

     

    (e)  The
      Buyer
      is a sophisticated investor familiar with the type of risks inherent in the
      acquisition of securities such as the shares of the Company and the Buyer’s
      financial position is such that the Buyer can afford to retain its shares of
      Company Series A-1 Preferred Stock for an indefinite period of time without
      realizing any direct or indirect cash return on its investment.

     

    5.  CONDUCT
      OF BUSINESS OF THE COMPANY PENDING CLOSING.

     

    The
      Company covenants and agrees that between the date hereof and the Closing
      Date:

     

    5.1.  Business
      in the Ordinary Course.
      Except
      as set forth in the SEC Documents, the business of the Company shall be
      conducted only in the ordinary course, and consistent with past practice.
      Without limiting the generality of the foregoing, and except as set forth in
      the
      SEC Documents or as otherwise approved by Buyer:

     

    (a)  Except
      for the transaction contemplated hereby, the Company shall not enter into any
      contract, agreement or other arrangement which would constitute a Material
      Contract, except for contracts to sell or supply goods or services to customers
      in the ordinary course of business at prices and on terms substantially
      consistent with the prior operating practices of the Company;

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    (b)  except
      for sales of personal property in the ordinary course of its business, the
      Company shall not sell, assign, transfer, mortgage, convey, encumber or
      otherwise dispose of, or cause the sale, assignment, transfer, mortgage,
      conveyance, encumbrance or other disposition of any of the assets or properties
      of the Company or any interest therein;

     

    (c)  the
      Company shall not acquire any material assets, except expenditures made in
      the
      ordinary course of business as reasonably necessary to enable the Company to
      conduct its normal business operations and to maintain its normal inventory
      of
      goods and materials, at prices and on terms substantially consistent with
      current market conditions and prior operating practices;

     

    (d)  the
      books, records and accounts of the Company shall be maintained in the usual,
      regular and ordinary course of business on a basis consistent with prior
      practices and in accordance with GAAP;

     

    (e)  the
      Company shall use its best efforts to preserve its business organization, to
      preserve the good will of its suppliers, customers and others having business
      relations with the Company, and to retain the services of key employees and
      agents of the Company; 

     

    (f)  except
      as
      it may terminate in accordance with the terms of this Agreement, the Company
      shall keep in full force and effect, and not cause a default of any of its
      obligations under, each of their contracts and commitments; 

     

    (g)  the
      Company shall duly comply in all material respects with all laws applicable
      to
      it and to the conduct of its business; 

     

    (h)  the
      Company shall not create, incur or assume any liability or indebtedness, except
      in the ordinary course of business consistent with past practices;

     

    (i)  other
      than as contemplated in this Agreement, the Company shall not apply any of
      its
      assets to the direct or indirect payment, discharge, satisfaction or reduction
      of any amount payable directly or indirectly to or for the benefit of any
      shareholder or any Related Party; and 

     

    (j)  the
      Company shall not take or omit to take any action which would render any of
      the
      representations or warranties untrue or misleading, or which would be a breach
      of any of the covenants. 

     

    5.2.  No
      Material Changes.
      Except
      as contemplated in this Agreement, the Company shall not materially alter its
      organization, capitalization, or financial structure, practices or operations.
      Without limiting the generality of the foregoing:

     

    (a)  no
      change
      shall be made in the articles of incorporation and bylaws of the
      Company;

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    (b)  no
      change
      shall be made in the authorized or issued capital stock of the
      Company;

     

    (c)  the
      Company shall not issue or grant any right or option to purchase or otherwise
      acquire any of its capital stock or other securities;

     

    (d)  no
      dividend or other distribution or payment shall be declared or made with respect
      to any of the capital stock of the Company; and

     

    (e)  no
      change
      shall be made affecting the banking arrangements of the Company.

     

    5.3.  Notification.
      Each
      party to this Agreement shall promptly notify the other parties in writing
      of
      the occurrence, or threatened occurrence, of any event that would constitute
      a
      breach or violation of this Agreement by any party or that would cause any
      representation or warranty made by the notifying party in this Agreement to
      be
      false or misleading in any respect. The Company will promptly notify the Buyers
      of any event that could have a material adverse effect on the business, assets,
      financial condition or prospects of the Company. The Company shall have the
      right to update the Schedules to this Agreement immediately prior to Closing;
      provided, if such update discloses any breach of a representation, warranty,
      covenant or obligation of the Company, the Buyer shall have the right to then
      exercise its available rights and remedies hereunder.

     

    6.  CONDITIONS
      TO OBLIGATIONS OF ALL PARTIES.

     

    The
      obligation of Buyers and the Company to consummate the transactions contemplated
      by this Agreement are subject to the satisfaction, on or before the Closing,
      of
      each of the following conditions; any or all of which may be waived in whole
      or
      in part by the joint agreement of Buyer and the Company:

     

    6.1.  Absence
      of Actions.
      No
      action or proceeding shall have been brought or threatened before any court
      or
      administrative agency to prevent the consummation or to seek damages in a
      material amount by reason of the transactions contemplated hereby, and no
      governmental authority shall have asserted that the within transactions (or
      any
      other pending transaction involving Buyer or the Company when considered in
      light of the effect of the within transactions) shall constitute a violation
      of
      law or give rise to material liability on the part of the Company or the
      Buyer.

     

    6.2.  Consents.
      The
      parties shall have received from any suppliers, lessors, lenders, lien holders
      or governmental authorities, bodies or agencies having jurisdiction over the
      transactions contemplated by this Agreement, or any part hereof, such consents,
      authorizations and approvals as are necessary for the consummation
      hereof.

     

    7.  CONDITIONS
      TO OBLIGATIONS OF THE BUYERS.

     

    All
      obligations of the Buyers to consummate the transactions contemplated by this
      Agreement are subject to the fulfillment and satisfaction of each and every
      of
      the following conditions on or prior to the Closing, any or all of which may
      be
      waived in whole or in part by Buyers:

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    7.1.  Representations
      and Warranties.
      The
      representations and warranties contained in Section
      3 of
      this
      Agreement and in any certificate, instrument, schedule, agreement or other
      writing delivered by or on behalf of the Company in connection with the
      transactions contemplated by this Agreement shall be true, correct and complete
      in all material respects (except for representations and warranties which are by
      their terms qualified by materiality, which shall be true, correct and complete
      in all respects) as of the date when made and shall be deemed to be made again
      at and as of the Closing Date and shall be true, correct and complete at and
      as
      of such time in all material respects (except for representations and warranties
      which are by their terms qualified by materiality, which shall be true, correct
      and complete in all respects). 

     

    7.2.  Compliance
      with Agreements and Conditions.
      The
      Company shall have performed and complied with all material agreements and
      conditions required by this Agreement to be performed or complied with by it
      prior to or on the Closing Date.

     

    7.3.  Absence
      of Material Adverse Changes.
      No
      material adverse change in the business, assets, financial condition, or
      prospects of the Company shall have occurred, no substantial part of the assets
      of the Company not substantially covered by insurance shall have been destroyed
      due to fire or other casualty, and no event shall have occurred which has had
      or
      will have a material adverse effect on the business, assets, financial condition
      or prospects of the Company. 

     

    7.4.  Board
      Approval.
      The
      Company’s Board of Directors shall have taken the action required by them
      pursuant to this Agreement, including an amendment to the Company’s articles of
      incorporation to adopt the rights and preferences of the Series A-1 Preferred
      Stock, authorize issuance of the Series A-1 Preferred Stock and Common Stock
      to
      be issued upon conversion of the Series A-1 Preferred Stock and the reservation
      of the shares of Common Stock to be issued upon conversion of the Series A-1
      Preferred Stock. 

     

    7.5.  Other
      Documents.
      The
      Company shall have delivered to the Buyer such other documents and instruments
      as the Buyers deem reasonably necessary or desirable to consummate the
      transactions contemplated hereby.

     

    All
      documents delivered to the Buyers shall be in form and substance reasonably
      satisfactory to the Buyers.

    

    8.  CONDITIONS
      TO OBLIGATIONS OF THE COMPANY.

     

    All
      of
      the obligations of the Company to consummate the transactions contemplated
      by
      this Agreement are subject to the fulfillment and satisfaction of each and
      every
      of the following conditions on or prior to the Closing, any or all of which
      may
      be waived in whole or in part by the Company:

     

    8.1.  Representations
      and Warranties.
      The
      representations and warranties contained in Section
      4 of
      this
      Agreement and in any certificate, instrument, schedule, agreement or other
      writing delivered by or on behalf of Buyers in connection with the transactions
      contemplated by this Agreement shall be true and correct in all material
      respects (except for representations and warranties which are by their terms
      qualified by materiality, which shall be true, correct and complete in all
      respects) when made and shall be deemed to be made again at and as of the
      Closing Date and shall be true at and as of such time in all material respects
      (except for representations and warranties which are by their terms qualified
      by
      materiality, which shall be true, correct and complete in all
      respects).

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    8.2.  Compliance
      with Agreements and Conditions.
      Buyers
      shall have performed and complied with all material agreements and conditions
      required by this Agreement to be performed or complied with by Buyer prior
      to or
      on the Closing Date.

     

    9.  INDEMNITY.

     

    9.1.  Indemnification
      by the Company.
      The
      Company (hereinafter collectively called the “Company
      Indemnitor”)
      shall
      defend, indemnify and hold harmless each Buyer, its direct and indirect parent
      corporations, subsidiaries and affiliates, their officers, members, directors,
      employees, attorneys and agents (hereinafter collectively called “Buyer
      Indemnitees”)
      against and in respect of any and all loss, damage, liability, fine, penalty,
      cost and expense, including reasonable attorneys' fees and amounts paid in
      settlement (collectively, “Buyer
      Losses”),
      suffered or incurred by any Buyer Indemnitee by reason of, or arising out of:
      

     

    (a)  any
      misrepresentation, breach of warranty or breach or nonfulfillment of any
      covenant, obligation or agreement of the Company contained in this Agreement
      or
      in any certificate, schedule, instrument or document delivered to such Buyer
      by
      or on behalf of the Company pursuant to the provisions of this Agreement
      (without regard to materiality thresholds contained therein); and

     

    (b)  any
      liabilities of the Company of any nature whatsoever (including tax liability,
      penalties and interest), whether accrued, absolute, contingent or otherwise,
      (i)
      existing as of the date of the 2006 Company Balance Sheet, and required to
      be
      shown therein in accordance with GAAP, to the extent not reflected or reserved
      against in full in the 2006 Company Balance Sheet; or (ii) arising or occurring
      between March 31, 2006 and the Closing Date, except for liabilities arising
      in
      the ordinary course of business, none of which shall have a material adverse
      effect on the Company.

     

    (c)  Indemnification
      by Buyers.
      Each
      Buyer (hereinafter called the “Buyer
      Indemnitor”)
      shall
      defend, indemnify and hold harmless the Company, its direct and indirect parent
      corporations, subsidiaries and affiliates, their officers, members, directors,
      employees, attorneys and agents (hereinafter called “Company
      Indemnitee”)
      against and in respect of any and all loss, damage, liability, cost and expense,
      including reasonable attorneys' fees and amounts paid in settlement
      (collectively, “Company
      Losses”),
      suffered or incurred by Company Indemnitee by reason of or arising out of any
      misrepresentation, breach of warranty or breach or non-fulfillment of any
      material covenant, obligation or agreement of such Buyer contained in this
      Agreement or in any other certificate, schedule, instrument or document
      delivered to the Company by or on behalf of such Buyer pursuant to the
      provisions of this Agreement (without regard to materiality thresholds contained
      therein).

     

    
      
         

      

      
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    9.2.  Defense
      of Claims.

     

    (a)  Each
      party seeking indemnification hereunder (an “Indemnitee”):
      (i)
      shall provide the other party or parties (the “Indemnitor”)
      written notice of any claim or action by a third party for which an Indemnitor
      may be liable under the terms of this Agreement, within ten (10) days after
      such
      claim or action arises and is known to Indemnitee, and (ii) shall give the
      Indemnitor a reasonable opportunity to participate in any proceedings and to
      settle or defend any such claim or action. The expenses of all proceedings,
      contests or lawsuits with respect to such claims or actions shall be borne
      by
      the Indemnitor. If the Indemnitor wishes to assume the defense of such claim
      or
      action, the Indemnitor shall give written notice to the Indemnitee within ten
      (10) days after notice from the Indemnitee of such claim or action, and the
      Indemnitor shall thereafter assume the defense of any such claim or liability,
      through counsel reasonably satisfactory to the Indemnitee, provided that
      Indemnitee may participate in such defense at their own expense, and the
      Indemnitor shall, in any event, have the right to control the defense of the
      claim or action. The failure of an Indemnitee to give any notice required by
      this Section shall not affect any of such party’s rights under this Section or
      otherwise, except and to the extent that such failure is actually prejudicial
      to
      the rights or obligations of the Indemnitor.

     

    (b)  If
      the
      Indemnitor shall not assume the defense of, or if after so assuming it shall
      fail to defend, any such claim or action, the Indemnitee may defend against
      any
      such claim or action in such manner as they may deem appropriate and the
      Indemnitees may settle such claim or litigation on such terms as they may deem
      appropriate but subject to the Indemnitor's approval, such approval not to
      be
      unreasonably withheld; provided, however, that any such settlement shall be
      deemed approved by the Indemnitor if the Indemnitor fails to object thereto,
      by
      written notice to the Indemnitee, within fifteen (15) days after the
      Indemnitor's receipt of a written summary of such settlement. The Indemnitor
      shall promptly reimburse the Indemnitee for the amount of all expenses, legal
      and otherwise, incurred by the Indemnitee in connection with the defense and
      settlement of such claim or action.

     

    (c)  If
      a
      non-appealable judgment is rendered against any Indemnitee in any action covered
      by the indemnification hereunder, or any lien attaches to any of the assets
      of
      any of the Indemnitee, the Indemnitor shall immediately upon such entry or
      attachment pay such judgment in full or discharge such lien unless, at the
      expense and direction of the Indemnitor, an appeal is taken under which the
      execution of the judgment or satisfaction of the lien is stayed. If and when
      a
      final judgment is rendered in any such action, the Indemnitor shall forthwith
      pay such judgment or discharge such lien before any Indemnitee is compelled
      to
      do so.

     

    9.3.  Waiver.
      The
      failure of any Indemnitee to give any notice or to take any action hereunder
      shall not be deemed a waiver of any of the rights of such Indemnitee hereunder,
      except to the extent that Indemnitor is actually prejudiced by such
      failure.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    10.  TERMINATION.

     

    10.1.  Termination.
      This
      Agreement may be terminated at any time on or prior to the Closing:

     

    (a)  By
      mutual
      consent of Buyers and the Company; or

     

    (b)  At
      the
      election of Buyers if: (i) a Company has breached or failed to perform or comply
      with any of its representations, warranties, covenants or obligations under
      this
      Agreement; or (ii) any of the conditions precedent set forth in Section
      6 or 7
      is not
      satisfied as and when required by this Agreement; or (iii) the Closing has
      not
      been consummated by October 1, 2006; or 

     

    (c)  At
      the
      election of the Company if: (i) a Buyer has breached or failed to perform or
      comply with any of its representations, warranties, covenants or obligations
      under this Agreement; or (ii) any of the conditions precedent set forth in
      Section
      6 or 8
      is not
      satisfied as and when required by this Agreement; or (iii) if the Closing has
      not been consummated by October 1, 2006.

     

    10.2.  Manner
      and Effect of Termination.
      Written
      notice of any termination (“Termination
      Notice”)
      pursuant to this Section
      10
      shall be
      given by the party electing termination of this Agreement (“Terminating
      Party”)
      to the
      other party or parties (collectively, the “Terminated
      Party”),
      and
      such notice shall state the reason for termination. The party or parties
      receiving Termination Notice shall have a period of ten (10) days after receipt
      of Termination Notice to cure the matters giving rise to such termination to
      the
      reasonable satisfaction of the Terminating Party. If the matters giving rise
      to
      termination are not cured as required hereby, this Agreement shall be terminated
      effective as of the close of business on the tenth (10th) day following the
      Terminated Party's receipt of Termination Notice. Upon termination of this
      Agreement prior to the consummation of the Closing and in accordance with the
      terms hereof, this Agreement shall become void and of no effect, and none of
      the
      parties shall have any liability to the others, except that nothing contained
      herein shall relieve any party from: (a) its obligations under Sections
      2.3 and 2.4;
      or (b)
      liability for its intentional breach of any representation, warranty or covenant
      contained herein, or its intentional failure to comply with the terms and
      conditions of this Agreement or to perform its obligations
      hereunder.

     

    
      
         

      

      
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    11.  MISCELLANEOUS.

     

    11.1.  Notices.

     

    (a)  All
      notices, requests, demands, or other communications required or permitted
      hereunder shall be in writing and shall be deemed to have been duly given upon
      receipt if delivered in person, or upon the expiration of two (2) days after
      the
      date sent, if sent by federal express (or similar overnight courier service)
      to
      the parties at the following addresses:

     

    (i) If
      to
      Buyer: To the address set forth adjacent to the Buyer’s signature to this
      Agreement.

    

    

    (ii) If
      to the
      Company:

    

    
      	
              Advanced
                Communications Technologies, Inc.

            
	
              420
                Lexington Avenue, Suite 2739

            
	
              New
                York, New York 10170

            
	
              Attention: Wayne
                I. Danson, President

            
	
              Telephone: 
                (646) 227-1600

            
	
              Facsimile: 
                (646) 227-1666

            

    

    

    

    With
      a
      copy to:

    

    
      	
              Eckert
                Seamans Cherin & Mellott, LLC

            
	
              1515
                Market Street

            
	
              Philadelphia,
                PA 19102

            
	
              Attention: Gary
                A. Miller, Esq.

            
	
              Telephone: 
                (215) 851-8472

            
	
              Facsimile: 
                (215) 851-8383

            

    

    

    (b)  Notices
      may also be given in any other manner permitted by law, effective upon actual
      receipt. Any party may change the address to which notices, requests, demands
      or
      other communications to such party shall be delivered or mailed by giving notice
      thereof to the other parties hereto in the manner provided herein.

     

    11.2.  Survival.
      The
      representations, warranties, agreements and indemnifica-tions of the parties
      contained in this Agreement or in any writing delivered pursuant to the
      provisions of this Agreement shall survive any investigation heretofore or
      hereafter made by the parties and the consummation of the transactions
      contemplated herein and shall continue in full force and effect after the
      Closing.

     

    11.3.  Counterparts;
      Interpretation.
      This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      deemed an original, and all of which shall constitute one and the same
      instrument. This Agreement supersedes all prior discussions and agreements
      between the parties with respect to the subject matter hereof, and this
      Agreement contains the sole and entire agreement among the parties with respect
      to the matters covered hereby. All Schedules hereto shall be deemed a part
      of
      this Agreement. This Agreement shall not be altered or amended except by an
      instrument in writing signed by or on behalf of all of the parties hereto.
      No
      ambiguity in any provision hereof shall be construed against a party by reason
      of the fact it was drafted by such party or its counsel. For purposes of this
      Agreement: “herein”, “hereby”, “hereunder”, “herewith”, “hereafter” and
“hereinafter” refer to this Agreement in its entirety, and not to any particular
      subsection or paragraph. References to “including” means including without
      limiting the generality of any description preceding such term. Nothing
      expressed or implied in this Agreement is intended, or shall be construed,
      to
      confer upon or give any person other than the parties hereto any rights or
      remedies under or by reason of this Agreement.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

    11.4.  Governing
      Law.
      This
      Agreement shall be governed by and interpreted in accordance with the laws
      of
      the State of New York without regard to the principles of conflict of
      laws.

     

    11.5.  Successors
      and Assigns; Assignment.
      This
      Agreement shall be binding upon and shall inure to the benefit of the parties
      hereto and their respective heirs, executors, legal representatives, and
      successors; provided, however, that the Company may not assign this Agreement
      or
      any rights hereunder, in whole or in part.

     

    11.6.  Partial
      Invalidity and Severability.
      All
      rights and restrictions contained herein may be exercised and shall be
      applicable and binding only to the extent that they do not violate any
      applicable laws and are intended to be limited to the extent necessary to render
      this Agreement legal, valid and enforceable. If any terms of this Agreement
      not
      essential to the commercial purpose of this Agreement shall be held to be
      illegal, invalid or unenforceable by a court of competent jurisdiction, it
      is
      the intention of the parties that the remaining terms hereof shall constitute
      their agreement with respect to the subject matter hereof and all such remaining
      terms shall remain in full force and effect. To the extent legally permissible,
      any illegal, invalid or unenforceable provision of this Agreement shall be
      replaced by a valid provision which will implement the commercial purpose of
      the
      illegal, invalid or unenforceable provision.

     

    11.7.  Waiver
      and Modification.
      (a)Any
      term or condition of this Agreement, and any performance thereof, may be waived
      at any time by the party which is entitled to the benefit thereof, but only
      if
      such waiver is evidenced by a writing signed by such party. No failure on the
      part of a party hereto to exercise, and no delay in exercising, any right,
      power
      or remedy created hereunder, shall operate as a waiver thereof, nor shall any
      single or partial exercise of any right, power or remedy by any such party
      preclude any other future exercise thereof or the exercise of any other right,
      power or remedy. No waiver by any party hereto to any breach of or default
      in
      any term or condition of this Agreement shall constitute a waiver of or assent
      to any succeeding breach of or default in the same or any other term or
      condition hereof.

     

    (b) Any
      term
      or condition of this Agreement, and any performance thereof, may be waived,
      and
      any term or condition of this Agreement may be amended or modified, by the
      written consent of (i) the Company and (ii) the holders of a majority in
      interest of the Series A-1 Convertible Preferred Stock, excluding any holder
      who
      is an officer or director of the Company or any of its subsidiaries.

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

     

    11.8.  Headings.
      The
      headings as to contents of particular paragraphs of this Agreement are inserted
      for convenience only and shall not be construed as a part of this Agreement
      or
      as a limitation on the scope of any terms or provisions of this
      Agreement.

     

    11.9.  Expenses.
      

     

    11.9.1.  Legal
      Fees.
      Except
      as otherwise expressly provided herein, all legal and other costs and expenses
      incurred in connection with this Agreement and the transactions contemplated
      hereby shall be paid by the Buyer or the Company as each party incurs such
      expenses. 

     

    11.10.  Finder’s
      Fees.
      The
      Buyer represents to the Company that no broker, agent, finder or other party
      has
      been retained by it in connection with the transactions contemplated hereby
      and
      that no other fee or commission has been agreed by the Buyer to be paid for
      or
      on account of the transactions contemplated hereby. The Company represents
      to
      the Buyer that no broker, agent, finder or other party has been retained by
      the
      Company in connection with the transactions contemplated hereby and that no
      other fee or commission has been agreed by the Company to be paid for or on
      account of the transactions contemplated hereby.

     

    11.11.  Gender.
      Where
      the context requires, the use of the singular form herein shall include the
      plural, the use of the plural shall include the singular, and the use of any
      gender shall include any and all genders.

     

    11.12.  Currency.
      All
      foreign currency amounts required to be converted to U.S. Dollars for purposes
      of this Agreement shall be converted in accordance with GAAP.

     

    11.13.  Acceptance
      by Fax.
      This
      Agreement shall be accepted, effective and binding, for all purposes, when
      the
      parties shall have signed and transmitted to each other, by telecopier or
      otherwise, copies of the signature pages hereto.

     

    11.14.  Attorneys
      Fees.
      If any
      legal action or other proceeding is brought for the enforcement of this
      Agreement, or because of an alleged dispute, breach, default or
      misrepresentation in connection with any provision of this Agreement, the
      prevailing party shall be entitled to recover reasonable attorneys' fees, court
      costs and all expenses (including, without limitation, all such fees, costs
      and
      expenses incident to appellate, bankruptcy, post-judgment and alternative
      dispute resolution proceedings), incurred in that action or proceeding, in
      addition to any other relief to which such party may be entitled.

     

    11.15.  NO
      JURY TRIAL.
      THE
      PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY
      OF
      THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON
      OR
      ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND ANY DOCUMENT
      CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT,
      COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY
      PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES' ACCEPTANCE
      OF
      THIS AGREEMENT.

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    

    IN
      WITNESS WHEREOF,
      the
      parties have executed this Investment Agreement or caused this Investment
      Agreement to be duly executed by their duly authorized officers as of the day
      and year first above written.

     

    BUYER:

    

    
      	 
	 
	
              Name: 

            
	 
	
              Number
                of Shares of Series A-1 Preferred Stock:

               

              ______________________________

            

    

    

    Address:    

     

     

    

    

    COMPANY:

    

    ADVANCED
      COMMUNICATIONS TECHNOLOGIES, INC.

    

    

    By:       

    Name:
       Wayne
      I. Danson      

    Title: President       

    
 

    22Unassociated Document

    Exhibit
      10.01

    Goldman
      Loan Agreement

    

    LOAN
      AGREEMENT

    THIS
      LOAN
      AGREEMENT (this "Agreement"),
      is
      executed as of July ____, 2006, by and between Itec Environmental Group, Inc.,
      a
      Delaware corporation (the "Company"),
      and
      Leroy and Lois Goldman (the "Lender").

     

    WHEREAS,
      the Company wishes to borrow and the Lender wishes to lend $500,000 as a short
      term bridge loan; and

     

    WHEREAS,
      the Lender is willing to provide such financing on terms and conditions as
      set
      forth herein.

     

    NOW,
      THEREFORE, in consideration of the mutual covenants and agreements set forth
      herein, and for other good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, the Company and the Lender,
      intending to be legally bound, agree as follows:

    ARTICLE
      1

    DEFINITIONS

     

    1.1 Defined
      terms.
      Certain
      capitalized terms used in this Agreement shall have the specific meanings
      defined below:

     

    “Business
      Day”
shall
      mean a day other than a Saturday, Sunday, or other day on which commercial
      banks
      are authorized or required by law to close.

     

    “Closing
      Date”
shall
      mean the date upon which the Loan is received by the Company.

     

    "Encumbrance"
      means
      any lien, charge, security interest, mortgage, deed of trust, pledge or other
      encumbrance of any nature whatsoever.

     

    “Interest
      Rate”
shall
      mean ten percent (10%) per annum.

     

    "Proprietary
      Rights"
      means
      all patents, trademarks, service marks, copyrights, trade names and all
      registrations and applications and renewals for any of the foregoing and all
      goodwill associated therewith.

     

    ARTICLE
      2

    THE
      LOAN

     

    2.1 Loan.
      According to the terms and subject to the conditions of this Agreement, the
      Lender shall loan to the Company on the Closing Date in the aggregate amount
      of
      Five Hundred Thousand Dollars ($500,000) (the "Loan").
      The
      Loan shall be evidenced by a convertible promissory
      note in the form attached hereto as Exhibit
      A
      ("Note"),
      duly
      executed on behalf of the Company and dated as of the Closing
      Date.

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    2.2 Interest.
      

     

    (a) Interest
      Rate.
      The
      Loan shall bear interest ("Interest")
      from
      the date of payment by the Lender until the Maturity Date at the Interest Rate
      (calculated on the basis of the actual number of days elapsed over a year of
      360
      days). Interest is payable by the Company on a monthly basis in arrears on
      the
      first Business Day of the month. 

     

    (b) Default
      Interest.
      Upon
      the occurrence of an Event of Default and for so long as such Event of Default
      continues, Interest shall accrue on the outstanding Loan amount at the rate
      per
      annum equal to the lower of eighteen percent (18%) or the maximum rate of
      interest permissible under applicable law at any time (the "Default
      Interest Rate").
      The
      term "Interest"
      shall
      include both the interest rate described in Section 2.2(a) and the Default
      Interest Rate, if applicable.

     

    2.3 Maturity
      Date.
      Unless
      the Loan is earlier accelerated pursuant to the terms hereof or converted
      pursuant to the provisions of Section 4.1 hereof, the Loan and all accrued
      Interest thereon shall be due and payable in full on the date that is one (1)
      year following the Closing Date (the “Maturity
      Date”).
      The
      Lender may, at the Lender's option, extend the Maturity Date on such terms
      and
      conditions as determined by the Lender in their sole discretion.

     

    2.4 Conditions
      Precedent to the Loan.
      The
      obligation of the Lender to make the Loan pursuant to Section 2.1 shall be
      subject to the satisfaction, on or before the Closing Date, of the conditions
      set forth in this Section. If the conditions set forth in this Section are
      not
      met on or prior to the Closing Date, the Lender shall have no obligation to
      make
      the Loan. 

     

    (a) The
      Company shall have duly executed and delivered to the Lender the Note
      representing the Loan.

     

    (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; provided,
      however,
      that
      the Security Interest shall be subordinate to that of the security interest
      granted in connection with the $2,000,000 loan from the California Integrated
      Waste Management Board (the “CIWMB Security Interest”). Lender shall be entitled
      to a second position security interest pari
      passu
      with the
      investors participating in private placement pursuant to the 2006 Private
      Placement Memorandum (the “PPM”) of the Company, subject to the Company’s right
      to subordinate such security interest to Senior Debt, as hereafter defined.
      “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.

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    ARTICLE
      3

    Representations
      and Warranties

     

    3.1 Organization,
      qualification and Authority.
      The
      Company is a corporation duly organized and validly existing under the laws
      of
      the State of Delaware, and is in good standing and duly qualified to do business
      as a foreign corporation in all jurisdictions where the operation of its
      business or the ownership of its properties make such qualification necessary.
      The Company has the requisite corporate power and authority to own, lease and
      operate its facilities and assets as presently owned, leased and operated,
      and
      to carry on its respective business as it is now being conducted. The Company
      has the requisite or individual right, power and authority to execute, deliver
      and carry out the terms of this Agreement and all documents and agreements
      necessary to give effect to the provisions of this Agreement and to consummate
      the transactions contemplated hereunder. The execution, delivery and
      consummation of this Agreement, and all other agreements and documents executed
      in connection herewith by the Company, have been duly authorized by all
      necessary action on the part of the Company. No other action, consent or
      approval on the part of the Company or any other person or entity, is necessary
      to authorize the Company's due and valid execution, delivery and consummation
      of
      this Agreement and all other agreements and documents executed in connection
      hereto. This Agreement and all other agreements and documents executed in
      connection herewith by the Company, upon due execution and delivery thereof,
      shall constitute the valid and binding obligations of the Company, enforceable
      in accordance with its terms, except as enforcement may be limited by
      bankruptcy, insolvency, reorganization or similar laws affecting creditors'
      rights generally and by general principles of equity.

     

    3.2 Compliance
      with Laws.
      The
      nature and transaction of the Company's business and operations and the use
      of
      its properties and assets do not, and during the term of this Agreement shall
      not, violate or conflict with in any material respect any applicable law,
      statute, ordinance, rule, regulation or order of any kind or
      nature.

     

    3.3 Absence
      of Conflicts.
      The
      execution, delivery and performance by the Company of this Agreement, and the
      transactions contemplated hereby, do not constitute a breach or default, or
      require consents under, any agreement, permit, contract or other instrument
      to
      which the Company is a party, or by which the Company is bound or to which
      any
      of the assets of the Company is subject, or any judgment, order, writ, decree,
      authorization, license, rule, regulation, or statute to which the Company is
      subject, and will not result in the creation of any lien upon any of the assets
      of the Company. 

     

    3.4 Litigation
      and Taxes.
      There
      is no
      litigation or governmental proceeding pending, or to the best knowledge of
      the
      Company after due inquiry, threatened, against the Company other than the cause
      of action filed by George Gitchel against the Company. The Company anticipates
      that a settlement between the parties will be reached in the near future. The
      Company has duly filed all applicable income or other tax returns and has paid
      all material income or other taxes when due. There is no controversy or
      objection pending, or to the best knowledge of the Company after due inquiry,
      threatened in respect of any tax returns of the Company.

     

    3.5 Intellectual
      Property.
      No
      proceedings have been instituted or are pending or, to the Company’s knowledge,
      threatened which challenge the validity of the ownership by the Company
      of any such Proprietary Rights. The Company has not licensed anyone to use
      any
      such Proprietary Rights and, to the Company’s knowledge, there has been no use
      or infringement of any of such Proprietary Rights by any other
      person.

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    3.6 Company's
      SEC Reports.
      The
      Company has timely filed with the Securities and Exchange Commission (the
“SEC”)
      all
      forms, reports, definitive proxy statements, schedules and registration
      statements (the “ Company
      SEC Reports”)
      required to be filed by it with the SEC pursuant to the Securities Act of 1933,
      as amended (the “Securities
      Act”),
      or
      the Securities Exchange Act of 1934, as amended (the “Exchange
      Act”).
      As of
      their respective filing dates or, if amended, as of the date of the last
      amendment, none of the Company SEC Reports contained any untrue statement of
      a
      material fact or omitted to state any material fact required to be stated
      therein or necessary to make the statements made therein, in the light of the
      circumstances under which they were made, not misleading. The Company SEC
      Reports (including, without limitation, any financial statements and schedules
      included therein) when filed or, if amended, as of the date of the last
      amendment, complied in all material respects with the applicable requirements
      of
      the Securities Act and the Exchange Act.

     

    3.7 No
      Omissions or Misstatements.
      None of
      the information included in this Agreement, other documents or information
      furnished or to be furnished by the Company, or any of its representations,
      contains any untrue statement of a material fact or is misleading in any
      material respect or omits to state any material fact. Copies of all documents
      referred to in herein have been delivered or made available to the Lender and
      constitute true and complete copies thereof and include all amendments,
      schedules, appendices, supplements or modifications thereto or waivers
      thereunder.

     

    ARTICLE
      4

    CONVERSION

     

    4.1 Conversion
      Right.
      Lender
      in their sole discretion may convert, via written notice to the Company, the
      full amount of the principal plus any interest payable under the Note and the
      Loan Agreement into shares of common stock of the Company at a conversion price
      of $0.0975 per share (the “Conversion Right”). Further, in the event that the
      Lender elects to exercise the Conversion Right, Lender shall be entitled to
      a
      warrant, exclusive of the warrant referenced in Article 6, with coverage equal
      to sixty-five percent (65%) of the value of the Loan, exercisable at Twelve
      Cents ($0.12) per share. 

     

    ARTICLE
      5

    DEFAULT

     

    5.1 Events
      of Default.
      The
      occurrence of any of the following events (each an “Event
      of Default”),
      not
      cured in the applicable cure period, if any, shall constitute and Event of
      Default of the Company:

    (a) a
      breach
      of any representation, warranty, covenant or other provision of this Agreement
      or the Note, which, if capable of being cured, is not cured within ten days
      following notice thereof to the Company;

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    (b) the
      failure to make when due any payment described in this Agreement or the Note,
      whether on or after the Maturity Date, by acceleration or otherwise;
      and

     

    (c) (i)
      the
      application for the appointment of a receiver or custodian for the Company
      or
      the property of the Company, (ii) the entry of an order for relief or the filing
      of a petition by or against the Company under the provisions of any bankruptcy
      or insolvency law, (iii) any assignment for the benefit of creditors by or
      against the Company, or (iv) the Company becomes insolvent.

     

    5.2 Effect
      of Default.
      Upon
      the occurrence of any Event of Default that is not cured within any applicable
      cure period, the Lender may elect, by written notice delivered to the Company,
      to take any or all of the following actions: (i) declare this Agreement
      terminated and the outstanding amounts under the Note to be forthwith due and
      payable, whereupon the entire unpaid Loan, together with accrued and unpaid
      Interest thereon (including the Default Interest Rate), and all other cash
      obligations hereunder, shall become forthwith due and payable, without
      presentment, demand, protest or any other notice of any kind, all of which
      are
      hereby expressly waived by the Company, anything contained herein or in any
      of
      the Note to the contrary notwithstanding, and (ii) exercise any and all other
      remedies provided hereunder or available at law or in equity upon the occurrence
      and continuation of an Event of Default. 

     

    ARTICLE
      6

    ISSUANCE
      OF STOCK

     

    6.1 Issuance
      of Warrants.
      The
      Company shall issue to the Lender one (1) warrant to purchase a combined total
      of five million (5,000,000) shares of common stock of the Company in the form
      attached hereto as Exhibit
      C
      (the
“Warrant”).
      The
      Warrant shall be immediately exercisable by the Lenders (or their assigns)
      on
      the Closing Date and at an exercise price of Twelve Cents ($0.12) per share.
      The
      Warrant shall be exercisable for a period of ten (10) years following the
      Closing Date.

     

    6.2 Registration
      of Registrable Securities.
      The
      shares underlying the warrants shall be entitled to be registered pursuant
      to
      any registration statement filed by the Company, except for registrations filed
      on Form S-4 or Form S-8. Registration costs shall be borne by the Company.
      

     

    ARTICLE
      7

    MISCELLANEOUS

     

    7.1 Successors
      and Assigns; Third Party Beneficiary.
      Subject
      to the exceptions specifically set forth in this Agreement, the terms and
      conditions of this Agreement shall inure to the benefit of and be binding upon
      the respective executors, administrators, heirs, successors and permitted
      assigns of the parties. This Agreement may not be assigned (whether by operation
      of law or otherwise) by the Company without the prior written consent of the
      Lender. This Agreement may be assigned by the Lender without the consent of
      the
      Company.

     

    7.2 Titles
      and Subtitles.
      The
      titles and subtitles of the Sections of this Agreement are used for convenience
      only and shall not be considered in construing or interpreting this
      agreement.

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    7.3 Notices.
      Any
      notice, request or other communication required or permitted hereunder shall
      be
      in writing and shall be delivered personally or by facsimile (receipt confirmed
      electronically) or shall be sent by a reputable express delivery service or
      by
      certified mail, postage prepaid with return receipt requested, addressed as
      follows:

    

    if
      to
      the Company, to:

    

    Itec
      Environmental Group, Inc.

    5300
      Claus Road, Box 760

    Riverbank,
      CA 95367

    Attn: Gary
      M.
      De Laurentiis

    Fax: (209)
      881-3529

    

    with
      a
      copy to:

    

    The
      Otto
      Law Group, PLLC

    601
      Union
      Street, Suite 4500

    Seattle,
      WA 98101

    Attn:
       David
      M.
      Otto

    Fax: (206)
      262-9513

    

    if
      to
      the Lender, to:

    

    Leroy
      and
      Lois Goldman 

    23808
      Ladrillo Street 

    Woodland
      Hills, CA 91376 

    

    Either
      party hereto may change the above specified recipient or mailing address by
      notice to the other party given in the manner herein prescribed. All notices
      shall be deemed given on the day when actually delivered as provided above
      (if
      delivered personally or by facsimile, provided that any such facsimile is
      received during regular business hours at the recipient's location) or on the
      day shown on the return receipt (if delivered by mail or delivery
      service).

     

    7.4 Governing
      Law.
      This
      Agreement shall be governed by and construed in accordance with the domestic
      laws of the State of California without giving effect to any choice of law
      or
      conflict of law provision or rule (whether of the State of California or any
      other jurisdiction) that would cause the application of the laws of any
      jurisdiction other than the State of California.

     

    7.5 Waiver
      and Amendment.
      Any
      term of this Agreement may be amended, waived or modified with the written
      consent of the Company and the Lender.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    7.6 Remedies.
      No
      delay or omission by the Lender in exercising any of its rights, remedies,
      powers or privileges hereunder or at law or in equity and no course of dealing
      between the Lender and the undersigned or any other person shall be deemed
      a
      waiver by the Lender of any such rights, remedies, powers or privileges, even
      if
      such delay or omission is continuous or repeated,
      nor shall any single or partial exercise of any right, remedy, power or
      privilege preclude any other or further exercise thereof by the Lender or the
      exercise of any other right, remedy, power or privilege by the Lender. The
      rights and remedies of the Lender described herein shall be cumulative and
      not
      restrictive of any other rights or remedies available under any other
      instrument, at law or in equity. 

    

    [the
      remainder of this page intentionally left blank]

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Company has caused this Loan Agreement to be signed in
      its
      name on the date first set forth above.

    

    
      	 	 	 
	 	
              ITEC
                ENVIRONMENTAL GROUP, INC.

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Gary
              M. De Laurentiis 
	 	Chief
              Executive Officer 

    

             

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

    

    IN
      WITNESS WHEREOF, the Lender has caused this Loan Agreement to be signed in
      its
      name on the date first set forth above.

     

    
      	 	 	 
	 	
              LEROY
                AND LOIS
                GOLDMAN 

            
	 
 	 
 	 
 
	 	By: 	
            
	 	Name:	
              
 
Leroy
              and Lois Goldman 
	 	 

    

    

    

    

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

    Exhibit
      A

    

    ITEC
      ENVIRONMENTAL GROUP, INC.

    10%
      CONVERTIBLE DEBENTURE

     

     

    
      	$500,000	
              August
                ___, 2006

            
	 	
              RIVERBANK,
                CALIFORNIA

            

    

    

                                                                                                                                                                                 

     

    

    

    ITEC
      ENVIRONMENTAL GROUP, INC. (“Maker” or the “Company”) hereby promises to pay to
      the order of Leroy and Lois Goldman (“Holder”), the sum of Five Hundred Thousand
      Dollars ($500,000), with interest at the rate of ten percent (10%) per annum
      until paid. All outstanding principal and accrued and unpaid interest shall
      become due eighteen months from the date upon which this 10% Convertible
      Debenture (“Debenture”) is executed (the “Maturity Date”). All payments due and
      owning under this Debenture shall be subject to the terms and conditions set
      forth herein. 

    

    
      	 	
              1.

            	
              Agreement.

            

    

    

    The
      Debenture is issued pursuant to that certain Subscription Agreement (the
“Agreement”), dated the same date as first set forth herein, by and between
      Maker and Holder, which is hereby incorporated by reference.

    

    
      	 	
              2.

            	
              Register.

            

    

    

    The
      Company shall keep at its principal office a register in which the Company
      shall
      provide for the registration of the Holder of the Debenture or for the
      registration of a transfer of the Debenture to a different Holder.

    

    
      	 	
              3.

            	
              Loss
                Theft, Destruction or Mutilation of the
                Debenture.

            

    

    

    Upon
      receipt of evidence reasonably satisfactory to the Company of the loss, theft,
      destruction or mutilation of the Debenture and, in the case of any such loss,
      theft or destruction, upon receipt of an indemnity bond in such reasonable
      amount as the Company may determine (or if such Debenture is held by the
      original Holder, of an unsecured indemnity agreement reasonably satisfactory
      to
      the Company) or, in the case of any such mutilation, upon surrender and
      cancellation of such Debenture, the Company will make and deliver, in lieu
      of
      such lost, stolen, destroyed or mutilated Debenture, a new Debenture of like
      tender and unpaid principal amount and dated as of the date to which interest
      has been paid on the Debenture so lost, stolen, destroyed or
      mutilated.

    

    
      	 	
              4.

            	
              Registered
                Holder.

            

    

    

    The
      Company may deem and treat the person in whose name any Debenture is registered
      as the absolute owner and Holder of such Debenture for the purpose of receiving
      payment of the principal of and interest on such Debenture and for the purpose
      of any notices, waivers or consents thereunder, whether or not such Debenture
      shall be overdue, and the Company shall not be affected by notice to the
      contrary. Payments with respect to any Debenture shall be made only to the
      registered Holder thereof.

    

    
      	 	
              5.

            	
              Surrender
                of the Debenture.

            

    

    

    The
      Company may, as a condition of payment of all or any of the principal of, and
      interest on, the Debenture, or its conversion, require Holder to present the
      Debenture for notation of such payment and, if the Debenture be paid in full
      or
      converted at the election of Holder as herein provided, require the surrender
      hereof.

    

    
      	 	
              6.

            	
              Subordination.

            

    

    

    The
      Company, in its sole discretion, may subordinate the Debenture to any Senior
      Debt of the Company. For purposes of the Debenture, “Senior Debt” shall mean all
      indebtedness for all principal,
      fees, expenses, interest, penalties, post-bankruptcy petition interest, and
      all
      other amounts payable for money borrowed.

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    

    
      	 	
              7.

            	
              Conversion.

            

    

    

    At
      any
      time prior to or at the Maturity Date, at the option of the Holder, all
      principal and accrued interest due on this Debenture (the “Convertible Amount”)
      may be converted at $0.0975 per share.

    

    If,
      upon
      the expiration of the Maturity Date or the Listing, Holder elects NOT to convert
      this Debenture, all outstanding principal and accrued and unpaid interest shall
      become due and payable. Holder shall provide fifteen (15) days written notice
      to
      the Company of Holder’s election to convert the Debenture.

    

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

    

    8. Mechanics
      of Conversion.

    

    Upon
      the
      Company’s receipt of written notice of Holder’s election to convert the
      Debenture, the principal amount of this Debenture plus any accrued interest
      shall be deemed converted into such number of shares of the Company’s Common
      Stock as determined pursuant to Section 7, and no further payments shall
      thereafter accrue or be owing under the Debenture. The entire balance due and
      owing under the Debenture must be converted to Common Stock; no partial
      conversions will be allowed. Holder shall return this Debenture to the Company
      at the address set forth below, or such other place as the Company may require
      in writing. Within ten (10) days after receipt of this Debenture, the Company
      shall cause to be issued in the name of and delivered to Holder at the address
      set forth above, or to such other address as to which Holder shall have notified
      the Company in writing, a certificate evidencing the securities to which Holder
      is entitled. No fractional securities will be issued upon conversion of the
      Debenture. If on conversion of the Debenture a fraction of a security results,
      the Company shall round up the total number of securities to be issued to Holder
      to the nearest whole number.

    

    
      	 	
              9.

            	
              Notice.

            

    

    

    Any
      notice required or desired to be given under this Agreement shall be in writing
      and shall be deemed given when personally delivered, sent by an overnight
      courier service, or sent by certified or registered mail to the addresses set
      forth below, or such other address as to which one party may have notified
      the
      other in such manner.

    

    
      	 	
              10.

            	
              Default.

            

    

    

    The
      following will be “Events of Default” under the Debenture: (a) the Company shall
      default on the payment of principal or interest on the Debenture or on any
      other
      indebtedness of the Company when due; (b) the Company shall default on the
      observance or performance of any other covenant set forth in the Debenture;
      (c)
      the Company shall issue any indebtedness senior to the Debenture or grant any
      security for any other indebtedness (other than in connection with operating
      leases such as stand-alone office equipment leases); (d) the Company shall
      become insolvent or file a voluntary petition in bankruptcy (or have such a
      petition filed against it) or have an assignment for the benefit of creditors
      or
      other creditor arrangement or similar event occur with respect to it or its
      assets; or (e) failure to comply with any other term or condition of the
      Debenture, which shall not have been cured within ten (10) business days receipt
      of written notice to the Company.

    

    Upon
      Default, and
      at
      the option of Holder, or Holder’s successors or assigns, with
      fifteen (15) days written notice to the Company, demand or presentment, Holder
      may (i) accelerate all amounts due and owing under this Debenture and demand
      payment immediately and/or (ii) declare the right to exercise any and all
      remedies available to Holder under applicable law.

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    11. Miscellaneous.

    

    (a) 10%
      per
      annum calculated using a 360-day year composed of 12 30-day months, payable
      in
      full, unless otherwise converted to common stock in the Company, at maturity
      or
      conversion.

    

    (b) The
      Company agrees that all Conversion Shares shall be fully paid and
      non-assessable. Maker shall pay upon demand any and all expenses, including
      reasonable attorney fees, incurred or paid by Holder of this Debenture without
      suit or action in attempting to collect funds due under this Debenture or in
      connection with the issuance of the Conversion Shares. In the event an action
      is
      instituted to enforce or interpret any of the terms of this Debenture including
      but not limited to any action or participation by Maker in, or in connection
      with, a case or proceeding under the Bankruptcy Code or any successor statute,
      the prevailing party shall be entitled to recover all expenses reasonably
      incurred at, before and after trial and on appeal or review, whether or not
      taxable as costs, including, without limitation, attorney fees, witness fees
      (expert and otherwise), deposition costs, copying charges and other
      expenses.

    

    (c) All
      parties to this Debenture hereby waive presentment, dishonor, notice of dishonor
      and protest. All parties hereto consent to, and Holder is hereby expressly
      authorized to make, without notice, any and all renewals, extensions,
      modifications or waivers of the time for or the terms of payment of any sum
      or
      sums due hereunder, or under any documents or instruments relating to or
      securing this Debenture, or of the performance of any covenants, conditions
      or
      agreements hereof or thereof or the taking or release of collateral securing
      this Debenture. Any such action taken by Holder shall not discharge the
      liability of any party to this Debenture.

    

    (d) This
      Debenture shall be governed by and construed in accordance with the laws of
      the
      state of California without regard to conflict of law principles.

    

    (e) All
      payments due and owing under this Debenture shall be delivered to the following:
      

     

                         
      ____________________________

                         
      ____________________________

                         
      ____________________________

    

    

    IN
      WITNESS WHEREOF, the parties hereto execute this Convertible Debenture as of
      this ____ day of August, 2006.

    

    

    
      	 	Maker:	 
ITEC
              ENVIRONMENTAL GROUP, INC.
	 	 	 
              ____________________________
	 	 	
                By: 

                Its: 

            

    

     

    

    Holder:_________________________________

    Holder’s
      address: ________________________

     ________________________

     ________________________

    

    
      

      
        	Maker’s address:	 	Itec
                Environmental Group
	 	 	Attn: Gary De Laurentiis
	 	 	
                5300 Claus Road

              
	 	 	P.O. Box 760
	 	 	Riverbank, California
                95367

      

       

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    
      
        

        
          	With a copy to:	 	The
                  Otto Law Group, PLLC
	 	 	Attn: David M. Otto
	 	 	
                  601 Union Street, Suite 4500

                
	 	 	Seattle, Washington
                  98101

          
            
              
              

            

            
              13

              
                

              

            

            
              
              

            

          

      

    

    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.

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    “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;

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    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.

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    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.

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    (b)
       Continuous
      Perfection.
      The
      Company will not change its name, identity or corporate structure in any manner
      unless the Company shall have given the Secured Parties at least 10 days' prior
      written notice thereof and shall have taken all action (or made arrangements
      to
      take such action substantially simultaneously with such change if it is
      impossible to take such action in advance) necessary or reasonably requested
      by
      any Secured Party to amend any financing statement or continuation statement
      filed with respect to the Collateral so that it is not misleading.

     

    (c)
       Insurance.
      The
      Company will insure the Collateral against such risks and hazards as other
      companies similarly situated insure against, in amounts and under policies
      which
      it currently holds and under such additional or substituted amounts or policies
      as it may from time to time determine, which shall be reasonably acceptable
      to
      the Secured Parties (providing that no cancellation of such insurance shall
      be
      effective without 30 days written notice to the Secured Parties and containing
      loss payable clauses to the Secured Parties as their interest may appear) and
      all premiums thereon shall be paid by the Company.

     

    7. 
Remedies,
      Rights Upon Default. 

     

    (a)
       In
      addition to any other rights given to the Secured Parties hereunder, if an
      Event
      of Default shall occur and be continuing and any Secured Party shall have
      declared the amounts owing under the Note(s) to be due and payable (or such
      amounts shall have automatically, become due and payable), all payments received
      by the Company under or in connection with any of the Collateral shall be
      subject to the subordination provisions contained in the preceding Section
      2,
      held by the Company in trust for the Secured Parties, shall be segregated from
      other funds of the Company and shall, if requested by any Secured Party
      forthwith upon receipt by the Company be turned over to the Secured Parties,
      in
      the same form as received by the Company (duly endorsed by the Company to the
      Secured Parties, if required).

     

    (b)
       If
      any
      Event of Default shall occur and be continuing and subject to the subordination
      provisions of the preceding Section 2, any Secured Party may exercise in
      addition to all other rights and remedies granted to it in this Security
      Agreement or in any other instrument or agreement securing, evidencing or
      relating to the Obligations or at law or in equity, all rights and remedies
      of a
      secured party under the Code. Without limiting the generality of the foregoing,
      the Company expressly agrees that in any such event, the Secured Parties,
      without demand of performance or other demand, (except the notice specified
      below of time and place of public or private sale) to or upon the Company or
      any
      other person may forthwith collect, receive, appropriate and realize upon the
      Collateral, or any part thereof, and/or may forthwith sell, lease, assign,
      give
      option or options to purchase, or sell or otherwise dispose of and deliver
      said
      Collateral (or contract to do so), or any part thereof, in one or more parcels
      at public or private sale or sales, at any exchange broker's board or at any
      of
      the Secured Parties’ offices or elsewhere at such prices as it may deem best,
      for cash or on credit or for future delivery without assumption of any credit
      risk. Each Secured Party shall have the right upon any such public sale or
      sales, and, to the extent permitted by law, upon any such private sale or sales,
      to purchase the whole or any part of said Collateral so sold, free of any right
      or equity of redemption, which equity of redemption the Company hereby releases.
      The Company further agrees, at any Secured Party’s request, to assemble the
      Collateral, make it available to one or more of the Secured Parties at places
      which a Secured Party shall reasonably select, whether at the Company's premises
      or elsewhere. The Secured Parties shall apply the net proceeds of any such
      collection, recovery, receipt, appropriation, realization or sale, after
      deducting all reasonable costs and expenses of every kind incurred therein
      or
      incidental to the care, safe keeping or otherwise of any or all of the
      Collateral or in any way relating to the rights of the Secured Parties
      hereunder, including reasonable attorneys' fees and legal expenses, to the
      payment in whole or in part of the Obligations, the Company remaining liable
      for
      any deficiency remaining unpaid after the application, and only after so paying
      over such net proceeds and after the payment by the Secured Parties of any
      other
      amount required by any provision of law. To the extent permitted by applicable
      law, the Company waives all claims, damages, and demands against the Secured
      Parties arising out of the repossession, retention or sale of the Collateral.
      The Company agrees that a Secured Party need not give more than 10 days notice
      of the time and place of any public sale or of the time after which a private
      sale may take place and that such notice is reasonable notification of such
      matters. The Company shall remain liable for any deficiency if the proceeds
      of
      any sale or disposition of the Collateral are insufficient to pay all amounts
      to
      which a Secured Party is entitled.

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    (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:

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    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.

    

    11. A
      party
      hereto may change the above specified recipient or mailing address by notice
      to
      the other party given in the manner herein prescribed. All notices shall be
      deemed given on the day when actually delivered as provided above (if delivered
      personally or by facsimile, provided that any such facsimile is received during
      regular business hours at the recipient's location) or on the day shown on
      the
      return receipt (if delivered by mail or delivery service).

     

    12. Severability.
      Any
      provision of this Security Agreement which is prohibited or unenforceable in
      any
      jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
      such prohibition or unenforceability without invalidating the remaining
      provisions hereof, and any such prohibition or unenforceability in any
      jurisdiction shall not invalidate or render unenforceable such provision in
      any
      other jurisdiction.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    
      13. No
        Waiver; Cumulative Remedies.
        No
        Secured Parties shall by any act, delay, omission or otherwise be deemed
        to have
        waived any of their rights or remedies hereunder and no
        waiver
        shall be valid unless in writing,signed
        by
        the Secured Party, and then only to the extent therein set forth. A waiver
        by a
        Secured Partyof
        any
        right orremedy
        hereunder on any one occasion shall not be construed as a bar to any right
        or
        remedy which theSecured
        Partieswould
        otherwise have had on any future occasion and shall not apply to any other
        Secured Party. Nofailure
        toexercise
        nor any delay in exercising on the part of a Secured Party, any right, power
        or
        privilegehereunder,
        shalloperate
        as a waiver thereof, nor shall any single or partial exercise of any right,
        power or privilegehereunderprecludeany
        other or future exercise thereof or the exercise or any other right, power
        or
        privilege. The rights andremedieshereunder
        provided are cumulative and may be exercised singly or concurrently, and
        are not
        exclusive ofany
        rightsand
        remedies provided by law.

    

     

    14. Successors
      and Assigns.
      This
      Security Agreement and all obligations of the Company hereunder shall be binding
      upon the successors and permitted assigns of the Company, and shall, together
      with the rights and remedies of the Secured Parties hereunder, inure to the
      benefit of each of the Secured Parties and their successors and permitted
      assigns; provided that the Company may not assign any of its rights or
      obligations hereunder without the prior written consent of each of the Secured
      Parties.

     

    15. 
      Waiver and Amendment.
      None of
      the terms or provisions of this Security Agreement may be waived, altered,
      modified or amended except by an instrument in writing, duly executed by the
      Company and the Secured Party against whom such waiver, alteration, modification
      or amendment is sought to be enforced.

     

    16. Governing
      Law.
      This
      Security Agreement shall be governed by and construed in accordance with the
      domestic laws of the State of California without giving effect to any choice
      of
      law or conflict of law provision or rule (whether of the State of California
      or
      any other jurisdiction) that would cause the application of the laws of any
      jurisdiction other than the State of California.

     

    17. Counterparts.
      This
      Security Agreement may be executed in separate counterparts each of which will
      be an original and all of which taken together will constitute one and the
      same
      agreement.

     

    18. Facsimile.
      This
      Security Agreement may be executed using facsimiles of signatures, and a
      facsimile of a signature shall be deemed to be the same, and equally
      enforceable, as an original of such signature.

     

    19. Termination.
      At such
      time as the Obligations have been fully paid in cash, the security interest
      created hereby shall automatically terminate, the Secured Parties shall take
      all
      such actions as may be requested by the Company to evidence such termination
      and
      to release the liens created hereby, at the Company's expense. 

    

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    

    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:  	 
	 	
              
Gary
              M. De Laurentiis 
	 	Chief
              Executive Officer

    

    

    
 

    
      	 	 	 
	 	
              SECURED
                PARTY: 

            
	 
 	 
 	 
 
	 	By:  	 
	 	 	
              

            
	 	Its:	
            
	 	
              

            

    

             

             

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    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

            

    

    

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    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

            

    

     

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

     

    
      	
              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

            

    

    

    

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    Exhibit
      C

    

    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 5,000,000 Shares of Common Stock

    

    Itec
      Environmental Group, inc.

    

    Date
      of
      Issuance: July ___, 2006

    

    No.
      90

    

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

    

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

    

    The
      Warrant shall expire on July ___, 2010 (the “Expiration Date”). The Investor may
      exercise the warrant at any time prior to the Expiration Date. The Company
      has
      no restriction on the sale or transfer of the Warrant or Warrant Shares;
      however, the Investor is required to comply with all state and U.S. laws and
      regulations relating to security sales and transfers.

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    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 this Warrant, in
      whole, in accordance with and subject to the terms and conditions set forth
      in
      the Subscription Agreement and then only if such sale, pledge, hypothecation,
      or
      transfer is made in compliance with the Act or pursuant to an available
      exemption from registration under the Act relating to the disposition of
      securities.

    

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

    

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

    

    7.
       Number
      of Warrant Shares.
      This
      Warrant shall be exercisable for 5,000,000 shares of the Company’s Common Stock,
      as adjusted in accordance with this Agreement. 

    

    8.
       Exercise
      Price; Adjustment of Warrants.
      

    

    a.
       Determination
      of Exercise Price.
      The per
      share purchase price (the “Exercise Price”) for each of the Warrant Shares
      purchasable under this Warrant shall be equal to $0.12. 

     

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

    

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

    

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

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

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

    

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

    

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

    

    11.
       Reclassification
      or Reorganization.
      In case
      of any reclassification, capital reorganization or other change of outstanding
      shares of common stock of the Company (other than a change in par value, or
      from
      par value to no par value, or from no par value to par value, or as a result
      of
      an issuance of common stock by way of dividend or other distribution or of
      a
      subdivision or combination), the Company shall cause effective provision to
      be
      made so that the Holder shall have the right thereafter by exercising this
      Warrant, to 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. 

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    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 each of
      the
      Investors in accordance with the provisions of this Section; and (ii) if to
      the
      Warrant holder, at the address indicated on the signature page hereof, or at
      such other addresses as such Holder may designate by notice to the Company
      in
      accordance with the provisions of this Section. 

    

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

    

    g.
       Entire
      Agreement.
      This
      Agreement, that certain Loan Agreement (including the exhibits and schedules
      thereto) by and between the Company and the Holder, constitute the entire
      agreement among the parties hereto with respect to the subject matter hereof
      and
      thereof and supersede all prior agreements, understandings, negotiations and
      discussions, whether oral or written, of the parties hereto. 

    

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

    

    

    Itec
      Environmental Group, Inc. 

    

    

    By:
      ____________________________________

          
      Name: Gary De Laurentiis

          
      Title: President and Chief Executive Officer

    

    

    Investor
      Name: ____________________________________

    

    Investor
      Address: __________________________________

    

    _________________________________________________

    

    _________________________________________________

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    

    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. 

    

    

    

    

    
      
        
        

      

      
        30

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