Document:

Exhibit
      10.2

    FUNDING
      AGREEMENT

    

    THIS
      FUNDING AGREEMENT (this "Agreement"),
      is
      executed as of February 6, 2006, by and between Itec Environmental Group, Inc.,
      a Delaware corporation (the "Company"),
      and
      Itec Capital Group, LLC, a Washington limited liability company ("ICG").

     

    WHEREAS,
      the Company wishes to sell and ICG wishes to invest on behalf of its members
      $1.0 million in connection with acquiring certain securities of the Company,
      with the rights provided and under the terms set forth herein; and

     

    WHEREAS,
      ICG is willing to provide such additional investment 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 ICG, 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 Investment (as defined below) 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
      INVESTMENT

     

    2.1 Investment.
      According to the terms and subject to the conditions of this Agreement, ICG
      shall invest on behalf of its members an amount of One Million Dollars
      ($1,000,000.00) (the “Investment”)
      under
      the
      terms of the KW
      Securities Financing pursuant to the Company’s 2006 Private Placement
      Memorandum
      (the
“PPM”)
      with
      an option to invest up to an additional Eight Million Dollars ($8,000,000)
      (the
“Additional
      Investment”).
      The
      Investment shall be evidenced by one or more convertible promissory notes (each
      a “Note”),
      duly
      executed on behalf of the Company and dated as of the date that funds are
      received by the Company. In connection with the Investment, the Company agrees
      and undertakes to do as follows:

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    (a)  issue
      Note(s) and Warrants (as defined below), and otherwise be responsible and
      liable, for the full amount of the Investment or Additional Investment but
      shall
      receive actual funds equal to ninety-two percent (92%) of the Investment and
      the
      Additional Investment (if applicable).

     

    (b)  issue
      to
      ICG, (i) a warrant for that number of shares equal to eight percent (8%) of
      the
      securities, exclusing any Note(s), issued pursuant to the Investment (the
“Investment Warrant”); (ii) a warrant for that number of shares equal to eight
      percent (8%) of the securities issued pursuant to the Additional Investment
      (the
“Additional Investment Warrant”); and (iii) that number of shares equal to eight
      percent (8%) of the securities issued in connection with the conversion of
      the
      Note(s) into equity (the “Conversion Warrant”).

     

    (c)  provide
      ICG with a cash payment equal to three percent (3%) of any cash received by
      the
      Company in connection with any future financing and a warrant equal to three
      percent (3%) of that number of securities issued by the Company pursuant to
      such
      future financing, for a one (1) year period from the date of this Agreement.
      

     

    2.2 Interest.
      

     

    (a)  Interest
      Rate.
      The
      Note(s) shall bear interest (“Interest”)
      from
      the date of issuance 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 Note 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 Note(s) are earlier accelerated pursuant to the terms hereof or converted
      pursuant to the provisions of Section 4.1 hereof, the Note(s) and all accrued
      Interest thereon shall be due and payable in full on the date that is one (1)
      year following the date the Company receives the funds represented by the Note
      (the “Maturity
      Date”).
      ICG
      may, at ICG's option, extend the Maturity Date on such terms and conditions
      as
      determined by ICG in their sole discretion.

     

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

     

    
      
         

      

      
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    (a)  The
      Company shall have duly executed and delivered to ICG the Note representing
      the
      Investment in the amount funded on the applicable Closing Date.

     

    (b)  The
      Company shall have duly authorized, executed, and delivered to ICG a security
      agreement (the “Security
      Agreement”)
      to
      secure the repayment of the Investment and granting ICG a continuing security
      interest in all presently existing and hereafter acquired assets and property
      of
      the Company of whatever nature and wherever located which such Security Interest
      shall be senior to all other security interests or Encumbrances against the
      assets and property of the Company other than Senior Debt (as hereafter
      defined). Except as set forth above, ICG’s security interest shall be senior to
      any other indebtedness of the Company, whether now existing or created or
      incurred in the future. “Senior
      Debt”
shall
      mean all indebtedness for all principal,
      fees, expenses, interest, penalties, post-bankruptcy petition interest, and
      all
      other amounts payable for money borrowed from banking or other financial
      institutions or governmental lending facilities that is not convertible into
      equity securities of the Company, including, but not limited to the $2,000,000
      loan from the California Integrated Waste Management Board (the “CIWMB
      Loan”)
      and
      the remaining amount due and owing the Elevation Fund, LLC (the “Elevation
      Fund”).

     

    ARTICLE
      3

    REPRESENTATIONS,
      WARRANTIES AND COVENANTS

     

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

     

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

     

    
      
         

      

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

     

    3.4 Litigation
      and Taxes.
      There
      is no
      litigation or governmental proceeding pending, or to the best knowledge of
      the
      Company after due inquiry, threatened, against the Company other than as
      disclosed in the Company SEC Reports (as defined below). The Company has duly
      filed all applicable income or other tax returns and has paid all material
      income or other taxes when due. There is no controversy or objection pending,
      or
      to the best knowledge of the Company after due inquiry, threatened in respect
      of
      any tax returns of the Company.

     

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

     

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

     

    3.7 No
      Omissions or Misstatements.
      None of
      the information included in this Agreement, other documents or information
      furnished to ICG 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 ICG and constitute true and complete
      copies thereof and include all amendments, schedules, appendices, supplements
      or
      modifications thereto or waivers thereunder.

     

    3.8 Other
      Indebtedness.
      On and
      as of the date hereof and on and as of each Closing Date, the Company does
      not
      and will not have any outstanding Senior Debt other than the CIWMB Loan and
      the
      amount due and owning the Elevation Fund. For so long as the Note(s) (or any
      note issued upon transfer of the Note(s), in whole or in part) remains
      outstanding, the Company shall not incur, create or enter into any agreement
      to
      incur or create indebtedness ranking on a parity or parri
      passu
      with the
      Note(s) (“Parity
      Debt”),
      other
      than the investors participating in the current financing under the Company’s
      2006 Private Placement Memorandum and certain other ICG investors, identified
      in
Schedule
      A
      to the
      Security Agreement, as defined below, without the prior written consent of
      ICG,
      which consent shall not be unreasonably withheld.

     

    
      
         

      

      
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    3.9 ICG
      Board Representation.
      Effective at the Closing of the Investment, the Company shall appoint a
      representative of ICG (the “ICG
      Representative”)
      to the
      Company’s Board of Directors. For so long as (i) the Note(s) (or any note issued
      upon transfer of the Note(s), in whole or in part) remains outstanding, or
      if
      later (ii) one year from the Maturity Date, the Company shall nominate ICG
      Representative for election to the Board at any and all times that the
      stockholders of the Company take action (whether by meeting or written consent)
      to elect members of the Board of Directors and shall use best efforts to secure
      ICG Representative election to the Board. 

     

    3.10 Right
      of Participation.
      ICG
      shall have the right in the event the Company proposes to offer equity
      securities (the “New
      Securities”)
      to any
      person or company to purchase any New Securities. ICG shall have the right
      to
      invest with current investors participating in the KW Securities Financing
      pursuant to the Company’s 2006 Private Placement Memorandum (the “PPM”),
      to
      collectively subscribe to, in the aggregate, fifty percent (50%) of the New
      Securities. The Company grants ICG this right for three (3) years. For purposes
      of this section, “New Securities” shall mean any capital stock of the Company
      whether now authorized or not, and rights options or warrants to purchase such
      capital stock, and securities of any type whatsoever that are, or may become,
      convertible into capital stock; provided that the term “New Securities” does not
      include (i) securities purchased under any common stock purchase agreements;
      (ii) securities issued upon any conversions; (iii) securities issued pursuant
      to
      the acquisition of another business entity or business segment of any such
      entity by the Company by merger, purchase of substantially all the assets or
      other reorganization whereby the Company will own more than fifty percent (50%)
      of the voting power of such business entity or business segment of any such
      entity; (iv) securities issued in connection with any borrowings, direct or
      indirect, from financial institutions or other persons by the Company, whether
      or not presently authorized, including any type of loan or payment evidenced
      by
      any type of debt instrument; (v) securities issued to employees, consultants,
      officers, directors or advisors of the Company pursuant to any stock option,
      stock purchase or stock bonus plan, agreement or arrangement approved by the
      Board of Directors; (vi) securities issued in connection obtaining lease
      financing, whether issued to a ICG, lessor, guarantor or other person and
      approved by the Board of Directors; (vii) securities issued to leasing
      companies, landlords, ICG and other providers of goods and services to the
      Company and approved by the Board of Directors; (viii) securities issued in
      a
      pubic offering pursuant to a registration under the Securities Act; (ix)
      securities issued in connection with any stock split, stock dividend or
      recapitalization of the Company; (x) securities issued in connection with
      strategic transactions involving the Company and other entities, including,
      (A)
      joint ventures, manufacturing, marketing or distribution arrangements or (B)
      technology license, transfer or development arrangements; provided that such
      strategic transactions and the issuance of shares therein, have been approved
      by
      the Company’s Board of Directors; and (xi) any right, option or warrant to
      acquire any security convertible into the securities excluded from the
      definition of New Securities pursuant to subsections (i) through (x)
      above.

     

    
      
         

      

      
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    ARTICLE
      4

    CONVERSION

     

    4.1 Conversion
      Right.
      ICG in
      its sole discretion may convert, via written notice to the Company, the full
      amount of the principal plus any interest payable under the Note(s) and the
      Funding Agreement into shares of common stock of the Company at a conversion
      price of $0.0975 per share (the “Conversion
      Right”).
      All
      conversion and exercise prices in this Funding Agreement shall be subject to
      appropriate adjustment in the case of stock splits, stock dividends,
      recapitalizations and the like. 

     

    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 an Event of
      Default of the Company:

     

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

     

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

     

    (c)  the
      failure to make when due any payment on any Senior Debt or Parity Debt, whether
      on or after the maturity date, by acceleration or otherwise; 

     

    (d)  The
      removal of ICG Representative from the Company’s Board of Directors or the
      failure of ICG Representative to continue to serve on the Board of Directors
      of
      the Company for any reason other than his death or voluntary resignation;
      and

     

    (e)  (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, ICG may elect, by written notice delivered to the Company, to
      take
      any or all of the following actions: (i) declare the outstanding amounts under
      the Note(s) to be forthwith due and payable, whereupon the entire unpaid Amount,
      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(s) 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.

     

    
      
         

      

      
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    ARTICLE
      6

    ISSUANCE
      OF SECURITIES

     

    6.1 Issuance
      of Shares and Warrants.
      As set
      forth in Section 2.1, the Company shall issue to ICG (i) a warrant for that
      number of shares equal to eight percent (8%) of the securities issued pursuant
      to the Investment (the “Investment Warrant”); and (ii) a warrant for that number
      of shares equal to eight percent (8%) of the securities issued pursuant to
      the
      Additional Investment (the “Additional Investment Warrant”), in the form
      attached hereto as Exhibit
      A
      (the
“Warrant”).
      The
      Warrant shall be immediately exercisable by ICG (or its assigns) on the Closing
      Date and at an exercise price of Six Cents ($0.06) per share. The Warrant shall
      be exercisable for a period of four (4) years following the Closing Date. The
      number of shares purchasable upon Exercise of the Warrant and the exercise
      price
      thereof shall be subject to appropriate adjustment in the case of stock splits,
      stock dividends, recapitalizations and will contain antidilution protection
      identical to those contained in the Note(s). Further, upon conversion of the
      Note(s) from debt to equity the Company shall issue to ICG that number of shares
      equal to eight percent (8%) of the securities issued in connection with the
      conversion of the Note(s) into equity (the “Conversion Shares”)

     

    6.2 Registration
      of Registrable Securities.
      Within
      twelve (12) months after the Closing Date,
      the
      Company, at its expense, shall have registered pursuant to one or more effective
      registration statements filed with the SEC under
      the
      Securities Act the
      resale by ICG or any successor thereto any and all Company shares issued or
      issuable (x) pursuant to the Conversion Right or otherwise with respect to
      the
      Investment and (y) upon exercise or conversion of the Warrants and the
      Conversion Warrant (collectively, the “Registrable
      Securities”),
      and
      the Company agrees to maintain the effectiveness
      and currency
      of each
      such
      registration statement, including any related prospectus until the earlier
      to
      occur of (i) the resale of the Registrable Securities by ICG or any successor
      thereto in the manner contemplated by such registration statement or (ii) such
      time as all of the Registrable Securities may be sold by ICG or any successor
      thereto pursuant to Rule 144(k) under the Securities Act (or any successor
      provision thereto); and the Company shall take all such further action
      (including, without limitation, any registration of such shares under applicable
      state securities laws
      and the
      listing of such shares on any and all trading markets or stock exchanges as
      the
      Company’s Common Shares may trade from time to time)
      as
      shall permit the resale of such shares, or any portion thereof, as aforesaid.
      The Company agrees to amend such registration statements from time to time
      upon
      request of ICG to reflect any successors of ICG’s rights hereunder. The Company
      shall from time to time furnish to ICG or any successor thereto sufficient
      copies of any such prospectus, and any supplements thereto, so as to permit
      the
      resale of such Registrable Securities, or any portion thereof, in the manner
      prescribed by ICG or any successor thereto. If,
      at any
      time prior to twelve (12) months after the Closing Date, the Company files
      a
      registration statement with the SEC for the purpose of registering the sale
      of
      its equity securities under the Securities Act (other than on Form S-4 or Form
      S-8), the Company agrees to include the registration of the resale of the
      Registrable Securities in such registration statement and the other applicable
      covenants and agreements of the Company set forth in this Section 6.2 shall
      apply to such registration statement.  

     

    
      
         

      

      
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    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 ICG.
      ICG’s rights under this Agreement and the related agreements of the Company
      contemplated hereby (including the Note(s) and the Security Agreement) may
      be
      assigned, in whole or in part, by ICG 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.
      

     

    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
      ICG, to:

    

    Itec
      Capital Group, LLC

    601
      Union
      Street, Suite 4500

    Seattle,
      WA 98101

     

    

    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).

     

    
      
         

      

      
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    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 ICG.

     

    7.6 Remedies.
      No
      delay or omission by ICG in exercising any of its rights, remedies, powers
      or
      privileges hereunder or at law or in equity and no course of dealing between
      the
      ICG and the undersigned or any other person shall be deemed a waiver by ICG
      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 ICG or the exercise of any other right, remedy, power or privilege by ICG.
      The rights and remedies of ICG described herein shall be cumulative and not
      restrictive of any other rights or remedies available under any other
      instrument, at law or in equity. 

     

    7.7 Expenses.
      The
      Company agrees to reimburse ICG for fees and expenses incurred by ICG in
      connection with the preparation of this Agreement and the transactions
      contemplated hereby, including reasonable attorneys fess, up to a maximum amount
      of Twenty Thousand Dollars ($20,000.00).  

     

    7.8 Enforcement.
      In
      the
      event an action is instituted to enforce or interpret any of the terms of this
      Agreement including but not limited to any action or participation by ICG 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.

     

    

     

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      remainder of this page intentionally left blank]

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the Company has caused this Funding 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 

    

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    

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

    

    

    ITEC
      CAPITAL GROUP, LLC 

     

    

    

    By: ________________________ 

    Name: David
      M.
      Otto

    Title:
      Manager 

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    Exhibit
      A

    

    Form
      of Warrant

     

     

     

     

     

    
      
         

      

      
        12Exhibit
      10.3

    MUTUAL
      SETTLEMENT AND RELEASE AGREEMENT

    AMONG

    EXCIPIO,
      S.A.,
      ITEC ENVIRONMENTAL GROUP, INC., 

    AND
      ITEC CAPITAL GROUP, LLC

    

    This
      Mutual Settlement and Release Agreement is entered into this 6th
      day of
      November 2006 (the “Agreement”)
      by and
      among Excipio S.A., a corporation created under the laws of the British Virgin
      Islands (“Excipio”),
      Itec
      Environmental Group, Inc., a Delaware corporation (“Itec”)
      and
      Itec Capital Group, LLC, a Washington limited liability company (“ICG”)
      (collectively referred to at times herein as the “Parties”
and
      individually as “Party”).
      This
      Agreement is entered into for the express purpose of resolving all of the
      differences among the Parties.

    

    WHEREAS,
      the Parties agree that the consulting agreement by and between Excipio and
      ICG
      (the “Consulting
      Agreement”),
      dated
      February 6, 2006, contains terms relevant to this Agreement, a copy of which
      is
      attached hereto as Exhibit
      A;

    

    WHEREAS,
      the Parties agree that the funding agreement by and between ICG and Itec (the
      “Funding
      Agreement”),
      dated
      February 6, 2006, contain terms relevant to this Agreement, a copy of which
      is
      attached hereto as Exhibit
      B;

    

    NOW,
      THEREFORE, it is the desire of the Parties to state in writing the details
      of
      their Agreement. For good and valuable consideration between the Parties, the
      receipt of which is hereby acknowledged, it is mutually agreed as
      follows:

    

    	1.  	
            Itec
              Cash Payments to Excipio.
              

          

    

    A.  The
      Parties hereby acknowledge that, as of the date of this Agreement, Excipio
      has
      received Three Hundred Eleven Thousand, Three Hundred Dollars ($311,300) for
      fees and expenses under the Funding Agreement and Consulting
      Agreement.

    

    B.  Upon
      execution of this Agreement, Itec agrees to pay to Excipio, in settlement of
      all
      remaining fees and expenses owed to Excipio, the cash payments in the total
      sum
      of Four Hundred Twenty-Eight Thousand, Seven Hundred Dollars ($428,700) (the
      “Settlement
      Amount”)
      in
      accordance with the following schedule: 

    

    	i.  	
            Two
              Hundred Thousand Dollars ($200,000) shall be paid within twenty-four
              (24)
              hours of the execution of this Agreement;

          

    

    	ii.  	
            Eighty
              Thousand Dollars ($80,000) shall be paid within forty-eight (48) hours
              of
              Itec receiving an additional One Million Dollars ($1,000,000) in
              additional financing; and 

          

    

    	iii.  	
            the
              remaining One Hundred Forty-Eight Thousand, Seven Hundred Dollars
              ($148,700) shall be paid in four (4) equal monthly installments of
              Thirty-Seven Thousand, One Hundred Seventy-Five Dollars ($37,175) and
              due
              upon the first day of each month beginning on the earlier of:
              

          

     

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    
 

    	1.  	
            Itec
              receiving One Million Five Hundred Thousand Dollars ($1,500,000) in
              financing in addition to the One Million Dollars ($1,000,000) in financing
              described in Subsection 1(B)(ii) above; or

          

    

    	2.  	
            February
              1, 2007.

          

    

    	2.  	
            Warrant
              Shares.
              

          

    

    A.  The
      Parties hereby acknowledge that, as of the date of this Agreement, Excipio
      has
      not been issued any warrant shares in connection with the Funding Agreement
      and
      Consulting Agreement.

    

    B.  Upon
      execution of this Agreement, Itec shall issue to Excipio the following
      warrants:

    

    	i.  	
            a
              warrant to purchase one million four hundred forty thousand (1,440,000)
              shares of common stock with a strike price of Six Cents ($0.06) per
              share.
              A copy of this warrant is attached hereto as Exhibit
              C;
              and

          

    

    	ii.  	
            a
              warrant to purchase three million seven hundred forty-eight thousand
              (3,748,000) shares of common stock with a strike price of Twelve Cents
              ($0.12) per share. A copy of this warrant is attached hereto as
              Exhibit
              D.

          

    

    3. Itec
      Shares of Common Stock. Itec
      shall deliver to Excipio additional shares of Itec’s common stock forthwith
      pursuant to any Convertible Debt, as defined below, which converts on or before
      February 6, 2007 in an amount equal to the percentage of the Convertible Debt
      that converts during this period, multiplied by and up to a maximum of seven
      million three hundred eight-four thousand, six hundred fifteen (7,384,615).
      These shares shall be delivered with piggyback registration rights. For purposes
      of clarification, if one hundred percent (100%) of Convertible Debt is converted
      on or before February 6, 2007, Itec shall issue to Excipio seven million three
      hundred eight-four thousand, six hundred fifteen (7,384,615) shares to Excipio.
      If none of the Convertible Debt holders convert on or before February 6, 2007,
      Excipio shall receive zero (0) shares. 

    

    For
      purposes of this Agreement, “Convertible
      Debt”
shall
      mean the dollar amount of all of the convertible debentures that have been
      issued pursuant to (i) Itec’s 2006 private placement memorandum and (ii) certain
      short term bridge loans effected by Itec and totaling Three Million Dollars
      ($3,000,000).

    

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    4. Public
      Statements - No Disparagement.
      No Party
      hereto shall make any disparaging statements regarding any other Party hereto
      with regard to the matters leading up to and at anytime after this
      Agreement.

    

    5. Mutual
      Release. Upon
      fulfillment of Sections 1, 2 and 3 of this Agreement, the
      Parties hereto agree to release and discharge each other, and each of their
      respective partners, agents, employees, attorneys, representatives, and the
      successors, heirs and assigns of any of the preceding, from all sums of money,
      claims, demands, contracts, actions, debts, controversies, agreements, damages
      and causes of action whatsoever, whether known or unknown, suspected or
      unsuspected by them, which they now own, hold, have or claim to have or at
      any
      time heretofore owned, held or claimed to have held against each other, by
      reason of any matter or thing alleged or referred to, or in any way connected
      with, arising out of or related to any of the matters, acts, events or
      occurrences alleged or referred to in the
      Agreement including, but not limited to the Consulting Agreement and the Funding
      Agreement.

    

    6. Cancellation
      and Amendment of Agreements.
      Upon
      fulfillment of Sections 1, 2 and 3 of the Agreement, the Parties hereto agree
      that:

    

    	A.  	
            the
              Consulting Agreement shall be cancelled in its entirety and any further
              remaining obligations existing under this Consulting Agreement shall
              be
              waived and dismissed; and

          

    

    	B.  	
            the
              Funding Agreement shall be amended to reflect the settlement of fees
              and
              expenses due, owed and paid pursuant to this Agreement. Upon execution
              of
              this Agreement, no additional fees or expenses shall accrue or become
              due
              in accordance with the Funding Agreement.

          

    

    7. Release
      of Known and Unknown Claims.
      The
      Parties acknowledge that there is risk that subsequent to the execution of
      this
      Agreement, one or more of the Parties will incur or suffer loss, damage or
      injury which is in some way caused by the matters referred to above, but which
      is unknown and unanswered at the time this Agreement is signed. Accordingly,
      the
      Parties hereby assume the above-mentioned risks and this Agreement shall apply
      to all unknown or unanticipated results of the transactions and occurrences
      hereinabove described, as well as those known and anticipated, and the parties
      do hereby waive any and all rights under California Civil Code Section 1542,
      which section reads as follows:

    

    "A
      general release does not extend to claims which the creditor does not know
      or
      suspect to exist in his favor at the time of executing the release, which if
      known by him must have materially affected his settlement with the
      debtor."

    

    8. Mutual
      Consideration. Each
      of
      the agreements, releases, and other provisions of this Agreement is executed
      and
      entered into in consideration for and in reliance upon the due execution and
      enforceability of all other agreements, releases, and other provisions of this
      Agreement. The effectiveness and the validity of each agreement or other
      provision hereof is conditioned upon the effectiveness and validity of each
      of
      the other agreements, releases, and other provisions hereof. 

    

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    9. Exclusive
      Representations. The
      Parties hereto represent, warrant, and agree that upon executing and entering
      into this Agreement that they, and each of them, are not relying upon and have
      not relied upon any representation, promise, or statement made by anyone which
      is not recited, contained, or embodied in this Agreement. The parties, and
      each
      of them, understand, agree, and expressly assume the risk that any fact not
      recited, contained, or embodied in this Agreement may turn out hereafter to
      be
      other than, different from, or contrary to the facts now known to them or
      believed by them to be true, and further agree that this Agreement shall be
      effective in all respects notwithstanding, and shall not be subject to
      termination, modification, or rescission by reason of, any such difference
      in
      facts.

    

    10. Reliance
      Upon Separate Legal Counsel. The
      Parties to this Agreement are represented by counsel or have had the opportunity
      to seek legal advice with respect to the terms of this Agreement.

    

    11. No
      Admission of Liability.
      The
      Parties hereto understand and agree that by execution of this Agreement there
      is
      no admission of any liability of any nature whatsoever and that this settlement
      is made entirely as a compromise and for the purpose of settlement of a disputed
      claim.

    

    12. Mutual
      Settlement Cooperation. The
      Parties agree to execute and deliver all such other and additional instruments,
      notices, consents or other documents and to do all such other acts and things
      as
      may be reasonably necessary to carry out the terms of this
      Agreement.

    

    13. Applicable
      Law.
      This
      Agreement shall be governed and interpreted in accordance with the laws of
      the
      State of California.

    

    14. Warranty
      and Indemnity.
      Each
      Party represents and warrants that it has not assigned or transferred and will
      not assign or transfer to any other persons, firm, or corporation, in any
      manner, by way of subrogation or operation of law, or otherwise, any portion
      of
      any claim, right, demand action, or cause of action that it has or might have
      arising out of any of the matters referred to in this Agreement, nor any portion
      of any recovery or settlement to which it might be entitled. In the event that
      claim, demand, or suit should be made or instituted against any party or parties
      because of any such purported assignment, subrogation, or transfer, the Party
      from whom such purported assignment, subrogation, or transfer was alleged to
      have occurred agrees to indemnify and hold harmless the other party against
      such
      claim, suit, or demand, including necessary expenses of investigation,
      attorneys' fees and costs.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    15.
      Attorneys’
      Fees and Costs for Enforcement.
      The
      Parties hereto agree that, if any action or dispute arises regarding enforcement
      of this Agreement, or any of the terms, covenants, or conditions hereof, whether
      the same shall proceed to judgment or not, the prevailing party shall be
      reimbursed for all reasonable expenses incurred in resolving such dispute,
      including attorneys' fees.

    

    16. Binding
      Upon Successors.
      This
      Agreement shall be binding upon the heirs, administrators, executors,
      successors, and assigns of the respective parties hereto, and any parent,
      subsidiary and affiliated entity of each Party.

    

    17. Entire
      Agreement.
      This
      Agreement supersedes any and all prior agreements, understandings or
      arrangements, whether written or oral, between the Parties. This Agreement
      contains the entire agreement between the Parties with respect to the subject
      matter hereof. There are no promises, agreements, conditions, undertakings,
      understandings, warranties, covenants or representa-tions, oral or written,
      express or implied, between them with respect to this Agreement or the matters
      described in this Agreement, except as set forth in this Agreement. Any such
      negotiations, promises, or understandings shall not be used to interpret or
      constitute this Agreement.

    

    18. Events
      of Default. The
      occurrence of any of the following events (each an “Event
      of Default”)
      not
      cured within the Cure Period (defined below), and results in any Party failing
      to fulfill its obligations under this Agreement, if any, shall constitute and
      Event of Default:

    

    	A.  	
            a
              breach of any provision, representation, warranty, understanding or
              other
              covenant of this Agreement, which is not cured within thirty (30) days
              following written notice thereof (the “Cure
              Period”)
              and

          

    

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

          

    

    Effect
      of Default.
      Upon the
      occurrence of any Event of Default that is not cured within the Cure Period,
      Excipio may elect, by written notice delivered to Itec, to take any or all
      of
      the following actions: (i) declare the outstanding amounts under the Agreement
      to be forthwith due and payable, whereupon the entire unpaid Settlement Amount
      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 Itec,
      anything contained herein or in any of the Agreement 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.

    

    19. Counterparts
      and Facsimiles.
      This
      Agreement may be executed in any number of counterparts, each of which shall
      constitute a duplicate original hereof. The Parties agree to accept facsimile
      copies of signatures as if originals. 

    

    20. Authority
      to Bind Corporate Parties. The
      undersigned represent and warrant their authority to bind by their signature
      the
      corporate parties to this Agreement. 

    

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    21. Consultation.
      The
      Parties acknowledge that each has been advised to seek legal consultation
      regarding this Agreement and has either retained or had sufficient opportunity
      to retain such legal representation and hereby waives insufficiency of legal
      consultation or representation as a claim or defense in any action arising
      out
      of this Agreement.

    

    22. Miscellaneous.

    

    	A.  	
            If
              any term or provision of this Agreement or any application thereof
              shall
              be invalid or unenforceable, such term or provision shall be deemed
              to be
              severed and the remainder of this Agreement and any other application
              of
              such term or provision shall not be affected or invalidated
              thereby.

          

    

    	B.  	
            Except
              as otherwise provided in this Agreement, each Party will bear its own
              attorneys’ fees and costs incurred in this matter through the date of
              execution of this Agreement. Should any of the Parties institute any
              action or proceeding to enforce any provision of this Agreement, or
              for
              damages by reason of any alleged breach of any provision of this
              Agreement, or for a declaration of any party’s rights or obligations
              hereunder, or for any other judicial remedy, the prevailing party in
              such
              action or proceeding shall recover from the losing party all reasonable
              attorneys’ fees, costs and expenses incurred by the prevailing party in
              such action or proceeding. 

          

    

    	C.  	
            All
              notices, demands and communications hereunder shall be in writing and
              personally delivered or sent by first class mail, certified or registered,
              postage prepaid, return receipt requested, addressed to the parties
              at the
              addresses below set forth, or at such other address as any Party shall
              have furnished to the other party in writing, or shall be given by
              telegram, telex, facsimile transmission, overnight courier or hand
              delivery, in any case to be effective when received, provided that
              actual
              receipt shall constitute notice regardless of method of
              delivery.

          

    

    

      
        	
                If
                  to Excipio:

              	
                Excipio
                  Group, S.A.

              
	 	
                13428
                  Maxella Ave., Suite 718

              
	 	
                Marina
                  del Rey, CA 90292

              
	
                :
                  

              	
                Attn
                  David Coloris

              
	 	
                Fax:
                  (310) 745-7811

              
	 	 
	
                If
                  to Itec:

              	
                Itec
                  Environmental Group

              
	 	
                5300
                  Claus Road, Box 760

              
	 	 
	 	
                Attn:
                  Rodney S. Rougelot, CEO

              
	 	
                Fax:
                  (209) 881-352

              
	
                 

              	 

      

       

       

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

       

      
        	 	 
	
                If
                  to ICG:

              	
                Itec
                  Capital Group, LLC

              
	 	
                c/o
                  The Otto Law Group, PLLC

              
	 	
                601
                  Union Street, Suite 4500

              
	 	
                Seattle,
                  WA 98101

              
	 	
                Attn:
                  David M. Otto, Manager

              
	 	
                Fax:
                  (206) 262-9513

              

      

    

    

     

    

    

    [Remainder
      of page intentionally left blank]

    
 

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    
 

    IN
      WITNESS WHEREOF,
      the
      Parties have executed this Agreement on the date first above
      written.

    

    

    EXCIPIO
      GROUP, S.A.

    

    

    

    _____________________________

    By:
      David
      Coloris

    Its:
      Secretary

    

    

    ITEC
      ENVIRONMENTAL GROUP, INC.

    

    

    

    _____________________________

    By:
      Rodney S. Rougelot

    Its:
      Director & CEO

    

    

    ITEC
      CAPITAL GROUP, LLC

    

    

    

    _____________________________

    By:
      David
      M. Otto

    Its:
      Manager

    
 

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    Exhibit
      A

    Consulting
      Agreement

    

     

     

     

    
 

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    Exhibit
      B

    Funding
      Agreement

    

     

     

     

    
 

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    Exhibit
      C

    Form
      of Warrant

    

    
 

     

     

    
 

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    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 1,440,000 Shares
      of
      Common Stock

    

    Itec
      Environmental Group, inc.

    

    Date
      of
      Issuance: November 6, 2006

    

    No.
      148

    

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

    

    1. Holder
      Exercise of Warrant.
      This
      Warrant shall only be exercisable in whole. 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 April 15, 2015 (the “Expiration Date”). The Investor may
      exercise the warrant at any time prior to the Expiration Date. The Company
      has
      no restriction on the sale or transfer of the Warrant or Warrant Shares;
      however, the Investor is required to comply with all state and U.S. laws and
      regulations relating to security sales and transfers.

    

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

    

    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. 

    

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    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 1,440,000 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 $0.06. 

    

    b. Net
      Issue Exercise.
      In lieu
      of exercising this Warrant, the Holder may elect to receive Shares equal to
      the
      value of this Warrant (or the portion thereof being canceled) by surrender
      of
      this Warrant at the principal office of the Company together with notice of
      such
      election, in which event the Company shall issue to the Holder a number of
      Shares computed using the following formula:

    

    X
      = Y
      (A-B)

    -------

    A

    

    Where
      X
 =
      the
      number of the Shares to be issued to the Holder.

    

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

    

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

    

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

    

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

    

    (i)
       If
      the
      Company's Common Stock is publicly traded, the per share fair market value
      of
      the Shares shall be the average of the closing prices of the Common Stock as
      quoted on the Nasdaq National Market or the principal exchange on which the
      Common Stock is listed, or if not so listed then the fair market value shall
      be
      the average of the closing bid prices of the Common Stock as published in The
      Wall Street Journal, in each case for the fifteen (15) trading days ending
      five
      (5) trading days prior to the date of determination of fair market
      value;

    

    (ii)
       If
      the
      Company's Common Stock is not so publicly traded, the per share fair market
      value of the Shares shall be such fair market value as is determined in good
      faith by the Board of Directors of the Company after taking into consideration
      factors it deems appropriate, including, without limitation, recent sale and
      offer prices of the capital stock of the Company in private transactions
      negotiated at arm's length.

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

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

    

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

    

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

    

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

    

    g.
       Ratchet
      Protection.
      In the
      event that the Company sells any shares of common stock, grants options or
      warrants to purchase any shares of its common stock, issues securities
      convertible into shares of its common stock or enters into any agreement to
      do
      any of the same (other than as compensation for employment or consulting
      services) at a price (the “Lower Price”) which is lower than the then Exercise
      Price, the Exercise Price shall be adjusted downward to the Lower Price. Any
      such adjustment shall apply for all such issuances. 

    

    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. 

    

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    11.
       Reclassification
      or Reorganization.
      In case
      of any reclassification, capital reorganization or other change of outstanding
      shares of common stock of the Company (other than a change in par value, or
      from
      par value to no par value, or from no par value to par value, or as a result
      of
      an issuance of common stock by way of dividend or other distribution or of
      a
      subdivision or combination), the Company shall cause effective provision to
      be
      made so that the Holder shall have the right thereafter by exercising this
      Warrant, to purchase the kind and amount of shares of stock and other securities
      and PROPERTY RECEIVABLE UPON SUCH RECLASSIFICATION, CAPITAL REORGANIZATION
      OR
      OTHER CHANGE, BY A HOLDER OF THE NUMBER OF SHARES OF COMMON STOCK WHICH MIGHT
      HAVE BEEN PURCHASED UPON EXERCISE OF THIS WARRANT IMMEDIATELY PRIOR TO SUCH
      RECLASSIFICATION OR CHANGE. ANY SUCH PROVISION SHALL INCLUDE PROVISION FOR
      ADJUSTMENTS WHICH SHALL BE AS NEARLY EQUIVALENT AS MAY BE PRACTICABLE TO THE
      ADJUSTMENTS PROVIDED FOR IN THIS WARRANT. THE FOREGOING PROVISIONS OF THIS
      SECTION 12 SHALL SIMILARLY APPLY TO SUCCESSIVE RECLASSIFICATIONS, CAPITAL
      REORGANIZATIONS AND CHANGES OF SHARES OF COMMON STOCK. IN THE EVENT THAT IN
      ANY
      SUCH CAPITAL REORGANIZATION, RECLASSIFICATION, OR OTHER CHANGE, ADDITIONAL
      SHARES OF COMMON STOCK SHALL BE ISSUED IN EXCHANGE, CONVERSION, SUBSTITUTION
      OR
      PAYMENT, IN WHOLE, FOR OR OF A SECURITY OF THE COMPANY OTHER THAN COMMON STOCK,
      ANY AMOUNT OF THE CONSIDERATION RECEIVED UPON THE ISSUE THEREOF BEING DETERMINED
      BY THE BOARD OF DIRECTORS OF THE COMPANY SHALL BE FINAL AND BINDING ON THE
      HOLDER. 

    

    12.
       Miscellaneous.
      

    

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

    

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

    

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

    

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

    

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

    

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    

    IN
      WITNESS WHEREOF, the undersigned hereby sets is hand and seal this 6th
      day of
      November, 2006. 

    

    

    Itec
      Environmental Group, Inc. 

    

    

    By:
      ____________________________________

    Name:
      Rodney S. Rougelot

    Title:
      Chief Executive Officer

    

    

    Investor
      Name: ____________________________________

    

    Investor
      Address: __________________________________

    

    _________________________________________________

    

    _________________________________________________

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    

    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. 

    

    

    

    

    
 

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    Exhibit
      D

    Form
      of Warrant

    

     

     

    
 

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    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 3,748,000 Shares of Common Stock

    

    Itec
      Environmental Group, inc.

    

    Date
      of
      Issuance: November 6, 2006

    

    No.
      149

    

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

    

    1. Holder
      Exercise of Warrant.
      This
      Warrant shall only be exercisable in whole. 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 April 15, 2010 (the “Expiration Date”). The Investor may
      exercise the warrant at any time prior to the Expiration Date. The Company
      has
      no restriction on the sale or transfer of the Warrant or Warrant Shares;
      however, the Investor is required to comply with all state and U.S. laws and
      regulations relating to security sales and transfers.

    

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

    

    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. 

    

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    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 3,748,000 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. Net
      Issue Exercise.
      In lieu
      of exercising this Warrant, the Holder may elect to receive Shares equal to
      the
      value of this Warrant (or the portion thereof being canceled) by surrender
      of
      this Warrant at the principal office of the Company together with notice of
      such
      election, in which event the Company shall issue to the Holder a number of
      Shares computed using the following formula:

    

    X
      = Y
      (A-B)

    -------

    A

    

    Where
      X
 =
      the
      number of the Shares to be issued to the Holder.

    

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

    

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

    

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

    

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

    

    (i)
       If
      the
      Company's Common Stock is publicly traded, the per share fair market value
      of
      the Shares shall be the average of the closing prices of the Common Stock as
      quoted on the Nasdaq National Market or the principal exchange on which the
      Common Stock is listed, or if not so listed then the fair market value shall
      be
      the average of the closing bid prices of the Common Stock as published in The
      Wall Street Journal, in each case for the fifteen (15) trading days ending
      five
      (5) trading days prior to the date of determination of fair market
      value;

    

    (ii)
       If
      the
      Company's Common Stock is not so publicly traded, the per share fair market
      value of the Shares shall be such fair market value as is determined in good
      faith by the Board of Directors of the Company after taking into consideration
      factors it deems appropriate, including, without limitation, recent sale and
      offer prices of the capital stock of the Company in private transactions
      negotiated at arm's length.

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

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

    

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

    

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

    

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

    

    g.
       Ratchet
      Protection.
      In the
      event that the Company sells any shares of common stock, grants options or
      warrants to purchase any shares of its common stock, issues securities
      convertible into shares of its common stock or enters into any agreement to
      do
      any of the same (other than as compensation for employment or consulting
      services) at a price (the “Lower Price”) which is lower than the then Exercise
      Price, the Exercise Price shall be adjusted downward to the Lower Price. Any
      such adjustment shall apply for all such issuances. 

    

    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. 

    

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    11.
       Reclassification
      or Reorganization.
      In case
      of any reclassification, capital reorganization or other change of outstanding
      shares of common stock of the Company (other than a change in par value, or
      from
      par value to no par value, or from no par value to par value, or as a result
      of
      an issuance of common stock by way of dividend or other distribution or of
      a
      subdivision or combination), the Company shall cause effective provision to
      be
      made so that the Holder shall have the right thereafter by exercising this
      Warrant, to purchase the kind and amount of shares of stock and other securities
      and PROPERTY RECEIVABLE UPON SUCH RECLASSIFICATION, CAPITAL REORGANIZATION
      OR
      OTHER CHANGE, BY A HOLDER OF THE NUMBER OF SHARES OF COMMON STOCK WHICH MIGHT
      HAVE BEEN PURCHASED UPON EXERCISE OF THIS WARRANT IMMEDIATELY PRIOR TO SUCH
      RECLASSIFICATION OR CHANGE. ANY SUCH PROVISION SHALL INCLUDE PROVISION FOR
      ADJUSTMENTS WHICH SHALL BE AS NEARLY EQUIVALENT AS MAY BE PRACTICABLE TO THE
      ADJUSTMENTS PROVIDED FOR IN THIS WARRANT. THE FOREGOING PROVISIONS OF THIS
      SECTION 12 SHALL SIMILARLY APPLY TO SUCCESSIVE RECLASSIFICATIONS, CAPITAL
      REORGANIZATIONS AND CHANGES OF SHARES OF COMMON STOCK. IN THE EVENT THAT IN
      ANY
      SUCH CAPITAL REORGANIZATION, RECLASSIFICATION, OR OTHER CHANGE, ADDITIONAL
      SHARES OF COMMON STOCK SHALL BE ISSUED IN EXCHANGE, CONVERSION, SUBSTITUTION
      OR
      PAYMENT, IN WHOLE, FOR OR OF A SECURITY OF THE COMPANY OTHER THAN COMMON STOCK,
      ANY AMOUNT OF THE CONSIDERATION RECEIVED UPON THE ISSUE THEREOF BEING DETERMINED
      BY THE BOARD OF DIRECTORS OF THE COMPANY SHALL BE FINAL AND BINDING ON THE
      HOLDER. 

    

    12.
       Miscellaneous.
      

    

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

    

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

    

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

    

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

    

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

    

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    

    IN
      WITNESS WHEREOF, the undersigned hereby sets is hand and seal this 6th
      day of
      November, 2006. 

    

    

    Itec
      Environmental Group, Inc. 

    

    

    By:
      ____________________________________

    Name:
      Rodney S. Rougelot

    Title:
      Chief Executive Officer

    

    

    Investor
      Name: ____________________________________

    

    Investor
      Address: __________________________________

    

    _________________________________________________

    

    _________________________________________________

    
 

    
 

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    

    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. 

    

     

    
      
         

      

      
        24

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