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Funding Agreement

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Title:

Funding Agreement

Entities:

Noonday Asset Management, L.P.

Date:

2006

Size:

29KB total

Price:

$47

ID:

#2635135

► Financing ► Funding Agreements

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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 Companys 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:

(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.

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