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U.S. Department of Justice
 
United States Attorney
Southern District of New York
             
The Silvio J. Mollo Building
 
One Saint Andrew's Plaza
 
New York. New York 10007
     
March 26, 2007

 
Aaron S. Dyer, Esq.
Pillsbury Winthrop Shaw Pittman
725 South Figueroa Street, Suite 2800
Los Angeles, California 900 17

 
Re:
ECHO, Inc -Non-Prosecution Agreement

Dear Mr. Dyer:

On the understandings specified below, the Office of the United States Attorney
for the Southern District of New York (the “Office”) will not criminally
prosecute Electronic Clearing House, Inc., and its subsidiaries (collectively,
“ECHO”) for any crimes (except for criminal tax violations, as to which this
Office cannot and does not make any agreement) related to its transfer of money
through its electronic payment services, including the automated clearinghouse
(“ACH”) system and related collection activities, on behalf of, or for the
benefit of, any company providing payment services to any internet gambling
operation servicing customers within the United States during the period January
2001, through and including the date of the signing of this Agreement. This
conduct is described more fully in the Statement of Facts, which is attached
hereto as Exhibit A, and incorporated by reference herein. This Agreement is
entered into by ECHO pursuant to authority conveyed by resolution of the
Executive Board of ECHO. A copy of the resolution is attached hereto as Exhibit
B.

Moreover, if ECHO fully complies with the understandings specified in this
Agreement, no information given at the request of this Office by or on behalf of
ECHO or any then- current employee (or any other information directly or
indirectly derived there from) will be used against ECHO in any criminal tax
prosecution. This Agreement does not provide any protection against prosecution
for any crimes except as set forth above, and applies only to ECHO and not to
any other entities or any individuals except as set forth herein. ECHO expressly
understands that the protections provided to ECHO by this Agreement shall not
apply to any successor entities, whether the successor’s interest arises through
a merger or plan of reorganization, unless and until such successor formally
adopts and executes this Agreement. The protections arising from this Agreement
will not apply to any purchasers of all or substantially all of the assets of
ECHO, unless such purchaser enters into a written agreement, on terms acceptable
to this Office, agreeing in substance to undertake all obligations set forth in
the Continuing Obligation to Cooperate paragraph.

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Aaron S. Dyer, Esq.
March 26, 2007
Page 2

Continuing Obligation To Cooperate

ECHO acknowledges and understands that the cooperation it has provided to date
in connection with a criminal investigation by the Office, and its pledge of
continuing cooperation, are important and material factors underlying the
Office’s decision to enter into this Agreement, and, therefore, ECHO agrees to
cooperate fully and actively with the Office, the Federal Bureau of
Investigation (the “FBI”), and with any other agency of the government
designated by the Office (“Designated Agencies”) regarding any matter relating
to the Office's investigation about which ECHO has knowledge or information.

In this regard, it is understood that, in connection with any matter relating to
ECHO’s operations, finances, and corporate governance between 2001 and the date
of the signing of this Agreement, ECHO: (a) shall truthfully and completely
disclose all information with respect to the activities of ECHO, its officers
and employees, and others concerning all such matters about which this Office
inquires, which information can be used for any purpose, except as limited by
the second paragraph of this Agreement; (b) shall cooperate fully with this
Office, the FBI, and any other law enforcement agency designated by this Office;
(c) shall, at the Office’s request, use its best efforts to assist this Office
in any prosecution or investigation arising out of the operation and/or
financing of any internet gambling site conducting business with customers in
the United States, by providing logistical and technical support for any
meeting, interview, grand jury proceeding, or any trial or other court
proceeding; (d) shall at the Office's request, use its best efforts to promptly
secure the attendance and truthful statements or testimony of any officer,
agent, employee, or former employee at any meeting or interview or before the
grand jury or at any trial or other court proceeding; (e) shall use its best
efforts to promptly provide to this Office, upon request, any document, record,
or other tangible evidence relating to matters concerning any automated
clearinghouse services about which this Office or any designated law enforcement
agency inquires, including assembling and organizing all documents, records,
information, and other evidence in ECHO’s possession, custody, or control as may
be requested by the Office or the FBI; and (f) shall bring to this Office's
attention all criminal conduct by, or criminal investigations of, ECHO or its
employees that comes to the attention of ECHO's board of directors or senior
management, as well as any administrative proceeding or civil action brought by
any governmental authority related to the operation of ECHO’s business. It is
further understood that ECHO shall commit no crimes whatsoever. Moreover, any
assistance that ECHO may provide to federal criminal investigators shall be
pursuant to the specific instructions and control of this Office and designated
investigators. ECHO'S obligations under this paragraph shall continue until the
later of (1) a period of one year from the date of the signing of this Agreement
or (2) the date upon which all prosecutions arising out of the conduct described
in the opening paragraph of this Agreement are final.

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Aaron S. Dyer, Esq.
March 26, 2007
Page 3
 
Disgorgement Obligations
 
In order to eliminate any benefit that ECHO received that may have related to
the online gaming business, ECHO agrees that it will pay a total of $2,300,000
(the “Property”) to the United States as part of this Agreement. ECHO agrees to
pay this money to the United States at the time of the execution of this
Agreement. Such payment shall be made by a certified check payable to the United
States Marshals Service or wire transfer to an account designated by the United
States Marshal for the Southern District of New York. ECHO agrees that it will
not file a claim with the Court or otherwise contest any civil forfeiture action
and will not assist a third party in asserting any claim against the Property,
except as required by lawful process. It is further understood that ECHO will
not file or assist anyone in filing a petition for remission or mitigation with
the Department of Justice concerning the Property.

Additional Obligations

It is understood that, should ECHO commit any crimes subsequent to the date of
the signing of this Agreement, or should it be determined that ECHO or any of
its representatives have given false, incomplete, or misleading testimony or
information, or has otherwise violated any provision of this Agreement, (a) ECHO
shall thereafter be subject to prosecution for any federal violation of which
this Office has knowledge, including perjury and obstruction of justice; (b) all
statements made by ECHO'S representatives to this Office, the FBI, or other
designated law enforcement agents, including but not limited to the Statement of
Facts, and any testimony given by ECHO'S representatives before a grand jury
subsequent to the signing of this Agreement, and any leads from such statements
or testimony shall be admissible in evidence in any criminal proceeding brought
against ECHO and relied upon as evidence to support any civil penalty imposed on
ECHO; and (c) ECHO shall assert no claim under the United States Constitution,
any statute, Rule 410 of the Federal Rules of Evidence, or any other federal
rule that such statements or any leads therefrom should be suppressed. In
addition, any such prosecution that is not time-barred by the applicable statute
of limitations on the date of the execution of this Agreement may be commenced
against ECHO, notwithstanding the expiration of the statute of limitations
between the signing of this Agreement and the commencement of such prosecution
or the imposition of such civil penalties. It is the intent of this Agreement to
waive all defenses based on the statute of limitations with respect to any
prosecution that is not time-barred on the date that this Agreement is signed.

It is understood that ECHO accepts and acknowledges as true the facts as set
forth in the Statement of Facts attached as Exhibit A, which is incorporated by
reference herein. Pursuant to this Agreement, ECHO agrees to maintain, with
respect to its operations, a permanent restriction upon illegally providing
automated clearinghouse services of any kind to any business entity providing
internet gambling services to customers in the United States in violation of the
law in the United States.

It is understood that this Agreement does not bind any federal, state, or local
agencies, any licensing authorities, or any regulatory authorities. This Office
will, however, bring the cooperation Aaron S. Dyer, Esq. March 26,2007 Page 4
and remedial actions of ECHO to the attention of other prosecuting and other
investigative offices, if requested by ECHO.

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Aaron S. Dyer, Esq.
March 26,2007
Page 4

With respect to this matter, this Agreement supersedes all prior understandings,
promises and/or conditions between this Office and ECHO. No additional promises,
agreements, and conditions have been entered into other than those set forth in
this letter and none will be entered into unless in writing and signed by all
parties.

     
Very truly yours,
             
MICHAEL J. GARCIA
     
United States Attorney
     
Southern District of New York
           
By:
/s/ Timothy Treanor
     
Timothy J. Treanor/Christopher P. Conniff
     
Assistant United States Attorneys
             
/s/ Lev Dassin
     
Lev L. Dassin
     
Chief, Criminal Division
       
AGREED AND CONSENTED TO:
              /s/ Joel M. Barry, CEO      
Pursuant to Authority Conveyed By Date Resolution of the Executive Board of ECHO
   
Date
               
APPROVED:
             
/s/ Aaron S. Dyer
   
3/26/07
Aaron S. Dyer, Esq.
   
Date
Pillsbury Winthrop Shaw Pittman for ECHO
     

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STATEMENT OF FACTS

Electronic Clearing House, Inc. (“ECHO”) is an electronic payment processor that
provides for the payment processing needs of merchants, banks, technology
partners and collection agencies. ECHO derives the majority of its revenue from
two main business segments: I) bankcard and transaction processing services
(“bankcard services”), whereby it provides solutions to merchants, banks and
technology partners to allow them to accept credit and debit card payments from
consumers; and 2) check-related products (“check services”), whereby it provides
various services to merchants, banks, technology partners, and collection
agencies to allow them to accept and process check payments from consumers.

The principal services offered within these two segments include, with respect
to its bankcard services, debit and credit card processing, and with respect to
its check services, check guarantee, check verification, electronic check
conversion, check re-presentment, and check collection. ECHO operates under the
following brands:

s MerchantAmerica, which is the retail provider of all credit card, debit card
and check payment processing services to both the merchant and bank markets;

s National Check Network (“NCN”), which is ECHO's proprietary database of
negative and positive check writer accounts, for check verification and check
conversion capture services;

sXPRESSCHEX, Inc. for check collection services; and

sECHO, for wholesale credit card and check processing services.

ECHO was incorporated in Nevada in December 1981. Its executive offices are
located at 730 Paseo Camarillo, Camarillo, California 930 10.ECHO's common stock
is traded on the NASDAQ Capital Market under the ticker symbol “ECHO.”

From 2001 until the beginning of 2007, ECHO provided payment processing and
collection services to several “internet wallet” or “e-wallet” companies. Those
companies, as ECHO has previously disclosed in its securities filings,
authenticated customers and acted as the online wallets for online merchants,
including gaming websites, and provided e-wallet and payment processing for
those online merchants. ECHO processed the transfer of finds between the
consumer and such e-wallets. After the individuals transferred money into their
online wallets, they could then use those funds to make online purchases,
including placing bets on gaming websites.

In late 2001, ECHO began processing payments for Optimal Payments, the parent of
e-wallet Firepay. Over the next five years, it began providing processing
services to several other e-wallets, including Citadel, Mediapay and Neteller.
Additionally, ECHO provided to some of these e-wallets collection services with
respect to delinquent accounts. ECHO knew that these e-wallets were providing
such services to these gaming websites. Each of these e-wallets almost
exclusively handled illegal transactions with online gaming websites.

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Beginning in October 2006, ECHO initiated a progressive wind-down plan for all
e-wallet companies and began shutting down processing and collection services
for e-wallets. In addition, ECHO is cooperating with the Department of Justice’s
ongoing investigation relating to e-wallets. To that end, ECHO has frozen funds
belonging to the e-wallet companies totaling approximately $21 million.

In order to eliminate any benefit that ECHO received that may have related to
online gaming, ECHO has agreed that it will disgorge any profits it earned from
processing transactions or providing collection services to e-wallets. While
some of the e-wallets acted as online wallets for non-gaming merchants, ECHO has
calculated its earnings by including all revenues from services provided to
e-wallets, rather than just those e-wallet revenues specifically attributable to
gaming. ECHO'S gross revenues from providing processing and collection services
to e-wallets totaled approximately $17.7 million over five years. In determining
its profits from the e-wallet revenues, ECHO allocated its expenses based on (I)
the proportion of revenues attributable to the e-wallets and (2) the higher
margin on most e-wallet transactions. As a result, ECHO estimates that
$2.3million (total e-wallet revenue less expenses allocated to e-wallet
business) reasonably represents its profits from its business with the
e-wallets.

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MINUTES OF THE MEETING OF
THE BOARD OF DIRECTORS
 
OF
 
ELECTRONIC CLEARING HOUSE, INC.
a Nevada Corporation

A duly noticed meeting of the Board of Directors (the “Board”) of Electronic
Clearing House, Inc., a Nevada corporation (the “Corporation”), was held on
March 21, 2007, at 3:00 p.m. (local time), at the Corporation’s offices at 730
Paseo Camarillo, Camarillo, California.

The following persons, constituting a majority of the directors of the
Corporation, were present: Charles Harris, a director and the President and
Chief Operating Officer of the Corporation, Aristides W. Georgantas, Carl R.
Terzian, Herbert L. Lucas, H. Eugene Lockhart and Richard D. Field. Also present
for portions of the meeting were Alice Cheung, Chief Financial Officer of the
Corporation, and Mark Salter, and Jonathan Howe, of New Century Capital
Partners, LLC and WedBush Morgan Securities, Inc., respectively. V. Joseph
Stubbs, Scott Galer and Gregory Akselrud of Stubbs Alderton & Markiles, LLP,
outside counsel to the Corporation, were also present during the meeting. Aaron
Dyer, of Pillsbury Winthrop, white collar criminal counsel to the Company, was
also present. Joel M. Barry, the Chairman and Chief Executive Officer of the
Corporation, was not present.

Mr. Harris acted as Chairman of the meeting and Mr. Akselrud acted as secretary
of the meeting and kept these minutes.

The Chairman announced that a quorum was present and that the meeting, having
been duly convened, was ready to proceed with its business.

1.     Intuit Transaction and Summary of Grand Juw Subpoena Matter 

The first item of business was [DISCUSSION REDACTED]. Upon motion duly made and
seconded, the following recitals and resolutions were approved by the Board:

WHEREAS, it has been proposed that the Corporation enter into a Non- Prosecution
Agreement substantially in the form attached hereto as Exhibit A
(“Non-Prosecution Agreement”); and

WHEREAS, the Board has determined that it is advisable and in the best interests
of the Corporation and its shareholders for the Corporation to enter into the
Non-Prosecution Agreement.

NOW, THEREFORE, BE IT RESOLVED, that the Corporation's entry into the
Non-Prosecution Agreement is hereby adopted, approved and ratified;

RESOLVED FURTHER, that the form, terms and provisions of the Non- Prosecution
Agreement, are hereby adopted, approved and ratified;

RESOLVED FURTHER, that the officers of the Corporation, and each of them, are
hereby authorized and directed to execute the Non-Prosecution Agreement and to
cause the Corporation to perform its obligations under the Non- Prosecution
Agreement and to consummate the actions contemplated thereby;
 

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RESOLVED FURTHER, that the officers of the Corporation, and each of them, are
hereby authorized, for and on behalf of the Corporation, to modify, amend or
revise the form, terms and provisions of the Non-Prosecution Agreement, to
execute, deliver and/or file any and all documents, certificates, instruments,
agreements and notices, and to perform or cause to be performed any and all acts
as may, in their judgment, be necessary or desirable to accomplish the purposes
of the foregoing resolutions and the actions contemplated thereby and the
Non-Prosecution Agreement therein approved, the making of any such modification,
amendment or revision, the taking of any such actions and/or the execution,
delivery or filing of any such documents or instruments shall be conclusive
evidence that the individual making such modification, amendment or revision,
taking such action and/or executing, delivering or filing such document or
instrument has deemed the same to be necessary or advisable; and

FINALLY RESOLVED, that the actions of the officers and other agents of the
Corporation, and each of them, previously taken in connection with the
negotiation and/or the preparation of the forms, terms and provisions of the
Non- Prosecution Agreement are hereby ratified, approved and adopted.
 
[REMAINDER OF MINUTES REDACTED]
 
[Signature Page Follows]

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There being no further business to come before the meeting, upon motion duly
made, seconded and unanimously approved, the meeting was.

         
/s/ Gregory Akselrud
 
Gregory Akselrud
 
Secretary of the Meeting
               
Attest:
     
/s/ Charles Harris
 
Charles Harris
 
Director
 

 
 
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