cornell Logo [cornell.jpg]

 
August 25, 2006

Ecuity, Inc.
800 Bellevue Way, Suite 600
Bellevue, WA 98004
Attention: Shane Smith, CEO and King Cole, President

Re:
Ecuity, Inc./Cornell Capital Partners, LP - Forbearance of Default under the
Investor Registration Rights Agreement dated March 30, 2006

Gentlemen:

Please be advised that pursuant to the letter dated August 4, 2006, Cornell
Capital Partners, LP (“Cornell”) formally served Equity, Inc. (the “Company”)
with notification of default under the financing documents entered into by and
between the parties dated March 30, 2006, including without limitation the
Securities Purchase Agreement (and as amended on the date hereof) and the
convertible debentures issued thereto (the “Convertible Debentures”) (any and
all documents entered into on March 30, 2006, or as subsequently modified, shall
collectively be referred to as the “Transaction Documents”) for failure to file
the registration statement in accordance with the terms of the Investor
Registration Rights Agreement dated March 30, 2006 (the “Investor Registration
Rights Agreement”). The cure period under such default expired on August 14,
2006. Cornell is willing to extend the cure period for failure to file the
registration statement under the terms and conditions set forth herein.

Cornell shall extend the cure period provided the Company adheres to the
following timeline: (i) the Company shall provide to Cornell by September 1,
2006, a business plan for the twelve (12) months starting September 1, 2006,
which business plan shall include provisions for commitments to keep the account
of its professional advisors (i.e. legal counsel, auditors, etc.) current during
this period; (ii) the Company shall file its Annual Report for the Fiscal Year
Ended June 30, 2006 on Form 10-KSB (the “Annual Report”) by October 13, 2006;
(iii) within five (5) Business Days after the filing of the Annual Report, the
Company shall file a Preliminary Proxy Statement on Schedule 14A with the U.S.
Securities and Exchange Commission (the “SEC”) increasing its authorized shares
of common stock to no less than 5,000,000,000; and (iv) within thirty (30) days
of the filing of the Definitive Proxy Statement on Schedule 14A or Schedule14C
with the SEC, the Company shall file a registration statement on Form SB-2,
registering the shares pursuant to the Investor Registration Rights Agreement.
Failure by the Company to adhere to any portion of this timeline will result in
an automatic default under the Transaction Documents, without any further action
on the part of Cornell. Notwithstanding the foregoing, nothing contained herein
shall preclude Cornell from delivering a notice of default under Section 2(a) of
the convertible debentures issued under the Amended and Restated Securities
Purchase Agreement dated August 25, 2006 for events of default other than
failure to file the registration statement. In addition, nothing contained
herein or Cornell’s failure to declare an event of default shall not be
considered a waiver on the part of Cornell of any and all of its rights under
the Transaction Documents. Except as modified herein, all other terms and
obligations contained in the Transaction Documents, including without limitation
the Investor Registration Rights Agreement dated March 30, 2006, shall remain in
full force and effect.

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August 23, 2006
Page of  2 of 2
 
The parties hereto acknowledged that presently there are not enough shares of
common stock authorized by the Company to issue to Cornell pursuant to any
conversion notices under the Convertible Debentures. Until the Company
effectuates its increase in the number of authorized shares of common stock in
accordance with the terms above, the Company shall issue shares of common to
Cornell pursuant to any future conversions from the One Hundred Million
(100,000,000) shares (the “Pledged Shares”), which were pledged to Cornell on
August 29, 2005. The Company shall replenish any of the Pledged Shares used for
Cornell’s conversions under the Convertible Debentures within five (5) days
following the date the Company increases its the number of authorized shares of
common stock by issuing to Cornell a stock certificate with a sufficient number
of shares so that aggregate number of Pledged Shares equals One Hundred Million
(100,000,000) shares of the Company’s common stock. The Company shall cooperate
fully and take any and all action necessary to issue to Cornell shares of common
stock pursuant to any conversions using the Pledged Shares as contemplated under
this Paragraph, including without limitation, directing its Transfer Agent to
issue shares from the Pledged Shares.

Please indicate your agreement to the foregoing by signing below where
indicated.

[SIGNATURE PAGE TO IMMEDIATELY FOLLOW]

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August 23, 2006
Page of 3 of 3

       
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
 
   
   
    By:      

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Name: Mark Angelo
Title:  Portfolio Manager
           

Acknowledged and Agreed
 
ECUITY, INC.
             
   
   
  By:        

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Name: Shane Smith
Title:  CEO
     

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