Exhibit 10.1





                          SECURITIES PURCHASE AGREEMENT
                          -----------------------------


                            LAURUS MASTER FUND, LTD.

                                       and

                            eLEC Communications Corp.


                               Dated: May 31, 2006





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                                TABLE OF CONTENTS
                                -----------------


                                                                            Page
                                                                            ----

1.   Agreement to Sell and Purchase. .........................................1

2.   Fees and Warrant.  On the Closing Date:..................................1

3.   Closing, Delivery and Payment............................................2
     3.1      Closing. .......................................................2
     3.2      Delivery........................................................2

4.   Representations and Warranties of the Company. ..........................2
     4.1      Organization, Good Standing and Qualification. .................2
     4.2      Subsidiaries. ..................................................3
     4.3      Capitalization; Voting Rights...................................4
     4.4      Authorization; Binding Obligations..............................4
     4.5      Liabilities. ...................................................5
     4.6      Agreements; Action..............................................5
     4.7      Obligations to Related Parties..................................7
     4.8      Changes.........................................................7
     4.9      Title to Properties and Assets; Liens, Etc......................8
     4.10     Intellectual Property...........................................9
     4.11     Compliance with Other Instruments...............................9
     4.12     Litigation.....................................................10
     4.13     Tax Returns and Payments.......................................10
     4.14     Employees......................................................10
     4.15     Registration Rights and Voting Rights. ........................11
     4.16     Compliance with Laws; Permits..................................11
     4.17     Environmental and Safety Laws..................................12
     4.18     Valid Offering.................................................12
     4.19     Full Disclosure................................................12
     4.20     Insurance. ....................................................13
     4.21     SEC Reports....................................................13
     4.22     Listing........................................................13
     4.23     No Integrated Offering.........................................13
     4.24     Stop Transfer..................................................13
     4.25     Dilution.......................................................13
     4.26     Patriot Act....................................................14
     4.27     ERISA..........................................................14

5.   Representations and Warranties of the Purchaser.........................15
     5.1      No Shorting....................................................15
     5.2      Requisite Power and Authority. ................................15
     5.3      Investment Representations. ...................................15
     5.4      The Purchaser Bears Economic Risk..............................15
     5.5      Acquisition for Own Account. ..................................16
     5.6      The Purchaser Can Protect Its Interest.........................16
     5.7      Accredited Investor............................................16
     5.8      Legends........................................................16

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                                                                         Page(s)
                                                                         ------
6.   Covenants of the Company..............................................17
     6.1     Stop-Orders. .................................................17
     6.2     Listing.......................................................17
     6.3     Market Regulations............................................17
     6.4     Reporting Requirements........................................17
     6.5     Use of Funds..................................................18
     6.6     Access to Facilities..........................................19
     6.7     Taxes.........................................................19
     6.8     Insurance.....................................................19
     6.9     Intellectual Property.........................................21
     6.10    Properties....................................................21
     6.11    Confidentiality...............................................21
     6.12    Required Approvals............................................21
     6.13    Reissuance of Securities. ....................................23
     6.14    Opinion. .....................................................23
     6.15    Margin Stock..................................................23
     6.16    Restricted Cash Disclosure. ..................................24
     6.17    No Restrictions on Additional Financing.......................24
     6.18    Authorization and Reservation of Shares.......................24

7.   Covenants of the Purchaser............................................24
     7.1     Confidentiality...............................................24
     7.2     Non-Public Information........................................24
     7.3     Limitation on Acquisition of Common Stock of the Company......24

8.   Covenants of the Company and the Purchaser Regarding Indemnification..25
     8.1     Company Indemnification. .....................................25
     8.2     Purchaser's Indemnification...................................25

9.   Exercise of Warrant...................................................25
     9.1     Mechanics of Exercise.........................................25

11.  Miscellaneous.........................................................26
     11.1    Governing Law, Jurisdiction and Waiver of Jury Trial..........26
     11.2    Severability. ................................................28
     11.3    Survival......................................................28
     11.4    Successors....................................................28
     11.5    Entire Agreement; Maximum Interest............................28
     11.6    Amendment and Waiver..........................................28
     11.7    Delays or Omissions...........................................29
     11.8    Notices.......................................................29
     11.9    Attorneys' Fees...............................................30
     11.10   Titles and Subtitles..........................................30
     11.11   Facsimile Signatures; Counterparts............................30
     11.12   Broker's Fees.................................................30
     11.13   Construction..................................................30

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<PAGE>

                                LIST OF EXHIBITS

Form of Secured Term Note..............................................Exhibit A
Form of Warrant........................................................Exhibit B
Form of Opinion........................................................Exhibit C
Form of Escrow Agreement...............................................Exhibit D


                                      iii
<PAGE>

                          SECURITIES PURCHASE AGREEMENT

         THIS  SECURITIES  PURCHASE  AGREEMENT  (this  "Agreement")  is made and
entered into as of May 31, 2006, by and between eLEC  Communications,  Corp.,  a
New York  corporation  (the  "Company"),  and LAURUS MASTER FUND, LTD., a Cayman
Islands company (the "Purchaser").

                                    RECITALS

         WHEREAS,  the Company has  authorized  the sale to the  Purchaser  of a
Secured Term Note in the aggregate principal amount of One Million Seven Hundred
Thousand  Dollars  ($1,700,000)  in the form of  Exhibit A hereto  (as  amended,
modified and/or supplemented from time to time, the "Note");

         WHEREAS,  the Company wishes to issue to the Purchaser a warrant in the
form of Exhibit B hereto (as amended,  modified and/or supplemented from time to
time, the "Warrant") to purchase up to 1,687,928  shares of the Company's Common
Stock  (subject  to  adjustment  as set forth  therein) in  connection  with the
Purchaser's purchase of the Note;

         WHEREAS,  the Purchaser desires to purchase the Note and the Warrant on
the terms and conditions set forth herein; and

         WHEREAS,  the Company desires to issue and sell the Note and Warrant to
the Purchaser on the terms and conditions set forth herein.

                                    AGREEMENT

         NOW,  THEREFORE,  in  consideration  of the foregoing  recitals and the
mutual promises, representations, warranties and covenants hereinafter set forth
and for other good and valuable  consideration,  the receipt and  sufficiency of
which  are  hereby   acknowledged,   the  parties   hereto   agree  as  follows:

         1. Agreement to Sell and Purchase. Pursuant to the terms and conditions
            ------------------------------
set forth in this Agreement,  on the Closing Date (as defined in Section 3), the
Company shall sell to the Purchaser,  and the Purchaser  shall purchase from the
Company,  the Note.  The sale of the Note on the Closing  Date shall be known as
the  "Offering."  The Note will mature on the  Maturity  Date (as defined in the
Note). Collectively, the Note and the Warrant and the Common Stock issuable upon
exercise of the Warrant are referred to as the "Securities."

         2. Fees and Warrant. On the Closing Date:
            -------------------------------------

                  (a) The Company  will issue and deliver to the  Purchaser  the
         Warrant to purchase up to 1,687,928  shares of Common Stock (subject to
         adjustment  as set forth  therein)  in  connection  with the  Offering,
         pursuant  to  Section 1  hereof.  All the  representations,  covenants,
         warranties,  undertakings, and indemnifications,  and other rights made
         or granted to or for the  benefit of the  Purchaser  by the Company are
         hereby  also made and  granted  for the  benefit  of the  holder of the
         Warrant and shares of the

<PAGE>

         Company's  Common  Stock  issuable  upon  exercise of the Warrant  (the
         "Warrant Shares").

                  (b) Subject to the terms of Section  2(d)  below,  the Company
         shall  pay to  Laurus  Capital  Management,  LLC,  the  manager  of the
         Purchaser, a closing payment in an amount $54,400. The foregoing fee is
         referred to herein as the "Closing Payment."

                  (c)  The  Company  shall   reimburse  the  Purchaser  for  its
         reasonable  expenses  (including  legal fees and expenses)  incurred in
         connection  with the  preparation and negotiation of this Agreement and
         the Related Agreements (as hereinafter defined),  and expenses incurred
         in connection with the Purchaser's due diligence  review of the Company
         and its  Subsidiaries  (as  defined  in  Section  4.2) and all  related
         matters.  Amounts  required to be paid under this  Section 2(c) will be
         paid on the Closing Date and shall be $5,000 for such expenses referred
         to in this  Section  2(c).

                  (d) The Closing  Payment and the  expenses  referred to in the
         preceding  clause (c) (net of deposits  previously paid by the Company)
         shall be paid at  closing  out of funds  held  pursuant  to the  Escrow
         Agreement   (as  defined   below)  and  a   disbursement   letter  (the
         "Disbursement Letter").

         3. Closing, Delivery and Payment.
            -----------------------------

            3.1 Closing. Subject to the terms and conditions herein, the closing
                -------
of the transactions contemplated hereby (the "Closing"), shall take place on the
date hereof, at such time or place as the Company and the Purchaser may mutually
agree (such date is hereinafter referred to as the "Closing Date").

            3.2 Delivery.  Pursuant to the Escrow  Agreement,  at the Closing on
                --------
the Closing Date, the Company will deliver to the Purchaser, among other things,
the Note and the Warrant and the  Purchaser  will deliver to the Company,  among
other  things,  the amounts set forth in the  Disbursement  Letter by  certified
funds or wire transfer (it being  understood  that $1,050,000 of the proceeds of
the Note shall be placed in the Restricted Account (as defined in the Restricted
Account  Agreement  referred to below)).  The Company  hereby  acknowledges  and
agrees that Purchaser's  obligation to purchase the Note from the Company on the
Closing  Date  shall be  contingent  upon the  satisfaction  (or  waiver  by the
Purchaser  in its sole  discretion)  of the items and  matters  set forth in the
closing  checklist  provided by the  Purchaser to the Company on or prior to the
Closing Date.

         4.  Representations  and Warranties of the Company.  The Company hereby
             ----------------------------------------------
represents and warrants to the Purchaser as follows:

            4.1  Organization,  Good  Standing  and  Qualification.  Each of the
                 -------------------------------------------------
Company and each of its  Subsidiaries  is a corporation,  partnership or limited
liability company,  as the case may be, duly organized,  validly existing and in
good standing under the laws of its  jurisdiction of  organization.  Each of the
Company  and  each of its  Subsidiaries  has the  corporate,  limited  liability
company  or  partnership,  as the case may be,  power and  authority  to own and
operate  its  properties  and assets  and,  insofar as it is or shall be a party
thereto,  to (1) execute and deliver (i) this  Agreement,  (ii) the Note and the
Warrant to be issued in connection with this Agreement,

                                       2
<PAGE>

(iii)  the  Reaffirmation  Agreement  dated as of the date  hereof  between  the
Company,  certain  Subsidiaries  of the Company and the  Purchaser  (as amended,
modified and/or supplemented from time to time, the "Reaffirmation  Agreement"),
(iv) the Funds Escrow  Agreement  dated as of the date hereof among the Company,
the Purchaser  and the escrow agent  referred to therein,  substantially  in the
form of Exhibit D hereto (as amended,  modified and/or supplemented from time to
time, the "Escrow Agreement"),  (v) the Restricted Account Agreement dated as of
the date  hereof  among the  Company,  the  Purchaser  and  North  Fork Bank (as
amended,  modified or supplemented  from time to time, the  "Restricted  Account
Agreement"),  (vi) the Restricted  Account Side Letter related to the Restricted
Account  Agreement  dated as of the date  hereof  between  the  Company  and the
Purchaser  (as  amended,  modified  or  supplemented  from  time  to  time,  the
"Restricted Account Side Letter") and (vii) all other documents, instruments and
agreements entered into in connection with the transactions  contemplated hereby
and thereby  (the  preceding  clauses  (ii)  through  (vii),  collectively,  the
"Related  Agreements")(the  preceding clauses (iii), (v) and (vi), together with
each other security agreement,  mortgage, cash collateral deposit letter, pledge
and other  similar  agreements  which are  executed by the Company or any of its
Subsidiaries in favor of the Purchaser, collectively, the "Security Documents");
(2) issue and sell the Note;  (3)  issue and sell the  Warrant  and the  Warrant
Shares;  and (4) carry out the  provisions  of this  Agreement  and the  Related
Agreements  and to carry on its  business as  presently  conducted.  Each of the
Company and each of its  Subsidiaries  is duly qualified and is authorized to do
business  and is in good  standing  as a  foreign  corporation,  partnership  or
limited liability company, as the case may be, in all jurisdictions in which the
nature or  location  of its  activities  and of its  properties  (both owned and
leased) makes such qualification  necessary,  except for those  jurisdictions in
which  failure to do so has not,  or could not  reasonably  be expected to have,
individually  or in the  aggregate,  a material  adverse effect on the business,
assets, liabilities,  condition (financial or otherwise), properties, operations
or prospects of the Company and its  Subsidiaries,  taken  individually and as a
whole (a "Material Adverse Effect").

            4.2  Subsidiaries.  Each  direct  and  indirect  Subsidiary  of  the
                 ------------
Company,  the  direct  owner of such  Subsidiary  and its  percentage  ownership
thereof, is set forth on Schedule 4.2. For the purpose of this Agreement,  (x) a
"Subsidiary"  of any person or entity  means (i) a  corporation  or other entity
whose shares of stock or other ownership  interests having ordinary voting power
(other than stock or other ownership  interests having such power only by reason
of the happening of a contingency)  to elect a majority of the directors of such
corporation,  or other persons or entities performing similar functions for such
person or entity, are owned, directly or indirectly, by such person or entity or
(ii) a corporation or other entity in which such person or entity owns, directly
or  indirectly,  more than 50% of the equity  interests  at such time ; provided
that,  for so long  as each of AVI  Holding  Corp.,  a Texas  corporation  ("AVI
Holdings"),   Line  One,  Inc.,  a  New  York   corporation   ("Line  One")  and
TelcoSoftware.com  Corp., a Delaware  corporation  ("TelcoSoftware" and together
with AVI  Holdings  and Line One,  the  "Inactive  Subsidiaries"  and  each,  an
"Inactive  Subsidiary") hold no significant assets or liabilities (other than in
respect of AVI Holdings,  capitalized  lease  obligations not to exceed $35,000,
and in respect of Line One, liabilities not to exceed $50,000) and do not engage
in any  business  activities,  the  defined  term  "Subsidiary"  as used in this
Agreement and the Related Agreements shall not include such Inactive Subsidiary;
provided,  further,  that if any Inactive Subsidiary shall at any time after the
--------   -------
date hereof hold  significant  assets or  liabilities  or engage in any business
activities,  such Inactive  Subsidiary  shall  thereafter be deemed a Subsidiary
hereunder   and  shall   otherwise   be  subject   to  all  terms,   agreements,
representations,  warranties and covenants

                                       3
<PAGE>

otherwise  applicable  to  Subsidiaries  under this  Agreement  and the  Related
Agreements  and (y) a "Credit  Party"  means,  the  Company  and each  direct or
indirect  Subsidiary  of the Company to the extent party to the Master  Security
Agreement (as defined in the Reaffirmation  Agreement),  the Subsidiary Guaranty
(as defined in the  Reaffirmation  Agreement),  the Stock Pledge  Agreement  (as
defined in the  Reaffirmation  Agreement) and such other security  documentation
required by the Purchaser to grant to the Purchaser a first  priority  perfected
security interest in substantially all of such Subsidiary's assets to secure the
Obligations (as defined in the Master Security Agreement).

            4.3 Capitalization; Voting Rights.
                -----------------------------

                  (a) The  authorized  capital  stock of the Company,  as of the
         date hereof  consists of 51,000,000  shares,  of which  50,000,000  are
         shares of Common Stock, par value $0.10 per share, 16,879,282 shares of
         which are issued and outstanding, and 1,000,000 are shares of preferred
         stock,  par value  $0.10 per  share,  no shares of which are issued and
         outstanding.  The authorized,  issued and outstanding  capital stock of
         each Subsidiary of the Company is set forth on Schedule 4.3.

                  (b) Except as disclosed on Schedule 4.3,  other than:  (i) the
         shares  reserved for issuance  under the Company's  stock option plans;
         and (ii) shares which may be granted pursuant to this Agreement and the
         Related Agreements,  there are no outstanding options, warrants, rights
         (including   conversion  or  preemptive  rights  and  rights  of  first
         refusal),   proxy  or  stockholder   agreements,   or  arrangements  or
         agreements of any kind for the purchase or acquisition from the Company
         of any of its securities.  Except as disclosed on Schedule 4.3, neither
         the offer,  issuance or sale of any of the Note or the Warrant,  or the
         issuance  of any of the Warrant  Shares,  nor the  consummation  of any
         transaction contemplated hereby will result in a change in the price or
         number  of  any   securities   of  the   Company   outstanding,   under
         anti-dilution or other similar provisions contained in or affecting any
         such securities.

                  (c) All issued and outstanding  shares of the Company's Common
         Stock:  (i) have been duly  authorized and validly issued and are fully
         paid and  nonassessable;  and (ii) were issued in  compliance  with all
         applicable   state  and  federal  laws   concerning   the  issuance  of
         securities.

                  (d) The rights,  preferences,  privileges and  restrictions of
         the  shares  of the  Common  Stock  are  as  stated  in  the  Company's
         Certificate of Incorporation  (the "Charter").  The Warrant Shares have
         been duly and validly reserved for issuance.  When issued in compliance
         with the  provisions of this Agreement and the Company's  Charter,  the
         Securities will be validly issued,  fully paid and  nonassessable,  and
         will be free of any liens or encumbrances;  provided, however, that the
         Securities  may be subject to  restrictions  on  transfer  under  state
         and/or  federal  securities  laws as set forth  herein or as  otherwise
         required by such laws at the time a transfer is proposed.

            4.4 Authorization;  Binding Obligations. All corporate,  partnership
                -----------------------------------
or  limited  liability  company,  as the case may be,  action on the part of the
Company and each of its Subsidiaries  (including  their respective  officers and
directors)  necessary for the  authorization  of

                                       4
<PAGE>

this Agreement and the Related Agreements, the performance of all obligations of
the  Company  and  its  Subsidiaries  hereunder  and  under  the  other  Related
Agreements at the Closing and, the authorization, sale, issuance and delivery of
the Note and Warrant has been taken or will be taken prior to the Closing.  This
Agreement  and the Related  Agreements,  when  executed and delivered and to the
extent it is a party thereto,  will be valid and binding  obligations of each of
the Company and each of its Subsidiaries,  enforceable  against each such person
or entity in accordance with their terms, except:

                  (a)  as  limited   by   applicable   bankruptcy,   insolvency,
         reorganization,   moratorium  or  other  laws  of  general  application
         affecting enforcement of creditors' rights; and

                  (b)   general   principles   of  equity  that   restrict   the
         availability of equitable or legal remedies.

The sale of the Note is not and will not be subject to any preemptive  rights or
rights of first refusal that have not been properly waived or complied with. The
issuance of the Warrant and the  subsequent  exercise of the Warrant for Warrant
Shares  are not and will not be subject  to any  preemptive  rights or rights of
first refusal that have not been properly waived or complied with.

            4.5 Liabilities. Neither the Company nor any of its Subsidiaries has
                -----------
any liabilities,  except current liabilities  incurred in the ordinary course of
business and  liabilities  disclosed in any of the  Company's  filings under the
Securities  Exchange Act of 1934 ("Exchange Act") made prior to the date of this
Agreement (collectively,  the "Exchange Act Filings"), copies of which have been
provided to the Purchaser.

            4.6  Agreements;  Action.  Except as set forth on Schedule 4.6 or as
                 -------------------
disclosed in any Exchange Act Filings:

                  (a)  there  are no  agreements,  understandings,  instruments,
         contracts,  proposed transactions,  judgments, orders, writs or decrees
         to which the Company or any of its  Subsidiaries is a party or by which
         it  is  bound  which  may  involve:  (i)  obligations   (contingent  or
         otherwise)  of, or payments to, the Company or any of its  Subsidiaries
         in excess of $50,000  (other than  obligations  of, or payments to, the
         Company  or any of its  Subsidiaries  arising  from  purchase  or  sale
         agreements  entered into in the ordinary  course of business);  or (ii)
         the transfer or license of any patent, copyright, trade secret or other
         proprietary  right to or from the  Company  or any of its  Subsidiaries
         (other than  licenses  arising  from the purchase of "off the shelf" or
         other  standard   products);   or  (iii)  provisions   restricting  the
         development, manufacture or distribution of the Company's or any of its
         Subsidiaries  products  or  services;  or (iv)  indemnification  by the
         Company or any of its  Subsidiaries  with respect to  infringements  of
         proprietary rights.

                  (b) Since  November  30,  2005  (the  "Balance  Sheet  Date"),
         neither the Company nor any of its  Subsidiaries  has:  (i) declared or
         paid any dividends, or authorized or made any distribution upon or with
         respect to any class or series of its capital stock;  (ii) incurred any
         indebtedness  for money borrowed or any other  liabilities  (other than
         ordinary course  obligations)  individually in excess of $50,000 or, in
         the case

                                       5
<PAGE>

         of indebtedness  and/or liabilities  individually less than $50,000, in
         excess of $100,000 in the  aggregate;  (iii) made any loans or advances
         to  any  person  or  entity  not  in  excess,  individually  or in  the
         aggregate, of $100,000,  other than ordinary course advances for travel
         expenses;  or (iv) sold,  exchanged or otherwise disposed of any of its
         assets or rights,  other than the sale of its inventory in the ordinary
         course of business.

                  (c) For the  purposes of  subsections  (a) and (b) above,  all
         indebtedness,  liabilities,  agreements,  understandings,  instruments,
         contracts and proposed transactions involving the same person or entity
         (including  persons or entities  the Company or any  Subsidiary  of the
         Company  has  reason to  believe  are  affiliated  therewith)  shall be
         aggregated  for the purpose of meeting the  individual  minimum  dollar
         amounts of such subsections.

                  (d) The Company maintains  disclosure  controls and procedures
         ("Disclosure Controls") designed to ensure that information required to
         be  disclosed  by the Company in the  reports  that it files or submits
         under  the  Exchange  Act  is  recorded,  processed,   summarized,  and
         reported,  within the time periods  specified in the rules and forms of
         the Securities and Exchange Commission ("SEC").

                  (e) The Company makes and keeps books,  records,  and accounts
         that,  in  reasonable   detail,   accurately  and  fairly  reflect  the
         transactions  and  dispositions  of the Company's  assets.  The Company
         maintains  internal  control  over  financial   reporting   ("Financial
         Reporting  Controls")  designed  by, or under the  supervision  of, the
         Company's principal  executive and principal  financial  officers,  and
         effected by the  Company's  board of directors,  management,  and other
         personnel, to provide reasonable assurance regarding the reliability of
         financial  reporting and the  preparation  of financial  statements for
         external  purposes in accordance  with  generally  accepted  accounting
         principles ("GAAP"), including that:

                           (i)  transactions  are  executed in  accordance  with
                  management's   general   or   specific   authorization;


                           (ii) unauthorized acquisition,  use or disposition of
                  the Company's  assets that could have a material effect on the
                  financial statements are prevented or timely detected;

                           (iii)  transactions  are  recorded  as  necessary  to
                  permit preparation of financial  statements in accordance with
                  GAAP,  and that the Company's  receipts and  expenditures  are
                  being  made  only in  accordance  with  authorizations  of the
                  Company's management and board of directors;

                           (iv)   transactions  are  recorded  as  necessary  to
                  maintain accountability for assets; and

                           (v)  the  recorded   accountability   for  assets  is
                  compared with the existing assets at reasonable intervals, and
                  appropriate action is taken with respect to any differences.

                                       6
<PAGE>

                  (f) There is no  weakness in any of the  Company's  Disclosure
         Controls  or  Financial  Reporting  Controls  that  is  required  to be
         disclosed in any of the Exchange Act Filings, except as so disclosed.

            4.7 Obligations to Related Parties.  Except as set forth on Schedule
                ------------------------------
4.7,  there are no  obligations  of the  Company or any of its  Subsidiaries  to
officers,  directors,  stockholders  or  employees  of the Company or any of its
Subsidiaries other than:

                  (a) for payment of salary for services  rendered and for bonus
         payments;

                  (b) reimbursement  for reasonable  expenses incurred on behalf
         of the Company and its Subsidiaries;

                  (c)  for  other  standard  employee  benefits  made  generally
         available  to  all  employees   (including   stock  option   agreements
         outstanding  under  any  stock  option  plan  approved  by the Board of
         Directors  of the  Company  and  each  Subsidiary  of the  Company,  as
         applicable); and

                  (d)  obligations  listed  in the  Company's  and  each  of its
         Subsidiary's  financial statements or disclosed in any of the Company's
         Exchange Act Filings.

Except as described  above or set forth on Schedule  4.7,  none of the officers,
directors  or,  to the  best  of  the  Company's  knowledge,  key  employees  or
stockholders  of the Company or any of its  Subsidiaries or any members of their
immediate  families,  are  indebted to the  Company or any of its  Subsidiaries,
individually  or in the  aggregate,  in excess of  $50,000 or have any direct or
indirect ownership interest in any firm or corporation with which the Company or
any of its  Subsidiaries  is  affiliated or with which the Company or any of its
Subsidiaries  has a  business  relationship,  or any firm or  corporation  which
competes  with  the  Company  or any of its  Subsidiaries,  other  than  passive
investments in publicly  traded  companies  (representing  less than one percent
(1%)  of  such  company)  which  may  compete  with  the  Company  or any of its
Subsidiaries.  Except as described above, no officer, director or stockholder of
the  Company  or any of its  Subsidiaries,  or any  member  of  their  immediate
families,  is, directly or indirectly,  interested in any material contract with
the Company or any of its  Subsidiaries  and no  agreements,  understandings  or
proposed  transactions  are  contemplated  between  the  Company  or  any of its
Subsidiaries  and any such person.  Except as set forth on Schedule 4.7, neither
the Company nor any of its  Subsidiaries  is a guarantor  or  indemnitor  of any
indebtedness of any other person or entity.

            4.8 Changes.  Since the Balance  Sheet Date,  except as disclosed in
                -------
any Exchange  Act Filing or in any  Schedule to this  Agreement or to any of the
Related Agreements, there has not been:

                  (a) any change in the business, assets, liabilities, condition
         (financial or  otherwise),  properties,  operations or prospects of the
         Company  or any  of  its  Subsidiaries,  which  individually  or in the
         aggregate   has  had,  or  could   reasonably   be  expected  to  have,
         individually or in the aggregate, a Material Adverse Effect;

                                       7
<PAGE>

                  (b)  any  resignation  or  termination  of  any  officer,  key
         employee  or  group  of   employees  of  the  Company  or  any  of  its
         Subsidiaries;

                  (c) any  material  change,  except in the  ordinary  course of
         business,  in the  contingent  obligations of the Company or any of its
         Subsidiaries by way of guaranty,  endorsement,  indemnity,  warranty or
         otherwise;

                  (d) any damage, destruction or loss, whether or not covered by
         insurance,  which has had,  or could  reasonably  be  expected to have,
         individually or in the aggregate, a Material Adverse Effect;

                  (e) any waiver by the Company or any of its  Subsidiaries of a
         valuable right or of a material debt owed to it;

                  (f) any direct or indirect loans made by the Company or any of
         its Subsidiaries to any stockholder,  employee,  officer or director of
         the Company or any of its Subsidiaries, other than advances made in the
         ordinary course of business;

                  (g) any material  change in any  compensation  arrangement  or
         agreement  with any employee,  officer,  director or stockholder of the
         Company or any of its Subsidiaries;

                  (h) any  declaration  or  payment  of any  dividend  or  other
         distribution of the assets of the Company or any of its Subsidiaries;

                  (i) any labor organization  activity related to the Company or
         any of its Subsidiaries;

                  (j) any debt,  obligation  or liability  incurred,  assumed or
         guaranteed by the Company or any of its Subsidiaries,  except those for
         immaterial amounts and for current liabilities incurred in the ordinary
         course of business;

                  (k)  any  sale,   assignment   or  transfer  of  any  patents,
         trademarks,  copyrights, trade secrets or other intangible assets owned
         by the Company or any of its Subsidiaries;

                  (l) any change in any material  agreement to which the Company
         or any of its Subsidiaries is a party or by which either the Company or
         any of its  Subsidiaries  is bound which either  individually or in the
         aggregate   has  had,  or  could   reasonably   be  expected  to  have,
         individually or in the aggregate, a Material Adverse Effect;

                  (m) any other event or condition of any character that, either
         individually  or in the  aggregate,  has had,  or could  reasonably  be
         expected to have,  individually or in the aggregate, a Material Adverse
         Effect; or

                  (n) any arrangement or commitment by the Company or any of its
         Subsidiaries  to do any of the acts described in subsection (a) through
         (m) above.

            4.9 Title to Properties and Assets;  Liens, Etc. Except as set forth
                -------------------------------------------
on Schedule 4.9, each of the Company and each of its  Subsidiaries  has good and
marketable  title to

                                       8
<PAGE>

its properties and assets,  and good title to its leasehold  interests,  in each
case subject to no mortgage,  pledge, lien, lease,  encumbrance or charge, other
than:

                  (a) those  resulting  from  taxes  which  have not yet  become
         delinquent;

                  (b)  minor  liens  and  encumbrances  which do not  materially
         detract from the value of the property  subject  thereto or  materially
         impair the  operations  of the Company or any of its  Subsidiaries,  so
         long as in each such case, such liens and  encumbrances  have no effect
         on the lien priority of the Purchaser in such property; and

                  (c) those that have otherwise arisen in the ordinary course of
         business,  so long as they have no effect on the lien  priority  of the
         Purchaser therein.

All facilities,  machinery,  equipment,  fixtures, vehicles and other properties
owned,  leased or used by the Company and its Subsidiaries are in good operating
condition  and repair and are  reasonably  fit and usable for the  purposes  for
which they are being used.  Except as set forth on Schedule 4.9, the Company and
its  Subsidiaries  are in  compliance  with all material  terms of each lease to
which it is a party or is otherwise bound.

            4.10 Intellectual Property.
                 ---------------------

                  (a) Except as set forth on Schedule 4.10,  each of the Company
         and each of its Subsidiaries owns or possesses  sufficient legal rights
         to all patents,  trademarks,  service marks,  trade names,  copyrights,
         trade secrets,  licenses,  information and other proprietary rights and
         processes  necessary  for its  business  as now  conducted  and, to the
         Company's  knowledge,  as  presently  proposed  to  be  conducted  (the
         "Intellectual Property"),  without any known infringement of the rights
         of others. There are no outstanding options,  licenses or agreements of
         any kind  relating  to the  foregoing  proprietary  rights,  nor is the
         Company or any of its Subsidiaries  bound by or a party to any options,
         licenses  or  agreements  of any  kind  with  respect  to the  patents,
         trademarks,  service  marks,  trade names,  copyrights,  trade secrets,
         licenses, information and other proprietary rights and processes of any
         other person or entity other than such licenses or  agreements  arising
         from the purchase of "off the shelf" or standard products.

                  (b) Except as set forth on Schedule 4.10,  neither the Company
         nor any of its  Subsidiaries has received any  communications  alleging
         that the Company or any of its  Subsidiaries  has  violated  any of the
         patents,  trademarks,  service marks, trade names,  copyrights or trade
         secrets or other proprietary  rights of any other person or entity, nor
         is the Company or any of its Subsidiaries aware of any basis therefor.

                  (c) The Company does not believe it is or will be necessary to
         utilize any inventions, trade secrets or proprietary information of any
         of its employees  made prior to their  employment by the Company or any
         of  its   Subsidiaries,   except  for  inventions,   trade  secrets  or
         proprietary  information  that have  been  rightfully  assigned  to the
         Company or any of its Subsidiaries.

            4.11 Compliance with Other Instruments.  Neither the Company nor any
                 ---------------------------------
of its Subsidiaries is in violation or default of (x) any term of its Charter or
Bylaws, or (y) any

                                       9
<PAGE>

provision  of any  indebtedness,  mortgage,  indenture,  contract,  agreement or
instrument  to which  it is  party  or by which it is bound or of any  judgment,
decree,  order or writ,  which violation or default,  in the case of this clause
(y), has had, or could reasonably be expected to have, either individually or in
the  aggregate,   a  Material  Adverse  Effect.  The  execution,   delivery  and
performance of and compliance with this Agreement and the Related  Agreements to
which it is a party,  and the  issuance  and sale of the Note by the Company and
the other Securities by the Company each pursuant hereto and thereto,  will not,
with or without  the  passage  of time or giving of  notice,  result in any such
material  violation,  or be in conflict  with or  constitute a default under any
such term or provision, or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company or any
of its  Subsidiaries or the suspension,  revocation,  impairment,  forfeiture or
nonrenewal of any permit,  license,  authorization or approval applicable to the
Company, its business or operations or any of its assets or properties.

            4.12 Litigation.  Except as set forth on Schedule 4.12 hereto, there
                 ----------
is no action,  suit,  proceeding or  investigation  pending or, to the Company's
knowledge,  currently  threatened against the Company or any of its Subsidiaries
that  prevents the Company or any of its  Subsidiaries  from  entering into this
Agreement or the other Related Agreements, or from consummating the transactions
contemplated  hereby  or  thereby,  or which  has had,  or could  reasonably  be
expected to have,  either  individually or in the aggregate,  a Material Adverse
Effect or any change in the current  equity  ownership  of the Company or any of
its Subsidiaries, nor is the Company aware that there is any basis to assert any
of the foregoing.  Neither the Company nor any of its Subsidiaries is a party to
or subject to the provisions of any order, writ, injunction,  judgment or decree
of any court or government agency or instrumentality.  There is no action, suit,
proceeding or investigation by the Company or any of its Subsidiaries  currently
pending or which the  Company or any of its  Subsidiaries  intends to  initiate.

            4.13 Tax Returns and  Payments.  Each of the Company and each of its
                 -------------------------
Subsidiaries has timely filed all federal,  state and, to the extent  consistent
and in accordance with industry practice, local tax returns required to be filed
by it. All taxes shown to be due and payable on such  returns,  any  assessments
imposed,  and all  other  taxes due and  payable  by the  Company  or any of its
Subsidiaries  on or before the Closing,  have been paid or will be paid prior to
the time they become  delinquent.  Except as set forth on Schedule 4.13, neither
the Company nor any of its Subsidiaries has been advised:

                  (a) that any of its  returns,  federal,  state or other,  have
         been or are being audited as of the date hereof; or

                  (b)  of  any  adjustment,   deficiency,  assessment  or  court
         decision in respect of its federal, state or other taxes.

The Company has no knowledge of any liability for any tax to be imposed upon its
properties  or assets as of the date of this  Agreement  that is not  adequately
provided for.

            4.14  Employees.  Except as set forth on Schedule 4.14,  neither the
                  ---------
Company nor any of its  Subsidiaries  has any collective  bargaining  agreements
with any of its employees.  There is no labor union organizing  activity pending
or, to the Company's knowledge, threatened

                                       10
<PAGE>

with respect to the Company or any of its  Subsidiaries.  Except as disclosed in
the Exchange Act Filings or on Schedule 4.14, neither the Company nor any of its
Subsidiaries  is a party  to or  bound  by any  currently  effective  employment
contract, deferred compensation arrangement,  bonus plan, incentive plan, profit
sharing  plan,  retirement  agreement  or other  employee  compensation  plan or
agreement.  To the Company's knowledge, no employee of the Company or any of its
Subsidiaries,   nor  any  consultant  with  whom  the  Company  or  any  of  its
Subsidiaries  has  contracted,  is in  violation  of any term of any  employment
contract,  proprietary  information agreement or any other agreement relating to
the right of any such  individual  to be employed by, or to contract  with,  the
Company or any of its  Subsidiaries  because of the nature of the business to be
conducted  by the  Company  or any of  its  Subsidiaries;  and to the  Company's
knowledge the continued  employment by the Company and its Subsidiaries of their
present  employees,  and the performance of the Company's and its  Subsidiaries'
contracts  with  its  independent  contractors,  will  not  result  in any  such
violation.  Neither the Company nor any of its Subsidiaries is aware that any of
its employees is obligated under any contract (including licenses,  covenants or
commitments  of any  nature) or other  agreement,  or  subject to any  judgment,
decree or order of any court or administrative  agency that would interfere with
their duties to the Company or any of its Subsidiaries.  Neither the Company nor
any of its Subsidiaries has received any notice alleging that any such violation
has  occurred.  Except for  employees  who have a current  effective  employment
agreement  with the  Company  or any of its  Subsidiaries,  no  employee  of the
Company  or any of its  Subsidiaries  has been  granted  the right to  continued
employment  by  the  Company  or  any of  its  Subsidiaries  or to any  material
compensation  following termination of employment with the Company or any of its
Subsidiaries.  Except as set forth on  Schedule  4.14,  the Company is not aware
that any officer,  key employee or group of employees  intends to terminate his,
her or their  employment with the Company or any of its  Subsidiaries,  nor does
the Company or any of its Subsidiaries have a present intention to terminate the
employment of any officer, key employee or group of employees.

            4.15 Registration  Rights and Voting Rights.  Except as set forth on
                 --------------------------------------
Schedule  4.15 and except as  disclosed  in Exchange  Act  Filings,  neither the
Company nor any of its  Subsidiaries  is  presently  under any  obligation,  and
neither  the  Company nor any of its  Subsidiaries  has  granted any rights,  to
register  any  of  the  Company's  or its  Subsidiaries'  presently  outstanding
securities or any of its securities that may hereafter be issued.  Except as set
forth on Schedule  4.15 and except as disclosed in Exchange Act Filings,  to the
Company's  knowledge,  no stockholder of the Company or any of its  Subsidiaries
has entered into any agreement  with respect to the voting of equity  securities
of the Company or any of its Subsidiaries.

            4.16 Compliance with Laws;  Permits.  Neither the Company nor any of
                 ------------------------------
its Subsidiaries is in violation of any provision of the  Sarbanes-Oxley  Act of
2002 or any SEC related  regulation or rule or any rule of the Principal  Market
(as hereafter defined)  promulgated  thereunder or any other applicable statute,
rule, regulation,  order or restriction of any domestic or foreign government or
any  instrumentality or agency thereof in respect of the conduct of its business
or the  ownership  of its  properties  which  has had,  or could  reasonably  be
expected to have,  either  individually or in the aggregate,  a Material Adverse
Effect.   No   governmental   orders,   permissions,   consents,   approvals  or
authorizations  are required to be obtained and no registrations or declarations
are required to be filed in  connection  with the execution and delivery of this
Agreement  or  any  other  Related  Agreement  and  the  issuance  of any of the
Securities,

                                       11
<PAGE>

except such as have been duly and validly  obtained or filed, or with respect to
any filings  that must be made after the  Closing,  as will be filed in a timely
manner.  Each of the Company and its Subsidiaries  has all material  franchises,
permits,  licenses and any similar  authority  necessary  for the conduct of its
business  as now  being  conducted  by it,  the  lack  of  which  could,  either
individually  or in the  aggregate,  reasonably  be  expected to have a Material
Adverse Effect.

            4.17  Environmental and Safety Laws.  Neither the Company nor any of
                  -----------------------------
its  Subsidiaries is in violation of any applicable  statute,  law or regulation
relating  to the  environment  or  occupational  health and  safety,  and to its
knowledge,  no material  expenditures are or will be required in order to comply
with any such  existing  statute,  law or  regulation.  Except  as set  forth on
Schedule  4.17, no Hazardous  Materials (as defined below) are used or have been
used,  stored,  or disposed of by the Company or any of its  Subsidiaries or, to
the Company's  knowledge,  by any other person or entity on any property  owned,
leased or used by the Company or any of its  Subsidiaries.  For the  purposes of
the preceding sentence, "Hazardous Materials" shall mean:

                  (a)  materials  which  are  listed  or  otherwise  defined  as
         "hazardous"  or "toxic"  under any  applicable  local,  state,  federal
         and/or foreign laws and  regulations  that govern the existence  and/or
         remedy of contamination on property,  the protection of the environment
         from   contamination,   the  control  of  hazardous  wastes,  or  other
         activities   involving   hazardous   substances,   including   building
         materials; or

                  (b) any petroleum products or nuclear materials.

            4.18 Valid  Offering.  Assuming the accuracy of the  representations
                 ---------------
and warranties of the Purchaser contained in this Agreement, the offer, sale and
issuance of the Securities will be exempt from the registration  requirements of
the Securities  Act of 1933, as amended (the  "Securities  Act"),  and will have
been registered or qualified (or are exempt from registration and qualification)
under the registration,  permit or qualification  requirements of all applicable
state securities laws.

            4.19  Full  Disclosure.   Each  of  the  Company  and  each  of  its
                  ----------------
Subsidiaries  has provided the Purchaser with all  information  requested by the
Purchaser  in  connection  with its  decision to purchase  the Note and Warrant,
including all information the Company and its Subsidiaries believe is reasonably
necessary to make such investment decision.  Neither this Agreement, the Related
Agreements, the exhibits and schedules hereto and thereto nor any other document
delivered  by  the  Company  or  any of its  Subsidiaries  to  Purchaser  or its
attorneys or agents in connection herewith or therewith or with the transactions
contemplated hereby or thereby,  contain any untrue statement of a material fact
nor omit to state a  material  fact  necessary  in order to make the  statements
contained  herein or therein,  in light of the  circumstances  in which they are
made, not misleading.  Any financial projections and other estimates provided to
the  Purchaser  by the  Company  or any of its  Subsidiaries  were  based on the
Company's and its Subsidiaries' experience in the industry and on assumptions of
fact  and  opinion  as to  future  events  which  the  Company  or  any  of  its
Subsidiaries,  at the date of the  issuance of such  projections  or  estimates,
believed to be reasonable.

                                       12
<PAGE>

            4.20 Insurance. Each of the Company and each of its Subsidiaries has
                 ---------
general commercial, product liability, fire and casualty insurance policies with
coverages  which the Company  believes are  customary  for  companies  similarly
situated to the Company and its  Subsidiaries  in the same or similar  business.

            4.21 SEC Reports.  Except as set forth on Schedule 4.21, the Company
                 -----------
has filed all proxy statements, reports and other documents required to be filed
by it under the Securities  Exchange Act 1934, as amended (the "Exchange  Act").
The Company has  furnished the  Purchaser  copies of: (i) its Annual  Reports on
Form 10-K for its fiscal years ended  November 30, 2005;  and (ii) its Quarterly
Reports on Form 10-Q for its fiscal  quarter  ended  February 28, 2006,  and the
Form 8-K filings  which it has made during the fiscal year ending  November  30,
2006 to date (collectively,  the "SEC Reports"). Except as set forth on Schedule
4.21, each SEC Report was, at the time of its filing, in substantial  compliance
with the  requirements of its respective  form and none of the SEC Reports,  nor
the financial statements (and the notes thereto) included in the SEC Reports, as
of their respective  filing dates,  contained any untrue statement of a material
fact or  omitted  to state a  material  fact  required  to be stated  therein or
necessary to make the statements  therein,  in light of the circumstances  under
which they were made, not misleading.

            4.22  Listing.  The Company's  Common Stock is listed or quoted,  as
                  -------
applicable,  on a Principal  Market (as hereafter  defined) and satisfies and at
all times hereafter will satisfy,  all requirements for the continuation of such
listing or  quotation,  as  applicable.  The Company has not received any notice
that its  Common  Stock  will be  delisted  from,  or no  longer  quoted  on, as
applicable,  the  Principal  Market or that its  Common  Stock does not meet all
requirements for such listing or quotation, as applicable.  For purposes hereof,
the term  "Principal  Market"  means the NASD Over The Counter  Bulletin  Board,
NASDAQ Capital Market,  NASDAQ National Markets System,  American Stock Exchange
or New  York  Stock  Exchange  (whichever  of the  foregoing  is at the time the
principal trading exchange or market for the Common Stock).

            4.23 No  Integrated  Offering.  Neither the Company,  nor any of its
                 ------------------------
Subsidiaries  or affiliates,  nor any person acting on its or their behalf,  has
directly or indirectly made any offers or sales of any security or solicited any
offers to buy any security under  circumstances that would cause the offering of
the Securities pursuant to this Agreement or any of the Related Agreements to be
integrated  with prior  offerings by the Company for purposes of the  Securities
Act which would prevent the Company from selling the Securities pursuant to Rule
506 under the  Securities  Act, or any applicable  exchange-related  stockholder
approval  provisions,  nor  will  the  Company  or  any  of  its  affiliates  or
Subsidiaries  take any  action or steps  that would  cause the  offering  of the
Securities to be integrated with other offerings.

            4.24 Stop Transfer.  The Securities are restricted  securities as of
                 -------------
the date of this Agreement. Neither the Company nor any of its Subsidiaries will
issue any stop transfer  order or other order  impeding the sale and delivery of
any of the  Securities at such time as the  Securities are registered for public
sale or an exemption from registration is available, except as required by state
and federal securities laws.

            4.25  Dilution.  The  Company  specifically  acknowledges  that  its
                  --------
obligation  to issue the shares of Common Stock upon  exercise of the Warrant is
binding  upon the  Company

                                       13
<PAGE>

and  enforceable  regardless  of the  dilution  such  issuance  may  have on the
ownership interests of other shareholders of the Company.

            4.26  Patriot  Act.  The  Company  certifies  that,  to the  best of
                  ------------
Company's  knowledge,  neither the Company nor any of its  Subsidiaries has been
designated,  nor is or shall be owned or controlled,  by a "suspected terrorist"
as defined in Executive Order 13224.  The Company hereby  acknowledges  that the
Purchaser seeks to comply with all applicable laws concerning  money  laundering
and related  activities.  In furtherance  of those  efforts,  the Company hereby
represents,  warrants and covenants  that: (i) none of the cash or property that
the  Company  or any of its  Subsidiaries  will  pay or will  contribute  to the
Purchaser has been or shall be derived from, or related to, any activity that is
deemed  criminal under United States law; and (ii) no contribution or payment by
the Company or any of its Subsidiaries to the Purchaser, to the extent that they
are within  the  Company's  and/or its  Subsidiaries'  control  shall  cause the
Purchaser to be in  violation of the United  States Bank Secrecy Act, the United
States  International  Money Laundering Control Act of 1986 or the United States
International  Money Laundering  Abatement and  Anti-Terrorist  Financing Act of
2001.  The  Company  shall  promptly  notify  the  Purchaser  if  any  of  these
representations,  warranties  or  covenants  ceases  to  be  true  and  accurate
regarding the Company or any of its Subsidiaries.  The Company shall provide the
Purchaser  all  additional  information  regarding  the  Company  or  any of its
Subsidiaries  that  the  Purchaser  deems  necessary  or  convenient  to  ensure
compliance  with all applicable  laws  concerning  money  laundering and similar
activities.  The  Company  understands  and  agrees  that  if at any  time it is
discovered  that any of the foregoing  representations,  warranties or covenants
are incorrect,  or if otherwise required by applicable law or regulation related
to  money  laundering  or  similar  activities,   the  Purchaser  may  undertake
appropriate  actions to ensure  compliance  with  applicable  law or regulation,
including but not limited to segregation  and/or  redemption of the  Purchaser's
investment in the Company.  The Company further  understands  that the Purchaser
may release confidential information about the Company and its Subsidiaries and,
if applicable,  any underlying  beneficial  owners, to proper authorities if the
Purchaser,  in its sole discretion,  determines that it is in the best interests
of the Purchaser in light of relevant rules and  regulations  under the laws set
forth in subsection (ii) above.

            4.27 ERISA.  Based upon the Employee  Retirement Income Security Act
                 -----
of 1974 ("ERISA"), and the regulations and published interpretations thereunder:
          -----
(i)  neither  the  Company  nor  any  of its  Subsidiaries  has  engaged  in any
Prohibited  Transactions (as defined in Section 406 of ERISA and Section 4975 of
the Internal  Revenue Code of 1986, as amended (the  "Code"));  (ii) each of the
                                                      ----
Company and each of its  Subsidiaries  has met all  applicable  minimum  funding
requirements  under Section 302 of ERISA in respect of its plans;  (iii) neither
the  Company  nor any of its  Subsidiaries  has any  knowledge  of any  event or
occurrence  which  would  cause the  Pension  Benefit  Guaranty  Corporation  to
institute  proceedings under Title IV of ERISA to terminate any employee benefit
plan(s);  (iv) neither the Company nor any of its Subsidiaries has any fiduciary
responsibility for investments with respect to any plan existing for the benefit
of persons  other than the  Company's or such  Subsidiary's  employees;  and (v)
neither the Company nor any of its  Subsidiaries  has  withdrawn,  completely or
partially,  from any multi-employer  pension plan so as to incur liability under
the Multiemployer Pension Plan Amendments Act of 1980.

                                       14
<PAGE>

         5.  Representations  and  Warranties  of the  Purchaser.  The Purchaser
             ---------------------------------------------------
hereby  represents and warrants to the Company as follows (such  representations
and  warranties do not lessen or obviate the  representations  and warranties of
the Company set forth in this Agreement):

            5.1  No  Shorting.  The  Purchaser  or any  of  its  affiliates  and
                 ------------
investment  partners has not,  will not and will not cause any person or entity,
to directly engage in "short sales" of the Company's Common Stock as long as the
Note shall be outstanding.

            5.2 Requisite  Power and Authority.  The Purchaser has all necessary
                ------------------------------
power and  authority  under all  applicable  provisions  of law to  execute  and
deliver  this  Agreement  and the  Related  Agreements  and to carry  out  their
provisions. All corporate action on the Purchaser's part required for the lawful
execution and delivery of this Agreement and the Related Agreements have been or
will be  effectively  taken  prior to the  Closing.  Upon  their  execution  and
delivery,  this Agreement and the Related  Agreements  will be valid and binding
obligations  of the  Purchaser,  enforceable  in  accordance  with their  terms,
except:

                  (a)  as  limited   by   applicable   bankruptcy,   insolvency,
         reorganization,   moratorium  or  other  laws  of  general  application
         affecting enforcement of creditors' rights; and

                  (b) as limited by general  principles  of equity that restrict
         the availability of equitable and legal remedies.

            5.3 Investment  Representations.  The Purchaser understands that the
                ---------------------------
Securities are being offered and sold pursuant to an exemption from registration
contained   in  the   Securities   Act  based  in  part  upon  the   Purchaser's
representations contained in this Agreement, including, without limitation, that
the  Purchaser is an  "accredited  investor"  within the meaning of Regulation D
under the Securities Act. The Purchaser confirms that it has received or has had
full access to all the information it considers necessary or appropriate to make
an informed  investment  decision with respect to the Note and the Warrant to be
purchased by it under this Agreement and the Warrant Shares  acquired by it upon
the exercise of the Warrant,  respectively.  The Purchaser further confirms that
it has had an opportunity to ask questions and receive  answers from the Company
regarding the Company's and its Subsidiaries' business, management and financial
affairs and the terms and conditions of the Offering,  the Note, the Warrant and
the  Warrant  Shares  and to obtain  additional  information  (to the extent the
Company  possessed  such  information  or could acquire it without  unreasonable
effort  or  expense)  necessary  to  verify  any  information  furnished  to the
Purchaser or to which the Purchaser had access.

            5.4 The Purchaser Bears Economic Risk. The Purchaser has substantial
                ---------------------------------
experience in  evaluating  and investing in private  placement  transactions  of
securities  in  companies  similar  to the  Company  so  that it is  capable  of
evaluating  the merits and risks of its  investment  in the  Company and has the
capacity to protect its own interests. The Purchaser must bear the economic risk
of this  investment  until the Securities are sold pursuant to: (i) an effective
registration  statement  under the  Securities  Act; or (ii) an  exemption  from
registration is available with respect to such sale.

                                       15
<PAGE>

            5.5 Acquisition for Own Account. The Purchaser is acquiring the Note
                ---------------------------
and  Warrant  and  the  Warrant  Shares  for the  Purchaser's  own  account  for
investment  only,  and not as a nominee or agent and not with a view  towards or
for resale in connection with their distribution.

            5.6 The Purchaser Can Protect Its Interest. The Purchaser represents
                --------------------------------------
that  by  reason  of  its,  or  of  its  management's,  business  and  financial
experience,  the  Purchaser has the capacity to evaluate the merits and risks of
its  investment in the Note,  the Warrant and the Warrant  Shares and to protect
its own  interests in  connection  with the  transactions  contemplated  in this
Agreement  and the Related  Agreements.  Further,  the  Purchaser is aware of no
publication  of  any   advertisement   in  connection   with  the   transactions
contemplated in the Agreement or the Related Agreements.

            5.7  Accredited  Investor.  The Purchaser  represents  that it is an
                 --------------------
accredited investor within the meaning of Regulation D under the Securities Act.

            5.8 Legends.
                -------

                  (a) The  Warrant  Shares,  if not  issued by DWAC  system  (as
         hereinafter   defined),   shall  bear  a  legend   which  shall  be  in
         substantially  the  following  form until such shares are covered by an
         effective registration statement filed with the SEC:

                  "THE  SHARES  REPRESENTED  BY THIS  CERTIFICATE  HAVE NOT BEEN
                  REGISTERED  UNDER THE SECURITIES  ACT OF 1933, AS AMENDED,  OR
                  ANY APPLICABLE  STATE SECURITIES LAWS. THESE SHARES MAY NOT BE
                  SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
                  OF AN EFFECTIVE  REGISTRATION  STATEMENT UNDER SUCH SECURITIES
                  ACT  AND  APPLICABLE  STATE  LAWS  OR AN  OPINION  OF  COUNSEL
                  REASONABLY SATISFACTORY TO eLEC COMMUNICATIONS CORP. THAT SUCH
                  REGISTRATION IS NOT REQUIRED."

                  (b) The Warrant shall bear substantially the following legend:

                  "THIS WARRANT AND THE COMMON SHARES  ISSUABLE UPON EXERCISE OF
                  THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
                  OF 1933, AS AMENDED,  OR ANY APPLICABLE STATE SECURITIES LAWS.
                  THIS WARRANT AND THE COMMON  SHARES  ISSUABLE UPON EXERCISE OF
                  THIS  WARRANT MAY NOT BE SOLD,  OFFERED  FOR SALE,  PLEDGED OR
                  HYPOTHECATED  IN  THE  ABSENCE  OF AN  EFFECTIVE  REGISTRATION
                  STATEMENT  AS TO THIS  WARRANT  OR THE  UNDERLYING  SHARES  OF
                  COMMON STOCK UNDER SAID ACT AND  APPLICABLE  STATE  SECURITIES
                  LAWS OR AN OPINION OF COUNSEL REASONABLY  SATISFACTORY TO eLEC
                  COMMUNICATIONS CORP. THAT SUCH REGISTRATION IS NOT REQUIRED."

                                       16
<PAGE>

         6. Covenants of the Company.  The Company covenants and agrees with the
            ------------------------
Purchaser as follows:

            6.1  Stop-Orders.  The Company will advise the  Purchaser,  promptly
                 -----------
after it receives notice of issuance by the SEC, any state securities commission
or any other  regulatory  authority of any stop order or of any order preventing
or  suspending  any  offering  of  any  securities  of  the  Company,  or of the
suspension of the  qualification of the Common Stock of the Company for offering
or sale in any  jurisdiction,  or the  initiation of any proceeding for any such
purpose.

            6.2  Listing.  The  Company  shall  promptly  secure the  listing or
                 -------
quotation,  as  applicable,  of the  shares of Common  Stock  issuable  upon the
exercise of the  Warrant on the  Principal  Market  upon which  shares of Common
Stock are listed or quoted for  trading,  as  applicable  (subject  to  official
notice of issuance) and shall maintain such listing or quotation, as applicable,
so long as any other  shares of Common  Stock  shall be so listed or quoted,  as
applicable.  The Company will maintain the listing or quotation,  as applicable,
of its Common  Stock on the  Principal  Market,  and will comply in all material
respects with the Company's  reporting,  filing and other  obligations under the
bylaws or rules of the National  Association of Securities  Dealers ("NASD") and
such exchanges, as applicable.

            6.3 Market  Regulations.  The Company shall notify the SEC, the NASD
                -------------------
and applicable state authorities, in accordance with their requirements,  of the
transactions  contemplated by this Agreement, and shall take all other necessary
action and  proceedings as may be required and permitted by applicable law, rule
and  regulation,  for the legal  and valid  issuance  of the  Securities  to the
Purchaser and promptly provide copies thereof to the Purchaser.

            6.4 Reporting Requirements. The Company will deliver, or cause to be
                ----------------------
delivered,  to the Purchaser each of the  following,  which shall be in form and
detail acceptable to the Purchaser:

                  (a) As soon as available,  and in any event within ninety (90)
         days  after the end of each  fiscal  year of the  Company,  each of the
         Company's and each of its Subsidiaries'  audited  financial  statements
         with a  report  of independent  registered  public  accounting  firm of
         recognized  standing  selected  by the Company  and  acceptable  to the
         Purchaser (the "Accountants"),  which annual financial statements shall
                         -----------
         include each of the  Company's  and each of its  Subsidiaries'  balance
         sheet as at the end of such fiscal year and the related  statements  of
         each of the Company's and each of its  Subsidiaries'  income,  retained
         earnings  and cash flows for the fiscal year then ended,  prepared on a
         consolidated  basis to include  the  Company,  each  Subsidiary  of the
         Company  and each of their  respective  affiliates,  all in  reasonable
         detail and prepared in accordance  with GAAP,  together with (i) if and
         when  available,  copies  of any  management  letters  prepared  by the
         Accountants;  and (ii) a certificate of the Company's President,  Chief
         Executive   Officer  or  Chief  Financial  Officer  stating  that  such
         financial  statements  have been prepared in  accordance  with GAAP and
         whether or not such  officer has  knowledge  of the  occurrence  of any
         Event of  Default  (as  defined  in the Note)  and,  if so,  stating in
         reasonable detail the facts with respect thereto;

                                       17
<PAGE>

                  (b) As soon as  available  and in any event  within forty five
         (45) days  after the end of each  fiscal  quarter  of the  Company,  an
         unaudited/internal  balance sheet and  statements  of income,  retained
         earnings and cash flows of the Company and each of its  Subsidiaries as
         at the end of and for such quarter and for the year to date period then
         ended,  prepared on a consolidating  and consolidated  basis to include
         all the  Company,  each  Subsidiary  of the  Company  and each of their
         respective affiliates,  in reasonable detail and stating in comparative
         form the figures for the corresponding date and periods in the previous
         year,  all  prepared  in  accordance  with GAAP,  subject  to  year-end
         adjustments   and   accompanied  by  a  certificate  of  the  Company's
         President,  Chief Executive Officer or Chief Financial Officer, stating
         (i) that such  financial  statements  have been  prepared in accordance
         with GAAP, subject to year-end audit  adjustments,  and (ii) whether or
         not such  officer  has  knowledge  of the  occurrence  of any  Event of
         Default (as defined in the Note) not theretofore  reported and remedied
         and,  if so,  stating  in  reasonable  detail  the facts  with  respect
         thereto;

                  (c) As soon as available  and in any event within  twenty (20)
         days  after  the  end of each  calendar  month,  an  unaudited/internal
         balance  sheet and  statements  of income,  retained  earnings and cash
         flows of each of the Company and its  Subsidiaries as at the end of and
         for such month and for the year to date period then ended,  prepared on
         a consolidating  and  consolidated  basis to include the Company,  each
         Subsidiary of the Company and each of their respective  affiliates,  in
         reasonable  detail and stating in comparative  form the figures for the
         corresponding  date and periods in the previous  year,  all prepared in
         accordance with GAAP,  subject to year-end  adjustments and accompanied
         by a certificate of the Company's President, Chief Executive Officer or
         Chief  Financial  Officer,  stating (i) that such financial  statements
         have been prepared in accordance  with GAAP,  subject to year-end audit
         adjustments,  and (ii) whether or not such officer has knowledge of the
         occurrence  of any  Event of  Default  (as  defined  in the  Note)  not
         theretofore  reported and remedied  and, if so,  stating in  reasonable
         detail the facts with respect thereto;

                  (d) The  Company  shall  timely  file with the SEC all reports
         required to be filed  pursuant  to the  Exchange  Act and refrain  from
         terminating  its status as an issuer  required by the  Exchange  Act to
         file  reports  thereunder  even if the  Exchange  Act or the  rules  or
         regulations  thereunder would permit such  termination.  Promptly after
         (i)  the  filing   thereof,   copies  of  the  Company's   most  recent
         registration statements and annual, quarterly, monthly or other regular
         reports  which the Company  files with the SEC,  and (ii) the  issuance
         thereof,  copies  of  such  financial  statements,  reports  and  proxy
         statements as the Company shall send to its stockholders; and

                  (e)  The  Company  shall  deliver,  or  cause  the  applicable
         Subsidiary  of the Company to deliver,  such other  information  as the
         Purchaser shall reasonably request.

            6.5 Use of Funds.  The Company shall use the proceeds of the sale of
                ------------
the Note and the Warrant  for the  acquisition  of all of the  capital  stock of
Liberty Bell Telecom LLC and for general working capital purposes only (it being
understood  that $1,050,000 of the proceeds of the Note will be deposited in the
Restricted Account on the Closing Date and shall be subject to

                                       18
<PAGE>

the terms and conditions of the Restricted  Account Agreement and the Restricted
Account Side Letter).

            6.6  Access  to  Facilities.  Each of the  Company  and  each of its
                 ----------------------
Subsidiaries will permit any representatives designated by the Purchaser (or any
successor of the Purchaser),  upon reasonable  notice and during normal business
hours,  at such person's  expense and  accompanied  by a  representative  of the
Company or any Subsidiary  (provided that no such prior notice shall be required
to be given and no such representative of the Company or any Subsidiary shall be
required to accompany the  Purchaser,  except in the case of access to switching
facilities,  in the event the  Purchaser  believes  such access is  necessary to
preserve or protect the Collateral (as defined in the Master Security Agreement)
or following the  occurrence  and during the  continuance of an Event of Default
(as defined in the Note)), to:

                  (a) visit and inspect any of the  properties of the Company or
         any of its Subsidiaries;

                  (b) examine the corporate and financial records of the Company
         or any of its Subsidiaries (unless such examination is not permitted by
         federal,  state or local law or by contract) and make copies thereof or
         extracts therefrom; and

                  (c) discuss the affairs,  finances and accounts of the Company
         or any of its Subsidiaries with the directors, officers and independent
         accountants of the Company or any of its Subsidiaries.

Notwithstanding  the foregoing,  neither the Company nor any of its Subsidiaries
will provide any material,  non-public  information to the Purchaser  unless the
Purchaser  signs  a  confidentiality   agreement  and  otherwise  complies  with
Regulation FD, under the federal securities laws.

            6.7 Taxes.  Each of the  Company and each of its  Subsidiaries  will
                -----
promptly pay and  discharge,  or cause to be paid and  discharged,  when due and
payable, all taxes,  assessments and governmental charges or levies imposed upon
the income,  profits,  property or business of the Company and its Subsidiaries;
provided,  however,  that any such tax,  assessment,  charge or levy need not be
paid  currently if (i) the validity  thereof shall  currently and  diligently be
contested in good faith by appropriate  proceedings,  (ii) such tax, assessment,
charge or levy shall have no effect on the lien priority of the Purchaser in any
property  of the  Company or any of its  Subsidiaries  and (iii) if the  Company
and/or such Subsidiary shall have set aside on its books adequate  reserves with
respect thereto in accordance with GAAP; and provided, further, that the Company
and its  Subsidiaries  will pay all such taxes,  assessments,  charges or levies
forthwith upon the  commencement  of proceedings to foreclose any lien which may
have attached as security therefor. Notwithstanding the foregoing, all state and
local telecom taxes need only be paid in accordance with industry practices.

            6.8 Insurance.  Each of the Company and its  Subsidiaries  will keep
                ---------
its assets which are of an insurable  character insured by financially sound and
reputable  insurers  against loss or damage by fire,  explosion  and other risks
customarily  insured against by companies in similar business similarly situated
as the Company and its  Subsidiaries;  and the Company and its Subsidiaries will
maintain, with financially sound and reputable insurers, insurance against other

                                       19
<PAGE>

hazards and risks and liability to persons and property to the extent and in the
manner  which the Company  reasonably  believes is  customary  for  companies in
similar business  similarly  situated as the Company and its Subsidiaries and to
the extent available on commercially  reasonable terms. The Company, and each of
its Subsidiaries, will jointly and severally bear the full risk of loss from any
loss  of any  nature  whatsoever  with  respect  to the  assets  pledged  to the
Purchaser as security for their respective  obligations  hereunder and under the
Related  Agreements.  At the Company's and each of its  Subsidiaries'  joint and
several cost and expense in amounts and with carriers  reasonably  acceptable to
the Purchaser,  each of the Company and each of its Subsidiaries  shall (i) keep
all its insurable  properties and properties in which it has an interest insured
against the hazards of fire, flood,  sprinkler leakage, those hazards covered by
extended coverage insurance and such other hazards,  and for such amounts, as is
customary  in the  case  of  companies  engaged  in  businesses  similar  to the
Company's  or  the  respective   Subsidiary's  including  business  interruption
insurance;  (ii)  maintain a bond in such amounts as is customary in the case of
companies  engaged in  businesses  similar to the  Company's  or the  respective
Subsidiary's   insuring   against   larceny,   embezzlement  or  other  criminal
misappropriation  of insured's  officers and  employees who may either singly or
jointly  with  others  at any time  have  access  to the  assets or funds of the
Company or any of its  Subsidiaries  either  directly  or  through  governmental
authority to draw upon such funds or to direct generally the disposition of such
assets; (iii) maintain public and product liability insurance against claims for
personal injury,  death or property damage suffered by others; (iv) maintain all
such worker's  compensation  or similar  insurance as may be required  under the
laws of any  state  or  jurisdiction  in which  the  Company  or the  respective
Subsidiary is engaged in business; and (v) furnish the Purchaser with (x) copies
of all policies and evidence of the maintenance of such policies at least thirty
(30) days before any  expiration  date,  (y) excepting  the  Company's  workers'
compensation  policy,  endorsements  to such  policies  naming the  Purchaser as
"co-insured" or "additional  insured" and appropriate loss payable  endorsements
in form and substance  satisfactory  to the  Purchaser,  naming the Purchaser as
loss payee,  and (z) evidence that as to the  Purchaser  the insurance  coverage
shall not be impaired or invalidated by any act or neglect of the Company or any
Subsidiary  and the insurer will provide the Purchaser with at least thirty (30)
days  notice  prior to  cancellation.  The  Company  and each  Subsidiary  shall
instruct the insurance  carriers that in the event of any loss  thereunder,  the
carriers  shall make payment for such loss to the Company  and/or the Subsidiary
and the Purchaser  jointly.  In the event that as of the date of receipt of each
loss recovery upon any such  insurance,  the Purchaser has not declared an event
of default with respect to this Agreement or any of the Related Agreements, then
the Company and/or such Subsidiary  shall be permitted to direct the application
of such  loss  recovery  proceeds  toward  investment  in  property,  plant  and
equipment that would comprise  "Collateral"  secured by the Purchaser's security
interest  pursuant  to the Master  Security  Agreement  or such  other  security
agreement as shall be required by the  Purchaser,  with any surplus  funds to be
applied  toward payment of the  obligations of the Company to the Purchaser.  In
the event that the  Purchaser  has  properly  declared an event of default  with
respect  to this  Agreement  or any of the  Related  Agreements,  then  all loss
recoveries  received by the Purchaser upon any such insurance  thereafter may be
applied  to the  obligations  of the  Company  hereunder  and under the  Related
Agreements, in such order as the Purchaser may determine. Any surplus (following
satisfaction of all Company  obligations to the Purchaser)  shall be paid by the
Purchaser  to the Company or applied as may be  otherwise  required by law.  Any
deficiency  thereon  shall  be  paid  by  the  Company  or  the  Subsidiary,  as
applicable, to the Purchaser, on demand.

                                       20
<PAGE>

            6.9  Intellectual  Property.  Each of the  Company  and  each of its
                 ----------------------
Subsidiaries  shall maintain in full force and effect its existence,  rights and
franchises and all licenses and other rights to use Intellectual  Property owned
or possessed by it and  reasonably  deemed to be necessary to the conduct of its
business.

            6.10  Properties.  Each of the Company and each of its  Subsidiaries
                  ----------
will keep its properties in good repair, working order and condition, reasonable
wear and tear  excepted,  and from  time to time  make all  needful  and  proper
repairs, renewals, replacements, additions and improvements thereto; and each of
the  Company  and each of its  Subsidiaries  will at all times  comply with each
provision  of all  leases  to which it is a party  or  under  which it  occupies
property if the breach of such provision  could,  either  individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

            6.11 Confidentiality.  The Company will not, and will not permit any
                 ---------------
of  its  Subsidiaries  to,  disclose,   and  will  not  include  in  any  public
announcement,  the name of the  Purchaser,  unless  expressly  agreed  to by the
Purchaser or unless and until such  disclosure  is required by law or applicable
regulation, and then only to the extent of such requirement. Notwithstanding the
foregoing,  the Company may disclose the  Purchaser's  identity and the terms of
this Agreement to its current and prospective debt and equity financing sources.

            6.12  Required  Approvals.  (I) For so long as  twenty-five  percent
                  -------------------
(25%) of the principal amount of the Note is outstanding,  the Company,  without
the prior written consent of the Purchaser,  shall not, and shall not permit any
of its Subsidiaries to:

                  (a) (i) directly or indirectly  declare or pay any  dividends,
         other than  dividends  paid to the  Company or any of its  wholly-owned
         Subsidiaries,  (ii)  issue  any  preferred  stock  that is  manditorily
         redeemable  prior to the one year  anniversary of the Maturity Date (as
         defined  in the Note) or (iii)  redeem  any of its  preferred  stock or
         other equity interests;

                  (b)  liquidate,  dissolve or effect a material  reorganization
         (it being  understood  that in no event shall the Company or any of its
         Subsidiaries  dissolve,  liquidate  or merge  with any other  person or
         entity  (unless,  in the case of such a merger,  the Company or, in the
         case  of  merger  not  involving  the  Company,  such  Subsidiary,   as
         applicable, is the surviving entity);

                  (c) become subject to (including,  without limitation,  by way
         of amendment to or modification  of) any agreement or instrument  which
         by its terms would (under any circumstances)  restrict the Company's or
         any of its  Subsidiaries,  right  to  perform  the  provisions  of this
         Agreement,  any Related Agreement or any of the agreements contemplated
         hereby or thereby;

                  (d)  materially  alter or change the scope of the  business of
         the Company and its Subsidiaries taken as a whole; or

                  (e)  (i)  create,   incur,  assume  or  suffer  to  exist  any
         indebtedness  (exclusive of trade debt and debt incurred to finance the
         purchase of  equipment  (not in excess of five percent (5%) of the fair
         market value of the Company's and its  Subsidiaries'  assets;

                                       21
<PAGE>

         provided that, not withstanding the forgoing, capitalized leases and/or
         financing to purchase  equipment in connection with the Company's Voice
         Over IP  Point-of-Presence  system shall be permitted to the extent not
         in excess of, when  aggregated  with all other debt incurred to finance
         the purchase of equipment, twenty-five percent (25%) of the fair market
         value of the Company's and its  Subsidiaries'  assets)) whether secured
         or  unsecured  other  than (x) the  Company's  obligations  owed to the
         Purchaser,  (y)  indebtedness  set forth on Schedule  6.12(e)  attached
         hereto and made a part  hereof  and any  refinancings  or  replacements
         thereof  on  terms  no  less   favorable  to  the  Purchaser  than  the
         indebtedness  being  refinanced or replaced,  and (z) any  indebtedness
         incurred  in  connection  with  the  purchase  of  assets  (other  than
         equipment) in the ordinary course of business,  or any  refinancings or
         replacements  thereof on terms no less  favorable to the Purchaser than
         the  indebtedness  being  refinanced  or replaced,  so long as any lien
         relating  thereto shall only encumber the fixed assets so purchased and
         no other assets of the Company or any of its Subsidiaries;  (ii) cancel
         any  indebtedness  owing to it in excess of  $50,000  in the  aggregate
         during  any 12  month  period;  (iii)  assume,  guarantee,  endorse  or
         otherwise become directly or contingently liable in connection with any
         obligations  of any other person or entity,  except the  endorsement of
         negotiable  instruments  by the Company or any Credit Party for deposit
         or  collection  or  similar  transactions  in the  ordinary  course  of
         business  or  guarantees  of  indebtedness  otherwise  permitted  to be
         outstanding pursuant to this clause (e);

                  (f)  purchase  or  hold   beneficially   any  Stock  or  other
         securities or evidences of indebtedness of, make or permit to exist any
         loans or advances  to, or make any  investment  or acquire any interest
         whatsoever  in, any other Person,  including any  partnership  or joint
         venture,  except  (x)  travel  advances,  (y)  loans  to  its  and  its
         Subsidiaries'  officers and  employees not exceeding at any one time an
         aggregate of $10,000,  and (z) loans or advances to any Credit  Parties
         (as used herein,  "Stock"  means all  certificated  and  uncertificated
         shares,  options,  warrants,  membership interests,  general or limited
         partnership interests,  participation or other equivalents  (regardless
         of  how  designated)  of  or  in a  corporation,  partnership,  limited
         liability  company or equivalent  entity  whether  voting or nonvoting,
         including common stock, preferred stock, or any other "equity security"
         (as such  term is  defined  in Rule  3a11-1  of the  General  Rules and
         Regulations promulgated by the SEC under the Exchange Act);

                  (g) enter into any transaction with any employee,  director or
         Affiliate,  except in the ordinary course on arms-length terms (as used
         herein (x) "Affiliate" means, with respect to any Person, (a) any other
                     ---------
         Person (other than a Subsidiary) which,  directly or indirectly,  is in
         control of, is  controlled  by, or is under  common  control  with such
         Person or (b) any other Person who is a director or officer (i) of such
         Person,  (ii) of any  Subsidiary  of such Person or (iii) of any Person
         described  in clause (a) above.  For the  purposes of this  definition,
         control of a Person shall mean the power (direct or indirect) to direct
         or cause the  direction of the  management  and policies of such Person
         whether by contract or otherwise and (y) "Person" means any individual,
                                                   ------
         sole proprietorship,  partnership, limited liability partnership, joint
         venture, trust, unincorporated organization,  association, corporation,
         limited liability  company,  institution,  public benefit  corporation,
         entity or government (whether federal,  state,  county, city, municipal
         or otherwise,

                                       22
<PAGE>

         including any  instrumentality,  division,  agency,  body or department
         thereof), and shall include such Person's successors and assigns); and

                  (h) sell,  lease,  transfer or otherwise dispose of any of its
         properties  or  assets,  or any  of the  properties  or  assets  of its
         Subsidiaries, except for (1) sales, leases, transfer or dispositions by
         any Credit Party to any other Credit  Party,  (2) the sale of Inventory
         (as defined in the Master Security Agreement) in the ordinary course of
         business and (3) the  disposition or transfer in the ordinary course of
         business during any fiscal year of obsolete and worn-out  Equipment (as
         defined in the Master  Security  Agreement) and only to the extent that
         (x)  the  proceeds  of  any  such   disposition  are  used  to  acquire
         replacement  Equipment  which  is  subject  to  the  Purchaser's  first
         priority security interest or are used to repay the Purchaser or to pay
         general corporate expenses, or (y) following the occurrence of an Event
         of Default  (as  defined in the Note)  which  continues  to exist,  the
         proceeds  of which are  remitted  to the  Purchaser  to be held as cash
         collateral  for the  Obligations  (as  defined in the  Master  Security
         Agreement).

         (II) The Company,  without the prior written  consent of the Purchaser,
shall not, and shall not permit any of its  Subsidiaries  to,  create or acquire
any  Subsidiary   after  the  date  hereof  unless  (i)  such  Subsidiary  is  a
wholly-owned  Subsidiary of the Company and (ii) such Subsidiary becomes a party
to the Master Security Agreement,  the Stock Pledge Agreement and the Subsidiary
Guaranty (either by executing a counterpart  thereof or an assumption or joinder
agreement  in respect  thereof)  and, to the extent  required by the  Purchaser,
satisfies each condition of this Agreement and the Related Agreements as if such
Subsidiary were a Subsidiary on the Closing Date.

            6.13  Reissuance  of  Securities.  The  Company  agrees  to  reissue
                  --------------------------
certificates  representing  the  Securities  without  the  legends  set forth in
Section 5.8 above at such time as:

                  (a)  the  holder  thereof  is  permitted  to  dispose  of such
         Securities pursuant to Rule 144(k) under the Securities Act; or

                  (b) upon resale subject to an effective registration statement
         after such Securities are registered under the Securities Act.

The Company  agrees to  cooperate  with the  Purchaser  in  connection  with all
resales  pursuant  to Rule 144(d) and Rule  144(k) and  provide  legal  opinions
necessary  to allow such resales  provided  the Company and its counsel  receive
reasonably requested representations from the Purchaser and broker, if any.

            6.14 Opinion.  On the Closing Date,  the Company will deliver to the
                 -------
Purchaser an opinion  acceptable  to the Purchaser  from the Company's  external
legal counsel.  The Company will provide,  at the Company's expense,  such other
legal opinions in the future as are deemed reasonably necessary by the Purchaser
(and  acceptable  to the  Purchaser)  in  connection  with the  exercise  of the
Warrant.

            6.15 Margin  Stock.  The Company will not permit any of the proceeds
                 -------------
of the Note or the Warrant to be used  directly or  indirectly  to "purchase" or
"carry"  "margin  stock" or to repay  indebtedness  incurred  to  "purchase"  or
"carry"  "margin  stock"  within the  respective

                                       23
<PAGE>

meanings  of each  of the  quoted  terms  under  Regulation  U of the  Board  of
Governors of the Federal  Reserve  System as now and from time to time hereafter
in effect.

            6.16  Restricted  Cash  Disclosure.  The  Company  agrees  that,  in
                  ----------------------------
connection  with  its  filing  of its 8-K  Report  with the SEC  concerning  the
transactions  contemplated  by this Agreement and the Related  Agreements  (such
report, the "Laurus  Transaction 8-K") in a timely manner after the date hereof,
it will  disclose in such Laurus  Transaction  8-K the amount of the proceeds of
the Note  issued to the  Purchaser  that has been  placed in a  restricted  cash
account and is subject to the terms and  conditions  of this  Agreement  and the
Related  Agreements.  Furthermore,  the Company agrees to disclose in all public
filings  required  by the SEC (where  appropriate)  following  the filing of the
Laurus  Transaction 8-K, the existence of the restricted cash referred to in the
immediately preceding sentence, together with the amount thereof.

            6.17 No Restrictions on Additional Financing.  The Company will not,
                 ---------------------------------------
and will not permit its Subsidiaries to, agree,  directly or indirectly,  to any
restriction  with any person or entity which limits the ability of the Purchaser
to extend any additional  indebtedness to the Company or any of its Subsidiaries
and/or the  ability of the Company or any of its  Subsidiaries  to sell or issue
any equity interests of the Company or any of its Subsidiaries to the Purchaser.

            6.18  Authorization and Reservation of Shares.  The Company shall at
                  ---------------------------------------
all times have  authorized and reserved a sufficient  number of shares of Common
Stock to provide for the exercise of the Warrant.

         7. Covenants of the Purchaser.  The Purchaser covenants and agrees with
            --------------------------
the Company as follows:

            7.1 Confidentiality.  The Purchaser will not disclose,  and will not
                ---------------
include in any public  announcement,  the name of the Company,  unless expressly
agreed to by the Company or unless and until such  disclosure is required by law
or applicable regulation, and then only to the extent of such requirement.

            7.2 Non-Public Information.  The Purchaser will not effect any sales
                ----------------------
in the shares of the  Company's  Common Stock while in  possession  of material,
non-public  information  regarding  the  Company  if such  sales  would  violate
applicable securities law.

            7.3  Limitation  on  Acquisition  of  Common  Stock of the  Company.
                 --------------------------------------------------------------
Notwithstanding  anything  to the  contrary  contained  in this  Agreement,  any
Related  Agreement or any  document,  instrument  or  agreement  entered into in
connection  with any other  transactions  between the Purchaser and the Company,
the  Purchaser  may  not  acquire  stock  in  the  Company  (including,  without
limitation,  pursuant  to a contract to  purchase,  by  exercising  an option or
warrant,  by  converting  any other  security or  instrument,  by  acquiring  or
exercising  any  other  right to  acquire,  shares  of  stock or other  security
convertible  into  shares  of  stock  in the  Company,  or  otherwise,  and such
contracts,   options,  warrants,   conversion  or  other  rights  shall  not  be
enforceable or exercisable) to the extent such stock acquisition would cause any
interest  (including any original issue discount)  payable by the Company to the
Purchaser not to qualify as "portfolio  interest"  within the meaning of Section
881(c)(2) of the Code, by reason of Section  881(c)(3) of the Code,  taking into
account the constructive  ownership rules under

                                       24
<PAGE>

Section 871(h)(3)(C) of the Code (the "Stock Acquisition Limitation"). The Stock
Acquisition  Limitation  shall  automatically  become null and void  without any
notice to the  Company  upon the  earlier to occur of either  (a) the  Company's
delivery to the Purchaser of a Notice of Redemption  (as defined in the Note) or
(b) the existence of an Event of Default (as defined in the Note) at a time when
the  average  closing  price  of the  Company's  Common  Stock  as  reported  by
Bloomberg,  L.P. on the  Principal  Market for the  immediately  preceding  five
trading days is greater than or equal to 150% of the Exercise  Price (as defined
in the Warrant).

         8.   Covenants   of   the   Company   and   the   Purchaser   Regarding
              ------------------------------------------------------------------
Indemnification.
---------------

            8.1 Company Indemnification.  The Company agrees to indemnify,  hold
                -----------------------
harmless,  reimburse and defend the Purchaser, each of the Purchaser's officers,
directors,  agents,  affiliates,  control persons,  and principal  shareholders,
against all claims, costs, expenses, liabilities, obligations, losses or damages
(including reasonable legal fees) of any nature, incurred by or imposed upon the
Purchaser   which   result,   arise   out  of  or  are  based   upon:   (i)  any
misrepresentation  by the  Company or any of its  Subsidiaries  or breach of any
warranty by the Company or any of its Subsidiaries in this Agreement,  any other
Related Agreement or in any exhibits or schedules attached hereto or thereto; or
(ii) any breach or default in performance by Company or any of its  Subsidiaries
of  any  covenant  or  undertaking  to be  performed  by  Company  or any of its
Subsidiaries hereunder, under any other Related Agreement or any other agreement
entered into by the Company  and/or any of its  Subsidiaries  and the  Purchaser
relating hereto or thereto.

            8.2 Purchaser's Indemnification.  The Purchaser agrees to indemnify,
                ---------------------------
hold  harmless,  reimburse  and defend  the  Company  and each of the  Company's
officers,   directors,   agents,  affiliates,   control  persons  and  principal
shareholders,  at all times against any claims,  costs,  expenses,  liabilities,
obligations,  losses or damages (including reasonable legal fees) of any nature,
incurred by or imposed upon the Company which result,  arise out of or are based
upon:  (i) any  misrepresentation  by the Purchaser or breach of any warranty by
the Purchaser in this Agreement or in any exhibits or schedules  attached hereto
or any Related  Agreement;  or (ii) any breach or default in  performance by the
Purchaser  of any  covenant or  undertaking  to be  performed  by the  Purchaser
hereunder,  or any other agreement entered into by the Company and the Purchaser
relating hereto.

         9. Exercise of Warrant.
            -------------------

            9.1 Mechanics of Exercise.
                ---------------------

                  (a)  Provided  the  Purchaser  has notified the Company of the
         Purchaser's intention to sell the Warrant Shares and the Warrant Shares
         are included in an effective  registration  statement or are  otherwise
         exempt  from  registration  when  sold:  (i) upon the  exercise  of the
         Warrant  or part  thereof,  the  Company  shall,  at its own  cost  and
         expense,  take all  necessary  action  (including  the  issuance  of an
         opinion of counsel reasonably  acceptable to the Purchaser  following a
         request by the  Purchaser) to assure that the Company's  transfer agent
         shall issue  shares of the  Company's  Common  Stock in the name of the
         Purchaser  (or its nominee) or such other  Persons as designated by the
         Purchaser  in  accordance  with  Section  9.1(b)  hereof  and  in  such
         denominations to be

                                       25
<PAGE>

         specified  representing the number of Warrant Shares issuable upon such
         exercise; and (ii) the Company warrants that no instructions other than
         these  instructions have been or will be given to the transfer agent of
         the Company's Common Stock.

                  (b) The Purchaser will give notice of its decision to exercise
         its right to exercise  the Warrant or part  thereof by  telecopying  or
         otherwise  delivering an executed and completed notice of the number of
         shares to be exercised to the Company (the "Form of Subscription")  and
         by  remitting  payment to the Company  for the  purchase of the Warrant
         Shares.  The  Purchaser  will not be required to surrender  the Warrant
         until the Purchaser receives a credit to the account of the Purchaser's
         prime broker through the DWAC system (as defined  below),  representing
         all the Warrant Shares issuable under the Warrant. Each date on which a
         Form of  Subscription  is  telecopied  or  delivered  to the Company in
         accordance  with the  provisions  hereof  shall be deemed an  "Exercise
         Date." Pursuant to the terms of the Form of  Subscription,  the Company
         will issue instructions to the transfer agent accompanied by an opinion
         of counsel  within one (1)  business day of the date of the delivery to
         the Company of the Form of  Subscription  and shall cause the  transfer
         agent to transmit the certificates  representing the Warrant Shares set
         forth in the applicable Form of Subscription to the Holder by crediting
         the account of the Purchaser's  prime broker with the Depository  Trust
         Company  ("DTC")  through  its  Deposit   Withdrawal  Agent  Commission
         ("DWAC")  system  within three (3) business  days after  receipt by the
         Company of the Form of Subscription (the "Delivery Date").

                  (c) The Company  understands  that a delay in the  delivery of
         the Warrant  Shares in the form  required  pursuant to Section 9 hereof
         beyond  the  Delivery  Date  could  result  in  economic  loss  to  the
         Purchaser.  In the event that the Company  fails to direct its transfer
         agent to  deliver  the  Warrant  Shares to the  Purchaser  via the DWAC
         system within the time frame set forth in Section  9.1(b) above and the
         Warrant Shares are not delivered to the Purchaser by the Delivery Date,
         as  compensation  to the Purchaser for such loss, the Company agrees to
         pay late  payments to the  Purchaser  for late  issuance of the Warrant
         Shares in the form required  pursuant to Section 9 hereof upon exercise
         of the  Warrant in the  amount  equal to the  greater  of: (i) $500 per
         business day after the Delivery  Date; or (ii) the  Purchaser's  actual
         damages from such delayed delivery.  The Company shall pay any payments
         incurred under this Section in immediately  available funds upon demand
         and,  in  the  case  of  actual  damages,   accompanied  by  reasonable
         documentation of the amount of such damages.  Such documentation  shall
         show the number of shares of Common  Stock the  Purchaser  is forced to
         purchase  (in  an  open  market   transaction)   which  the   Purchaser
         anticipated  receiving upon such  exercise,  and shall be calculated as
         the amount by which (A) the Purchaser's total purchase price (including
         customary brokerage commissions, if any) for the shares of Common Stock
         so purchased  exceeds (B) the aggregate  exercise price of the Warrant,
         for which such Form of Subscription was not timely honored.

         10. Miscellaneous.
             -------------

            10.1  Governing Law, Jurisdiction and Waiver of Jury Trial.
                  ----------------------------------------------------

                                       26
<PAGE>

                  (a) THIS AGREEMENT AND THE OTHER RELATED  AGREEMENTS  SHALL BE
         GOVERNED BY AND CONSTRUED  AND ENFORCED IN ACCORDANCE  WITH THE LAWS OF
         THE STATE OF NEW YORK  APPLICABLE  TO CONTRACTS  MADE AND  PERFORMED IN
         SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

                  (b) THE COMPANY  HEREBY  CONSENTS AND AGREES THAT THE STATE OR
         FEDERAL  COURTS  LOCATED IN THE  COUNTY OF NEW YORK,  STATE OF NEW YORK
         SHALL HAVE EXCLUSIVE  JURISDICTION  TO HEAR AND DETERMINE ANY CLAIMS OR
         DISPUTES  BETWEEN THE COMPANY,  ON THE ONE HAND, AND THE PURCHASER,  ON
         THE OTHER  HAND,  PERTAINING  TO THIS  AGREEMENT  OR ANY OF THE RELATED
         AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT
         OR ANY OF THE OTHER RELATED  AGREEMENTS;  PROVIDED,  THAT THE PURCHASER
                                                   --------
         AND THE COMPANY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE
         TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE
         OF NEW YORK;  AND FURTHER  PROVIDED,  THAT,  NOTHING IN THIS  AGREEMENT
                           -------  --------   ----
         SHALL BE DEEMED OR OPERATE TO PRECLUDE THE PURCHASER FROM BRINGING SUIT
         OR TAKING OTHER LEGAL ACTION IN ANY OTHER  JURISDICTION  TO COLLECT THE
         OBLIGATIONS,  TO REALIZE ON THE  COLLATERAL  (AS  DEFINED IN THE MASTER
         SECURITY  AGREEMENT)  OR ANY OTHER  SECURITY  FOR THE  OBLIGATIONS  (AS
         DEFINED IN THE MASTER SECURITY AGREEMENT),  OR TO ENFORCE A JUDGMENT OR
         OTHER COURT  ORDER IN FAVOR OF THE  PURCHASER.  THE  COMPANY  EXPRESSLY
         SUBMITS AND CONSENTS IN ADVANCE TO SUCH  JURISDICTION  IN ANY ACTION OR
         SUIT  COMMENCED IN ANY SUCH COURT,  AND THE COMPANY  HEREBY  WAIVES ANY
         OBJECTION  THAT IT MAY HAVE BASED UPON LACK OF  PERSONAL  JURISDICTION,
         IMPROPER  VENUE OR FORUM NON  CONVENIENS.  THE  COMPANY  HEREBY  WAIVES
                            ---------------------
         PERSONAL SERVICE OF THE SUMMONS,  COMPLAINT AND OTHER PROCESS ISSUED IN
         ANY SUCH  ACTION  OR SUIT AND  AGREES  THAT  SERVICE  OF SUCH  SUMMONS,
         COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
         ADDRESSED  TO THE COMPANY AT THE ADDRESS SET FORTH IN SECTION  11.9 AND
         THAT SERVICE SO MADE SHALL BE DEEMED  COMPLETED UPON THE EARLIER OF THE
         COMPANY'S ACTUAL RECEIPT THEREOF.

                  (c) THE PARTIES  DESIRE  THAT THEIR  DISPUTES BE RESOLVED BY A
         JUDGE APPLYING SUCH  APPLICABLE  LAWS.  THEREFORE,  TO ACHIEVE THE BEST
         COMBINATION OF THE BENEFITS OF THE JUDICIAL  SYSTEM AND OF ARBITRATION,
         THE  PARTIES  HERETO  WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY  ACTION,
         SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,  WHETHER ARISING IN
         CONTRACT,  TORT, OR OTHERWISE  BETWEEN THE PURCHASER AND/OR THE COMPANY
         ARISING  OUT  OF,   CONNECTED  WITH,   RELATED  OR  INCIDENTAL  TO  THE
         RELATIONSHIP   ESTABLISHED   BETWEEN  THEM  IN  CONNECTION   WITH  THIS
         AGREEMENT,

                                       27
<PAGE>

         ANY OTHER  RELATED  AGREEMENT  OR THE  TRANSACTIONS  RELATED  HERETO OR
         THERETO.

            10.2   Severability.   Wherever  possible  each  provision  of  this
                   ------------
Agreement and the Related  Agreements  shall be interpreted in such manner as to
be  effective  and valid under  applicable  law,  but if any  provision  of this
Agreement or any Related  Agreement shall be prohibited by or invalid or illegal
under  applicable law such provision  shall be ineffective to the extent of such
prohibition or invalidity or illegality,  without  invalidating the remainder of
such provision or the remaining provisions thereof which shall not in any way be
affected or impaired thereby.

            10.3  Survival.  The  representations,   warranties,  covenants  and
                  --------
agreements made herein shall survive any investigation made by the Purchaser and
the  closing of the  transactions  contemplated  hereby to the  extent  provided
therein.  All statements as to factual  matters  contained in any certificate or
other  instrument  delivered by or on behalf of the Company  pursuant  hereto in
connection  with the  transactions  contemplated  hereby  shall be  deemed to be
representations and warranties by the Company hereunder solely as of the date of
such  certificate or instrument.  All indemnities set forth herein shall survive
the execution,  delivery and  termination of this Agreement and the Note and the
making and repayment of the obligations  arising  hereunder,  under the Note and
under the other Related Agreements.

            10.4 Successors.  Except as otherwise expressly provided herein, the
                 ----------
provisions  hereof  shall  inure to the  benefit  of, and be binding  upon,  the
successors,  heirs, executors and administrators of the parties hereto and shall
inure to the benefit of and be  enforceable by each person or entity which shall
be a holder of the  Securities  from time to time,  other  than the  holders  of
Common  Stock  which has been sold by the  Purchaser  pursuant to Rule 144 or an
effective registration statement. The Purchaser shall not be permitted to assign
its rights  hereunder  or under any Related  Agreement  to a  competitor  of the
Company  unless an Event of Default (as defined in the Note) has occurred and is
continuing.

            10.5 Entire Agreement; Maximum Interest. This Agreement, the Related
                 ----------------------------------
Agreements,  the  exhibits  and  schedules  hereto  and  thereto  and the  other
documents delivered pursuant hereto constitute the full and entire understanding
and  agreement  between the parties  with regard to the  subjects  hereof and no
party   shall  be  liable   or  bound  to  any  other  in  any   manner  by  any
representations, warranties, covenants and agreements except as specifically set
forth  herein and therein.  Nothing  contained  in this  Agreement,  any Related
Agreement  or in any  document  referred to herein or  delivered  in  connection
herewith  shall be deemed to  establish  or  require  the  payment  of a rate of
interest or other charges in excess of the maximum rate  permitted by applicable
law. In the event that the rate of interest or dividends  required to be paid or
other  charges  hereunder  exceed the maximum  rate  permitted  by such law, any
payments in excess of such maximum shall be credited against amounts owed by the
Company to the Purchaser and thus refunded to the Company.

            10.6  Amendment and Waiver.
                  --------------------

                  (a) This  Agreement  may be amended or modified  only upon the
         written consent of the Company and the Purchaser.

                                       28
<PAGE>

                  (b) The  obligations  of the  Company  and the  rights  of the
         Purchaser  under this  Agreement  may be waived  only with the  written
         consent of the Purchaser.

                  (c) The  obligations  of the  Purchaser  and the rights of the
         Company  under  this  Agreement  may be waived  only  with the  written
         consent of the Company.

            10.7 Delays or Omissions.  It is agreed that no delay or omission to
                 -------------------
exercise  any right,  power or remedy  accruing  to any party,  upon any breach,
default or  noncompliance  by another party under this  Agreement or the Related
Agreements,  shall  impair  any such  right,  power or  remedy,  nor shall it be
construed to be a waiver of any such breach,  default or  noncompliance,  or any
acquiescence  therein, or of or in any similar breach,  default or noncompliance
thereafter occurring.  All remedies,  either under this Agreement or the Related
Agreements,  by law or otherwise  afforded to any party, shall be cumulative and
not alternative.

            10.8  Notices. All notices required or permitted  hereunder shall be
                  -------
in writing and shall be deemed effectively given:

                  (a) upon personal delivery to the party to be notified;

                  (b) when sent by  confirmed  facsimile  if sent during  normal
         business hours of the recipient, if not, then on the next business day;

                  (c)  three  (3)  business  days  after  having  been  sent  by
         registered  or  certified  mail,  return  receipt  requested,   postage
         prepaid; or

                  (d) one (1) day after  deposit  with a  nationally  recognized
         overnight   courier,   specifying  next  day  delivery,   with  written
         verification of receipt.

All communications shall be sent as follows:

                                      eLEC Communications Corp.
         If to the Company, to:       75 South Broadway, Suite 302
                                      White Plains, NY 10601

                                      Attention:  Chief Executive Officer

                                      Facsimile:  914-682-0820

                                      with a copy to:
                                      Pryor Cashman Sherman & Flynn LLP
                                      410 Park Avenue
                                      New York, NY  10022

                                      Attention:  Eric M. Hellige, Esq.

                                      Facsimile:  212-798-6380

                                       29
<PAGE>

         If to the Purchaser, to:     Laurus Master Fund, Ltd.
                                      c/o M&C Corporate Services Limited
                                      P.O.  Box 309 GT
                                      Ugland House
                                      George Town
                                      South Church Street
                                      Grand Cayman, Cayman Islands
                                      Facsimile:  345-949-8080

                                      with a copy to:

                                      John E.  Tucker, Esq.
                                      825 Third Avenue 14th Floor
                                      New York, NY 10022
                                      Facsimile:  212-541-4434

or at such  other  address as the  Company or the  Purchaser  may  designate  by
written  notice to the other parties hereto given in accordance  herewith.

            10.9  Attorneys'  Fees.  In the  event  that any suit or  action  is
                  ----------------
instituted to enforce any provision in this Agreement or any Related  Agreement,
the  prevailing  party in such  dispute  shall be entitled  to recover  from the
losing  party  all fees,  costs  and  expenses  of  enforcing  any right of such
prevailing  party under or with  respect to this  Agreement  and/or such Related
Agreement,  including,  without limitation, such reasonable fees and expenses of
attorneys and accountants,  which shall include,  without limitation,  all fees,
costs and expenses of appeals.

            10.10  Titles  and  Subtitles.   The  titles  of  the  sections  and
                   ----------------------
subsections of this Agreement are for  convenience of reference only and are not
to be considered in construing this Agreement.

            10.11  Facsimile  Signatures;  Counterparts.  This  Agreement may be
                   ------------------------------------
executed by  facsimile  signatures  and in any number of  counterparts,  each of
which shall be an  original,  but all of which  together  shall  constitute  one
agreement.

            10.12 Broker's  Fees.  Except as set forth on Schedule 11.12 hereof,
                  --------------
each party hereto  represents  and warrants  that no agent,  broker,  investment
banker,  person or firm acting on behalf of or under the authority of such party
hereto is or will be  entitled  to any  broker's  or  finder's  fee or any other
commission   directly  or  indirectly  in  connection   with  the   transactions
contemplated  herein.  Each party hereto  further agrees to indemnify each other
party for any  claims,  losses or  expenses  incurred  by such other  party as a
result of the representation in this Section 10.12 being untrue.

            10.13  Construction.  Each party acknowledges that its legal counsel
                   ------------
participated  in the  preparation of this  Agreement and the Related  Agreements
and, therefore, stipulates that the rule of construction that ambiguities are to
be  resolved   against  the   drafting   party  shall  not  be  applied  in  the
interpretation  of this  Agreement  or any Related  Agreement to favor any party
against the other.

                                       30
<PAGE>

         11.  Grant of Irrevocable Proxy.
              --------------------------

            For good and  valuable  consideration,  receipt  of which is  hereby
acknowledged,  Purchaser, hereby appoints the Company (the "Proxy Holder"), with
a mailing address set forth in Section 10.8, with full power of substitution, as
proxy,  to vote all shares of Common Stock of the Company,  now or in the future
owned by Purchaser (including shares acquired upon conversion of any convertible
security or exercise of any option or warrant  (other than the Warrant)) but not
including the Warrant Shares.

            This proxy is  irrevocable  and coupled with an  interest.  Upon the
sale or other transfer of the Warrant  Shares,  in whole or in part,  this proxy
shall  automatically  terminate with respect to such sold or transferred Warrant
Shares at the time of such sale  and/or  transfer  without  any  further  action
required by any Person.

            Purchaser  shall use its best  efforts to  forward  to Proxy  Holder
within two (2) business  days  following  Purchaser's  receipt  thereof,  at the
address  for Proxy  Holder set forth in Section  10.8 , copies of all  materials
received by Purchaser relating, in each case, to the solicitation of the vote of
shareholders of the Company.

            This proxy shall  remain in effect with respect to the Shares of the
Company during the period commencing on the date hereof and continuing until the
earlier of (a) payment in full of all obligations  and liabilities  owing by the
Company to Purchaser (as the same may be amended, restated, extended or modified
from time to time) and (b) the occurrence and  continuance of a default or event
of default under any document,  instrument or agreement between the Company and,
or made by the Company in favor of, Purchaser.

             [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK


                                       31
<PAGE>

         IN WITNESS  WHEREOF,  the parties  hereto have executed the  SECURITIES
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.


COMPANY:                                      PURCHASER:

ELEC COMMUNICATIONS, CORP.                    LAURUS MASTER FUND, LTD.


By:  /s/  Paul H. Riss                        By:   /s/ Eugene Grin
     --------------------------------              -----------------------------

Name:    Paul H. Riss                         Name:   Eugene Grin
       ------------------------------               ----------------------------

Title:   Chief Executive Officer              Title:   Director
       ------------------------------                ---------------------------


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                                    EXHIBIT A

                            FORM OF SECURED TERM NOTE




                                      A-1
<PAGE>




                                    EXHIBIT B

                                 FORM OF WARRANT




                                      B-1

<PAGE>




                                    EXHIBIT C

                                 FORM OF OPINION






                                       C-1

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                                    EXHIBIT D

                            FORM OF ESCROW AGREEMENT




                                      D-1