ex101.htm


    
      SECURITIES
        PURCHASE AGREEMENT

       

      Securities
        Purchase Agreement dated as of December 27, 2007 (this “Agreement”) by and between
        eTelCharge.com, a Nevada corporation, with principal executive offices located
        at 1636 N. Hampton, Suite 270, Desoto, Texas 75115 (the “Company”), and Golden Gate
        Investors, Inc. (“Holder”).

       

      WHEREAS,
        Holder desires to purchase from the Company, and the Company desires to issue
        and sell to Holder, upon the terms and subject to the conditions of this
        Agreement, a Convertible Debenture of the Company in the aggregate principal
        amount of $1,500,000 (the “Debenture”); and

       

      WHEREAS,
        upon the terms and subject to the conditions set forth in the Debenture,
        the
        Debenture is convertible into shares of the Company’s Common Stock (the “Common Stock”).

       

      NOW,
        THEREFORE, in consideration of the premises and the mutual covenants contained
        herein, the parties hereto, intending to be legally bound, hereby agree as
        follows:

       

      
        	
                 

              	
                I.

              	
                PURCHASE
                  AND SALE OF DEBENTURE 

              


      

       

      A.           
Transaction.  Holder
        hereby agrees to purchase from the Company, and the Company has offered and
        hereby agrees to issue and sell to Holder in a transaction exempt from the
        registration and prospectus delivery requirements of the Securities Act of
        1933,
        as amended (the “Securities
        Act”), the Debenture.

       

      B.           
Purchase
        Price; Form of
        Payment.  The purchase price for the Debenture to be purchased
        by Holder hereunder shall be $1,500,000 (the “Purchase
        Price”).  Simultaneously with the execution of this Agreement,
        Holder shall pay the Purchase Price by wire transfer of $200,000 in immediately
        available funds to the Company and delivery to the Company of a Secured
        Promissory Note in the principal amount of $1,300,000, in the form attached
        hereto as Exhibit
        A (the “Promissory
        Note”).  Simultaneous with the execution of this Agreement, the
        Company shall deliver the Debenture (which shall have been duly authorized,
        issued and executed I/N/O Holder or, if the Company otherwise has been notified,
        I/N/O Holder’s nominee) to the Holder.

       

      C.           
Second
        Debenture.  Provided that no Event of Default (as defined in
        the Debenture) has occurred under the Debenture (provided that Holder may,
        in
        its sole and absolute discretion waive the occurrence of such Event of Default
        with respect to this Section), Holder shall, in Holder’s sole and absolute
        discretion, select a date during the Second Debenture Period (as defined
        below)
        (with such date as selected by Holder referred to herein as the “Second Debenture Date”) at
        which the Company shall sell and the Holder shall purchase a debenture in
        the
        principal amount of $1,500,000 in exchange for a purchase price of $1,500,000
        (the “Second
        Debenture”), with such purchase price paid via a cash payment of $200,000
        and the issuance of a promissory note in the principal amount of $1,300,000
        (the
“Second Promissory
        Note”), with the form of and terms of the Second Debenture and the Second
        Promissory Note and payment of the purchase price subject to the same terms
        and
        conditions of this Agreement, the Debenture and the Promissory Note, as
        applicable, including the issuance of a Stock Pledge Agreement in the same
        form
        as the Stock Pledge Agreement (as defined herein) executed in connection
        withthe execution of the this Agreement, and when the
        Second Debenture is issued, the term “Debenture” as used in this Agreement shall
        be deemed to include the Second Debenture in all respects and when the Second
        Promissory Note is issued, the term “Promissory Note” as used in this Agreement
        shall be deemed to include the Second Promissory Note in all respects. The
        closing of the purchase and sale of the Second Debenture and the issuance
        of the
        Second Promissory Note shall occur upon the earlier of (i) thirty days from
        the
        Second Debenture Date, or (ii) the funding of the Second Debenture by
        Holder.  For the purposes of this Agreement, the “Second Debenture
        Period” shall mean the period that commences on the date hereof and terminates
        upon the date that the remaining Principal Amount of the Debenture issued
        on the
        date hereof is equal to an amount not greater than $250,000.


      
        
           

        

        
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      D.           
Third
        Debenture.  Provided that no Event of Default (as defined in
        the Debenture) has occurred under the Debenture (provided that Holder may,
        in
        its sole and absolute discretion waive the occurrence of such Event of Default
        with respect to this Section), Holder shall, in Holder’s sole and absolute
        discretion, select a date during the Third Debenture Period (as defined below)
        (with such date as selected by Holder referred to herein as the “Third Debenture Date”) at
        which the Company shall sell and the Holder shall purchase a debenture in
        the
        principal amount of $1,500,000 in exchange for a purchase price of $1,500,000
        (the “Third Debenture”),
        with such purchase price paid via a cash payment of $200,000 and the issuance
        of
        a promissory note in the principal amount of $1,300,000 (the “Third Promissory Note”), with
        the form of and terms of the Third Debenture and the Third Promissory Note
        and
        payment of the purchase price subject to the same terms and conditions of
        this
        Agreement, the Debenture and the Promissory Note, as applicable, including
        the
        issuance of a Stock Pledge Agreement in the same form as the Stock Pledge
        Agreement (as defined herein) executed in connection with the execution of
        the
        this Agreement, and when the Third Debenture is issued, the term “Debenture” as
        used in this Agreement shall be deemed to include the Third Debenture in
        all
        respects and when the Third Promissory Note is issued, the term “Promissory
        Note” as used in this Agreement shall be deemed to include the Third Promissory
        Note in all respects. The closing of the purchase and sale of the Third
        Debenture and the issuance of the Third Promissory Note shall occur upon
        the
        earlier of (i) thirty days from the Third Debenture Date, or (ii) the funding
        of
        the Third Debenture by Holder.  For the purposes of this Agreement,
        the “Third Debenture Period” shall mean the period that commences on the date of
        the issuance of the Second Debenture to Holder and terminates upon the date
        that
        the remaining Principal Amount of the Second Debenture is equal to an amount
        not
        greater than $250,000.

       

      E.           
Fourth
        Debenture.  Provided that no Event of Default (as defined in
        the Debenture) has occurred under the Debenture (provided that Holder may,
        in
        its sole and absolute discretion waive the occurrence of such Event of Default
        with respect to this Section), Holder shall, in Holder’s sole and absolute
        discretion, select a date during the Fourth Debenture Period (as defined
        below)
        (with such date as selected by Holder referred to herein as the “Fourth Debenture Date”) at
        which the Company shall sell and the Holder shall purchase a debenture in
        the
        principal amount of $1,500,000 in exchange for a purchase price of $1,500,000
        (the “Fourth
        Debenture”), with such purchase price paid via a cash payment of $200,000
        and the issuance of a promissory note in the principal amount of $1,300,000
        (the
“Fourth Promissory
        Note”), with the form of and terms of the Fourth Debenture and the Fourth
        Promissory Note and payment of the purchase price subject to the same terms
        and
        conditions of this Agreement, the Debentureand the
        Promissory Note, as applicable, including the issuance of a Stock Pledge
        Agreement in the same form as the Stock Pledge Agreement (as defined herein)
        executed in connection with the execution of the this Agreement, and when
        the
        Fourth Debenture is issued, the term “Debenture” as used in this Agreement shall
        be deemed to include the Fourth Debenture in all respects and when the Fourth
        Promissory Note is issued, the term “Promissory Note” as used in this Agreement
        shall be deemed to include the Fourth Promissory Note in all respects. The
        closing of the purchase and sale of the Fourth Debenture and the issuance
        of the
        Fourth Promissory Note shall occur upon the earlier of (i) thirty days from
        the
        Fourth Debenture Date, or (ii) the funding of the Fourth Debenture by
        Holder.  For the purposes of this Agreement, the “Fourth Debenture
        Period” shall mean the period that commences on the date of the issuance of the
        Third Debenture to Holder and terminates upon the date that the remaining
        Principal Amount of the Third Debenture is equal to an amount not greater
        than
        $250,000.


      
        
           

        

        
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      F.           
Non-Funding
        Penalty.  Notwithstanding the foregoing requirements of Holder
        to purchase each of the Second Debenture, Third Debenture and Fourth Debenture
        (each, an “Additional
        Debenture” and collectively, the “Additional Debentures”), in
        the event that Holder does not purchase any or all of the Additional Debentures
        within 10 business days of the date that the delivery of funds associated
        with
        such purchase would otherwise be due, upon 20 days’ prior written notice from
        the Company of such failure to so purchase any or all of the Additional
        Debentures, Holder shall pay an amount equal to $100,000 (the “Non-Funding Penalty”) to the
        Company.  The amount payable by the Holder to the Company in
        connection with any damages, losses, claims or other amounts in connection
        with
        the failure of the Holder to purchase any or all of the Additional Debentures
        shall not exceed $100,000 in the aggregate.  Upon the payment of the
        Non-Funding Penalty to the Company, the Holder shall have no further obligations
        or duties under this Agreement, the Debenture or any agreements or debentures
        entered into in connection with any of the Additional Debentures, if any,
        with
        respect to the purchase of any Additional Debenture or other duties to deliver
        any additional funds to the Company, provided however, that other than with
        respect to the removal of the requirement to enter into any Additional
        Debenture, the Company and the Holder shall remain obligated and bound by
        the
        remaining terms and conditions of this Agreement, the Debenture, the Promissory
        Note and any agreements or debentures previously entered into in connection
        with
        any Additional Debenture.  The Company’s sole and exclusive remedy in
        the event that the Holder fails to purchase any or all of the Additional
        Debentures shall be the right of the Company to receive the Non-Funding Penalty
        from the Holder.

       

      
        	
                 

              	
                II.

              	
                HOLDER’S
                  REPRESENTATIONS AND WARRANTIES 

              


      

       

      Holder
        represents and warrants to and covenants and agrees with the Company as
        follows:

       

      1.           
        Holder is purchasing the Debenture and the Common Stock issuable upon conversion
        or redemption of the Debenture (the “Conversion Shares” and,
        collectively with the Debenture, the “Securities”) for its own
        account, for investment purposes only and not with a view towards or in
        connection with the public sale or distribution thereof in violation of the
        Securities Act.


      
        
           

        

        
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      2.           
        Holder is (i) an “accredited investor” within the meaning of Rule 501 of
        Regulation D under the Securities Act, (ii) experienced in making investments
        of
        the kind contemplated by this Agreement, (iii) capable, by reason of its
        business and financial experience, of evaluating the relative merits and
        risks
        of an investment in the Securities, and (iv) able to afford the loss of its
        investment in the Securities.

       

      3.           
        Holder understands that the Securities are being offered and sold by the
        Company
        in reliance on an exemption from the registration requirements of the Securities
        Act and equivalent state securities and “blue sky” laws, and that the Company is
        relying upon the accuracy of, and Holder’s compliance with, Holder’s
        representations, warranties and covenants set forth in this Agreement to
        determine the availability of such exemption and the eligibility of Holder
        to
        purchase the Securities;

       

      4.           
        Holder understands that the Securities have not been approved or disapproved
        by
        the Securities and Exchange Commission (the “Commission”) or any state or
        provincial securities commission.

       

      5.           
        This Agreement has been duly and validly authorized, executed and delivered
        by
        Holder and is a valid and binding agreement of Holder enforceable against
        it in
        accordance with its terms, subject to applicable bankruptcy, insolvency,
        fraudulent conveyance, reorganization, moratorium and similar laws affecting
        creditors’ rights and remedies generally and except as rights to indemnity and
        contribution may be limited by federal or state securities laws or the public
        policy underlying such laws.

       

      
        	
                 

              	
                III.

              	
                THE
                  COMPANY’S REPRESENTATIONS 

              


      

       

      The
        Company represents and warrants as of the date hereof to the Holder that,
        except
        as set forth on Schedule III attached hereto, the statements contained in
        this
        Section 3 are complete and accurate as of the date of this
        Agreement.  As used in this Section 3, the term “Knowledge” shall mean
        the knowledge of the members of the board of directors of the Company and/or
        the
        officers or employees of the Company after reasonable investigation.

       

      A.           
        Capitalization.

       

      1.           
        The authorized capital stock of the Company consists of 400,000,000 shares
        of
        Common Stock of which 282,087,602 shares are issued and outstanding as of
        the
        date hereof and are fully paid and nonassessable. The amount, exercise,
        conversion or subscription price and expiration date for each outstanding
        option
        and other security or agreement to purchase shares of Common Stock is accurately
        set forth on Schedule
        III.A.1.

       

      2.           
        The Conversion Shares have been duly and validly authorized and reserved
        for
        issuance by the Company (based, for the purposes of this Section III.A.2.
        only,
        on an assumed $0.05 Conversion Price), and, when issued by the Company upon
        conversion of the Debenture, will be duly and validly issued, fully paid
        and
        nonassessable and will not subject the holder thereof to personal liability
        by
        reason of being such holder.


      
        
           

        

        
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      3.           
        Except as disclosed on Schedule III.A.3.,
        there are no preemptive, subscription, “call,” right of first refusal or other
        similar rights to acquire any capital stock of the Company or other voting
        securities of the Company that have been issued or granted to any person
        and no
        other obligations of the Company to issue, grant, extend or enter into any
        security, option, warrant, “call,” right, commitment, agreement, arrangement or
        undertaking with respect to any of their respective capital stock.

       

      B.           
        Organization; Reporting Company Status.

       

      1.           
        The Company is a corporation duly organized, validly existing and in good
        standing under the laws of the state or jurisdiction in which it is incorporated
        and is duly qualified as a foreign corporation in all jurisdictions in which
        the
        failure so to qualify would reasonably be expected to have a material adverse
        effect on the business, properties, prospects, condition (financial or
        otherwise) or results of operations of the Company or on the consummation
        of any
        of the transactions contemplated by this Agreement (a “Material Adverse
        Effect”).

       

      2.           
        The Company is subject to the reporting requirements of the Securities Exchange
        Act of 1934, as amended (the “Exchange Act”).  The
        Common Stock is traded on the OTC Bulletin Board service of the National
        Association of Securities Dealers, Inc. (“OTCBB”) and the Company
        has
        not received any notice regarding, and to its Knowledge there is no threat
        of,
        the termination or discontinuance of the eligibility of the Common Stock
        for
        such trading.

       

      C.           
Authorization.  The
        Company (i) has duly and validly authorized and reserved for issuance shares
        of
        Common Stock, which is a number sufficient for the conversion of the Debenture
        in full and (ii) at all times from and after the date hereof shall have a
        sufficient number of shares of Common Stock duly and validly authorized and
        reserved for issuance to satisfy the conversion of the Debenture in
        full.  The Company understands and acknowledges the potentially
        dilutive effect on the Common Stock of the issuance of the Conversion
        Shares.  The Company further acknowledges that its obligation to issue
        Conversion Shares upon conversion of the Debenture in accordance with this
        Agreement is absolute and unconditional regardless of the dilutive effect
        that
        such issuance may have on the ownership interests of other stockholders of
        the
        Company and notwithstanding the commencement of any case under 11 U.S.C.
        § 101 et
        seq. (the “Bankruptcy
        Code”).  In the event the Company is a debtor under the
        Bankruptcy Code, the Company hereby waives to the fullest extent permitted
        any
        rights to relief it may have under 11 U.S.C. § 362 in respect of the
        conversion of the Debenture.  The Company agrees, without cost or
        expense to Holder, to take or consent to any and all action necessary to
        effectuate relief under 11 U.S.C. § 362.

       

      D.           
Authority;
        Validity and
        Enforceability.  The Company has the requisite corporate power
        and authority to enter into the Documents (as such term is hereinafter defined)
        and to perform all of its obligations hereunder and thereunder (including
        the
        issuance, sale and delivery to Holder of the Securities).  The
        execution, delivery and performance by the Company of the Documents and the
        consummation by the Company of the transactions contemplated hereby and thereby
        (including, without limitation, the issuance of the Debenture and the issuance
        and reservation for issuance of the Conversion Shares) have been duly and
        validly authorized byall
        necessary corporate action on the part of the Company and no further filing,
        consent, or authorization is required by the Company, its board of directors,
        or
        its stockholders.  Each of the Documents has been duly and validly
        executed and delivered by the Company and each Document constitutes a valid
        and
        binding obligation of the Company enforceable against it in accordance with
        its
        terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
        reorganization, moratorium and similar laws affecting creditors’ rights and
        remedies generally and except as rights to indemnity and contribution may
        be
        limited by federal or state securities laws or the public policy underlying
        such
        laws.  The Securities have been duly and validly authorized for
        issuance by the Company and, when executed and delivered by the Company,
        will be
        valid and binding obligations of the Company enforceable against it in
        accordance with their respective terms, subject to applicable bankruptcy,
        insolvency, fraudulent conveyance, reorganization, moratorium and similar
        laws
        affecting creditors’ rights and remedies generally.  For purposes of
        this Agreement, the term “Documents” means (i) this
        Agreement; (ii) the Debenture; (iii) the Promissory Note; and (iv) the Stock
        Pledge Agreement dated as of the date hereof between the Holder and the parties
        listed on the signature pages thereto (the “Stock Pledge
        Agreement”).


      
        
           

        

        
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      E.           
Validity
        of Issuance of the
        Securities.  The Debenture and the Conversion Shares upon their
        issuance in accordance with the Debenture, will be validly issued and
        outstanding, fully paid and nonassessable, and not subject to any preemptive
        rights, rights of first refusal, tag-along rights, drag-along rights or other
        similar rights.

       

      F.           
Non-contravention.  The
        execution and delivery by the Company of the Documents, the issuance of the
        Securities, and the consummation by the Company of the other transactions
        contemplated hereby and thereby do not, and compliance with the provisions
        of
        this Agreement and other Documents will not, conflict with, or result in
        any
        violation of, or default (with or without notice or lapse of time, or both)
        under, or give rise to a right of termination, cancellation or acceleration
        of
        any obligation or loss of a material benefit under, or result in the creation
        of
        any Lien (as such term is hereinafter defined) upon any of the properties
        or
        assets of the Company or any of its Subsidiaries under, or result in the
        termination of, or require that any consent be obtained or any notice be
        given
        with respect to (i) the Articles or Certificate of Incorporation or By-Laws
        of
        the Company or the comparable charter or organizational documents of any
        of its
        Subsidiaries, in each case as amended to the date of this Agreement, (ii)
        any
        loan or credit agreement, debenture, bond, mortgage, indenture, lease, contract
        or other agreement, instrument or permit applicable to the Company or any
        of its
        Subsidiaries or their respective properties or assets or (iii) any statute,
        law,
        rule or regulation applicable to, or any judgment, decree or order of any
        court
        or government body having jurisdiction over, the Company or any of its
        Subsidiaries or any of their respective properties or assets.  A
“Lien” means any
        assignment, transfer, pledge, mortgage, security interest or other encumbrance
        of any nature, or an agreement to do so, or the ownership or acquisition
        or
        agreement to acquire any asset or property of any character subject to any
        of
        the foregoing encumbrances (including any conditional sale contract or other
        title retention agreement).

       

      G.           
Approvals.  No
        authorization, approval or consent of any court or public or governmental
        authority is required to be obtained by the Company for the issuance and
        sale
        ofthe Securities to Holder as contemplated by this
        Agreement, except such authorizations, approvals and consents as have been
        obtained by the Company prior to the date hereof.


      
        
           

        

        
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      H.           
Commission
        Filings.  Except as set forth on Schedule
        III.H., the
        Company has properly and timely filed (or if not timely filed, such filing
        have
        since been made) with the Commission all reports, proxy statements, forms
        and
        other documents required to be filed with the Commission under the Securities
        Act and the Exchange Act since becoming subject to such Acts (the “Commission
        Filings”).  As of their respective dates, (i) the Commission
        Filings complied in all material respects with the requirements of the
        Securities Act or the Exchange Act, as the case may be, and the rules and
        regulations of the Commission promulgated thereunder applicable to such
        Commission Filings and (ii) none of the Commission Filings contained at the
        time
        of its filing any untrue statement of a material fact or omitted to state
        a
        material fact required to be stated therein or necessary in order to make
        the
        statements therein, in light of the circumstances under which they were made,
        not misleading.  The financial statements of the Company included in
        the Commission Filings, as of the dates of such documents, were true and
        complete in all material respects and complied with applicable accounting
        requirements and the published rules and regulations of the Commission with
        respect thereto, were prepared in accordance with generally accepted accounting
        principles in the United States (“GAAP”) (except in the
        case of
        unaudited statements permitted by Form 10-QSB under the Exchange Act) applied
        on
        a consistent basis during the periods involved (except as may be indicated
        in
        the notes thereto) and fairly presented the consolidated financial position
        of
        the Company and its Subsidiaries as of the dates thereof and the consolidated
        results of their operations and cash flows for the periods then ended (subject,
        in the case of unaudited statements, to normal year-end audit adjustments
        that
        in the aggregate are not material and to any other adjustment described
        therein).

       

      I.           
Full
        Disclosure.  There is no fact known to the Company (other than
        general economic or industry conditions known to the public generally) that
        has
        not been fully disclosed in the Commission Filings that (i) reasonably could
        be
        expected to have a Material Adverse Effect or (ii) reasonably could be
        expected to materially and adversely affect the ability of the Company to
        perform its obligations pursuant to the Documents.

       

      J.           
Absence
        of Events of
        Default.  No “Event of Default” (as defined
        in any agreement or instrument to which the Company is a party) and no event
        which, with notice, lapse of time or both, would constitute an Event of Default
        (as so defined), has occurred and is continuing.

       

      K.           
Securities
        Law
        Matters.  Assuming the accuracy of the representations and
        warranties of Holder set forth in Article II, the offer and sale by the Company
        of the Securities is exempt from (i) the registration and prospectus delivery
        requirements of the Securities Act and the rules and regulations of the
        Commission thereunder and (ii) the registration and/or qualification provisions
        of all applicable state and provincial securities and “blue sky”
laws.  The Company shall not directly or indirectly take, and shall
        not permit any of its directors, officers or Affiliates directly or indirectly
        to take, any action (including, without limitation, any offering or sale
        to any
        person or entity of any security similar to the Debenture) which will make
        unavailable the exemption from Securities Act registration being relied upon
        by
        the Company forthe
        offer
        and sale to Holder of the Debenture and the Conversion Shares, as contemplated
        by this Agreement.  No form of general solicitation or advertising has
        been used or authorized by the Company or any of its officers, directors
        or
        Affiliates in connection with the offer or sale of the Debenture (and the
        Conversion Shares), as contemplated by this Agreement or any other agreement
        to
        which the Company is a party.  As used in the Documents, “Affiliate” has the meaning
        ascribed to such term in Rule 12b-2 under the Exchange Act.


      
        
           

        

        
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      L.           
Registration
        Rights.  Except as set forth on Schedule III.L.,
        no Person has, and as of the Closing (as such term is hereinafter defined),
        no
        Person shall have, any demand, “piggy-back” or other rights to cause the Company
        to file any registration statement under the Securities Act relating to any
        of
        its securities or to participate in any such registration statement.

       

      M.           
Interest.  The
        timely payment of interest on the Debenture is not prohibited by the Articles
        or
        Certificate of Incorporation or By-Laws of the Company, in each case as amended
        to the date of this Agreement, or any agreement, contract, document or other
        undertaking to which the Company is a party.

       

      N.           
No
        Misrepresentation.  No representation or warranty of the
        Company contained in this Agreement or any of the other Documents, any schedule,
        annex or exhibit hereto or thereto or any agreement, instrument or certificate
        furnished by the Company to Holder pursuant to this Agreement contains any
        untrue statement of a material fact or omits to state a material fact required
        to be stated therein or necessary to make the statements therein not
        misleading.

       

      O.           
Finder’s
        Fee.  There
        is no finder’s fee, brokerage commission or like payment in connection with the
        transactions contemplated by this Agreement for which Holder is liable or
        responsible.

       

      P.           
Subsidiaries.  Other
        than the
        Subsidiaries, the Company does not presently own or control, directly or
        indirectly, any interest in any other corporation, association, or other
        business entity.  The Company is not a participant in any joint
        venture, partnership, or similar arrangement.

       

      Q.           
Litigation.  Other
        than as
        disclosed in the Commission Filings, there is no action, suit, proceeding
        or
        investigation pending or, to the Company’s knowledge, currently threatened
        against the Company or its Subsidiaries that questions the validity of this
        Agreement, the Documents, or the right of the Company to enter into such
        agreements, or to consummate the transactions contemplated hereby or thereby,
        or
        that might result, either individually or in the aggregate, in any material
        adverse changes in the business, assets or condition of the Company and its
        Subsidiaries, taken as a whole, financially or otherwise, or any change in
        the
        current equity ownership of the Company or its Subsidiaries.  Neither
        the Company nor its Subsidiaries are parties 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 its Subsidiaries currently pending or that
        the
        Company or its Subsidiaries intends to initiate.


      
        
           

        

        
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      R.           
Agreements.  Except
        for agreements explicitly contemplated hereby, or disclosed in the Commission
        Filings, there are no agreements, understandings or proposed transactions
        between the Company and any of its officers, directors, Affiliates, or any
        affiliate thereof.

       

      S.           
Tax
        Returns.  Except
        as disclosed in the Commission Filings, the Company and each of its Subsidiaries
        has made and filed all federal and state income and all other tax returns,
        reports and declarations required by any jurisdiction to which it is subject
        and
        (unless and only to the extent that the Company and each of its Subsidiaries
        has
        set aside on its books provisions reasonably adequate for the payment of
        all
        unpaid and unreported taxes) has paid all taxes and other governmental
        assessments and charges that are material in amount, shown or determined
        to be
        due on such returns, reports and declarations, except those being contested
        in
        good faith and has set aside on its books provision reasonably adequate for
        the
        payment of all taxes for periods subsequent to the periods to which such
        returns, reports or declarations apply. There are no unpaid taxes in any
        material amount claimed to be due by the taxing authority of any jurisdiction,
        and the officers of the Company know of no basis for any such claim.

       

      
        	
                 

              	
                IV.

              	
                CERTAIN
                  COVENANTS AND ACKNOWLEDGMENTS 

              


      

       

      A.           
Filings.  The
        Company shall make all necessary Commission Filings and “blue sky” filings
        required to be made by the Company in connection with the sale of the Securities
        to Holder as required by all applicable laws, and shall provide a copy thereof
        to Holder promptly after such filing.

       

      B.           
Reporting
        Status.  So long as Holder beneficially owns any of the
        Securities, the Company shall timely file all reports required to be filed
        by it
        with the Commission pursuant to Section 13 or 15(d) of the Exchange Act or
        otherwise required by the Exchange Act.  On or before the fourth
        Business Day following the date hereof, the Company shall file a Current
        Report
        on Form 8-K describing the terms of the transactions contemplated by the
        Documents in the form required by the Exchange Act and attaching the material
        Documents (including, without limitation, this Agreement, the Debenture and
        the
        Stock Pledge Agreement) as exhibits to such filing.

       

      C.           
Listing.  Except
        to
        the extent the Company lists its Common Stock on The New York Stock Exchange,
        The American Stock Exchange or The Nasdaq Stock Market, the Company shall
        use
        its best efforts to maintain its listing of the Common Stock on
        OTCBB.  If the Common Stock is delisted from OTCBB, the Company will
        use its best efforts to list the Common Stock on the most liquid national
        securities exchange or quotation system that the Common Stock is qualified
        to be
        listed on.

       

      D.           
Reserved
        Conversion Common
        Stock.  The Company at all times from and after the date hereof
        shall have such number of shares of Common Stock duly and validly authorized
        and
        reserved for issuance as shall be sufficient for the conversion in full of
        the
        Debenture, provided however that the Company shall not be required to authorize
        and reserve additional shares of Common Stock required for the conversion
        of any
        Additional Debenture until the 6 month anniversary of the date hereof.


      
        
           

        

        
          -9-

          
            

          

        

        
           

        

      


       

      E.           
Information.  Each
        of the parties hereto acknowledges and agrees that Holder shall not be provided
        with, nor be given access to, any material non-public information relating
        to
        the Company.

       

      F.           
Accounting
        and
        Reserves.  The Company shall maintain a standard and uniform
        system of accounting and shall keep proper books and records and accounts
        in
        which full, true, and correct entries shall be made of its transactions,
        all in
        accordance with GAAP applied on consistent basis through all periods, and
        shall
        set aside on such books for each fiscal year all such reserves for depreciation,
        obsolescence, amortization, bad debts and other purposes in connection with
        its
        operations as are required by such principles so applied.

       

      G.           
Transactions
        with
        Affiliates.  So long as the Debenture is outstanding, neither
        the Company nor any of its Subsidiaries shall, directly or indirectly, enter
        into any material transaction or agreement with any stockholder, officer,
        director or Affiliate of the Company or family member of any officer, director
        or Affiliate of the Company, unless the transaction or agreement is
        (i) reviewed and approved by a majority of Disinterested Directors (as such
        term is hereinafter defined) and (ii) on terms no less favorable to the
        Company or the applicable Subsidiary than those obtainable from a nonaffiliated
        person.  A “Subsidiary” means any entity
        of which securities or other ownership interests having ordinary voting power
        to
        elect a majority of the board of directors or other persons performing similar
        functions are owned directly or indirectly by the Company.  A “Disinterested Director” shall
        mean a director of the Company who is not and has not been an officer or
        employee of the Company and who is not a member of the family of, controlled
        by
        or under common control with, any such officer or employee.

       

      H.           
Certain
        Restrictions.  So long as the Debenture is outstanding, no
        dividends shall be declared or paid or set apart for payment nor shall any
        other
        distribution be declared or made upon any capital stock of the Company, nor
        shall any capital stock of the Company be redeemed, purchased or otherwise
        acquired (other than a redemption, purchase or other acquisition of shares
        of
        Common Stock made for purposes of an employee incentive or benefit plan
        (including a stock option plan) of the Company or pursuant to any of the
        security agreements listed on Schedule IV.H) for
        any consideration by the Company, directly or indirectly, nor shall any moneys
        be paid to or made available for a sinking fund for the redemption of any
        Common
        Stock.

       

      I.           
Short
        Selling. So long as
        the Debenture is outstanding, Holder agrees and covenants on its behalf and
        on
        behalf of its affiliates that neither Holder nor its affiliates shall at
        any
        time engage in any short sales with respect to the Company’s Common Stock, or
        sell put options or similar instruments with respect to the Company’s Common
        Stock. The parties acknowledge that Holder shall be entitled, subject to
        applicable securities laws, to sell the Common Stock from each Debenture
        conversion immediately upon submission of the applicable Debenture Conversion
        Notice, and payment of the purchase price, to the Company for such Common
        Stock.


      
        
           

        

        
          -10-

          
            

          

        

        
           

        

      


      
         

        
          	
                   

                	
                  V.

                	
                  ISSUANCE
                    OF COMMON STOCK

                


        

               
          

      

       

      A.           
The
        Company
        undertakes and agrees that no instruction other than the instructions referred
        to in this Article V shall be given to its transfer agent for the Conversion
        Shares and that the Conversion Shares shall otherwise be freely transferable
        on
        the books and records of the Company as and to the extent provided in this
        Agreement and applicable law. Nothing contained in this Section V.A. shall
        affect in any way Holder’s obligations and agreement to comply with all
        applicable securities laws upon resale of such Common Stock.

       

      B.           
Holder
        shall
        have the right to convert the Debenture by telecopying an executed and completed
        Conversion Notice (as such term is defined in the Debenture) to the Company.
        Each date on which a Conversion Notice is telecopied to and received by the
        Company in accordance with the provisions hereof shall be deemed a Conversion
        Date (as such term is defined in the Debenture). The Company shall cause
        the
        transfer agent to transmit the certificates evidencing the Common Stock issuable
        upon conversion of the Debenture (together with a new debenture, if any,
        representing the principal amount of the Debenture not being so converted)
        to
        Holder via express courier, or if a Registration Statement covering the Common
        Stock has been declared effective by the SEC by electronic transfer, within
        three (3) business days after receipt by the Company of the Conversion Notice,
        as applicable (the “Delivery
        Date”).

       

      C.           
Upon
        the
        conversion of the Debenture or respective part thereof, the Company shall,
        at
        its own cost and expense, take all necessary action (including the issuance
        of
        an opinion of counsel) to assure that the Company's transfer agent shall
        issue
        stock certificates in the name of Holder (or its nominee) or such other persons
        as designated by Holder and in such denominations to be specified at conversion
        or exercise representing the number of shares of common stock issuable upon
        such
        conversion or exercise. The Company warrants that the Conversion Shares will
        be
        unlegended, free-trading, and freely transferable, and will not contain a
        legend
        restricting the resale or transferability of the Company Common Stock provided
        the Conversion Shares, as applicable, are being sold pursuant to an effective
        registration statement covering the Common Stock to be sold or is otherwise
        freely transferable under Rule 144(k) promulgated under the Securities Act,
        or
        its successor.

       

      D.           
The
        Company
        understands that a delay in the delivery of the Common Stock in the form
        required pursuant to this section, or the Mandatory Redemption Amount described
        in Section E hereof, beyond the Delivery Date or Mandatory Redemption Payment
        Date (as hereinafter defined) could result in economic loss to the Holder.
        As
        compensation to the Holder for such loss, the Company agrees to pay late
        payments to the Holder for late issuance of Common Stock in the form required
        pursuant to Section E hereof upon Conversion of the Debenture or late payment
        of
        the Mandatory Redemption Amount, in the amount of $100 per business day after
        the Delivery Date or Mandatory Redemption Payment Date, as the case may be,
        for
        each $10,000 of Debenture principal amount being converted or redeemed. The
        Company shall pay any payments incurred under this Section in immediately
        available funds upon demand. Furthermore, in addition to any other remedies
        which may be available to the Holder, in the event that the Company fails
        for
        any reason to effect delivery of the Common Stock by the Delivery Date or
        make
        payment by the Mandatory Redemption Payment Date, the Holder will beentitled
        to revoke all or part of the relevant Notice of Conversion or rescind all
        or
        part of the notice of Mandatory Redemption by delivery of a notice to such
        effect to the Company whereupon the Company and the Holder shall each be
        restored to their respective positions immediately prior to the delivery
        of such
        notice, except that late payment charges described above shall be payable
        through the date notice of revocation or rescission is given to the
        Company.


      
        
           

        

        
          -11-

          
            

          

        

        
           

        

      

       

      E.           
Mandatory
        Redemption. In the
        event the Company is prohibited from issuing Common Stock, or fails to timely
        deliver Common Stock on a Delivery Date, or upon the occurrence of an Event
        of
        Default (as defined in the Debenture) or for any reason other than pursuant
        to
        the limitations set forth herein, then at the Holder's election, the Company
        must pay to the Holder ten (10) business days after request by the Holder
        or on
        the Delivery Date (if requested by the Holder) a sum of money determined
        by
        multiplying up to the outstanding Principal Amount (as defined in the Debenture)
        of the Debenture designated by the Holder by 120%, together with accrued
        but
        unpaid interest thereon ("Mandatory Redemption
        Payment"). The Mandatory Redemption Payment must be received by the
        Holder on the same date as the Company Common Stock otherwise deliverable
        or
        within ten (10) business days after request, whichever is sooner ("Mandatory Redemption Payment
        Date"). Upon receipt of the Mandatory Redemption Payment, the
        corresponding Debenture principal and interest will be deemed paid and no
        longer
        outstanding.

       

      F.           
Buy-In.
        In addition to any
        other rights available to the Holder, if the Company fails to deliver to
        the
        Holder such Common Stock issuable upon conversion of a Debenture by the Delivery
        Date and if ten (10) days after the Delivery Date the Holder purchases (in
        an
        open market transaction or otherwise) shares of Common Stock to deliver in
        satisfaction of a sale by the Holder of the Common Stock which the Holder
        anticipated receiving upon such conversion (a "Buy-In"), then the Company
        shall pay in cash to the Holder (in addition to any remedies available to
        or
        elected by the Holder) the amount by which (A) the Holder's total purchase
        price
        (including brokerage commissions, if any) for the shares of Common Stock
        so
        purchased exceeds (B) the aggregate principal and/or interest amount of the
        Debenture for which such conversion was not timely honored, together with
        interest thereon at a rate of 15% per annum, accruing until such amount and
        any
        accrued interest thereon is paid in full (which amount shall be paid as
        liquidated damages and not as a penalty). For example, if the Holder purchases
        shares of Common Stock having a total purchase price of $11,000 to cover
        a
        Buy-In with respect to an attempted conversion of $10,000 of Debenture
        principal, the Company shall be required to pay the Holder $1,000, plus
        interest. The Holder shall provide the Company written notice indicating
        the
        amounts payable to the Holder in respect of the Buy-In.

       

      G.           
The
        Securities shall be deemed delivered by the Company to the Holder upon the
        Holder’s delivery of the Purchase Price (including the Promissory Note) at the
        Closing.

       

      
        	
                 

              	
                VI.

              	
                CLOSING
                  DATE 

              


      

       

      The
        “Closing” shall occur by
        the delivery: (i) to the Holder of the documents evidencing the Debenture
        and
        all other Documents, and (ii) to the Company the Purchase Price,
        includingthe
        Promissory Note, and the date on which the Closing occurs shall be referred
        to
        herein as the “Closing
        Date”.


      
        
           

        

        
          -12-

          
            

          

        

        
           

        

      

       

       

      
        	
                 

              	
                VII.

              	
                CONDITIONS
                  TO THE COMPANY’S OBLIGATIONS 

              


      

       

      Holder
        understands that the Company’s obligation to sell the Debenture on the Closing
        Date to Holder pursuant to this Agreement is conditioned upon:

       

      A.           
Delivery
        by
        Holder to the Company of the Purchase Price, including the Promissory Note
        evidencing such applicable portion of the Purchase Price;

       

      B.           
The
        accuracy
        on the Closing Date of the representations and warranties of Holder contained
        in
        this Agreement and the other Documents as if made on the Closing Date (except
        for representations and warranties which, by their express terms, speak as
        of
        and relate to a specified date, in which case such accuracy shall be measured
        as
        of such specified date) and the performance by Holder in all material respects
        on or before the Closing Date of all covenants and agreements of Holder required
        to be performed by it pursuant to this Agreement and the other Documents
        on or
        before the Closing Date; and

       

      C.           
There
        shall
        not be in effect any law or order, ruling, judgment or writ of any court
        or
        public or governmental authority restraining, enjoining or otherwise prohibiting
        any of the transactions contemplated by this Agreement.

       

      
        	
                VIII.

              	
                CONDITIONS
                  TO HOLDER’S OBLIGATIONS 

              


      

       

      The
        Company understands that Holder’s obligation to purchase the Securities on the
        Closing Date pursuant to this Agreement is conditioned upon:

       

      A.           
Delivery
        by
        the Company of the Debenture (I/N/O Holder or I/N/O Holder’s nominee) to
        Holder;

       

      B.           
The
        accuracy
        on the Closing Date of the representations and warranties of the Company
        contained in this Agreement as if made on the Closing Date (except for
        representations and warranties which, by their express terms, speak as of
        and
        relate to a specified date, in which case such accuracy shall be measured
        as of
        such specified date) and the performance by the Company in all respects on
        or
        before the Closing Date of all covenants and agreements of the Company required
        to be performed by it pursuant to this Agreement on or before the Closing
        Date,
        all of which shall be confirmed to Holder by delivery of the certificate
        of the
        chief executive officer of the Company to that effect;

       

      C.           
The
        Company
        shall have delivered to the Holder a certificate of the Company executed
        by an
        officer of the Company, dated as of the Closing, certifying the resolutions
        adopted by the Company’s board of directors authorizing the execution of the
        Documents, the issuance of the Securities, and the transactions contemplated
        hereby, and copies of any required third party consents, approvals and filings
        required in connection with the consummation of the transactions contemplated
        by
        this Agreement;


      
        
           

        

        
          -13-

          
            

          

        

        
           

        

      


       

      D.           
There
        not
        having occurred (i) any general suspension of trading in, or limitation on
        prices listed for, the Common Stock on the OTCBB/Pink Sheet, (ii) the
        declaration of a banking moratorium or any suspension of payments in respect
        of
        banks in the United States, (iii) the commencement of a war, armed hostilities
        or other international or national calamity directly or indirectly involving
        the
        United States or any of its territories, protectorates or possessions or
        (iv) in the case of the foregoing existing at the date of this Agreement, a
        material acceleration or worsening thereof;

       

      E.           
There
        not
        having occurred any event or development, and there being in existence no
        condition, having or which reasonably and foreseeably could have a Material
        Adverse Effect;

       

      F.           
There
        shall
        not be in effect any law, order, ruling, judgment or writ of any court or
        public
        or governmental authority restraining, enjoining or otherwise prohibiting
        any of
        the transactions contemplated by this Agreement;

       

      F.           
The
        Company
        shall have obtained all consents, approvals or waivers from governmental
        authorities and third persons necessary for the execution, delivery and
        performance of the Documents and the transactions contemplated thereby, all
        without material cost to the Company;

       

      G.           
Holder
        shall
        have received such additional documents, certificates, payment, assignments,
        transfers and other deliveries as it or its legal counsel may reasonably
        request
        and as are customary to effect a closing of the matters herein
        contemplated;

      


      H.           
Delivery
        by
        the Company of an enforceability opinion with respect to this Agreement and
        the
        transactions contemplated hereunder from its outside counsel in form and
        substance satisfactory to Holder;

      


      I.           
Delivery
        to
        the Holder of the fully executed Stock Pledge Agreement and the delivery
        of the
        Pledged Shares (as defined in the Stock Pledge Agreement) to the Holder in
        connection therewith; and

      


      I.           
Delivery
        by
        the Company of a valid waiver of any preemptive rights held by the individuals
        and/or parties listed on Schedule III.A.3 hereto in form and substance
        satisfactory to Holder.

       

      
        	
                 

              	
                IX.

              	
                SURVIVAL;
                  INDEMNIFICATION 

              


      

       

      A.           
The
        representations, warranties and covenants made by each of the Company and
        Holder
        in this Agreement, the annexes, schedules and exhibits hereto and in each
        instrument, agreement and certificate entered into and delivered by them
        pursuant to this Agreement shall survive the Closing and the consummation
        of the
        transactions contemplated hereby. In the event of a breach or violation of
        any
        of such representations, warranties or covenants, the party to whom such
        representations, warranties or covenants have been made shall have all rights
        and remedies for such breach or violation available to it under the provisions
        of this Agreement orotherwise,
        whether at law or in equity, irrespective of any investigation made by or
        on
        behalf of such party on or prior to the Closing Date.


      
        
           

        

        
          -14-

          
            

          

        

        
           

        

      

       

      B.           
The
        Company
        hereby agrees to indemnify and hold harmless Holder, its affiliates and their
        respective officers, directors, employees, consultants, partners and members
        (collectively, the “Holder
        Indemnitees”) from and against any and all losses, claims, damages,
        judgments, penalties, liabilities and deficiencies (collectively, “Losses”) and agrees to
        reimburse Holder Indemnitees for all reasonable out-of-pocket expenses
        (including the reasonable fees and expenses of legal counsel), in each case
        promptly as incurred by Holder Indemnitees and to the extent arising out
        of or
        in connection with:

       

      1.           
        any misrepresentation, omission of fact or breach of any of the Company’s
        representations or warranties contained in this Agreement or the other
        Documents, or the annexes, schedules or exhibits hereto or thereto or any
        instrument, agreement or certificate entered into or delivered by the Company
        pursuant to this Agreement or the other Documents;

       

      2.           
        any failure by the Company to perform any of its covenants, agreements,
        undertakings or obligations set forth in this Agreement or the other Documents
        or any instrument, certificate or agreement entered into or delivered by
        the
        Company pursuant to this Agreement or the other Documents; and

       

      3.           
        any claims by third parties in connection with the purchase of the Debenture,
        the conversion of the Debenture, the payment of interest on the Debenture,
        the
        consummation of the transactions contemplated by this Agreement and the other
        Documents, the use of any of the proceeds of the Purchase Price by the Company,
        the purchase or ownership of any or all of the Securities, the performance
        by
        the parties hereto of their respective obligations hereunder and under the
        Documents or any claim, litigation, investigation, proceedings or governmental
        action relating to any of the foregoing, whether or not Holder is a party
        thereto.

       

      C.           
Promptly
        after receipt by a party seeking indemnification pursuant to this
        Article VIII (an “Indemnified Party”) of written
        notice of any investigation, claim, proceeding or other action in respect
        of
        which indemnification is being sought (each, a “Claim”), the Indemnified
        Party
        promptly shall notify the Company against whom indemnification pursuant to
        this
        Article VIII is being sought (the “Indemnifying Party”) of the
        commencement thereof, but the omission so to notify the Indemnifying Party
        shall
        not relieve it from any liability that it otherwise may have to the Indemnified
        Party except to the extent that the Indemnifying Party is materially prejudiced
        and forfeits substantive rights or defenses by reason of such
        failure.  In connection with any Claim as to which both the
        Indemnifying Party and the Indemnified Party are parties, the Indemnifying
        Party
        shall be entitled to assume the defense thereof.  Notwithstanding the
        assumption of the defense of any Claim by the Indemnifying Party, the
        Indemnified Party shall have the right to employ separate legal counsel and
        to
        participate in the defense of such Claim, and the Indemnifying Party shall
        bear
        the reasonable fees, out-of-pocket costs and expenses of such separate legal
        counsel to the Indemnified Party if (and only if): (x) the Indemnifying
        Party shall have agreed to pay such fees, out-of-pocket costs and
        expenses,(y) the Indemnified Party and the
        Indemnifying Party reasonably shall have concluded that representation of
        the
        Indemnified Party and the Indemnifying Party by the same legal counsel would
        not
        be appropriate due to actual or, as reasonably determined by legal counsel
        to
        the Indemnified Party, potentially differing interests between such parties
        in
        the conduct of the defense of such Claim, or if there may be legal defenses
        available to the Indemnified Party that are in addition to or disparate from
        those available to the Indemnifying Party or (z) the Indemnifying Party
        shall have failed to employ legal counsel reasonably satisfactory to the
        Indemnified Party within a reasonable period of time after notice of the
        commencement of such Claim.  If the Indemnified Party employs separate
        legal counsel in circumstances other than as described in clauses (x), (y)
        or
        (z) above, the fees, costs and expenses of such legal counsel shall be borne
        exclusively by the Indemnified Party.  Except as provided above, the
        Indemnifying Party shall not, in connection with any Claim in the same
        jurisdiction, be liable for the fees and expenses of more than one firm of
        legal
        counsel for the Indemnified Party (together with appropriate local
        counsel).  The Indemnifying Party shall not, without the prior written
        consent of the Indemnified Party (which consent shall not unreasonably be
        withheld), settle or compromise any Claim or consent to the entry of any
        judgment that does not include an unconditional release of the Indemnified
        Party
        from all liabilities with respect to such Claim or judgment.


      
        
           

        

        
          -15-

          
            

          

        

        
           

        

      

       

       

      D.           
In
        the event
        one party hereunder should have a claim for indemnification that does not
        involve a claim or demand being asserted by a third party, the Indemnified
        Party
        promptly shall deliver notice of such claim to the Indemnifying Party. If
        the
        Indemnified Party disputes the claim, such dispute shall be resolved by mutual
        agreement of the Indemnified Party and the Indemnifying Party or by binding
        arbitration conducted in accordance with the procedures and rules of the
        American Arbitration Association. Judgment upon any award rendered by any
        arbitrators may be entered in any court having competent jurisdiction
        thereof.

       

      
        	
                 

              	
                X.

              	
                GOVERNING
                  LAW 

              


      

       

      This
        Agreement shall be governed by and interpreted in accordance with the laws
        of
        the State of California, without regard to the conflicts of law principles
        of
        such state.

       

      
        	
                 

              	
                XI.

              	
                SUBMISSION
                  TO JURISDICTION 

              


      

       

      Each
        of
        the parties hereto consents to the exclusive jurisdiction of the federal
        courts
        whose districts encompass any part of the City of San Diego or the state
        courts
        of the State of California sitting in the City of San Diego in connection
        with
        any dispute arising under this Agreement and the other
        Documents.  Each party hereto hereby irrevocably and unconditionally
        waives, to the fullest extent it may effectively do so, any defense of an
        inconvenient forum or improper venue to the maintenance of such action or
        proceeding in any such court and any right of jurisdiction on account of
        its
        place of residence or domicile.  Each party hereto irrevocably and
        unconditionally consents to the service of any and all process in any such
        action or proceeding in such courts by the mailing of copies of such process
        by
        registered or certified mail (return receipt requested), postage prepaid,
        at its
        address specified in Article XVII.  Each party hereto agrees that a
        final judgment in any such action or proceeding shall be conclusive and
        maybe
        enforced in other jurisdictions by suit on the judgment or in any other manner
        provided by law.


      
        
           

        

        
          -16-

          
            

          

        

        
           

        

      

       

      
        	
                 

              	
                XII.

              	
                WAIVER
                  OF JURY TRIAL 

              


      

       

      TO
        THE FULLEST EXTENT PERMITTED BY LAW, EACH OF THE PARTIES HERETO HEREBY
        KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ITS RESPECTIVE RIGHTS TO
        A JURY
        TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
        AGREEMENT OR ANY OTHER DOCUMENT OR ANY DEALINGS BETWEEN THEM RELATING TO
        THE
        SUBJECT MATTER OF THIS AGREEMENT AND OTHER DOCUMENTS.  EACH PARTY
        HERETO (i) CERTIFIES THAT NEITHER OF THEIR RESPECTIVE REPRESENTATIVES, AGENTS
        OR
        ATTORNEYS HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD
        NOT, IN
        THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (ii)
        ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
        OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.

       

      
        	
                XIII.

              	
                COUNTERPARTS;
                  EXECUTION 

              


      

       

      This
        Agreement may be executed in counterparts, each of which when so executed
        and
        delivered shall be an original, but both of which counterparts shall together
        constitute one and the same instrument.  A facsimile transmission of
        this signed Agreement shall be legal and binding on both parties hereto.

       

      
        	
                XIV.

              	
                HEADINGS
                  

              


      

       

      The
        headings of this Agreement are for convenience of reference and shall not
        form
        part of, or affect the interpretation of, this Agreement.

       

      
        	
                 

              	
                XV.

              	
                SEVERABILITY
                  

              


      

       

      In
        the
        event any one or more of the provisions contained in this Agreement or in
        the
        other Documents should be held invalid, illegal or unenforceable in any respect,
        the validity, legality and enforceability of the remaining provisions contained
        herein or therein shall not in any way be affected or impaired
        thereby.  The parties shall endeavor in good-faith negotiations to
        replace the invalid, illegal or unenforceable provisions with valid provisions,
        the economic effect of which comes as close as possible to that of the invalid,
        illegal or unenforceable provisions.

      
         

        
          	
                   

                	
                  XVI.

                	
                  
                    ENTIRE
                      AGREEMENT; REMEDIES, AMENDMENTS AND WAIVERS
                      

                  

                


        

         

      

      This
        Agreement and the Documents constitute the entire agreement between the parties
        hereto pertaining to the subject matter hereof and supersede all prior
        agreements, understandings, negotiations and discussions, whether oral or
        written, of such parties.  No supplement, modification or waiver of
        this Agreement shall be binding unless executed in writing by both
        parties.  No waiver of any of the provisions of this Agreement shall
        be deemed or shall constitutea
        waiver
        of any other provision hereof (whether or not similar), nor shall such waiver
        constitute a continuing waiver unless otherwise expressly provided.


      
        
           

        

        
          -17-

          
            

          

        

        
           

        

      


       

      
        	
                 

              	
                XVII.

              	
                
                  NOTICES
                    

                

              


      

       

      Except
        as
        may be otherwise provided herein, any notice or other communication or delivery
        required or permitted hereunder shall be in writing and shall be delivered
        personally, or sent by telecopier machine or by a nationally recognized
        overnight courier service, and shall be deemed given when so delivered
        personally, or by telecopier machine or overnight courier service as
        follows:

       

      A.           
If
        to the
        Company, to:

      


      eTelCharge.com

      1636
        N. Hampton, Suite 270

      Desoto,
        Texas

      Telephone:                                
        972-298-3800

      Facsimile:                                
        [_______________________]

      


       

      B.           
If
        to Holder,
        to:

       

      Golden
        Gate Investors, Inc.

       

      7817
        Herschel Avenue, Suite 200

       

      La
        Jolla,
        California 92037

       

      Telephone:                                
        858-551-8789

       

      Facsimile:                                
        858-551-8779

       

      The
        Company or Holder may change the foregoing address by notice given pursuant
        to
        this Article XVII.

       

      
        	
                XVIII.

              	
                CONFIDENTIALITY
                  

              


      

       

      Each
        of
        the Company and Holder agrees to keep confidential and not to disclose to
        or use
        for the benefit of any third party the terms of this Agreement or any other
        information which at any time is communicated by the other party as being
        confidential without the prior written approval of the other party; provide,
        however, that this provision shall not apply to information which, at the
        time
        of disclosure, is already part of the public domain (except by breach of
        this
        Agreement) and information which is required to be disclosed by law (including,
        without limitation, pursuant to Item 601(b)(10) of Regulation S-K or S-B
        under
        the Securities Act and the Exchange Act).

       

      
        	
                XIX.

              	
                ASSIGNMENT
                  

              


      

       

      This
        Agreement shall not be assignable by the Company without the prior written
        consent of the Holder.  The Holder may assign this Agreement upon 10
        days prior written notice to the Company.


      
        
           

        

        
          -18-

          
            

          

        

        
           

        

      


       

      


      


      IN
        WITNESS WHEREOF, the parties hereto have duly caused this Agreement to be
        executed and delivered on the date first above written.

      


      


      eTelCharge.com                                                                                                
        Golden Gate Investors, Inc.

      


      By:
        __________________________                                                                                                           
By: __________________________

      


      Title:
        _________________________                                                                                                           
Title: _________________________


      
        
           

        

        
          -19-

          
            

          

        

        
           

        

      


      


       

      SCHEDULE
        III.A.1

       

      

        
          	
                  Name

                	
                  Number
                    of Shares of Common
                    Stock

                
	 	
                  Options

                
	 	 
	
                  Michael
                    Fox

                	
                  10,000

                
	
                  James
                    (Toby) Wilson

                	
                  1,200,000

                
	
                  Robert
                    M. Howe, III

                	
                  20,000,000

                
	
                  Robyn
                    Gatch-Priest

                	
                  1,200,000

                
	
                  John
                    Todd

                	
                  2,200,000

                


        

      

      



      
        
           

        

        
          -20-

          
            

          

        

        
           

        

      


      


       

      SCHEDULE
        III.A.3

       

      PREEMPTIVE
        RIGHTS

       

      None.


      
        
           

        

        
          -21-

          
            

          

        

        
           

        

      


      


       

      SCHEDULE
        III.H.

       

      The
        Company has determined that certain “Information Statements” required to be
        filed under Reg 14C of the Exchange Act in connection with certain actions
        taken
        by written consent of the Company’s stockholders, in 2000, 2005 and 2007, were
        not so filed, and has begun communications with the Securities and Exchange
        Commission’s Division of Corporation Finance in this regard.  Current
        management of the Company, which came on board in mid 2007, has not made
        a
        thorough review of prior Commission Filings.  However, except as set
        forth above, current management is not aware of material omissions or
        misstatements in said filings that have not since been corrected by more
        recent
        filings.  In addition, current management, with newly hired S.E.C.
        counsel, has undertaken to prepare and file a Form 10KSB for the year ended
        Dec
        31, 2007, and all periodic reports required under the Exchange Act thereafter,
        that will comply in all respects with the requirements of the Exchange
        Act.


      
        
           

        

        
          -22-

          
            

          

        

        
           

        

      


      


       

      SCHEDULE
        III.L.

       

      REGISTRATION
        RIGHTS

       

      None.


      
        
           

        

        
          -23-

          
            

          

        

        
           

        

      


      


       

      SCHEDULE
        IV.H.

       

      SECURITY
        AGREEMENTS

       

      None.


      
        
           

        

        
          -24-