Document:

Exhibit 10.20

                             FUNDS ESCROW AGREEMENT

         This  Agreement  (this  "Agreement")  is  dated  as of the  8th  day of
February,  2005 among eLEC  COMMUNICATIONS  CORP., a New York  corporation  (the
"Company"), Laurus Master Fund, Ltd. (the "Purchaser"), and Loeb & Loeb LLP (the
"Escrow Agent"):

                              W I T N E S S E T H:
                              - - - - - - - - - -

         WHEREAS,  the  Purchaser  has  advised  the  Escrow  Agent that (a) the
Company and the Purchaser have entered into a Securities Purchase Agreement (the
"Purchase  Agreement") for the sale by the Company to the Purchaser of a secured
convertible  term note (the  "Term  Note"),  (b) the  Company  has issued to the
Purchaser  a  common  stock  purchase  warrant  (the  "Term  Note  Warrant")  in
connection  with the  issuance  of the Term Note,  and (c) the  Company  and the
Purchaser  have  entered  into a  Registration  Rights  Agreement  covering  the
registration of the Company's common stock underlying the Term Note and the Term
Note Warrant (the "Term Note Registration Rights Agreement");

         WHEREAS, the Company and the Purchaser wish the Purchaser to deliver to
the Escrow Agent copies of the Documents (as hereafter defined) and the Escrowed
Payment  (as  hereafter  defined)  to be held and  released  by Escrow  Agent in
accordance with the terms and conditions of this Agreement; and

         WHEREAS,  the Escrow Agent is willing to serve as escrow agent pursuant
to the terms and conditions of this Agreement;

         NOW THEREFORE, the parties agree as follows:

                                   ARTICLE I

                                 INTERPRETATION

         1.1. Definitions.  Whenever used in this Agreement, the following terms
              -----------
shall have the meanings set forth below.

            (a) "Agreement"  means this Agreement,  as amended,  modified and/or
supplemented from time to time by written agreement among the parties hereto.

            (b) "Closing Payment" means the closing payment to be paid to Laurus
Capital Management, LLC, the fund manager, as set forth on Schedule A hereto.

            (c) "Disbursement Letter" means that certain letter delivered to the
Escrow  Agent  by each of the  Purchaser  and the  Company  setting  forth  wire
instructions and amounts to be funded at the Closing.

<PAGE>

            (d)  "Documents"  means  copies  of  the  Disbursement  Letter,  the
Purchase  Agreement,  the Term Note,  the Term Note  Warrant,  and the Term Note
Registration Rights Agreement.

            (e) "Escrowed Payment" means $2,000,000.

         1.2. Entire Agreement.  This Agreement constitutes the entire agreement
              ----------------
among the  parties  hereto  with  respect to the  matters  contained  herein and
supersedes all prior agreements, understandings, negotiations and discussions of
the parties,  whether oral or written. There are no warranties,  representations
and other  agreements  made by the parties in connection with the subject matter
hereof except as specifically set forth in this Agreement.

         1.3. Extended Meanings.  In this Agreement words importing the singular
              -----------------
number include the plural and vice versa;  words importing the masculine  gender
include  the  feminine  and  neuter  genders.  The  word  "person"  includes  an
individual,  body  corporate,  partnership,  trustee or trust or  unincorporated
association, executor, administrator or legal representative.

         1.4. Waivers and Amendments.  This Agreement may be amended,  modified,
              ----------------------
superseded,  cancelled, renewed or extended, and the terms and conditions hereof
may be waived,  in each case only by a written  instrument signed by all parties
hereto, or, in the case of a waiver, by the party waiving compliance.  Except as
expressly  stated  herein,  no delay on the part of any party in exercising  any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any party of any right,  power or privilege  hereunder
preclude  any other or future  exercise of any other  right,  power or privilege
hereunder.

         1.5. Headings. The division of this Agreement into articles,  sections,
              --------
subsections  and paragraphs and the insertion of headings are for convenience of
reference only and shall not affect the construction or  interpretation  of this
Agreement.

         1.6.  Law  Governing  this  Agreement;  Consent to  Jurisdiction.  This
               ----------------------------------------------------------
Agreement  shall be governed by and construed in accordance with the laws of the
State of New York  without  regard to  principles  of  conflicts  of laws.  With
respect to any suit,  action or proceeding  relating to this Agreement or to the
transactions contemplated hereby ("Proceedings"),  each party hereto irrevocably
submits to the exclusive  jurisdiction  of the courts of the County of New York,
State of New York and the United States  District court located in the county of
New York in the State of New York.  Each party  hereto  hereby  irrevocably  and
unconditionally  (a) waives  trial by jury in any  Proceeding  relating  to this
Agreement and for any related counterclaim and (b) waives any objection which it
may have at any time to the  laying of venue of any  Proceeding  brought  in any
such  court,  waives any claim  that such  Proceedings  have been  brought in an
inconvenient forum and further waives the right to object,  with respect to such
Proceedings,  that such court does not have  jurisdiction  over such  party.  As
between the Company and the Purchaser, the prevailing party shall be entitled to
recover from the other party its reasonable  attorneys'  fees and costs.  In the
event that any provision of this Agreement is determined by a court of competent
jurisdiction  to be  invalid  or  unenforceable,  then  the  remainder  of  this
Agreement shall not be affected and shall remain in full force and effect.

                                       2
<PAGE>

         1.7.  Construction.  Each  party  acknowledges  that its legal  counsel
               ------------
participated  in the  preparation of this Agreement 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 to
favor any party against the other.

                                   ARTICLE II

                APPOINTMENT OF AND DELIVERIES TO THE ESCROW AGENT

         2.1.  Appointment.  The Company and the  Purchaser  hereby  irrevocably
               -----------
designate  and appoint the Escrow  Agent as their  escrow agent for the purposes
set forth  herein,  and the Escrow Agent by its  execution  and delivery of this
Agreement  hereby  accepts such  appointment  under the terms and conditions set
forth herein.

         2.2.  Copies of Documents to Escrow Agent. On or about the date hereof,
               -----------------------------------
the Purchaser shall deliver to the Escrow Agent copies of the Documents executed
by the Company to the extent it is a party thereto.

         2.3. Delivery of Escrowed Payment to Escrow Agent. On or about the date
              --------------------------------------------
hereof, the Purchaser shall deliver to the Escrow Agent the Escrowed Payment.

         2.4.  Intention  to  Create  Escrow  Over  the  Escrowed  Payment.  The
               -----------------------------------------------------------
Purchaser  and the Company  intend that the  Escrowed  Payment  shall be held in
escrow by the Escrow Agent and released  from escrow by the Escrow Agent only in
accordance with the terms and conditions of this Agreement.

                                  ARTICLE III

                                RELEASE OF ESCROW

         3.1.  Release of Escrow.  Subject to the provisions of Section 4.2, the
               -----------------
Escrow Agent shall release the Escrowed Payment from escrow as follows:

            (a) Promptly  following receipt by the Escrow Agent of (i) copies of
the fully executed  Documents and this Agreement,  (ii) the Escrowed  Payment in
immediately   available  funds,   (iii)  joint  written   instructions   ("Joint
Instructions")  executed  by the  Company and the  Purchaser  setting  forth the
payment  direction  instructions  with respect to the Escrowed  Payment and (iv)
Escrow Agent's verbal  instructions  from David Grin and/or Eugene Grin (each of
whom is a director of the  Purchaser)  indicating  that all  closing  conditions
relating to the Documents  have been  satisfied and directing  that the Escrowed
Payment  be  disbursed  by  the  Escrow  Agent  in  accordance  with  the  Joint
Instructions, then the Escrowed Payment shall be deemed released from escrow and
shall be promptly disbursed in accordance with the Joint Instructions. The Joint
Instructions shall include, without limitation,  Escrow Agent's authorization to
retain from the Escrowed  Payment  Escrow Agent's fee for acting as Escrow Agent
hereunder and the Closing Payment for delivery to Laurus Capital Management, LLC
in accordance with the Joint Instructions.

                                       3
<PAGE>

            (b) Upon receipt by the Escrow  Agent of a final and  non-appealable
judgment,  order, decree or award of a court of competent jurisdiction (a "Court
Order")  relating  to the  Escrowed  Payment,  the Escrow  Agent shall remit the
Escrowed  Payment in accordance  with the Court Order.  Any Court Order shall be
accompanied by an opinion of counsel for the party presenting the Court Order to
the Escrow Agent (which  opinion shall be  satisfactory  to the Escrow Agent) to
the  effect  that the  court  issuing  the Court  Order is a court of  competent
jurisdiction and that the Court Order is final and non-appealable.

         3.2.  Acknowledgement of Company and Purchaser;  Disputes.  The Company
               ---------------------------------------------------
and the Purchaser  acknowledge that the only terms and conditions upon which the
Escrowed  Payment is to be  released  from escrow are as set forth in Sections 3
and 4 of this Agreement.  The Company and the Purchaser reaffirm their agreement
to abide by the terms and  conditions  of this  Agreement  with  respect  to the
release of the Escrowed Payment.  Any dispute with respect to the release of the
Escrowed  Payment  shall be  resolved  pursuant  to  Section  4.2 or by  written
agreement between the Company and Purchaser.

                                   ARTICLE IV

                           CONCERNING THE ESCROW AGENT

         4.1.  Duties  and  Responsibilities  of the  Escrow  Agent.  The Escrow
               ----------------------------------------------------
Agent's duties and responsibilities  shall be subject to the following terms and
conditions:

            (a) The  Purchaser  and the Company  acknowledge  and agree that the
Escrow Agent (i) shall not be required to inquire  into  whether the  Purchaser,
the Company or any other party is entitled to receipt of any  Document or all or
any portion of the Escrowed  Payment;  (ii) shall not be called upon to construe
or review any Document or any other  document,  instrument or agreement  entered
into in connection therewith;  (iii) shall be obligated only for the performance
of such duties as are specifically  assumed by the Escrow Agent pursuant to this
Agreement;  (iv) may rely on and shall be protected in acting or refraining from
acting upon any written notice, instruction,  instrument,  statement, request or
document  furnished  to it  hereunder  and  believed by the Escrow Agent in good
faith to be genuine and to have been signed or presented by the proper person or
party,  without being required to determine the  authenticity  or correctness of
any fact stated therein or the propriety or validity or the service thereof; (v)
may assume that any person  purporting  to give notice or make any  statement or
execute any  document in  connection  with the  provisions  hereof has been duly
authorized to do so; (vi) shall not be responsible  for the identity,  authority
or rights of any person,  firm or company  executing or delivering or purporting
to execute or deliver  this  Agreement  or any  Document or any funds  deposited
hereunder or any endorsement thereon or assignment  thereof;  (vii) shall not be
under any duty to give the property  held by Escrow Agent  hereunder any greater
degree of care than Escrow Agent gives its own similar property;  and (viii) may
consult counsel  satisfactory to Escrow Agent  (including,  without  limitation,
Loeb & Loeb, LLP or such other counsel of Escrow Agent's choosing),  the opinion
of such counsel to be full and complete  authorization and protection in respect
of any action taken, suffered or omitted by Escrow Agent hereunder in good faith
and in accordance with the opinion of such counsel.

                                       4
<PAGE>

            (b) The Purchaser and the Company  acknowledge that the Escrow Agent
is acting  solely as a  stakeholder  at their  request and that the Escrow Agent
shall not be liable  for any  action  taken by  Escrow  Agent in good  faith and
believed  by  Escrow  Agent to be  authorized  or  within  the  rights or powers
conferred  upon Escrow Agent by this  Agreement.  The  Purchaser and the Company
hereby, jointly and severally,  indemnify and hold harmless the Escrow Agent and
any of Escrow Agent's partners,  employees,  agents and representatives from and
against any and all actions  taken or omitted to be taken by Escrow Agent or any
of them hereunder and any and all claims,  losses,  liabilities,  costs, damages
and expenses  suffered and/or incurred by the Escrow Agent arising in any manner
whatsoever out of the  transactions  contemplated  by this Agreement  and/or any
transaction related in any way hereto, including the fees of outside counsel and
other  costs and  expenses of  defending  itself  against  any  claims,  losses,
liabilities,  costs,  damages and expenses arising in any manner  whatsoever out
the transactions  contemplated by this Agreement and/or any transaction  related
in any way hereto, except for such claims, losses,  liabilities,  costs, damages
and  expenses  incurred  by reason of the Escrow  Agent's  gross  negligence  or
willful misconduct.  The Escrow Agent shall owe a duty only to the Purchaser and
Company under this Agreement and to no other person.

            (c) The  Purchaser  and the  Company  shall  jointly  and  severally
reimburse the Escrow Agent for its reasonable  out-of-pocket expenses (including
counsel fees (which  counsel may be Loeb & Loeb LLP or such other counsel of the
Escrow  Agent's  choosing)  incurred in connection  with the  performance of its
duties and  responsibilities  hereunder,  which  shall not  (subject  to Section
4.1(b)) exceed $1,500.

            (d)  The  Escrow  Agent  may at any  time  resign  as  Escrow  Agent
hereunder by giving five (5) business days prior written  notice of  resignation
to the Purchaser and the Company.  Prior to the effective date of resignation as
specified in such  notice,  the  Purchaser  and Company will issue to the Escrow
Agent a Joint Instruction authorizing delivery of the Documents and the Escrowed
Payment to a substitute  Escrow Agent selected by the Purchaser and the Company.
If no successor  Escrow  Agent is named by the  Purchaser  and the Company,  the
Escrow Agent may apply to a court of competent  jurisdiction in the State of New
York for appointment of a successor  Escrow Agent, and deposit the Documents and
the Escrowed Payment with the clerk of any such court and/or otherwise  commence
an interpleader  or similar action for a  determination  of where to deposit the
same.

            (e) The Escrow Agent does not have and will not have any interest in
the  Documents  and the Escrowed  Payment,  but is serving only as escrow agent,
having only possession thereof.

            (f) The Escrow  Agent  shall not be liable  for any action  taken or
omitted  by it in good  faith and  reasonably  believed  by it to be  authorized
hereby or within  the  rights or powers  conferred  upon it  hereunder,  nor for
action taken or omitted by it in good faith,  and in  accordance  with advice of
counsel  (which  counsel  may be Loeb & Loeb,  LLP or such other  counsel of the
Escrow  Agent's  choosing),  and shall not be liable for any  mistake of fact or
error of judgment or for any acts or  omissions of any kind except to the extent
any such liability arose from its own willful misconduct or gross negligence.

                                       5
<PAGE>

            (g) This Agreement sets forth  exclusively  the duties of the Escrow
Agent  with  respect to any and all  matters  pertinent  thereto  and no implied
duties or obligations shall be read into this Agreement.

            (h) The Escrow  Agent shall be  permitted  to act as counsel for the
Purchaser  or the  Company,  as the  case  may  be,  in  any  dispute  as to the
disposition  of the  Documents  and the Escrowed  Payment,  in any other dispute
between the Purchaser  and the Company,  whether or not the Escrow Agent is then
holding the  Documents  and/or the Escrowed  Payment and continues to act as the
Escrow Agent hereunder.

            (i) The provisions of this Section 4.1 shall survive the resignation
of the Escrow Agent or the termination of this Agreement.

         4.2.  Dispute  Resolution;  Judgments.  Resolution of disputes  arising
               -------------------------------
under this Agreement shall be subject to the following terms and conditions:

            (a) If  any  dispute  shall  arise  with  respect  to the  delivery,
ownership,  right of  possession  or  disposition  of the  Documents  and/or the
Escrowed Payment,  or if the Escrow Agent shall in good faith be uncertain as to
its duties or rights  hereunder,  the Escrow Agent shall be authorized,  without
liability  to anyone,  to (i)  refrain  from  taking  any  action  other than to
continue to hold the Documents  and the Escrowed  Payment  pending  receipt of a
Joint Instruction from the Purchaser and Company,  (ii) commence an interpleader
or similar  action,  suit or proceeding  for the resolution of any such dispute;
and/or (iii) deposit the  Documents  and the Escrowed  Payment with any court of
competent jurisdiction in the State of New York, in which event the Escrow Agent
shall give written  notice  thereof to the  Purchaser  and the Company and shall
thereupon be relieved and discharged  from all further  obligations  pursuant to
this Agreement.  The Escrow Agent may, but shall be under no duty to,  institute
or defend any legal  proceedings  which relate to the Documents and the Escrowed
Payment.  The Escrow Agent shall have the right to retain  counsel if it becomes
involved in any disagreement, dispute or litigation on account of this Agreement
or  otherwise  determines  that it is necessary  to consult  counsel  which such
counsel  may be Loeb & Loeb LLP or such  other  counsel  of the  Escrow  Agent's
choosing.

            (b) The Escrow Agent is hereby  expressly  authorized to comply with
and obey any Court  Order.  In case the Escrow  Agent obeys or  complies  with a
Court Order,  the Escrow Agent shall not be liable to the  Purchaser and Company
or to any other person, firm, company or entity by reason of such compliance.

                                   ARTICLE V

                                 GENERAL MATTERS

         5.1. Termination.  This escrow shall terminate upon disbursement of the
              -----------
Escrowed  Payment in accordance with the terms of this Agreement or earlier upon
the  agreement in writing of the  Purchaser  and Company or  resignation  of the
Escrow Agent in accordance with the terms hereof.

                                       6
<PAGE>

         5.2. Notices. All notices,  requests,  demands and other communications
              -------
required or permitted  hereunder shall be in writing and shall be deemed to have
been duly given one (1) day after being sent by telecopy (with copy delivered by
overnight courier, regular or certified mail):

            (a) If to the Company, to:

                         eLEC COMMUNICATIONS CORP.
                         75 South Broadway, Suite 302
                         White Plains, NY 10601
                         Facsimile: 914-682-0820

                With a copy to:      Pryor Cashman Sherman & Flynn LLP
                                     410 Park Avenue
                                     New York, NY 10022
                                     Facsimile:  212-798-6380
                                     Attention:  Eric M. Hellige, Esq.

            (b) If to the Purchaser, to:

                         LAURUS MASTER FUND, LTD.
                         M&C Corporate Services Limited, P.O. Box 309 GT,
                         Ugland House, South Church Street, George Town, Grand
                         Cayman, Cayman Islands, Fax: 345-949-8080

            (b) If to the Escrow Agent, to:

                                      Loeb & Loeb LLP
                                      345 Park Avenue
                                      New York, New York 10154
                                      Fax:  (212) 407-4990
                                      Attention:  Scott J. Giordano, Esq.

or to such other  address as any of them shall give to the others by notice made
pursuant to this Section 5.2.

         5.3.  Interest.  The Escrowed  Payment shall not be held in an interest
               --------
bearing account nor will interest be payable in connection therewith.

         5.4.  Assignment;  Binding  Agreement.  Neither this  Agreement nor any
               -------------------------------
right or obligation hereunder shall be assignable by any party without the prior
written consent of the other parties  hereto.  This Agreement shall inure to the
benefit of and be binding  upon the parties  hereto and their  respective  legal
representatives, successors and assigns.

         5.5.  Invalidity.  In the event that any one or more of the  provisions
               ----------
contained  herein,  or the  application  thereof  in any  circumstance,  is held
invalid,  illegal, or unenforceable in any respect for any reason, the validity,
legality and  enforceability of any such provision in every other respect and of
the  remaining  provisions  contained  herein  shall not be in any way  impaired

                                       7
<PAGE>

thereby,  it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.

         5.6.  Counterparts/Execution.  This  Agreement  may be  executed in any
               ----------------------
number  of  counterparts  and  by  different   signatories  hereto  on  separate
counterparts,  each of which, when so executed, shall be deemed an original, but
all such  counterparts  shall  constitute but one and the same  agreement.  This
Agreement may be executed by facsimile transmission.

                   REMAINDER OF PAGE LEFT INTENTIONALLY BLANK

                                       8
<PAGE>

            IN WITNESS WHEREOF,  the parties hereto have executed this Agreement
as of the date and year first above written.

                                    COMPANY:

                                    eLEC COMMUNICATIONS CORP.

                                    By: /s/Paul H. Riss
                                        ---------------------------
                                    Name: Paul H. Riss
                                    Title: Chief Executive Officer

                                   PURCHASER:

                                   LAURUS MASTER FUND, LTD.

                                   By:  /s/Eugene Grin
                                        --------------------------
                                   Name: Eugene Grin
                                   Title: Director

                                  ESCROW AGENT:

                                  LOEB & LOEB LLP

                                  By: /s/Scott J. Giordano
                                      ---------------------------
                                  Name: Scott J. Giordano
                                  Title:  Partner

                                       9
<PAGE>

<TABLE>
<CAPTION>

                             SCHEDULE A TO FUNDS ESCROW AGREEMENT
                             ------------------------------------

------------------------------------------------------------------------------------------
PURCHASER                                       PRINCIPAL NOTE AMOUNT
------------------------------------------------------------------------------------------
<S>                                              <C>
LAURUS MASTER FUND, LTD.,                       Term Note in an aggregate principal amount
M&C Corporate Services Limited, P.O. Box 309    of $2,000,000
GT, Ugland House, South Church Street, George
Town, Grand Cayman, Cayman Islands, Fax:
345-949-8080
------------------------------------------------------------------------------------------
TOTAL                                           $2,000,000
------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------
FUND MANAGER                                    CLOSING PAYMENT
------------------------------------------------------------------------------------------
LAURUS CAPITAL MANAGEMENT, L.L.C.               Closing payment payable in connection with
825 Third Avenue, 14th Floor                    investment by Laurus Master Fund, Ltd. For
New York, New York 10022                        which Laurus Capital Management, L.L.C.
Fax: 212-541-4434                               is the Manager.
------------------------------------------------------------------------------------------
TOTAL                                           $70,000
------------------------------------------------------------------------------------------

WARRANTS

------------------------------------------------------------------------------------------
WARRANT RECIPIENT                               WARRANTS IN CONNECTION WITH
                                                OFFERING
------------------------------------------------------------------------------------------
LAURUS MASTER FUND, LTD.                        Term Note Warrant exercisable to purchase
M&C Corporate Services Limited, P.O. Box 309    up to 793,650 shares of common stock of
GT, Ugland House, South Church Street, George   the Company issuable in connection with
Town, Grand Cayman, Cayman Islands, Fax:        the Term Note.
345-949-8080
Fax: 345-949-9877
------------------------------------------------------------------------------------------
TOTAL                                           Warrants exercisable to purchase up to
                                                793,650 shares of common stock of the
                                                Company.
------------------------------------------------------------------------------------------

</TABLE>

                                       10Exhibit 10.21

                             FUNDS ESCROW AGREEMENT

         This  Agreement  (this  "Agreement")  is  dated  as of the  30th day of
November  2005 among eLEC  COMMUNICATIONS  CORP.,  a New York  corporation  (the
"Company"), Laurus Master Fund, Ltd. (the "Purchaser"), and Loeb & Loeb LLP (the
"Escrow Agent"):

                              W I T N E S S E T H:
                               - - - - - - - - - -

         WHEREAS,  the  Purchaser  has  advised  the  Escrow  Agent that (a) the
Company and the Purchaser have entered into a Securities Purchase Agreement (the
"Purchase  Agreement") for the sale by the Company to the Purchaser of a secured
convertible  term note (the  "Term  Note"),  (b) the  Company  has issued to the
Purchaser  a  common  stock  purchase  warrant  (the  "Term  Note  Warrant")  in
connection  with the  issuance  of the Term Note,  and (c) the  Company  and the
Purchaser  have  entered  into a  Registration  Rights  Agreement  covering  the
registration of the Company's common stock underlying the Term Note and the Term
Note Warrant (the "Term Note Registration Rights Agreement");

         WHEREAS, the Company and the Purchaser wish the Purchaser to deliver to
the Escrow Agent copies of the Documents (as hereafter defined) and the Escrowed
Payment  (as  hereafter  defined)  to be held and  released  by Escrow  Agent in
accordance with the terms and conditions of this Agreement; and

         WHEREAS,  the Escrow Agent is willing to serve as escrow agent pursuant
to the terms and conditions of this Agreement;

         NOW THEREFORE, the parties agree as follows:

                                   ARTICLE I

                                 INTERPRETATION

         1.1. Definitions.  Whenever used in this Agreement, the following terms
              -----------
shall have the meanings set forth below.

            (a) "Agreement"  means this Agreement,  as amended,  modified and/or
supplemented from time to time by written agreement among the parties hereto.

            (b) "Closing Payment" means the closing payment to be paid to Laurus
Capital Management, LLC, the fund manager, as set forth on Schedule A hereto.

            (c) "Disbursement Letter" means that certain letter delivered to the
Escrow  Agent  by each of the  Purchaser  and the  Company  setting  forth  wire
instructions and amounts to be funded at the Closing.

            (d)  "Documents"  means  copies  of  the  Disbursement  Letter,  the
Purchase  Agreement,  the Term Note,  the Term Note  Warrant,  and the Term Note
Registration Rights Agreement.

<PAGE>

            (e) "Escrowed Payment" means $2,000,000.

         1.2. Entire Agreement.  This Agreement constitutes the entire agreement
              ----------------
among the  parties  hereto  with  respect to the  matters  contained  herein and
supersedes all prior agreements, understandings, negotiations and discussions of
the parties,  whether oral or written. There are no warranties,  representations
and other  agreements  made by the parties in connection with the subject matter
hereof except as specifically set forth in this Agreement.

         1.3. Extended Meanings.  In this Agreement words importing the singular
              -----------------
number include the plural and vice versa;  words importing the masculine  gender
include  the  feminine  and  neuter  genders.  The  word  "person"  includes  an
individual,  body  corporate,  partnership,  trustee or trust or  unincorporated
association, executor, administrator or legal representative.

         1.4. Waivers and Amendments.  This Agreement may be amended,  modified,
              ----------------------
superseded,  cancelled, renewed or extended, and the terms and conditions hereof
may be waived,  in each case only by a written  instrument signed by all parties
hereto, or, in the case of a waiver, by the party waiving compliance.  Except as
expressly  stated  herein,  no delay on the part of any party in exercising  any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any party of any right,  power or privilege  hereunder
preclude  any other or future  exercise of any other  right,  power or privilege
hereunder.

         1.5. Headings. The division of this Agreement into articles,  sections,
              --------
subsections  and paragraphs and the insertion of headings are for convenience of
reference only and shall not affect the construction or  interpretation  of this
Agreement.

         1.6.  Law  Governing  this  Agreement;  Consent to  Jurisdiction.  This
               ----------------------------------------------------------
Agreement  shall be governed by and construed in accordance with the laws of the
State of New York  without  regard to  principles  of  conflicts  of laws.  With
respect to any suit,  action or proceeding  relating to this Agreement or to the
transactions contemplated hereby ("Proceedings"),  each party hereto irrevocably
submits to the exclusive  jurisdiction  of the courts of the County of New York,
State of New York and the United States  District court located in the county of
New York in the State of New York.  Each party  hereto  hereby  irrevocably  and
unconditionally  (a) waives  trial by jury in any  Proceeding  relating  to this
Agreement and for any related counterclaim and (b) waives any objection which it
may have at any time to the  laying of venue of any  Proceeding  brought  in any
such  court,  waives any claim  that such  Proceedings  have been  brought in an
inconvenient forum and further waives the right to object,  with respect to such
Proceedings,  that such court does not have  jurisdiction  over such  party.  As
between the Company and the Purchaser, the prevailing party shall be entitled to
recover from the other party its reasonable  attorneys'  fees and costs.  In the
event that any provision of this Agreement is determined by a court of competent
jurisdiction  to be  invalid  or  unenforceable,  then  the  remainder  of  this
Agreement shall not be affected and shall remain in full force and effect.

         1.7.  Construction.  Each  party  acknowledges  that its legal  counsel
               ------------
participated  in the  preparation of this Agreement 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 to
favor any party against the other.

                                       2
<PAGE>

                                   ARTICLE II

                APPOINTMENT OF AND DELIVERIES TO THE ESCROW AGENT

         2.1.  Appointment.  The Company and the  Purchaser  hereby  irrevocably
               -----------
designate  and appoint the Escrow  Agent as their  escrow agent for the purposes
set forth  herein,  and the Escrow Agent by its  execution  and delivery of this
Agreement  hereby  accepts such  appointment  under the terms and conditions set
forth herein.

         2.2.  Copies of Documents to Escrow Agent. On or about the date hereof,
               -----------------------------------
the Purchaser shall deliver to the Escrow Agent copies of the Documents executed
by the Company to the extent it is a party thereto.

         2.3. Delivery of Escrowed Payment to Escrow Agent. On or about the date
              --------------------------------------------
hereof, the Purchaser shall deliver to the Escrow Agent the Escrowed Payment.

         2.4.  Intention  to  Create  Escrow  Over  the  Escrowed  Payment.  The
               -----------------------------------------------------------
Purchaser  and the Company  intend that the  Escrowed  Payment  shall be held in
escrow by the Escrow Agent and released  from escrow by the Escrow Agent only in
accordance with the terms and conditions of this Agreement.

                                  ARTICLE III

                                RELEASE OF ESCROW

         3.1.  Release of Escrow.  Subject to the provisions of Section 4.2, the
               -----------------
Escrow Agent shall release the Escrowed Payment from escrow as follows:

            (a) Promptly  following receipt by the Escrow Agent of (i) copies of
the fully executed  Documents and this Agreement,  (ii) the Escrowed  Payment in
immediately   available  funds,   (iii)  joint  written   instructions   ("Joint
Instructions")  executed  by the  Company and the  Purchaser  setting  forth the
payment  direction  instructions  with respect to the Escrowed  Payment and (iv)
Escrow Agent's verbal  instructions  from David Grin and/or Eugene Grin (each of
whom is a director of the  Purchaser)  indicating  that all  closing  conditions
relating to the Documents  have been  satisfied and directing  that the Escrowed
Payment  be  disbursed  by  the  Escrow  Agent  in  accordance  with  the  Joint
Instructions, then the Escrowed Payment shall be deemed released from escrow and
shall be promptly disbursed in accordance with the Joint Instructions. The Joint
Instructions shall include, without limitation,  Escrow Agent's authorization to
retain from the Escrowed  Payment  Escrow Agent's fee for acting as Escrow Agent
hereunder and the Closing Payment for delivery to Laurus Capital Management, LLC
in accordance with the Joint Instructions.

            (b) Upon receipt by the Escrow  Agent of a final and  non-appealable
judgment,  order, decree or award of a court of competent jurisdiction (a "Court
Order")  relating  to the  Escrowed  Payment,  the Escrow  Agent shall remit the
Escrowed  Payment in accordance  with the Court Order.  Any Court Order shall be
accompanied by an opinion of counsel for the party presenting the Court Order to
the Escrow Agent (which  opinion shall be  satisfactory  to the

                                       3
<PAGE>

Escrow Agent) to the effect that the court issuing the Court Order is a court of
competent jurisdiction and that the Court Order is final and non-appealable.

         3.2.  Acknowledgement of Company and Purchaser;  Disputes.  The Company
and the Purchaser  acknowledge that the only terms and conditions upon which the
Escrowed  Payment is to be  released  from escrow are as set forth in Sections 3
and 4 of this Agreement.  The Company and the Purchaser reaffirm their agreement
to abide by the terms and  conditions  of this  Agreement  with  respect  to the
release of the Escrowed Payment.  Any dispute with respect to the release of the
Escrowed  Payment  shall be  resolved  pursuant  to  Section  4.2 or by  written
agreement between the Company and Purchaser.

                                   ARTICLE IV

                           CONCERNING THE ESCROW AGENT

         4.1.  Duties  and  Responsibilities  of the  Escrow  Agent.  The Escrow
Agent's duties and responsibilities  shall be subject to the following terms and
conditions:

            (a) The  Purchaser  and the Company  acknowledge  and agree that the
Escrow Agent (i) shall not be required to inquire  into  whether the  Purchaser,
the Company or any other party is entitled to receipt of any  Document or all or
any portion of the Escrowed  Payment;  (ii) shall not be called upon to construe
or review any Document or any other  document,  instrument or agreement  entered
into in connection therewith;  (iii) shall be obligated only for the performance
of such duties as are specifically  assumed by the Escrow Agent pursuant to this
Agreement;  (iv) may rely on and shall be protected in acting or refraining from
acting upon any written notice, instruction,  instrument,  statement, request or
document  furnished  to it  hereunder  and  believed by the Escrow Agent in good
faith to be genuine and to have been signed or presented by the proper person or
party,  without being required to determine the  authenticity  or correctness of
any fact stated therein or the propriety or validity or the service thereof; (v)
may assume that any person  purporting  to give notice or make any  statement or
execute any  document in  connection  with the  provisions  hereof has been duly
authorized to do so; (vi) shall not be responsible  for the identity,  authority
or rights of any person,  firm or company  executing or delivering or purporting
to execute or deliver  this  Agreement  or any  Document or any funds  deposited
hereunder or any endorsement thereon or assignment  thereof;  (vii) shall not be
under any duty to give the property  held by Escrow Agent  hereunder any greater
degree of care than Escrow Agent gives its own similar property;  and (viii) may
consult counsel  satisfactory to Escrow Agent  (including,  without  limitation,
Loeb & Loeb, LLP or such other counsel of Escrow Agent's choosing),  the opinion
of such counsel to be full and complete  authorization and protection in respect
of any action taken, suffered or omitted by Escrow Agent hereunder in good faith
and in accordance with the opinion of such counsel.

            (b) The Purchaser and the Company  acknowledge that the Escrow Agent
is acting  solely as a  stakeholder  at their  request and that the Escrow Agent
shall not be liable  for any  action  taken by  Escrow  Agent in good  faith and
believed  by  Escrow  Agent to be  authorized  or  within  the  rights or powers
conferred  upon Escrow Agent by this  Agreement.  The  Purchaser and the Company
hereby, jointly and severally,  indemnify and hold harmless the Escrow Agent and
any of Escrow Agent's partners,  employees,  agents and representatives from and
against any

                                       4
<PAGE>

and all  actions  taken or  omitted  to be taken by Escrow  Agent or any of them
hereunder  and any and all  claims,  losses,  liabilities,  costs,  damages  and
expenses  suffered  and/or  incurred by the Escrow  Agent  arising in any manner
whatsoever out of the  transactions  contemplated  by this Agreement  and/or any
transaction related in any way hereto, including the fees of outside counsel and
other  costs and  expenses of  defending  itself  against  any  claims,  losses,
liabilities,  costs,  damages and expenses arising in any manner  whatsoever out
the transactions  contemplated by this Agreement and/or any transaction  related
in any way hereto, except for such claims, losses,  liabilities,  costs, damages
and  expenses  incurred  by reason of the Escrow  Agent's  gross  negligence  or
willful misconduct.  The Escrow Agent shall owe a duty only to the Purchaser and
Company under this Agreement and to no other person.

            (c) The  Purchaser  and the  Company  shall  jointly  and  severally
reimburse the Escrow Agent for its reasonable  out-of-pocket expenses (including
counsel fees (which  counsel may be Loeb & Loeb LLP or such other counsel of the
Escrow  Agent's  choosing)  incurred in connection  with the  performance of its
duties and  responsibilities  hereunder,  which  shall not  (subject  to Section
4.1(b)) exceed $1,500.

            (d)  The  Escrow  Agent  may at any  time  resign  as  Escrow  Agent
hereunder by giving five (5) business days prior written  notice of  resignation
to the Purchaser and the Company.  Prior to the effective date of resignation as
specified in such  notice,  the  Purchaser  and Company will issue to the Escrow
Agent a Joint Instruction authorizing delivery of the Documents and the Escrowed
Payment to a substitute  Escrow Agent seLECted by the Purchaser and the Company.
If no successor  Escrow  Agent is named by the  Purchaser  and the Company,  the
Escrow Agent may apply to a court of competent  jurisdiction in the State of New
York for appointment of a successor  Escrow Agent, and deposit the Documents and
the Escrowed Payment with the clerk of any such court and/or otherwise  commence
an interpleader  or similar action for a  determination  of where to deposit the
same.

            (e) The Escrow Agent does not have and will not have any interest in
the  Documents  and the Escrowed  Payment,  but is serving only as escrow agent,
having only possession thereof.

            (f) The Escrow  Agent  shall not be liable  for any action  taken or
omitted  by it in good  faith and  reasonably  believed  by it to be  authorized
hereby or within  the  rights or powers  conferred  upon it  hereunder,  nor for
action taken or omitted by it in good faith,  and in  accordance  with advice of
counsel  (which  counsel  may be Loeb & Loeb,  LLP or such other  counsel of the
Escrow  Agent's  choosing),  and shall not be liable for any  mistake of fact or
error of judgment or for any acts or  omissions of any kind except to the extent
any such liability arose from its own willful misconduct or gross negligence.

            (g) This Agreement sets forth  exclusively  the duties of the Escrow
Agent  with  respect to any and all  matters  pertinent  thereto  and no implied
duties or obligations shall be read into this Agreement.

            (h) The Escrow  Agent shall be  permitted  to act as counsel for the
Purchaser  or the  Company,  as the  case  may  be,  in  any  dispute  as to the
disposition  of the  Documents  and the Escrowed  Payment,  in any other dispute
between the Purchaser  and the Company,  whether or not

                                       5
<PAGE>

the Escrow Agent is then holding the Documents  and/or the Escrowed  Payment and
continues to act as the Escrow Agent hereunder.

            (i) The provisions of this Section 4.1 shall survive the resignation
of the Escrow Agent or the termination of this Agreement.

         4.2.  Dispute  Resolution;  Judgments.  Resolution of disputes  arising
               -------------------------------
under this Agreement shall be subject to the following terms and conditions:

            (a) If  any  dispute  shall  arise  with  respect  to the  delivery,
ownership,  right of  possession  or  disposition  of the  Documents  and/or the
Escrowed Payment,  or if the Escrow Agent shall in good faith be uncertain as to
its duties or rights  hereunder,  the Escrow Agent shall be authorized,  without
liability  to anyone,  to (i)  refrain  from  taking  any  action  other than to
continue to hold the Documents  and the Escrowed  Payment  pending  receipt of a
Joint Instruction from the Purchaser and Company,  (ii) commence an interpleader
or similar  action,  suit or proceeding  for the resolution of any such dispute;
and/or (iii) deposit the  Documents  and the Escrowed  Payment with any court of
competent jurisdiction in the State of New York, in which event the Escrow Agent
shall give written  notice  thereof to the  Purchaser  and the Company and shall
thereupon be relieved and discharged  from all further  obligations  pursuant to
this Agreement.  The Escrow Agent may, but shall be under no duty to,  institute
or defend any legal  proceedings  which relate to the Documents and the Escrowed
Payment.  The Escrow Agent shall have the right to retain  counsel if it becomes
involved in any disagreement, dispute or litigation on account of this Agreement
or  otherwise  determines  that it is necessary  to consult  counsel  which such
counsel  may be Loeb & Loeb LLP or such  other  counsel  of the  Escrow  Agent's
choosing.

            (b) The Escrow Agent is hereby  expressly  authorized to comply with
and obey any Court  Order.  In case the Escrow  Agent obeys or  complies  with a
Court Order,  the Escrow Agent shall not be liable to the  Purchaser and Company
or to any other person, firm, company or entity by reason of such compliance.

                                   ARTICLE V

                                 GENERAL MATTERS

         5.1. Termination.  This escrow shall terminate upon disbursement of the
              -----------
Escrowed  Payment in accordance with the terms of this Agreement or earlier upon
the  agreement in writing of the  Purchaser  and Company or  resignation  of the
Escrow Agent in accordance with the terms hereof.

         5.2. Notices. All notices,  requests,  demands and other communications
              -------
required or permitted  hereunder shall be in writing and shall be deemed to have
been duly given one (1) day after being sent by teLECopy (with copy delivered by
overnight courier, regular or certified mail):

                                       6
<PAGE>

                  (a)      If to the Company, to:

                           eLEC COMMUNICATIONS CORP.
                           75 South Broadway, Suite 302
                           White Plains, NY 10601
                           Facsimile: 914-682-0820

                With a copy to:      Pryor Cashman Sherman & Flynn LLP
                                     410 Park Avenue
                                     New York, NY 10022
                                     Facsimile: 212-798-6380
                                     Attention: Eric M. Hellige, Esq.

                  (b)      If to the Purchaser, to:

                           LAURUS MASTER FUND, LTD.
                           M&C Corporate Services Limited, P.O. Box 309 GT,
                           Ugland House, South Church Street, George Town, Grand
                           Cayman, Cayman Islands, Fax: 345-949-8080

                  (c)      If to the Escrow Agent, to:

                                     Loeb & Loeb LLP
                                     345 Park Avenue
                                     New York, New York 10154
                                     Fax:  (212) 407-4990
                                     Attention:  Scott J. Giordano, Esq.

or to such other  address as any of them shall give to the others by notice made
pursuant to this Section 5.2.

         5.3.  Interest.  The Escrowed  Payment shall not be held in an interest
               --------
bearing account nor will interest be payable in connection therewith.

         5.4.  Assignment;  Binding  Agreement.  Neither this  Agreement nor any
               -------------------------------
right or obligation hereunder shall be assignable by any party without the prior
written consent of the other parties  hereto.  This Agreement shall inure to the
benefit of and be binding  upon the parties  hereto and their  respective  legal
representatives, successors and assigns.

         5.5.  Invalidity.  In the event that any one or more of the  provisions
               ----------
contained  herein,  or the  application  thereof  in any  circumstance,  is held
invalid,  illegal, or unenforceable in any respect for any reason, the validity,
legality and  enforceability of any such provision in every other respect and of
the  remaining  provisions  contained  herein  shall not be in any way  impaired
thereby,  it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.

                                       7
<PAGE>

         5.6.  Counterparts/Execution.  This  Agreement  may be  executed in any
               ----------------------
number  of  counterparts  and  by  different   signatories  hereto  on  separate
counterparts,  each of which, when so executed, shall be deemed an original, but
all such  counterparts  shall  constitute but one and the same  agreement.  This
Agreement may be executed by facsimile transmission.

                   REMAINDER OF PAGE LEFT INTENTIONALLY BLANK

                                       8
<PAGE>

         IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as
of the date and year first above written.

                                          COMPANY:

                                          eLEC COMMUNICATIONS CORP.

                                          By: /s/ Paul Riss
                                             --------------------
                                          Name: Paul Riss
                                          Title: Chief Executive Officer

                                          PURCHASER:

                                          LAURUS MASTER FUND, LTD.

                                          By: /s/ David Grin
                                             --------------------
                                          Name: David Grin
                                          Title: Managing Director

                                          ESCROW AGENT:

                                          LOEB & LOEB LLP

                                          By: /s/ Loeb & Loeb LLP
                                             --------------------
                                          Name:
                                          Title:

                                       9
<PAGE>
<TABLE>
<CAPTION>

                            SCHEDULE A TO FUNDS ESCROW AGREEMENT

-------------------------------------------------------------------------------------------
PURCHASER                                        PRINCIPAL NOTE AMOUNT
-------------------------------------------------------------------------------------------
<S>                                             <C>
LAURUS MASTER FUND, LTD.,                        Term Note in an aggregate principal amount
M&C Corporate Services Limited, P.O. Box 309     of $2,000,000
GT, Ugland House, South Church Street, George
Town, Grand Cayman, Cayman Islands, Fax:
345-949-8080
-------------------------------------------------------------------------------------------
TOTAL                                            $2,000,000
-------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------
FUND MANAGER                                     CLOSING PAYMENT
-------------------------------------------------------------------------------------------
LAURUS CAPITAL MANAGEMENT, L.L.C.                Closing payment payable in connection with
825 Third Avenue, 14th Floor                     investment by Laurus Master Fund, Ltd. For
New York, New York 10022                         which Laurus Capital Management, L.L.C.
Fax: 212-541-4434                                is the Manager.
-------------------------------------------------------------------------------------------
TOTAL                                            $75,000
-------------------------------------------------------------------------------------------

WARRANTS

-------------------------------------------------------------------------------------------
WARRANT RECIPIENT                                WARRANTS IN CONNECTION WITH OFFERING
-------------------------------------------------------------------------------------------
LAURUS MASTER FUND, LTD.                         Term Note Warrant exercisable to purchase
M&C Corporate Services Limited, P.O. Box 309     up to 1,683,928 shares of common stock of
GT, Ugland House, South Church Street, George    the Company issuable in connection with
Town, Grand Cayman, Cayman Islands, Fax:         he Term Note.
345-949-8080
Fax: 345-949-9877
-------------------------------------------------------------------------------------------
TOTAL                                            Warrants exercisable  to purchase  up  to
                                                 1,683,928 shares of common  stock of the
                                                 Company.
-------------------------------------------------------------------------------------------
</TABLE>

                                             10

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