Document:

SUBSCRIPTION AGREEMENT

     THIS  SUBSCRIPTION AGREEMENT (this "AGREEMENT"), dated as of May 23, 2005,
by  and  among  GTC Telecom Corp., a Nevada corporation (the "COMPANY"), and the
subscribers  identified  on  the  signature page hereto (each a "SUBSCRIBER" and
collectively  "SUBSCRIBERS").

WHEREAS,  the  Company  and  the  Subscribers  are executing and delivering this
Agreement in reliance upon an exemption from securities registration afforded by
the  provisions  of  Section 4(2), Section 4(6) and/or Regulation D ("REGULATION
D")  as promulgated by the United States Securities and Exchange Commission (the
"COMMISSION")  under  the  Securities  Act of 1933, as amended (the "1933 ACT").

WHEREAS,  the  parties desire that, upon the terms and subject to the conditions
contained  herein,  the  Company  shall  issue  and  sell to the Subscribers, as
provided  herein,  and  the  Subscribers,  in  the aggregate, shall purchase One
Million  and  Eighty-Eight  Thousand  Two  Hundred  and  Thirty-Five  Dollars
($1,088,235)  (the  "PURCHASE PRICE") of principal amount of promissory notes of
the Company ("NOTE" or "NOTES") at an original issue discount of fifteen percent
(15%),  which  Notes  are convertible into shares of the Company's common stock,
$.001  par  value (the "COMMON STOCK") at a per share conversion price set forth
in  the  Note;  two  (2)  shares  of Common Stock for each One Dollar ($1.00) of
Purchase  Price ("INITIAL SHARES"); and share purchase warrants (the "WARRANTS")
in the forms attached hereto as EXHIBITS A1 AND A2, to purchase shares of Common
Stock  (the "WARRANT SHARES"). The Notes, Initial Shares, shares of Common Stock
issuable  upon  conversion  of  the  Notes  (the "SHARES"), the Warrants and the
Warrant  Shares  are  collectively  referred  to herein as the "SECURITIES"; and

WHEREAS, the aggregate proceeds of the sale of the Notes, Initial Shares and the
Warrants  contemplated hereby shall be held in escrow pursuant to the terms of a
Funds  Escrow  Agreement to be executed by the parties substantially in the form
attached  hereto  as  EXHIBIT  B  (the  "ESCROW  AGREEMENT").

NOW,  THEREFORE,  in  consideration of the mutual covenants and other agreements
contained  in  this  Agreement  the  Company and the Subscribers hereby agree as
follows:

     1.     Closing.   Subject  to  the  satisfaction or waiver of the terms and
conditions of this Agreement, on the "CLOSING DATE" (as defined in Section 13(b)
hereof),  each  Subscriber  shall  purchase  and  the Company shall sell to each
Subscriber  a  Note  in  the  principal  amount designated on the signature page
hereto for the consideration set forth on the signature page hereto, the Initial
Shares,  and  the  amount  of  Warrants  determined pursuant to Section 3 below.

     2.     Security  Interest.   The Subscribers will be granted a security
interest  in  all the assets of the Company, including ownership of Subsidiaries
as defined in Section 5(a) of this Agreement, and the assets of the Subsidiaries
to  be  memorialized in "SECURITY AGREEMENTS", forms of which are annexed hereto
as  EXHIBIT C1 AND C2. The Company will execute such other agreements, documents
and  financing  statements  to  be  filed  at  the  Company's  expense with such
jurisdictions,  states  and  counties designated by the Subscribers. The Company
will  also  execute  all  such  documents reasonably necessary in the opinion of
Subscriber  to  memorialize  and further protect the security interest described
herein.  The  Subscribers  will  appoint  a  Collateral  Agent to represent them
collectively  in  connection  with  the  security  interest to be granted in the
assets  of  the  Company and Subsidiaries. The appointment will be pursuant to a
"COLLATERAL  AGENT  AGREEMENT",  a form of which is annexed hereto as EXHIBIT D.

      3.     Warrants.

     (a)     Class A Warrants.   On the Closing Date, the Company will issue and
deliver  Class  A  Warrants  to  the  Subscribers.  Six Class A Warrants will be
issued  for  each  one dollar of Note principal issued on the Closing Date.  The
exercise  price  to  acquire  a Warrant Share upon exercise of a Class A Warrant
shall  be  110%  of  the  closing  bid  price of the Common Stock as reported by
Bloomberg  LP for the OTC Bulletin Board ("BULLETIN BOARD") for the last trading
day preceding the Closing Date, subject to reduction as described in the Class A
Warrant.   The  Class A Warrants shall be exercisable until four years after the
Closing  Date.

     (b)     Class B Warrants.   On the Closing Date, the Company will issue and
deliver  Class  B  Warrants  to  the Subscribers.  Five Class B Warrants will be
issued  for  each  one dollar of Note principal issued on the Closing Date.  The
exercise  price  to  acquire  a Warrant Share upon exercise of a Class B Warrant
shall  be  $0.20.   The  Class  B  Warrants  shall  be  exercisable  until  the
Registration  Statement [defined in Section 11.1(iv)] has been effective for the
public  unrestricted  resale  of  the  Shares  and  Warrants  for  120  days.

      4.     Subscriber's  Representations  and Warranties.  Each Subscriber
hereby  represents  and  warrants to and agrees with the Company only as to such
Subscriber  that:

     (a)     Organization and Standing of the Subscribers.  If the Subscriber is
an  entity,  such  Subscriber is a corporation, partnership or other entity duly
incorporated  or organized, validly existing and in good standing under the laws
of  the  jurisdiction  of  its  incorporation  or  organization.

     (b)     Authorization  and  Power.  Each Subscriber has the requisite power
and  authority  to  enter  into  and  perform this Agreement and to purchase the
Notes,  Initial  Shares and Warrants being sold to it hereunder.  The execution,
delivery  and  performance  of  this  Agreement  by  such  Subscriber  and  the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate or partnership action, and no further
consent  or  authorization  of  such  Subscriber  or  its  Board  of  Directors,
stockholders,  partners,  members,  as  the  case  may  be,  is  required.  This
Agreement  has  been  duly  authorized, executed and delivered by Subscriber and
constitutes,  or  shall  constitute  when  executed  and  delivered, a valid and
binding  obligation  of  the  Subscriber  enforceable  against the Subscriber in
accordance  with  the  terms  thereof.

     (c)     No Conflicts.  The execution, delivery and performance of this
Agreement  and  the  consummation by Subscriber of the transactions contemplated
hereby  or relating hereto do not and will not (i) result in a violation of such
Subscriber's  charter  documents  or bylaws or other organizational documents or
(ii)  conflict  with,  or constitute a default (or an event which with notice or
lapse  of  time  or  both  would  become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of any agreement,
indenture  or instrument or obligation to which such Subscriber is a party or by
which  its  properties or assets are bound, or result in a violation of any law,
rule,  or  regulation,  or  any  order,  judgment  or  decree  of  any  court or
governmental  agency applicable to such Subscriber or its properties (except for
such  conflicts,  defaults  and  violations as would not, individually or in the
aggregate,  have  a material adverse effect on such Subscriber). Such Subscriber
is  not  required  to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute,  deliver  or  perform any of its obligations under this Agreement or to
purchase  the Notes or acquire the Warrants in accordance with the terms hereof,
provided  that  for  purposes  of the representation made in this sentence, such
Subscriber  is  assuming  and  relying  upon  the  accuracy  of  the  relevant
representations  and  agreements  of  the  Company  herein.

     (d)     Information  on Company. The Subscriber has been furnished with or
has  had  access  at  the  EDGAR Website of the Commission to the Company's Form
10-KSB  for  the year ended June 30, 2004 as filed with the Commission, together
with  all  subsequently  filed  Forms  10-QSB,  8-K,  and  filings made with the
Commission  available at the EDGAR website (hereinafter referred to collectively
as  the  "REPORTS").  The Subscriber has had an opportunity to ask questions and
receive answers from representatives of the Company. In addition, the Subscriber
has  received  in writing from the Company such other information concerning its
operations,  financial  condition  and  other  matters  as  the  Subscriber  has
requested in writing (such other information is collectively, the "OTHER WRITTEN
INFORMATION"),  and  considered  all  factors  the  Subscriber deems material in
deciding  on  the  advisability  of  investing  in  the  Securities.

     (e)     Information  on  Subscriber.  The Subscriber is, and will be at the
time of the conversion of the Notes and exercise of the Warrants, an "ACCREDITED
INVESTOR", as such term is defined in Regulation D promulgated by the Commission
under the 1933 Act, is experienced in investments and business matters, has made
investments  of  a  speculative  nature  and  has purchased securities of United
States  publicly-owned companies in private placements in the past and, with its
representatives,  has  such knowledge and experience in financial, tax and other
business  matters  as  to  enable the Subscriber to utilize the information made
available  by  the  Company  to  evaluate the merits and risks of and to make an
informed  investment  decision  with  respect  to  the  proposed purchase, which
represents  a  speculative  investment.  The Subscriber has the authority and is
duly  and  legally qualified to purchase and own the Securities.  The Subscriber
is  able  to  bear  the  risk of such investment for an indefinite period and to
afford a complete loss thereof.  The information set forth on the signature page
hereto  regarding the Subscriber is accurate.  The Subscriber is not required to
be registered as a broker-dealer under Section 15 of the Securities Exchange Act
of  1934, as amended (the "1934 Act") and the Subscriber is not a broker-dealer.

     (f)     Purchase  of  Notes  and  Warrants.  On  the  Closing  Date,  the
Subscriber will purchase the Notes, Initial Shares and Warrants as principal for
its own account for investment only and not with a view toward, or for resale in
connection  with,  the  public  sale  or  any  distribution  thereof.

     (g)     Compliance  with  Securities  Act.   The Subscriber understands and
agrees  that  the  Securities have not been registered under the 1933 Act or any
applicable  state  securities laws, by reason of their issuance in a transaction
that  does  not  require  registration  under the 1933 Act (based in part on the
accuracy  of the representations and warranties of Subscriber contained herein),
and  that  such  Securities  must  be  held  indefinitely  unless  a  subsequent
disposition  is registered under the 1933 Act or any applicable state securities
laws  or  is  exempt  from  such  registration.

     (h)     Shares  Legend.  The  Shares, Initial Shares and the Warrant Shares
shall  bear  the  following  or  similar  legend:

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

     (i)     Warrants  Legend.  The  Warrants  shall  bear  the  following
or  similar  legend:
"THIS  WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT  BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THIS WARRANT
AND  THE  COMMON  SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED  FOR  SALE,  PLEDGED  OR  HYPOTHECATED  IN  THE  ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR ANY APPLICABLE STATE
SECURITIES  LAW  OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO GTC TELECOM
CORP.  THAT  SUCH  REGISTRATION  IS  NOT  REQUIRED."

     (j)     Note  Legend.  The  Note  shall  bear  the  following  legend:
"THIS  NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THIS NOTE AND THE
COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE,  PLEDGED  OR  HYPOTHECATED  IN  THE  ABSENCE  OF AN EFFECTIVE REGISTRATION
STATEMENT  AS  TO  THIS  NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY  TO  GTC  TELECOM  CORP.  THAT  SUCH REGISTRATION IS NOT REQUIRED."

     (k)     Communication  of  Offer.  The  offer  to  sell  the Securities was
directly  communicated  to  the  Subscriber  by the Company.  At no time was the
Subscriber  presented  with  or  solicited by any leaflet, newspaper or magazine
article,  radio  or  television  advertisement,  or  any  other  form of general
advertising  or  solicited  or invited to attend a promotional meeting otherwise
than  in  connection  and  concurrently  with  such  communicated  offer.

     (l)     Authority; Enforceability.  This  Agreement  and  other  agreements
delivered  together with this Agreement or in connection herewith have been duly
authorized,  executed  and delivered by the Subscriber and are valid and binding
agreements  enforceable  in  accordance with their terms, subject to bankruptcy,
insolvency,  fraudulent transfer, reorganization, moratorium and similar laws of
general  applicability  relating to or affecting creditors' rights generally and
to  general  principles  of  equity; and Subscriber has full corporate power and
authority  necessary  to enter into this Agreement and such other agreements and
to perform its obligations hereunder and under all other agreements entered into
by  the  Subscriber  relating  hereto.

     (m)     Restricted Securities.   Subscriber understands that the Securities
have  not  been registered under the 1933 Act and such Subscriber will not sell,
offer  to  sell,  assign,  pledge,  hypothecate or otherwise transfer any of the
Securities unless pursuant to an effective registration statement under the 1933
Act,  or  unless  an  exemption from registration is available.  Notwithstanding
anything  to  the  contrary  contained  in  this  Agreement, such Subscriber may
transfer  (without  restriction  and without the need for an opinion of counsel)
the  Securities  to  its  Affiliates  (as defined below) provided that each such
Affiliate  is  an  "accredited  investor"  under Regulation D and such Affiliate
agrees  to  be  bound  by  the  terms  and conditions of this Agreement. For the
purposes  of  this  Agreement,  an "AFFILIATE" of any person or entity means any
other  person  or  entity  directly  or indirectly controlling, controlled by or
under  direct  or indirect common control with such person or entity.  Affiliate
includes  each  subsidiary  of  the  Company.  For  purposes of this definition,
"CONTROL"  means  the power to direct the management and policies of such person
or  firm,  directly  or  indirectly,  whether  through  the  ownership of voting
securities,  by  contract  or  otherwise.

     (n)     No  Governmental  Review.  Each  Subscriber  understands  that no
United  States federal or state agency or any other governmental or state agency
has  passed  on  or made recommendations or endorsement of the Securities or the
suitability of the investment in the Securities nor have such authorities passed
upon  or  endorsed  the  merits  of  the  offering  of  the  Securities.

      (o)     Correctness  of  Representations.  Each Subscriber represents as
to  such  Subscriber  that the foregoing representations and warranties are true
and  correct  as  of the date hereof and, unless a Subscriber otherwise notifies
the  Company  prior  to  the  Closing  Date  shall be true and correct as of the
Closing  Date.

     (p)     Survival.  The  foregoing  representations  and  warranties  shall
survive  the  Closing  Date  for  a  period  of  three  years.

     5.     Company  Representations and Warranties.  The Company represents and
warrants  to  and  agrees  with  each  Subscriber  that:

     (a)     Due  Incorporation.  The  Company and each of its Subsidiaries is a
corporation or other entity duly incorporated or organized, validly existing and
in  good  standing  under  the  laws of the jurisdiction of its incorporation or
organization  and has the requisite corporate power to own its properties and to
carry  on  its  business  as  presently  conducted.  The Company and each of its
Subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in each jurisdiction where the nature of the business conducted or
property  owned  by  it  makes  such  qualification  necessary, other than those
jurisdictions  in  which  the  failure  to  so qualify would not have a Material
Adverse  Effect.  For  purposes  of  this Agreement, a "MATERIAL ADVERSE EFFECT"
shall  mean  a  material  adverse  effect on the financial condition, results of
operations,  properties or business of the Company and its Subsidiaries taken as
a  whole.  For  purposes  of this Agreement, "SUBSIDIARY" means, with respect to
any entity at any date, any corporation, limited or general partnership, limited
liability  company,  trust, estate, association, joint venture or other business
entity  of  which  more than 50% of (i) the outstanding capital stock having (in
the  absence  of contingencies) ordinary voting power to elect a majority of the
board  of directors or other managing body of such entity, (ii) in the case of a
partnership or limited liability company, the interest in the capital or profits
of  such  partnership  or  limited  liability  company or (iii) in the case of a
trust,  estate,  association,  joint  venture  or  other  entity, the beneficial
interest  in such trust, estate, association or other entity business is, at the
time of determination, owned or controlled directly or indirectly through one or
more  intermediaries,  by such entity.  All the Company's Subsidiaries as of the
Closing  Date  are  set  forth  on  SCHEDULE  5(A)  hereto.

     (b)     Outstanding  Stock.  All  issued  and outstanding shares of capital
stock  of  the Company has been duly authorized and validly issued and are fully
paid  and  nonassessable.

     (c)     Authority;  Enforceability. This Agreement, the Note, the Warrants,
the  Escrow  Agreement,  Security Agreements and Collateral Agent Agreement, and
any  other  agreements  delivered  together with this Agreement or in connection
herewith  (collectively  "TRANSACTION  DOCUMENTS")  have  been  duly authorized,
executed  and  delivered  by  the  Company  and are valid and binding agreements
enforceable  in  accordance with their terms, subject to bankruptcy, insolvency,
fraudulent  transfer,  reorganization,  moratorium  and  similar laws of general
applicability  relating  to  or  affecting  creditors'  rights  generally and to
general principles of equity. The Company has full corporate power and authority
necessary to enter into and deliver the Transaction Documents and to perform its
obligations  thereunder.

     (d)     Additional Issuances.   There  are  no  outstanding  agreements  or
preemptive  or similar rights affecting the Company's common stock or equity and
no  outstanding  rights,  warrants  or  options  to  acquire,  or  instruments
convertible  into  or  exchangeable  for,  or  agreements or understandings with
respect  to  the sale or issuance of any shares of common stock or equity of the
Company  or  other  equity  interest  in  any of the Subsidiaries of the Company
except  as  described  on  SCHEDULE  5(D).

      (e)     Consents. No  consent, approval, authorization or order of any
court,  governmental  agency  or body or arbitrator having jurisdiction over the
Company,  or  any  of  its  Affiliates,  the  Bulletin  Board  nor the Company's
shareholders  is  required  for  the execution by the Company of the Transaction
Documents and compliance and performance by the Company of its obligations under
the  Transaction Documents, including, without limitation, the issuance and sale
of  the  Securities.

      (f)     No  Violation  or Conflict.  Assuming the representations and
warranties  of  the  Subscribers  in Section 4 are true and correct, neither the
issuance  and  sale  of  the  Securities  nor  the  performance of the Company's
obligations  under  this  Agreement and all other agreements entered into by the
Company  relating  thereto  by  the  Company  will:

      (i)    violate,  conflict  with,  result  in  a breach of, or constitute a
default  (or  an  event  which with the giving of notice or the lapse of time or
both  would be reasonably likely to constitute a default) under (A) the articles
or  certificate  of  incorporation, charter or bylaws of the Company, (B) to the
Company's  knowledge, any decree, judgment, order, law, treaty, rule, regulation
or  determination applicable to the Company of any court, governmental agency or
body,  or arbitrator having jurisdiction over the Company or over the properties
or  assets  of  the Company or any of its Affiliates, (C) the terms of any bond,
debenture,  note  or any other evidence of indebtedness, or any agreement, stock
option or other similar plan, indenture, lease, mortgage, deed of trust or other
instrument  to  which  the Company or any of its Affiliates is a party, by which
the Company or any of its Affiliates is bound, or to which any of the properties
of  the  Company  or  any  of its Affiliates is subject, or (D) the terms of any
"lock-up" or similar provision of any underwriting or similar agreement to which
the Company, or any of its Affiliates is a party except the violation, conflict,
breach,  or  default  of  which  would  not  have  a Material Adverse Effect; or

     (ii)     result  in  the  creation  or  imposition  of  any lien, charge or
encumbrance  upon  the  Securities or any of the assets of the Company or any of
its  Affiliates  except  as  described  herein;  or

     (iii)     result  in  the activation of any anti-dilution rights or a reset
or  repricing of any debt or security instrument of any other creditor or equity
holder  of  the  Company,  nor result in the acceleration of the due date of any
obligation  of  the  Company;  or

     (iv)     result  in  the  activation  of  any  piggy-back registration
rights  of  any person or entity holding securities of the Company or having the
right  to  receive  securities  of  the  Company.

     (g)     The  Securities.  The  Securities  upon  issuance:

     (i)     are,  or  will be, free and clear of any security interests, liens,
claims  or  other  encumbrances, subject to restrictions upon transfer under the
1933  Act  and  any  applicable  state  securities  laws;

     (ii)  have been, or will be, duly and validly authorized and on the date of
issuance of the Shares and upon exercise of the Warrants, the Shares and Warrant
Shares  will  be  duly  and  validly  issued, fully paid and nonassessable or if
registered  pursuant  to  the  1933  Act,  and  resold  pursuant to an effective
registration  statement  will  be  free  trading  and  unrestricted);

     (iii)     will  not have been issued or sold in violation of any preemptive
or  other  similar  rights  of  the  holders  of  any securities of the Company;

     (iv)  will  not subject the holders thereof to personal liability by reason
of  being  such  holders;  and

     (v) assuming the representations warranties of the Subscribers as set forth
in  Section  4  hereof  are  true and correct, will not result in a violation of
Section  5  under  the  1933  Act.

     (h)  Litigation.  There  is  no  pending  or,  to the best knowledge of the
Company,  threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or  any  of its Affiliates that would affect the execution by the Company or the
performance  by  the Company of its obligations under the Transaction Documents.
Except as disclosed in the Reports and schedules hereto, there is no pending or,
to  the  best  knowledge  of  the Company, basis for or threatened action, suit,
proceeding  or  investigation  before any court, governmental agency or body, or
arbitrator  having jurisdiction over the Company, or any of its Affiliates which
litigation  if  adversely  determined  would  have  a  Material  Adverse Effect.

     (i)  Reporting  Company.  The Company is a publicly-held company subject to
reporting  obligations pursuant to Section 13 of the 1934 Act and has a class of
common  shares registered pursuant to Section 12(g) of the 1934 Act. Pursuant to
the  provisions  of  the  1934  Act, the Company has filed all reports and other
materials  required  to  be  filed  thereunder  with  the  Commission during the
preceding  twelve  months.

     (j)  No Market Manipulation. The Company and its Affiliates have not taken,
and will not take, directly or indirectly, any action designed to, or that might
reasonably  be  expected to, cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Securities
or  affect  the  price  at  which  the  Securities  may  be  issued  or  resold.

     (k)  Information  Concerning  Company.  The  Reports  contain  all material
information  relating  to the Company and its operations and financial condition
as  of  their  respective  dates  which  information is required to be disclosed
therein. Since the date of the financial statements included in the Reports, and
except  as modified in the Other Written Information or in the Schedules hereto,
there  has  been  no  Material Adverse Event relating to the Company's business,
financial  condition or affairs not disclosed in the Reports. The Reports do not
contain any untrue statement of a material fact or omit to state a material fact
required  to  be  stated therein or necessary to make the statements therein not
misleading  in  light  of  the  circumstances  when  made.

     (l)  Stop  Transfer.  The Company will not issue any stop transfer order or
other  order  impeding  the  sale,  resale or delivery of any of the Securities,
except as may be required by any applicable federal or state securities laws and
unless  contemporaneous  notice  of such instruction is given to the Subscriber.

     (m)  Defaults.  The  Company  is  not  in  violation  of  its  articles  of
incorporation  or  bylaws.  Except as described on SCHEDULE 5(Q), the Company is
(i)  not  in  default  under  or in violation of any other material agreement or
instrument  to  which  it is a party or by which it or any of its properties are
bound  or  affected,  which  default  or violation would have a Material Adverse
Effect,  (ii)  not in default with respect to any order of any court, arbitrator
or  governmental  body  or  subject  to  or  party  to any order of any court or
governmental  authority  arising out of any action, suit or proceeding under any
statute  or other law respecting antitrust, monopoly, restraint of trade, unfair
competition  or  similar  matters,  or  (iii)  to the Company's knowledge not in
violation of any statute, rule or regulation of any governmental authority which
violation  would  have  a  Material  Adverse  Effect.

       (n)     No Integrated Offering.  Neither the Company, nor any of its
Affiliates,  nor  any  person  acting  on  its  or their behalf, has directly or
indirectly  made  any offers or sales of any security or solicited any offers to
buy  any  security  under  circumstances  that  would  cause  the  offer  of the
Securities  pursuant  to this Agreement to be integrated with prior offerings by
the  Company for purposes of the 1933 Act or any applicable stockholder approval
provisions,  including,  without  limitation, under the rules and regulations of
the  Bulletin  Board.  Nor  will  the  Company or any of its Affiliates take any
action  or  steps that would cause the offer or issuance of the Securities to be
integrated with other offerings. The Company will not conduct any offering other
than the transactions contemplated hereby that will be integrated with the offer
or  issuance  of  the  Securities.

        (o)    No  General  Solicitation.  Neither  the  Company,  nor  any
of  its  Affiliates,  nor  to  its  knowledge, any person acting on its or their
behalf,  has  engaged in any form of general solicitation or general advertising
(within  the  meaning of Regulation D under the 1933 Act) in connection with the
offer  or  sale  of  the  Securities.

         (p)   Listing.  The  Common Stock is quoted on the Bulletin Board.
The Company has not received any oral or written notice that the Common Stock is
not  eligible nor will become ineligible for quotation on the Bulletin Board nor
that  the  Common  Stock  does not meet all requirements for the continuation of
such  quotation and the Company satisfies all the requirements for the continued
quotation  of  the  Common  Stock  on  the  Bulletin  Board.

         (q)     No  Undisclosed  Liabilities.  The  Company  has no liabilities
or  obligations  which are material, individually or in the aggregate, which are
not  disclosed  in  the  Reports and Other Written Information, other than those
incurred  in the ordinary course of the Company's businesses since June 30, 2004
and  which,  individually  or  in the aggregate, would reasonably be expected to
have  a  Material  Adverse  Effect, except as disclosed on SCHEDULE 5(Q). (r) No
Undisclosed  Events  or  Circumstances.  Since  June  30,  2004,  no  event  or
circumstance  has  occurred  or  exists  with  respect  to  the  Company  or its
businesses,  properties,  operations  or  financial  condition,  that,  under
applicable  law,  rule or regulation, requires public disclosure or announcement
prior  to  the  date  hereof  by  the Company but which has not been so publicly
announced  or  disclosed  in  the  Reports.

         (s)    Capitalization.  The  authorized  and  outstanding capital stock
of  the  Company  as  of  the  date  of this Agreement and the Closing Date (not
including the Securities) are set forth on SCHEDULE 5(D). Except as set forth on
SCHEDULE  5(D),  there  are  no  options,  warrants,  or rights to subscribe to,
securities, rights or obligations convertible into or exchangeable for or giving
any  right to subscribe for any shares of capital stock of the Company or any of
its  Subsidiaries.  All of the outstanding shares of Common Stock of the Company
have  been  duly  and  validly  authorized  and  issued  and  are fully paid and
nonassessable.

         (t)     Dilution. The  Company's  executive  officers and directors
understand the nature of the Securities being sold hereby and recognize that the
issuance  of  the Securities will have a potential dilutive effect on the equity
holdings of other holders of the Company's equity or rights to receive equity of
the  Company.  The  board of directors of the Company has concluded, in its good
faith  business  judgment  that  the  issuance  of the Securities is in the best
interests  of  the  Company.  The  Company  specifically  acknowledges  that its
obligation  to  issue  the  Shares upon conversion of the Notes, and the Warrant
Shares upon exercise of the Warrants is binding upon the Company and enforceable
regardless  of the dilution such issuance may have on the ownership interests of
other  shareholders  of the Company or parties entitled to receive equity of the
Company.

          (u)     No  Disagreements  with  Accountants  and  Lawyers.  There are
no  disagreements  of  any kind presently existing, or reasonably anticipated by
the  Company  to  arise,  between  the  Company  and the accountants and lawyers
formerly  or  presently  employed  by  the Company, including but not limited to
disputes  or  conflicts  over  payment  owed  to  such  accountants and lawyers.

          (v)     DTC  Status.  The Company's transfer agent is a participant in
and  the  Common Stock is eligible for transfer pursuant to the Depository Trust
Company  Automated  Securities  Transfer  Program.

          (w)     Investment  Company.   Neither  the  Company  nor  any
Affiliate  is  an  "investment  company"  within  the  meaning of the Investment
Company  Act  of  1940,  as  amended.

          (x)     Subsidiary  Representations.   The  Company  makes  each  of
the  representations  contained  in Sections 5(a), (b), (d), (f), (h), (k), (m),
(q)  through  (s),  (u)  and  (w)  of  this  Agreement,  as  same relate to each
Subsidiary  of  the  Company.

          (y)     Company  Predecessor.  All representations made by or relating
to  the  Company  of  a  historical  or  prospective  nature and all undertaking
described  in  Sections  9.1(g)  through  9.1(l)  shall  relate and refer to the
Company,  its  predecessors,  and  the  Subsidiaries.

          (z)     Correctness  of  Representations.  The Company represents that
the foregoing representations and warranties are true and correct as of the date
hereof  in all material respects, and, unless the Company otherwise notifies the
Subscribers prior to the Closing Date, shall be true and correct in all material
respects  as  of  the  Closing  Date.

          (AA)    Survival. The  foregoing  representations and warranties shall
survive  the  Closing  Date  for  a  period  of  three  years.

     6.     Regulation  D Offering.  The offer and issuance of the Securities to
the  Subscribers  is  being made pursuant to the exemption from the registration
provisions  of the 1933 Act afforded by Section 4(2) or Section 4(6) of the 1933
Act  and/or  Rule  506  of  Regulation D promulgated thereunder.  On the Closing
Date,  the  Company  will provide an opinion reasonably acceptable to Subscriber
from  the  Company's  legal  counsel opining on the availability of an exemption
from  registration under the 1933 Act as it relates to the offer and issuance of
the Securities and other matters reasonably requested by Subscribers.  A form of
the  legal opinion is annexed hereto as EXHIBIT E.  The Company will provide, at
the Company's expense, such other legal opinions in the future as are reasonably
necessary  for  the issuance and/or resale of the Initial Shares, and the Common
Stock  issuable  upon  conversion  of  the  Notes  and  exercise of the Warrants
pursuant  to  an  effective  registration  statement.

     7.1.     Conversion  of  Note.

     (a)     Upon  the  conversion of a Note or part thereof, the Company shall,
at  its own cost and expense, take all necessary action, including obtaining and
delivering,  an  opinion  of counsel to assure that the Company's transfer agent
shall  issue  stock  certificates  in the name of Subscriber (or its nominee) or
such  other  persons as designated by Subscriber and in such denominations to be
specified  at  conversion  representing  the  number  of  shares of Common Stock
issuable  upon such conversion.  The Company warrants that no instructions other
than  these instructions have been or will be given to the transfer agent of the
Company's  Common  Stock  and  that, unless waived by the Subscriber, the Shares
will  be  free-trading,  and  freely transferable, and will not contain a legend
restricting  the resale or transferability of the Shares provided the Shares are
being  sold  pursuant to an effective registration statement covering the Shares
or  are  otherwise  exempt  from  registration.

     (b)     Subscriber  will  give notice of its decision to exercise its right
to  convert  the  Note,  interest,  any  sum  due  to  the  Subscriber under the
Transaction  Documents  including  Liquidated  Damages,  or  part  thereof  by
telecopying  an  executed and completed Notice of Conversion (a form of which is
annexed  as  EXHIBIT  A  to  the  Note)  to the Company via confirmed telecopier
transmission  or  otherwise  pursuant  to  Section 13(a) of this Agreement.  The
Subscriber  will  not  be required to surrender the Note until the Note has been
fully  converted  or  satisfied.  Each  date  on which a Notice of Conversion is
telecopied  to  the  Company  in  accordance with the provisions hereof shall be
deemed  a  CONVERSION  DATE.  The  Company  will  itself  or cause the Company's
transfer  agent to transmit the Company's Common Stock certificates representing
the  Shares  issuable  upon conversion of the Note to the Subscriber via express
courier  for  receipt  by  such  Subscriber within three (3) business days after
receipt  by  the  Company  of the Notice of Conversion (such third day being the
"DELIVERY DATE").  In the event the Shares are electronically transferable, then
delivery  of the Shares must be made by electronic transfer provided request for
such  electronic transfer has been made by the Subscriber and the Subscriber has
complied  with all applicable securities laws in connection with the sale of the
Common  Stock,  including,  without  limitation,  the  prospectus  delivery
requirements.   A  Note  representing  the  balance of the Note not so converted
will  be  provided  by the Company to the Subscriber if requested by Subscriber,
provided the Subscriber delivers  the original Note to the Company. In the event
that  a  Subscriber  elects  not to surrender a Note for reissuance upon partial
payment or conversion, the Subscriber hereby indemnifies the Company against any
and  all  loss  or  damage  attributable  to a third-party claim in an amount in
excess  of  the  actual  amount  then  due  under  the  Note.

     (c)     The  Company understands that a delay in the delivery of the Shares
in the form required pursuant to Section 7.1 hereof, or the Mandatory Redemption
Amount  described in Section 7.2 hereof, respectively after the Delivery Date or
the  Mandatory  Redemption Payment Date (as hereinafter defined) could result in
economic  loss  to  the  Subscriber.  As compensation to the Subscriber for such
loss,  the Company agrees to pay (as liquidated damages and not as a penalty) to
the  Subscriber  for  late  issuance  of Shares in the form required pursuant to
Section  7.1  hereof  upon  Conversion  of  the  Note  in the amount of $100 per
business  day  after the Delivery Date for each $10,000 of Note principal amount
being converted of the corresponding Shares which are not timely delivered.  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 Subscriber, in the event that the Company fails
for  any  reason  to  effect delivery of the Shares by the Delivery Date or make
payment  by  the  Mandatory  Redemption  Payment  Date,  the  Subscriber will be
entitled  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 Subscriber shall each
be  restored  to their respective positions immediately prior to the delivery of
such notice, except that the liquidated damages described above shall be payable
through  the  date  notice  of revocation or rescission is given to the Company.

     (d)     Nothing  contained  herein or in any document referred to herein or
delivered  in  connection  herewith  shall be deemed to establish or require the
payment  of  a  rate  of  interest  or  other  charges  in excess of the maximum
permitted  by  applicable  law.  In  the  event  that  the  rate  of interest or
dividends  required  to  be  paid  or other charges hereunder exceed the maximum
permitted  by such law, any payments in excess of such maximum shall be credited
against  amounts  owed by the Company to the Subscriber and thus refunded to the
Company.

     7.2.     Mandatory  Redemption  at Subscriber's Election.  In the event the
Company  is prohibited from issuing Shares, or fails to timely deliver Shares on
a  Delivery  Date,  or  upon  the  occurrence  of any other Event of Default (as
defined  in  the  Note  or  in  this  Agreement)  that  is  not cured during any
applicable  cure  period  and  an  additional  ten  days thereafter, then at the
Subscriber's  election, the Company must pay to the Subscriber ten (10) business
days  after  request  by  the Subscriber, at the Subscriber's election, a sum of
money  determined  by  (i) multiplying up to the outstanding principal amount of
the Note designated by the Subscriber by 115%, or (ii) multiplying the number of
Shares  otherwise  deliverable  upon  conversion  of an amount of Note principal
and/or  interest  designated  by the Subscriber (with the date of giving of such
designation  being a "DEEMED CONVERSION DATE") at the then Conversion Price that
would be in effect on the Deemed Conversion Date by the highest closing price of
the Common Stock on the principal market for the period commencing on the Deemed
Conversion  Date  until the day prior to the receipt of the Mandatory Redemption
Payment, whichever is greater, together with accrued but unpaid interest thereon
and  any  other  sums  arising  and  outstanding under the Transaction Documents
("MANDATORY  REDEMPTION  PAYMENT").  The  Mandatory  Redemption  Payment must be
received  by  the  Subscriber  on  the same date as the Company Shares 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 Note principal and interest will be deemed paid and
no longer outstanding.  Liquidated damages calculated pursuant to Section 7.1(c)
hereof,  that  have  been paid or accrued for the twenty day period prior to the
actual  receipt  of  the Mandatory Redemption Payment by the Subscriber shall be
credited  against  the  Mandatory  Redemption  Payment  calculated  pursuant  to
subsections  (i)  and (ii) above of this Section 7.2.  In the event of a "CHANGE
IN CONTROL" (as defined below), the Subscriber may demand, and the Company shall
pay,  a  Mandatory Redemption Payment equal to 115% of the outstanding principal
amount of the Note designated by the Subscriber together with accrued but unpaid
interest  thereon  and  any  other  sums  arising  and  outstanding  under  the
Transaction  Documents.  For  purposes  of this Section 7.2, "CHANGE IN CONTROL"
shall  mean (i) the Company no longer having a class of shares publicly tradable
and  listed  on  a  Principal  Market, (ii) the Company becoming a Subsidiary of
another  entity  or merging into or with another entity, (iii) a majority of the
board  of  directors  of the Company as of the Closing Date no longer serving as
directors  of the Company, other than due to natural causes, (iv) if the holders
of  the Company's Common Stock as of the Closing Date beneficially owning at any
time  after  the  Closing Date less than thirty-five percent of the Common stock
owned  by  them on the Closing Date, or (v) the sale, lease, license or transfer
of  substantially  all  the  assets  of  the  Company  or  Subsidiaries.

          7.3.     Maximum  Conversion.  The Subscriber shall not be entitled to
convert  on  a  Conversion  Date that amount of the Note in connection with that
number  of shares of Common Stock which would be in excess of the sum of (i) the
number  of  shares  of common stock beneficially owned by the Subscriber and its
Affiliates  on  a Conversion Date, and (ii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of  this  provision  is  being  made on a Conversion Date, which would result in
beneficial  ownership by the Subscriber and its Affiliates of more than 4.99% of
the  outstanding  shares of common stock of the Company on such Conversion Date.
For  the  purposes  of  the  provision  to  the  immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities  Exchange  Act  of 1934, as amended, and Regulation 13d-3 thereunder.
Subject  to  the  foregoing,  the  Subscriber  shall not be limited to aggregate
conversions of only 4.99% and aggregate conversions by the Subscriber may exceed
4.99%.  The  Subscriber  may  waive  the conversion limitation described in this
Section 7.3, in whole or in part, or increase the permitted beneficial ownership
amount  upon  and  effective  after 61 days prior written notice to the Company.
The  Subscriber  may  allocate  which  of  the  equity  of  the  Company  deemed
beneficially  owned  by  the  Subscriber  shall  be included in the 4.99% amount
described  above  and  which  shall  be  allocated  to  the  excess above 4.99%.

     7.4.     Injunction Posting of Bond.  In the event a Subscriber shall elect
to  convert  a Note or part thereof or exercise the Warrant in whole or in part,
the  Company  may not refuse conversion or exercise based on any claim that such
Subscriber  or  any  one  associated or affiliated with such Subscriber has been
engaged  in any violation of law, or for any other reason, unless, an injunction
from  a court, on notice, restraining and or enjoining conversion of all or part
of  such  Note or exercise of all or part of such Warrant shall have been sought
and  obtained  by  the Company  and the Company has posted a surety bond for the
benefit  of  such Subscriber in the amount of 120% of the amount of the Note, or
aggregate purchase price of the Warrant Shares which are sought to be subject to
the  injunction,  which  bond  shall  remain  in  effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to  such  Subscriber  to  the  extent  Subscriber  obtains  judgment.

     7.5.  Buy-In.  In addition to any other rights available to the Subscriber,
if  the  Company  fails  to  deliver to the Subscriber such shares issuable upon
conversion  of  a Note by the Delivery Date and if after seven (7) business days
after  the Delivery Date the Subscriber purchases (in an open market transaction
or  otherwise)  shares  of  Common Stock to deliver in satisfaction of a sale by
such Subscriber of the Common Stock which the Subscriber was entitled to receive
upon  such  conversion  (a  "BUY-IN"), then the Company shall pay in cash to the
Subscriber  (in  addition  to  any  remedies  available  to  or  elected  by the
Subscriber)  the  amount  by  which  (A)  the  Subscriber'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 Note
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 Subscriber 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  note  principal and/or interest, the
Company  shall  be  required  to  pay  the Subscriber $1,000, plus interest. The
Subscriber  shall  provide  the  Company  written  notice indicating the amounts
payable  to  the  Subscriber  in  respect  of  the  Buy-In.

     7.6 Adjustments. The Conversion Price, Warrant exercise price and amount of
Shares  issuable upon conversion of the Notes and exercise of the Warrants shall
be  equitably  adjusted  and as otherwise described in this Agreement, the Notes
and  Warrants.

     7.7.  Redemption.  The  Note  shall not be redeemable or callable except as
described  in  the  Note.  The  Warrants  shall  not  be callable or redeemable.

      8.     Broker/Legal  Fees.

     (a)  Broker's  Fee.  The  Company on the one hand, and each Subscriber (for
himself  only)  on the other hand, agree to indemnify the other against and hold
the  other  harmless  from  any  and  all  liabilities  to  any persons claiming
brokerage  commissions  or  finder's fees other than Hunter Wise Securities, LLC
("BROKER")  on  account of services purported to have been rendered on behalf of
the  indemnifying  party  in  connection with this Agreement or the transactions
contemplated  hereby and arising out of such party's actions. The Company agrees
that  on  the Closing Date, the Company will pay the Broker the fee as described
on  SCHEDULE 8 hereto ("BROKER'S FEE"). The Company represents that there are no
other  parties  entitled  to  receive  fees, commissions, or similar payments in
connection  with  the  Offering  except  the  Broker.

     (b)  Legal Fees. The Company shall pay to Grushko & Mittman, P.C., a fee of
$18,000  ("LEGAL  FEES")  (of  which  $5,000 has been paid) as reimbursement for
services  rendered  to the Subscribers in connection with this Agreement and the
purchase and sale of the Notes, Initial Shares and Warrants (the "OFFERING") and
acting  as  Escrow Agent for the Offering. The Legal Fees will be payable out of
funds  held  pursuant  to  the Escrow Agreement. Grushko & Mittman, P.C. will be
reimbursed  at  Closing  for  all  UCC  search  and  filing  fees.

      9.     Covenants  of  the  Company.  The  Company  covenants and agrees
with  the  Subscribers  as  follows:

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

      (b)    Listing.  The  Company  shall promptly secure the listing of the
Initial  Shares,  Shares  and  the  Warrant Shares upon each national securities
exchange,  or  electronic  or  automated quotation system upon which they are or
become eligible for listing and shall maintain such listing so long as any Notes
or Warrants are outstanding. The Company will maintain the listing of its Common
Stock  on  the  American Stock Exchange, Nasdaq SmallCap Market, Nasdaq National
Market  System,  Bulletin  Board,  or  New York Stock Exchange (whichever of the
foregoing is at the time the principal trading exchange or market for the Common
Stock  (the  "PRINCIPAL  MARKET")),  and  will  comply  in all respects with the
Company's  reporting,  filing and other obligations under the bylaws or rules of
the  Principal  Market,  as applicable. The Company will provide the Subscribers
copies  of  all  notices it receives notifying the Company of the threatened and
actual  delisting  of the Common Stock from any Principal Market. As of the date
of  this  Agreement  and the Closing Date, the Bulletin Board is and will be the
Principal  Market.

      (c)    Market  Regulations.  The  Company  shall  notify  the  Commission,

the  Principal Market and applicable state authorities, in accordance with their
requirements, of the transactions contemplated by this Agreement, and shall take
all  other  necessary action and proceedings as may be required and permitted by
applicable  law,  rule  and  regulation, for the legal and valid issuance of the
Securities to the Subscribers and promptly provide copies thereof to Subscriber.

     (d)  Filing  Requirements.  From  the  date of this Agreement and until the
sooner  of  (i)  three  (3)  years after the Closing Date, or (ii) until all the
Shares, Initial Shares and Warrant Shares have been resold or transferred by all
the  Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitation, the Company will (A) cause its Common Stock
to  continue  to be registered under Section 12(b) or 12(g) of the 1934 Act, (B)
comply  in all respects with its reporting and filing obligations under the 1934
Act, (C) comply with all reporting requirements that are applicable to an issuer
with a class of shares registered pursuant to Section 12(b) or 12(g) of the 1934
Act,  as  applicable, and (D) comply with all filing requirements related to any
registration  statement  filed  pursuant to this Agreement. The Company will use
its  best  efforts  not  to take any action or file any document (whether or not
permitted  by the 1933 Act or the 1934 Act or the rules thereunder) to terminate
or suspend such registration or to terminate or suspend its reporting and filing
obligations  under said acts until three (3) years after the Closing Date. Until
the  earlier  of  the resale of the Shares, Initial Shares and Warrant Shares by
each Subscriber or until three (3) years after the Warrants have been exercised,
the  Company  will  use its best efforts to continue the listing or quotation of
the  Common Stock on a Principal Market and will comply in all respects with the
Company's  reporting,  filing and other obligations under the bylaws or rules of
the Principal Market. The Company agrees to timely file a Form D with respect to
the  Securities  if required under Regulation D and to provide a copy thereof to
each  Subscriber  promptly  after  such  filing.

     (e)     Use  of Proceeds.  The proceeds of the Offering must be employed by
the  Company  for the purposes set forth on SCHEDULE 9(E) hereto.  Except as set
forth  on  SCHEDULE  9(E),  the  Purchase Price may not and will not be used for
accrued  and  unpaid officer and director salaries, payment of financing related
debt,  redemption  of outstanding notes or equity instruments of the Company nor
non-trade  obligations  outstanding  on  a  Closing  Date.  The  proceeds of the
Offering  to  be used for designated purposes as set forth on SCHEDULE 9(E) will
be  paid  out  of  the  escrow  account  pursuant  to  the  Escrow  Agreement.

     (f)     Reservation.   Prior to the Closing Date, the Company undertakes to
reserve,  pro  rata,  on  behalf  of  each holder of a Note or Warrant, from its
authorized but unissued common stock, a number of common shares equal to 175% of
the  amount  of Common Stock necessary to allow each holder of a Note to be able
to  convert  all  such  outstanding Notes and interest and reserve the amount of
Warrant  Shares  issuable  upon  exercise  of  the  Warrants.   Failure  to have
sufficient  shares  reserved  pursuant  to  this  Section  9(f)  for  three  (3)
consecutive  business days or ten (10) days in the aggregate shall be a material
default  of  the  Company's  obligations  under  this  Agreement and an Event of
Default  under  the  Note.

     (g)     Taxes.  From  the  date of this  Agreement and until the sooner of
(i)  three  (3)  years  after  the  Closing  Date, or (ii) until all the Shares,
Initial  Shares  and  Warrant  Shares have been resold or transferred by all the
Subscribers  pursuant  to  the  Registration  Statement or pursuant to Rule 144,
without  regard  to  volume  limitations,  the  Company  will  promptly  pay and
discharge,  or cause to be paid and discharged, when due and payable, all lawful
taxes,  assessments  and governmental charges or levies imposed upon the income,
profits,  property  or business of the Company; provided, however, that any such
tax,  assessment,  charge or levy need not be paid if the validity thereof shall
currently  be  contested  in  good  faith  by appropriate proceedings and if the
Company  shall  have  set  aside  on  its  books  adequate reserves with respect
thereto,  and  provided,  further,  that  the  Company  will pay all such taxes,
assessments, charges or levies forthwith upon the commencement of proceedings to
foreclose  any  lien  which  may  have  attached  as  security  therefore.

      (h)     Insurance.  From  the date of this Agreement and until the sooner
of  (i)  three  (3)  years after the Closing Date, or (ii) until all the Shares,
Initial  Shares  and  Warrant  Shares have been resold or transferred by all the
Subscribers  pursuant  to  the  Registration  Statement or pursuant to Rule 144,
without regard to volume limitations, the Company will keep its assets which are
of  an  insurable  character insured by financially sound and reputable insurers
against  loss  or  damage by fire, explosion and other risks customarily insured
against by companies in the Company's line of business, in amounts sufficient to
prevent  the  Company from becoming a co-insurer, and the Company will maintain,
with  financially  sound and reputable insurers, insurance against other hazards
and  risks and liability to persons and property to the extent and in the manner
customary  for  companies  in  similar  businesses similarly situated and to the
extent  available  on  commercially  reasonable  terms.

      (i)     Books and Records.  From the date of this Agreement and until the
sooner  of  (i)  three  (3)  years after the Closing Date, or (ii) until all the
Shares, Initial Shares and Warrant Shares have been resold or transferred by all
the  Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without  regard  to  volume  limitations, the Company will keep true records and
books  of  account  in  which full, true and correct entries will be made of all
dealings  or  transactions in relation to its business and affairs in accordance
with generally accepted accounting principles applied on a consistent basis.

     (j) Governmental Authorities. From the date of this Agreement and until the
sooner  of  (i)  three  (3)  years after the Closing Date, or (ii) until all the
Shares, Initial Shares and Warrant Shares have been resold or transferred by all
the  Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitations, the Company shall duly observe and conform
in  all  material respects to all valid requirements of governmental authorities
relating  to  the  conduct  of  its business or to its properties or assets. (k)
Intellectual  Property.  From the date of this Agreement and until the sooner of
(i)  three  (3)  years  after  the  Closing  Date, or (ii) until all the Shares,
Initial  Shares  and  Warrant  Shares have been resold or transferred by all the
Subscribers  pursuant  to  the  Registration  Statement or pursuant to Rule 144,
without  regard  to volume limitations, the Company shall maintain in full force
and  effect  its corporate existence, rights and franchises and all licenses and
other  rights  to  use  intellectual  property  owned  or  possessed  by  it and
reasonably  deemed  to  be  necessary  to  the  conduct  of  its  business.

      (l)     Properties.  From the date of this Agreement and until the sooner
of  (i)  three  (3)  years after the Closing Date, or (ii) until all the Shares,
Initial  Shares  and  Warrant  Shares have been resold or transferred by all the
Subscribers  pursuant  to  the  Registration  Statement  (as  defined in Section
11.1(iv)  hereof) or pursuant to Rule 144, without regard to volume limitations,
the  Company  will  keep  its  properties  in  good  repair,  working  order and
condition,  reasonable  wear  and  tear excepted, and from time to time make all
necessary and proper repairs, renewals, replacements, additions and improvements
thereto;  and  the  Company  will at all times comply with each provision of all
leases  to which it is a party or under which it occupies property if the breach
of  such  provision  could  reasonably  be  expected  to have a Material Adverse
Effect.

      (m)     Confidentiality/Public  Announcement.  From  the  date of this
Agreement and until the sooner of (i) three (3) years after the Closing Date, or
(ii) until all the Shares, Initial Shares and Warrant Shares have been resold or
transferred  by  all  the  Subscribers pursuant to the Registration Statement or
pursuant  to  Rule 144, without regard to volume limitations, the Company agrees
that except in connection with a Form 8-K or the Registration Statement, it will
not  disclose  publicly  or  privately  the  identity  of the Subscribers unless
expressly agreed to in writing by a Subscriber or only to the extent required by
law  and  then  only upon five days prior notice to Subscriber. In any event and
subject  to  the  foregoing,  the Company shall file a Form 8-K or make a public
announcement describing the Offering not later than the first business day after
the  Closing  Date.  In  the  Form  8-K or public announcement, the Company will
specifically  disclose  the amount of common stock outstanding immediately after
the  Closing.  A  form  of  the  proposed  Form 8-K or public announcement to be
employed  in  connection  with  the  Offering  is  annexed  hereto as EXHIBIT F.

      (n)     Further  Registration  Statements.   Except for a registration
statement  filed  on  behalf  of  the Subscribers pursuant to Section 11 of this
Agreement  the  Company  will  not file any registration statements or amend any
already  filed  registration  statement,  including but not limited to Form S-8,
with  the Commission or with state regulatory authorities without the consent of
the  Subscriber  until  the  sooner of (i) the Registration Statement shall have
been  current  and  available  for  use  in  connection  with  the resale of the
Registrable  Securities (as defined in Section 11.1(i) for a period of 120 days,
or  (ii)  until  all  the  Shares,  Initial Shares, and Warrant Shares have been
resold  or transferred by the Subscribers pursuant to the Registration Statement
or  Rule  144,  without  regard  to volume limitations ("EXCLUSION PERIOD"). The
Exclusion  Period  will  be tolled during the pendency of an Event of Default as
defined  in  the  Note.

     (o)     Blackout.    The  Company  undertakes  and covenants that until the
end  of  the  Exclusion Period, the Company will not enter into any acquisition,
merger,  exchange  or  sale  or  other transaction that could have the effect of
delaying  the  effectiveness of any pending registration statement or causing an
already  effective  registration  statement to no longer be effective or current
for  a  period  twenty  (20)  or  more  days.

     (p)     Non-Public  Information.  The  Company  covenants  and  agrees that
neither it nor any other person acting on its behalf will provide any Subscriber
or  its  agents  or  counsel  with  any  information  that  the Company believes
constitutes  material  non-public  information,  unless  prior  thereto  such
Subscriber  shall  have  agreed  in  writing  to  receive such information.  The
Company  understands  and  confirms that each Subscriber shall be relying on the
foregoing  representations  in  effecting  transactions  in  securities  of  the
Company.

     (q)     Limited  Standstill.   The  Company will deliver to the Subscribers
on  or  before  the  Closing  Date  and  enforce  the  provisions of irrevocable
standstill  agreements  ("LIMITED  STANDSTILL  AGREEMENTS")  in the form annexed
hereto  as  EXHIBIT  G,  with  the  parties  identified on SCHEDULE 9(Q) hereto.

10.     Covenants  of  the  Company  and  Subscriber  Regarding Indemnification.

     (a)     The  Company  agrees  to  indemnify,  hold  harmless, reimburse and
defend  the  Subscribers,  the  Subscribers'  officers,  directors,  agents,
Affiliates,  control  persons,  and  principal  shareholders, against any claim,
cost, expense, liability, obligation, loss or damage (including reasonable legal
fees)  of  any  nature,  incurred  by or imposed upon the Subscriber or any such
person  which  results,  arises  out  of  or  is  based  upon  (i)  any material
misrepresentation  by  Company  or  breach  of  any  warranty by Company in this
Agreement  or  in  any Exhibits or Schedules attached hereto, or other agreement
delivered  pursuant  hereto;  or  (ii)  after  any applicable notice and/or cure
periods,  any breach or default in performance by the Company of any covenant or
undertaking  to  be  performed  by the Company hereunder, or any other agreement
entered  into  by  the  Company  and  Subscriber  relating  hereto.

     (b)  Each  Subscriber  agrees  to  indemnify,  hold harmless, reimburse and
defend  the  Company  and  each  of  the  Company's officers, directors, agents,
Affiliates,  control  persons  against  any  claim,  cost,  expense,  liability,
obligation,  loss  or  damage  (including  reasonable legal fees) of any nature,
incurred by or imposed upon the Company or any such person which results, arises
out of or is based upon (i) any material misrepresentation by such Subscriber in
this  Agreement  or  in  any  Exhibits  or  Schedules  attached hereto, or other
agreement  delivered pursuant hereto; or (ii) after any applicable notice and/or
cure  periods,  any  breach  or default in performance by such Subscriber of any
covenant  or  undertaking  to  be performed by such Subscriber hereunder, or any
other  agreement  entered  into by the Company and Subscribers, relating hereto.

     (c)  In  no  event  shall  the  liability  of  any  Subscriber or permitted
successor  hereunder  or  under  any  Transaction  Document  or  other agreement
delivered  in connection herewith be greater in amount than the dollar amount of
the  net  proceeds  actually  received  by  such  Subscriber  upon  the  sale of
Registrable  Securities  (as  defined  herein).

     (d)  The  procedures  set  forth  in  Section  11.6  shall  apply  to  the
indemnification  set  forth  in  Sections  10(a)  and  10(b)  above.

     11.1.     Registration  Rights.  The  Company  hereby  grants the following
registration  rights  to  holders  of  the  Securities.

     (i)     On one occasion, for a period commencing one hundred and  forty-one
(141)  days  after  the Closing Date, but not later than two (2) years after the
Closing  Date  ("REQUEST DATE"), upon a written request therefor from any record
holder  or  holders  of  more  than 50% of the Initial Shares, Shares issued and
issuable  upon  conversion  of the Notes and Warrant Shares actually issued upon
exercise of the Warrants, the Company shall prepare and file with the Commission
a  registration  statement  under  the  1933 Act registering the Initial Shares,
Shares  issuable  upon  conversion  of  all sums due under the Notes and Warrant
Shares  issuable  upon  exercise  of  the  Warrants  (collectively  "REGISTRABLE
SECURITIES")  which  are  the  subject  of  such request for unrestricted public
resale  by  the  holder thereof.  For purposes of Sections 11.1(i) and 11.1(ii),
Registrable Securities shall not include Securities (A) which are registered for
resale  in an effective registration statement, (B) included for registration in
a pending registration statement, or  (C) which have been issued without further
transfer  restrictions  after  a sale or transfer pursuant to Rule 144 under the
1933  Act.  Upon  the  receipt  of such request, the Company shall promptly give
written  notice  to  all other record holders of the Registrable Securities that
such  registration  statement  is  to  be  filed  and  shall  include  in  such
registration  statement Registrable Securities for which it has received written
requests within ten (10) days after the Company gives such written notice.  Such
other  requesting  record holders shall be deemed to have exercised their demand
registration  right  under  this  Section  11.1(i).

     (ii)  If the Company at any time proposes to register any of its securities
under  the  1933  Act for sale to the public, whether for its own account or for
the  account  of  other  security  holders  or  both,  except  with  respect  to
registration  statements  on  Forms  S-4,  S-8 or another form not available for
registering  the  Registrable  Securities  for  sale to the public, provided the
Registrable  Securities  are  not  otherwise  registered  for  resale  by  the
Subscribers or Holder pursuant to an effective registration statement, each such
time it will give at least fifteen (15) days' prior written notice to the record
holder of the Registrable Securities of its intention so to do. Upon the written
request  of  the  holder, received by the Company within ten (10) days after the
giving  of  any  such  notice by the Company, to register any of the Registrable
Securities  not  previously  registered, the Company will cause such Registrable
Securities  as to which registration shall have been so requested to be included
with  the  securities to be covered by the registration statement proposed to be
filed  by  the  Company,  all to the extent required to permit the sale or other
disposition  of  the  Registrable Securities so registered by the holder of such
Registrable  Securities  (the  "SELLER"  or  "SELLERS").  In  the event that any
registration pursuant to this Section 11.1(ii) shall be, in whole or in part, an
underwritten  public  offering  of  common  stock  of the Company, the number of
shares  of  Registrable Securities to be included in such an underwriting may be
reduced  by  the  managing underwriter if and to the extent that the Company and
the  underwriter  shall  reasonably  be of the opinion that such inclusion would
adversely  affect  the  marketing  of  the  securities to be sold by the Company
therein;  provided, however, that the Company shall notify the Seller in writing
of any such reduction. Notwithstanding the foregoing provisions, or Section 11.4
hereof,  the Company may withdraw or delay or suffer a delay of any registration
statement  referred  to  in  this Section 11.1(ii) without thereby incurring any
liability  to  the  Seller.

     (iii)  If,  at the time any written request for registration is received by
the  Company  pursuant to Section 11.1(i), the Company has determined to proceed
with  the  actual  preparation  and filing of a registration statement under the
1933  Act  in connection with the proposed offer and sale for cash of any of its
securities for the Company's own account and the Company actually does file such
other  registration statement, such written request shall be deemed to have been
given  pursuant  to Section 11.1(ii) rather than Section 11.1(i), and the rights
of  the  holders of Registrable Securities covered by such written request shall
be  governed  by  Section  11.1(ii).

     (iv)  The  Company  shall  file with the Commission a Form SB-2 or Form S-3
registration  statement  (the "REGISTRATION STATEMENT") (or such other form that
it  is  eligible  to  use)  in  order to register the Registrable Securities for
resale and distribution under the 1933 Act) not later than forty-seven (47) days
after  the  Closing  Date  (the  "FILING  DATE"),  and  cause  it to be declared
effective not later than one hundred and forty (140) days after the Closing Date
(the  "EFFECTIVE  DATE").  The  Company  will register not less than a number of
shares  of  Common  Stock  in  the aforedescribed registration statement that is
equal to 175% of the Shares issuable upon conversion of the Notes and all of the
Initial  Shares  and  Warrant  Shares issuable upon exercise of the Warrants and
Broker's  Warrants  (as  described  on  SCHEDULE  8  hereto).  The  Registrable
Securities  shall  be reserved and set aside exclusively for the benefit of each
Subscriber  and  Warrant  holder, pro rata, and not issued, employed or reserved
for  anyone other than each such Subscriber and Warrant holder. The Registration
Statement will immediately be amended or additional registration statements will
be  immediately  filed by the Company as necessary to register additional shares
of  Common  Stock to allow the public resale of all Common Stock included in and
issuable by virtue of the Registrable Securities. Without the written consent of
the  Subscriber,  no  securities  of  the  Company  other  than  the Registrable
Securities will be included in the Registration Statement except as described on
SCHEDULE  11.1,  hereto.  It  shall be deemed a Non-Registration Event if at any
time  after  the  date  the  Registration Statement is declared effective by the
Commission ("ACTUAL EFFECTIVE DATE") the Company has registered for unrestricted
resale  on behalf of a Subscriber fewer than 125% of the amount of Common Shares
issuable  upon  full  conversion of all sums due under the Notes and 100% of the
Initial  Shares  and  Warrant  Shares issuable upon exercise of the Warrants and
Broker's  Warrants.

     11.2.     Registration  Procedures. If and whenever the Company is required
by  the  provisions  of  Section  11.1(i),  11.1(ii),  or  (iv)  to  effect  the
registration of any Registrable Securities under the 1933 Act, the Company will,
as  expeditiously  as  possible:

     (a)     subject  to  the  timelines provided in this Agreement, prepare and
file  with  the Commission a registration statement required by Section 11, with
respect  to  such securities and use its best efforts to cause such registration
statement  to  become  and  remain  effective for the period of the distribution
contemplated  thereby  (determined  as herein provided), promptly provide to the
holders  of  the  Registrable  Securities  copies  of all filings and Commission
letters of comment and notify Subscribers (by telecopier and by e-mail addresses
provided by Subscribers) and Grushko & Mittman, P.C. (by telecopier and by email
to Counslers@aol.com) on or before 3:00 PM EST on the next business day that the
Company  receives  notice  that (i) the Commission has no comments or no further
comments  on the Registration Statement, and (ii) the registration statement has
been  declared  effective  (failure to timely provide notice as required by this
Section  11.2(a)  shall  be a material breach of the Company's obligation and an
Event of Default as defined in the Notes and a Non-Registration Event as defined
in  Section  11.4  of  this  Agreement);

     (b) prepare and file with the Commission such amendments and supplements to
such  registration  statement and the prospectus used in connection therewith as
may  be  necessary  to  keep  such  registration  statement effective until such
registration  statement  has been effective for a period of three (3) years, and
comply  with  the  provisions of the 1933 Act with respect to the disposition of
all  of  the  Registrable  Securities  covered by such registration statement in
accordance  with  the  Sellers' intended method of disposition set forth in such
registration  statement  for  such  period;

     (c) furnish to the Sellers, at the Company's expense, such number of copies
of  the  registration  statement  and the prospectus included therein (including
each  preliminary prospectus) as such persons reasonably may request in order to
facilitate  the  public  sale  or their disposition of the securities covered by
such  registration  statement;

     (d) use its commercially reasonable best efforts to register or qualify the
Registrable  Securities  covered  by  such  registration  statement  under  the
securities  or "blue sky" laws of New York and such jurisdictions as the Sellers
shall  request in writing, provided, however, that the Company shall not for any
such  purpose be required to qualify generally to transact business as a foreign
corporation  in  any  jurisdiction where it is not so qualified or to consent to
general  service  of  process  in  any  such  jurisdiction;

     (e)  if  applicable,  list  the  Registrable  Securities  covered  by  such
registration statement with any securities exchange on which the Common Stock of
the  Company  is  then  listed;

     (f) notify the Subscribers within two hours of the Company's becoming aware
that  a  prospectus  relating thereto is required to be delivered under the 1933
Act,  of  the  happening  of  any  event of which the Company has knowledge as a
result of which the prospectus contained in such registration statement, as then
in  effect,  includes an 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  in  light  of the circumstances then existing or which
becomes  subject  to  a Commission, state or other governmental order suspending
the  effectiveness of the registration statement covering any of the Shares; and

     (g)  provided same would not be in violation of the provision of Regulation
FD  under  the  1934  Act, make available for inspection by the Sellers, and any
attorney,  accountant  or other agent retained by the Seller or underwriter, all
publicly  available,  non-confidential  financial  and  other records, pertinent
corporate  documents  and  properties  of  the  Company, and cause the Company's
officers,  directors  and  employees  to  supply  all  publicly  available,
non-confidential  information  reasonably  requested  by  the  seller, attorney,
accountant  or  agent  in  connection  with  such  registration  statement.

     11.3.     Provision  of  Documents.  In  connection  with each registration
described in this Section 11, each Seller will furnish to the Company in writing
such  information  and  representation  letters  with  respect to itself and the
proposed  distribution by it as reasonably shall be necessary in order to assure
compliance  with  federal  and  applicable  state  securities  laws.

     11.4.  Non-Registration  Events. The Company and the Subscribers agree that
the  Sellers  will  suffer damages if the Registration Statement is not filed by
the  Filing  Date  and not declared effective by the Commission by the Effective
Date,  and any registration statement required under Section 11.1(i) or 11.1(ii)
is  not filed within 60 days after written request and declared effective by the
Commission  within 120 days after such request, and maintained in the manner and
within  the  time periods contemplated by Section 11 hereof, and it would not be
feasible to ascertain the extent of such damages with precision. Accordingly, if
(A) the Registration Statement is not filed on or before the Filing Date, (B) is
not  declared  effective  on  or before the Effective Date, (C) the Registration
Statement is not declared effective within three (3) business days after receipt
by  the  Company  or  its  attorneys of a written or oral communication from the
Commission  that  the  Registration  Statement  will not be reviewed or that the
Commission  has no further comments, (D) if the registration statement described
in  Sections  11.1(i) or 11.1(ii) is not filed within 60 days after such written
request,  or  is  not  declared  effective  within  120  days after such written
request,  or  (E)  any  registration  statement  described  in Sections 11.1(i),
11.1(ii)  or 11.1(iv) is filed and declared effective but shall thereafter cease
to be effective (without being succeeded within fifteen (15) business days by an
effective  replacement  or  amended registration statement) for a period of time
which shall exceed 20 days in the aggregate per year (defined as a period of 365
days  commencing  on  the date the Registration Statement is declared effective)
(each  such event referred to in clauses (A) through (E) of this Section 11.4 is
referred  to  herein  as  a  "Non-Registration  Event"),  then the Company shall
deliver  to  the  holder  of  Registrable  Securities, as Liquidated Damages, an
amount  equal  to  two  percent  (2%) for each thirty (30) days or part thereof,
thereafter of the Purchase Price of the Notes remaining unconverted and purchase
price  of  Shares  issued  upon  conversion of the Notes owned of record by such
holder  which  are  subject to such Non-Registration Event. The Company must pay
the  Liquidated  Damages in cash. The Liquidated Damages must be paid within ten
(10)  days  after the end of each thirty (30) day period or shorter part thereof
for  which Liquidated Damages are payable. In the event a Registration Statement
is  filed  by the Filing Date but is withdrawn prior to being declared effective
by  the  Commission, then such Registration Statement will be deemed to have not
been  filed.  All oral or written comments received from the Commission relating
to  the  Registration  Statement  must be satisfactorily responded to within ten
(10)  business  days  after  receipt of comments from the Commission. Failure to
timely  respond  to  Commission  comments  is a Non-Registration Event for which
Liquidated  Damages shall accrue and be payable by the Company to the holders of
Registrable  Securities  at  the  same rate set forth above. Notwithstanding the
foregoing,  the Company shall not be liable to the Subscriber under this Section
11.4  for  any  events  or  delays  occurring  as  a  consequence of the acts or
omissions  of  the  Subscribers  contrary  to  the  obligations  undertaken  by
Subscribers  in  this  Agreement.  Liquidated  Damages  will  not  accrue nor be
payable  pursuant  to  this  Section  11.4  nor will a Non-Registration Event be
deemed  to  have  occurred  for  times  during  which Registrable Securities are
transferable  by  the  holder  of Registrable Securities pursuant to Rule 144(k)
under  the  1933  Act.

     11.5.  Expenses.  All  expenses  incurred  by the Company in complying with
Section  11,  including,  without  limitation, all registration and filing fees,
printing  expenses,  fees  and  disbursements  of counsel and independent public
accountants  for  the  Company,  fees and expenses (including reasonable counsel
fees)  incurred in connection with complying with state securities or "blue sky"
laws,  fees  of  the  National Association of Securities Dealers, Inc., transfer
taxes, fees of transfer agents and registrars, costs of insurance and fee of one
counsel  for  all  Sellers  are called "REGISTRATION EXPENSES." All underwriting
discounts  and  selling  commissions  applicable  to  the  sale  of  Registrable
Securities,  including  any fees and disbursements of one counsel to the Seller,
are called "SELLING EXPENSES." The Company will pay all Registration Expenses in
connection with the registration statement under Section 11. Selling Expenses in
connection  with  each registration statement under Section 11 shall be borne by
the  Seller and may be apportioned among the Sellers in proportion to the number
of  shares  sold  by the Seller relative to the number of shares sold under such
registration  statement  or  as  all  Sellers  thereunder  may  agree.

     11.6.  Indemnification  and  Contribution.

     (a)     In  the event of a registration of any Registrable Securities under
the  1933  Act pursuant to Section 11, the Company will, to the extent permitted
by law, indemnify and hold harmless the Seller, each officer of the Seller, each
director  of  the  Seller,  each  underwriter  of  such  Registrable  Securities
thereunder  and  each  other  person,  if  any,  who  controls  such  Seller  or
underwriter  within  the  meaning  of  the 1933 Act, against any losses, claims,
damages  or  liabilities,  joint  or  several,  to  which  the  Seller,  or such
underwriter  or  controlling  person  may  become  subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect  thereof) arise out of or are based upon any untrue statement or alleged
untrue  statement  of  any material fact contained in any registration statement
under  which  such  Registrable  Securities  was  registered  under the 1933 Act
pursuant to Section 11, any preliminary prospectus or final prospectus contained
therein,  or  any  amendment or supplement thereof, or arise out of or are based
upon  the omission or alleged omission to state therein a material fact required
to  be stated therein or necessary to make the statements therein not misleading
in  light  of the circumstances when made, and will subject to the provisions of
Section  11.6(c)  reimburse  the  Seller,  each  such  underwriter and each such
controlling  person  for any legal or other expenses reasonably incurred by them
in  connection  with  investigating  or  defending any such loss, claim, damage,
liability  or action; provided, however, that the Company shall not be liable to
the Seller to the extent that any such damages arise out of or are based upon an
untrue  statement  or  omission  made  in  any preliminary prospectus if (i) the
Seller failed to send or deliver a copy of the final prospectus delivered by the
Company  to  the Seller with or prior to the delivery of written confirmation of
the sale by the Seller to the person asserting the claim from which such damages
arise,  (ii)  the final prospectus would have corrected such untrue statement or
alleged  untrue  statement or such omission or alleged omission, or (iii) to the
extent  that any such loss, claim, damage or liability arises out of or is based
upon  an  untrue  statement  or  alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by any such Seller, or
any such controlling person in writing specifically for use in such registration
statement  or  prospectus.

     (b)  In  the  event  of a registration of any of the Registrable Securities
under the 1933 Act pursuant to Section 11, each Seller severally but not jointly
will,  to  the extent permitted by law, indemnify and hold harmless the Company,
and each person, if any, who controls the Company within the meaning of the 1933
Act,  each  officer  of  the  Company who signs the registration statement, each
director  of  the  Company,  each  underwriter  and each person who controls any
underwriter  within  the  meaning  of  the 1933 Act, against all losses, claims,
damages  or liabilities, joint or several, to which the Company or such officer,
director,  underwriter  or  controlling person may become subject under the 1933
Act  or  otherwise,  insofar  as such losses, claims, damages or liabilities (or
actions  in respect thereof) arise out of or are based upon any untrue statement
or  alleged  untrue statement of any material fact contained in the registration
statement under which such Registrable Securities were registered under the 1933
Act  pursuant  to  Section  11,  any  preliminary prospectus or final prospectus
contained  therein,  or  any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required  to  be  stated therein or necessary to make the statements therein not
misleading,  and  will  reimburse  the  Company and each such officer, director,
underwriter  and  controlling  person for any legal or other expenses reasonably
incurred  by  them  in connection with investigating or defending any such loss,
claim,  damage,  liability or action, provided, however, that the Seller will be
liable  hereunder in any such case if and only to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged  untrue  statement or omission or alleged omission made in reliance upon
and in conformity with information pertaining to such Seller, as such, furnished
in  writing  to  the  Company  by  such  Seller  specifically  for  use  in such
registration  statement  or prospectus, and provided, further, however, that the
liability  of the Seller hereunder shall be limited to the net proceeds actually
received  by  the Seller from the sale of Registrable Securities covered by such
registration  statement.

     (c)  Promptly  after receipt by an indemnified party hereunder of notice of
the  commencement  of  any  action,  such indemnified party shall, if a claim in
respect  thereof  is to be made against the indemnifying party hereunder, notify
the  indemnifying  party  in  writing thereof, but the omission so to notify the
indemnifying  party shall not relieve it from any liability which it may have to
such  indemnified  party  other  than  under this Section 11.6(c) and shall only
relieve  it from any liability which it may have to such indemnified party under
this  Section  11.6(c),  except  and  only if and to the extent the indemnifying
party  is  prejudiced by such omission. In case any such action shall be brought
against  any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and,  to  the  extent it shall wish, to assume and undertake the defense thereof
with  counsel satisfactory to such indemnified party, and, after notice from the
indemnifying  party  to  such indemnified party of its election so to assume and
undertake  the  defense  thereof,  the indemnifying party shall not be liable to
such  indemnified  party  under  this  Section  11.6(c)  for  any legal expenses
subsequently  incurred  by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so  selected,  provided,  however,  that,  if  the defendants in any such action
include  both  the  indemnified  party  and  the  indemnifying  party  and  the
indemnified  party  shall have reasonably concluded that there may be reasonable
defenses  available  to  it  which  are  different  from  or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably  may  be  deemed  to  conflict with the interests of the indemnifying
party,  the  indemnified parties, as a group, shall have the right to select one
separate  counsel and to assume such legal defenses and otherwise to participate
in  the  defense  of  such action, with the reasonable expenses and fees of such
separate  counsel  and  other  expenses  related  to  such  participation  to be
reimbursed  by  the  indemnifying  party  as  incurred.

          (d)  In  order  to  provide for just and equitable contribution in the
     event of joint liability under the 1933 Act in any case in which either (i)
     a  Seller,  or  any  controlling  person  of  a  Seller,  makes a claim for
     indemnification  pursuant  to  this  Section  11.6  but  it  is  judicially
     determined  (by  the  entry  of  a  final  judgment or decree by a court of
     competent  jurisdiction  and the expiration of time to appeal or the denial
     of  the last right of appeal) that such indemnification may not be enforced
     in  such  case notwithstanding the fact that this Section 11.6 provides for
     indemnification  in  such case, or (ii) contribution under the 1933 Act may
     be  required  on the part of the Seller or controlling person of the Seller
     in  circumstances  for  which  indemnification  is  not provided under this
     Section  11.6; then, and in each such case, the Company and the Seller will
     contribute to the aggregate losses, claims, damages or liabilities to which
     they  may be subject (after contribution from others) in such proportion so
     that  the  Seller  is  responsible  only for the portion represented by the
     percentage  that the public offering price of its securities offered by the
     registration statement bears to the public offering price of all securities
     offered  by  such  registration  statement, provided, however, that, in any
     such  case, (y) the Seller will not be required to contribute any amount in
     excess  of  the  public  offering  price  of all such securities sold by it
     pursuant to such registration statement; and (z) no person or entity guilty
     of fraudulent misrepresentation (within the meaning of Section 11(f) of the
     1933  Act)  will  be entitled to contribution from any person or entity who
     was  not  guilty  of  such  fraudulent  misrepresentation.

     11.7.     Delivery  of  Unlegended  Shares.

     (a)  Within  three  (3)  business  days  (such third business day being the
"UNLEGENDED  SHARES  DELIVERY DATE") after the business day on which the Company
has  received  (i)  a  notice that Shares, Initial Shares or Warrant Shares have
been sold pursuant to the Registration Statement or Rule 144 under the 1933 Act,
(ii)  a  representation  that  the  prospectus  delivery  requirements,  or  the
requirements  of  Rule  144, as applicable and if required, have been satisfied,
and  (iii)  the  original  share  certificates representing the shares of Common
Stock  that  have  been  sold,  and  (iv)  in  the case of sales under Rule 144,
customary  representation  letters  of the Subscriber and/or Subscriber's broker
regarding  compliance  with  the  requirements  of  Rule 144, the Company at its
expense,  (y)  shall  deliver,  and  shall  cause  legal counsel selected by the
Company  to  deliver  to  its  transfer  agent  (with  copies  to Subscriber) an
appropriate  instruction  and opinion of such counsel, directing the delivery of
shares  of  Common  Stock  without any legends including the legend set forth in
Section  4(h)  above,  reissuable  pursuant  to  any  effective  and  current
Registration  Statement described in Section 11 of this Agreement or pursuant to
Rule  144  under  the  1933  Act  (the  "UNLEGENDED  SHARES"); and (z) cause the
transmission  of  the  certificates  representing the Unlegended Shares together
with  a  legended  certificate  representing  the  balance  of  the  submitted
certificates,  if  any, to the Subscriber at the address specified in the notice
of  sale,  via express courier, by electronic transfer or otherwise on or before
the  Unlegended  Shares Delivery Date. Transfer fees shall be the responsibility
of  the  Seller.

     (b) In lieu of delivering physical certificates representing the Unlegended
Shares, if the Company's transfer agent is participating in the Depository Trust
Company  ("DTC")  Fast  Automated Securities Transfer program, upon request of a
Subscriber,  so  long  as the certificates therefor do not bear a legend and the
Subscriber  is  not  obligated to return such certificate for the placement of a
legend  thereon,  the  Company  shall cause its transfer agent to electronically
transmit  the  Unlegended  Shares by crediting the account of Subscriber's prime
Broker  with  DTC  through  its Deposit Withdrawal Agent Commission system. Such
delivery  must  be  made  on  or  before  the  Unlegended  Shares Delivery Date.

     (c)     The  Company  understands  that  a  delay  in  the  delivery of the
Unlegended Shares pursuant to Section 11 hereof later than the Unlegended Shares
Delivery Date could result in economic loss to a Subscriber.  As compensation to
a  Subscriber  for  such  loss,  the Company agrees to pay late payment fees (as
liquidated  damages and not as a penalty) to the Subscriber for late delivery of
Unlegended Shares in the amount of $100 per business day after the Delivery Date
for  each  $10,000  of  purchase  price  of the Unlegended Shares subject to the
delivery  default.  If  during  any 360 day period, the Company fails to deliver
Unlegended  Shares  as  required by this Section 11.7 for an aggregate of thirty
(30)  days,  then each Subscriber or assignee holding Securities subject to such
default  may, at its option, require the Company to redeem all or any portion of
the Shares, Initial Shares and Warrant Shares subject to such default at a price
per  share  equal  to  115%  of the purchase price or value described in Section
12(e)  hereof,  of  such  Shares, Initial Shares and Warrant Shares ("UNLEGENDED
REDEMPTION  AMOUNT").  The  amount of the aforedescribed liquidated damages that
have  accrued or been paid for the twenty day period prior to the receipt by the
Subscriber  of  the  Unlegended  Redemption Amount shall be credited against the
Unlegended Redemption Amount.  The Company shall pay any payments incurred under
this  Section  in  immediately  available  funds  upon  demand.

     (d)     In  addition  to any other rights available to a Subscriber, if the
Company  fails to deliver to a Subscriber Unlegended Shares as required pursuant
to  this  Agreement,  within seven (7) business days after the Unlegended Shares
Delivery  Date  and  the  Subscriber purchases (in an open market transaction or
otherwise)  shares  of common stock to deliver in satisfaction of a sale by such
Subscriber  of  the  shares of Common Stock which the Subscriber was entitled to
receive from the Company (a "BUY-IN"), then the Company shall pay in cash to the
Subscriber  (in  addition  to  any  remedies  available  to  or  elected  by the
Subscriber)  the  amount  by  which  (A)  the  Subscriber's total purchase price
(including  brokerage  commissions,  if  any)  for the shares of common stock so
purchased exceeds (B) the aggregate purchase price of the shares of Common Stock
delivered  to  the  Company  for  reissuance as Unlegended Shares  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  a Subscriber
purchases  shares  of  Common  Stock having a total purchase price of $11,000 to
cover  a  Buy-In  with  respect to $10,000 of purchase price of shares of Common
Stock  delivered to the Company for reissuance as Unlegended Shares, the Company
shall  be  required  to pay the Subscriber $1,000, plus interest. The Subscriber
shall  provide  the Company written notice indicating the amounts payable to the
Subscriber  in  respect  of  the  Buy-In.

     (e)     In  the  event  a  Subscriber  shall request delivery of Unlegended
Shares  as described in Section 11.7 and the Company is required to deliver such
Unlegended  Shares  pursuant  to  Section  11.7,  the  Company may not refuse to
deliver  Unlegended  Shares  based  on any claim that such Subscriber or any one
associated  or affiliated with such Subscriber has been engaged in any violation
of  law, or for any other reason, unless, an injunction or temporary restraining
order  from  a  court,  on notice, restraining and or enjoining delivery of such
Unlegended  Shares  or  exercise  of all or part of said Warrant shall have been
sought  and obtained and the Company has posted a surety bond for the benefit of
such  Subscriber  in  the amount of 120% of the amount of the aggregate purchase
price of the Common Stock and Warrant Shares which are subject to the injunction
or  temporary  restraining  order,  which  bond shall remain in effect until the
completion  of  arbitration/litigation  of the dispute and the proceeds of which
shall be payable to such Subscriber to the extent Subscriber obtains judgment in
Subscriber's  favor.

     12.     (a)     Right  of  First Refusal.  Until the Registration Statement
has  been  effective  for  the  public  unrestricted  resale  of the Registrable
Securities  for 365 days, the Subscribers shall be given not less than seven (7)
business  days  prior  written notice of any proposed sale by the Company of its
common  stock or other securities or debt obligations, except in connection with
(i)  as  a  result  of  the  exercise  of  options  or warrants or conversion of
convertible  Notes  or  amounts  which are granted, issued or accrue pursuant to
this  Agreement,  (ii)  as  has  been  described in the Reports or Other Written
Information  filed  with the Commission or delivered to the Subscribers prior to
the  Closing  Date,  (iii)  full  or  partial consideration in connection with a
strategic  merger,  consolidation  or  purchase  of  substantially  all  of  the
securities or assets of corporation or other entity, (iv) the Company's issuance
of  securities  in  connection  with  strategic  license  agreements  and  other
partnering  arrangements  so  long  as such issuances are not for the purpose of
raising  capital, and (v) the Company's issuance of Common Stock or the issuance
or  grants  of  options to purchase Common Stock pursuant to the Company's stock
option  plans  and employee stock purchase plans as they now exist, which copies
of such plans have been delivered to the Subscribers (collectively the foregoing
are  "EXCEPTED ISSUANCES").   The Subscribers who exercise their rights pursuant
to  this  Section  12(a) shall have the right during the seven (7) business days
following  receipt of the notice to purchase in the aggregate up to 100% of such
offered  common stock, debt or other securities in accordance with the terms and
conditions  set forth in the notice of sale in the same proportion to each other
as  their  purchase  of  Notes  in  the  Offering.  In  the event such terms and
conditions are modified during the notice period, the Subscribers shall be given
prompt notice of such modification and shall have the right during the seven (7)
business  days  following  the  notice  of modification, whichever is longer, to
exercise  such  right.

     (b)     Offering  Restrictions.   Other  than the Excepted Issuances, until
the Registration Statement has been effective for the public unrestricted resale
of  the  Shares, Initial Shares and Warrant Shares for sixty days and during the
pendency  of an Event of Default, or when any compensatory or liquidated damages
are accruing or are outstanding, the Company will not enter into an agreement to
nor  issue  any  equity,  convertible  debt or other securities convertible into
common  stock or equity of the Company nor modify any of the foregoing which may
be  outstanding at anytime, without the prior written consent of the Subscriber,
which  consent  may  be  withheld  for any reason.  For so long as the Notes are
outstanding the Company will not enter into any equity line of credit or similar
agreement,  nor  issue  or agree to issue any floating or variable priced equity
linked  instruments  nor any of the foregoing or equity with price reset rights.

     (c)     Favored  Nations Provision.   Except for the Excepted Issuances, if
at  any time Notes or Warrants are outstanding the Company shall offer, issue or
agree  to  issue  any common stock or securities convertible into or exercisable
for  shares  of  common  stock  (or  modify  any  of  the foregoing which may be
outstanding)  to  any  person  or  entity  at a price per share or conversion or
exercise  price  per  share  which  shall  be  less than the Conversion Price in
respect  of the Shares, or if less than the Warrant exercise price in respect of
the  Warrant  Shares,  without  the  consent  of  each Subscriber holding Notes,
Shares, Warrants, or Warrant Shares, then the Company shall issue, for each such
occasion,  additional  shares  of  Common  Stock  to each Subscriber so that the
average  per  share  purchase  price of the shares of Common Stock issued to the
Subscriber  (of  only  the  Common  Stock  or  Warrant Shares still owned by the
Subscriber)  is  equal  to  such  other lower price per share and the Conversion
Price  and  Warrant  Exercise Price shall automatically be reduced to such other
lower  price  per  share.  The  average Purchase Price of the Shares and average
exercise  price in relation to the Warrant Shares shall be calculated separately
for the Shares and Warrant Shares.  The foregoing calculation and issuance shall
be  made  separately for Shares received upon Note conversion and separately for
Warrant  Shares.  The  delivery  to  the  Subscriber of the additional shares of
Common  Stock shall be not later than the closing date of the transaction giving
rise  to  the  requirement  to  issue  additional  shares  of Common Stock.  The
Subscriber  is granted the registration rights described in Section 11 hereof in
relation  to  such additional shares of Common Stock except that the Filing Date
and  Effective  Date  vis-  -vis  such  additional  common  shares  shall  be,
respectively,  the  thirtieth  (30th) and sixtieth (60th) date after the closing
date  giving  rise  to  the requirement to issue the additional shares of Common
Stock.  For purposes of the issuance and adjustment described in this paragraph,
the  issuance  of any security of the Company carrying the right to convert such
security  into  shares  of  Common  Stock  or of any warrant, right or option to
purchase  Common  Stock shall result in the issuance of the additional shares of
Common  Stock  upon  the  sooner  of the agreement to or actual issuance of such
convertible  security,  warrant,  right or option and again at any time upon any
subsequent  issuances of shares of Common Stock upon exercise of such conversion
or  purchase  rights  if  such  issuance is at a price lower than the Conversion
Price or Warrant exercise price in effect upon such issuance.  The rights of the
Subscriber  set forth in this Section 12 are in addition to any other rights the
Subscriber  has  pursuant to this Agreement, the Note, any Transaction Document,
and  any  other  agreement  referred  to or entered into in connection herewith.

      (d)     Option  Plan  Restrictions.   The only officer, director, employee
and  consultant  stock  option  or  stock  incentive plan currently in effect or
contemplated  by  the  Company  has  been  submitted  to  the  Subscribers or is
described  with  Reports.  No  other plan will be adopted nor may any options or
equity  not  included  in  such plan be issued until after the Exclusion Period.

     (e)  Paid  In  Kind. The Subscriber may demand that some or all of the sums
payable  to the Subscriber pursuant to Sections 7.1(c), 7.2, 7.5, 11.4, 11.7(c),
11.7(d)  and  11.7(e) that are not paid within ten business days of the required
payment date be paid in shares of Common Stock valued at the Conversion Price in
effect  at  the  time  Subscriber  makes  such  demand  or,  at the Subscriber's
election,  at  such  other  valuation described in the Transaction Documents. In
addition to any other rights granted to the Subscriber herein, the Subscriber is
also  granted  the  registration  rights set forth in Section 11.1(ii) hereof in
relation  to  such shares of Common Stock and the Common Stock issuable pursuant
to  this  Section 12(e). For purposes only of determining any liquidated damages
pursuant  to  the  Transaction  Documents,  the  entire  Purchase Price shall be
allocated  to  the Notes and none to the Initial Shares or Warrants; the Initial
Shares  shall be valued at the Conversion Price in effect at the time liquidated
damages  accrued;  and the Warrant Shares shall be valued at the actual exercise
price  thereof.

     (f)  Maximum  Exercise  of  Rights. In the event the exercise of the rights
described  in Sections 12(a), 12(c) and 12(e) would result in the issuance of an
amount  of common stock of the Company that would exceed the maximum amount that
may  be issued to a Subscriber calculated in the manner described in Section 7.3
of  this  Agreement, then the issuance of such additional shares of common stock
of  the  Company  to  such Subscriber will be deferred in whole or in part until
such  time  as  such  Subscriber  is  able to beneficially own such common stock
without  exceeding  the  maximum  amount  set  forth  calculated  in  the manner
described  in  Section  7.3  of  this  Agreement. The determination of when such
common  stock  may  be  issued  shall be made by each Subscriber as to only such
Subscriber.

    13.     Miscellaneous.

     (a)     Notices.  All  notices, demands, requests, consents, approvals, and
other  communications  required  or permitted hereunder shall be in writing and,
unless  otherwise  specified  herein,  shall  be  (i)  personally  served,  (ii)
deposited  in  the  mail,  registered  or  certified,  return receipt requested,
postage  prepaid,  (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as  set  forth below or to such other address as such party shall have specified
most  recently by written notice.  Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or  delivery  by  facsimile,  with  accurate  confirmation  generated  by  the
transmitting  facsimile  machine,  at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be  received),  or  the first business day following such delivery (if delivered
other  than  on a business day during normal business hours where such notice is
to  be received) or (b) on the second business day following the date of mailing
by  express  courier  service, fully prepaid, addressed to such address, or upon
actual  receipt of such mailing, whichever shall first occur.  The addresses for
such communications shall be: (i) if to the Company, to: GTC Telecom Corp., 3151
Airway  Avenue,  Suite P-3, Costa Mesa, CA 92626, Attn: Vi Bui, Esq., telecopier
number:  (714)  549-7707,  and  (ii)  if to the Subscribers, to: the one or more
addresses  and  telecopier numbers indicated on the signature pages hereto, with
an  additional  copy  by  telecopier only to: Grushko & Mittman, P.C., 551 Fifth
Avenue, Suite 1601, New York, New York 10176, telecopier number: (212) 697-3575.

(b)     Closing.  The consummation of the transactions contemplated herein shall
take  place  at  the offices of Grushko & Mittman, P.C., 551 Fifth Avenue, Suite
1601,  New  York,  New  York  10176,  upon the satisfaction of all conditions to
Closing  set  forth  in  this  Agreement  ("CLOSING  DATE").

(c)     Entire  Agreement;  Assignment.  This  Agreement  and  other  documents
delivered  in  connection  herewith  represent  the entire agreement between the
parties hereto with respect to the subject matter hereof and may be amended only
by  a writing executed by both parties.  Neither the Company nor the Subscribers
have  relied  on  any  representations  not  contained  or  referred  to in this
Agreement  and the documents delivered herewith.   No right or obligation of the
Company shall be assigned without prior notice to and the written consent of the
Subscribers.

(d)      Counterparts/Execution.  This  Agreement  may be executed in any number
of  counterparts  and  by  the  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 instrument.  This
Agreement  may  be  executed  by  facsimile signature and delivered by facsimile
transmission.

(e)     Law  Governing  this Agreement.  This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
conflicts  of  lawsprinciples  that  would  result  in  the  application  of the
substantive  laws  of  another jurisdiction.  Any action brought by either party
against  the  other  concerning  the transactions contemplated by this Agreement
shall  be  brought only in the state courts of New York or in the federal courts
located  in  the  state  of New York.  THE PARTIES AND THE INDIVIDUALS EXECUTING
THIS  AGREEMENT  AND  OTHER  AGREEMENTS  REFERRED  TO  HEREIN  OR  DELIVERED  IN
CONNECTION HEREWITH ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE JURISDICTION
OF  SUCH COURTS AND WAIVE TRIAL BY JURY.  The prevailing party shall be entitled
to  recover  from  the other party its reasonable attorney's fees and costs.  In
the  event that any provision of this Agreement or any other agreement delivered
in  connection herewith is invalid or unenforceable under any applicable statute
or  rule  of  law, then such provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to conform with such
statute  or  rule  of  law.  Any  such  provision  which  may  prove  invalid or
unenforceable  under  any law shall not affect the validity or enforceability of
any  other  provision  of  any  agreement.

(f)     Specific  Enforcement,  Consent  to  Jurisdiction.  The  Company  and
Subscriber  acknowledge  and  agree  that  irreparable damage would occur in the
event  that  any  of  the  provisions  of  this  Agreement were not performed in
accordance  with  their  specific  terms  or  were  otherwise  breached.  It  is
accordingly agreed that the parties shall be entitled to one or more preliminary
and  final  injunctions  to  prevent  or cure breaches of the provisions of this
Agreement  and  to  enforce  specifically  the terms and provisions hereof, this
being  in  addition  to any other remedy to which any of them may be entitled by
law or equity.  Subject to Section 13(e) hereof, each of the Company, Subscriber
and  any  signator hereto in his personal capacity hereby waives, and agrees not
to  assert  in  any  such  suit,  action or proceeding, any claim that it is not
personally subject to the jurisdiction in New York of such court, that the suit,
action  or  proceeding  is brought in an inconvenient forum or that the venue of
the  suit,  action  or  proceeding  is  improper.  Nothing in this Section shall
affect or limit any right to serve process in any other manner permitted by law.

(g)     Independent Nature of Subscribers.     The Company acknowledges that the
obligations  of  each Subscriber under the Transaction Documents are several and
not  joint with the obligations of any other Subscriber, and no Subscriber shall
be  responsible  in  any way for the performance of the obligations of any other
Subscriber  under  the Transaction Documents. The Company acknowledges that each
Subscriber  has  represented  that  the  decision of each Subscriber to purchase
Securities  has  been  made  by  such  Subscriber  independently  of  any  other
Subscriber  and  independently  of  any  information,  materials,  statements or
opinions  as  to  the  business,  affairs,  operations,  assets,  properties,
liabilities,  results  of  operations,  condition  (financial  or  otherwise) or
prospects  of  the  Company  which  may  have  been  made  or given by any other
Subscriber  or  by  any  agent  or  employee  of  any  other  Subscriber, and no
Subscriber  or  any  of  its agents or employees shall have any liability to any
Subscriber  (or  any  other  person)  relating  to  or  arising  from  any  such
information,  materials,  statements or opinions.  The Company acknowledges that
nothing  contained  in  any  Transaction  Document,  and  no action taken by any
Subscriber  pursuant  hereto  or thereto (including, but not limited to, the (i)
inclusion  of a Subscriber in the Registration Statement and (ii) review by, and
consent  to,  such  Registration  Statement  by a Subscriber) shall be deemed to
constitute  the Subscribers as a partnership, an association, a joint venture or
any  other  kind  of entity, or create a presumption that the Subscribers are in
any  way acting in concert or as a group with respect to such obligations or the
transactions  contemplated  by  the  Transaction  Documents.  The  Company
acknowledges that each Subscriber shall be entitled to independently protect and
enforce  its rights, including without limitation, the rights arising out of the
Transaction Documents, and it shall not be necessary for any other Subscriber to
be  joined  as  an  additional  party  in  any proceeding for such purpose.  The
Company  acknowledges  that  it  has elected to provide all Subscribers with the
same  terms and Transaction Documents for the convenience of the Company and not
because  Company  was  required  or  requested to do so by the Subscribers.  The
Company  acknowledges  that  such  procedure  with  respect  to  the Transaction
Documents  in  no  way creates a presumption that the Subscribers are in any way
acting in concert or as a group with respect to the Transaction Documents or the
transactions  contemplated  thereby.

                      [THIS SPACE INTENTIONALLY LEFT BLANK]

<PAGE>
                  SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (A)

     Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.

                                            GTC TELECOM CORP.
                                            a Nevada corporation

                                            By: /s/ S. Paul Sandhu
                                               Name: S. Paul Sandhu
                                               Title: CEO

                                               Dated: May 23, 2005

SUBSCRIBER             NOTE         PAYMENT      INITIAL  CLASS A    CLASS B
                       PRINCIPAL    AFTER        SHARES   WARRANTS   WARRANTS
                       ORIGINAL
                       ISSUE
                       DISCOUNT

ALPHA CAPITAL         $352,941.00  $300,000.00  705,882  2,117,646  1,764,705
AKTIENGESELLSCHAFT
Pradafant 7
9490 Furstentums
Vaduz, Lichtenstein
Fax: 011-42-32323196

/s/ Signature illegible
(Signature)
By:

<PAGE>
                  SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (B)

     Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.

                                            GTC TELECOM CORP.
                                            a Nevada corporation

                                            By: /s/ S. Paul Sandhu
                                               Name: S. Paul Sandhu
                                               Title: CEO

                                               Dated: May 23, 2005

SUBSCRIBER             NOTE         PAYMENT      INITIAL  CLASS A    CLASS B
                       PRINCIPAL    AFTER        SHARES   WARRANTS   WARRANTS
                       ORIGINAL
                       ISSUE
                       DISCOUNT

DCOFI  MASTER  LDC     $352,941.00   $300,000.00  705,882  2,117,646  1,764,705
830 Third Avenue,
14th Floor
New  York,  NY  10022
Fax:  (212)  922-2081

/s/Jeffrey M. Haas
(Signature)
By: Jeffrey M. Haas
Authorized Signatory

<PAGE>
                  SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (C)

     Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.

                                            GTC TELECOM CORP.
                                            a Nevada corporation

                                            By: /s/ S. Paul Sandhu
                                               Name: S. Paul Sandhu
                                               Title: CEO

                                               Dated: May 23, 2005

SUBSCRIBER                   NOTE         PAYMENT     INITIAL  CLASS A   CLASS B
                           PRINCIPAL    AFTER       SHARES   WARRANTS  WARRANTS
                           ORIGINAL
                           ISSUE
                           DISCOUNT

SCG CAPITAL, LLC           $147,059.00  $125,000.00 294,118  882,354    735,295
19495 Biscayne Boulevard,
Suite  608
Aventura,  FL  33180
Attn:  Steven  Geduld,
President
Fax:  (305)  466-4415

/s/ Steven Geduld
(Signature)
By: Steven Geduld

<PAGE>
                  SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (D)

     Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.

                                            GTC TELECOM CORP.
                                            a Nevada corporation

                                            By: /s/ S. Paul Sandhu
                                               Name: S. Paul Sandhu
                                               Title: CEO

                                               Dated: May 23, 2005

SUBSCRIBER                   NOTE         PAYMENT     INITIAL  CLASS A   CLASS B
                           PRINCIPAL    AFTER       SHARES   WARRANTS  WARRANTS
                           ORIGINAL
                           ISSUE
                           DISCOUNT

SILVER OAK
INVESTMENTS, INC.          $176,470.00  $150,000.00 352,940 1,058,820  882,350
350 California Street,
Suite 1750
San Francisco, CA 94104
Fax: (415) 217-7072

/s/ Murry Todd
(Signature)
By: Murry Todd

<PAGE>
                  SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (E)
     Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.

                                            GTC TELECOM CORP.
                                            a Nevada corporation

                                            By: /s/ S. Paul Sandhu
                                               Name: S. Paul Sandhu
                                               Title: CEO

                                               Dated: May 23, 2005

SUBSCRIBER                   NOTE         PAYMENT     INITIAL  CLASS A   CLASS B
                           PRINCIPAL    AFTER       SHARES   WARRANTS  WARRANTS
                           ORIGINAL
                           ISSUE
                           DISCOUNT

ELLIS INTERNATIONAL LTD.   $58,824.00   $50,000.00  117,648  352,944   294,120
53rd Street Urbanizacion
Obarrio
Swiss Tower, 16th Floor,
Panama
Republic of Panama
Fax: (516) 887-8990

/s/ Wilhelm Unger
(Signature)
By: Wilhelm Unger, Officer

<PAGE>
                         LIST OF EXHIBITS AND SCHEDULES

     Exhibit  A1         Form  of  Class  A  Warrant
     Exhibit  A2         Form  of  Class  B  Warrant
     Exhibit  B          Escrow  Agreement
     Exhibit  C1         Security  Agreement  (Company)
     Exhibit  C2         Security  Agreement  (Subsidiary)
     Exhibit  D          Collateral  Agent  Agreement
     Exhibit  E          Form  of  Legal  Opinion
     Exhibit  F          Form  of  Public  Announcement  or  Form  8-K
     Exhibit  G          Form  of  Limited  Standstill  Agreement
     Schedule  5(a)      Subsidiaries
     Schedule  5(d)      Additional  Issuances  /  Capitalization
     Schedule  5(q)      Undisclosed  Liabilities
     Schedule  8         Broker
     Schedule  9(e)      Use  of  Proceeds
     Schedule  9(q)      Providers  of  Limited  Standstill  Agreements
     Schedule  11.1      Other  Securities  to  be  RegisteredTHIS  WARRANT  AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT  BEEN  REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND  THE  COMMON  SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED  FOR  SALE,  PLEDGED  OR  HYPOTHECATED  IN  THE  ABSENCE OF AN EFFECTIVE
REGISTRATION  STATEMENT  UNDER  SAID  ACT  OR  AN  OPINION OF COUNSEL REASONABLY
SATISFACTORY  TO  GTC  TELECOM  CORP.  THAT  SUCH  REGISTRATION IS NOT REQUIRED.

     Right  to  Purchase  ________  shares  of Common Stock of GTC Telecom Corp.
(subject  to  adjustment  as  provided  herein)

                      CLASS A COMMON STOCK PURCHASE WARRANT

No.  2005-A-001                              Issue  Date:  May  ____,  2005

     GTC  TELECOM  CORP., a corporation organized under the laws of the State of
Nevada  (the  "Company"),  hereby  certifies  that,  for  value  received,
_______________________________,  or  its  assigns  (the "Holder"), is entitled,
subject  to  the terms set forth below, to purchase from the Company at any time
after  the  Issue Date until 5:00 p.m., E.S.T on the fourth (4th) anniversary of
the  Issue  Date  (the  "Expiration  Date"),  up  to  ________  fully  paid  and
nonassessable  shares  of  Common  Stock  at a per share purchase price of $____
[110% of the Closing Bid Price of the Common Stock for the Trading Day preceding
the  Issue  102901544Date102901544vvbui1029015441184177189Four  year  life  --
exercise  price  of  110% of closing bid]. The aforedescribed purchase price per
share,  as  adjusted from time to time as herein provided, is referred to herein
as the "Purchase Price." The number and character of such shares of Common Stock
and the Purchase Price are subject to adjustment as provided herein. The Company
may  reduce  the  Purchase  Price without the consent of the Holder. Capitalized
terms used and not otherwise defined herein shall have the meanings set forth in
that  certain  Subscription  Agreement (the "SUBSCRIPTION AGREEMENT"), dated May
____,  2005,  entered  into  by the Company and Holders of the Class A Warrants.

     As  used herein the following terms, unless the context otherwise requires,
have  the  following  respective  meanings:

(a)     The  term  "Company" shall include GTC Telecom Corp. and any corporation
which  shall  succeed  or assume the obligations of GTC Telecom Corp. hereunder.

(b)     The  term  "Common Stock" includes (a) the Company's Common Stock, $.001
par  value  per  share, as authorized on the date of the Subscription Agreement,
and  (b)  any  other  securities  into  which or for which any of the securities
described  in  (a)  may  be  converted  or  exchanged  pursuant  to  a  plan  of
recapitalization,  reorganization,  merger,  sale  of  assets  or  otherwise.

(c)     The  term  "Other  Securities"  refers  to  any stock (other than Common
Stock)  and  other  securities  of the Company or any other person (corporate or
otherwise)  which  the  holder  of  the Warrant at any time shall be entitled to
receive,  or  shall have received, on the exercise of the Warrant, in lieu of or
in  addition  to  Common  Stock, or which at any time shall be issuable or shall
have  been  issued  in  exchange  for or in replacement of Common Stock or Other
Securities  pursuant  to  Section  5  or  otherwise.

(d)     The  term  "Warrant  Shares"  shall  mean the Common Stock issuable upon
exercise  of  this  Warrant.

<PAGE>
1.     Exercise  of  Warrant.

1.1.  Number  of  Shares  Issuable  upon Exercise. From and after the Issue Date
through  and  including the Expiration Date, the Holder hereof shall be entitled
to  receive, upon exercise of this Warrant in whole in accordance with the terms
of  subsection  1.2  or upon exercise of this Warrant in part in accordance with
subsection  1.3,  shares  of  Common Stock of the Company, subject to adjustment
pursuant  to  Section  4.

1.2.     Full  Exercise.  This  Warrant  may  be exercised in full by the Holder
hereof  by delivery of an original or facsimile copy of the form of subscription
attached  as  Exhibit  A  hereto (the "Subscription Form") duly executed by such
Holder  and  surrender of the original Warrant within four (4) days of exercise,
to the Company at its principal office or at the office of its Warrant Agent (as
provided  hereinafter),  accompanied  by  payment,  in cash, wire transfer or by
certified  or  official  bank  check payable to the order of the Company, in the
amount  obtained  by  multiplying the number of shares of Common Stock for which
this  Warrant  is  then  exercisable  by  the  Purchase  Price  then  in effect.

1.3.     Partial Exercise.  This Warrant may be exercised in part (but not for a
fractional  share)  by  surrender of this Warrant in the manner and at the place
provided  in subsection 1.2 except that the amount payable by the Holder on such
partial  exercise  shall be the amount obtained by multiplying (a) the number of
whole  shares  of Common Stock designated by the Holder in the Subscription Form
by  (b)  the  Purchase  Price then in effect.  On any such partial exercise, the
Company,  at  its expense, will forthwith issue and deliver to or upon the order
of  the  Holder  hereof  a  new Warrant of like tenor, in the name of the Holder
hereof or as such Holder (upon payment by such Holder of any applicable transfer
taxes)  may  request,  the whole number of shares of Common Stock for which such
Warrant  may  still  be  exercised.

1.4.     Fair Market Value. Fair Market Value of a share of Common Stock as of a
particular  date  (the  "Determination  Date")  shall  mean:

(a)  If  the Company's Common Stock is traded on an exchange or is quoted on the
National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ"),
National  Market  System,  the  NASDAQ  SmallCap  Market  or  the American Stock
Exchange,  LLC,  then the closing or last sale price, respectively, reported for
the  last  business  day  immediately  preceding  the  Determination  Date;

(b)     If  the  Company's  Common  Stock is not traded on an exchange or on the
NASDAQ  National Market System, the NASDAQ SmallCap Market or the American Stock
Exchange,  Inc.,  but is traded in the over-the-counter market, then the average
of the closing bid and ask prices reported for the last business day immediately
preceding  the  Determination  Date;

(c)     Except as provided in clause (d) below, if the Company's Common Stock is
not publicly traded, then as the Holder and the Company agree, or in the absence
of  such an agreement, by arbitration in accordance with the rules then standing
of the American Arbitration Association, before a single arbitrator to be chosen
from  a  panel  of  persons  qualified  by education and training to pass on the
matter  to  be  decided;  or

(d)     If  the  Determination Date is the date of a liquidation, dissolution or
winding  up,  or any event deemed to be a liquidation, dissolution or winding up
pursuant  to  the Company's charter, then all amounts to be payable per share to
holders  of  the  Common  Stock  pursuant  to  the  charter in the event of such
liquidation, dissolution or winding up, plus all other amounts to be payable per
share  in respect of the Common Stock in liquidation under the charter, assuming
for  the purposes of this clause (d) that all of the shares of Common Stock then
issuable  upon  exercise  of  all  of  the  Warrants  are  outstanding  at  the
Determination  Date.

1.5.  Company  Acknowledgment.  The Company will, at the time of the exercise of
the  Warrant,  upon  the request of the Holder hereof acknowledge in writing its
continuing  obligation  to afford to such Holder any rights to which such Holder
shall  continue  to  be  entitled  after  such  exercise  in accordance with the
provisions  of  this Warrant. If the Holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
to  such  Holder  any  such  rights.

1.6.     Trustee  for Warrant Holders. In the event that a bank or trust company
shall  have been appointed as trustee for the Holder of the Warrants pursuant to
Subsection  3.2, such bank or trust company shall have all the powers and duties
of  a warrant agent (as hereinafter described) and shall accept, in its own name
for  the  account  of  the  Company  or such successor person as may be entitled
thereto,  all amounts otherwise payable to the Company or such successor, as the
case  may  be,  on  exercise  of  this  Warrant  pursuant  to  this  Section  1.

1.7  Delivery  of  Stock Certificates, etc. on Exercise. The Company agrees that
the  shares  of  Common  Stock  purchased upon exercise of this Warrant shall be
deemed  to  be issued to the Holder hereof as the record owner of such shares as
of  the  close  of  business  on  the date on which this Warrant shall have been
surrendered  and  payment  made  for  such  shares  as  aforesaid.  As  soon  as
practicable  after  the  exercise of this Warrant in full or in part, and in any
event  within  four  (4)  business  days  thereafter, the Company at its expense
(including  the  payment  by  it of any applicable issue taxes) will cause to be
issued  in  the  name  of  and delivered to the Holder hereof, or as such Holder
(upon  payment  by  such  Holder of any applicable transfer taxes) may direct in
compliance  with  applicable  securities laws, a certificate or certificates for
the  number  of  duly and validly issued, fully paid and nonassessable shares of
Common  Stock  (or  Other  Securities) to which such Holder shall be entitled on
such  exercise, plus, in lieu of any fractional share to which such Holder would
otherwise  be  entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share of Common Stock, together with any other stock or
other  securities  and property (including cash, where applicable) to which such
Holder  is  entitled  upon  such  exercise  pursuant  to Section 1 or otherwise.

 2.     Cashless  Exercise.

(a)  If  a  Registration  Statement  (as  defined in the Subscription Agreement)
("Registration  Statement")  is  effective and the Holder may sell its shares of
Common  Stock  upon exercise hereof pursuant to the Registration Statement, this
Warrant  may  be  exercisable  in whole or in part for cash only as set forth in
Section  1 above. If no such Registration Statement is available during the time
that  such  Registration  Statement  is required to be effective pursuant to the
terms  of  the Subscription Agreement, then payment upon exercise may be made at
the  option  of  the Holder either in (i) cash, wire transfer or by certified or
official  bank check payable to the order of the Company equal to the applicable
aggregate  Purchase  Price,  (ii)  by  delivery  of  Common  Stock issuable upon
exercise  of  the  Warrants  in  accordance with Section (b) below or (iii) by a
combination  of  any  of  the  foregoing methods, for the number of Common Stock
specified in such form (as such exercise number shall be adjusted to reflect any
adjustment  in the total number of shares of Common Stock issuable to the holder
per  the  terms  of  this Warrant) and the holder shall thereupon be entitled to
receive  the  number  of  duly  authorized,  validly  issued,  fully-paid  and
non-assessable  shares  of  Common  Stock  (or  Other  Securities) determined as
provided  herein.

(b)     If  the  Fair  Market Value of one share of Common Stock is greater than
the  Purchase  Price (at the date of calculation as set forth below), in lieu of
exercising  this  Warrant for cash, the holder may elect to receive shares equal
to the value (as determined below) of this Warrant (or the portion thereof being
cancelled)  by  surrender of this Warrant at the principal office of the Company
together with the properly endorsed Subscription Form in which event the Company
shall  issue to the holder a number of shares of Common Stock computed using the
following  formula:

              X = Y (A-B)
                    -----
                      A

    Where     X =   the  number of shares of Common Stock to be issued to
                    the  holder

              Y =   the number of shares of Common Stock purchasable under
                    the  Warrant  or,  if only a portion of the Warrant is being
                    exercised,  the  portion  of the Warrant being exercised (at
                    the  date  of  such  calculation)

              A =   the  Fair Market Value of one share of the Company's
                    Common  Stock  (at  the  date  of  such  calculation)

              B =   Purchase Price (as adjusted to the date of such calculation)

(c)     The Holder may employ the cashless exercise feature described in Section
(b) above only during the pendency of a Non-Registration Event as described
in  Section  11  of  the  Subscription  Agreement.

     For  purposes  of  Rule 144 promulgated under the 1933 Act, it is intended,
understood  and  acknowledged  that  the  Warrant  Shares  issued  in a cashless
exercise  transaction  shall  be deemed to have been acquired by the Holder, and
the  holding period for the Warrant Shares shall be deemed to have commenced, on
the  date  this  Warrant  was  originally  issued  pursuant  to the Subscription
Agreement.

3.     Adjustment  for  Reorganization,  Consolidation,  Merger,  etc.

3.1.  Reorganization,  Consolidation,  Merger,  etc. In case at any time or from
time  to  time,  the  Company shall (a) effect a reorganization, (b) consolidate
with  or merge into any other person or (c) transfer all or substantially all of
its  properties  or  assets  to  any  other person under any plan or arrangement
contemplating  the  dissolution  of  the  Company, then, in each such case, as a
condition  to  the  consummation  of  such  a  transaction,  proper and adequate
provision  shall  be  made by the Company whereby the Holder of this Warrant, on
the exercise hereof as provided in Section 1, at any time after the consummation
of  such  reorganization,  consolidation or merger or the effective date of such
dissolution,  as the case may be, shall receive, in lieu of the Common Stock (or
Other  Securities)  issuable on such exercise prior to such consummation or such
effective  date, the stock and other securities and property (including cash) to
which  such  Holder  would  have  been  entitled  upon  such  consummation or in
connection  with  such  dissolution,  as  the case may be, if such Holder had so
exercised  this  Warrant,  immediately  prior  thereto,  all  subject to further
adjustment  thereafter  as  provided  in  Section  4.

3.2.     Dissolution.  In  the event of any dissolution of the Company following
the  transfer  of  all  or  substantially  all  of its properties or assets, the
Company,  prior to such dissolution, shall at its expense deliver or cause to be
delivered  the  stock  and  other securities and property (including cash, where
applicable) receivable by the Holder of the Warrants after the effective date of
such  dissolution  pursuant  to  this  Section  3  to a bank or trust company (a
"Trustee")  having  its  principal  office  in  New York, NY, as trustee for the
Holder  of  the  Warrants.

3.3.     Continuation  of Terms.  Upon any reorganization, consolidation, merger
or  transfer  (and  any  dissolution following any transfer) referred to in this
Section  3,  this  Warrant shall continue in full force and effect and the terms
hereof  shall  be  applicable to the Other Securities and property receivable on
the  exercise  of  this  Warrant  after the consummation of such reorganization,
consolidation  or merger or the effective date of dissolution following any such
transfer,  as the case may be, and shall be binding upon the issuer of any Other
Securities,  including,  in  the case of any such transfer, the person acquiring
all  or substantially all of the properties or assets of the Company, whether or
not  such  person  shall  have  expressly  assumed  the terms of this Warrant as
provided  in  Section  4.  In  the  event this Warrant does not continue in full
force  and  effect  after  the consummation of the transaction described in this
Section  3,  then  only in such event will the Company's securities and property
(including  cash,  where applicable) receivable by the Holder of the Warrants be
delivered  to  the  Trustee  as  contemplated  by  Section  3.2.

3.4  Share  Issuance.  Until the Expiration Date, if the Company shall issue any
Common  Stock  except for the Excepted Issuances (as defined in the Subscription
Agreement),  prior  to the complete exercise of this Warrant for a consideration
less  than the Purchase Price that would be in effect at the time of such issue,
then, and thereafter successively upon each such issue, the Purchase Price shall
be reduced to such other lower issue price. For purposes of this adjustment, the
issuance of any security or debt instrument of the Company carrying the right to
convert  such  security  or debt instrument into Common Stock or of any warrant,
right  or  option  to purchase Common Stock shall result in an adjustment to the
Purchase  Price  upon  the  issuance  of  the  above-described  security,  debt
instrument,  warrant, right, or option and again at any time upon any subsequent
issuances of shares of Common Stock upon exercise of such conversion or purchase
rights  if  such  issuance is at a price lower than the Purchase Price in effect
upon  such  issuance.  The  reduction  of  the  Purchase Price described in this
Section  3.4  is  in addition to the other rights of the Holder described in the
Subscription  Agreement.

4.  Extraordinary  Events  Regarding Common Stock. In the event that the Company
shall  (a)  issue  additional  shares of the Common Stock as a dividend or other
distribution  on  outstanding Common Stock, (b) subdivide its outstanding shares
of  Common Stock, or (c) combine its outstanding shares of the Common Stock into
a  smaller  number  of shares of the Common Stock, then, in each such event, the
Purchase  Price  shall,  simultaneously  with  the  happening  of such event, be
adjusted  by multiplying the then Purchase Price by a fraction, the numerator of
which  shall  be  the  number  of shares of Common Stock outstanding immediately
prior  to  such event and the denominator of which shall be the number of shares
of  Common  Stock  outstanding  immediately after such event, and the product so
obtained  shall  thereafter  be  the Purchase Price then in effect. The Purchase
Price, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive event or events described herein in this Section 4. The number
of  shares  of Common Stock that the Holder of this Warrant shall thereafter, on
the  exercise  hereof  as provided in Section 1, be entitled to receive shall be
adjusted  to  a  number determined by multiplying the number of shares of Common
Stock  that  would  otherwise  (but  for  the  provisions  of this Section 4) be
issuable  on  such  exercise  by  a  fraction  of which (a) the numerator is the
Purchase  Price  that would otherwise (but for the provisions of this Section 4)
be  in  effect,  and  (b) the denominator is the Purchase Price in effect on the
date  of  such  exercise.

5.     Certificate  as  to  Adjustments.  In  each  case  of  any  adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise  of  the  Warrants,  the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or  readjustment  in  accordance  with  the  terms  of the Warrant and prepare a
certificate  setting forth such adjustment or readjustment and showing in detail
the  facts  upon  which  such  adjustment  or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to  have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities)  outstanding or deemed to be outstanding, and (c) the Purchase Price
and  the  number  of shares of Common Stock to be received upon exercise of this
Warrant,  in  effect immediately prior to such adjustment or readjustment and as
adjusted  or  readjusted as provided in this Warrant. The Company will forthwith
mail  a  copy  of  each  such  certificate  to the Holder of the Warrant and any
Warrant  Agent  of  the  Company  (appointed  pursuant  to  Section  11 hereof).

6.  Reservation  of  Stock,  etc.  Issuable  on  Exercise  of Warrant; Financial
Statements. The Company will at all times reserve and keep available, solely for
issuance  and  delivery  on  the  exercise of the Warrants, all shares of Common
Stock  (or  Other  Securities) from time to time issuable on the exercise of the
Warrant.  This  Warrant  entitles  the  Holder  hereof  to receive copies of all
financial and other information distributed or required to be distributed to the
holders  of  the  Company's  Common  Stock.

7.     Assignment;  Exchange  of Warrant.  Subject to compliance with applicable
securities  laws,  this  Warrant,  and  the  rights  evidenced  hereby,  may  be
transferred  by  any registered holder hereof (a "Transferor"). On the surrender
for  exchange  of this Warrant, with the Transferor's endorsement in the form of
Exhibit  B attached hereto (the "Transferor Endorsement Form") and together with
an  opinion  of counsel reasonably satisfactory to the Company that the transfer
of  this  Warrant  will  be  in  compliance with applicable securities laws, the
Company  at  its expense, twice, only, but with payment by the Transferor of any
applicable  transfer  taxes,  will  issue  and deliver to or on the order of the
Transferor  thereof  a new Warrant or Warrants of like tenor, in the name of the
Transferor  and/or  the  transferee(s)  specified in such Transferor Endorsement
Form  (each  a  "Transferee"),  calling  in  the  aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant so surrendered by the Transferor.  No such transfers shall result
in  a  public  distribution  of  the  Warrant.

8.     Replacement  of  Warrant.  On receipt of evidence reasonably satisfactory
to  the  Company  of  the loss, theft, destruction or mutilation of this Warrant
and,  in  the  case  of  any such loss, theft or destruction of this Warrant, on
delivery  of  an indemnity agreement or security reasonably satisfactory in form
and  amount  to the Company or, in the case of any such mutilation, on surrender
and  cancellation  of this Warrant, the Company at its expense, twice only, will
execute  and  deliver,  in  lieu  thereof,  a  new  Warrant  of  like  tenor.

9.     Registration Rights.  The Holder of this Warrant has been granted certain
registration  rights by the Company.  These registration rights are set forth in
the  Subscription  Agreement.  The  terms  of  the  Subscription  Agreement  are
incorporated  herein  by  this  reference.

10.     Maximum  Exercise.  The  Holder  shall  not be entitled to exercise this
Warrant  on an exercise date, in connection with that number of shares of Common
Stock  which would be in excess of the sum of (i) the number of shares of Common
Stock  beneficially  owned by the Holder and its affiliates on an exercise date,
and (ii) the number of shares of Common Stock issuable upon the exercise of this
Warrant with respect to which the determination of this limitation is being made
on  an  exercise  date, which would result in beneficial ownership by the Holder
and  its affiliates of more than 4.99% of the outstanding shares of Common Stock
on  such  date.  For  the  purposes  of  the  immediately  preceding  sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities  Exchange  Act  of 1934, as amended, and Regulation 13d-3 thereunder.
Subject to the foregoing, the Holder shall not be limited to aggregate exercises
which  would  result  in  the  issuance  of  more  than  4.99%.  The restriction
described  in  this paragraph may be waived, in whole or in part, upon sixty-one
(61)  days prior notice from the Holder to the Company.  The Holder may allocate
which  of  the equity of the Company deemed beneficially owned by the Subscriber
shall  be  included  in  the  4.99%  amount  described  above and which shall be
allocated  to  the  excess  above  4.99%.

11.     Warrant  Agent.  The Company may, by written notice to the Holder of the
Warrant,  appoint an agent (a "Warrant Agent") for the purpose of issuing Common
Stock  (or Other Securities) on the exercise of this Warrant pursuant to Section
1,  exchanging  this  Warrant  pursuant to Section 7, and replacing this Warrant
pursuant  to  Section  8,  or  any  of  the  foregoing,  and thereafter any such
issuance,  exchange  or  replacement,  as the case may be, shall be made at such
office  by  such  Warrant  Agent.

12.     Transfer  on  the Company's Books.  Until this Warrant is transferred on
the  books of the Company, the Company may treat the registered holder hereof as
the  absolute  owner  hereof for all purposes, notwithstanding any notice to the
contrary.

13.  Notices.  All  notices,  demands,  requests, consents, approvals, and other
communications  required  or permitted hereunder shall be in writing and, unless
otherwise  specified  herein,  shall be (i) personally served, (ii) deposited in
the  mail,  registered  or certified, return receipt requested, postage prepaid,
(iii)  delivered  by reputable air courier service with charges prepaid, or (iv)
transmitted  by  hand  delivery,  telegram, or facsimile, addressed as set forth
below  or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted to be
given  hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile,  with  accurate  confirmation generated by the transmitting facsimile
machine,  at  the address or number designated below (if delivered on a business
day  during  normal  business hours where such notice is to be received), or the
first  business  day  following  such  delivery  (if  delivered  other than on a
business  day  during normal business hours where such notice is to be received)
or  (b)  on  the  second  business  day following the date of mailing by express
courier  service,  fully  prepaid,  addressed  to  such  address, or upon actual
receipt  of  such  mailing,  whichever shall first occur. The addresses for such
communications  shall  be:  (i)  if  to  the Company to: GTC Telecom Corp., 3151
Airway  Avenue,  Suite P-3, Costa Mesa, CA 92626, Attn: Vi Bui, Esq., telecopier
number: (714) 549-7707, and (ii) if to the Holder, to the address and telecopier
number listed on the first paragraph of this Warrant, with an additional copy by
telecopier  only  to: Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New
York,  New  York  10176,  telecopier  number:  (212)  697-3575.

14.  Miscellaneous.  This  Warrant  and  any term hereof may be changed, waived,
discharged  or  terminated  only by an instrument in writing signed by the party
against  which  enforcement  of such change, waiver, discharge or termination is
sought.  This  Warrant  shall  be  construed and enforced in accordance with and
governed  by the laws of New York. Any dispute relating to this Warrant shall be
adjudicated  in  New  York County in the State of New York. The headings in this
Warrant  are  for  purposes  of reference only, and shall not limit or otherwise
affect  any  of  the  terms  hereof.  The  invalidity or unenforceability of any
provision  hereof  shall  in no way affect the validity or enforceability of any
other  provision.

     IN  WITNESS  WHEREOF,  the Company has executed this Warrant as of the date
first  written  above.

                                   GTC  TELECOM  CORP.

                                   By:
                                   Name:  Eric  A.  Clemons
                                   Title:  President

Witness:

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