Document:

EXHIBIT 10.1

                            eLEC COMMUNICATIONS CORP.

                          SECURITIES PURCHASE AGREEMENT

                                November 30, 2005

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                                TABLE OF CONTENTS

                                                                            Page

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

2.    Fees and Warrant.........................................................1

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

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

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

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6.    Covenants of the Company................................................17
      6.1        Stop-Orders..................................................17
      6.2        Trading......................................................17
      6.3        Market Regulations...........................................17
      6.4        Reporting Requirements.......................................18
      6.5        Use of Funds.................................................18
      6.6        Access to Facilities.........................................18
      6.7        Taxes........................................................18
      6.8        Insurance....................................................19
      6.9        Intellectual Property........................................20
      6.10       Properties...................................................20
      6.11       Confidentiality..............................................20
      6.12       Required Approvals...........................................20
      6.13       Reissuance of Securities.....................................21
      6.14       Opinion......................................................21
      6.15       Margin Stock.................................................22
      6.16       No Restrictions on Additional Financing......................22
      6.17       Authorization and Reservation of Shares......................22
      6.18       Repayment of Seller Note.....................................22

7.    Covenants of the Purchaser..............................................22
      7.1        Confidentiality..............................................22
      7.2        Non-Public Information.......................................22

8.    Covenants of the Company and Purchaser Regarding Indemnification........23
      8.1        Company Indemnification......................................23
      8.2        Purchaser's Indemnification..................................23

9.    Conversion of Convertible Note..........................................23
      9.1        Mechanics of Conversion......................................23

10.   Registration Rights.....................................................25
      10.1       Registration Rights Granted..................................25
      10.2       Offering Restrictions........................................25

11.   Miscellaneous...........................................................25
      11.1       Governing Law................................................25
      11.2       Severability. ...............................................26
      11.3       Survival.....................................................26
      11.4       Successors...................................................26
      11.5       Entire Agreement; Maximum Interest...........................26
      11.6       Amendment and Waiver.........................................26
      11.7       Delays or Omissions..........................................27
      11.8       Notices......................................................27
      11.9       Attorneys' Fees..............................................28
      11.10      Titles and Subtitles.........................................28
      11.11      Facsimile Signatures; Counterparts...........................28
      11.12      Broker's Fees................................................28
      11.13      Construction.................................................28

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                                LIST OF EXHIBITS
--------------------------------------------------------------------------------

Form of Convertible Term Note.......................................   Exhibit A

Form of Warrant.....................................................   Exhibit B

Form of Opinion.....................................................   Exhibit C

Form of Escrow Agreement............................................   Exhibit D

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                          SECURITIES PURCHASE AGREEMENT

      THIS SECURITIES  PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of November 30, 2005, by and between eLEC  Communications  Corp.,  a New
York corporation (the "Company"), and Laurus Master Fund, Ltd., a Cayman Islands
company (the "Purchaser").

                                    RECITALS

      WHEREAS,  the  Company  has  authorized  the  sale to the  Purchaser  of a
Convertible  Term Note in the aggregate  principal amount of Two Million Dollars
($2,000,000)  (as  amended,  modified  or  supplemented  from time to time,  the
"Note"),  which Note is convertible  into shares of the Company's  common stock,
$0.10 par value per share (the "Common  Stock"),  at an initial fixed conversion
price of $0.61 [which has been  determined on the date of this Note as an amount
equal to 140% of the average closing price of the Common Stock for the three (3)
trading  days  immediately  prior to the date of this  Note] per share of Common
Stock ("Fixed Conversion Price");

      WHEREAS,  the  Company  wishes  to issue a  warrant  to the  Purchaser  to
purchase  up to  1,683,928  shares of the  Company's  Common  Stock  (subject to
adjustment as set forth therein) in connection with Purchaser's  purchase of the
Note;

      WHEREAS,  Purchaser  desires  to  purchase  the Note and the  Warrant  (as
defined in Section 2) on the terms and conditions set forth herein; and

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

                                    AGREEMENT

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

      1.  Agreement to Sell and Purchase.  Pursuant to the terms and  conditions
set forth in this Agreement,  on the Closing Date (as defined in Section 3), the
Company  agrees to sell to the  Purchaser,  and the  Purchaser  hereby agrees to
purchase  from  the  Company,  a  Note  in the  aggregate  principal  amount  of
$2,000,000  convertible in accordance  with the terms thereof into shares of the
Company's  Common  Stock  in  accordance  with  the  terms  of the Note and this
Agreement. The offering of the Note purchased on the Closing Date shall be known
as the  "Offering." A form of the Note is annexed  hereto as Exhibit A. The Note
will mature on the Maturity Date (as defined in the Note). The Note, the Warrant
and the shares of Common Stock issuable in payment of the Note,  upon conversion
of the Note and upon exercise of the Warrant are collectively referred to as the
"Securities."

      2. Fees and Warrant. On the Closing Date:

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            (a) The Company will issue and deliver to the Purchaser a Warrant to
purchase up to 1,683,928  shares of Common Stock in connection with the Offering
(as amended, modified or supplemented from time to time, the "Warrant") pursuant
to Section 1 hereof.  The Warrant must be delivered on the Closing  Date. A form
of Warrant is annexed hereto as Exhibit B. All the  representations,  covenants,
warranties,  undertakings, and indemnification, and other rights made or granted
to or for the benefit of the  Purchaser  by the Company are hereby also made for
the benefit of the holder of the Warrant and the shares of Common Stock issuable
thereunder and upon  conversion of the Note. The shares of Common Stock issuable
upon  exercise  of the  Warrant  are  hereinafter  referred  to as the  "Warrant
Shares".

            (b) Subject to the terms of Section  2(d) below,  the Company  shall
pay to Laurus Capital Management,  LLC, the manager of the Purchaser,  a closing
payment in an amount equal to three and three  quarters  percent  (3.75%) of the
aggregate  principal amount of the Note. The foregoing fee is referred to herein
as the "Closing Payment."

            (c) The Company shall  reimburse  the  Purchaser for its  reasonable
expenses  (including  legal fees and expenses)  incurred in connection  with the
preparation  and  negotiation of this  Agreement and the Related  Agreements (as
hereinafter  defined),  and expenses incurred in connection with the Purchaser's
due diligence  review of the Company and its Subsidiaries (as defined in Section
4.2) and all related  matters.  Amounts  required to be paid under this  Section
2(c) will be paid on the  Closing  Date and shall not exceed  $10,000  (less any
deposit  paid by the  Company  prior to closing  in  respect of the  transaction
described  herein);  provided however,  that, this amount,  does not include the
cost of any required  third-party  appraisals,  Company  approved  extraordinary
diligence  or  retention  of outside  counsel to the  extent  deemed  reasonably
necessary or prudent by the Purchaser, the cost for which shall be reimbursed to
the Purchaser by the Company..

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

      3. Closing, Delivery and Payment.

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

      3.2 Delivery.  Pursuant to the Escrow Agreement (as hereinafter  defined),
at the Closing on the Closing Date,  the Company will deliver to the  Purchaser,
among other  things,  a Note in the form  attached as Exhibit A in the principal
amount of  $2,000,000  and a Warrant  in the form  attached  as Exhibit B in the
Purchaser's name representing  1,683,928  Warrants Shares and the Purchaser will
deliver  to the  Company,  among  other  things,  the  amounts  set forth in the
Disbursement  Letter by or wire transfer of immediately  available funds to such
account of the Company as the Company shall direct.

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      4.  Representations  and  Warranties  of the Company.  The Company  hereby
represents and warrants to the Purchaser as follows (which  representations  and
warranties are supplemented  where indicated by the information set forth in the
Company's  filings under the  Securities  Exchange Act of 1934 made prior to the
date of this Agreement  (collectively,  the "Exchange Act  Filings"),  copies of
which have been provided to the Purchaser):

      4.1 Organization, Good Standing and Qualification. Each of the Company and
each of its  Subsidiaries  is a corporation,  partnership  or limited  liability
company,  as the case  may be,  duly  organized,  validly  existing  and in good
standing under the laws of its jurisdiction of organization. Each of the Company
and each of its  Subsidiaries  has the corporate  power and authority to own and
operate its properties and assets, to execute and deliver,  in each case, to the
extent  party  thereto (i) this  Agreement,  (ii) the Note and the Warrant to be
issued in connection  with this Agreement,  (iii) the Master Security  Agreement
dated as of February 8, 2005 between the Company,  certain  Subsidiaries  of the
Company and the Purchaser  (as amended,  modified or  supplemented  from time to
time, the "Master Security  Agreement"),  (iv) the Registration Rights Agreement
relating to the  Securities  dated as of the date hereof between the Company and
the  Purchaser  (as amended,  modified or  supplemented  from time to time,  the
"Registration  Rights  Agreement"),  (v) the  Subsidiary  Guaranty  dated  as of
February  8, 2005 made by  certain  Subsidiaries  of the  Company  (as  amended,
modified or supplemented from time to time, the "Subsidiary Guaranty"), (vi) the
Stock Pledge  Agreement dated as of February 8, 2005 among the Company,  certain
Subsidiaries  of  the  Company  and  the  Purchaser  (as  amended,  modified  or
supplemented from time to time, the "Stock Pledge  Agreement"),  (vii) the Funds
Escrow  Agreement  dated as of the date hereof among the Company,  the Purchaser
and the escrow agent referred to therein, substantially in the form of Exhibit D
hereto (as  amended,  modified or  supplemented  from time to time,  the "Escrow
Agreement")  and (viii) all other  agreements  related to this Agreement and the
Note and  referred  to  herein  (the  preceding  clauses  (ii)  through  (viii),
collectively,  the "Related  Agreements"),  to carry out the  provisions of this
Agreement and the Related  Agreements  and to carry on its business as presently
conducted,  and in the case of the Company  only, to issue and sell the Note and
the  shares of Common  Stock  issuable  upon  conversion  of the Note (the "Note
Shares") and to issue and sell the Warrant and the Warrant  Shares.  Each of the
Company and each of its  Subsidiaries  is duly qualified and is authorized to do
business  and is in good  standing  as a  foreign  corporation,  partnership  or
limited liability company, as the case may be, in all jurisdictions in which the
nature of its  activities  and of its  properties  (both owned and leased) makes
such qualification necessary, except for those jurisdictions in which failure to
do so has not, or could not reasonably be expected to have,  individually  or in
the aggregate, a material adverse effect on the business,  assets,  liabilities,
condition (financial or otherwise),  properties,  operations or prospects of the
Company and its  Subsidiaries,  taken  individually  and as a whole (a "Material
Adverse Effect").

      4.2 Subsidiaries. Each direct and indirect Subsidiary of the Company, each
Inactive  Subsidiary (as defined below), the direct owner of such Subsidiary and
Inactive  Subsidiary  and its  percentage  ownership  thereof,  is set  forth on
Schedule  4.2  hereto.  For the  purpose  of  this  Agreement  and  the  Related
Agreements,  a  "Subsidiary"  of any person or entity means (i) a corporation or
other entity whose shares of stock or other ownership  interests having ordinary
voting power (other than stock or other  ownership  interests  having such power
only by reason of the  happening  of a  contingency)  to elect a majority of the
directors of such corporation,  or other persons or entities  performing similar
functions for such person or entity, are owned, directly or

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indirectly,  by such person or entity or (ii) a  corporation  or other entity in
which such person or entity owns,  directly or indirectly,  more than 50% of the
equity interests at such time; provided that, for so long as each of AVI Holding
Corp.,  a Texas  corporation  ("AVI  Holdings"),  Line  One,  Inc.,  a New  York
corporation  ("Line One") and  TelcoSoftware.com  Corp., a Delaware  corporation
("TelcoSoftware"  and together  with AVI  Holdings  and Line One, the  "Inactive
Subsidiaries" and each, an "Inactive  Subsidiary") hold no significant assets or
liabilities   (other  than  in  respect  of  AVI  Holdings,   capitalized  lease
obligations not to exceed $35,000,  and in respect of Line One,  liabilities not
to exceed  $50,000)  and do not engage in any business  activities,  the defined
term "Subsidiary" as used in this Agreement and the Related Agreements shall not
include  such  Inactive  Subsidiary;  provided,  further,  that if any  Inactive
Subsidiary  shall at any time after the date hereof hold  significant  assets or
liabilities or engage in any business activities, such Inactive Subsidiary shall
thereafter be deemed a Subsidiary  hereunder  and shall  otherwise be subject to
all terms,  agreements,  representations,  warranties  and  covenants  otherwise
applicable to Subsidiaries under this Agreement and the Related Agreements.

      4.3 Capitalization; Voting Rights.

            (a) The  authorized  capital  stock of the  Company,  as of the date
      hereof consists of 51,000,000  shares,  of which  50,000,000 are shares of
      Common Stock,  par value $0.10 per share,  16,839,282  shares of which are
      issued and  outstanding,  and  1,000,000  of which are shares of Preferred
      Stock,  par value  $0.10 per  share,  no  shares of which are  issued  and
      outstanding.  The  authorized  capital  stock  of each  Subsidiary  of the
      Company is set forth on Schedule 4.3.

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

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

            (d) The rights,  preferences,  privileges  and  restrictions  of the
      shares of the Common Stock are as stated in the Company's  Certificate  of
      Incorporation  (the  "Charter").  The Note Shares and Warrant  Shares have
      been duly and validly  reserved for  issuance.  When issued in  compliance
      with the  provisions  of this  Agreement and the  Company's  Charter,  the
      Securities will be validly issued, fully paid and nonassessable,  and will
      be  free  of any  liens  or  encumbrances;  provided,  however,  that  the
      Securities may

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      be  subject  to  restrictions  on  transfer  under  state  and/or  federal
      securities laws as set forth herein or as otherwise  required by such laws
      at the time a transfer is proposed.

      4.4  Authorization;  Binding  Obligations.  All corporate,  partnership or
limited liability company, as the case may be, action on the part of the Company
and each of its Subsidiaries  (including the respective  officers and directors)
necessary for the  authorization  of this Agreement and the Related  Agreements,
the performance of all obligations of the Company and its Subsidiaries hereunder
and under the other Related  Agreements  at the Closing and, the  authorization,
sale,  issuance  and  delivery of the Note and Warrant has been taken or will be
taken prior to the Closing.  This  Agreement  and the Related  Agreements,  when
executed and  delivered and to the extent it is a party  thereto,  will be valid
and binding  obligations  of each of the  Company and each of its  Subsidiaries,
enforceable against each such person in accordance with their terms, except:

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

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

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

      4.5  Liabilities.  Neither the Company nor any of its Subsidiaries has any
contingent  liabilities  in excess of $10,000 in the  aggregate,  except current
liabilities  incurred  in  the  ordinary  course  of  business  and  liabilities
disclosed in any Exchange Act Filings.

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

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

            (b) Since  November  30,  2004,  neither  the Company nor any of its
      Subsidiaries  has: (i) declared or paid any  dividends,  or  authorized or
      made any

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      distribution  upon or with  respect to any class or series of its  capital
      stock;  (ii)  incurred any  indebtedness  for money  borrowed or any other
      liabilities  (other than  ordinary  course  obligations)  individually  in
      excess of  $50,000  or,  in the case of  indebtedness  and/or  liabilities
      individually  less than $50,000,  in excess of $100,000 in the  aggregate;
      (iii) made any loans or advances to any person not in excess, individually
      or in the aggregate, of $100,000,  other than ordinary course advances for
      travel expenses;  or (iv) sold,  exchanged or otherwise disposed of any of
      its assets or rights, other than the sale of its inventory in the ordinary
      course of business.

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

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

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

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

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

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

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

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

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

      4.7 Obligations to Related  Parties.  Except as set forth on Schedule 4.7,
there are no obligations of the Company or any of its  Subsidiaries to officers,
directors, stockholders directly or indirectly holding more than 5% of any class
of the voting  securities or capital stock of or equity interests in the Company
or employees of the Company or any of its Subsidiaries other than:

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

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

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

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

Except as described  above or set forth on Schedule  4.7,  none of the officers,
directors  or,  to the  best  of  the  Company's  knowledge,  key  employees  or
stockholders  of the Company or any  members of their  immediate  families,  are
indebted to the Company,  individually or in the aggregate, in excess of $50,000
or have any direct or indirect ownership interest  (representing more than a one
percent  (1%)  interest)  in any firm or  corporation  with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation which competes with the Company,  other than passive  investments in
publicly  traded  companies  (representing  less than one  percent  (1%) of such
company)  which may compete with the  Company.  Except as  described  above,  no
officer,  director or stockholder directly or indirectly holding more than 5% of
any class of the voting  securities or capital  stock of or equity  interests in
the  Company,  or any  member  of their  immediate  families,  is,  directly  or
indirectly,  interested  in  any  material  contract  with  the  Company  and no
agreements, understandings or proposed transactions are contemplated between the
Company and any such person. Except as set forth on Schedule 4.7, the Company is
not a guarantor or indemnitor of any  indebtedness of any other person,  firm or
corporation.

                                       7
<PAGE>

      4.8 Changes.  Since November 30, 2004, except as disclosed in any Exchange
Act  Filing  or in any  Schedule  to  this  Agreement  or to any of the  Related
Agreements, there has not been:

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

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

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

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

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

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

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

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

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

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

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

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

                                       8
<PAGE>

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

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

      4.9 Title to Properties  and Assets;  Liens,  Etc.  Except as set forth on
Schedule  4.9,  each of the  Company and each of its  Subsidiaries  has good and
marketable  title to its properties and assets,  and good title to its leasehold
estates, in each case subject to no mortgage,  pledge, lien, lease,  encumbrance
or charge, other than:

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

            (b) minor liens and  encumbrances  which do not  materially  detract
      from the value of the property  subject  thereto or materially  impair the
      operations of the Company or any of its Subsidiaries; and

            (c) those  that have  otherwise  arisen  in the  ordinary  course of
      business.

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

      4.10 Intellectual Property.

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

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

                                       9
<PAGE>

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

      4.11  Compliance with Other  Instruments.  Except as set forth on Schedule
4.11, neither the Company nor any of its Subsidiaries is in violation or default
of (x)  any  term of its  Charter  or  Bylaws,  or (y) of any  provision  of any
indebtedness, mortgage, indenture, contract, agreement or instrument to which it
is party or by which  it is  bound or of any  judgment,  decree,  order or writ,
which  violation  or default,  in the case of this clause (y), has had, or could
reasonably  be expected to have,  either  individually  or in the  aggregate,  a
Material  Adverse  Effect.  The  execution,  delivery  and  performance  of  and
compliance  with this  Agreement  and the  Related  Agreements  to which it is a
party,  and the  issuance  and sale of the  Note by the  Company  and the  other
Securities by the Company,  each pursuant hereto and thereto,  will not, with or
without  the  passage of time or giving of notice,  result in any such  material
violation, or be in conflict with or constitute a default under any such term or
provision, or result in the creation of any mortgage,  pledge, lien, encumbrance
or charge  upon any of the  properties  or assets of the  Company  or any of its
Subsidiaries or the suspension, revocation, impairment, forfeiture or nonrenewal
of any permit, license, authorization or approval applicable to the Company, its
business or operations or any of its assets or properties.

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

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

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

                                       10
<PAGE>

                  (b) of any  deficiency in  assessment or proposed  judgment to
      its federal, state or other taxes.

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

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

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

      4.16  Compliance  with Laws;  Permits.  Neither the Company nor any of its
Subsidiaries is in violation of any provision of the  Sarbanes-Oxley Act of 2002
or any SEC related regulation

                                       11
<PAGE>

or rule or any rule of the Principal Market (as hereafter  defined)  promulgated
thereunder  or  any  other  applicable  statute,  rule,  regulation,   order  or
restriction  of any domestic or foreign  government  or any  instrumentality  or
agency thereof in respect of the conduct of its business or the ownership of its
properties  which has had,  or could  reasonably  be  expected  to have,  either
individually or in the aggregate,  a Material  Adverse  Effect.  No governmental
orders,  permissions,  consents,  approvals or authorizations are required to be
obtained  and no  registrations  or  declarations  are  required  to be filed in
connection  with the  execution  and  delivery  of this  Agreement  or any other
Related Agreement and the issuance of any of the Securities,  except such as has
been duly and validly  obtained or filed,  or with  respect to any filings  that
must be made after the Closing, as will be filed in a timely manner. Each of the
Company and its Subsidiaries has all material franchises,  permits, licenses and
any similar  authority  necessary  for the conduct of its  business as now being
conducted  by it,  the  lack  of  which  could,  either  individually  or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

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

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

            (b) any petroleum products or nuclear materials.

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

      4.19 Full Disclosure. Each of the Company and each of its Subsidiaries has
provided  the  Purchaser  with all  information  requested  by the  Purchaser in
connection  with its decision to purchase the Note and  Warrant,  including  all
information the Company and its Subsidiaries  believe is reasonably necessary to
make such investment decision.  Neither this Agreement,  the Related Agreements,
the exhibits and schedules  hereto and thereto nor any other document  delivered
by the Company or any of its  Subsidiaries  to  Purchaser  or its  attorneys  or
agents in connection herewith or therewith or with the transactions contemplated
hereby or thereby,

                                       12
<PAGE>

contain  any untrue  statement  of a material  fact nor omit to state a material
fact necessary in order to make the statements  contained herein or therein,  in
light of the circumstances in which they are made, not misleading. Any financial
projections and other estimates  provided to the Purchaser by the Company or any
of its Subsidiaries were based on the Company's and its Subsidiaries' experience
in the industry and on assumptions of fact and opinion as to future events which
the  Company or any of its  Subsidiaries,  at the date of the  issuance  of such
projections or estimates, believed to be reasonable.

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

      4.21 SEC Reports.  Except as set forth on Schedule  4.21,  the Company has
filed all proxy statements,  reports and other documents required to be filed by
it under the Securities  Exchange Act 1934, as amended (the "Exchange Act"). The
Company has  furnished the Purchaser  with, or otherwise  made  available to the
Purchaser,  copies of: (i) its Annual  Report on Form 10-KSB for its fiscal year
ended November 30, 2004;  and (ii) its Quarterly  Reports on Form 10-QSB for its
fiscal  quarters  ended February 28, 2005, May 31, 2005 and August 31, 2005, and
the Form 8-K  filings  which it has made  during  the  fiscal  year 2005 to date
(collectively,  the "SEC  Reports").  Except as set forth on Schedule 4.21, each
SEC Report was, at the time of its filing,  in substantial  compliance  with the
requirements  of its  respective  form  and  none  of the SEC  Reports,  nor the
financial  statements (and the notes thereto) included in the SEC Reports, as of
their respective filing dates, contained any untrue statement of a material fact
or omitted to state a material fact  required to be stated  therein or necessary
to make the statements  therein,  in light of the circumstances under which they
were made, not misleading.

      4.22 Listing. The Company's Common Stock is listed for trading on the NASD
OTC  Bulletin  Board  ("OTC  BB")  and  satisfies  all   requirements   for  the
continuation  of such listing.  The Company has not received any notice that its
Common Stock will be delisted  from the OTC BB or that its Common Stock does not
meet all requirements for listing.

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

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

                                       13
<PAGE>

      4.25  Dilution. The Company specifically  acknowledges that its obligation
            to issue the shares of Common Stock upon  conversion of the Note and
            exercise of the Warrant 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.

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

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

                                       14
<PAGE>

employer pension plan so as to incur liability under the  Multiemployer  Pension
Plan Amendments Act of 1980.

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

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

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

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

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

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

      5.4  Purchaser   Bears  Economic  Risk.  The  Purchaser  has   substantial
experience in  evaluating  and investing in private  placement  transactions  of
securities  in  companies  similar  to the  Company  so  that it is  capable  of
evaluating  the merits and risks of its  investment  in the  Company and has the
capacity to protect its own interests. The Purchaser must bear the

                                       15
<PAGE>

economic risk of this investment  until the Securities are sold pursuant to: (i)
an  effective  registration  statement  under  the  Securities  Act;  or (ii) an
exemption from registration is available with respect to such sale.

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

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

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

      5.8 Legends.

            (a) The Note shall bear substantially the following legend:

            "THIS NOTE AND THE COMMON STOCK  ISSUABLE  UPON  CONVERSION  OF THIS
            NOTE HAVE NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS
            AMENDED,  OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE AND THE
            COMMON STOCK 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 OR SUCH  SHARES
            UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
            COUNSEL REASONABLY  SATISFACTORY TO ELEC  COMMUNICATIONS  CORP. THAT
            SUCH REGISTRATION IS NOT REQUIRED."

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

            "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
            UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED,  OR ANY  APPLICABLE
            STATE  SECURITIES  LAWS.  THESE SHARES MAY NOT BE SOLD,  OFFERED FOR
            SALE,  PLEDGED  OR  HYPOTHECATED  IN  THE  ABSENCE  OF AN  EFFECTIVE
            REGISTRATION  STATEMENT  UNDER SUCH  SECURITIES  ACT AND  APPLICABLE
            STATE LAWS OR AN

                                       16
<PAGE>

            OPINION OF COUNSEL  REASONABLY  SATISFACTORY TO ELEC  COMMUNICATIONS
            CORP. THAT SUCH REGISTRATION IS NOT REQUIRED."

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

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

      6.  Covenants of the Company.  The Company  covenants  and agrees with the
Purchaser  that,  so long as the Note and, in respect of the covenants set forth
in Sections  6.1, 6.2,  6.3,  6.4(a),  6.13,  6.14,  6.16 and 6.17,  the Warrant
remains outstanding:

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

      6.2 Trading.  The Company shall promptly  secure the trading of the shares
of Common Stock  issuable  upon  conversion of the Note and upon the exercise of
the Warrant on the OTC BB (the  "Principal  Market") upon which shares of Common
Stock are traded and shall  maintain such trading so long as any other shares of
Common Stock shall be so traded.  The Company  will  maintain the listing of its
Common Stock on the  Principal  Market or on Nasdaq or any  securities  exchange
(not  including the "pink sheets"  electronic  quotations  system),  and, to the
extent applicable to the Company,  will comply in all material respects with the
Company's  reporting,  filing and other obligations under the bylaws or rules of
the National  Association of Securities Dealers ("NASD") and such exchanges,  as
applicable.

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

                                       17
<PAGE>

      6.4 Reporting  Requirements(a) . (a) The Company will timely file with the
SEC all reports  required to be filed  pursuant to the  Exchange Act and refrain
from  terminating  its status as an issuer  required by the Exchange Act to file
reports  thereunder  even  if  the  Exchange  Act or the  rules  or  regulations
thereunder would permit such termination.

            (b) The Company  shall  provide to the  Purchaser  no later than the
15th of each month,  an electronic file containing a list of the legal names and
mailing addresses of all customers of the Company and its Subsidiaries as of the
last day of the prior month, as well as the respective aggregate billing amounts
for such customers for such prior month.

      6.5 Use of Funds.  The Company agrees that it will use the proceeds of the
sale of the Note and the Warrant only for marketing, general working capital and
general business purposes.

      6.6 Access to Facilities. Each of the Company and each of its Subsidiaries
will permit any representatives designated by the Purchaser (or any successor of
the Purchaser), upon no less than one (1) business day's prior notice and during
normal  business   hours,  at  such  person's   expense  and  accompanied  by  a
representative  of the Company or any  Subsidiary  (provided  that no such prior
notice shall be required to be given and no such  representative  of the Company
or any Subsidiary  shall be required to accompany the Purchaser in the event the
Purchaser  believes  such  access  is  necessary  to  preserve  or  protect  the
Collateral  (as  defined in the Master  Security  Agreement)  or  following  the
occurrence and during the  continuance of an Event of Default (as defined in the
Note)), to:

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

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

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

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

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

                                       18
<PAGE>

charges or levies  forthwith upon the  commencement  of proceedings to foreclose
any lien which may have attached as security therefor.

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

                                       19
<PAGE>

Related Agreements, then all loss recoveries received by Purchaser upon any such
insurance  thereafter may be applied to the obligations of the Company hereunder
and under the Related Agreements,  in such order as the Purchaser may determine.
Any surplus  (following  satisfaction  of all Company  obligations to Purchaser)
shall  be paid by  Purchaser  to the  Company  or  applied  as may be  otherwise
required  by law.  Any  deficiency  thereon  shall be paid by the Company or the
Subsidiary, as applicable, to Purchaser, on demand.

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

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

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

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

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

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

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

                                       20
<PAGE>

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

            (e) (i) create,  incur,  assume or suffer to exist any  indebtedness
      (exclusive  of trade debt and debt  incurred  to finance  the  purchase of
      equipment  (not in excess of five percent (5%) of the fair market value of
      the  Company's  and  its   Subsidiaries'   assets;   provided   that,  not
      withstanding the forgoing, capitalized leases and/or financing to purchase
      equipment in connection with the Company's Voice Over IP Point-to-Presence
      system shall be permitted to the extent not in excess of, when  aggregated
      with all other  debt  incurred  to  finance  the  purchase  of  equipment,
      twenty-five  percent  (25%) of the fair market value of the  Company's and
      its Subsidiaries' assets)) whether secured or unsecured other than (x) the
      Company's  indebtedness to the Purchaser,  (y)  indebtedness  set forth on
      Schedule   6.12(e)  attached  hereto  and  made  a  part  hereof  and  any
      refinancings  or  replacements  thereof on terms no less  favorable to the
      Purchaser than the  indebtedness  being  refinanced or replaced so long as
      any lien  relating  thereto  shall  only  encumber  the  fixed  assets  so
      purchased  and no other assets of the Company or any of its  Subsidiaries;
      and (z) any debt incurred in connection with the purchase of assets in the
      ordinary course of business,  or any refinancings or replacements  thereof
      on terms no less  favorable to the Purchaser than the  indebtedness  being
      refinanced  or  replaced;  (ii) cancel any debt (other than  uncollectible
      customer  receivables)  owing to it in excess of $50,000 in the  aggregate
      during any 12 month period; (iii) assume, guarantee,  endorse or otherwise
      become directly or contingently  liable in connection with any obligations
      of any other Person,  except the endorsement of negotiable  instruments by
      the Company  for  deposit or  collection  or similar  transactions  in the
      ordinary  course of  business  or  guarantees  of  indebtedness  otherwise
      permitted to be outstanding pursuant to this clause (e); and

            (f) create or acquire any  Subsidiary  after the date hereof  unless
      (i) such  Subsidiary is a wholly-owned  Subsidiary of the Company and (ii)
      such Subsidiary becomes party to the Master Security Agreement,  the Stock
      Pledge  Agreement  and the  Subsidiary  Guaranty  (either by  executing  a
      counterpart  thereof  or an  assumption  or joinder  agreement  in respect
      thereof)  and, to the extent  required by the  Purchaser,  satisfies  each
      condition  of  this  Agreement  and  the  Related  Agreements  as if  such
      Subsidiary were a Subsidiary on the Closing Date.

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

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

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

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

                                       21
<PAGE>

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

      6.15 Margin Stock.  The Company will not permit any of the proceeds of the
Note or the Warrant to be used  directly or  indirectly to "purchase" or "carry"
"margin  stock" or to repay  indebtedness  incurred  to  "purchase"  or  "carry"
"margin stock" within the respective  meanings of each of the quoted terms under
Regulation U of the Board of Governors of the Federal  Reserve System as now and
from time to time hereafter in effect.

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

      6.17  Authorization  and  Reservation of Shares.  The Company shall at all
times have authorized and reserved a sufficient number of shares of Common Stock
to provide for the conversion of the Note and exercise of the Warrants.

      6.18 Repayment of Seller Note. The Company shall on or before December 20,
2005, repay in full all outstanding obligations under the promisorry note issued
by the  Company to  Strategic  Working  Capital  Fund,  L.P.  and shall  provide
evidence  reasonably  satisfactory to the Purchaser that no further  obligations
remain outstanding to Strategic Working Capital Fund, L.P.

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

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

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

            7.3  Limitation  on  Acquisition  of  Common  Stock of the  Company.
Notwithstanding  anything  to the  contrary  contained  in this  Agreement,  any
Related  Agreement,  any  document,  instrument  or  agreement  entered  into in
connection with the transactions contemplated hereby or any document, instrument
or agreement entered into in connection with any other transaction  entered into
by and between the Purchaser and the Company (and/or  subsidiaries or affiliates
of  the  Company),  the  Purchaser  shall  not  acquire  stock  in  the  Company
(including,  without  limitation,   pursuant  to  a  contract  to  purchase,  by
exercising an option or warrant, by converting any other security or instrument,
by acquiring or exercising any other right to acquire,  shares of stock or other
security convertible into shares of stock in the Company,

                                       22
<PAGE>

or otherwise, and such options,  warrants,  conversion or other rights shall not
be  exercisable) to the extent such stock  acquisition  would cause any interest
(including any original issue discount)  payable by the Company to the Purchaser
not to qualify as portfolio interest, within the meaning of Section 881(c)(2) of
the Code,  by reason of Section  881(c)(3) of the Code,  taking into account the
constructive  ownership rules under Section 871(h)(3)(C) of the Code (the "Stock
Acquisition  Limitation").  The Stock Acquisition Limitation shall automatically
become null and void without any notice to the Company upon the earlier to occur
of either (a) the Company's  delivery to the Purchaser of a Notice of Redemption
(as  defined in the Note) or (b) an Event of Default  under,  and as defined in,
the Note,  so long as, at the time of the  occurrence  of such Event of Default,
the average  closing  price of Company's  Common Stock as reported by Bloomberg,
L.P. on the Principal Market for the immediately preceding five (5) trading days
is greater  than or equal to 150% of the Fixed  Conversion  Price (as defined in
the Note) at such time.

      8. Covenants of the Company and Purchaser Regarding Indemnification.

      8.1  Company  Indemnification.  The  Company  agrees  to  indemnify,  hold
harmless,  reimburse and defend the Purchaser, each of the Purchaser's officers,
directors,  agents,  affiliates,  control persons,  and principal  shareholders,
against  any  claim,  cost,  expense,  liability,  obligation,  loss  or  damage
(including reasonable legal fees) of any nature, incurred by or imposed upon the
Purchaser   which   results,   arises  out  of  or  is  based   upon:   (i)  any
misrepresentation  by the  Company or any of its  Subsidiaries  or breach of any
warranty by the Company or any of its Subsidiaries in this Agreement,  any other
Related Agreement or in any exhibits or schedules attached hereto or thereto; or
(ii) any breach or default in performance by Company or any of its  Subsidiaries
of any  covenant or  undertaking  to be  performed  by the Company or any of its
Subsidiaries hereunder, under any other Related Agreement or any other agreement
entered  into  by the  Company  and/or  any of its  Subsidiaries  and  Purchaser
relating hereto or thereto.

      8.2  Purchaser's  Indemnification.  Purchaser  agrees to  indemnify,  hold
harmless,  reimburse and defend the Company and each of the Company's  officers,
directors,  agents, affiliates,  control persons and principal shareholders,  at
all times  against any claim,  cost,  expense,  liability,  obligation,  loss or
damage (including  reasonable legal fees) of any nature,  incurred by or imposed
upon  the  Company  which  results,  arises  out of or is  based  upon:  (i) any
misrepresentation  by  Purchaser  or breach of any warranty by Purchaser in this
Agreement or any Related  Agreement  or in any  exhibits or  schedules  attached
hereto thereto; or (ii) any breach or default in performance by Purchaser of any
covenant or  undertaking  to be  performed  by  Purchaser  hereunder,  under any
Related  Agreement  or any  other  agreement  entered  into by the  Company  and
Purchaser relating hereto.

      9. Conversion of Convertible Note.

      9.1 Mechanics of Conversion.

            (a)  Provided the  Purchaser  has notified the Company in writing of
      the Purchaser's  intention to sell the Note Shares and the Note Shares are
      included in an effective  registration  statement or are otherwise  exempt
      from  registration  when sold: (i) upon the conversion of the Note or part
      thereof,  the  Company  shall,  at its own  cost  and  expense,  take  all
      necessary  action  (including  the  issuance  of  an  opinion  of  counsel
      reasonably  acceptable  to  the  Purchaser  following  a  request  by  the
      Purchaser) to assure

                                       23
<PAGE>

      that the  Company's  transfer  agent shall issue  shares of the  Company's
      Common Stock in the name of the  Purchaser  (or its nominee) or such other
      persons as designated by the Purchaser in accordance  with Section  9.1(b)
      hereof and in such  denominations to be specified  representing the number
      of Note  Shares  issuable  upon  such  conversion;  and (ii)  the  Company
      warrants that no instructions  other than these  instructions have been or
      will be given to the  transfer  agent of the  Company's  Common  Stock and
      that, subject to Section 7(d) of the Registration Rights Agreement,  after
      the Effectiveness  Date (as defined in the Registration  Rights Agreement)
      the  Note  Shares  issued  will  be  freely  transferable  subject  to the
      prospectus delivery  requirements of the Securities Act and the provisions
      of this Agreement, and will not contain a legend restricting the resale or
      transferability of the Note Shares.

            (b) Purchaser will give notice of its decision to exercise its right
      to convert the Note or part thereof by telecopying or otherwise delivering
      an executed and  completed  notice of the number of shares to be converted
      to the Company (the "Notice of  Conversion").  The  Purchaser  will not be
      required to surrender  the Note until the  Purchaser  receives a credit to
      the account of the  Purchaser's  prime broker  through the DWAC system (as
      defined  below),  representing  the Note Shares or until the Note has been
      fully  satisfied.  Each date on which a Notice of Conversion is telecopied
      or delivered to the Company in accordance with the provisions hereof shall
      be deemed a  "Conversion  Date."  Pursuant  to the terms of the  Notice of
      Conversion,  the Company will issue  instructions  to the  transfer  agent
      accompanied by an opinion of counsel (if required) within two (2) business
      days  of the  date  of  the  delivery  to the  Company  of the  Notice  of
      Conversion and shall cause the transfer agent to transmit the certificates
      representing the Conversion  Shares to the Holder by crediting the account
      of the Purchaser's  prime broker with the Depository Trust Company ("DTC")
      through its Deposit  Withdrawal  Agent  Commission  ("DWAC") system within
      three (3)  business  days after  receipt  by the  Company of the Notice of
      Conversion (the "Delivery Date").

            (c) The Company understands that a delay in the delivery of the Note
      Shares  in the form  required  pursuant  to  Section 9 hereof  beyond  the
      Delivery Date could result in economic loss to the Purchaser. In the event
      that the Company  fails to direct its  transfer  agent to deliver the Note
      Shares to the  Purchaser  via the DWAC  system  within  the time frame set
      forth in Section 9.1(b) above and the Note Shares are not delivered to the
      Purchaser by the Delivery Date, as  compensation to the Purchaser for such
      loss,  the Company  agrees to pay late  payments to the Purchaser for late
      issuance  of the Note  Shares in the form  required  pursuant to Section 9
      hereof upon  conversion of the Note in the amount equal to the greater of:
      (i) $500 per business day after the Delivery Date; or (ii) the Purchaser's
      actual damages from such delayed delivery.  Notwithstanding the foregoing,
      the Company will not owe the  Purchaser  any late payments if the delay in
      the delivery of the Note Shares  beyond the Delivery Date is solely out of
      the control of the Company and the Company is actively  trying to cure the
      cause of the delay. The Company shall pay any payments incurred under this
      Section in  immediately  available  funds upon  demand and, in the case of
      actual damages,  accompanied by reasonable  documentation of the amount of
      such damages. Such documentation shall show the number of shares of Common
      Stock the Purchaser is forced to purchase (in an open market  transaction)
      which the Purchaser anticipated receiving upon such conversion, and

                                       24
<PAGE>

      shall be  calculated  as the  amount  by which (A) the  Purchaser's  total
      purchase price (including customary brokerage commissions, if any) for the
      shares of Common Stock so purchased  exceeds (B) the  aggregate  principal
      and/or interest  amount of the Note, for which such Conversion  Notice was
      not timely honored.

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 amount permitted by such
law, any payments in excess of such maximum  shall be credited  against  amounts
owed by the Company to a Purchaser and thus refunded to the Company.

      10. Registration Rights.

      10.1 Registration  Rights Granted.  The Company hereby grants registration
rights to the Purchaser pursuant to a Registration  Rights Agreement dated as of
even date herewith between the Company and the Purchaser.

      10.2  Offering  Restrictions.  Except as  previously  disclosed in the SEC
Reports or in the  Exchange Act Filings,  or stock or stock  options  granted to
employees, directors or consultants of the Company (these exceptions hereinafter
referred  to as the  "Excepted  Issuances"),  neither the Company nor any of its
Subsidiaries  will,  prior  to the  full  repayment  or  conversion  of the Note
(together with all accrued and unpaid  interest and fees related  thereto),  (x)
enter into any equity  line of credit  agreement  or  similar  agreement  or (y)
issue,   or  enter  into  any  agreement  to  issue,   any  securities   with  a
variable/floating  conversion  and/or pricing  feature which are or could be (by
conversion or registration)  free-trading  securities (i.e. common stock subject
to a registration statement).

      11. Miscellaneous.

      11.1  Governing Law. THIS  AGREEMENT AND EACH RELATED  AGREEMENT  SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT  REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION BROUGHT BY EITHER
PARTY  AGAINST  THE  OTHER  CONCERNING  THE  TRANSACTIONS  CONTEMPLATED  BY THIS
AGREEMENT AND EACH RELATED  AGREEMENT  SHALL BE BROUGHT ONLY IN THE STATE COURTS
OF NEW YORK OR IN THE  FEDERAL  COURTS  LOCATED  IN THE STATE OF NEW YORK.  BOTH
PARTIES AND THE INDIVIDUALS  EXECUTING THIS AGREEMENT AND THE RELATED AGREEMENTS
ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE  JURISDICTION OF SUCH COURTS AND
WAIVE TRIAL BY JURY.  IN THE EVENT THAT ANY  PROVISION OF THIS  AGREEMENT OR ANY
RELATED 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

                                       25
<PAGE>

VALIDITY OR  ENFORCEABILITY  OF ANY OTHER  PROVISION  OF THIS  AGREEMENT  OR ANY
RELATED AGREEMENT.

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

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

      11.4  Successors.  Except as  otherwise  expressly  provided  herein,  the
provisions  hereof  shall  inure to the  benefit  of, and be binding  upon,  the
successors,  heirs, executors and administrators of the parties hereto and shall
inure to the benefit of and be  enforceable by each person who shall be a holder
of the  Securities  from time to time,  other than the  holders of Common  Stock
which  has been  sold by the  Purchaser  pursuant  to Rule  144 or an  effective
registration  statement.  Purchaser  may not assign its  rights  hereunder  to a
competitor of the Company.

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

      11.6 Amendment and Waiver.

                                       26
<PAGE>

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

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

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

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

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

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

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

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

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

All communications shall be sent as follows:

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

                                   Attention:  Chief Executive Officer
                                   Facsimile:  914-682-0820

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

                                   Attention:  Eric M. Hellige, Esq.
                                   Facsimile:  212-798-6380

                                       27
<PAGE>

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

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

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

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

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

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

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

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

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

                                       28
<PAGE>

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

COMPANY:                                   PURCHASER:

eLEC COMMUNICATIONS CORP.                  LAURUS MASTER FUND, LTD.

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

                                       29
<PAGE>

                                    EXHIBIT A

                            FORM OF CONVERTIBLE NOTE

                                      A-1
<PAGE>

                                    EXHIBIT B

                                 FORM OF WARRANT

                                      B-1
<PAGE>

                                    EXHIBIT C

                                 FORM OF OPINION

      1. Each of the Company and each of its  Subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the laws of the [State
of New  York],  [State  of  Delaware],  [State  of  Texas]  [break  out for each
jurisdiction]  and has all  requisite  corporate  power  and  authority  to own,
operate and lease its properties and to carry on its business as it is now being
conducted.

      2. Each of the  Company  and each of its  Subsidiaries  has the  requisite
corporate  power and authority to execute,  deliver and perform its  obligations
under the Agreement and the Related Agreements. All corporate action on the part
of the Company and each of its  Subsidiaries  and its  officers,  directors  and
stockholders  necessary  has  been  taken  for:  (i)  the  authorization  of the
Agreement and the Related  Agreements and the  performance of all obligations of
the Company and each of its Subsidiaries thereunder; and (ii) the authorization,
sale,  issuance and delivery of the Securities pursuant to the Agreement and the
Related Agreements. The Note Shares and the Warrant Shares, when issued pursuant
to and in accordance with the terms of the Agreement and the Related  Agreements
and upon delivery  shall be validly issued and  outstanding,  fully paid and non
assessable.

      3. The execution, delivery and performance by each of the Company and each
of its Subsidiaries of the Agreement and the Related Agreements to which it is a
party and the consummation of the  transactions on its part  contemplated by any
thereof,  will not,  with or without the giving of notice or the passage of time
or both:

            (a) Violate the provisions of their respective Charter or bylaws; or

            (b)  Violate  any  judgment,  decree,  order or  award of any  court
      binding upon the Company or any of its Subsidiaries; or

            (c) Violate any [insert jurisdictions in which counsel is qualified]
      or federal law

      4. The Agreement and the Related  Agreements  will  constitute,  valid and
legally binding  obligations of each of the Company and each of its Subsidiaries
(to the extent such person is a party thereto), and are enforceable against each
of the Company and each of its  Subsidiaries in accordance with their respective
terms, except:

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

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

      5. To such  counsel's  knowledge,  the sale of the Note and the subsequent
conversion of the Note into Note Shares are not subject to any preemptive rights
or rights of first refusal that have not been properly  waived or complied with.
To such counsel's knowledge, the sale of the

                                      C-1
<PAGE>

Warrant and the  subsequent  exercise of the Warrant for Warrant  Shares are not
subject to any  preemptive  rights or, to such  counsel's  knowledge,  rights of
first refusal that have not been properly waived or complied with.

      6.  Assuming the accuracy of the  representations  and  warranties  of the
Purchaser  contained  in the  Agreement,  the offer,  sale and  issuance  of the
Securities on the Closing Date will be exempt from the registration requirements
of the Securities Act. To such counsel's knowledge, 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 and  security  under  circumstances  that would  cause the  offering  of the
Securities  pursuant to the Agreement or any Related  Agreement to be integrated
with prior  offerings  by the Company for purposes of the  Securities  Act which
would prevent the Company from selling the Securities pursuant to Rule 506 under
the Securities  Act, or any  applicable  exchange-related  stockholder  approval
provisions.

      7. There is no action,  suit,  proceeding or investigation  pending or, to
such counsel's knowledge, currently threatened against the Company or any of its
Subsidiaries  that prevents the right of the Company or any of its  Subsidiaries
to enter into this Agreement or any of the Related Agreements,  or to consummate
the transactions  contemplated thereby. To such counsel's knowledge, the Company
is not a party or subject to the  provisions  of any  order,  writ,  injunction,
judgment or decree of any court or government agency or instrumentality;  nor is
there any action,  suit,  proceeding or investigation  by the Company  currently
pending or which the Company intends to initiate.

      8. The terms and provisions of the Master Security Agreement and the Stock
Pledge  Agreement  create a valid security  interest in favor of Laurus,  in the
respective  rights,  title and interests of the Company and its  Subsidiaries in
and to the Collateral (as defined in each of the Master  Security  Agreement and
the Stock Pledge Agreement).  Each UCC-1 Financing  Statement naming the Company
or any  Subsidiary  thereof as debtor and Laurus as secured  party are in proper
form for filing and  assuming  that such UCC-1  Financing  Statements  have been
filed  with the  Secretary  of  State of New  York,  the  Secretary  of State of
Delaware and the  Secretary of State of Texas,  as the case may be, the security
interest created under the Master Security Agreement will constitute a perfected
security  interest  under  the  Uniform  Commercial  Code in favor of  Laurus in
respect of the Collateral that can be perfected by filing a financing statement.
After  giving  effect  to the  delivery  to  Laurus  of the  stock  certificates
representing the ownership interests of each Subsidiary of the Company (together
with effective  endorsements) and assuming the continued possession by Laurus of
such stock  certificates in the State of New York, the security interest created
in favor of Laurus  under the Stock  Pledge  Agreement  constitutes  a valid and
enforceable first perfected  security interest in such ownership  interests (and
the proceeds thereof) in favor of Laurus, subject to no other security interest.
No filings,  registrations  or  recordings  are required in order to perfect (or
maintain the perfection or priority of) the security  interest created under the
Stock Pledge Agreement in respect of such ownership interests.

                                      C-2
<PAGE>

                                    EXHIBIT D

                            FORM OF ESCROW AGREEMENT

                                      D-1Exhibit 10.2

      THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE
      NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED,  OR ANY
      STATE  SECURITIES  LAWS.  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 AND ANY APPLICABLE  STATE  SECURITIES  LAWS OR AN
      OPINION OF COUNSEL REASONABLY  SATISFACTORY TO eLEC  COMMUNICATIONS  CORP.
      THAT SUCH REGISTRATION IS NOT REQUIRED.

                          SECURED CONVERTIBLE TERM NOTE
                          -----------------------------

      FOR VALUE RECEIVED, eLEC COMMUNICATIONS CORP., a New York corporation (the
"Borrower"),  hereby  promises  to pay to  LAURUS  MASTER  FUND,  LTD.,  c/o M&C
Corporate Services Limited,  P.O. Box 309 GT, Ugland House, South Church Street,
George Town, Grand Cayman,  Cayman Islands,  Fax: 345-949-8080 (the "Holder") or
its  registered  assigns or  successors  in interest,  on order,  the sum of Two
Million  Dollars  ($2,000,000),  together  with any accrued and unpaid  interest
hereon, on November 30, 2008 (the "Maturity Date") if not sooner paid.

      This  Secured  Convertible  Term Note (the  "Note")  is  intended  to be a
registered   obligation  within  the  meaning  of  Treasury  Regulation  Section
1.871-14(c)(1)(i)  and the Borrower (or its agent) shall register this Note (and
thereafter shall maintain such registration) as to both principal and any stated
interest. Notwithstanding any document, instrument or agreement relating to this
Note to the  contrary,  transfer  of this Note (or the right to any  payments of
principal or stated  interest  thereunder) may only be effected by (i) surrender
of this Note and either the  reissuance  by the Borrower of this Note to the new
holder or the issuance by the Borrower of a new instrument to the new holder, or
(ii)  transfer  through a book entry system  maintained  by the Borrower (or its
agent), within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)(B).

      Capitalized  terms used herein without  definition shall have the meanings
ascribed to such terms in that certain Securities Purchase Agreement dated as of
the date hereof  between the Borrower  and the Holder (as  amended,  modified or
supplemented from time to time, the "Purchase Agreement").

The following terms shall apply to this Note:

                                    ARTICLE I
                             INTEREST & AMORTIZATION

      1.1 (a) Interest  Rate.  Subject to Sections  1.1(b),  4.2 and 5.6 hereof,
interest  payable on this Note shall  accrue at a rate per annum (the  "Interest
Rate") equal to the "prime rate"  published in The Wall Street Journal from time
to time, plus two percent (2%). The prime rate shall be

<PAGE>

increased or  decreased as the case may be for each  increase or decrease in the
prime rate in an amount  equal to such  increase  or decrease in the prime rate;
each change to be effective  as of the day of the change in such rate.  Interest
shall be (i)  calculated  on the  basis  of a 360 day  year,  and  (ii)  payable
monthly, in arrears, commencing on January 1, 2006 and on the first business day
of each  consecutive  calendar month  thereafter until the Maturity Date (and on
the Maturity Date),  whether by  acceleration  or otherwise  (each, a "Repayment
Date").

      1.1 (b) Interest Rate Adjustment. The Interest Rate shall be calculated on
the last  business day of each month  hereafter  until the Maturity Date (each a
"Determination Date") and shall be subject to adjustment as set forth herein. If
(i) the Borrower shall have registered the shares of the Borrower's common stock
issuable  upon the  conversion  of this Note and the  exercise  of that  certain
warrant issued to Holder on a registration  statement  declared effective by the
Securities  and Exchange  Commission  (the "SEC"),  and (ii) the average  market
price (the "Market Price") of the Common Stock as reported by Bloomberg, L.P. on
the Principal  Market (as defined  below) for the five (5)  consecutive  trading
days  immediately  preceding a  Determination  Date exceeds the then  applicable
Fixed Conversion Price (as defined below) by at least twenty five percent (25%),
the Interest  Rate for the  succeeding  calendar  month shall  automatically  be
reduced by 200 basis points (200 b.p.) (2.0.%) for each incremental  twenty five
percent  (25%)  increase in the Market  Price of the Common Stock above the then
applicable Fixed Conversion Price.  Notwithstanding  the foregoing (and anything
to the  contrary  contained in herein),  in no event shall the Interest  Rate be
less than zero percent (0%).

      1.2  Minimum  Monthly  Principal  Payments.  Amortizing  payments  of  the
aggregate  principal  amount  outstanding  under  this  Note  at any  time  (the
"Principal  Amount")  shall  begin on May 1, 2006 and  shall  recur on the first
business day of each succeeding  month thereafter until the Maturity Date (each,
an  "Amortization  Date").  Subject to Article 3 below,  beginning  on the first
Amortization  Date,  the Borrower  shall make monthly  payments to the Holder on
each Repayment Date, each in the amount of $33,333.33, together with any accrued
and unpaid interest to date on such portion of the Principal Amount plus any and
all other amounts which are then owing under this Note,  the Purchase  Agreement
or any  other  Related  Agreement  but  have not been  paid  (collectively,  the
"Monthly Amount"). Any Principal Amount that remains outstanding on the Maturity
Date shall be due and payable on the Maturity Date.

                                   ARTICLE II
                              CONVERSION REPAYMENT

      2.1 (a) Payment of Monthly Amount in Cash or Common Stock.  If the Monthly
Amount  (or a portion  thereof  of such  Monthly  Amount if such  portion of the
Monthly  Amount  would have been  converted  into shares of Common Stock but for
Section 3.2) is required to be paid in cash pursuant to Section 2.1(b), then the
Borrower  shall pay the Holder an amount equal to 102% of the Monthly Amount due
and owing to the Holder on the Repayment Date in cash. If the Monthly Amount (or
a  portion  of such  Monthly  Amount  if not all of the  Monthly  Amount  may be
converted into shares of Common Stock pursuant to Section 3.2) is required to be
paid in shares of

                                       2
<PAGE>

Common Stock pursuant to Section 2.1(b),  the number of such shares to be issued
by the Borrower to the Holder on such Repayment Date (in respect of such portion
of the  Monthly  Amount  converted  into in shares of Common  Stock  pursuant to
Section 2.1(b)),  shall be the number  determined by dividing (x) the portion of
the  Monthly  Amount  converted  into  shares of Common  Stock,  by (y) the then
applicable  Fixed  Conversion  Price.  For purposes  hereof,  the initial "Fixed
Conversion  Price"  means $0.61 [which has been  determined  on the date of this
Note as an amount equal to 140% of the average closing price of the Common Stock
for the three (3) trading days immediately prior to the date of this Note].

      (b) Monthly Amount Conversion Guidelines.  Subject to Sections 2.1(a), 2.2
and 3.2 hereof,  the Holder  shall  convert into shares of Common Stock all or a
portion  of the  Monthly  Amount due on each  Repayment  Date  according  to the
following guidelines (the "Conversion Criteria"):  (i) the average closing price
of the Common Stock as reported by Bloomberg,  L.P. on the Principal  Market for
the five (5) consecutive trading days immediately  preceding such Repayment Date
shall be greater  than or equal to 115% of the Fixed  Conversion  Price and (ii)
the amount of such  conversion  does not exceed twenty five percent (25%) of the
aggregate  dollar trading volume of the Common Stock for the twenty two (22) day
trading  period  immediately  preceding the  applicable  Repayment  Date. If the
Conversion  Criteria are not met, the Holder shall convert only such part of the
Monthly  Amount  that meets the  Conversion  Criteria.  Any part of the  Monthly
Amount due on a Repayment  Date that the Holder is not  required to convert into
shares of Common Stock due to failure to meet the Conversion Criteria,  shall be
paid by the Borrower in cash at the rate of 102% of the Monthly Amount otherwise
due on such  Repayment  Date,  within three (3) business days of the  applicable
Repayment Date.

      2.2 No Effective  Registration.  Notwithstanding  anything to the contrary
herein, no amount  outstanding  hereunder or under the Purchase Agreement or the
other Related  Agreements  may be converted  into Common Stock unless (i) either
(x) an effective current Registration  Statement (as defined in the Registration
Rights  Agreement)  covering  the  shares  of  Common  Stock  to  be  issued  in
satisfaction of such obligations exists or (y) an exemption from registration of
the Common Stock is  available  pursuant to Rule 144 of the  Securities  Act and
(ii) no Event of Default  hereunder exists and is continuing,  unless such Event
of Default is cured within any applicable cure period or is otherwise  waived in
writing by the Holder in whole or in part at the Holder's option.

      2.3 Optional  Redemption  in Cash.  The  Borrower  will have the option of
prepaying this Note in whole or in part ("Optional Redemption") by paying to the
Holder  a sum of  money  (the  "Redemption  Amount")  equal  to (x) if  redeemed
following  the date of this  Note,  one  hundred  five  percent  (105%),  of the
principal  amount of this Note together with accrued but unpaid interest thereon
and any and all other sums due,  accrued or payable to the Holder  arising under
this Note, the Purchase  Agreement or any Related  Agreement  outstanding on the
Redemption  Payment Date (as defined  below).  The Borrower shall deliver to the
Holder a written notice of redemption  (the "Notice of  Redemption")  specifying
the date for such Optional  Redemption (the  "Redemption  Payment Date"),  which
date shall be ten (10)  business days after the date of the Notice of Redemption
(the "Redemption Period"), and the principal amount of this Note to be redeemed.
A

                                       3
<PAGE>

Notice of Redemption  shall not be effective with respect to any portion of this
Note for which the Holder has a pending  election to convert pursuant to Section
3.1, or for conversions  initiated or made by the Holder pursuant to Section 3.1
during the Redemption Period. The relevant Redemption Amount shall be determined
as if such Holder's conversion elections had been completed immediately prior to
the date of the  Notice of  Redemption.  On the  Redemption  Payment  Date,  the
relevant  Redemption  Amount  must be paid in good funds to the  Holder.  In the
event the Borrower fails to pay the relevant Redemption Amount on the Redemption
Payment Date as set forth herein,  then such Redemption  Notice will be null and
void.

                                   ARTICLE III
                                CONVERSION RIGHTS

      3.1. Holder's  Conversion Rights. The Holder shall have the right, but not
the obligation,  to convert all or any portion of the then aggregate outstanding
principal amount of this Note,  together with interest and fees due hereon, into
shares of Common  Stock  subject to the terms and  conditions  set forth in this
Article III. The Holder may exercise such right by delivery to the Borrower of a
written  notice of  conversion  not less than one (1)  business day prior to the
date upon which such  conversion  shall occur.  The shares of Common Stock to be
issued upon such conversion are herein referred to as the "Conversion Shares."

      3.2 Conversion  Limitation.  Notwithstanding  anything contained herein to
the contrary,  the Holder shall not be entitled to convert pursuant to the terms
of this Note an amount that would be convertible  into that number of Conversion
Shares which would exceed the difference between 4.99% of the outstanding shares
of Common  Stock of the  Borrower  and the  number  of  shares  of Common  Stock
beneficially  owned by such Holder or issuable upon exercise of warrants held by
such Holder. For the purposes of the immediately preceding sentence,  beneficial
ownership  shall be determined in accordance  with Section 13(d) of the Exchange
Act and Regulation 13d-3 thereunder.  The Conversion Shares limitation described
in this Section 3.2 shall automatically become null and void following notice to
the  Borrower  upon the  occurrence  and during the  continuance  of an Event of
Default,  upon 75 days  prior  notice to the  Borrower,  or upon  receipt by the
Holder of a Notice of Redemption.  Notwithstanding  anything contained herein to
the contrary,  the provisions of this Section 3.2 are irrevocable and may not be
waived by the Holder or the Borrower.

      3.3  Mechanics  of Holder's  Conversion.  (a) In the event that the Holder
elects to convert any amount  outstanding under this Note into Common Stock, the
Holder  shall  give  notice of such  election  by  delivering  an  executed  and
completed notice of conversion (a "Notice of Conversion") to the Borrower, which
Notice of  Conversion  shall  provide a breakdown  in  reasonable  detail of the
Principal Amount, accrued interest and fees being converted.  On each Conversion
Date (as  hereinafter  defined) and in accordance with its Notice of Conversion,
the Holder shall make the appropriate reduction to the Principal Amount, accrued
interest  and fees as entered in its records and shall  provide  written  notice
thereof to the Borrower within two (2) business days after the

                                       4
<PAGE>

Conversion  Date.  Each date on which a Notice of  Conversion  is  delivered  or
telecopied to the Borrower in  accordance  with the  provisions  hereof shall be
deemed a "Conversion Date". A form of Notice of Conversion to be employed by the
Holder is annexed hereto as Exhibit A.

            (b)  Pursuant to the terms of a Notice of  Conversion,  the Borrower
(i) will use its  best  efforts  to issue  instructions  to the  transfer  agent
accompanied by an opinion of counsel,  if so required by the Borrower's transfer
agent,  within one (1)  business  day of the date of the delivery to Borrower of
the Notice of Conversion and (ii) shall cause the transfer agent to transmit the
certificates  representing the Conversion  Shares to the Holder by crediting the
account of the Holder's  designated broker with the Depository Trust Corporation
("DTC") through its Deposit  Withdrawal Agent Commission  ("DWAC") system within
three  (3)  business  days  after  receipt  by the  Borrower  of the  Notice  of
Conversion (the "Delivery  Date"). In the case of the exercise of the conversion
rights set forth herein the  conversion  privilege  shall be deemed to have been
exercised  and the  Conversion  Shares  issuable upon such  conversion  shall be
deemed to have been  issued  upon the date of  receipt  by the  Borrower  of the
Notice of Conversion. The Holder shall be treated for all purposes as the record
holder of such shares of Common Stock,  unless the Holder  provides the Borrower
written instructions to the contrary.

      3.4  Conversion  Mechanics.  The  number of  shares of Common  Stock to be
issued upon each  conversion  of this Note shall be  determined by dividing that
portion of the principal  and interest and fees to be converted,  if any, by the
then  applicable  Fixed  Conversion  Price.  In the event of any  conversions of
outstanding  principal  amount under this Note in part  pursuant to this Article
III, such conversions  shall be deemed to constitute  conversions of outstanding
principal  amount applying to Monthly Amounts for the remaining  Repayment Dates
in chronological order.

      3.5 Adjustment Provisions.  The Fixed Conversion Price and number and kind
of shares or other securities to be issued upon conversion  determined  pursuant
to this  Note  shall  be  subject  to  adjustment  from  time to time  upon  the
occurrence  of  certain  events  during the period  that this  conversion  right
remains outstanding, as follows:

            (a)  Reclassification.  If  the  Borrower  at  any  time  shall,  by
reclassification  or  otherwise,  change  the  Common  Stock  into the same or a
different  number of  securities  of any class or classes,  this Note, as to the
unpaid Principal Amount and accrued interest thereon, shall thereafter be deemed
to evidence the right to purchase an adjusted number of such securities and kind
of  securities  as would have been  issuable  as the result of such  change with
respect to the Common Stock (i) immediately prior to or (ii) immediately  after,
such reclassification or other change at the sole election of the Holder.

            (b) Stock  Splits,  Combinations  and  Dividends.  If the  shares of
Common  Stock are  subdivided  or combined  into a greater or smaller  number of
shares of Common  Stock,  or if a dividend  is paid on the  Common  Stock or any
preferred  stock  issued by the  Borrower in shares of Common  Stock,  the Fixed
Conversion  Price shall be  proportionately  reduced in case of  subdivision  of
shares or stock dividend or proportionately increased in the case of combination
of shares, in each

                                       5
<PAGE>

such case by the  ratio  which  the  total  number  of  shares  of Common  Stock
outstanding  immediately after such event bears to the total number of shares of
Common Stock outstanding immediately prior to such event.

                  (c) Share Issuances. Subject to the provisions of this Section
3.6, if the Borrower  shall at any time prior to the  conversion or repayment in
full of the  Principal  Amount  issue any shares of Common  Stock or  securities
convertible  into  Common  Stock to a Person  other than the Holder  (except (i)
pursuant to Sections 3.5(a) or (b) above; (ii) pursuant to options, warrants, or
other obligations to issue shares outstanding on the date hereof as disclosed to
the Holder in writing  (including  shares issuable under the  circumstances  set
forth on Schedule 4.2 to the Purchase  Agreement);  or (iii) pursuant to options
that may be  issued  under  any  employee  incentive  stock  option  and/or  any
qualified  stock option plan adopted by the  Borrower) for a  consideration  per
share (the "Offer Price") less than the Fixed  Conversion Price in effect at the
time of such  issuance,  then the Fixed  Conversion  Price shall be  immediately
reset pursuant to the formula below.  For purposes  hereof,  the issuance of any
security of the Borrower  convertible  into or exercisable or  exchangeable  for
Common Stock shall result in an  adjustment to the Fixed  Conversion  Price upon
the issuance of such securities.

                  If the Borrower  issues any additional  shares of Common Stock
for a consideration  per share less than the  then-applicable  Fixed  Conversion
Price pursuant to this Section 3.6 then, and thereafter  successively  upon each
such issue, the Fixed Conversion Price shall be adjusted by multiplying the then
applicable Fixed Conversion Price by the following fraction:

                        ---------------------------------
                                      A + B
                        ---------------------------------
                          (A + B) + [((C - D) x B) / C]
                        ---------------------------------

                  A = Total amount of shares convertible pursuant to this Note

                  B = Actual shares sold in the offering

                  C = Fixed Conversion Price

                  D = Offer Price

            (d)  Computation of  Consideration.  For purposes of any computation
respecting   consideration  received  pursuant  to  Section  3.6(c)  above,  the
following shall apply:

                  (i) in the case of the  issuance of shares of Common Stock for
      cash, the consideration shall be the amount of such cash, provided that in
      no case shall any deduction

                                       6
<PAGE>

      be made for any commissions,  discounts or other expenses  incurred by the
      Borrower for any  underwriting  of the issue or  otherwise  in  connection
      therewith;

                  (ii) in the case of the issuance of shares of Common Stock for
      a  consideration  in whole or in part other than cash,  the  consideration
      other than cash  shall be deemed to be the fair  market  value  thereof as
      determined  in good  faith  by the  Board  of  Directors  of the  Borrower
      (irrespective of the accounting treatment thereof); and

                  (iii)  upon any such  exercise,  the  aggregate  consideration
      received  for such  securities  shall be  deemed  to be the  consideration
      received by the  Borrower  for the  issuance of such  securities  plus the
      additional minimum  consideration,  if any, to be received by the Borrower
      upon the conversion or exchange thereof (the consideration in each case to
      be determined in the same manner as provided in  subsections  (i) and (ii)
      of this Section 3.6(d)).

      3.5 Reservation of Shares.  During the period the conversion right exists,
the  Borrower  will  reserve from its  authorized  and  unissued  Common Stock a
sufficient  number of shares to provide for the  issuance of  Conversion  Shares
upon the full conversion of this Note and the Warrant.  The Borrower  represents
that upon issuance, the Conversion Shares will be duly and validly issued, fully
paid and  non-assessable.  The  Borrower  agrees that its  issuance of this Note
shall constitute full authority to its officers, agents, and transfer agents who
are charged with the duty of executing and issuing stock certificates to execute
and  issue  the  necessary  certificates  for the  Conversion  Shares  upon  the
conversion of this Note.

      3.6 Registration  Rights. The Holder has been granted  registration rights
with respect to the Conversion  Shares as set forth in the  Registration  Rights
Agreement.

      3.7 Issuance of New Note. Upon any partial  conversion of this Note, a new
Note  containing the same date and provisions of this Note shall, at the written
request of the Holder, be issued by the Borrower to the Holder for the principal
balance of this Note and accrued interest which shall not have been converted or
paid.  Subject to the  provisions of Article IV, the Borrower will pay no costs,
fees or any other consideration to the Holder for the production and issuance of
a new Note.

                                   ARTICLE IV
                                EVENTS OF DEFAULT

      4.1 Events of Default.  The occurrence of any of the following  events set
forth in subparagraphs (a) through (i), inclusive, is an "Event of Default":

            (a) Failure to Pay  Principal,  Interest or other Fees. The Borrower
      fails to pay when due any installment of principal, interest or other fees
      hereon in accordance  herewith,  and in any such case,  such failure shall
      continue for a period of three (3)

                                       7
<PAGE>

      days following the date upon which any such payment was due.

            (b) Breach of Covenant.  The  Borrower  breaches any covenant or any
      other term or  condition  of this Note or the  Purchase  Agreement  in any
      material respect, or the Borrower or any of its Subsidiaries  breaches any
      covenant or any other term or  condition  of any Related  Agreement in any
      material  respect and, in any such case, such breach,  if subject to cure,
      continues for a period of fifteen (15) days after the occurrence thereof.

            (c) Breach of Representations and Warranties.  Any representation or
      warranty made by the Borrower in this Note or the Purchase  Agreement,  or
      by the  Borrower  or any of its  Subsidiaries  in any  Related  Agreement,
      shall, in any such case, be false or misleading in any material respect on
      the date that such representation or warranty was made or deemed made.

            (d)  Receiver or Trustee.  The  Borrower or any of its  Subsidiaries
      shall make an  assignment  for the benefit of  creditors,  or apply for or
      consent  to the  appointment  of a  receiver  or  trustee  for it or for a
      substantial  part of its  property  or  business;  or such a  receiver  or
      trustee shall otherwise be appointed.

            (e)  Judgments.  Any money  judgment,  writ or similar final process
      shall be entered or filed against the Borrower or any of its  Subsidiaries
      or any of  their  respective  property  or  other  assets  for  more  than
      $250,000, and shall remain unvacated, unbonded or unstayed for a period of
      sixty (60) days.

            (f)   Bankruptcy.   Bankruptcy,   insolvency,    reorganization   or
      liquidation   proceedings  or  other   proceedings  or  relief  under  any
      bankruptcy  law or any  law  for  the  relief  of  debtors,  voluntary  or
      involuntary,  shall be instituted by or against the Borrower or any of its
      Subsidiaries  and,  only in the  case  of an  involuntary  case  commenced
      against  the  Borrower  or any of its  Subsidiaries,  the  petition is not
      controverted  within ten (10) days, or is not dismissed  within sixty (60)
      days  after  commencement  of  the  case,  or the  Borrower  or any of its
      Subsidiaries shall (i) become insolvent, cease operations, dissolve and/or
      terminate its business existence, (ii) apply for, consent to, or suffer to
      exist the  appointment  of, or the taking of  possession  by, a  receiver,
      custodian, trustee, liquidator or other fiduciary of itself or of all or a
      substantial part of its property,  (iii) make a general assignment for the
      benefit of  creditors or (iv) take any action for the purpose of effecting
      any of the foregoing.

            (g) Stop Trade. An SEC stop trade order or Principal  Market trading
      suspension of the Common Stock shall be in effect for five (5) consecutive
      days or five (5)  days  during a  period  of ten  (10)  consecutive  days,
      excluding in all cases a suspension of all trading on a Principal  Market,
      provided that the Borrower shall not

                                       8
<PAGE>

      have been able to cure such trading  suspension within thirty (30) days of
      the notice  thereof or list the Common Stock on another  Principal  Market
      within  sixty (60) days of such  notice.  The  "Principal  Market" for the
      Common Stock shall include the NASD OTC Bulletin  Board,  NASDAQ  SmallCap
      Market,  NASDAQ  National Market System,  American Stock Exchange,  or New
      York  Stock  Exchange  (whichever  of the  foregoing  is at the  time  the
      principal trading exchange or market for the Common Stock).

            (h)  Failure  to  Deliver  Common  Stock or  Replacement  Note.  The
      Borrower  shall  fail (i) to timely  deliver  Common  Stock to the  Holder
      pursuant  to and in the form  required  by this Note and  Section 9 of the
      Purchase  Agreement,  if such failure to timely deliver Common Stock shall
      not be cured within two (2) business days or (ii) to deliver a replacement
      Note to Holder within seven (7) business days  following the required date
      of such  issuance  pursuant to this Note,  the  Purchase  Agreement or any
      Related Agreement (to the extent required under such agreements).

            (i)  Default  Under  Related  Agreements  or Other  Agreements.  The
      occurrence  and  continuance  of any Event of Default  (as  defined in the
      Purchase  Agreement or any Related  Agreement) or any event of default (or
      similar term) under any other indebtedness (including, without limitation,
      indebtedness  evidenced by the Securities Purchase Agreement,  dated as of
      February 8, 2005  between the Borrower  and the Holder  together  with the
      Related Agreements referred to therein),  provided that it shall not be an
      Event  of  Default   under  this  Section   4.1(i)  unless  the  aggregate
      outstanding  principal amount of all such other  indebtedness as described
      above is at least $50,000.00.

            (j) Change in  Control.  (i) Any  "Person" or "group" (as such terms
      are defined in Sections  13(d) and 14(d) of the Exchange Act, as in effect
      on the date  hereof) is or becomes the  "beneficial  owner" (as defined in
      Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly,
      of 35% or more on a fully  diluted  basis of the then  outstanding  voting
      equity  interest  of the  Borrower or (ii) the Board of  Directors  of the
      Borrower shall cease to consist of a majority of the Board of Directors of
      the Borrower on the date hereof (or  directors  appointed by a majority of
      the Board of Directors in effect immediately prior to such appointment).

      4.2  Default  Interest  Rate.  Following  the  occurrence  and  during the
continuance of an Event of Default,  the Borrower shall pay additional  interest
on  this  Note in an  amount  equal  to one  percent  (1%)  per  month,  and all
outstanding  obligations  under  this Note,  including  unpaid  interest,  shall
continue  to accrue  such  additional  interest  from the date of such  Event of
Default until the date such Event of Default is cured or waived.

      4.3 Default  Payment.  Following the occurrence and during the continuance
of an Event of Default,  the Holder, at its option, may demand repayment in full
of all obligations and liabilities

                                       9
<PAGE>

owing by Borrower to the Holder under this Note, the Purchase  Agreement  and/or
any other  Related  Agreement  and/or may elect,  in  addition to all rights and
remedies  of the  Holder  under the  Purchase  Agreement  and the other  Related
Agreements  and all  obligations  and  liabilities  of the  Borrower  under  the
Purchase Agreement and the other Related Agreements,  to require the Borrower to
make a Default Payment ("Default Payment"). The Default Payment shall be 125% of
the outstanding  principal amount of the Note, plus accrued but unpaid interest,
all other fees then remaining unpaid,  and all other amounts payable  hereunder.
The Default  Payment  shall be applied  first to any fees due and payable to the
Holder pursuant to this Note, the Purchase  Agreement,  and/or the other Related
Agreements, then to accrued and unpaid interest due on this Note and then to the
outstanding principal balance of this Note. The Default Payment shall be due and
payable  immediately  on the date  that the  Holder  has  exercised  its  rights
pursuant to this Section 4.3.

      4.3 Conversion Privileges.  The conversion privileges set forth in Article
III shall remain in full force and effect  immediately  from the date hereof and
until this Note is paid in full.

      4.4 Cumulative Remedies. The remedies under this Note shall be cumulative.

                                    ARTICLE V
                                  MISCELLANEOUS

      5.1 Failure or Indulgence  Not Waiver.  No failure or delay on the part of
the Holder  hereof in the exercise of any power,  right or  privilege  hereunder
shall operate as a waiver thereof,  nor shall any single or partial  exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other  right,  power or  privilege.  All  rights  and  remedies  existing
hereunder  are  cumulative  to, and not  exclusive  of,  any rights or  remedies
otherwise available.

      5.2 Notices.  Any notice herein required or permitted to be given shall be
in writing and shall be deemed  effectively given: (a) upon personal delivery to
the party notified, (b) when sent by confirmed telex or facsimile if sent during
normal  business hours of the recipient,  if not, then on the next business day,
(c) five days after having been sent by  registered  or certified  mail,  return
receipt  requested,  postage  prepaid,  or (d)  one  day  after  deposit  with a
nationally  recognized  overnight  courier,  specifying next day delivery,  with
written  verification  of  receipt.  All  communications  shall  be  sent to the
Borrower  at  the  address  provided  in  the  Purchase  Agreement  executed  in
connection herewith,  with a copy to Pryor Cashman Sherman & Flynn LLP, 410 Park
Avenue, New York, New York 10022,  Attention:  Eric M. Hellige,  Esq., facsimile
number (212) 798-6380 and to the Holder at the address  provided in the Purchase
Agreement  for such  Holder,  with a copy to John E.  Tucker,  Esq.,  825  Third
Avenue,  14th Floor, New York, New York 10022,  facsimile number (212) 541-4434,
or at such other address as the Borrower or the Holder may designate by ten days
advance written notice to the other parties hereto. A Notice of Conversion shall
be deemed given when made to the Borrower pursuant to the Purchase Agreement.

      5.3 Amendment  Provision.  The term "Note" and all reference  thereto,  as
used  throughout  this  instrument,  shall mean this  instrument  as  originally
executed, or if later amended or

                                       10
<PAGE>

supplemented,  then as so amended or supplemented,  and any successor instrument
issued pursuant to Section 3.5 hereof, as it may be amended or supplemented.

      5.4  Assignability.  This Note shall be binding  upon the Borrower and its
successors  and  assigns,  and shall  inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder in accordance with the
requirements of the Purchase  Agreement.  This Note shall not be assigned by the
Borrower without the consent of the Holder.

      5.5  Governing  Law.  This Note  shall be  governed  by and  construed  in
accordance with the laws of the State of New York,  without regard to principles
of  conflicts  of laws.  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.  Both  parties and the  individual  signing this Note on behalf of the
Borrower  agree to submit to the  jurisdiction  of such courts.  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 Note 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 this
Note. Nothing contained herein shall be deemed or operate to preclude the Holder
from  bringing  suit or taking  other legal  action  against the Borrower in any
other  jurisdiction  to  collect on the  Borrower's  obligations  to Holder,  to
realize on any  collateral  or any other  security for such  obligations,  or to
enforce a judgment or other court in favor of the Holder.

      5.6  Maximum  Payments.  Nothing  contained  herein  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  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  Borrower  to the Holder and thus  refunded to the
Borrower.

      5.7  Security  Interest  and  Guarantee.  The  Holder  has been  granted a
security  interest (i) in certain assets of the Borrower and its Subsidiaries as
more fully  described  in the  Master  Security  Agreement  dated as of the date
hereof and (ii)  pursuant  to the Stock  Pledge  Agreement  dated as of the date
hereof.  The  obligations  of the  Borrower  under this Note are  guaranteed  by
certain  Subsidiaries of the Borrower pursuant to the Subsidiary  Guaranty dated
as of the date hereof.

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

      5.9 Cost of  Collection.  If default is made in the  payment of this Note,
the  Borrower  shall pay to Holder  reasonable  costs of  collection,  including
reasonable attorney's fees.

                                       11
<PAGE>

      5.10 Business Day. If any Repayment Date is a Saturday, Sunday or a day on
which  banking  institutions  in New York City are not  required  to be open for
business  (each, a "Legal  Holiday"),  payment of any Monthly Amount due on such
day may be made on the next  succeeding day that is not a Legal Holiday,  and no
interest shall accrue in respect of such payment for the intervening period.

       [Balance of page intentionally left blank; signature page follows.]

                                       12
<PAGE>

      IN WITNESS WHEREOF,  the Borrower has caused this Note to be signed in its
name effective as of this 30th day of November 2005.

                                        eLEC COMMUNICATIONS CORP.

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

WITNESS:

/s/ Rita Kovalsky
---------------------------

                                       13
<PAGE>

                                    EXHIBIT A

                              NOTICE OF CONVERSION
                              --------------------

(To be  executed  by the Holder in order to convert all or part of the Note into
Common Stock

[Name and Address of Holder]

The  Undersigned  hereby  converts  $_________  of the principal due on [specify
applicable  Repayment  Date]  under the  Convertible  Term  Note  issued by eLEC
COMMUNICATIONS  CORP.  dated  November  30, 2005 by delivery of Shares of Common
Stock of eLEC COMMUNICATIONS CORP. on and subject to the conditions set forth in
Article III of such Note.

1.    Date of Conversion         _______________________

2.    Shares To Be Delivered:    _______________________

                                         By:_______________________________
                                         Name:_____________________________
                                         Title:____________________________

                                       14

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