Document:

EXHIBIT  4.1

                              CONVERTIBLE DEBENTURE
                    EXCHANGE AGREEMENT / CONVERSION OF NOTES

This  Convertible  Debenture and Exchange Agreement (this "Agreement"), dated as
of  December  18,  2005,  is  entered  into  by and between NeWave, Inc., a Utah
corporation  (the  "Company"),  and eFund Capital Partners, LLC, (the "Holder").

RECITALS

WHEREAS,  the  Holder  currently  has  notes  ("Notes"), August 105, August 106,
August  107 and August 108 due and payable on their respective dates of December
18,  2005,  and  as of January 3, 2006, these Notes are in default.  The Company
owes  to  the  Holder  of  these  Notes  the  Face Amounts of $125,000; $29,789;
$84,000;  and  $48,000  respectively;
$286,789.00
WHEREAS,  the Holder is entitled to assess a 10% penalty for the default of said
Notes  pursuant  to  their  respective  Note  Agreements;

WHEREAS,  the  Penalties  due  under the 10% default clause are $12,500; $2,978;
$8,400;  and  $4,800  respectively;

WHEREAS,  Holder  agrees to waive the penalties so long as all interest payments
are  made  within 3 days of their due dates and so long as the Principle is paid
when  due.  Should  any  payment be late the Holder reserves the right to assess
the  penalties  that  are  currently  owed  as  described  above.

     WHEREAS,  the Holder hereby agrees to convert the entire outstanding amount
of the Notes of $286,789.00 into a Convertible Debenture ("Debenture"). Pursuant
to  the  Holder's  rights  of  conversion,  upon  conversion  of the Convertible
Debenture  into the Company's common shares ("Stock") and for purposes of resale
of  such Stock pursuant to Rule 144 or Rule 145, the date of consideration shall
remain  respective  to  the  original  dates  of  the  Notes  mentioned  above.

     WHEREAS,  the  Holder  desires to acquire, and the Company desires to issue
and  sell  to the Holder, a Convertible Debenture of the Company in exchange for
the  Notes;  and

     WHEREAS,  the  parties  hereto  desire  to  enter  into  this  Agreement.

                                    AGREEMENT

     NOW,  THEREFORE,  in  consideration  of  the  mutual promises and covenants
contained  in  this  Agreement  and  other  good and valuable consideration, the
receipt  and  sufficiency  of  which  is hereby acknowledged, the parties hereto
agree  as  follows:

1.     AUTHORIZATION  AND  SALE  OF  SHARES.

1.1     Authorization.  The  Company has, or will have, duly authorized the sale
and  issuance  of up to $286,789.00. of Convertible Debenture having the rights,
restrictions,  privileges  and  preferences  set  forth  in  the  form  of  the
Certificate  of  Designation  attached  hereto as Exhibit A (the "Certificate of
Designation").

1.2     Agreement  to  Exchange.  Subject  to  the  terms and conditions of this
Agreement,  the  Company  will sell and issue to the Holder, and the Holder will
acquire from the Company, $286,789.00 of Convertible Debenture of the Company in
exchange  for  the  cancellation  of  the outstanding debt currently owed to the
Holder  in  the  aggregate  amount  of  $286,789.00  in  the  form  of  Notes.

1.3     No  Public Solicitation. The Holder is not subscribing for the Debenture
as  a  result  of  or  subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or broadcast
over  television  or  radio,  or  presented  at  any  seminar or meeting, or any
solicitation of a subscription by a person not previously known to the Holder in
connection  with  investments  in  securities  generally.

2.     Representations  of  the  Company.  The  Company  hereby  represents  and
warrants  to the Holder, that, to the extent applicable, all representations and
warranties  of  the  Company  set forth in the Note Agreements, are incorporated
herein  as  though  fully  set  forth.

3.     Representations of the Holder.  The Holder represents and warrants to the
Company  as  follows:

3.1     Investment  Intent.  The  Debenture, and the shares of Common Stock into
which  the  Debenture,  may  be  converted  or  exercised  (collectively,  the
"Securities")  are,  or  will  be,  acquired  for  the Holder's own account, for
investment  and  not  with  a  view  to,  or  for resale in connection with, any
distribution  or  public  offering  thereof within the meaning of the Securities
Act.

3.2     Reviews  and  Inspection.  The Holder and his or its representatives and
legal  counsel  have  been  granted  the  opportunity  to review and inspect the
Company's  corporate books, financial statements, records, contracts, documents,
offices  and  facilities, and have been afforded an opportunity to ask questions
of  the  Company's  officers, employees, agents, accountants and representatives
concerning  the  Company's  business.   Holder  is  relying  on its own analysis
regarding the Company's operations, financial condition, assets, liabilities and
other  relevant  matters  as  Holder  deemed  necessary or desirable in order to
evaluate the merits and risks of the prospective investment contemplated herein.
Holder acknowledges that it has not relied upon any information given to Holder,
or  any  statements  made,  by  the  Company or any officers or directors of the
Company,  except for the representations and warranties of the Company expressly
made  herein.

3.3     Holder  Due  Diligence.  The  Holder  and its representatives are solely
responsible  for  the  Holder's own "due diligence" investigation of the Company
and  its  management  and  business  and  for Holder's analysis of the financial
future  and  viability  of  the  Company  and  desirability of the terms of this
investment.   Holder  acknowledges  that  neither the Company nor any officer or
director  of  the Company is making any representation or warranty regarding the
Company's  financial  projections  previously given to Holder or the assumptions
underlying such financial projections, as such financial projections are subject
to  significant  business,  economic  and other uncertainties and contingencies.
Holder  acknowledges  that  if  the Company is not able to operate profitably or
generate  positive  cash  flows,  the  Company  may  have difficulty meeting its
obligations  and may not be able to continue to operate its business, and Holder
could  lose all of its investment.  The Holder has such knowledge and experience
in  financial  and business matters that the Holder is capable of evaluating the
merits and risks of the purchase of the Securities pursuant to the terms of this
Agreement  and  of  protecting  the  Holder's  interest in connection therewith.

3.4     Accredited  Investor Status.  Holder is an "Accredited Investor" as that
term is defined in Rule 501 of Regulation D promulgated under the Securities Act
because  each member of Holder is an "Accredited Investor" and Holder is able to
bear  the  economic risk of the purchase of the Securities pursuant to the terms
of  this  Agreement, including a complete loss of the Holder's investment in the
Securities.

3.5     Authority  for  Agreement.  The  Holder  has  the  full right, power and
authority  to  enter  into  and  perform the Holder's obligations under the this
Agreement,  and  the  Agreement constitutes the valid and binding obligations of
the  Holder  enforceable  in  accordance  with their terms, except as limited by
applicable  bankruptcy,  insolvency, reorganization, moratorium or other laws of
general  application  relating  to or affecting enforcement of creditors' rights
and  rules  or  laws  concerning  equitable  remedies.

3.6     Governmental  Consents.  No  consent,  approval  or  authorization of or
designation,  declaration  or filing with any governmental authority on the part
of  the  Holder is required in connection with the valid execution, delivery and
performance  of  this  Agreement.

3.7     Not an Investment Company.  Neither the Holder nor any of its members is
an  "investment  company"  or  a  company controlled by an "investment company",
within the meaning of the Investment Company Act of 1940, or principally engaged
in, or undertaking as one of its important activities, the business of extending
credit  for  the  purpose  of  purchasing  or  carrying  margin  stock.

3.8     Tax  Matters.  The  Holder  has  not  relied  on  any  statements  or
representations of the Company or any of its agents with respect to the federal,
state,  local  and  foreign tax consequences of this investment and the federal,
state,  local  and foreign tax consequences of transactions contemplated by this
Agreement.  With  respect  to  such matters, the Holder understands that it (and
not  the  Company) shall be responsible for its own tax liability that may arise
as  a  result  of  this  investment  or  the  transactions  contemplated by this
Agreement.

4.     Reserved

5.     Assignment.  This  Agreement  and  all  of  the provisions hereof will be
binding upon and inure to the benefit of the parties hereto and there respective
successors  and  permitted assigns.  Any party hereunder may assign neither this
Agreement  nor any of the rights, interests or obligations without prior written
consent  of  the  other  party.

6.     Survival  of  Representations  and  Warranties.  All  agreements,
representations  and warranties contained herein shall survive the execution and
delivery  of  this  Agreement; provided, however, that except as provided above,
such representations and warranties need only be accurate as of the date of such
execution.

7.     Notices.  All notices, requests, consents, and other communications under
this  Agreement  shall  be  in  writing and shall be delivered by hand or fax or
mailed  by  first  class certified or registered mail, return receipt requested,
postage  prepaid:

If,  to  the  Company,  at

Mike  Hill,  Chief  Executive  Officer
NeWave,  Inc.
401  East  First  Street,  Number  1345
Long  Beach,  CA  90802
Telephone:  (805)  964-9202
Facsimile:  (562)-983-5571

If  to  the  Holder,

Barrett  Evans
eFund  Capital  Partners,  LLC
301  E.  Ocean  Blvd.,  Suite  640
Long  Beach,  CA  90802
Telephone:  (562)  983-0660
Facsimile:  (562)  983-0662

     Notices  provided in accordance with this Section shall be deemed delivered
upon  personal  delivery  or  two  business  days  after  deposit  in  the mail.

8.     Brokers.  Each of the Holder and the Company  (a) represents and warrants
to the other party that it has not retained any finders or brokers in connection
with the transactions contemplated by this Agreement, and (b) will indemnify and
save  the  other party harmless from and against any and all claims, liabilities
or  obligations  with  respect  to brokerage or finders' fees or commissions, or
consulting  fees  in  connection  with  the  transactions  contemplated  by this
Agreement  asserted  by  any  person  on  the  basis  of  any  statement  or
representation  alleged  to  have  been  made  by  it.

9.     Entire  Agreement.  This  Agreement  embodies  the  entire  agreement and
understanding  between  the  parties  hereto  with respect to the subject matter
hereof  and  supersedes all prior agreements and understandings relating to such
subject  matter.

10.     Amendments  and  Waivers.  Any term of this Agreement may be amended and
the  observance of any term of this Agreement may be waived (either generally or
in  a  particular  instance and either retroactively or prospectively) only with
the  written consent of the Company and the Holder.  No waivers of or exceptions
to  any  term,  condition  or  provision  of  this Agreement, in any one or more
instances,  shall  be  deemed  to  be,  or construed as, a further or continuing
waiver  of  any  such  term,  condition  or  provision.

11.     Counterparts.  This  Agreement  may  be  executed  in  one  or  more
counterparts,  each of which shall be deemed to be an original, but all of which
shall  be  one  and  the  same  document.

12.     Section  Headings.  The  Section headings are for the convenience of the
parties  and  in no way alter, modify, amend, limit, or restrict the contractual
obligations  of  the  parties.

13.     Severability.  Any  part,  provision, representation or warranty of this
Agreement  that  is prohibited or that is held to be void or unenforceable shall
be  ineffective  solely  to the extent of such prohibition or non-enforceability
without  invalidating  the  remaining  provisions  hereof.

14.     Governing  Law.  This  Agreement  shall  be governed by and construed in
accordance  with  the  laws  of  the  State of California (without regard to its
conflict  of  laws  principles).  The  parties hereto irrevocably consent to the
exclusive  personal  jurisdiction  of  the  federal  and state courts located in
California,  as  applicable,  for  any matter arising out of or relating to this
Agreement.

     [Signature  page  follows]

<PAGE>

                 DEBENTURE EXCHANGE AGREEMENT / NOTE CONVERSION

IN  WITNESS  WHEREOF,  the  parties  have executed this Agreement as of the date
written  in  the  preamble  of  this  Agreement.

"COMPANY":

NEWAVE,  INC.
a  Utah  corporation

By:  /s/  Michael  Hill
__________________________
Name:   Michael  Hill
Title:  CEO

By:  /s/  Paul  Daniel
__________________________
Name:  Paul  Daniel
Title:  CFO

"HOLDER":

By:
__________________________
"HOLDER":
EFUND  CAPITAL  PARTNERS,  LLC

By:  /s/  Barrett  Evans
__________________________
Barrett  Evans,  Managing  Member

<PAGE>

                                    EXHIBIT A
                            Certificate of Designation

FOR  VALUE  RECEIVED,  NeWave,  Inc.  a Utah corporation (the "Company"), hereby
promises  to  pay  EFUND  CAPITAL  PARTNERS,  LLC.  (the  "Holder"),  the  total
principal  amount of Two Hund Thousand  ($286,789.00)  U.S., and to pay interest
on the principal amount hereof, in such amounts, at such times and on such terms
and  conditions  as  are  specified  herein.
Section  1     Tacking

     The  Company  does  hereby  irrevocably  agree to allow the Holder to "tack
back"  to  the  original  date  of  each Note as described above for the Date of
Consideration  for  the  Debenture.

Section  2     Method  of  Payment/Interest

     The  Company  shall  pay  interest  on  the  unpaid principal amount of the
Debenture  (the  "Debenture")  commencing  on  the  date  of this Certificate of
Designation,  until  the  principal  amount  hereof  is paid in full or has been
converted.  The  Debenture  shall  pay  ten  percent  (10%) cumulative interest,
compounded  daily,  in  cash  or stock at the Holder's option.  The Holder shall
have  the  option to request payments in cash the amount of $2,390.00 commencing
on  January  3,  2006,  and  shall  be  made  monthly  on  the first day of each
subsequent  month.  Any  amounts  paid  over  interest  due  shall be applied to
principal  and  Redemption  as described herein.  The closing shall be deemed to
have  occurred  on the dates of the respective Notes as outlined above ("Closing
Date").  The  Debenture  are  subject to automatic conversion at the end of four
(4) years from the date of issuance at which time all Debenture outstanding will
be  automatically  converted  based  upon  the formula set forth in Section 3.2.

     The  Holder,  at  its sole option, shall be entitled to either a) request a
cash  Payment  from  the Company, pursuant to Section 3.8; or, b) the Holder, at
its  sole  option,  may  elect to convert a portion of the Debenture pursuant to
Article  3  below

Section  3     Conversion

3.1     Conversion  Privilege

The  Holder  of the Debenture shall have the right to convert the Debenture into
shares  of  Common  Stock  at  any  time following the Closing Date and which is
before  the  close  of  business  on  the  Maturity Date, except as set forth in
Section  3.2below.  The  number  of  shares  of  Common  Stock issuable upon the
conversion  of  the Debenture is determined pursuant to Section 3.2 and rounding
the  result  to  the  nearest  whole  share.

The  Debenture  may  not  be  converted,  whether in whole or in part, except in
accordance  with  Section  3.

In  the  event  all  or  any portion of the Debenture remains outstanding on the
Maturity  Date,  the unconverted portion of such Debenture will automatically be
converted  into  shares  of Common Stock on such date in the manner set forth in
Section  3.2.

3.2     Conversion  Procedure.

(a)  Conversion  Procedures.  The  amount  of the Debenture may be converted, in
whole or in part, any time following the Closing Date.  Such conversion shall be
effectuated by surrendering to the Company, or its attorney, the Debenture to be
converted  together  with  a  facsimile  or  original  of  the  signed Notice of
Conversion  which  evidences  Holder's  intention  to  convert  the  Debenture
indicated.  The date on which the Notice of Conversion is effective ("Conversion
Date")  shall  be deemed to be the date on which the Holder has delivered to the
Company  a  facsimile or original of the signed Notice of Conversion, as long as
the  original  Debenture(s)  to  be converted are received by the Company within
three  (3)  business  days thereafter.  At such time that the original Debenture
has  been submitted to the Company, the Holder can elect to whether a reissuance
of  the  debenture is warranted, or whether the Company can retain the Debenture
as  to  a continual conversion by Holder.  Notwithstanding the above, any Notice
of  Conversion  received by 5:00 P.M. EST, shall be deemed to have been received
the  previous  business  day.  Receipt  being  via  a  confirmation  of  time of
facsimile  of  the  Holder.

(b)  Common  Stock  to  be Issued. Upon the conversion of any Debenture and upon
receipt  by  the  Company or its attorney of a facsimile or original of Holder's
signed  Notice  of  Conversion  the Company shall instruct its transfer agent to
issue  stock  certificates  without  restrictive  legend  or  stop  transfer
instructions,  if  at  that  time  the  Registration Statement has been declared
effective  (or  with proper restrictive legend if the Registration Statement has
not  as  yet  been declared effective), in such denominations to be specified at
conversion  representing the number of shares of Common Stock issuable upon such
conversion,  as  applicable.   The  Company  shall  act  as  Registrar and shall
maintain an appropriate ledger containing the necessary information with respect
to  each  Debenture. The Company warrants that no instructions, other than these
instructions,  have  been  given or will be given to the transfer agent and that
the  Common  Stock  shall otherwise be freely resold, except as may be set forth
herein.

(c)  Conversion  Rate.  Holder  is  entitled  to  convert the Face Amount of the
Debenture,  plus  accrued  interest,  anytime following the Closing Date, at the
lesser  of  (i)  75%  of  the  lowest  closing bid price during the fifteen (15)
trading  days  prior  to  the Conversion Date or (ii) 100% of the average of the
closing  bid  prices  for the twenty (20) trading days immediately preceding the
Closing  Date  of  the  Debenture Exchange Agreement ("Fixed Conversion Price"),
each being referred to as the "Conversion Price".  No fractional shares or scrip
representing fractions of shares will be issued on conversion, but the number of
shares  issuable shall be rounded up or down, as the case may be, to the nearest
whole  share.

(d)  Maximum  Interest.  Nothing  contained  in the Debenture shall be deemed to
establish  or  require the payment of interest to the Holder at a rate in excess
of  the  maximum rate permitted by governing law.  In the event that the rate of
interest  required  to  be  paid exceeds the maximum rate permitted by governing
law,  the rate of interest required to be paid thereunder shall be automatically
reduced  to  the  maximum rate permitted under the governing law and such excess
shall  be  returned  with  reasonable  promptness  by the Holder to the Company.

(e)  Costs.  It  shall  be  the  Company's  responsibility to take all necessary
actions and to bear all such costs to issue the Common Stock as provided herein,
including  the  responsibility and cost for delivery of an opinion letter to the
transfer  agent,  if  so  required.  The person in whose name the certificate of
Common  Stock is to be registered shall be treated as a shareholder of record on
and  after  the  conversion date. Upon surrender of any Debenture that are to be
converted  in  part, the Company shall issue to the Holder a new Debenture equal
to  the  unconverted  amount,  if  so  requested  in  writing  by  Holder.

(f) Delivery.  Within three (3) business days after receipt of the documentation
referred to above in Section 3.2(a), the Company shall deliver a certificate, in
accordance with Section 3.2(c) for the number of shares of Common Stock issuable
upon  the  conversion.  In  the  event the Company does not make delivery of the
Common  Stock, as instructed by Holder, within three (3) business days after the
Conversion  Date,  then  in  such  event  the  Company shall pay to Holder three
percent  (3%)  in  cash,  of  the dollar value of the Debenture being converted,
compounded  daily, per each day after the third (3rd) business day following the
Conversion  Date  that  the  Common  Stock  is  not  delivered to the Purchaser.

                The  Company acknowledges that its failure to deliver the Common
Stock  within  three  (3) business days after the Conversion Date will cause the
Holder  to  suffer  damages  in  an  amount that will be difficult to ascertain.
Accordingly,  the  parties  agree  that  it  is  appropriate  to  include in the
Debenture a provision for liquidated damages.  The parties acknowledge and agree
that  the  liquidated damages provision set forth in this section represents the
parties' good faith effort to quantify such damages and, as such, agree that the
form  and  amount  of  such  liquidated  damages  are  reasonable  and  will not
constitute  a  penalty.  The payment of liquidated damages shall not relieve the
Company  from  its obligations to deliver the Common Stock pursuant to the terms
of  the  Debenture.

              To  the extent that the failure of the Company to issue the Common
Stock pursuant to this Section 3.2(f) is due to the unavailability of authorized
but unissued shares of Common Stock, the provisions of this Section 3.2(f) shall
not  apply  but  instead  the  provisions  of  Section  3.2(g)  shall  apply.

              The  Company  shall  make any payments incurred under this Section
3.2(f)  in  immediately  available funds within three (3) business days from the
date the Common Stock is fully delivered.  Nothing herein shall limit a Holder's
right  to  pursue  actual  damages  or  cancel  the conversion for the Company's
failure  to  issue  and  deliver  Common  Stock  to  the Holder within three (3)
business  days  after  the  Conversion  Date.

The Company shall at all times reserve (or make alternative written arrangements
for  reservation  or contribution of shares) and have available all Common Stock
necessary  to  meet  conversion  of  the  Debenture by all Holders of the entire
amount of Debenture then outstanding. If, at any time Holder submits a Notice of
Conversion  and  the  Company  does  not have sufficient authorized but unissued
shares  of  Common  Stock  (or  alternative  shares  of  Common  Stock as may be
contributed  by  Stockholders) available to effect, in full, a conversion of the
Debenture  (a  "Conversion  Default", the date of such default being referred to
herein  as the "Conversion Default Date"), the Company shall issue to the Holder
all  of  the  shares  of  Common  Stock  which  are available, and the Notice of
Conversion  as to any Debenture requested to be converted but not converted (the
"Unconverted  Debenture"),  may be deemed null and void upon written notice sent
by  the  Holder  to  the  Company.  The  Company  shall  provide  notice of such
Conversion  Default  ("Notice of Conversion Default") to all existing Holders of
outstanding  Debenture,  by  facsimile,  within  three  (3) business day of such
default  (with  the original delivered by overnight or two day courier), and the
Holder  shall  give notice to the Company by facsimile within five business days
of  receipt  of  the  original  Notice  of Conversion Default (with the original
delivered  by overnight or two day courier) of its election to either nullify or
confirm  the  Notice  of  Conversion.

     The  Company agrees to pay to the Holders of outstanding Debenture payments
for  a  Conversion  Default  ("Conversion  Default  Payments")  in the amount of
(N/365)  x (.24) x the initial issuance price of the outstanding and/or tendered
but  not  converted  Debenture  held by each Holder where N = the number of days
from the Conversion Default Date to the date (the "Authorization Date") that the
Company  authorizes  a  sufficient  number  of  shares of Common Stock to effect
conversion  of  all  remaining  Debenture.  The  Company  shall  send  notice
("Authorization Notice") to each Holder of outstanding Debenture that additional
shares  of  Common  Stock  have  been authorized, the Authorization Date and the
amount  of Holder's accrued Conversion Default Payments.  The accrued Conversion
Default  shall  be paid in cash or shall be convertible into Common Stock at the
Conversion  Rate,  upon  written notice sent by the Holder to the Company, which
Conversion  Default shall be payable as follows:  (i) in the event Holder elects
to  take  such  payment  in  cash, cash payments shall be made to such Holder of
outstanding  Debenture by the fifth day of the following calendar month, or (ii)
in the event Holder elects to take such payment in stock, the Holder may convert
such  payment  amount  into  Common  Stock  at  the conversion rate set forth in
Section 3.2(c) at any time after the 5th day of the calendar month following the
month  in  which  the Authorization Notice was received, until the expiration of
the  mandatory  four  (4)  year  conversion  period.

     The  Company  acknowledges that its failure to maintain a sufficient number
of authorized but unissued shares of Common Stock to effect in full a conversion
of  the Debenture will cause the Holder to suffer damages in an amount that will
be  difficult  to  ascertain.  Accordingly,  the  parties  agree  that  it  is
appropriate  to  include  in  this Agreement a provision for liquidated damages.
The  parties  acknowledge  and  agree  that the liquidated damages provision set
forth in this section represents the parties' good faith effort to quantify such
damages  and, as such, agree that the form and amount of such liquidated damages
are  reasonable  and  will  not constitute a penalty.  The payment of liquidated
damages shall not relieve the Company from its obligations to deliver the Common
Stock  pursuant  to  the terms of the Debenture.  Nothing herein shall limit the
Holder's  right to pursue actual damages for the Company's failure to maintain a
sufficient  number  of  authorized  shares  of  Common  Stock.

If,  by the third (3rd) business day after the Conversion Date of any portion of
the  Debenture  to  be converted (the "Delivery Date"), the transfer agent fails
for  any  reason  to  deliver the Common Stock upon conversion by the Holder and
after such Delivery Date, the Holder purchases, in an open market transaction or
otherwise,  shares  of  Common  Stock (the "Covering Shares") solely in order to
make delivery in satisfaction of a sale of Common Stock by the Holder (the "Sold
Shares"),  which delivery such Holder anticipated to make using the Common Stock
issuable  upon  conversion (a "Buy-In"), the Company shall pay to the Holder, in
addition  to  any other amounts due to Holder pursuant to the Debenture, and not
in  lieu  thereof, the Buy-In Adjustment Amount (as defined below).  The "Buy In
Adjustment  Amount"  is  the  amount  equal  to  the  excess, if any, of (x) the
Holder's  total purchase price (including brokerage commissions, if any) for the
Covering  Shares over (y) the net proceeds (after brokerage commissions, if any)
received  by the Holder from the sale of the Sold Shares.  The Company shall pay
the Buy-In Adjustment Amount to the Holder in immediately available funds within
five  (5) business days of written demand by the Holder.  By way of illustration
and not in limitation of the foregoing, if the Holder purchases shares of Common
Stock having a total purchase price (including brokerage commissions) of $11,000
to  cover  a  Buy-In  with  respect  to  shares  of Common Stock it sold for net
proceeds  of  $10,000,  the  Buy-In  Adjustment Amount which the Company will be
required  to  pay  to  the  Holder  will  be  $1,000.

(g)  Prospectus  and  Other  Documents. The Company shall furnish to Holder such
number of prospectuses and other documents incidental to the registration of the
shares  of  Common Stock underlying the Debenture, including any amendment of or
supplements  thereto.

(h)  Limitation  on  Issuance  of  Shares. If the Company's Common Stock becomes
listed  on  the  Nasdaq SmallCap Market after the issuance of the Debenture, the
Company  may  be limited in the number of shares of Common Stock it may issue by
virtue  of  (X)  the number of authorized shares or (Y) the applicable rules and
regulations  of  the  principal  securities  market on which the Common Stock is
listed  or  traded,  including,  but  not  necessarily  limited  to, NASDAQ Rule
4310(c)(25)(H)(i)  or  Rule  4460(i)(1), as may be applicable (collectively, the
"Cap  Regulations").  Without  limiting  the  other  provisions thereof, (i) the
Company  will  take  all steps reasonably necessary to be in a position to issue
shares  of Common Stock on conversion of the Debenture without violating the Cap
Regulations  and  (ii)  if,  despite taking such steps, the Company still cannot
issue  such  shares  of  Common Stock without violating the Cap Regulations, the
holder of a Debenture which cannot be converted as result of the Cap Regulations
(each  such Debenture, an "Unconverted Debenture") shall have the right to elect
either  of  the  following  remedies:

     (x)  if  permitted  by  the  Cap  Regulations, require the Company to issue
shares  of Common Stock in accordance with such holder's Notice of Conversion at
a  conversion  purchase  price equal to the average of the closing bid price per
share  of  Common  Stock  for  any five (5) consecutive trading days (subject to
certain  equitable  adjustments for certain events occurring during such period)
during the sixty (60) trading days immediately preceding the Conversion Date; or

     (y)  require the Company to redeem each Unconverted Debenture for an amount
(the  "Redemption Amount"), payable in cash, equal to the sum of (i) one hundred
thirty-three  percent  (133%) of the principal of an Unconverted Debenture, plus
(ii) any accrued but unpaid interest thereon through and including the date (the
"Redemption  Date")  on  which  the  Redemption  Amount  is  paid to the holder.

     A  holder  of  an Unconverted Debenture may elect one of the above remedies
with  respect  to  a  portion of such Unconverted Debenture and the other remedy
with  respect  to  other  portions  of the Unconverted Debenture.  The Debenture
shall  contain  provisions  substantially  consistent with the above terms, with
such additional provisions as may be consented to by the Holder.  The provisions
of  this section are not intended to limit the scope of the provisions otherwise
included  in  the  Debenture.

(i)  Limitation  on Amount of Conversion and Ownership. Notwithstanding anything
to  the  contrary  in the Debenture, in no event shall the Holder be entitled to
convert  that amount of Debenture, and in no event shall the Company permit that
amount of conversion, into that number of shares, which when added to the sum of
the  number  of  shares  of  Common  Stock  beneficially owned, (as such term is
defined  under  Section  13(d)  and Rule 13d-3 of the Securities Exchange Act of
1934, as may be amended, (the "1934 Act")), by the Holder, would exceed 4.99% of
the  number  of  shares  of  Common Stock outstanding on the Conversion Date, as
determined  in  accordance with Rule 13d-1(j) of the 1934 Act. In the event that
the  number  of  shares  of Common Stock outstanding as determined in accordance
with  Section  13(d) of the 1934 Act is different on any Conversion Date than it
was  on  the Closing Date, then the number of shares of Common Stock outstanding
on  such  Conversion  Date  shall govern for purposes of determining whether the
Holder  would be acquiring beneficial ownership of more than 4.99% of the number
of  shares  of  Common  Stock  outstanding  on  such  Conversion  Date.

(j)  Legend.  The  Holder  acknowledges  that  each certificate representing the
Debenture,  and the Common Stock unless registered shall be stamped or otherwise
imprinted  with  a  legend  substantially  in  the  following  form:

THE  SECURITIES  EVIDENCED  BY  THIS  CERTIFICATE  MAY  NOT  BE OFFERED OR SOLD,
TRANSFERRED,  PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT (i) PURSUANT
TO  AN  EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE SECURITIES ACT OF 1933, AS
AMENDED,  (ii)  TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR
RULE  UNDER  SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) IF AN
EXEMPTION  FROM  REGISTRATION  UNDER  SUCH  ACT  IS  AVAILABLE.

(k)  Prior  to conversion of all the Debenture, if at any time the conversion of
all  the  Debenture and exercise of all the Warrants outstanding would result in
an  insufficient  number of authorized shares of Common Stock being available to
cover all the conversions, then in such event, the Company will move to call and
hold  a shareholder's meeting or have shareholder action with written consent of
the proper number of shareholders within thirty (30) days of such event, or such
greater  period  of  time  if  statutorily  required  or reasonably necessary as
regards  standard brokerage house and/or SEC requirements and/or procedures, for
the  purpose  of authorizing additional shares of Common Stock to facilitate the
conversions.   In such an event management of the Company shall recommend to all
shareholders  to  vote their shares in favor of increasing the authorized number
of  shares  of  Common  Stock.  Management  of the Company shall vote all of its
shares of Common Stock in favor of increasing the number of shares of authorized
Common  Stock.  Company represents and warrants that under no circumstances will
it  deny  or  prevent Holder's right to convert the Debenture as permitted under
the  terms  of this Subscription Agreement or the Registration Rights Agreement.
Nothing  in  this  Section shall limit the obligation of the Company to make the
payments set forth in Section 3.  The investor, at their option, may request the
company  to  authorize  and  issue additional shares if the investor feels it is
necessary for conversions in the future In the event the Company's shareholder's
meeting does not result in the necessary authorization, the Company shall redeem
the outstanding Debenture for an amount equal to (x) the sum of the principal of
the  outstanding Debenture plus accrued interest thereon multiplied by (y) 133%.

3.3  Fractional Shares.  The Company shall not issue fractional shares of Common
Stock,  or  scrip  representing fractions of such shares, upon the conversion of
the Debenture.  Instead, the Company shall round up or down, as the case may be,
to  the  nearest  whole  share.

3.4  Taxes  on  Conversion.  The  Company  shall  pay  any documentary, stamp or
similar  issue  or  transfer tax due on the issue of shares of Common Stock upon
the  conversion  of  the  Debenture.  However, the Holder shall pay any such tax
which  is  due  because  the  shares  are  issued in a name other than its name.

3.5 Company to Reserve Stock.  The Company shall reserve the number of shares of
Common  Stock  required  pursuant  to  and  upon  the  terms  set  forth  in the
Subscription Agreement to permit the conversion of the Debenture.  All shares of
Common  Stock which may be issued upon the conversion hereof shall upon issuance
be  validly issued,  fully paid and nonassessable and free from all taxes, liens
and  charges  with  respect  to  the  issuance  thereof.

3.6  Restrictions  on  Sale.  The  Debenture  has  not been registered under the
Securities  Act  of  1933,  as  amended,  (the  "Act") and is being issued under
Section  4(2) of the Act and Rule 506 of Regulation D promulgated under the Act.
The Debenture and the Common Stock issuable upon the conversion thereof may only
be  sold  pursuant  to  registration  under  or  an  exemption  from  the  Act.

3.7  Mergers,  Etc.  If  the  Company  merges  or  consolidates  with  another
corporation  or  sells  or  transfers  all or substantially all of its assets to
another  person  and  the  holders  of  the Common Stock are entitled to receive
stock,  securities  or  property  in respect of or in exchange for Common Stock,
then  as  a  condition  of  such merger, consolidation, sale or transfer, it may
thereafter  be  converted  on  the terms and subject to the conditions set forth
above  into the kind and amount of stock, securities or property receivable upon
such merger, consolidation, sale or transfer by a holder of the number of shares
of  Common  Stock into which the Debenture might have been converted immediately
before  such  merger,  consolidation,  sale  or transfer, subject to adjustments
which  shall  be  as  nearly  equivalent  as  may  be practicable to adjustments
provided  for  in  this  Article  3.

3.8  Redemption.  The  Holder,  at  its  sole  option,  shall  have the right to
exercise  a  "Mandatory  Redemption"  to  redeem,  in  whole  or  in  part,  the
outstanding  amount  of  the  Debenture,  as follows: The Holder must notify the
Company  in writing, via facsimile transmission, that it is exercising its right
of  Mandatory  Redemption.  In  the  event  the  Holder  exercises such right of
Mandatory  Redemption  the Company shall pay the Holder in U.S. currency 100% of
that  portion  of the Debenture being redeemed, plus accrued but unpaid interest
and  liquidated  damages,  if  any.  The  redemption amount shall be paid to the
Holder  within  five  (5) calendar days of the date the Company receives written
notice  from  the  Holder  of the Mandatory Redemption notice and if not paid in
such time the Company shall not be entitled to any further Mandatory Redemption.

Section  3.9     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 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 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.

Section  4     Mergers

     The  Company  shall  not  consolidate  or  merge  into,  or transfer all or
substantially  all  of  its assets to, any person, unless such person assumes in
writing the obligations of the Company under the Debenture and immediately after
such  transaction  no  Event  of  Default  exists.  Any  reference herein to the
Company  shall  refer  to  such  surviving  or  transferee  corporation  and the
obligations  of  the  Company  shall  terminate  upon  such  written assumption.

Section  5     Reports

     The  Company  will mail to the Holder hereof at its address as shown on the
Register  a  copy  of any annual, quarterly or current report that it files with
the  Securities  and Exchange Commission promptly after the filing thereof and a
copy  of  any annual, quarterly or other report or proxy statement that it gives
to  its  shareholders  generally at the time such report or statement is sent to
shareholders.

Section  6     Defaults  and  Remedies

Events  of  Default.  An  "Event  of Default" occurs if (a) the Company does not
make  the  Payment  of  the  principal  of this Debenture, or by conversion into
Common  Stock  if  requested  by  Holder,  within  five (5) business days of the
Maturity  Date  or  upon  redemption,  (b) the Company does not make an interest
payment within three (3) business days of the due date, (c) any of the Company's
representations  or  warranties contained in this Debenture were false when made
by the Company and such failure continuesfor a period of five (5) business days,
(d)  the  Company  pursuant  to  or within the meaning of any Bankruptcy Law (as
hereinafter  defined):  (i)  commences  a  voluntary  case; (ii) consents to the
entry  of  an order for relief against it in an involuntary case; (iii) consents
to  the  appointment of a Custodian (as hereinafter defined) of it or for all or
substantially  all  of  its  property or (iv) makes a general assignment for the
benefit  of  its  creditors  or  (v) a court of competent jurisdiction enters an
order  or  decree  under any Bankruptcy Law that:  (A) is for relief against the
Company  in  an involuntary case; (B) appoints a Custodian of the Company or for
all  or  substantially  all of its property or (C) orders the liquidation of the
Company,  and  the order or decree remains unstayed and in effect for sixty (60)
calendar  days,  (e) the Company's Common Stock is suspended or no longer listed
on  any recognized exchange including electronic over-the-counter bulletin board
for  in excess of five (5) consecutive Trading Days (e) the Company violates any
terms  and  conditions of the Registration Rights Agreement (f) the Registration
Statement  underlying  the Debenture is not declared effective by the SEC within
twelve  (12)  months  of  the  Issuance  Date.

As  used  in  this  Section 6.1, the term "Bankruptcy Law" means Title 11 of the
United  States  Code  or  any  similar  federal  or  state law for the relief of
debtors.  The term "Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law.  A default under clause (c) or (e)
above  is  not  an  Event  of  Default until the holders of at least one hundred
percent  (100%)  of  the aggregate principal amount of the Debenture outstanding
notify  the Company of such default and the Company does not cure it within five
(5) business days after the receipt of such notice, unless the Company commences
to  cure such default within such period, which must specify the default, demand
that  it  be  remedied  and state that it is a "Notice of Default". Prior to the
expiration  of  the  time  for  curing  a  default as set forth in the preceding
sentence,  the  holders  of  a  majority  in  aggregate  principal amount of the
Debenture  at  the  time  outstanding  (exclusive of Debenture then owned by the
Company  or any subsidiary or affiliate) may, on behalf of the holders of all of
the  Debenture,  waive  any  past  Event of Default hereunder (or any past event
which,  with  the  lapse  of  time  or  notice  and  lapse of time designated in
subsection  (a),  would  constitute  an  Event  of  Default  hereunder)  and its
consequences, except a default in the payment of the principal of or interest on
any  of  the Debenture. In the case of any such waiver, such default or Event of
Default  shall  be deemed to have been cured for every purpose of this Debenture
and  the  Company  and  the  holders of the Debenture shall be restored to their
former  positions  and  rights hereunder, respectively; but no such waiver shall
extend  to  any  subsequent  or  other  default  or  impair any right consequent
thereon.

          In  the Event of Default and provided the Debenture have not been paid
in full, the Holder may elect to secure a portion of the Company's assets not to
exceed  200%  of the Face Amount of the Note,  in Pledged Collateral (as defined
in the Security Agreement).  The Holder may also elect to garnishee Revenue from
the Company in an amount that will repay the Holder on the schedules outlined in
this  Agreement.

     In  the  Event  of  Default,  as outlined in this Agreement, the Holder can
exercise  its  right to increase the Face Amount of the Debenture by ten percent
(10%)  as an initial penalty and for each Event of Default under this Agreement.
In  addition,  the  Holder  may  elect  to  increase  the Face Amount by two and
one-half  percent  (2.5%)  per  month  (pro-rata  for partial periods) paid as a
penalty  for liquated damages ("Liquidated Damages").  The Liquated Damages will
be  compounded  daily.  It  is the intention and acknowledgement of both parties
that  the  Liquidated  Damages  not  be  deemed  as  interest.

     In  the  event  of  Default,  the Holder may elect to switch the Conversion
Price  of  the  Debenture  as  outlined in Section 3.2 (c) above to the "Default
Conversion  Price",  as  described above.  The Default Conversion Price shall be
equal to the lesser of a) the Fixed Conversion Price or b) seventy percent (70%)
of  the  lowest  closing  bid  price of the Common Stock during the fifteen (15)
trading days prior to conversion.  Upon written notice being sent to the Company
by  the  Holder  of  Default under Section 6.1 (f), and the Holder's election to
exercise  the  remedy  to  switch the conversion price to the Default Conversion
Price,  the  Company  shall  immediately  withdraw  the  Registration Statement.
Further,  the  Company  agrees  that the date of consideration for the Debenture
shall  remain  the  Issuance  Date  stated herein.  The Company shall provide an
opinion  letter  from counsel within two (2) business days of written request by
the  Holder  stating  that  the  date  of consideration for the Debenture is the
Issuance Date and submission of proper Rule 144 support documentation consisting
of  Form  144,  a  broker's  representation letter and a seller's representation
letter.  In the event the Company does not deliver the opinion letter within two
business  days,  the  Default Conversion Price shall immediately decrease by two
percent  (2%) for each business day an opinion letter fails to be delivered.  In
the  event  that counsel to the Company fails or refuses to render an opinion as
required  to  issue the Shares in accordance with this paragraph (either with or
without  restrictive  legends,  as applicable), then the Company irrevocably and
expressly  authorizes  counsel  to the Investor to render such opinion and shall
authorize  the  Transfer  Agent  shall  accept  and  be entitled to rely on such
opinion  for  the purposes of issuing the Shares (which is attached as Exhibit E
to  the Subscription Agreement between the Company and the Holder of even date).
Any  costs incurred by Holder for such opinion letter shall be added to the Face
Amount  of  the  Debenture.

Sectioin  6.2     Acceleration.  If  an Event of Default occurs and is not cured
within  five  (5)  business days, the Holder hereof by notice to the Company may
declare  the  remaining  principal  amount  of the Debentures, together with all
accrued  interest  and any liquidated damages, to be due and payable.  Upon such
declaration,  any remaining principal, interest and penalty amounts shall be due
and  payable  immediately.

Section  6.3     Seniority,  No  indebtedness  of  the  Company is senior to the
Debenture in right of payment, whether with respect to interest, damages or upon
liquidation  or  dissolution  or  otherwise.

Section  7     Registered  Debenture

Record  Ownership.  The  Company,  or its attorney, shall maintain a register of
the  holders of the Debenture (the "Register") showing their names and addresses
and  the  serial numbers and principal amounts of Debenture issued to them.  The
Register  may  be maintained in electronic, magnetic or other computerized form.
The  Company  may  treat  the person named as the Holder of the Debenture in the
Register  as  the  sole owner of the Debenture.   The Holder of the Debenture is
the  person  exclusively  entitled  to  receive  payments  of  interest  on  the
Debenture,  receive notifications with respect to the Debenture, convert it into
Common Stock and otherwise exercise all of the rights and powers as the absolute
owner  hereof.

Worn or Lost Debenture.  If the Debenture becomes worn, defaced or mutilated but
is  still  substantially  intact  and recognizable, the Company or its agent may
issue  a  new Debenture in lieu hereof upon its surrender.   Where the Holder of
the  Debenture  claims that the Debenture has been lost, destroyed or wrongfully
taken,  the  Company  shall  issue  a  new  Debenture  in  place of the original
Debenture  if  the  Holder so requests by written notice to the Company actually
received  by  the  Company  before  it  is  notified that the Debenture has been
acquired by a bona fide purchaser and the Holder has delivered to the Company an
indemnity  bond  in  such  amount and issued by such surety as the Company deems
satisfactory  together  with  an affidavit of the Holder setting forth the facts
concerning  such loss, destruction or wrongful taking and such other information
in  such  form  with  such  proof  or  verification  as the Company may request.

Section  8     Notice.

     Any  notices,  consents,  waivers  or  other  communications  required  or
permitted  to  be  given under the terms of the Debenture must be in writing and
will  be  deemed  to  have  been  delivered  (i)  upon  receipt,  when delivered
personally;  (ii)  upon receipt, when sent by facsimile (provided a confirmation
of  transmission is mechanically or electronically generated and kept on file by
the  sending  party);  or  (iii)  one  (1)  day  after deposit with a nationally
recognized  overnight  delivery  service, in each case properly addressed to the
party  to  receive  the  same.  The  addresses  and  facsimile  numbers for such
communications  shall  be:

If  to  the  Company:
Mike  Hill,  Chief  Executive  Officer
NeWave,  Inc.
401  East  First  Street,  Number  1345
Long  Beach,  CA  90802
Telephone:  (805)  964-9202
             --------------
Facsimile:  (562)-983-5571
             -------------

If  to  the  Investor:

Barrett  Evans
eFund  Capital  Partners,  LLC
301  E.  Ocean  Blvd.,  Suite  640
Long  Beach,  CA  90802
Telephone:  (562)  983-0660
Facsimile:  (562)  983-0662

     Each  party  shall provide five (5) business days prior notice to the other
party  of  any  change  in  address,  phone  number  or  facsimile  number.

Section  9     Time
     Where  the  Debenture  authorizes  or  requires the payment of money or the
performance  of  a  condition  or obligation on a Saturday or Sunday or a public
holiday,  or authorizes or requires the payment of money or the performance of a
condition or obligation within, before or after a period of time computed from a
certain date, and such period of time ends on a Saturday or a Sunday or a public
holiday,  such  payment  may be made or condition or obligation performed on the
next  succeeding  business day, and if the period ends at a specified hour, such
payment  may  be made or condition performed, at or before the same hour of such
next  succeeding  business  day,  with  the  same force and effect as if made or
performed in accordance with the terms of the Debenture.  A "business day" shall
mean  a  day  on  which  the banks in New York are not required or allowed to be
closed.

Section  10     No  Assignment

     The  Debenture  shall  not  be  assignable.

Section  11      Rules  of  Construction.

     In  the  Debenture,  unless  the  context  otherwise requires, words in the
singular  number include the plural, and in the plural include the singular, and
words  of the masculine gender include the feminine and the neuter, and when the
sense  so  indicates,  words  of the neuter gender may refer to any gender.  The
numbers  and  titles  of  sections  contained  in the Debenture are inserted for
convenience of reference only, and they neither form a part of the Debenture nor
are  they to be used in the construction or interpretation hereof.  Wherever, in
the  Debenture,  a  determination  of  the  Company is required or allowed, such
determination  shall  be  made  by  a  majority of the Board of Directors of the
Company and if it is made in good faith, it shall be conclusive and binding upon
the  Company  and  the  Holder  of  the  Debenture.

Section  12     Governing  Law

     The  validity, terms, performance and enforcement of the Debenture shall be
governed  and construed by the provisions hereof and in accordance with the laws
of  the  State  of  California  applicable  to  agreements  that are negotiated,
executed,  delivered  and  performed  solely  in  the  State  of  California.
Section  13     Litigation

Disputes  subject  to  arbitration  governed  by  California  law
-----------------------------------------------------------------

     All  disputes  arising  under  this  agreement  shall  be  governed  by and
interpreted  in  accordance  with  the  laws of the State of California, without
regard  to  principles  of conflict of laws.  The parties to this agreement will
submit  all disputes arising under this agreement to arbitration in Los Angeles,
California  before  a  single arbitrator of the American Arbitration Association
("AAA").  The  arbitrator  shall  be selected by application of the rules of the
AAA, or by mutual agreement of the parties, except that such arbitrator shall be
an  attorney  admitted  to practice law in the State of California.  No party to
this  agreement  will challenge the jurisdiction or venue provisions as provided
in  this  section.

Section  14     Waiver

The  Holder's  delay or failure at any time or times hereafter to require strict
performance  by  Company  of any undertakings, agreements or covenants shall not
waiver,  affect,  or  diminish  any  right of the Holder under this Agreement to
demand  strict  compliance and performance herewith. Any waiver by the Holder of
any  Event  of  Default  shall  not  waive or affect any other Event of Default,
whether  such Event of Default is prior or subsequent thereto and whether of the
same  or a different type. None of the undertakings, agreements and covenants of
the  Company  contained  in  this  Agreement,  and no Event of Default, shall be
deemed  to  have  been  waived by the Holder, nor may this Agreement be amended,
changed  or  modified,  unless such waiver, amendment, change or modification is
evidenced  by an instrument in writing specifying such waiver, amendment, change
or  modification  and  signed  by  the  Holder.

Section  15     Waiver  of  Jury  Trial.

AS A MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS AGREEMENT, THE
PARTIES  HERETO  HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
RELATED  IN  ANY WAY TO THIS AGREEMENT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS
ASSOCIATED  WITH  THIS  TRANSACTION.

Section  16     Transactions  With  Affiliates.

     The  Company  shall  not,  and shall cause each of its Subsidiaries not to,
enter into, amend, modify or supplement, or permit any Subsidiary to enter into,
amend,  modify  or  supplement,  any  agreement,  transaction,  commitment  or
arrangement with any of its or any Subsidiary's officers, directors, persons who
were  officers  or  directors  at any time during the previous two years, or any
such  entities  controlled  by  the  officers  or  directors,  shareholders  who
beneficially own five percent (5%) or more of the Common Stock, or affiliates or
with  any  individual  related  by  blood,  marriage  or  adoption  to  any such
individual or with any entity in which any such entity or individual owns a five
percent  (5%)  or  more  beneficial interest (each a "Related Party") during the
Lock  Up  Period

Section  17     Registration

     The  Company  shall  file  a registration statement with the SEC, within 45
days  following  a  written  request by the Holder ("Filing Date"), covering the
Debenture.  The  number of shares of Stock registered shall be equivalent to the
sum  of:  1)  the Face Amount divided by the Fixed Conversion Price. The Company
agrees  that if such registration statement has not been submitted to the SEC by
the  Filing  Date,  the  Fixed  Conversion Price will initially drop ten percent
(10%)  and  an  additional  ten  percent (10%) for every fifteen (15) day period
thereafter,  the  Company fails to file the Registration Statement.  The Company
also  agrees  that  if  the  Filing  Date  exceeds 45 days or the Effective Date
exceeds  90  days from the Filing Date ("Penalty Date" collectively the "Penalty
Dates"),  a  penalty  of  two  percent (2%) per month, of the Face Amount of the
Debenture, shall accrue for each month the Filing Date and/or the Effective Date
exceeds  the Penalty Date, pro-rated for partial periods. The Company agrees not
to  include  any  other  registration  to  this statement without the Investor's
consent.

Section  18     Miscellaneous

a.     All  pronouns  and  any variations thereof used herein shall be deemed to
refer  to  the  masculine,  feminine,  impersonal,  singular  or  plural, as the
identity  of  the  person  or  persons  may  require.

b.     Neither  this  Debenture  nor  any  provision  hereof  shall  be  waived,
modified,  changed,  discharged,  terminated,  revoked or canceled, except by an
instrument  in  writing  signed by the party effecting the same against whom any
change,  discharge  or  termination  is  sought.

c.     Notices  required  or permitted to be given hereunder shall be in writing
and  shall  be deemed to be sufficiently given when personally delivered or sent
by  facsimile  transmission:  (i) if to the Company, at its executive offices or
(ii)  if  to  the  Holder,  at  the  address for correspondence set forth in the
Article 6, or at such other address as may have been specified by written notice
given  in  accordance  with  this  paragraph.

d.     This Note may be executed in two or more counterparts, all of which taken
together  shall  constitute one instrument.  Execution and delivery of this Note
by exchange of facsimile copies bearing the facsimile signature of a party shall
constitute  a  valid  and  binding  execution  and delivery of this Note by such
party.  Such  facsimile  copies shall constitute enforceable original documents.

e.     This Written Agreement represent the FINAL AGREEEMENT between the Company
and  the  Holders  and  may  not  be  contradicted  by  evidence  of  prior,
contemporaneous,  or  subsequent  oral  agreements  of the parties, there are no
unwritten  oral  agreements  among  the  parties.

f.     The  execution,  delivery and performance of this Note by the Company and
the  consummation  by  the  Company  of the transactions contemplated hereby and
thereby will not (i) result in a violation of the Articles of Incorporation, any
Certificate of Designations, Preferences and Rights of any outstanding series of
preferred  stock  of  the  Company  or  the  By-laws  or  (ii) conflict with, or
constitute a material default (or an event which with notice or lapse of time or
both  would  become  a  material default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
contract, indenture mortgage, indebtedness or instrument to which the Company or
any  of  its Subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree, including United States federal and state
securities  laws  and regulations and the rules and regulations of the principal
securities  exchange  or  trading  market on which the Common Stock is traded or
listed  (the  "Principal  Market"),  applicable  to  the  Company  or any of its
Subsidiaries  or  by  which  any  property or asset of the Company or any of its
Subsidiaries  is  bound or affected. Neither the Company nor its Subsidiaries is
in violation of any term of, or in default under, the Articles of Incorporation,
any  Certificate  of  Designations,  Preferences  and  Rights of any outstanding
series  of preferred stock of the Company or the By-laws or their organizational
charter  or  by-laws,  respectively,  or  any  contract,  agreement,  mortgage,
indebtedness,  indenture,  instrument, judgment, decree or order or any statute,
rule  or  regulation  applicable  to the Company or its Subsidiaries, except for
possible  conflicts,  defaults,  terminations,  amendments,  accelerations,
cancellations  and  violations  that  would not individually or in the aggregate
have a Material Adverse Effect. The business of the Company and its Subsidiaries
is  not  being  conducted,  and shall not be conducted, in violation of any law,
statute,  ordinance,  rule, order or regulation of any governmental authority or
agency,  regulatory  or  self-regulatory  agency,  or court, except for possible
violations the sanctions for which either individually or in the aggregate would
not  have  a Material Adverse Effect.  The Company is not required to obtain any
consent,  authorization,  permit or order of, or make any filing or registration
(except  the  filing of a registration statement)  with, any court, governmental
authority  or  agency, regulatory or self-regulatory agency or other third party
in  order for it to execute, deliver or perform any of its obligations under, or
contemplated  by,  this Note in accordance with the terms hereof or thereof. All
consents,  authorizations,  permits, orders, filings and registrations which the
Company  is  required  to  obtain  pursuant  to the preceding sentence have been
obtained  or  effected  on or prior to the date hereof and are in full force and
effect  as  of  the date hereof. The Company and its Subsidiaries are unaware of
any  facts  or  circumstances which might give rise to any of the foregoing. The
Company is not, and will not be, in violation of the listing requirements of the
Principal  Market  as  in  effect  on the date hereof and on each of the Closing
Dates  and is not aware of any facts which would reasonably lead to delisting of
the  Common  Stock  by  the  Principal  Market  in  the  foreseeable  future.

g.     The  Company and its "Subsidiaries" (which for purposes of this Debenture
means  any  entity  in  which  the Company, directly or indirectly, owns capital
stock  or  holds  an equity or similar interest) are corporations duly organized
and  validly  existing  in  good  standing  under  the  laws  of  the respective
jurisdictions of their incorporation, and have the requisite corporate power and
authorization  to  own  their  properties  and to carry on their business as now
being  conducted. Both the Company and its Subsidiaries are duly qualified to do
business and are in good standing in every jurisdiction in which their ownership
of  property  or  the  nature  of  the  business  conducted  by  them makes such
qualification  necessary,  except  to  the  extent  that  the  failure  to be so
qualified  or  be  in good standing would not have a Material Adverse Effect. As
used  in  this Note, "Material Adverse Effect" means any material adverse effect
on  the  business,  properties,  assets,  operations,  results  of  operations,
financial  condition  or  prospects of the Company and its Subsidiaries, if any,
taken  as  a  whole,  or  on  the  transactions  contemplated  hereby  or by the
agreements  and instruments to be entered into in connection herewith, or on the
authority  or  ability of the Company to perform its obligations under the Note.

h.     Authorization;  Enforcement;  Compliance with Other Instruments.  (i) The
Company  has  the  requisite  corporate  power  and  authority to enter into and
perform  this  Note, and to issue the Note and Incentive Debenture in accordance
with  the  terms hereof and thereof, (ii) the execution and delivery of the Note
by  the  Company  and  the  consummation  by it of the transactions contemplated
hereby  and  thereby,  including without limitation the reservation for issuance
and  the  issuance  of  the Incentive Debenture pursuant to this Note, have been
duly  and  validly authorized by the Company's Board of Directors and no further
consent  or authorization is required by the Company, its Board of Directors, or
its  shareholders,  (iii)  the  Note  has  been  duly  and  validly executed and
delivered  by  the  Company, and (iv) the Note constitutes the valid and binding
obligations  of  the  Company enforceable against the Company in accordance with
their  terms, except as such enforceability may be limited by general principles
of  equity  or  applicable  bankruptcy,  insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of  creditors'  rights  and  remedies.

                                      *****

     Any misrepresentations shall be considered a breach of contract and Default
under  this Agreement and the Holder may seek to take actions as described under
Section  6  of  this  Agreement.

     IN  WITNESS  WHEREOF, the Company has duly executed the Debenture as of the
date  first  written  above.
                         NeWave,  Inc

By
      /s/  Michael  Hill
      ------------------
Name:      Michael  Hill
Title   :       CEO

By
      /s/  Paul  Daniel
      -----------------
Name:      Paul Daniel
Title:        CFO

                         eFund  Capital  Partners,  LLC
                         BY  ITS  GENERAL  PARTNER

                              /s/  Barrett  Evans
                 By:  __________________________________
                 Name:  Barrett  Evans
                 Title:  Managing  Partner

<PAGE>

                   Exhibit A to the Certificate of Designation

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

(To  be  Executed  by  the  Registered  Owner  in  order  to  Convert Debenture)

     The  undersigned  hereby  irrevocably  elects,  as  of ________________, to
convert  $________________  of  its convertible debenture (the "Debenture") into
Common  Stock  of  NeWave,  Inc. (the "Company") according to the conditions set
forth  in  the  Debenture  issued  by  the  Company.

Date  of  Conversion________________________________________________

Applicable  Conversion  Price________________________________________

Number  of  Debenture  Issuable  upon  this  Conversion_______________________

Name(Print)___________EFUND  CAPITAL  PARTNERS,  LLC.  _________________
                      -------------------------------

Address:  301  E.  OCEAN  BLVD.,  SUITE  640,  LONG  BEACH,  CA  90802
          ------------------------------------------------------------

Phone:  562-983-0660           Fax:     562-983-0662
        ------------                    ------------

                    By:____________________________
                                       Barrett  EvansEXHIBIT  4.2

                              CONVERTIBLE DEBENTURE
                    EXCHANGE AGREEMENT / CONVERSION OF NOTES

This  Convertible  Debenture  Exchange Agreement (this "Agreement"), dated as of
December  18,  2005,  is  entered  into  by  and  between  NeWave,  Inc., a Utah
corporation  (the  "Company"), and  Dutchess Private Equities Fund, II, LP, (the
"Holder").

RECITALS

     WHEREAS,  the  Holder  currently  has  notes  ("Notes"), dated May 20, 2005
($402,750)  with  a current balance of the date of this Agreement of ($290,250),
June  2,  2005  ($540,000), July 22, 2005 ($258,000), August 4, 2005 ($162,000),
and August 17, 2005 ($247,200) due and payable on their respective dates, and as
of  December,  2005,  such  amount  owed by the Company to the Holder totals for
those Notes $1,497,450.

     WHEREAS,  the Holder is entitled to assess a 10% penalty for the default of
said Notes pursuant to their respective Note Agreements;

     WHEREAS,  the  Penalties  due  under  the  10%  default clause are $40,275,
$29,025, $54,000, $25,800, $16,200 and $15,200 respectively;

     WHEREAS,  Holder  agrees  to  waive  the  penalties so long as all interest
payments  are made within 3 days of their due dates and so long as the Principle
is  paid  when  due. Should any payment be late the Holder reserves the right to
assess the penalties that are currently owed as described above

     WHEREAS,  the Holder hereby agrees to convert the entire outstanding amount
of the Notes of $1,497,450  into a Convertible Debenture ("Debenture"). Pursuant
to  the  Holder's  rights  of  conversion,  upon  conversion  of the Convertible
Debenture  into the Company's common shares ("Stock") and for purposes of resale
of  such Stock pursuant to Rule 144 or Rule 145, the date of consideration shall
remain  respective  to  the  original  dates  of  the  Notes  mentioned  above.

     WHEREAS,  the  Holder  desires to acquire, and the Company desires to issue
and  sell  to the Holder, a Convertible Debenture of the Company in exchange for
the  Notes;  and

     WHEREAS,  the  parties  hereto  desire  to  enter  into  this  Agreement.

                                    AGREEMENT

     NOW,  THEREFORE,  in  consideration  of  the  mutual promises and covenants
contained  in  this  Agreement  and  other  good and valuable consideration, the
receipt  and  sufficiency  of  which  is hereby acknowledged, the parties hereto
agree  as  follows:

1.     AUTHORIZATION  AND  SALE  OF  SHARES.

1.1     Authorization.  The  Company has, or will have, duly authorized the sale
and  issuance  of  up to $1,497,450. of Convertible Debenture having the rights,
restrictions,  privileges  and  preferences  set  forth  in  the  form  of  the
Certificate  of  Designation  attached  hereto as Exhibit A (the "Certificate of
Designation").

1.2     Agreement  to  Exchange.  Subject  to  the  terms and conditions of this
Agreement,  the  Company  will sell and issue to the Holder, and the Holder will
acquire  from the Company, $1,497,450 of Convertible Debenture of the Company in
exchange  for  the  cancellation  of  the outstanding debt currently owed to the
Holder  in  the  aggregate  amount  of  $1,497,450  in  the  form  of  Notes.

1.3     No  Public Solicitation. The Holder is not subscribing for the Debenture
as  a  result  of  or  subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or broadcast
over  television  or  radio,  or  presented  at  any  seminar or meeting, or any
solicitation of a subscription by a person not previously known to the Holder in
connection  with  investments  in  securities  generally.

2.     Representations  of  the  Company.  The  Company  hereby  represents  and
warrants  to the Holder, that, to the extent applicable, all representations and
warranties  of  the  Company  set forth in the Note Agreements, are incorporated
herein  as  though  fully  set  forth.

3.     Representations of the Holder.  The Holder represents and warrants to the
Company  as  follows:

3.1     Investment  Intent.  The  Debenture, and the shares of Common Stock into
which  the  Debenture,  may  be  converted  or  exercised  (collectively,  the
"Securities")  are,  or  will  be,  acquired  for  the Holder's own account, for
investment  and  not  with  a  view  to,  or  for resale in connection with, any
distribution  or  public  offering  thereof within the meaning of the Securities
Act.

3.2     Reviews  and  Inspection.  The Holder and his or its representatives and
legal  counsel  have  been  granted  the  opportunity  to review and inspect the
Company's  corporate books, financial statements, records, contracts, documents,
offices  and  facilities, and have been afforded an opportunity to ask questions
of  the  Company's  officers, employees, agents, accountants and representatives
concerning  the  Company's  business.   Holder  is  relying  on its own analysis
regarding the Company's operations, financial condition, assets, liabilities and
other  relevant  matters  as  Holder  deemed  necessary or desirable in order to
evaluate the merits and risks of the prospective investment contemplated herein.
Holder acknowledges that it has not relied upon any information given to Holder,
or  any  statements  made,  by  the  Company or any officers or directors of the
Company,  except for the representations and warranties of the Company expressly
made  herein.

3.3     Holder  Due  Diligence.  The  Holder  and its representatives are solely
responsible  for  the  Holder's own "due diligence" investigation of the Company
and  its  management  and  business  and  for Holder's analysis of the financial
future  and  viability  of  the  Company  and  desirability of the terms of this
investment.   Holder  acknowledges  that  neither the Company nor any officer or
director  of  the Company is making any representation or warranty regarding the
Company's  financial  projections  previously given to Holder or the assumptions
underlying such financial projections, as such financial projections are subject
to  significant  business,  economic  and other uncertainties and contingencies.
Holder  acknowledges  that  if  the Company is not able to operate profitably or
generate  positive  cash  flows,  the  Company  may  have difficulty meeting its
obligations  and may not be able to continue to operate its business, and Holder
could  lose all of its investment.  The Holder has such knowledge and experience
in  financial  and business matters that the Holder is capable of evaluating the
merits and risks of the purchase of the Securities pursuant to the terms of this
Agreement  and  of  protecting  the  Holder's  interest in connection therewith.

3.4     Accredited  Investor Status.  Holder is an "Accredited Investor" as that
term is defined in Rule 501 of Regulation D promulgated under the Securities Act
because  each member of Holder is an "Accredited Investor" and Holder is able to
bear  the  economic risk of the purchase of the Securities pursuant to the terms
of  this  Agreement, including a complete loss of the Holder's investment in the
Securities.

3.5     Authority  for  Agreement.  The  Holder  has  the  full right, power and
authority  to  enter  into  and  perform the Holder's obligations under the this
Agreement,  and  the  Agreement constitutes the valid and binding obligations of
the  Holder  enforceable  in  accordance  with their terms, except as limited by
applicable  bankruptcy,  insolvency, reorganization, moratorium or other laws of
general  application  relating  to or affecting enforcement of creditors' rights
and  rules  or  laws  concerning  equitable  remedies.

3.6     Governmental  Consents.  No  consent,  approval  or  authorization of or
designation,  declaration  or filing with any governmental authority on the part
of  the  Holder is required in connection with the valid execution, delivery and
performance  of  this  Agreement.

3.7     Not an Investment Company.  Neither the Holder nor any of its members is
an  "investment  company"  or  a  company controlled by an "investment company",
within the meaning of the Investment Company Act of 1940, or principally engaged
in, or undertaking as one of its important activities, the business of extending
credit  for  the  purpose  of  purchasing  or  carrying  margin  stock.

3.8     Tax  Matters.  The  Holder  has  not  relied  on  any  statements  or
representations of the Company or any of its agents with respect to the federal,
state,  local  and  foreign tax consequences of this investment and the federal,
state,  local  and foreign tax consequences of transactions contemplated by this
Agreement.  With  respect  to  such matters, the Holder understands that it (and
not  the  Company) shall be responsible for its own tax liability that may arise
as  a  result  of  this  investment  or  the  transactions  contemplated by this
Agreement.

4.     Reserved

5.     Assignment.  This  Agreement  and  all  of  the provisions hereof will be
binding upon and inure to the benefit of the parties hereto and there respective
successors  and  permitted assigns.  Any party hereunder may assign neither this
Agreement  nor any of the rights, interests or obligations without prior written
consent  of  the  other  party.

6.     Survival  of  Representations  and  Warranties.  All  agreements,
representations  and warranties contained herein shall survive the execution and
delivery  of  this  Agreement; provided, however, that except as provided above,
such representations and warranties need only be accurate as of the date of such
execution.

7.     Notices.  All notices, requests, consents, and other communications under
this  Agreement  shall  be  in  writing and shall be delivered by hand or fax or
mailed  by  first  class certified or registered mail, return receipt requested,
postage  prepaid:

     If,  to  the  Company,  at
Mike  Hill,  Chief  Executive  Officer
NeWave,  Inc.
401  East  First  Street,  Number  1345
Long  Beach,  CA  90802
Telephone:  (805)  964-9202
Facsimile:  (562)-983-5571

If  to  the  Holder,

     Dutchess  Private  Equities  Fund,  II,  LP
     Douglas  Leighton
     50  Commonwealth  Ave,  Suite  2
     Boston,  MA  02116
     Telephone:  (617)  301-4700
     Facsimile:  (617)  249-0947

     Notices  provided in accordance with this Section shall be deemed delivered
upon  personal  delivery  or  two  business  days  after  deposit  in  the mail.

8.     Brokers.  Each of the Holder and the Company  (a) represents and warrants
to the other party that it has not retained any finders or brokers in connection
with the transactions contemplated by this Agreement, and (b) will indemnify and
save  the  other party harmless from and against any and all claims, liabilities
or  obligations  with  respect  to brokerage or finders' fees or commissions, or
consulting  fees  in  connection  with  the  transactions  contemplated  by this
Agreement  asserted  by  any  person  on  the  basis  of  any  statement  or
representation  alleged  to  have  been  made  by  it.

9.     Entire  Agreement.  This  Agreement  embodies  the  entire  agreement and
understanding  between  the  parties  hereto  with respect to the subject matter
hereof  and  supersedes all prior agreements and understandings relating to such
subject  matter.

10.     Amendments  and  Waivers.  Any term of this Agreement may be amended and
the  observance of any term of this Agreement may be waived (either generally or
in  a  particular  instance and either retroactively or prospectively) only with
the  written consent of the Company and the Holder.  No waivers of or exceptions
to  any  term,  condition  or  provision  of  this Agreement, in any one or more
instances,  shall  be  deemed  to  be,  or construed as, a further or continuing
waiver  of  any  such  term,  condition  or  provision.

11.     Counterparts.  This  Agreement  may  be  executed  in  one  or  more
counterparts,  each of which shall be deemed to be an original, but all of which
shall  be  one  and  the  same  document.

12.     Section  Headings.  The  Section headings are for the convenience of the
parties  and  in no way alter, modify, amend, limit, or restrict the contractual
obligations  of  the  parties.

13.     Severability.  Any  part,  provision, representation or warranty of this
Agreement  that  is prohibited or that is held to be void or unenforceable shall
be  ineffective  solely  to the extent of such prohibition or non-enforceability
without  invalidating  the  remaining  provisions  hereof.

14.     Governing  Law.  This  Agreement  shall  be governed by and construed in
accordance  with  the  laws of the State of Massachusetts (without regard to its
conflict  of  laws  principles).  The  parties hereto irrevocably consent to the
exclusive  personal  jurisdiction  of  the  federal  and state courts located in
Massachusetts,  as applicable, for any matter arising out of or relating to this
Agreement.

     [Signature  page  follows]

<PAGE>

                 DEBENTURE EXCHANGE AGREEMENT / NOTE CONVERSION

IN  WITNESS  WHEREOF,  the  parties  have executed this Agreement as of the date
written  in  the  preamble  of  this  Agreement.

"COMPANY":

NEWAVE,  INC.
a  Utah  corporation

By:  /s/  Michael  Hill
__________________________
Name:   Michael  Hill
Title:  CEO

By:  /s/  Paul  Daniel
__________________________
Name:  Paul  Daniel
Title:  CFO

"HOLDER":

By:  /s/  Douglas  H.  Leighton
__________________________
Douglas  H.  Leighton
Managing  Member  of:
Dutchess  Capital  Management,  LLC
General  Partner  to:
Dutchess  Private  Equities  Fund,  II,  L.P.

<PAGE>

                                    EXHIBIT A
                            Certificate of Designation

     FOR VALUE RECEIVED, NeWave, Inc. a Utah corporation (the "Company"), hereby
promises  to pay DUTCHESS PRIVATE EQUITIES FUND, II, L.P.  (the "Holder") on the
respective dates of Notes owed as outlined in the Convertible Debenture Exchange
Agreement  -  May 20, 2005 ($402,750) with a current balance of the date of this
Agreement  of  ($290,250)  June  2,  2005  ($540,000), July 22, 2005 ($258,000),
August  4,  2005  ($162,000),  and  August  17,  2005  ($247,200) (the "Maturity
Dates"),  the  total  principal  amount of One Million Four Hundred Ninety-seven
Thousand  Four Hundred and Fifty Dollars ($1,497,450)  U.S., and to pay interest
on the principal amount hereof, in such amounts, at such times and on such terms
and  conditions  as  are  specified  herein.

Section  1     Tacking

     The  Company  does  hereby  irrevocably  agree to allow the Holder to "tack
back"  to  the  original  date  of  each Note as described above for the Date of
Consideration  for  the  Debenture.

Section  2     Method  of  Payment/Interest

     The  Company  shall  pay  interest  on  the  unpaid principal amount of the
Debenture  (the  "Debenture")  commencing  on  the  date  of this Certificate of
Designation,  until  the  principal  amount  hereof  is paid in full or has been
converted.  The  Debenture  shall  pay  ten  percent  (10%) cumulative interest,
compounded  daily,  in  cash  or stock at the Holder's option.  The Holder shall
have  the option to request payments in cash the amount of $12,357.24 commencing
on  January  3,  2006,  and  shall  be  made  monthly  on  the first day of each
subsequent  month.  Any  amounts  paid  over  interest  due  shall be applied to
principal  and  Redemption  as described herein.  The closing shall be deemed to
have  occurred  on the dates of the respective Notes as outlined above ("Closing
Date").  The  Debenture  are  subject to automatic conversion at the end of four
(4) years from the date of issuance at which time all Debenture outstanding will
be  automatically  converted  based  upon  the formula set forth in Section 3.2.

     The  Holder,  at  its sole option, shall be entitled to either a) request a
cash  Payment  from the Company, pursuant to Section 3.8; or,  b) the Holder, at
its  sole  option,  may  elect to convert a portion of the Debenture pursuant to
Article  3  below

Section  3     Conversion

3.1     Conversion  Privilege

The  Holder  of the Debenture shall have the right to convert the Debenture into
shares  of  Common  Stock  at  any time following the Closing Date and  which is
before  the  close  of  business  on  the  Maturity Date, except as set forth in
Section  3.2  below.  The  number  of  shares  of Common Stock issuable upon the
conversion  of  the Debenture is determined pursuant to Section 3.2 and rounding
the  result  to  the  nearest  whole  share.

The  Debenture  may  not  be  converted,  whether in whole or in part, except in
accordance  with  Section  3.

In  the  event  all  or  any portion of the Debenture remains outstanding on the
Maturity  Date,  the unconverted portion of such Debenture will automatically be
converted  into  shares  of Common Stock on such date in the manner set forth in
Section  3.2.

3.2     Conversion  Procedure.

(a)  Conversion  Procedures.  The  amount  of the Debenture may be converted, in
whole or in part, any time following the Closing Date.  Such conversion shall be
effectuated by surrendering to the Company, or its attorney, the Debenture to be
converted  together  with  a  facsimile  or  original  of  the  signed Notice of
Conversion  which  evidences  Holder's  intention  to  convert  the  Debenture
indicated.  The date on which the Notice of Conversion is effective ("Conversion
Date")  shall  be deemed to be the date on which the Holder has delivered to the
Company  a  facsimile or original of the signed Notice of Conversion, as long as
the  original  Debenture(s)  to  be converted are received by the Company within
three  (3)  business  days thereafter.  At such time that the original Debenture
has  been submitted to the Company, the Holder can elect to whether a reissuance
of  the  debenture is warranted, or whether the Company can retain the Debenture
as  to  a continual conversion by Holder.  Notwithstanding the above, any Notice
of  Conversion  received by 5:00 P.M. EST, shall be deemed to have been received
the  previous  business  day.  Receipt  being  via  a  confirmation  of  time of
facsimile  of  the  Holder.

(b)  Common  Stock  to  be Issued. Upon the conversion of any Debenture and upon
receipt  by  the  Company or its attorney of a facsimile or original of Holder's
signed  Notice  of  Conversion  the Company shall instruct its transfer agent to
issue  stock  certificates  without  restrictive  legend  or  stop  transfer
instructions,  if  at  that  time  the  Registration Statement has been declared
effective  (or  with proper restrictive legend if the Registration Statement has
not  as  yet  been declared effective), in such denominations to be specified at
conversion  representing the number of shares of Common Stock issuable upon such
conversion,  as  applicable.   The  Company  shall  act  as  Registrar and shall
maintain an appropriate ledger containing the necessary information with respect
to  each  Debenture. The Company warrants that no instructions, other than these
instructions,  have  been  given or will be given to the transfer agent and that
the  Common  Stock  shall otherwise be freely resold, except as may be set forth
herein.

(c)  Conversion  Rate.  Holder  is  entitled  to  convert the Face Amount of the
Debenture,  plus  accrued  interest,  anytime following the Closing Date, at the
lesser  of  (i)  75%  of  the  lowest  closing bid price during the fifteen (15)
trading  days  prior  to  the Conversion Date or (ii) 100% of the average of the
closing  bid  prices  for the twenty (20) trading days immediately preceding the
Closing  Date  of  the  Debenture Exchange Agreement ("Fixed Conversion Price"),
each being referred to as the "Conversion Price".  No fractional shares or scrip
representing fractions of shares will be issued on conversion, but the number of
shares  issuable shall be rounded up or down, as the case may be, to the nearest
whole  share.

(d)  Maximum  Interest.  Nothing  contained  in the Debenture shall be deemed to
establish  or  require the payment of interest to the Holder at a rate in excess
of  the  maximum rate permitted by governing law.  In the event that the rate of
interest  required  to  be  paid exceeds the maximum rate permitted by governing
law,  the rate of interest required to be paid thereunder shall be automatically
reduced  to  the  maximum rate permitted under the governing law and such excess
shall  be  returned  with  reasonable  promptness  by the Holder to the Company.

(e)  Costs.  It  shall  be  the  Company's  responsibility to take all necessary
actions and to bear all such costs to issue the Common Stock as provided herein,
including  the  responsibility and cost for delivery of an opinion letter to the
transfer  agent,  if  so  required.  The person in whose name the certificate of
Common  Stock is to be registered shall be treated as a shareholder of record on
and  after  the  conversion date. Upon surrender of any Debenture that are to be
converted  in  part, the Company shall issue to the Holder a new Debenture equal
to  the  unconverted  amount,  if  so  requested  in  writing  by  Holder.

(f) Delivery.  Within three (3) business days after receipt of the documentation
referred to above in Section 3.2(a), the Company shall deliver a certificate, in
accordance with Section 3.2(c) for the number of shares of Common Stock issuable
upon  the  conversion.  In  the  event the Company does not make delivery of the
Common  Stock, as instructed by Holder, within three (3) business days after the
Conversion  Date,  then  in  such  event  the  Company shall pay to Holder three
percent  (3%)  in  cash,  of  the dollar value of the Debenture being converted,
compounded  daily, per each day after the third (3rd) business day following the
Conversion  Date  that  the  Common  Stock  is  not  delivered to the Purchaser.

                The  Company acknowledges that its failure to deliver the Common
Stock  within  three  (3) business days after the Conversion Date will cause the
Holder  to  suffer  damages  in  an  amount that will be difficult to ascertain.
Accordingly,  the  parties  agree  that  it  is  appropriate  to  include in the
Debenture a provision for liquidated damages.  The parties acknowledge and agree
that  the  liquidated damages provision set forth in this section represents the
parties' good faith effort to quantify such damages and, as such, agree that the
form  and  amount  of  such  liquidated  damages  are  reasonable  and  will not
constitute  a  penalty.  The payment of liquidated damages shall not relieve the
Company  from  its obligations to deliver the Common Stock pursuant to the terms
of  the  Debenture.

              To  the extent that the failure of the Company to issue the Common
Stock pursuant to this Section 3.2(f) is due to the unavailability of authorized
but unissued shares of Common Stock, the provisions of this Section 3.2(f) shall
not  apply  but  instead  the  provisions  of  Section  3.2(g)  shall  apply.

              The  Company  shall  make any payments incurred under this Section
3.2(f)  in  immediately  available funds within three (3) business days from the
date the Common Stock is fully delivered.  Nothing herein shall limit a Holder's
right  to  pursue  actual  damages  or  cancel  the conversion for the Company's
failure  to  issue  and  deliver  Common  Stock  to  the Holder within three (3)
business  days  after  the  Conversion  Date.

The Company shall at all times reserve (or make alternative written arrangements
for  reservation  or contribution of shares) and have available all Common Stock
necessary  to  meet  conversion  of  the  Debenture by all Holders of the entire
amount of Debenture then outstanding. If, at any time Holder submits a Notice of
Conversion  and  the  Company  does  not have sufficient authorized but unissued
shares  of  Common  Stock  (or  alternative  shares  of  Common  Stock as may be
contributed  by  Stockholders) available to effect, in full, a conversion of the
Debenture  (a  "Conversion  Default", the date of such default being referred to
herein  as the "Conversion Default Date"), the Company shall issue to the Holder
all  of  the  shares  of  Common  Stock  which  are available, and the Notice of
Conversion  as to any Debenture requested to be converted but not converted (the
"Unconverted  Debenture"),  may be deemed null and void upon written notice sent
by  the  Holder  to  the  Company.  The  Company  shall  provide  notice of such
Conversion  Default  ("Notice of Conversion Default") to all existing Holders of
outstanding  Debenture,  by  facsimile,  within  three  (3) business day of such
default  (with  the original delivered by overnight or two day courier), and the
Holder  shall  give notice to the Company by facsimile within five business days
of  receipt  of  the  original  Notice  of Conversion Default (with the original
delivered  by overnight or two day courier) of its election to either nullify or
confirm  the  Notice  of  Conversion.

     The  Company agrees to pay to the Holders of outstanding Debenture payments
for  a  Conversion  Default  ("Conversion  Default  Payments")  in the amount of
(N/365)  x (.24) x the initial issuance price of the outstanding and/or tendered
but  not  converted  Debenture  held by each Holder where N = the number of days
from the Conversion Default Date to the date (the "Authorization Date") that the
Company  authorizes  a  sufficient  number  of  shares of Common Stock to effect
conversion  of  all  remaining  Debenture.  The  Company  shall  send  notice
("Authorization Notice") to each Holder of outstanding Debenture that additional
shares  of  Common  Stock  have  been authorized, the Authorization Date and the
amount of Holder's accrued  Conversion Default Payments.  The accrued Conversion
Default  shall  be paid in cash or shall be convertible into Common Stock at the
Conversion  Rate,  upon  written notice sent by the Holder to the Company, which
Conversion  Default shall be payable as follows:  (i) in the event Holder elects
to  take  such  payment  in  cash, cash payments shall be made to such Holder of
outstanding  Debenture by the fifth day of the following calendar month, or (ii)
in the event Holder elects to take such payment in stock, the Holder may convert
such  payment  amount  into  Common  Stock  at  the conversion rate set forth in
Section 3.2(c) at any time after the 5th day of the calendar month following the
month  in  which  the Authorization Notice was received, until the expiration of
the  mandatory  four  (4)  year  conversion  period.

     The  Company  acknowledges that its failure to maintain a sufficient number
of authorized but unissued shares of Common Stock to effect in full a conversion
of  the Debenture will cause the Holder to suffer damages in an amount that will
be  difficult  to  ascertain.  Accordingly,  the  parties  agree  that  it  is
appropriate  to  include  in  this Agreement a provision for liquidated damages.
The  parties  acknowledge  and  agree  that the liquidated damages provision set
forth in this section represents the parties' good faith effort to quantify such
damages  and, as such, agree that the form and amount of such liquidated damages
are  reasonable  and  will  not constitute a penalty.  The payment of liquidated
damages shall not relieve the Company from its obligations to deliver the Common
Stock  pursuant  to  the terms of the Debenture.  Nothing herein shall limit the
Holder's  right to pursue actual damages for the Company's failure to maintain a
sufficient  number  of  authorized  shares  of  Common  Stock.

If,  by the third (3rd) business day after the Conversion Date of any portion of
the  Debenture  to  be converted (the "Delivery Date"), the transfer agent fails
for  any  reason  to  deliver the Common Stock upon conversion by the Holder and
after such Delivery Date, the Holder purchases, in an open market transaction or
otherwise,  shares  of  Common  Stock (the "Covering Shares") solely in order to
make delivery in satisfaction of a sale of Common Stock by the Holder (the "Sold
Shares"),  which delivery such Holder anticipated to make using the Common Stock
issuable  upon  conversion (a "Buy-In"), the Company shall pay to the Holder, in
addition  to  any other amounts due to Holder pursuant to the Debenture, and not
in  lieu  thereof, the Buy-In Adjustment Amount (as defined below).  The "Buy In
Adjustment  Amount"  is  the  amount  equal  to  the  excess, if any, of (x) the
Holder's  total purchase price (including brokerage commissions, if any) for the
Covering  Shares over (y) the net proceeds (after brokerage commissions, if any)
received  by the Holder from the sale of the Sold Shares.  The Company shall pay
the Buy-In Adjustment Amount to the Holder in immediately available funds within
five  (5) business days of written demand by the Holder.  By way of illustration
and not in limitation of the foregoing, if the Holder purchases shares of Common
Stock having a total purchase price (including brokerage commissions) of $11,000
to  cover  a  Buy-In  with  respect  to  shares  of Common Stock it sold for net
proceeds  of  $10,000,  the  Buy-In  Adjustment Amount which the Company will be
required  to  pay  to  the  Holder  will  be  $1,000.

(g)  Prospectus  and  Other  Documents. The Company shall furnish to Holder such
number of prospectuses and other documents incidental to the registration of the
shares  of  Common Stock underlying the Debenture, including any amendment of or
supplements  thereto.

(h)  Limitation  on  Issuance  of  Shares. If the Company's Common Stock becomes
listed  on  the  Nasdaq SmallCap Market after the issuance of the Debenture, the
Company  may  be limited in the number of shares of Common Stock it may issue by
virtue  of  (X)  the number of authorized shares or (Y) the applicable rules and
regulations  of  the  principal  securities  market on which the Common Stock is
listed  or  traded,  including,  but  not  necessarily  limited  to, NASDAQ Rule
4310(c)(25)(H)(i)  or  Rule  4460(i)(1), as may be applicable (collectively, the
"Cap  Regulations").  Without  limiting  the  other  provisions thereof, (i) the
Company  will  take  all steps reasonably necessary to be in a position to issue
shares  of Common Stock on conversion of the Debenture without violating the Cap
Regulations  and  (ii)  if,  despite taking such steps, the Company still cannot
issue  such  shares  of  Common Stock without violating the Cap Regulations, the
holder of a Debenture which cannot be converted as result of the Cap Regulations
(each  such Debenture, an "Unconverted Debenture") shall have the right to elect
either  of  the  following  remedies:

     (x)  if  permitted  by  the  Cap  Regulations, require the Company to issue
shares  of Common Stock in accordance with such holder's Notice of Conversion at
a  conversion  purchase  price equal to the average of the closing bid price per
share  of  Common  Stock  for  any five (5) consecutive trading days (subject to
certain  equitable  adjustments for certain events occurring during such period)
during the sixty (60) trading days immediately preceding the Conversion Date; or

     (y)  require the Company to redeem each Unconverted Debenture for an amount
(the  "Redemption Amount"), payable in cash, equal to the sum of (i) one hundred
thirty-three  percent  (133%) of the principal of an Unconverted Debenture, plus
(ii) any accrued but unpaid interest thereon through and including the date (the
"Redemption  Date")  on  which  the  Redemption  Amount  is  paid to the holder.

     A  holder  of  an Unconverted Debenture may elect one of the above remedies
with  respect  to  a  portion of such Unconverted Debenture and the other remedy
with  respect  to  other  portions  of the Unconverted Debenture.  The Debenture
shall  contain  provisions  substantially  consistent with the above terms, with
such additional provisions as may be consented to by the Holder.  The provisions
of  this section are not intended to limit the scope of the provisions otherwise
included  in  the  Debenture.

(i)  Limitation  on Amount of Conversion and Ownership. Notwithstanding anything
to  the  contrary  in the Debenture, in no event shall the Holder be entitled to
convert  that amount of Debenture, and in no event shall the Company permit that
amount of conversion, into that number of shares, which when added to the sum of
the  number  of  shares  of  Common  Stock  beneficially owned, (as such term is
defined  under  Section  13(d)  and Rule 13d-3 of the Securities Exchange Act of
1934, as may be amended, (the "1934 Act")), by the Holder, would exceed 4.99% of
the  number  of  shares  of  Common Stock outstanding on the Conversion Date, as
determined  in  accordance with Rule 13d-1(j) of the 1934 Act. In the event that
the  number  of  shares  of Common Stock outstanding as determined in accordance
with  Section  13(d) of the 1934 Act is different on any Conversion Date than it
was  on  the Closing Date, then the number of shares of Common Stock outstanding
on  such  Conversion  Date  shall govern for purposes of determining whether the
Holder  would be acquiring beneficial ownership of more than 4.99% of the number
of  shares  of  Common  Stock  outstanding  on  such  Conversion  Date.

(j)  Legend.  The  Holder  acknowledges  that  each certificate representing the
Debenture,  and the Common Stock unless registered shall be stamped or otherwise
imprinted  with  a  legend  substantially  in  the  following  form:

THE  SECURITIES  EVIDENCED  BY  THIS  CERTIFICATE  MAY  NOT  BE OFFERED OR SOLD,
TRANSFERRED,  PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT (i) PURSUANT
TO  AN  EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE SECURITIES ACT OF 1933, AS
AMENDED,  (ii)  TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR
RULE  UNDER  SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) IF AN
EXEMPTION  FROM  REGISTRATION  UNDER  SUCH  ACT  IS  AVAILABLE.

(k)  Prior  to conversion of all the Debenture, if at any time the conversion of
all  the  Debenture and exercise of all the Warrants outstanding would result in
an  insufficient  number of authorized shares of Common Stock being available to
cover all the conversions, then in such event, the Company will move to call and
hold  a shareholder's meeting or have shareholder action with written consent of
the proper number of shareholders within thirty (30) days of such event, or such
greater  period  of  time  if  statutorily  required  or reasonably necessary as
regards  standard brokerage house and/or SEC requirements and/or procedures, for
the  purpose  of authorizing additional shares of Common Stock to facilitate the
conversions.   In such an event management of the Company shall recommend to all
shareholders  to  vote their shares in favor of increasing the authorized number
of  shares  of  Common  Stock.  Management  of the Company shall vote all of its
shares of Common Stock in favor of increasing the number of shares of authorized
Common  Stock.  Company represents and warrants that under no circumstances will
it  deny  or  prevent Holder's right to convert the Debenture as permitted under
the  terms  of this Subscription Agreement or the Registration Rights Agreement.
Nothing  in  this  Section shall limit the obligation of the Company to make the
payments set forth in Section 3.  The investor, at their option, may request the
company  to  authorize  and  issue additional shares if the investor feels it is
necessary for conversions in the future In the event the Company's shareholder's
meeting does not result in the necessary authorization, the Company shall redeem
the outstanding Debenture for an amount equal to (x) the sum of the principal of
the  outstanding Debenture plus accrued interest thereon multiplied by (y) 133%.

3.3  Fractional Shares.  The Company shall not issue fractional shares of Common
Stock,  or  scrip  representing fractions of such shares, upon the conversion of
the Debenture.  Instead, the Company shall round up or down, as the case may be,
to  the  nearest  whole  share.

3.4  Taxes  on  Conversion.  The  Company  shall  pay  any documentary, stamp or
similar  issue  or  transfer tax due on the issue of shares of Common Stock upon
the  conversion  of  the  Debenture.  However, the Holder shall pay any such tax
which  is  due  because  the  shares  are  issued in a name other than its name.

3.5 Company to Reserve Stock.  The Company shall reserve the number of shares of
Common  Stock  required  pursuant  to  and  upon  the  terms  set  forth  in the
Subscription Agreement to permit the conversion of the Debenture.  All shares of
Common  Stock which may be issued upon the conversion hereof shall upon issuance
be  validly issued,  fully paid and nonassessable and free from all taxes, liens
and  charges  with  respect  to  the  issuance  thereof.

3.6  Restrictions  on  Sale.  The  Debenture  has  not been registered under the
Securities  Act  of  1933,  as  amended,  (the  "Act") and is being issued under
Section  4(2) of the Act and Rule 506 of Regulation D promulgated under the Act.
The Debenture and the Common Stock issuable upon the conversion thereof may only
be  sold  pursuant  to  registration  under  or  an  exemption  from  the  Act.

3.7  Mergers,  Etc.  If  the  Company  merges  or  consolidates  with  another
corporation  or  sells  or  transfers  all or substantially all of its assets to
another  person  and  the  holders  of  the Common Stock are entitled to receive
stock,  securities  or  property  in respect of or in exchange for Common Stock,
then  as  a  condition  of  such merger, consolidation, sale or transfer, it may
thereafter  be  converted  on  the terms and subject to the conditions set forth
above  into the kind and amount of stock, securities or property receivable upon
such merger, consolidation, sale or transfer by a holder of the number of shares
of  Common  Stock into which the Debenture might have been converted immediately
before  such  merger,  consolidation,  sale  or transfer, subject to adjustments
which  shall  be  as  nearly  equivalent  as  may  be practicable to adjustments
provided  for  in  this  Article  3.

3.8  Redemption.  The  Holder,  at  its  sole  option,  shall  have the right to
exercise  a  "Mandatory  Redemption"  to  redeem,  in  whole  or  in  part,  the
outstanding  amount  of  the  Debenture,  as follows: The Holder must notify the
Company  in writing, via facsimile transmission, that it is exercising its right
of  Mandatory  Redemption.  In  the  event  the  Holder  exercises such right of
Mandatory  Redemption  the Company shall pay the Holder in U.S. currency 100% of
that  portion  of the Debenture being redeemed, plus accrued but unpaid interest
and  liquidated  damages,  if  any.  The  redemption amount shall be paid to the
Holder  within  five  (5) calendar days of the date the Company receives written
notice  from  the  Holder  of the Mandatory Redemption notice and if not paid in
such time the Company shall not be entitled to any further Mandatory Redemption.

Section  3.9     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 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 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.

Section  4     Mergers

     The  Company  shall  not  consolidate  or  merge  into,  or transfer all or
substantially  all  of  its assets to, any person, unless such person assumes in
writing the obligations of the Company under the Debenture and immediately after
such  transaction  no  Event  of  Default  exists.  Any  reference herein to the
Company  shall  refer  to  such  surviving  or  transferee  corporation  and the
obligations  of  the  Company  shall  terminate  upon  such  written assumption.

Section  5     Reports

     The  Company  will mail to the Holder hereof at its address as shown on the
Register  a  copy  of any annual, quarterly or current report that it files with
the  Securities  and Exchange Commission promptly after the filing thereof and a
copy  of  any annual, quarterly or other report or proxy statement that it gives
to  its  shareholders  generally at the time such report or statement is sent to
shareholders.

Section  6     Defaults  and  Remedies

Events  of  Default.  An  "Event  of Default" occurs if (a) the Company does not
make  the  Payment  of  the  principal  of this Debenture, or by conversion into
Common  Stock  if  requested  by  Holder,  within  five (5) business days of the
Maturity  Date  or  upon  redemption,  (b) the Company does not make an interest
payment within three (3) business days of the due date, (c) any of the Company's
representations  or  warranties contained in this Debenture were false when made
by the Company and such failure continuesfor a period of five (5) business days,
(d)  the  Company  pursuant  to  or within the meaning of any Bankruptcy Law (as
hereinafter  defined):  (i)  commences  a  voluntary  case; (ii) consents to the
entry  of  an order for relief against it in an involuntary case; (iii) consents
to  the  appointment of a Custodian (as hereinafter defined) of it or for all or
substantially  all  of  its  property or (iv) makes a general assignment for the
benefit  of  its  creditors  or  (v) a court of competent jurisdiction enters an
order  or  decree  under any Bankruptcy Law that:  (A) is for relief against the
Company  in  an involuntary case; (B) appoints a Custodian of the Company or for
all  or  substantially  all of its property or (C) orders the liquidation of the
Company,  and  the order or decree remains unstayed and in effect for sixty (60)
calendar  days,  (e) the Company's Common Stock is suspended or no longer listed
on  any recognized exchange including electronic over-the-counter bulletin board
for  in excess of five (5) consecutive Trading Days (e) the Company violates any
terms  and  conditions of the Registration Rights Agreement (f) the Registration
Statement  underlying  the Debenture is not declared effective by the SEC within
twelve  (12)  months  of  the  Issuance  Date.

As  used  in  this  Section 6.1, the term "Bankruptcy Law" means Title 11 of the
United  States  Code  or  any  similar  federal  or  state law for the relief of
debtors.  The term "Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law.  A default under clause (c) or (e)
above  is  not  an  Event  of  Default until the holders of at least one hundred
percent  (100%)  of  the aggregate principal amount of the Debenture outstanding
notify  the Company of such default and the Company does not cure it within five
(5) business days after the receipt of such notice, unless the Company commences
to  cure such default within such period, which must specify the default, demand
that  it  be  remedied  and state that it is a "Notice of Default". Prior to the
expiration  of  the  time  for  curing  a  default as set forth in the preceding
sentence,  the  holders  of  a  majority  in  aggregate  principal amount of the
Debenture  at  the  time  outstanding  (exclusive of Debenture then owned by the
Company  or any subsidiary or affiliate) may, on behalf of the holders of all of
the  Debenture,  waive  any  past  Event of Default hereunder (or any past event
which,  with  the  lapse  of  time  or  notice  and  lapse of time designated in
subsection  (a),  would  constitute  an  Event  of  Default  hereunder)  and its
consequences, except a default in the payment of the principal of or interest on
any  of  the Debenture. In the case of any such waiver, such default or Event of
Default  shall  be deemed to have been cured for every purpose of this Debenture
and  the  Company  and  the  holders of the Debenture shall be restored to their
former  positions  and  rights hereunder, respectively; but no such waiver shall
extend  to  any  subsequent  or  other  default  or  impair any right consequent
thereon.

          In  the Event of Default and provided the Debenture have not been paid
in full, the Holder may elect to secure a portion of the Company's assets not to
exceed  200%  of the Face Amount of the Note,  in Pledged Collateral (as defined
in the Security Agreement).  The Holder may also elect to garnishee Revenue from
the Company in an amount that will repay the Holder on the schedules outlined in
this  Agreement.

     In  the  Event  of  Default,  as outlined in this Agreement, the Holder can
exercise  its  right to increase the Face Amount of the Debenture by ten percent
(10%)  as an initial penalty and for each Event of Default under this Agreement.
In  addition,  the  Holder  may  elect  to  increase  the Face Amount by two and
one-half  percent  (2.5%)  per  month  (pro-rata  for partial periods) paid as a
penalty  for liquated damages ("Liquidated Damages").  The Liquated Damages will
be  compounded  daily.  It  is the intention and acknowledgement of both parties
that  the  Liquidated  Damages  not  be  deemed  as  interest.

     In  the  event  of  Default,  the Holder may elect to switch the Conversion
Price  of  the  Debenture  as  outlined in Section 3.2 (c) above to the "Default
Conversion  Price",  as  described above.  The Default Conversion Price shall be
equal to the lesser of a) the Fixed Conversion Price or b) seventy percent (70%)
of  the  lowest  closing  bid  price of the Common Stock during the fifteen (15)
trading days prior to conversion.  Upon written notice being sent to the Company
by  the  Holder  of  Default under Section 6.1 (f), and the Holder's election to
exercise  the  remedy  to  switch the conversion price to the Default Conversion
Price,  the  Company  shall  immediately  withdraw  the  Registration Statement.
Further,  the  Company  agrees  that the date of consideration for the Debenture
shall  remain  the  Issuance  Date  stated herein.  The Company shall provide an
opinion  letter  from counsel within two (2) business days of written request by
the  Holder  stating  that  the  date  of consideration for the Debenture is the
Issuance Date and submission of proper Rule 144 support documentation consisting
of  Form  144,  a  broker's  representation letter and a seller's representation
letter.  In the event the Company does not deliver the opinion letter within two
business  days,  the  Default Conversion Price shall immediately decrease by two
percent  (2%) for each business day an opinion letter fails to be delivered.  In
the  event  that counsel to the Company fails or refuses to render an opinion as
required  to  issue the Shares in accordance with this paragraph (either with or
without  restrictive  legends,  as applicable), then the Company irrevocably and
expressly  authorizes  counsel  to the Investor to render such opinion and shall
authorize  the  Transfer  Agent  shall  accept  and  be entitled to rely on such
opinion  for  the purposes of issuing the Shares (which is attached as Exhibit E
to  the Subscription Agreement between the Company and the Holder of even date).
Any  costs incurred by Holder for such opinion letter shall be added to the Face
Amount  of  the  Debenture.

Sectioin  6.2     Acceleration.  If  an Event of Default occurs and is not cured
within  five  (5)  business days, the Holder hereof by notice to the Company may
declare  the  remaining  principal  amount  of the Debentures, together with all
accrued  interest  and any liquidated damages, to be due and payable.  Upon such
declaration,  any remaining principal, interest and penalty amounts shall be due
and  payable  immediately.

Section  6.3     Seniority,  No  indebtedness  of  the  Company is senior to the
Debenture in right of payment, whether with respect to interest, damages or upon
liquidation  or  dissolution  or  otherwise.

Section  7     Registered  Debenture

Record  Ownership.  The  Company,  or its attorney, shall maintain a register of
the  holders of the Debenture (the "Register") showing their names and addresses
and  the  serial numbers and principal amounts of Debenture issued to them.  The
Register  may  be maintained in electronic, magnetic or other computerized form.
The  Company  may  treat  the person named as the Holder of the Debenture in the
Register  as  the  sole owner of the Debenture.   The Holder of the Debenture is
the  person  exclusively  entitled  to  receive  payments  of  interest  on  the
Debenture,  receive notifications with respect to the Debenture, convert it into
Common Stock and otherwise exercise all of the rights and powers as the absolute
owner  hereof.

Worn or Lost Debenture.  If the Debenture becomes worn, defaced or mutilated but
is  still  substantially  intact  and recognizable, the Company or its agent may
issue  a  new Debenture in lieu hereof upon its surrender.   Where the Holder of
the  Debenture  claims that the Debenture has been lost, destroyed or wrongfully
taken,  the  Company  shall  issue  a  new  Debenture  in  place of the original
Debenture  if  the  Holder so requests by written notice to the Company actually
received  by  the  Company  before  it  is  notified that the Debenture has been
acquired by a bona fide purchaser and the Holder has delivered to the Company an
indemnity  bond  in  such  amount and issued by such surety as the Company deems
satisfactory  together  with  an affidavit of the Holder setting forth the facts
concerning  such loss, destruction or wrongful taking and such other information
in  such  form  with  such  proof  or  verification  as the Company may request.

Section  8     Notice.

     Any  notices,  consents,  waivers  or  other  communications  required  or
permitted  to  be  given under the terms of the Debenture must be in writing and
will  be  deemed  to  have  been  delivered  (i)  upon  receipt,  when delivered
personally;  (ii)  upon receipt, when sent by facsimile (provided a confirmation
of  transmission is mechanically or electronically generated and kept on file by
the  sending  party);  or  (iii)  one  (1)  day  after deposit with a nationally
recognized  overnight  delivery  service, in each case properly addressed to the
party  to  receive  the  same.  The  addresses  and  facsimile  numbers for such
communications  shall  be:

If  to  the  Company:
Mike  Hill,  Chief  Executive  Officer
NeWave,  Inc.
401  East  First  Street,  Number  1345
Long  Beach,  CA  90802
Telephone:  (805)  964-9202
             --------------
Facsimile:  (562)-983-5571
             -------------

If  to  the  Investor:

     Dutchess  Private  Equities  Fund,  LP
     Douglas  Leighton
     50  Commonwealth  Ave,  Suite  2
     Boston,  MA  02116
     Telephone:  (617)  301-4700
                  --------------
     Facsimile:  (617)  249-0947
                  --------------

     Each  party  shall provide five (5) business days prior notice to the other
party  of  any  change  in  address,  phone  number  or  facsimile  number.

Section  9     Time
     Where  the  Debenture  authorizes  or  requires the payment of money or the
performance  of  a  condition  or obligation on a Saturday or Sunday or a public
holiday,  or authorizes or requires the payment of money or the performance of a
condition or obligation within, before or after a period of time computed from a
certain date, and such period of time ends on a Saturday or a Sunday or a public
holiday,  such  payment  may be made or condition or obligation performed on the
next  succeeding  business day, and if the period ends at a specified hour, such
payment  may  be made or condition performed, at or before the same hour of such
next  succeeding  business  day,  with  the  same force and effect as if made or
performed in accordance with the terms of the Debenture.  A "business day" shall
mean  a  day  on  which  the banks in New York are not required or allowed to be
closed.

Section  10     No  Assignment

     The  Debenture  shall  not  be  assignable.

Section  11      Rules  of  Construction.

     In  the  Debenture,  unless  the  context  otherwise requires, words in the
singular  number include the plural, and in the plural include the singular, and
words  of the masculine gender include the feminine and the neuter, and when the
sense  so  indicates,  words  of the neuter gender may refer to any gender.  The
numbers  and  titles  of  sections  contained  in the Debenture are inserted for
convenience of reference only, and they neither form a part of the Debenture nor
are  they to be used in the construction or interpretation hereof.  Wherever, in
the  Debenture,  a  determination  of  the  Company is required or allowed, such
determination  shall  be  made  by  a  majority of the Board of Directors of the
Company and if it is made in good faith, it shall be conclusive and binding upon
the  Company  and  the  Holder  of  the  Debenture.

Section  12     Governing  Law

     The  validity, terms, performance and enforcement of the Debenture shall be
governed  and construed by the provisions hereof and in accordance with the laws
of  the  Commonwealth  of  Massachusetts  applicable  to  agreements  that  are
negotiated,  executed,  delivered  and  performed  solely in the Commonwealth of
Massachusetts.

Section  13     Litigation

Disputes  subject  to  arbitration  governed  by  Massachusetts  law
--------------------------------------------------------------------

     All  disputes  arising  under  this  agreement  shall  be  governed  by and
interpreted  in  accordance  with the laws of the Commonwealth of Massachusetts,
without regard to principles of conflict of laws.  The parties to this agreement
will  submit all disputes arising under this agreement to arbitration in Boston,
Massachusetts before a single arbitrator of the American Arbitration Association
("AAA").  The  arbitrator  shall  be selected by application of the rules of the
AAA, or by mutual agreement of the parties, except that such arbitrator shall be
an  attorney  admitted to practice law in the Commonwealth of Massachusetts.  No
party  to  this agreement will challenge the jurisdiction or venue provisions as
provided  in  this  section.

Section  14     Waiver

The  Holder's  delay or failure at any time or times hereafter to require strict
performance  by  Company  of any undertakings, agreements or covenants shall not
waiver,  affect,  or  diminish  any  right of the Holder under this Agreement to
demand  strict  compliance and performance herewith. Any waiver by the Holder of
any  Event  of  Default  shall  not  waive or affect any other Event of Default,
whether  such Event of Default is prior or subsequent thereto and whether of the
same  or a different type. None of the undertakings, agreements and covenants of
the  Company  contained  in  this  Agreement,  and no Event of Default, shall be
deemed  to  have  been  waived by the Holder, nor may this Agreement be amended,
changed  or  modified,  unless such waiver, amendment, change or modification is
evidenced  by an instrument in writing specifying such waiver, amendment, change
or  modification  and  signed  by  the  Holder.

Section  15     Waiver  of  Jury  Trial.

AS A MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS AGREEMENT, THE
PARTIES  HERETO  HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
RELATED  IN  ANY WAY TO THIS AGREEMENT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS
ASSOCIATED  WITH  THIS  TRANSACTION.

Section  16     Transactions  With  Affiliates.

     The  Company  shall  not,  and shall cause each of its Subsidiaries not to,
enter into, amend, modify or supplement, or permit any Subsidiary to enter into,
amend,  modify  or  supplement,  any  agreement,  transaction,  commitment  or
arrangement with any of its or any Subsidiary's officers, directors, persons who
were  officers  or  directors  at any time during the previous two years, or any
such  entities  controlled  by  the  officers  or  directors,  shareholders  who
beneficially own five percent (5%) or more of the Common Stock, or affiliates or
with  any  individual  related  by  blood,  marriage  or  adoption  to  any such
individual or with any entity in which any such entity or individual owns a five
percent  (5%)  or  more  beneficial interest (each a "Related Party") during the
Lock  Up  Period

Section  17     Registration

     The  Company  shall  file  a registration statement with the SEC, within 45
days  following  a  written  request by the Holder ("Filing Date"), covering the
Debenture.  The  number of shares of Stock registered shall be equivalent to the
sum  of:  1)  the Face Amount divided by the Fixed Conversion Price. The Company
agrees  that if such registration statement has not been submitted to the SEC by
the  Filing  Date,  the  Fixed  Conversion Price will initially drop ten percent
(10%)  and  an  additional  ten  percent (10%) for every fifteen (15) day period
thereafter,  the  Company fails to file the Registration Statement.  The Company
also  agrees  that  if  the  Filing  Date  exceeds 45 days or the Effective Date
exceeds  90  days from the Filing Date ("Penalty Date" collectively the "Penalty
Dates"),  a  penalty  of  two  percent (2%) per month, of the Face Amount of the
Debenture, shall accrue for each month the Filing Date and/or the Effective Date
exceeds  the Penalty Date, pro-rated for partial periods. The Company agrees not
to  include  any  other  registration  to  this statement without the Investor's
consent.

Section  18     Miscellaneous

a.     All  pronouns  and  any variations thereof used herein shall be deemed to
refer  to  the  masculine,  feminine,  impersonal,  singular  or  plural, as the
identity  of  the  person  or  persons  may  require.

b.     Neither  this  Debenture  nor  any  provision  hereof  shall  be  waived,
modified,  changed,  discharged,  terminated,  revoked or canceled, except by an
instrument  in  writing  signed by the party effecting the same against whom any
change,  discharge  or  termination  is  sought.

c.     Notices  required  or permitted to be given hereunder shall be in writing
and  shall  be deemed to be sufficiently given when personally delivered or sent
by  facsimile  transmission:  (i) if to the Company, at its executive offices or
(ii)  if  to  the  Holder,  at  the  address for correspondence set forth in the
Article 6, or at such other address as may have been specified by written notice
given  in  accordance  with  this  paragraph.

d.     This Note may be executed in two or more counterparts, all of which taken
together  shall  constitute one instrument.  Execution and delivery of this Note
by exchange of facsimile copies bearing the facsimile signature of a party shall
constitute  a  valid  and  binding  execution  and delivery of this Note by such
party.  Such  facsimile  copies shall constitute enforceable original documents.

e.     This Written Agreement represent the FINAL AGREEEMENT between the Company
and  the  Holders  and  may  not  be  contradicted  by  evidence  of  prior,
contemporaneous,  or  subsequent  oral  agreements  of the parties, there are no
unwritten  oral  agreements  among  the  parties.

f.     The  execution,  delivery and performance of this Note by the Company and
the  consummation  by  the  Company  of the transactions contemplated hereby and
thereby will not (i) result in a violation of the Articles of Incorporation, any
Certificate of Designations, Preferences and Rights of any outstanding series of
preferred  stock  of  the  Company  or  the  By-laws  or  (ii) conflict with, or
constitute a material default (or an event which with notice or lapse of time or
both  would  become  a  material default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
contract, indenture mortgage, indebtedness or instrument to which the Company or
any  of  its Subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree, including United States federal and state
securities  laws  and regulations and the rules and regulations of the principal
securities  exchange  or  trading  market on which the Common Stock is traded or
listed  (the  "Principal  Market"),  applicable  to  the  Company  or any of its
Subsidiaries  or  by  which  any  property or asset of the Company or any of its
Subsidiaries  is  bound or affected. Neither the Company nor its Subsidiaries is
in violation of any term of, or in default under, the Articles of Incorporation,
any  Certificate  of  Designations,  Preferences  and  Rights of any outstanding
series  of preferred stock of the Company or the By-laws or their organizational
charter  or  by-laws,  respectively,  or  any  contract,  agreement,  mortgage,
indebtedness,  indenture,  instrument, judgment, decree or order or any statute,
rule  or  regulation  applicable  to the Company or its Subsidiaries, except for
possible  conflicts,  defaults,  terminations,  amendments,  accelerations,
cancellations  and  violations  that  would not individually or in the aggregate
have a Material Adverse Effect. The business of the Company and its Subsidiaries
is  not  being  conducted,  and shall not be conducted, in violation of any law,
statute,  ordinance,  rule, order or regulation of any governmental authority or
agency,  regulatory  or  self-regulatory  agency,  or court, except for possible
violations the sanctions for which either individually or in the aggregate would
not  have  a Material Adverse Effect.  The Company is not required to obtain any
consent,  authorization,  permit or order of, or make any filing or registration
(except  the  filing of a registration statement)  with, any court, governmental
authority  or  agency, regulatory or self-regulatory agency or other third party
in  order for it to execute, deliver or perform any of its obligations under, or
contemplated  by,  this Note in accordance with the terms hereof or thereof. All
consents,  authorizations,  permits, orders, filings and registrations which the
Company  is  required  to  obtain  pursuant  to the preceding sentence have been
obtained  or  effected  on or prior to the date hereof and are in full force and
effect  as  of  the date hereof. The Company and its Subsidiaries are unaware of
any  facts  or  circumstances which might give rise to any of the foregoing. The
Company is not, and will not be, in violation of the listing requirements of the
Principal  Market  as  in  effect  on the date hereof and on each of the Closing
Dates  and is not aware of any facts which would reasonably lead to delisting of
the  Common  Stock  by  the  Principal  Market  in  the  foreseeable  future.

g.     The  Company and its "Subsidiaries" (which for purposes of this Debenture
means  any  entity  in  which  the Company, directly or indirectly, owns capital
stock  or  holds  an equity or similar interest) are corporations duly organized
and  validly  existing  in  good  standing  under  the  laws  of  the respective
jurisdictions of their incorporation, and have the requisite corporate power and
authorization  to  own  their  properties  and to carry on their business as now
being  conducted. Both the Company and its Subsidiaries are duly qualified to do
business and are in good standing in every jurisdiction in which their ownership
of  property  or  the  nature  of  the  business  conducted  by  them makes such
qualification  necessary,  except  to  the  extent  that  the  failure  to be so
qualified  or  be  in good standing would not have a Material Adverse Effect. As
used  in  this Note, "Material Adverse Effect" means any material adverse effect
on  the  business,  properties,  assets,  operations,  results  of  operations,
financial  condition  or  prospects of the Company and its Subsidiaries, if any,
taken  as  a  whole,  or  on  the  transactions  contemplated  hereby  or by the
agreements  and instruments to be entered into in connection herewith, or on the
authority  or  ability of the Company to perform its obligations under the Note.

h.     Authorization;  Enforcement;  Compliance with Other Instruments.  (i) The
Company  has  the  requisite  corporate  power  and  authority to enter into and
perform  this  Note, and to issue the Note and Incentive Debenture in accordance
with  the  terms hereof and thereof, (ii) the execution and delivery of the Note
by  the  Company  and  the  consummation  by it of the transactions contemplated
hereby  and  thereby,  including without limitation the reservation for issuance
and  the  issuance  of  the Incentive Debenture pursuant to this Note, have been
duly  and  validly authorized by the Company's Board of Directors and no further
consent  or authorization is required by the Company, its Board of Directors, or
its  shareholders,  (iii)  the  Note  has  been  duly  and  validly executed and
delivered  by  the  Company, and (iv) the Note constitutes the valid and binding
obligations  of  the  Company enforceable against the Company in accordance with
their  terms, except as such enforceability may be limited by general principles
of  equity  or  applicable  bankruptcy,  insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of  creditors'  rights  and  remedies.

                                      *****

     Any misrepresentations shall be considered a breach of contract and Default
under  this Agreement and the Holder may seek to take actions as described under
Section  6  of  this  Agreement.

     IN  WITNESS  WHEREOF, the Company has duly executed the Debenture as of the
date  first  written  above.
                         NeWave,  Inc

By:

      /s/  Michael  Hill
      ------------------
Name:      Michael  Hill
Title:          CEO

By:
      /s/  Paul  Daniel
      -----------------
Name:       Paul Daniel
Title:         CFO

                         DUTCHESS  PRIVATE  EQUITIES  FUND,  II,  L.P.
                         BY  ITS  GENERAL  PARTNER  DUTCHESS
                         CAPITAL  MANAGEMENT,  LLC

By:
      /s/  Douglas  H.  Leighton
      --------------------------
Name:      Douglas  H.  Leighton
Title:      A  Managing  Member

<PAGE>

                   Exhibit A to the Certificate of Designation

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

(To  be  Executed  by  the  Registered  Owner  in  order  to  Convert Debenture)

     The  undersigned  hereby  irrevocably  elects,  as  of ________________, to
convert  $________________  of  its convertible debenture (the "Debenture") into
Common  Stock  of  NeWave,  Inc. (the "Company") according to the conditions set
forth  in  the  Debenture  issued  by  the  Company.

Date  of  Conversion________________________________________________

Applicable  Conversion  Price________________________________________

Number  of  Debenture  Issuable  upon  this  Conversion_______________________

Name(Print)___________Dutchess  Private  Equities Fund, II, LP _________________
                      ----------------------------------------

Address______________50  Commonwealth  Ave____________________________
                     ---------------------

Phone_____617-301-4700_____________  Fax________617-249-0947___________
          -------------------------             ------------

                    By:_______________________________________
                                           Douglas  Leighton

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00097-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00097-of-00352.parquet"}]]