Exhibit 10.6 | ||
THIRD AMENDED AND RESTATED SECURED TERM NOTE | ||
FOR VALUE RECEIVED, eLEC COMMUNICATIONS CORP., a New York | ||
corporation (the “Borrower”), hereby promises to pay to LAURUS MASTER FUND, LTD., c/o | ||
M&C Corporate Services Limited, P.O. Box 309 GT, Ugland House, South Church Street, | ||
George Town, Grand Cayman, Cayman Islands, Fax: 345-949-8080 (the “Holder”) or its | ||
registered assigns or successors in interest, on order, the sum of One Million Nine Hundred Sixty | ||
Six Thousand Six Hundred Sixty Seven Dollars ($1,966,667), together with any accrued and | ||
unpaid interest hereon, on September 30, 2010 (the “Maturity Date”) if not sooner paid. | ||
This Note amends and restates in its entirety (and is given in substitution for and not in | ||
satisfaction of) that certain $2,200,000 Second Amended and Restated Secured Term Note made | ||
by the Borrower in favor of Holder on September 7, 2007. | ||
This Third Amended and Restated Secured Term Note (the “Note”) is intended to be a | ||
registered obligation within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i) and | ||
the Borrower (or its agent) shall register this Note (and thereafter shall maintain such | ||
registration) as to both principal and any stated interest. Notwithstanding any document, | ||
instrument or agreement relating to this Note to the contrary, transfer of this Note (or the right to | ||
any payments of principal or stated interest thereunder) may only be effected by (i) surrender of | ||
this Note and either the reissuance by the Borrower of this Note to the new holder or the issuance | ||
by the Borrower of a new instrument to the new holder, or (ii) transfer through a book entry | ||
system maintained by the Borrower (or its agent), within the meaning of Treasury Regulation | ||
Section 1.871-14(c)(1)(i)(B). | ||
Capitalized terms used herein without definition shall have the meanings ascribed to such | ||
terms in that certain Securities Purchase Agreement dated as of November 30, 2005 between the | ||
Borrower and the Holder (as amended, modified or supplemented from time to time, the | ||
“Purchase Agreement”). | ||
The following terms shall apply to this Note: | ||
ARTICLE I | ||
INTEREST & AMORTIZATION | ||
1.1 Interest Rate. Subject to Sections 3.2 and 4.6 hereof, interest payable on | ||
this Note shall accrue at a rate per annum (the “Interest Rate”) equal to the “prime rate” | ||
published inThe Wall Street Journalfrom time to time, plus two percent (2%). The prime rate | ||
shall be increased or decreased as the case may be for each increase or decrease in the prime rate | ||
in an amount equal to such increase or decrease in the prime rate; each change to be effective as | ||
of the day of the change in such rate. Interest shall be (i) calculated on the basis of a 360 day | ||
year, and (ii) payable monthly, in arrears, commencing on November 1, 2007 and is payable on | ||
the first business day of each consecutive calendar month thereafter until the Maturity Date (and | ||
on the Maturity Date), whether by acceleration or otherwise (each, a “Repayment Date”). |
1.2 Maturity Date. The principal amount outstanding under this Note, |
together with any accrued and unpaid interest to date on such amount plus any and all other |
amounts which are then owing under this Note, the Purchase Agreement or any other Related |
Agreement but have not been paid, shall be due and payable on the Maturity Date. |
ARTICLE II |
REPAYMENT |
2.1 Optional Redemption in Cash. The Borrower will have the option of |
prepaying this Note in whole or in part (“Optional Redemption”) by paying to the Holder a sum |
of money (the “Redemption Amount”) equal to the principal amount of this Note together with |
accrued but unpaid interest thereon and any and all other sums due, accrued or payable to the |
Holder arising under this Note, the Purchase Agreement or any Related Agreement outstanding |
on the Redemption Payment Date (as defined below). The Borrower shall deliver to the Holder a |
written notice of redemption (the “Notice of Redemption”) specifying the date for such |
Optional Redemption (the “Redemption Payment Date”), which date shall be no more than ten |
(10) business days after the date of the Notice of Redemption (the “Redemption Period”), and |
the principal amount of this Note to be redeemed. On the Redemption Payment Date, the |
relevant Redemption Amount must be paid in good funds to the Holder. In the event the |
Borrower fails to pay the relevant Redemption Amount on the Redemption Payment Date as set |
forth herein, then such Redemption Notice will be null and void. |
ARTICLE III |
EVENTS OF DEFAULT |
3.1 Events of Default. The occurrence of any of the following events set forth |
in subparagraphs (a) through (i), inclusive, is an “Event of Default”: |
(a) Failure to Pay Principal, Interest or other Fees. The Borrower fails |
to pay when due any installment of principal, interest or other fees hereon in accordance |
herewith, and in any such case, such failure shall continue for a period of three (3) days |
following the date upon which any such payment was due. |
(b) Breach of Covenant. The Borrower breaches any covenant or any |
other term or condition of this Note or the Purchase Agreement in any material respect, or the |
Borrower or any of its Subsidiaries breaches any covenant or any other term or condition of any |
Related Agreement in any material respect and, in any such case, such breach, if subject to cure, |
continues for a period of fifteen (15) days after the occurrence thereof. |
(c) Breach of Representations and Warranties. Any representation or |
warranty made by the Borrower in this Note or the Purchase Agreement, or by the Borrower or |
any of its Subsidiaries in any Related Agreement, shall, in any such case, be false or misleading |
in any material respect on the date that such representation or warranty was made or deemed |
made. |
(d) Receiver or Trustee. The Borrower or any of its Subsidiaries shall |
make an assignment for the benefit of creditors, or apply for or consent to the appointment of a |
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receiver or trustee for it or for a substantial part of its property or business; or such a receiver or |
trustee shall otherwise be appointed. |
(e) Judgments. Any money judgment, writ or similar final process |
shall be entered or filed against the Borrower or any of its Subsidiaries or any of their respective |
property or other assets for more than $250,000, and shall remain unvacated, unbonded or |
unstayed for a period of sixty (60) days. |
(f) Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation |
proceedings or other proceedings or relief under any bankruptcy law or any law for the relief of |
debtors, voluntary or involuntary, shall be instituted by or against the Borrower or any of its |
Subsidiaries and, only in the case of an involuntary case commenced against the Borrower or any |
of its Subsidiaries, the petition is not controverted within ten (10) days, or is not dismissed within |
sixty (60) days after commencement of the case, or the Borrower or any of its Subsidiaries shall |
(i) become insolvent, cease operations, dissolve and/or terminate its business existence, (ii) apply |
for, consent to, or suffer to exist the appointment of, or the taking of possession by, a receiver, |
custodian, trustee, liquidator or other fiduciary of itself or of all or a substantial part of its |
property, (iii) make a general assignment for the benefit of creditors or (iv) take any action for |
the purpose of effecting any of the foregoing. |
(g) Stop Trade. An SEC stop trade order or Principal Market trading |
suspension of the Common Stock shall be in effect for five (5) consecutive days or five (5) days |
during a period of ten (10) consecutive days, excluding in all cases a suspension of all trading on |
a Principal Market,providedthat the Borrower shall not have been able to cure such trading |
suspension within thirty (30) days of the notice thereof or list the Common Stock on another |
Principal Market within sixty (60) days of such notice. The “Principal Market” for the Common |
Stock shall include the NASD OTC Bulletin Board, NASDAQ Capital Market, NASDAQ |
National Market System, American Stock Exchange, or New York Stock Exchange (whichever |
of the foregoing is at the time the principal trading exchange or market for the Common Stock). |
(h) Default Under Related Agreements or Other Agreements.(i) The |
occurrence and continuance of any Event of Default under and as defined in the Purchase |
Agreement or any Related Agreement or any event of default (or similar term) under any other |
indebtedness or (ii) an Event of Default shall occur under and as defined in the Securities |
Purchase Agreement dated as of May 31, 2006 by and between the Company and the Holder (as |
amended, modified and/or supplemented from time to time, the “May 2006 Purchase |
Agreement”) or any Related Agreement (as defined in the May 2006 Purchase Agreement);. |
(i) The LV Agreements. An Event of Default shall occur under and |
as defined in (i) the Securities Purchase Agreement dated as of September 28, 2007 by and |
among the Company, the purchasers party thereto from time to time and LV Administrative |
Services, LLC, as administrative and collateral agent for such purchasers (as amended, modified |
and/or supplemented from time to time, the “LV Purchase Agreement”) or (ii) any Related |
Agreement (as defined in the LV Purchase Agreement), as each may be amended, restated, |
modified and/or supplemented from time to time; or |
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(j) Change in Control. (i) Any “Person” or “group” (as such terms are |
defined in Sections 13(d) and 14(d) of the Exchange Act, as in effect on the date hereof) is or |
becomes the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange |
Act), directly or indirectly, of 35% or more on a fully diluted basis of the then outstanding voting |
equity interest of the Borrower or (ii) the Board of Directors of the Borrower shall cease to |
consist of a majority of the Board of Directors of the Borrower on the date hereof (or directors |
appointed by a majority of the Board of Directors in effect immediately prior to such |
appointment). |
3.2 Default Interest Rate. Following the occurrence and during the |
continuance of an Event of Default, the Borrower shall pay additional interest on this Note in an |
amount equal to one percent (1%) per month, and all outstanding obligations under this Note, |
including unpaid interest, shall continue to accrue such additional interest from the date of such |
Event of Default until the date such Event of Default is cured or waived. |
3.3 Default Payment. Following the occurrence and during the continuance of |
an Event of Default, the Holder, at its option, may demand repayment in full of all obligations |
and liabilities owing by Borrower to the Holder under this Note, the Purchase Agreement and/or |
any other Related Agreement and/or may elect, in addition to all rights and remedies of the |
Holder under the Purchase Agreement and the other Related Agreements and all obligations and |
liabilities of the Borrower under the Purchase Agreement and the other Related Agreements, to |
require the Borrower to make a default payment (“Default Payment”). The Default Payment |
shall be 110% of the outstanding principal amount of the Note, plus accrued but unpaid interest, |
all other fees then remaining unpaid, and all other amounts payable hereunder. The Default |
Payment shall be applied first to any fees due and payable to the Holder pursuant to this Note, |
the Purchase Agreement, and/or the other Related Agreements, then to accrued and unpaid |
interest due on this Note and then to the outstanding principal balance of this Note. The Default |
Payment shall be due and payable immediately on the date that the Holder has exercised its |
rights pursuant to this Section 4.3. |
3.4 Cumulative Remedies. The remedies under this Note shall be cumulative. |
ARTICLE IV |
MISCELLANEOUS |
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the |
Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver |
thereof, nor shall any single or partial exercise of any such power, right or privilege preclude |
other or further exercise thereof or of any other right, power or privilege. All rights and |
remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies |
otherwise available. |
4.2 Notices. Any notice herein required or permitted to be given shall be in |
writing and shall be deemed effectively given: (a) upon personal delivery to the party notified, |
(b) when sent by confirmed telex or facsimile if sent during normal business hours of the |
recipient, if not, then on the next business day, (c) five days after having been sent by registered |
or certified mail, return receipt requested, postage prepaid, or (d) one day after deposit with a |
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nationally recognized overnight courier, specifying next day delivery, with written verification of |
receipt. All communications shall be sent to the Borrower at the address provided in the |
Purchase Agreement executed in connection herewith, with a copy to Pryor Cashman LLP, 410 |
Park Avenue, New York, New York 10022, Attention: Eric M. Hellige, Esq., facsimile number |
(212) 798-6380 and to the Holder at the address provided in the Purchase Agreement for such |
Holder, with a copy to Portfolio Services 335 Madison Avenue, 10thFloor, New York, New |
York 10017, facsimile number (212) 541-4434, or at such other address as the Borrower or the |
Holder may designate by ten days advance written notice to the other parties hereto. |
4.3 Amendment Provision. The term “Note” and all reference thereto, as used |
throughout this instrument, shall mean this instrument as originally executed, or if later amended |
or supplemented, then as so amended or supplemented, and any successor instrument issued, as it |
may be amended or supplemented. |
4.4 Assignability. This Note shall be binding upon the Borrower and its |
successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns, |
and may be assigned by the Holder in full or in part at any time . This Note shall not be assigned |
by the Borrower without the consent of the Holder. |
4.5 Governing Law. This Note shall be governed by and construed in |
accordance with the laws of the State of New York, without regard to principles of conflicts of |
laws. Any action brought by either party against the other concerning the transactions |
contemplated by this Agreement shall be brought only in the state courts of New York or in the |
federal courts located in the State of New York. Both parties and the individual signing this |
Note on behalf of the Borrower agree to submit to the jurisdiction of such courts. The prevailing |
party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In |
the event that any provision of this Note is invalid or unenforceable under any applicable statute |
or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict |
therewith and shall be deemed modified to conform with such statute or rule of law. Any such |
provision which may prove invalid or unenforceable under any law shall not affect the validity or |
enforceability of any other provision of this Note. Nothing contained herein shall be deemed or |
operate to preclude the Holder from bringing suit or taking other legal action against the |
Borrower in any other jurisdiction to collect on the Borrower’s obligations to Holder, to realize |
on any collateral or any other security for such obligations, or to enforce a judgment or other |
court in favor of the Holder. |
4.6 Maximum Payments. Nothing contained herein shall be deemed to |
establish or require the payment of a rate of interest or other charges in excess of the maximum |
permitted by applicable law. In the event that the rate of interest required to be paid or other |
charges hereunder exceed the maximum permitted by such law, any payments in excess of such |
maximum shall be credited against amounts owed by the Borrower to the Holder and thus |
refunded to the Borrower. |
4.7 Security Interest and Guarantee. The Holder has been granted a security |
interest (i) in certain assets of the Borrower and its Subsidiaries as more fully described in the |
Master Security Agreement dated as of February 8, 2005 and (ii) pursuant to the Stock Pledge |
Agreement dated as of February 8, 2005. The obligations of the Borrower under this Note are |
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guaranteed by certain Subsidiaries of the Borrower pursuant to the Subsidiary Guaranty dated as |
of February 8, 2005. |
4.8 Construction. Each party acknowledges that its legal counsel participated |
in the preparation of this Note and, therefore, stipulates that the rule of construction that |
ambiguities are to be resolved against the drafting party shall not be applied in the interpretation |
of this Note to favor any party against the other. |
4.9 Cost of Collection. If default is made in the payment of this Note, the |
Borrower shall pay to Holder reasonable costs of collection, including reasonable attorney’s fees. |
4.10 Business Day. If any Repayment Date is a Saturday, Sunday or a day on |
which banking institutions in New York City are not required to be open for business (each, a |
“Legal Holiday”), payment of any Monthly Amount due on such day may be made on the next |
succeeding day that is not a Legal Holiday, and no interest shall accrue in respect of such |
payment for the intervening period. |
[Balance of page intentionally left blank; signature page follows.] |
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IN WITNESS WHEREOF, the Borrower has caused this Third Amended and Restated |
Note to be signed in its name effective as of this 28th day of September 2007. |
eLEC COMMUNICATIONS CORP. |
By:/s/ Paul H. Riss |
Name: Paul H. Riss |
Title: Chief Executive Officer |
WITNESS: |
/s/ Lauri Vertrees |
SIGNATURE PAGE TO |
THIRD AMENDED AND RESTATED |
SECURED TERM NOTE |