Exhibit 10.7 | ||
AMENDED AND RESTATED SECURED TERM NOTE | ||
FOR VALUE RECEIVED, ELEC COMMUNICATIONS CORP., a New York | ||
corporation (the “Company”), 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, the sum of One Million Four Hundred Twenty Eight Thousand | ||
Dollars ($1,428,000), 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 $1,700,000 Secured Term Note made by the Company in favor of | ||
Holder on May 31, 2006. | ||
Capitalized terms used herein without definition shall have the meanings ascribed to such | ||
terms in that certain Securities Purchase Agreement dated as of May 31, 2006 hereof by and | ||
between the Company and the Holder (as amended, modified and/or supplemented from time to | ||
time, the “Purchase Agreement”). | ||
The following terms shall apply to this Secured Term Note (this “Note”): | ||
ARTICLE I | ||
CONTRACT RATE AND AMORTIZATION | ||
1.1 Contract Rate. Subject to Sections 3.2 and 4.10, interest payable on the | ||
outstanding principal amount of this Note shall accrue at a rate per annum equal to the “prime | ||
rate” published inThe Wall Street Journalfrom time to time (the “Prime Rate”), plus two | ||
percent (2.0%) (the “Contract Rate”). The Contract 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 the | ||
Prime Rate. Interest shall be calculated on the basis of a 360 day year. Interest shall be payable | ||
monthly, in arrears, commencing on November 1, 2007, on the first business day of each | ||
consecutive calendar month thereafter through and including the Maturity Date, and on the | ||
Maturity Date, whether by acceleration or otherwise. | ||
1.2 Contract Rate Payments. The Contract Rate shall be calculated on the last | ||
business day of each calendar month hereafter (other than for increases or decreases in the Prime | ||
Rate which shall be calculated and become effective in accordance with the terms of Section 1.1) | ||
until the Maturity Date. | ||
1.3 Maturity Date. The principal amount outstanding under this Note, | ||
together with any accrued and unpaid interest on such amount plus any and all other unpaid | ||
amounts which are then owing under this Note, the Purchase Agreement and/or any other | ||
Related Agreement, shall be due and payable on the Maturity Date. |
ARTICLE II |
REDEMPTION |
2.1 Optional Redemption. The Company may prepay the outstanding |
principal amount of this Note, in whole or in part (the “Optional Redemption”), by paying to |
the Holder a sum of money equal to one hundred percent (100%) of the principal amount to be |
redeemed 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 other |
Related Agreement (the “Redemption Amount”) outstanding on the Redemption Payment Date |
(as defined below). The Company 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 seven (7) business days after the date of the Notice of |
Redemption (the “Redemption Period”). On the Redemption Payment Date, the Redemption |
Amount must be paid in good funds to the Holder. In the event the Company fails to pay the |
Redemption Amount on the Redemption Payment Date as set forth herein, then such Notice of |
Redemption 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 this Section 3.1 shall constitute an event of default (“Event of Default”) hereunder: |
(a) Failure to Pay. The Company fails to pay when due any |
installment of principal, interest or other fees hereon in accordance herewith, or the |
Company fails to pay any of the other Obligations (under and as defined in the Master |
Security Agreement) when due, 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 Company or any of its Subsidiaries |
breaches any covenant or any other term or condition of this Note in any material respect |
and 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, |
warranty or statement made or furnished by the Company or any of its Subsidiaries in |
this Note, the Purchase Agreement or any other Related Agreement shall at any time be |
false or misleading in any material respect on the date as of which made or deemed made. |
(d) Default Under Other Agreements. The occurrence of any default |
(or similar term) in the observance or performance of any other agreement or condition |
relating to any indebtedness or contingent obligation of the Company or any of its |
Subsidiaries beyond the period of grace (if any), the effect of which default is to cause, or |
permit the holder or holders of such indebtedness or beneficiary or beneficiaries of such |
contingent obligation to cause, such indebtedness to become due prior to its stated |
maturity or such contingent obligation to become payable |
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(e) Bankruptcy. The Company or any of its Subsidiaries shall |
(i) apply for, consent to or suffer to exist the appointment of, or the taking of possession |
by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its |
property, (ii) make a general assignment for the benefit of creditors, (iii) commence a |
voluntary case under the federal bankruptcy laws (as now or hereafter in effect), (iv) be |
adjudicated a bankrupt or insolvent, (v) file a petition seeking to take advantage of any |
other law providing for the relief of debtors, (vi) acquiesce to, without challenge within |
ten (10) days of the filing thereof, or failure to have dismissed, within thirty (30) days, |
any petition filed against it in any involuntary case under such bankruptcy laws, or (vii) |
take any action for the purpose of effecting any of the foregoing; |
(f) Judgments. Attachments or levies in excess of $250,000 in the |
aggregate are made upon the Company or any of its Subsidiary’s assets or a judgment is |
rendered against the Company’s property involving a liability of more than $250,000 |
which shall not have been vacated, discharged, stayed or bonded within thirty (30) days |
from the entry thereof; |
(g) Insolvency. The Company or any of its Subsidiaries shall admit in |
writing its inability, or be generally unable, to pay its debts as they become due or cease |
operations of its present business; |
(h) Change of Control. A Change of Control (as defined below) shall |
occur with respect to the Company, unless Holder shall have expressly consented to such |
Change of Control in writing. A “Change of Control” shall mean any event or |
circumstance as a result of which (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), other |
than the Holder, 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 Company (other than a |
“Person” or “group” that beneficially owns 35% or more of such outstanding voting |
equity interests of the Company on the date hereof), (ii) the Board of Directors of the |
Company shall cease to consist of a majority of the Company’s board of directors on the |
date hereof (or directors appointed by a majority of the board of directors in effect |
immediately prior to such appointment) or (iii) the Company or any of its Subsidiaries |
merges or consolidates with, or sells all or substantially all of its assets to, any other |
person or entity; |
(i) Indictment; Proceedings. The indictment or threatened indictment |
of the Company or any of its Subsidiaries or any executive officer of the Company or any |
of its Subsidiaries under any criminal statute, or commencement or threatened |
commencement of criminal or civil proceeding against the Company or any of its |
Subsidiaries or any executive officer of the Company or any of its Subsidiaries pursuant |
to which statute or proceeding penalties or remedies sought or available include forfeiture |
of any of the property of the Company or any of its Subsidiaries; |
(j) The Purchase Agreement and Related Agreements. (i) An Event |
of Default shall occur under and as defined in the Purchase Agreement or any other |
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Related Agreement, (ii) the Company or any of its Subsidiaries shall breach any term or |
provision of the Purchase Agreement or any other Related Agreement in any material |
respect and such breach, if capable of cure, continues unremedied for a period of fifteen |
(15) days after the occurrence thereof, (iii) the Company or any of its Subsidiaries |
attempts to terminate, challenges the validity of, or its liability under, the Purchase |
Agreement or any Related Agreement, (iv) any proceeding shall be brought to challenge |
the validity, binding effect of the Purchase Agreement or any Related Agreement or (v) |
the Purchase Agreement or any Related Agreement ceases to be a valid, binding and |
enforceable obligation of the Company or any of its Subsidiaries (to the extent such |
persons or entities are a party thereto) or (v) an Event of Default shall occur under and as |
defined in the Securities Purchase Agreement dated as of November 30, 2005 by and |
between the Company and the Holder (as amended, modified and/or supplemented from |
time to time, the “November 2005 Purchase Agreement”) or any Related Agreement |
(as defined in the November 2005 Purchase Agreement); |
(k) 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 |
(l) Stop Trade. An SEC stop trade order or Principal Market trading |
suspension of the Common Stock shall be in effect for five (5) consecutive days or five |
(5) days during a period of ten (10) consecutive days, excluding in all cases a suspension |
of all trading on a Principal Market, provided that the Company 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. |
3.2 Default Interest. Following the occurrence and during the continuance of |
an Event of Default, the Company shall pay additional interest on this Note in an amount equal |
to one percent (1%) per month, and all outstanding obligations under this Note, the Purchase |
Agreement and each other Related Agreement, including unpaid interest, shall continue to accrue |
interest at such additional interest rate 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 Company 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 Company under the Purchase Agreement and the other Related Agreements, to |
require the Company 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, |
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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 3.3. |
ARTICLE IV |
MISCELLANEOUS |
4.1 Issuance of New Note. Upon any partial redemption of this Note, a new |
Note containing the same date and provisions of this Note shall, at the request of the Holder, be |
issued by the Company to the Holder for the principal balance of this Note and interest which |
shall not have been converted or paid. Subject to the provisions of Article III of this Note, the |
Company shall not pay any costs, fees or any other consideration to the Holder for the |
production and issuance of a new Note. |
4.2 Cumulative Remedies. The remedies under this Note shall be cumulative. |
4.3 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. |
4.4 Notices. Any notice herein required or permitted to be given shall be in |
writing and shall be deemed effectively given: (a) upon personal delivery to the party notified, |
(b) when sent by confirmed telex or facsimile if sent during normal business hours of the |
recipient, if not, then on the next business day, (c) five days after having been sent by registered |
or certified mail, return receipt requested, postage prepaid, or (d) one day after deposit with a |
nationally recognized overnight courier, specifying next day delivery, with written verification of |
receipt. All communications shall be sent to the Company at the address provided in the |
Purchase Agreement executed in connection herewith, with a copy to Eric M. Hellige, Esq., |
Pryor Cashman LLP, 410 Park Avenue, New York, New York 10022, 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 Company or the Holder |
may designate by ten days advance written notice to the other parties hereto. A Notice of |
Conversion shall be deemed given when made to the Company pursuant to the Purchase |
Agreement. |
4.5 Amendment Provision. The term “Note” and all references 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 |
as such successor instrument may be amended or supplemented. |
4.6 Assignability. This Note shall be binding upon the Company and its |
successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns, |
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and may be assigned by the Holder in accordance with the requirements of the Purchase |
Agreement. The Company may not assign any of its obligations under this Note without the |
prior written consent of the Holder, any such purported assignment without such consent being |
null and void. |
4.7 Cost of Collection. In case of any Event of Default under this Note, the |
Company shall pay the Holder reasonable costs of collection, including reasonable attorneys’ |
fees. |
4.8 Governing Law, Jurisdiction and Waiver of Jury Trial. |
(a) THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED |
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW |
YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. |
(b) THE COMPANY HEREBY CONSENTS AND AGREES THAT |
THE STATE OR FEDERAL COURTS LOCATED IN THE COUNTY OF NEW |
YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO |
HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE |
COMPANY, ON THE ONE HAND, AND THE HOLDER, ON THE OTHER HAND, |
PERTAINING TO THIS NOTE OR ANY OF THE OTHER RELATED |
AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS |
NOTE OR ANY OF THE RELATED AGREEMENTS;PROVIDED, THAT THE |
COMPANY ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS |
MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY |
OF NEW YORK, STATE OF NEW YORK; ANDFURTHER PROVIDED, THAT |
NOTHING IN THIS NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE |
THE HOLDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN |
ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE |
ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, |
OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE |
HOLDER. THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN |
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED |
IN ANY SUCH COURT, AND THE COMPANY HEREBY WAIVES ANY |
OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL |
JURISDICTION, IMPROPER VENUE ORFORUM NON CONVENIENS. THE |
COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, |
COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT |
AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER |
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED |
TO THE COMPANY AT THE ADDRESS SET FORTH IN THE PURCHASE |
AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED |
COMPLETED UPON THE COMPANY’S ACTUAL RECEIPT THEREOF. |
(c) THE COMPANY DESIRES THAT ITS DISPUTES BE |
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, |
TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL |
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SYSTEM AND OF ARBITRATION, THE COMPANY HERETO WAIVES ALL |
RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING |
BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, |
TORT, OR OTHERWISE BETWEEN THE HOLDER AND THE COMPANY |
ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE |
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS |
NOTE, ANY OTHER RELATED AGREEMENT OR THE TRANSACTIONS |
RELATED HERETO OR THERETO. |
4.9 Severability. 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. |
4.10 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 rate permitted by such law, any payments in excess of |
such maximum rate shall be credited against amounts owed by the Company to the Holder and |
thus refunded to the Company. |
4.11 Security Interest and Guarantee. The Holder has been granted a security |
interest (i) in certain assets of the Company 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 Company under this Note are |
guaranteed by certain Subsidiaries of the Company pursuant to the Subsidiary Guaranty dated as |
of February 8, 2005. |
4.12 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. |
4.13 Registered Obligation. This Note is intended to be a registered obligation |
within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i) and the Company (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 Company of this Note to the new holder or the issuance by the Company of a new |
instrument to the new holder, or (ii) transfer through a book entry system maintained by the |
Company (or its agent), within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)(B). |
[Balance of page intentionally left blank; signature page follows] |
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IN WITNESS WHEREOF, the Company has caused this Secured Term Note to be |
signed in its name effective as of this 28thday of September 2007. |
eLEC COMMUNICATIONS CORP. |
By:/s/ Paul H. Riss |
Name: Paul H. Riss |
Title: Chief Executive Officer |
WITNESS: |
/s/ Lauri Vertrees |
Lauri Vertrees |
SIGNATURE PAGE TO |
AMENDED AND RESTATED |
SECURED TERM NOTE |