Exhibit 10.9
AMENDED AND RESTATED SECURED TERM NOTE
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FOR VALUE RECEIVED, eLEC COMMUNICATIONS CORP., a New York corporation
(the "Borrower"), hereby promises to pay to LAURUS MASTER FUND, LTD., c/o M&C
Corporate Services Limited, P.O. Box 309 GT, Ugland House, South Church Street,
George Town, Grand Cayman, Cayman Islands, Fax: 345-949-8080 (the "Holder") or
its registered assigns or successors in interest, on order, the sum of Two
Million Dollars ($2,000,000), together with any accrued and unpaid interest
hereon, on February 8, 2008 (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 $2,000,000 Secured
Convertible Term Note made by the Company in favor of Holder on February 8,
2005.
This 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 February 8, 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
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payable on this Note shall accrue at a rate per annum (the "Interest Rate")
equal to the "prime rate" published in The Wall Street Journal from time to
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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,
which commenced on March 1, 2005 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 Minimum Monthly Principal Payments. Amortizing payments of the
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aggregate principal amount outstanding under this Note at any time (the
"Principal Amount") began on May 1, 2005 and shall recur on the first business
day of each succeeding month thereafter until the Maturity Date (each, an
"Amortization Date"). Beginning on the first Amortization Date, the Borrower
shall make monthly payments to the Holder on each Repayment Date, each in the
amount of $60,606.06, together with any accrued and unpaid interest to date on
such portion of the Principal Amount plus any and all other amounts which are
then owing under this Note, the Purchase Agreement or any other Related
Agreement but have not been paid (collectively, the "Monthly Amount"). Any
Principal Amount that remains outstanding on the Maturity Date shall be due and
payable on the Maturity Date.
ARTICLE II
REPAYMENT
2.1 Optional Redemption in Cash. The Borrower will have the option of
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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 Upon the occurrence and continuance of an Event of Default beyond
any applicable grace period, the Holder may make all sums of principal, interest
and other fees then remaining unpaid hereon and all other amounts payable
hereunder immediately due and payable. In the event of such an acceleration, the
amount due and owing to the Holder shall be 125% of the outstanding principal
amount of the Note (plus accrued and unpaid interest and fees, if any) (the
"Default Payment"). If, with respect to any Event of Default capable of being
cured at the reasonable discretion of Holder, the Borrower cures such Event of
Default, such Event of Default will be deemed to no longer exist and any rights
and remedies of the Holder pertaining to such Event of Default will be of no
further force or effect. The Default Payment shall be applied first to any fees
due and payable to Holder pursuant to this Note or the Related Agreements, then
to accrued and unpaid interest due on this Note and then to outstanding
principal balance of this Note.
The occurrence of any of the following events set forth in
subparagraphs (a) through (i), inclusive, is an "Event of Default":
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(a) Failure to Pay Principal, Interest or other Fees. The
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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
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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
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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
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Subsidiaries shall make an assignment for the benefit of creditors, or
apply for or consent to the appointment of a receiver or trustee for it
or for a substantial part of its property or business; or such a
receiver or trustee shall otherwise be appointed.
(e) Judgments. Any money judgment, writ or similar final
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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
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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 Company 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
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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
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suspension of all trading on a Principal Market, provided that 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 SmallCap Market, NASDAQ National Market System,
American Stock Exchange, or New York Stock Exchange (whichever of the
foregoing is at the time the principal trading exchange or market for
the Common Stock).
(h) Default Under Related Agreements or Other Agreements. The
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occurrence and continuance of any Event of Default (as defined in the
Purchase Agreement or any Related Agreement) or any event of default
(or similar term) under any other indebtedness, provided that it shall
not be an Event of Default under this Section 4.1(i) unless the
aggregate outstanding principal amount of all such other indebtedness
as described above is at least $50,000.00.
(i) Change in Control. (i) Any "Person" or "group" (as such
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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
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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 Cumulative Remedies. The remedies under this Note shall be
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cumulative.
ARTICLE IV
MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part
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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
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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
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next business day, (c) five days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (d) one day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be sent
to the Borrower at the address provided in the Purchase Agreement executed in
connection herewith, with a copy to Pryor Cashman Sherman & Flynn LLP, 410 Park
Avenue, New York, New York 10022, Attention: Eric M. Hellige, Esq., facsimile
number (212) 798-6380 and to the Holder at the address provided in the Purchase
Agreement for such Holder, with a copy to John E. Tucker, Esq., 825 Third
Avenue, 14th Floor, New York, New York 10022, facsimile number (212) 541-4434,
or at such other address as the Borrower or the Holder may designate by ten days
advance written notice to the other parties hereto.
4.3 Amendment Provision. The term "Note" and all reference thereto, as
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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
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successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder in accordance with the
requirements of the Purchase Agreement. This Note shall not be assigned by the
Borrower without the consent of the Holder.
4.5 Governing Law. This Note shall be governed by and construed in
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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
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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
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security interest (i) in certain assets of the Borrower and its Subsidiaries as
more fully described in the Master Security
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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 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
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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,
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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
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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.
4.11 Prior Notice. This Note amends and restates in its entirety the
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Secured Convertible Term Note dated February 8, 2005 delivered by the Borrower
to the Holder pursuant to the Purchase Agreement.
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IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in
its name effective as of this 31st day of May, 2006.
eLEC COMMUNICATIONS CORP.
By: /s/ Paul H. Riss
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Name: Paul H. Riss
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Title: Chief Executive Officer
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WITNESS:
/s/ Lauri Vertrees
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