exhibit1011.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

EX-10 12 exhibit1011.htm exhibit1011.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

Exhibit 10.11

eLEC COMMUNICATIONS CORP. AND CERTAIN OF ITS SUBSIDIARIES
MASTER SECURITY AGREEMENT

To:		LV Administrative Services, Inc., as Agent
		c/o Valens Capital Management, LLC
		335 Madison Avenue, 10^thFloor
		New York, NY 10017

Date: September 28, 2007

To Whom It May Concern:

1. To secure the payment of all Obligations (as hereafter defined), eLEC
Communications Corp., a New York corporation (the “Company”), each of the other
undersigned parties (other than the Agent as defined below) and each other entity that is required
to enter into this Master Security Agreement (each an “Assignor” and, collectively, the
“Assignors”) hereby assigns and grants to the Agent, for the ratable benefit of the Creditor
Parties (as defined in the Securities Purchase Agreement referred to below), a continuing security
interest in all of the following property now owned or at any time hereafter acquired by any
Assignor, or in which any Assignor now has or at any time in the future may acquire any right,
title or interest (the “Collateral”): all cash, cash equivalents, accounts, accounts receivable,
deposit accounts, (including, without limitation, the Restricted Account (the “Restricted
Account”) maintained at North Fork Bank (Account Name: eLEC Communications Corp.
Restricted - LV, Account Number: 270-405-7914) referred to in the Restricted Account
Agreement (as defined in the Securities Purchase Agreement), inventory, equipment, goods,
fixtures, documents, instruments (including, without limitation, promissory notes and marketable
equity securities), contract rights, general intangibles (including, without limitation, payment
intangibles and an absolute right to license on terms no less favorable than those current in effect
among any Assignor’s affiliates), chattel paper, supporting obligations, investment property
(including, without limitation, all partnership interests, limited liability company membership
interests and all other equity interests owned by any Assignor), letter-of-credit rights,
trademarks, trademark applications, tradestyles, patents, patent applications, copyrights,
copyright applications and other intellectual property in which any Assignor now has or hereafter
may acquire any right, title or interest, all proceeds and products thereof (including, without
limitation, proceeds of insurance) and all additions, accessions and substitutions thereto or
therefor. In the event any Assignor wishes to finance the acquisition in the ordinary course of
business of any hereafter acquired equipment and have obtained a commitment from a financing
source to finance such equipment from an unrelated third party, Agent agrees to release its
security interest on such hereafter acquired equipment so financed by such third party financing
source. Except as otherwise defined herein, all capitalized terms used herein shall have the
meaning provided such terms in that certain Securities Purchase Agreement dated as of the date
hereof (as amended, restated, modified and/or supplemented from time to time, the “Securities
Purchase Agreement”) by and among the Company, the Purchasers party thereto and LV
Administrative Services, Inc., as administrative and collateral agent for the Purchasers (the

“Agent”). All items of Collateral which are defined in the UCC shall have the meanings set forth

in the UCC. For purposes hereof, the term “UCC” means the Uniform Commercial Code as the

same may, from time to time, be in effect in the State of New York; provided, that in the event

that, by reason of mandatory provisions of law, any or all of the attachment, perfection or

priority of, or remedies with respect to, the Agent’s security interest in any Collateral is governed

by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York,

the term “UCC” shall mean the Uniform Commercial Code as in effect in such other jurisdiction

for purposes of the provisions of this Agreement relating to such attachment, perfection, priority

or remedies and for purposes of definitions related to such provisions; provided further, that to

the extent that the UCC is used to define any term herein and such term is defined differently in

different Articles or Divisions of the UCC, the definition of such term contained in Article or

Division 9 shall govern.

2. The term “Obligations” as used herein shall mean and include all debts, liabilities

and obligations owing by each Assignor to any Creditor Party arising under, out of, or in

connection with: (i) the Securities Purchase Agreement and (ii) the Related Agreements referred

to in the Securities Purchase Agreement (the Securities Purchase Agreement and each Related

Agreement, as each may be amended, modified, restated or supplemented from time to time,

collectively, referred to herein as the “Documents”), and in connection with any documents,

instruments or agreements relating to or executed in connection with the Documents or any

documents, instruments or agreements referred to therein or otherwise, and in connection with

any other indebtedness, obligations or liabilities of each such Assignor to any Creditor Party,

whether now existing or hereafter arising, direct or indirect, liquidated or unliquidated, absolute

or contingent, due or not due and whether under, pursuant to or evidenced by a note, agreement,

guaranty, instrument or otherwise, including, without limitation, obligations and liabilities of

each Assignor for post-petition interest, fees, costs and charges that accrue after the

commencement of any case by or against such Assignor under any bankruptcy, insolvency,

reorganization or like proceeding (collectively, the “Debtor Relief Laws”) in each case,

irrespective of the genuineness, validity, regularity or enforceability of such Obligations, or of

any instrument evidencing any of the Obligations or of any collateral therefor or of the existence

or extent of such collateral, and irrespective of the allowability, allowance or disallowance of any

or all of the Obligations in any case commenced by or against any Assignor under Title 11,

United States Code, including, without limitation, obligations or indebtedness of each Assignor

for post-petition interest, fees, costs and charges that would have accrued or been added to the

Obligations but for the commencement of such case

3. Each Assignor hereby jointly and severally represents, warrants and covenants to

Agent, for the benefit of the Creditor Parties, that:

(a) it is a corporation, partnership or limited liability company, as the case

may be, validly existing, in good standing and organized under the

respective laws of its jurisdiction of organization set forth on Schedule A,

and each Assignor will provide the Agent thirty (30) days’ prior written

notice of any change in any of its respective jurisdiction of organization;

(b) its legal name is as set forth in its Certificate of Incorporation or other

organizational document (as applicable) as amended through the date

hereof and as set forth on Schedule A attached hereto, and it will provide

the Agent thirty (30) days’ prior written notice of any change in its legal

name;

Schedule A hereto, and it will provide the Agent thirty (30) days’ prior

written notice of any change in any of its organizational identification

number;

(d) it is the lawful owner of its respective Collateral and it has the sole right to

grant a security interest therein and will defend the Collateral against all

claims and demands of all persons and entities;

(e) other than permitted liens identified in Schedule 4.9 of the Securities

Purchase Agreement, it will keep its Collateral free and clear of all

attachments, levies, taxes, liens, security interests and encumbrances of

every kind and nature (“Encumbrances”), except Permitted

Encumbrances;

(f) it will, at its and the other Assignors’ joint and several cost and expense,

keep the Collateral in good state of repair (ordinary wear and tear

excepted) and will not waste or destroy the same or any part thereof other

than ordinary course discarding of items no longer used or useful in its or

such other Assignors’ business;

(g) it will not, without the Agent’s prior written consent, sell, exchange, lease

or otherwise dispose of the Collateral, whether by sale, lease or otherwise,

except for the sale of inventory in the ordinary course of business and

except for the disposition or transfer in the ordinary course of business

during any fiscal year of obsolete and worn-out equipment or equipment

no longer necessary for its ongoing needs, having an aggregate fair market

value of not more than $100,000 and only to the extent that:

(i) the proceeds of any such disposition are used to acquire

replacement Collateral which is subject to the Agent’s first priority

perfected security interest, or are used to repay the Obligations or

to pay general corporate expenses; and

(ii) following the occurrence of an Event of Default which continues to

exist the proceeds of which are remitted to the Agent to be held as

cash collateral for the Obligations;

(h) it will insure or cause the Collateral to be insured in the Agent’s name

against loss or damage by fire, theft, burglary, pilferage, loss in transit and

such other hazards in amounts and coverage consistent and in accordance

with industry practice under policies by insurers reasonably acceptable to

the Agent and all premiums thereon shall be paid by such Assignor and

the policies delivered to the Agent. If any such Assignor fails to do so, the

Agent may procure such insurance and the cost thereof shall be promptly

reimbursed by the Assignors, jointly and severally, and shall constitute

Obligations;

(i) it will at all reasonable times and upon at least (1) day’s prior notice allow

the Creditor Parties or their respective representatives free access to and

the right of inspection of the Collateral; and

(j) such Assignor (jointly and severally with each other Assignor) hereby

indemnifies and saves the Agent and each other Creditor Party harmless

from all loss, costs, damage, liability and/or expense, including reasonable

attorneys’ fees, that the Agent and each other Creditor Party may sustain

or incur to enforce payment, performance or fulfillment of any of the

Obligations and/or in the enforcement of this Master Security Agreement

or in the prosecution or defense of any action or proceeding either against

the Agent, any other Creditor Party or any Assignor concerning any matter

growing out of or in connection with this Master Security Agreement,

and/or any of the Obligations and/or any of the Collateral except to the

extent caused by the Agent’s or any Creditor Party’s own gross negligence

or willful misconduct (as determined by a court of competent jurisdiction

in a final and non-appealable decision).

4. The occurrence of any of the following events or conditions shall constitute an

“Event of Default” under this Master Security Agreement:

(a) an Event of Default shall have occurred under and as defined in any

Document;

(b) the loss, theft, substantial damage, destruction, sale or encumbrance to or

of any of the Collateral or the making of any levy, seizure or attachment

thereof or thereon except to the extent:

(i) such loss is covered by insurance proceeds which are used to

replace the item or repay the Agent; or

(ii) said levy, seizure or attachment does not secure indebtedness in

excess of $100,000 and such levy, seizure or attachment has been

removed or otherwise released within ten (10) days of the creation

or the assertion thereof.

5. Upon the occurrence of any Event of Default and at any time thereafter, the Agent

may declare all Obligations immediately due and payable and the Agent shall have the remedies

of a secured party provided in the UCC, this Agreement and other applicable law. Subject to the

rights of Laurus Master Fund, Ltd., upon the occurrence of any Event of Default and at any time

thereafter, the Agent will have the right to take possession of the Collateral and to maintain such

possession on its premises or to remove the Collateral or any part thereof to such other premises

as the Agent may desire. Subject to the rights of Laurus Master Fund, Ltd., upon the Agent’s

request, each Assignor shall assemble or cause the Collateral to be assembled and make it

available to the Agent at a place reasonably designated by the Agent. If any notification of

intended disposition of any Collateral is required by law, such notification, if mailed, shall be

deemed properly and reasonably given if mailed at least ten (10) business days before such

disposition, postage prepaid, addressed to the applicable Assignor either at any Assignor’s

address shown herein or at any address appearing on the Agent’s records for such Assignor. Any

proceeds of any disposition of any of the Collateral shall be applied by the Agent to the payment

of all expenses in connection with the sale of the Collateral, including reasonable attorneys’ fees

and other legal expenses and disbursements and the reasonable expenses of retaking, holding,

preparing for sale, selling, and the like, and any balance of such proceeds may be applied by the

Agent toward the payment of the Obligations in such order of application as the Agent may elect,

and each Assignor shall be liable for any deficiency. For the avoidance of doubt, following the

occurrence and during the continuance of an Event of Default, the Agent shall have the

immediate right to withdraw any and all monies contained in any deposit account in the name of

any Assignor and controlled by the Agent and apply same to the repayment of the Obligations (in

such order of application as the Agent may elect). The parties hereto each hereby agree that the

exercise by any party hereto of any right granted to it or the exercise by any party hereto of any

remedy available to it (including, without limitation, the issuance of a notice of redemption, a

borrowing request and/or a notice of default), in each case, hereunder, under the Securities

Purchase Agreement or under any other Related Agreement shall not constitute confidential

information and no party shall have any duty to the other party to maintain such information as

confidential.

6. If any Assignor defaults in the performance or fulfillment of any of the terms,

conditions, promises, covenants, provisions or warranties on such Assignor’s part to be

performed or fulfilled under or pursuant to this Master Security Agreement, the Agent may, at its

option without waiving its right to enforce this Master Security Agreement according to its

terms, immediately or at any time thereafter and without notice to any Assignor, perform or

fulfill the same or cause the performance or fulfillment of the same for each Assignor’s joint and

several account and at each Assignor’s joint and several cost and expense, and the cost and

expense thereof (including reasonable attorneys’ fees) shall be added to the Obligations and shall

be payable on demand with interest thereon at the highest rate permitted by law, or, at the

Agent’s option during the continuance of an Event of Default, debited by the Agent from any

other deposit accounts in the name of any Assignor and controlled by the Agent.

7. Each Assignor appoints the Agent, any of the Agent’s officers, employees or any

other person or entity whom the Agent may designate as its attorney, with power to execute such

documents on such Assignor’s behalf and to supply any omitted information and correct patent

errors in any documents executed by such Assignor or on such Assignor’s behalf; to file

financing statements against such Assignor covering the Collateral (and, in connection with the

filing of any such financing statements, describe the Collateral as “all assets and all personal

property, whether now owned and/or hereafter acquired” (or any substantially similar variation

thereof)); to sign such Assignor’s name on public records; and to do all other things Laurus deem

necessary to carry out this Master Security Agreement. Each Assignor hereby ratifies and

approves all acts of the attorney and neither the Agent, any Creditor Party nor the attorney will

be liable for any acts of commission or omission, nor for any error of judgment or mistake of fact

or law other than gross negligence or willful misconduct (as determined by a court of competent

jurisdiction in a final and non-appealable decision). This power being coupled with an interest,

is irrevocable so long as any Obligations remains unpaid.

8. No delay or failure on the Agent’s part in exercising any right, privilege or option

hereunder shall operate as a waiver of such or of any other right, privilege, remedy or option, and

no waiver whatever shall be valid unless in writing, signed by the Agent and then only to the

extent therein set forth, and no waiver by the Agent of any default shall operate as a waiver of

any other default or of the same default on a future occasion. The Creditor Parties’ books and

records containing entries with respect to the Obligations shall be admissible in evidence in any

action or proceeding, shall be binding upon each Assignor for the purpose of establishing the

items therein set forth (absent manifest error) and shall constitute prima facie proof thereof. The

Agent shall have the right to enforce any one or more of the remedies available to the Agent,

successively, alternately or concurrently. Each Assignor agrees to join with the Agent in

executing such documents or other instruments to the extent required by the UCC in form

satisfactory to the Agent and in executing such other documents or instruments as may be

required or deemed necessary by the Agent for purposes of affecting or continuing the Agent’s

security interest in the Collateral.

9. This Master Security Agreement shall be governed and construed in accordance

with the laws of the State of New York and cannot be terminated orally. All of the rights,

remedies, options, privileges and elections given to the Agent hereunder shall inure to the benefit

of the Agent’s successors and assigns. The term “Agent” as herein used shall include the Agent,

any parent of the Agent’s, any of the Agent’s subsidiaries and any co-subsidiaries of the Agent’s

parent, whether now existing or hereafter created or acquired, and shall bind the representatives,

successors and assigns of each Assignor. The Agent and each Assignor hereby (a) waive any

and all right to trial by jury in litigation relating to this Agreement and the transactions

contemplated hereby and each Assignor agrees not to assert any counterclaim in such litigation,

(b) submit to the nonexclusive jurisdiction of any New York State court sitting in the borough of

Manhattan, the city of New York and (c) waive any objection the Agent or each Assignor may

have as to the bringing or maintaining of such action with any such court.

10. This Master Security Agreement may be executed in any number of counterparts,

each of which shall be an original, but all of which shall constitute one instrument. Any

signature delivered by a party by facsimile or electronic transmission shall be deemed to be an

original signature hereto.

11. It is understood and agreed that any person or entity that desires to become an

Assignor hereunder, or is required to execute a counterpart of this Master Security Agreement

after the date hereof pursuant to the requirements of any Document, shall become an Assignor

hereunder by (x) executing a Joinder Agreement in form and substance satisfactory to the Agent,

(y) delivering supplements to such exhibits and annexes to such Documents as the Agent shall

reasonably request and (z) taking all actions as specified in this Master Security Agreement as

would have been taken by such Assignor had it been an original party to this Master Security

Agreement, in each case with all documents required above to be delivered to the Agent and with

all documents and actions required above to be taken to the reasonable satisfaction of the Agent.

12. All notices from the Agent to any Assignor shall be sufficiently given if mailed or
delivered to such Assignor’s address set forth below, with a copy to Pryor Cashman LLP, 410
Park Avenue, New York, New York 10022, Attention: Eric M. Hellige, Esq.

	Very truly yours,


	eLEC COMMUNICATIONS CORP.


	By: /s/ Paul H. Riss

	Name: Paul H. Riss
	Title: Chief Executive Officer
	Address:	75 South Broadway, Suite 302
		White Plains, NY 10602
	Facsimile:	914-682-0820


	VOX COMMUNICATIONS CORP.


	By: /s/ Paul H. Riss

	Name: Paul H. Riss
	Title: Chief Executive Officer
	Address:	75 South Broadway, Suite 302
		White Plains, NY 10602
	Facsimile:	914-682-0820


	AVI HOLDING CORP.


	By: /s/ Paul H. Riss

	Name: Paul H. Riss
	Title: Chief Executive Officer
	Address:	75 South Broadway, Suite 302
		White Plains, NY 10602
	Facsimile:	914-682-0820


	TELCOSOFTWARE.COM CORP.


	By: /s/ Paul H. Riss
	Name: Paul H. Riss
	Title: Chief Executive Officer
	Address:	75 South Broadway, Suite 302
		White Plains, NY 10602
	Facsimile:	914-682-0820

		LINE ONE, INC.


		By: /s/ Paul H. Riss
		Name: Paul H. Riss
		Title: Chief Executive Officer
		Address: 75 South Broadway, Suite 302
		White Plains, NY 10602
		Facsimile: 914-682-0820


		ACKNOWLEDGED:


		LV ADMINISTRATIVE SERVICES, INC.,
		as Agent


		By: Valens Capital Management, LLC, its
		investment manager

		By: /s/ Pat Regan
		Name: Pat Regan
		Title: Authorized Signatory

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