exhibit107.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

EX-10 8 exhibit107.htm exhibit107.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

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 in The Wall Street Journal from 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.

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

(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

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,

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, 10^thFloor, 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,

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; AND FURTHER 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 OR FORUM 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.

RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE,

TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL

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]

IN WITNESS WHEREOF, the Company has caused this Secured Term Note to be

signed in its name effective as of this 28^th day 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