Document:

pv104.htm

    
      

      

    

    Exhibit
10.4

     

    THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS.  THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO PERVASIP CORP. THAT
SUCH REGISTRATION IS NOT REQUIRED.

     

    THIS
NOTE IS REGISTERED WITH THE AGENT PURSUANT TO SECTION 11.4(B) OF THE PURCHASE
AGREEMENT (AS DEFINED BELOW).  TRANSFER OF ALL OR ANY PORTION OF THIS
NOTE IS PERMITTED SUBJECT TO THE PROVISIONS SET FORTH IN SUCH SECTION 11.4(B)
WHICH REQUIRE, AMONG OTHER THINGS, THAT NO TRANSFER IS EFFECTIVE UNTIL THE
TRANSFEREE IS REFLECTED AS SUCH ON THE REGISTRY MAINTAINED WITH THE AGENT
PURSUANT TO SUCH SECTION 11.4(B).

     

    AMENDED AND RESTATED SECURED
TERM NOTE

     

    FOR VALUE
RECEIVED, PERVASIP CORP. (f/k/a eLEC Communications Corp.), a New York
corporation (the “Company”), hereby promises to
pay to VALENS OFFSHORE SPV II, CORP. (the “Holder”) or its registered
assigns or successors in interest, the sum of Six Hundred Thousand Dollars
($600,000), together with any accrued and unpaid interest hereon, on September
28, 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 $600,000 Secured Term Note made by the Company in
favor of Holder on September 28, 2007.

     

    Capitalized
terms used herein without definition shall have the meanings ascribed to such
terms in that certain Securities Purchase Agreement dated as of September 27,
2007 (as amended, restated, modified and/or supplemented from time to time, the
“Purchase Agreement”)
among the Company, the Holder, each other Purchaser and LV Administrative
Services, Inc., as administrative and collateral agent for the Purchasers (the
“Agent” together with
the Purchasers, collectively, the “Creditor
Parties”).

     

     The
following terms shall apply to this Note:

     

    ARTICLE
I

     

    CONTRACT
RATE AND AMORTIZATION

     

    1.1 Contract
Rate.

     

    (a) Subject
to Sections 2.2 and 3.9, interest payable on the outstanding principal amount of
this Note (the “Principal
Amount”) 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.  The Contract
Rate shall not at any time be less than nine and three-quarters percent
(9.75%).  Interest shall be calculated on the basis of a 360 day
year.

     

    (b)    During
the period beginning on the date hereof through and including May 31, 2009, the
Company shall pay interest on the Principal Amount in kind (the “PIK Interest”).  The
PIK Interest shall accrue monthly, in arrears, commencing on June 1, 2008, and
on the first business day of each consecutive calendar month thereafter, through
and including May 31, 2009.  The PIK Interest shall be added to the
Principal Amount and payable on the Maturity Date.  At the option of
the Holder, the increased portion of the Principal Amount shall be evidenced by
a note (a “PIK Note”) in
form and substance reasonably satisfactory to the Holder; provided, however,
that such PIK Note shall not be necessary to evidence such portion of the
Principal Amount nor shall the absence of such PIK Note relieve the Company of
its obligation to pay such portion of the Principal Amount to the
Holder.

     

    (c) On and
after June 1, 2009, interest shall be payable monthly in arrears, commencing on
July 1, 2009, 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 and shall be
subject to adjustment as set forth herein.

     

    1.3 Principal
Payments.  Amortizing payments of the Principal Amount shall be
made by the Company on October 1, 2009 and on the first business day of each
succeeding month thereafter through and including the Maturity Date (each, an
“Amortization
Date”).  Subject to Article III below, commencing on the first
Amortization Date, the Company shall make monthly payments to the Holder on each
Amortization Date, each such payment in the amount of $15,000 together with any
accrued and unpaid interest on such portion of the Principal Amount plus any and
all other unpaid amounts which are then owing to the Holder under this Note, the
Purchase Agreement and/or any other Related Agreement (collectively, the “Monthly
Amount”).  Any outstanding Principal Amount together with any
accrued and unpaid interest and any and all other unpaid amounts which are then
owing by the Company to the Holder under this Note, the Purchase Agreement
and/or any other Related Agreement shall be due and payable on the Maturity
Date.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

       

       

    

    1.4 Optional
Redemption.  The Company may prepay this Note (“Optional Redemption”) by
paying to the Holder a sum of money equal to one hundred percent (100%) of the
Principal Amount outstanding at such time 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 ten (10) 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 Redemption Notice will be null and void.  If
any Notes issued pursuant to the Purchase Agreement, in addition to this Note,
are outstanding (collectively, the “Outstanding Notes”) and the
Company pursuant to this Section 1.4 elects to make an Optional Redemption, then
the Company shall take the same action with respect to all Outstanding Notes and
make such payments to all holders of Outstanding Notes on a pro rata basis based
upon the Redemption Amount of each Outstanding Note.

     

    ARTICLE
II

     

    EVENTS
OF DEFAULT

     

    2.1 Events of
Default.  The occurrence of any of the following events set
forth in this Section 2.1 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 (including, without limitation, the Subordinated Debt (as defined
below)) 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 any 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;

     

    
      
         

      

      
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    (j) The Purchase Agreement and
Related Agreements.  (i) An Event of Default shall occur under
and as defined in (A) the Purchase Agreement or any other Related Agreement, (B)
that certain Securities Purchase Agreement dated as of November 30, 2005 between
the Company and Valens Offshore SPV I, Ltd. (as assignee of Laurus Master Fund,
Ltd.) (as amended, modified or supplemented from time to time, the “November 2005 Purchase Agreement”) or any
other Related Agreement (as defined in the November 2005 Purchase
Agreement)(collectively, the “November 2005 Related Agreements”), (C) that
certain Securities Purchase Agreement dated as of May 31, 2006 (as amended,
modified and/or supplemented from time to time, the “May 2006 Purchase Agreement”) by and
between the Company and Valens Offshore SPV I, Ltd. (as assignee of Laurus
Master Fund, Ltd.) or any other Related Agreement (as defined in the May 2006
Purchase Agreement)(collectively, the “May 2006 Related Agreements”), and/or
(D) that that certain Securities Purchase Agreement dated as of the date hereof
(as amended, modified and/or supplemented from time to time, the “May 2008 Purchase Agreement” and
together with the Purchase Agreement, November 2005 Purchase Agreement and May
2006 Purchase Agreement, collectively, the “Valens Purchase Agreements”
and each a “Valens Purchase
Agreement”) by and among the Company, the purchasers from time to time
party thereto and LV Administrative Services, Inc., as administrative and
collateral agent, or any other Related Agreement (as defined in the May 2008
Purchase Agreement)(collectively, the “May 2008 Related Agreements”
and together with the Related Agreements, November 2005 Related Agreements and
May 2006 Related Agreements, collectively, the “Valens Related Agreements” and
each a “Valens Related
Agreement”), (ii) the Company or any of its Subsidiaries shall breach any
term or provision of any Valens Purchase Agreement or any other Valens 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, any Valens Purchase Agreement or any other
Valens Related Agreement, (iv) any proceeding shall be brought to challenge the
validity, binding effect of any Valens Purchase Agreement or any other Valens
Related Agreement or (v) any Valens Purchase Agreement or any other Valens
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);

     

    (k) the
occurrence of an Event of Default under and as defined in any document,
instrument or agreement by and between the Company and/or any guarantor of the
Company’s indebtedness (the “Credit Parties”) and
LV Administrative Services, Inc., as administrative and collateral agent, Valens
Offshore SPV I, Ltd. and/or Valens Offshore SPV II, Corp. (and their respective
assignees, collectively the “Creditor Parties”)
shall constitute an Event of Default under and as defined in each other
document, instrument and agreement by and between any Credit Party and any
Creditor Party;

     

    (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;

     

    (m) Failure to Deliver
Replacement Note.  The Company is required to issue a
replacement Note to the Holder and the Company shall fail to deliver such
replacement Note within seven (7) business days; or

     

    (n) Subordinated
Debt.  The Company or any of its Subsidiaries shall take or
participate in any action which would be prohibited under the provisions of any
subordination agreement governing any indebtedness for borrowed money of the
Company or any of its Subsidiaries which has been subordinated in right of
payment to the obligations hereunder (“Subordinated Debt”) or make
any payment on the Subordinated Debt to a person or entity that was not entitled
to receive such payments under the provisions of any subordination agreement
governing such Subordinated Debt.

     

    2.2 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 (1.0%) 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.

     

    2.3 Default
Payment.  Following the occurrence and during the continuance
of an Event of Default, the Agent may demand repayment in full of all
obligations and liabilities owing by the 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 Agent 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 one hundred ten
percent (110%) of the outstanding principal amount of this Note, plus accrued
but unpaid interest, all other fees then remaining unpaid, and all other amounts
payable hereunder.  The Default Payment shall be due and payable
immediately on the date that the Agent has exercised its rights pursuant to this
Section 2.3.

     

    ARTICLE
III

     

    MISCELLANEOUS

     

    3.1 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 II 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.

     

    3.2 Cumulative
Remedies.  The remedies under this Note shall be
cumulative.

     

    
      
         

      

      
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    3.3 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.

     

    3.4 Notices.  Any
notice herein required or permitted to be given shall be given in writing in
accordance with the terms of the Purchase Agreement.

     

    3.5 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.

     

    3.6 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.

     

    3.7 Cost of
Collection.  In case of the occurrence of an Event of Default
under this Note, the Company shall pay the Holder’s reasonable costs of
collection, including reasonable attorneys’ fees.

     

    3.8 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.

     

    (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 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.

     

    3.9 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.

     

    3.10 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.

     

    3.11 Security Interest and
Guarantees.  The Holder and/or LV Administrative Services,
Inc., as administrative and collateral agent, has been granted a security
interest in certain assets of the Company and its Subsidiaries, and the
obligations of the Company under this Note are guaranteed by certain
Subsidiaries of the Company, in each case, as more fully described in the Valens
Purchase Agreements and other Valens Related Agreements.

     

    
      
         

      

      
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    3.12 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.

     

    3.13 Registered
Obligation.  This Note shall be registered (and such
registration shall thereafter be maintained) as set forth in Section 11.4(b) of
the Purchase Agreement.  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) registration of such holder as an assignee
in accordance with Section 11.4(b) of the Purchase Agreement.

     

     

     

     

    [Balance
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    IN WITNESS WHEREOF, the
Company has caused this Amended and Restated Secured Term Note to be signed in
its name effective as of this 28th day of May, 2008.

     

     

     

    PERVASIP
CORP. (f/k/a eLEC Communications Corp.)

     

     

    
      	
               
      

            	
              By: /s/ Paul H.
      Riss

            

    

    
      	
               
      

            	
              Name:
      Paul H. Riss

            

    

    
      	
               
      

            	
              Title:
      Chief Executive Officer

            

    

     

    WITNESS:

     

    /s/ Lauri
Vertress

     

     

    
      
         

      

      
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-pv105.htm

    
      

      

    

    Exhibit
10.5

     

    FUNDS
ESCROW AGREEMENT

     

    This
Funds Escrow Agreement (this “Agreement”) is dated
as of May 28, 2008 among Pervasip Corp., a New York corporation (the “Company”), LV
Administrative Services, Inc., as administrative and collateral agent for the
Purchasers (as defined in the Purchase Agreement referred to below) (the “Agent”), and Loeb
& Loeb LLP (the “Escrow
Agent”).

     

    W I T N E S S E T H:

     

    WHEREAS,
the Agent has advised the Escrow Agent that the Company, the Agent and the
Purchasers have entered into a Securities Purchase Agreement (the “Purchase Agreement”)
for the sale by the Company to the Purchasers of secured term notes (the “Term
Notes”);

     

    WHEREAS,
the Company and the Agent wish to deliver to the Escrow Agent copies of the
Documents (as hereafter defined) and, following the satisfaction of all closing
conditions relating to the Documents, the Purchasers delivery of the Escrowed
Payment (as hereafter defined), in each case, to be held and released by Escrow
Agent in accordance with the terms and conditions of this Agreement;
and

     

    WHEREAS,
the Escrow Agent is willing to serve as escrow agent pursuant to the terms and
conditions of this Agreement;

     

    NOW
THEREFORE, the parties agree as follows:

     

    ARTICLE
I

     

    INTERPRETATION

     

    1.1. Definitions.  Whenever
used in this Agreement, the following terms shall have the meanings set forth
below.

     

    (a) “Agreement” means this
Agreement, as amended, modified and/or supplemented from time to time by written
agreement among the parties hereto.

     

    (b) “Closing Payments”
means, collectively, (i) the closing payment to be paid to Valens Capital
Management, LLC, an investment manager of the Creditor Parties, in the amount of
$21,000 and (ii) certain Purchasers in the aggregate amount of
$28,000.

     

    (c) “Creditor Parties”
means collectively, the Agent and the Purchasers.

     

    (d) “Disbursement Letter”
means that certain letter delivered to the Escrow Agent by the Company,
acceptable in form and substance to the Agent, setting forth wire instructions
and amounts to be funded at the Closing.

     

    (e) “Documents” means
copies of the Disbursement Letter, the Purchase Agreement and the Term
Notes.

     

    (f) “Escrowed Payment”
means $300,000.

     

    1.2. Entire
Agreement.  This Agreement constitutes the entire agreement
among the parties hereto with respect to the arrangement with the Escrow Agent
and supersedes all prior agreements, understandings, negotiations and
discussions of the parties, whether oral or written with respect to the
arrangement with the Escrow Agent.  There are no warranties,
representations and other agreements made by the parties in connection with the
arrangement with the Escrow Agent except as specifically set forth in this
Agreement.

     

    1.3. Extended
Meanings.  In this Agreement words importing the singular
number include the plural and vice versa; words importing the masculine gender
include the feminine and neuter genders.  The word “person” includes
an individual, body corporate, partnership, trustee or trust or unincorporated
association, executor, administrator or legal representative.

     

    1.4. Waivers and
Amendments.  This Agreement may be amended, modified,
superseded, cancelled, renewed or extended, and the terms and conditions hereof
may be waived, in each case only by a written instrument signed by all parties
hereto, or, in the case of a waiver, by the party waiving
compliance.  Except as expressly stated herein, no delay on the part
of any party in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any waiver on the part of any party of any right,
power or privilege hereunder preclude any other or future exercise of any other
right, power or privilege hereunder.

     

    1.5. Headings.  The
division of this Agreement into articles, sections, subsections and paragraphs
and the insertion of headings are for convenience of reference only and shall
not affect the construction or interpretation of this Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

       

    

    1.6. Law Governing this
Agreement; Consent to Jurisdiction.  THIS AGREEMENT 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.  With respect to
any suit, action or proceeding relating to this Agreement or to the transactions
contemplated hereby (“Proceedings”), each
party hereto irrevocably submits to the exclusive jurisdiction of the courts of
the County of New York, State of New York and the United States District court
located in the county of New York in the State of New York.  Each
party hereto hereby irrevocably and unconditionally (a) waives trial by jury in
any Proceeding relating to this Agreement and for any related counterclaim and
(b) waives any objection which it may have at any time to the laying of venue of
any Proceeding brought in any such court, waives any claim that such Proceedings
have been brought in an inconvenient forum and further waives the right to
object, with respect to such Proceedings, that such court does not have
jurisdiction over such party.  As between the Company and the Agent,
the prevailing party shall be entitled to recover from the other party its
reasonable attorneys’ fees and costs.  In the event that any provision
of this Agreement is determined by a court of competent jurisdiction to be
invalid or unenforceable, then the remainder of this Agreement shall not be
affected and shall remain in full force and effect.

     

    1.7. Construction.  Each
party acknowledges that its legal counsel participated in the preparation of
this Agreement 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 Agreement to favor any party against the
other.

     

    ARTICLE
II

     

    APPOINTMENT
OF AND DELIVERIES TO THE ESCROW AGENT

     

    2.1. Appointment.  The
Company and the Agent hereby irrevocably designate and appoint the Escrow Agent
as their escrow agent for the purposes set forth herein, and the Escrow Agent by
its execution and delivery of this Agreement hereby accepts such appointment
under the terms and conditions set forth herein.

     

    2.2. Copies of Documents to
Escrow Agent.  On or about the date hereof, the Agent and the
Company shall deliver to the Escrow Agent copies of the Documents executed by
such parties.

     

    2.3. Delivery of Escrowed Payment
to Escrow Agent.  Following the satisfaction of all closing
conditions relating to the Documents (other than the funding of the Escrowed
Payment), the Purchasers shall deliver to the Escrow Agent the Escrowed
Payment.  At such time, the Escrow Agent shall hold the Escrowed
Payment as agent for the Company, subject to the terms and conditions of this
Agreement.

     

    2.4. Intention to Create Escrow
Over the Escrowed Payment.  The Agent and the Company intend
that the Escrowed Payment shall be held in escrow by the Escrow Agent and
released from escrow by the Escrow Agent only in accordance with the terms and
conditions of this Agreement.

     

    ARTICLE
III

     

    RELEASE
OF ESCROW

     

    3.1. Release of
Escrow.  Subject to the provisions of Section 4.2, the Escrow
Agent shall release the Escrowed Payment from escrow as follows:

     

    (a) Upon
receipt by the Escrow Agent of (i) oral instructions from David Grin and/or
Eugene Grin (each of whom is an officer of the Agent) consenting to the release
of the Escrowed Payment from escrow in accordance with the Disbursement Letter
following the Escrow Agent’s receipt of the Escrowed Payment, (ii) the
Disbursement Letter, and (iii) the Escrowed Payment, the Escrowed Payment shall
promptly be disbursed in accordance with the Disbursement Letter.  The
Disbursement Letter shall include, without limitation, Escrow Agent’s
authorization to retain from the Escrowed Payment Escrow Agent’s fee for acting
as Escrow Agent hereunder and the Closing Payments for delivery to Valens
Capital Management, LLC in accordance with the Disbursement Letter.

     

    (b) Upon
receipt by the Escrow Agent of a final and non-appealable judgment, order,
decree or award of a court of competent jurisdiction (a “Court Order”)
relating to the Escrowed Payment, the Escrow Agent shall remit the Escrowed
Payment in accordance with the Court Order.  Any Court Order shall be
accompanied by an opinion of counsel for the party presenting the Court Order to
the Escrow Agent (which opinion shall be satisfactory to the Escrow Agent) to
the effect that the court issuing the Court Order is a court of competent
jurisdiction and that the Court Order is final and non-appealable.

     

    3.2. Acknowledgement of Company
and Agent; Disputes.  The Company and the Agent acknowledge
that the only terms and conditions upon which the Escrowed Payment are to be
released from escrow are as set forth in Sections 3 and 4 of this
Agreement.  The Company and the Agent reaffirm their agreement to
abide by the terms and conditions of this Agreement with respect to the release
of the Escrowed Payment.  Any dispute with respect to the release of
the Escrowed Payment shall be resolved pursuant to Section 4.2 or by written
agreement between the Company and Agent.

     

    
      
        
        

      

      
        - 2
-

        
          

        

      

      
        
        

      

    

     

     

    ARTICLE
IV

     

    CONCERNING
THE ESCROW AGENT

     

    4.1. Duties and Responsibilities
of the Escrow Agent.  The Escrow Agent’s duties and
responsibilities shall be subject to the following terms and
conditions:

     

    (a) The Agent
and the Company acknowledge and agree that the Escrow Agent (i) shall not be
required to inquire into whether the Agent, the Company or any other party is
entitled to receipt of any Document or all or any portion of the Escrowed
Payment; (ii) shall not be called upon to construe or review any Document or any
other document, instrument or agreement entered into in connection therewith;
(iii) shall be obligated only for the performance of such duties as are
specifically assumed by the Escrow Agent pursuant to this Agreement; (iv) may
rely on and shall be protected in acting or refraining from acting upon any
written notice, instruction, instrument, statement, request or document
furnished to it hereunder and believed by the Escrow Agent in good faith to be
genuine and to have been signed or presented by the proper person or party,
without being required to determine the authenticity or correctness of any fact
stated therein or the propriety or validity or the service thereof; (v) may
assume that any person purporting to give notice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so; (vi) shall not be responsible for the identity, authority
or rights of any person, firm or company executing or delivering or purporting
to execute or deliver this Agreement or any Document or any funds deposited
hereunder or any endorsement thereon or assignment thereof; (vii) shall not be
under any duty to give the property held by Escrow Agent hereunder any greater
degree of care than Escrow Agent gives its own similar property; and (viii) may
consult counsel satisfactory to Escrow Agent (including, without limitation,
Loeb & Loeb LLP or such other counsel of Escrow Agent’s choosing), the
opinion of such counsel to be full and complete authorization and protection in
respect of any action taken, suffered or omitted by Escrow Agent hereunder in
good faith and in accordance with the opinion of such counsel.

     

    (b) The Agent
and the Company acknowledge that the Escrow Agent is acting solely as a
stakeholder at their request and that the Escrow Agent shall not be liable for
any action taken by Escrow Agent in good faith and believed by Escrow Agent to
be authorized or within the rights or powers conferred upon Escrow Agent by this
Agreement.  The Agent and the Company hereby, jointly and severally,
indemnify and hold harmless the Escrow Agent and any of Escrow Agent’s partners,
employees, agents and representatives from and against any and all actions taken
or omitted to be taken by Escrow Agent or any of them hereunder and any and all
claims, losses, liabilities, costs, damages and expenses suffered and/or
incurred by the Escrow Agent arising in any manner whatsoever out of the
transactions contemplated by this Agreement and/or any transaction related in
any way hereto, including the fees of outside counsel and other costs and
expenses of defending itself against any claims, losses, liabilities, costs,
damages and expenses arising in any manner whatsoever out the transactions
contemplated by this Agreement and/or any transaction related in any way hereto,
except for such claims, losses, liabilities, costs, damages and expenses
incurred by reason of the Escrow Agent’s gross negligence or willful
misconduct.  The Escrow Agent shall owe a duty only to the Agent and
the Company under this Agreement and to no other person.

     

    (c) The Agent
and the Company shall jointly and severally reimburse the Escrow Agent for its
reasonable out-of-pocket expenses (including counsel fees (which counsel may be
Loeb & Loeb LLP or such other counsel of the Escrow Agent’s choosing)
incurred in connection with the performance of its duties and responsibilities
hereunder, which shall not (subject to Section 4.1(b)) exceed
$1,500.

     

    (d) The
Escrow Agent may at any time resign as Escrow Agent hereunder by giving five (5)
business days prior written notice of resignation to the Agent and the
Company.  Prior to the effective date of resignation as specified in
such notice, the Agent and Company will issue to the Escrow Agent a joint
instruction authorizing delivery of the Documents and the Escrowed Payment to a
substitute Escrow Agent selected by the Agent and the Company.  If no
successor Escrow Agent is named by the Agent and the Company, the Escrow Agent
may apply to a court of competent jurisdiction in the State of New York for
appointment of a successor Escrow Agent, and deposit the Documents and the
Escrowed Payment with the clerk of any such court, and/or otherwise commence an
interpleader or similar action for a determination of where to deposit the
same.

     

    (e) The
Escrow Agent does not have and will not have any interest in the Documents and
the Escrowed Payment, but is serving only as escrow agent, having only
possession thereof.

     

    (f) The
Escrow Agent shall not be liable for any action taken or omitted by it in good
faith and reasonably believed by it to be authorized hereby or within the rights
or powers conferred upon it hereunder, nor for action taken or omitted by it in
good faith, and in accordance with advice of counsel (which counsel may be Loeb
& Loeb LLP or such other counsel of the Escrow Agent’s choosing), and shall
not be liable for any mistake of fact or error of judgment or for any acts or
omissions of any kind except to the extent any such liability arose from its own
willful misconduct or gross negligence.

     

    (g) This
Agreement sets forth exclusively the duties of the Escrow Agent with respect to
any and all matters pertinent thereto and no implied duties or obligations shall
be read into this Agreement.

     

    (h) The
Escrow Agent shall be permitted to act as counsel for the Creditor Parties or
the Company, as the case may be, in any dispute as to the disposition of the
Documents and the Escrowed Payment, in any other dispute between the Creditor
Parties and the Company, whether or not the Escrow Agent is then holding the
Documents and/or the Escrowed Payment and continues to act as the Escrow Agent
hereunder.

     

    (i) The
provisions of this Section 4.1 shall survive the resignation of the Escrow Agent
or the termination of this Agreement.

     

    
      
        
        

      

      
        - 3
-

        
          

        

      

      
        
        

      

       

       

    

    4.2. Dispute Resolution;
Judgments.  Resolution of disputes arising under this Agreement
shall be subject to the following terms and conditions:

     

    (a) If any
dispute shall arise with respect to the delivery, ownership, right of possession
or disposition of the Documents and/or the Escrowed Payment, or if the Escrow
Agent shall in good faith be uncertain as to its duties or rights hereunder, the
Escrow Agent shall be authorized, without liability to anyone, to (i) refrain
from taking any action other than to continue to hold the Documents and the
Escrowed Payment pending receipt of a joint instruction from the Agent and the
Company, (ii) commence an interpleader or similar action, suit or proceeding for
the resolution of any such dispute; and/or (iii) deposit the Documents and the
Escrowed Payment with any court of competent jurisdiction in the State of New
York, in which event the Escrow Agent shall give written notice thereof to the
Agent and the Company and shall thereupon be relieved and discharged from all
further obligations pursuant to this Agreement.  The Escrow Agent may,
but shall be under no duty to, institute or defend any legal proceedings which
relate to the Documents and the Escrowed Payment.  The Escrow Agent
shall have the right to retain counsel if it becomes involved in any
disagreement, dispute or litigation on account of this Agreement or otherwise
determines that it is necessary to consult counsel which such counsel may be
Loeb & Loeb LLP or
such other counsel of the Escrow Agent’s choosing.

     

    (b) The
Escrow Agent is hereby expressly authorized to comply with and obey any Court
Order.  In case the Escrow Agent obeys or complies with a Court Order,
the Escrow Agent shall not be liable to the Creditor Parties, the Company or any
other person, firm, company or entity by reason of such compliance.

     

    ARTICLE
V

     

    GENERAL
MATTERS

     

    5.1. Termination.  This
escrow shall terminate upon disbursement of the Escrowed Payment in accordance
with the terms of this Agreement or earlier upon the agreement in writing of the
Agent and the Company or resignation of the Escrow Agent in accordance with the
terms hereof.

     

    5.2. Notices.  All
notices, requests, demands and other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given one
(1) day after being sent by telecopy (with copy delivered by overnight courier,
regular or certified mail):

     

    5.3. 

    
      	
              If
      to the Company, to:

            	
              Pervasip
      Corp.

              75
      South Broadway, Suite 302

              White
      Plains, NY 10601

              Attention:  Chief
      Financial Officer

              Facsimile:  914-682-0820

            
	
              With
      a copy to:

            	
              Pryor
      Cashman LLP

              410
      Park Avenue

              New
      York, NY  10022

              Attention:  Eric
      M. Hellige, Esq.

              Facsimile:  212-798-6380

            
	
              If
      to the Agent, to:

            	
              LV
      Administrative Services Corp.

              335
      Madison Avenue, 10th Floor

              New
      York, New York 10017

              Attention:  Portfolio
      Services

              Fax:  212-581-5037

            
	
              If
      to the Escrow Agent, to:

            	
              Loeb
      & Loeb LLP

              345
      Park Avenue

              New
      York, New York 10154

              Attention:  Scott
      J. Giordano, Esq.

              Fax:  (212)
      407-4990

            

    

     

    or to
such other address as any of them shall give to the others by notice made
pursuant to this Section 5.2.

     

    5.4. Interest.  The
Escrowed Payment shall not be held in an interest bearing account nor will
interest be payable in connection therewith.

     

    5.5. Assignment; Binding
Agreement.  Neither this Agreement nor any right or obligation
hereunder shall be assignable by any party without the prior written consent of
the other parties hereto.  This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective legal
representatives, successors and assigns.

     

    
      
        
        

      

      
        - 4
-

        
          

        

      

      
        
        

      

       

       

    

    5.6. Invalidity.  In
the event that any one or more of the provisions contained herein, or the
application thereof in any circumstance, is held invalid, illegal, or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be in any way impaired thereby, it being
intended that all of the rights and privileges of the parties hereto shall be
enforceable to the fullest extent permitted by law.

     

    5.7. Counterparts/Execution.  This
Agreement may be executed in any number of counterparts and by different
signatories hereto on separate counterparts, each of which, when so executed,
shall be deemed an original, but all such counterparts shall constitute but one
and the same agreement.  This Agreement may be executed by facsimile
or electronic transmission.

     

    [Signature
Page to Follow]

     

     

    
      
         

      

      
        - 5
-

        
          

        

      

      
         

      

    

     

    IN
WITNESS WHEREOF, the parties hereto have executed this Funds Escrow Agreement as
of the date and year first above written.

     

    COMPANY:

     

    PERVASIP
CORP.

     

    
      	
               
      

            	
              By:
      /s/ Paul H.
      Riss

            

    

    
      	
               
      

            	
              Name:
      Paul H. Riss

            

    

    
      	
               
      

            	
              Title:
      Chief Executive Officer

            

    

     

     

    AGENT:

     

    LV
ADMINISTRATIVE SERVICES CORP.,

     

    as
Agent

     

    
      	 	By:
      /s/ Patrick
      Regan
	
               
      

            	
              Name:
      Patrick Regan

            

    

    
      	
               
      

            	
              Title:
      Authorized Signatory

            

    

     

     

    ESCROW
AGENT:

     

    LOEB
& LOEB LLP

     

    
      	 	
              By:
      /s/ Loeb &
      Loeb

            
	
               
      

            	
              Name:

            

    

    
      	
               
      

            	
              Title:

            

    

     

     

    
      
         

      

      
        - 6
-

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