SECURED TERM NOTE

Exhibit 10.3

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 ELEC COMMUNICATIONS
CORP. THAT SUCH REGISTRATION IS NOT REQUIRED.

THIS NOTE IS REGISTERED WITH THE COMPANY 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).

SECURED TERM NOTE

FOR VALUE RECEIVED, 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.

Capitalized terms used herein without definition shall have the meanings ascribed
to 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 “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 Secured Term Note (this “Note”):

ARTICLE I
CONTRACT RATE AND AMORTIZATION

1.1 Contract Rate. 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 (i) calculated on the basis of a 360 day
year, and (ii) 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 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.

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;

(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);

(k) The Laurus Notes. (i) An Event of Default shall occur under and

as defined in that certain Third Amended and Restated Term Note made by the Company in

favor of Laurus Master Fund, Ltd. (“Laurus”) in the aggregate amount of $1,966,667 dated as of

the date hereof and that certain Amended and Restated Term Note made by the Company in

favor of Laurus Master Fund, Ltd. in the aggregate amount of $1,428,000 dated as of the date

hereof (collectively, the “Laurus Notes”), (ii) the Company or any of its Subsidiaries shall

breach any term or provision of any Laurus Note 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

Laurus Notes, (iv) any proceeding shall be brought to challenge the validity, binding effect of the

Laurus Notes or (v) any Laurus Note 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);

(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.

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.

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 Agent, for the ratable benefit of the

Creditor Parties, has been granted a security interest in certain assets of the Company as more

fully described in the Master Security Agreement and the other Related Agreements. The

obligations of the Borrower under this Note are guaranteed by certain subsidiaries of the

Company pursuant to a Guaranty dated as of the date hereof.

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 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 28th day of September, 2007.

eLEC Communications Corp.

By: Xxxx X. Xxxx

Name: Xxxx X. Xxxx

Title: Chief Executive Officer

WITNESS:

/s/ Xxxxx Xxxxxxxx

SIGNATURE PAGE TO

VALENS SECURED TERM NOTE

Document Metadata

Table of Contents

SECURED TERM NOTE

Document Metadata