exv10w53



 





EXHIBIT 10.53




ACCERIS COMMUNICATIONS INC.




SECURITIES PURCHASE AGREEMENT




October 14, 2004




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TABLE OF CONTENTS




	 	 	 	 	 
	 	 	 	 	Page
	1.	 	Agreement to Sell and Purchase
	 	1
	2.	 	Fees and Warrant
	 	1
	3.	 	Closing, Delivery and Payment
	 	2
	 	 	3.1 Closing
	 	2
	 	 	3.2 Delivery
	 	2
	4.	 	Representations and Warranties of the Company
	 	2
	 	 	4.1 Organization, Good Standing and Qualification
	 	2
	 	 	4.2 Subsidiaries
	 	3
	 	 	4.3 Capitalization; Voting Rights
	 	3
	 	 	4.4 Authorization; Binding Obligations
	 	4
	 	 	4.5 Liabilities
	 	5
	 	 	4.6 Agreements; Action
	 	5
	 	 	4.7 Obligations to Related Parties
	 	5
	 	 	4.8 Changes
	 	6
	 	 	4.9 Title to Properties and Assets; Liens, Etc
	 	7
	 	 	4.10 Intellectual Property
	 	8
	 	 	4.11 Compliance with Other Instruments
	 	8
	 	 	4.12 Litigation
	 	9
	 	 	4.13 Tax Returns and Payments
	 	9
	 	 	4.14 Employees
	 	9
	 	 	4.15 Registration Rights and Voting Rights
	 	10
	 	 	4.16 Compliance with Laws; Permits
	 	10
	 	 	4.17 Environmental and Safety Laws
	 	10
	 	 	4.18 Valid Offering
	 	11
	 	 	4.19 Full Disclosure
	 	11
	 	 	4.20 Insurance
	 	11
	 	 	4.21 SEC Reports
	 	11
	 	 	4.22 Listing
	 	12
	 	 	4.23 No Integrated Offering
	 	12
	 	 	4.24 Stop Transfer
	 	12







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TABLE OF CONTENTS

(Continued)




	 	 	 	 	 
	 	 	 	 	Page
	 	 	4.25 Dilution
	 	12
	 	 	4.26 Patriot Act
	 	12
	5.	 	Representations and Warranties of the Purchaser
	 	13
	 	 	5.1 No Shorting
	 	13
	 	 	5.2 Requisite Power and Authority
	 	13
	 	 	5.3 Investment Representations
	 	13
	 	 	5.4 Purchaser Bears Economic Risk
	 	14
	 	 	5.5 Acquisition for Own Account
	 	14
	 	 	5.6 Purchaser Can Protect Its Interest
	 	14
	 	 	5.7 Accredited Investor
	 	14
	 	 	5.8 Legends
	 	14
	6.	 	Covenants of the Company
	 	15
	 	 	6.1 Stop-Orders
	 	15
	 	 	6.2 Listing
	 	15
	 	 	6.3 Market Regulations
	 	16
	 	 	6.4 Reporting Requirements
	 	16
	 	 	6.5 Use of Funds
	 	16
	 	 	6.6 Access to Facilities
	 	16
	 	 	6.7 Taxes
	 	16
	 	 	6.8 Insurance
	 	17
	 	 	6.9 Intellectual Property
	 	18
	 	 	6.10 Properties
	 	18
	 	 	6.11 Confidentiality
	 	18
	 	 	6.12 Required Approvals
	 	18
	 	 	6.13 Reissuance of Securities
	 	19
	 	 	6.14 Opinion
	 	19
	 	 	6.15 Margin Stock
	 	19
	7.	 	Covenants of the Purchaser
	 	20
	 	 	7.1 Confidentiality
	 	20
	 	 	7.2 Non-Public Information
	 	20





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TABLE OF CONTENTS

(Continued)




	 	 	 	 	 
	 	 	 	 	Page
	8.	 	Covenants of the Company and Purchaser
Regarding Indemnification
	 	20
	 	 	8.1 Company Indemnification
	 	20
	 	 	8.2 Purchaser’s Indemnification
	 	20
	9.	 	Conversion of Convertible Note
	 	20
	 	 	9.1 Mechanics of Conversion
	 	20
	10.	 	Registration Rights
	 	22
	 	 	10.1 Registration Rights Granted
	 	22
	11.	 	Miscellaneous
	 	22
	 	 	11.1 Governing Law
	 	22
	 	 	11.2 Survival
	 	22
	 	 	11.3 Successors
	 	23
	 	 	11.4 Entire Agreement
	 	23
	 	 	11.5 Severability
	 	23
	 	 	11.6 Amendment and Waiver
	 	23
	 	 	11.7 Delays or Omissions
	 	23
	 	 	11.8 Notices
	 	23
	 	 	11.9 Attorneys’ Fees
	 	24
	 	 	11.10 Titles and Subtitles
	 	25
	 	 	11.11 Facsimile Signatures; Counterparts
	 	25
	 	 	11.12 Broker’s Fees
	 	25
	 	 	11.13 Construction
	 	25







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LIST OF EXHIBITS




	 	 	 
	Form of Convertible Term Note

	 	Exhibit A
	Form of Warrant

	 	Exhibit B
	Form of Escrow Agreement

	 	Exhibit C







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THIS AGREEMENT IS SUBJECT TO THE TERMS AND PROVISIONS OF (i) THAT CERTAIN
INTERCREDITOR AGREEMENT DATED OF EVEN DATE HEREWITH BY AND AMONG THE COMPANY,
THE PURCHASER AND WELLS FARGO FOOTHILL, INC. AND (ii) ANY REPLACEMENT OR
SUCCESSOR INTERCREDITOR AGREEMENT WITH ANY REPLACEMENT OR SUCCESSOR SENIOR
CREDITOR.




SECURITIES PURCHASE AGREEMENT




     THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered
into as of October 14, 2004, by and between ACCERIS COMMUNICATIONS INC., a
Florida corporation (the “Company”), and Laurus Master Fund, Ltd., a Cayman
Islands company (the “Purchaser”).



RECITALS




     WHEREAS, the Company has authorized the sale to the Purchaser of a
Convertible Term Note in the original principal amount of Five Million Dollars
($5,000,000) (as amended, modified or supplemented from time to time, the
“Note”), which Note is convertible into shares of the Company’s common stock,
$0.01 par value per share (the “Common Stock”) at the initial fixed conversion
price per share of Common Stock as set forth in the Note (“Fixed Conversion
Price”);



     WHEREAS, the Company wishes to issue a warrant to the Purchaser to
purchase up to 1,000,000 shares of the Company’s Common Stock (subject to
adjustment as set forth therein) in connection with Purchaser’s purchase of the
Note;



     WHEREAS, Purchaser desires to purchase the Note and the Warrant (as
defined in Section 2) on the terms and conditions set forth herein;



     WHEREAS, the Company desires to issue and sell the Note and Warrant to
Purchaser on the terms and conditions set forth herein;



     WHEREAS, the Company has a secured senior credit facility in place as of
the date hereof pursuant to that certain Loan and Security Agreement by and
among the Company, Acceris Communications Corp. and Wells Fargo Foothill, Inc.,
a California corporation (“Foothill”), dated as of December 10, 2001, as
amended from time to time through the date hereof (as amended through the date
hereof, the “Foothill Loan”); and



     WHEREAS, the Company and the Purchaser desire to enter into an
Intercreditor Agreement by and among the Company, the Purchaser and Foothill of
even date herewith to subordinate this Agreement, the Note and the Related
Agreements (as defined below) to the Foothill Loan,



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AGREEMENT




     NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises, representations, warranties and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:



     1. Agreement to Sell and Purchase; Subordination.



          (a) Pursuant to the terms and conditions set forth in this Agreement, on
the Closing Date (as defined in Section 3), the Company agrees to sell to the
Purchaser, and the Purchaser hereby agrees to purchase from the Company, a Note
in the aggregate principal amount of $5,000,000 convertible in accordance with
the terms thereof into shares of the Company’s Common Stock in accordance with
the terms of the Note and this Agreement. The Note purchased on the Closing
Date shall be known as the “Offering.” A form of the Note is annexed hereto as
Exhibit A. The Note will mature on the Maturity Date (as defined in the Note).
Collectively, the Note and Warrant and Common Stock issuable in payment of the
Note, upon conversion of the Note and upon exercise of the Warrant are referred
to as the “Securities.”



          (b) The Purchaser acknowledges and agrees that this Agreement, the Note
and the other Related Agreements (as defined below) shall be subordinate to the
Foothill Loan, pursuant to that certain Intercreditor Agreement among the
Company (and/or Acceris Communications Corp.), the Purchaser and Foothill of
even date herewith (the “Foothill Intercreditor Agreement”). The term “Senior
Debt” as used herein shall refer to (i) the Foothill Loan and all obligations
of the Company and/or Acceris Communications Corp. to Foothill in connection
therewith and (ii) any replacement or successor senior credit facility of the
Company and/or Acceris Communications Corp. in the aggregate principal amount
of up to $18 million, with interest to accrue thereon at a rate not to exceed
10% per annum. The term “Intercreditor Agreement” as used herein shall refer
to (i) the Foothill Intercreditor Agreement and (ii) the intercreditor
agreement to be entered into in connection with any subsequent Senior Debt,
having subordination and security provisions not materially more restrictive
upon the Purchaser than those contained in the Foothill Intercreditor
Agreement. The term “Senior Creditor” as used herein shall refer to (i)
Foothill and (ii) any subsequent lender of Senior Debt.



     2. Fees and Warrant. On the Closing Date:




     (a) The Company will issue and deliver to the Purchaser a Warrant to
purchase up to 1,000,000 shares of Common Stock in connection with the
Offering (as amended, modified or supplemented from time to time, the
“Warrant”) pursuant to Section 1 hereof. The Warrant must be delivered on
the Closing Date. A form of Warrant is annexed hereto as Exhibit B. All
the representations, covenants, warranties, undertakings, and
indemnification, and other rights made or granted to or for the benefit
of the Purchaser by the Company hereunder are hereby also made and
granted in respect of the Warrant and shares of the Company’s Common
Stock issuable upon exercise of the Warrant (the “Warrant Shares”).



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     (b) Subject to the terms of Section 2(d) below, the Company shall
pay to Laurus Capital Management, LLC, the manager of the Purchaser, a
closing payment in an amount equal to three and nine tenths percent
(3.90%) of the original principal amount of the Note. The foregoing fee
is referred to herein as the “Closing Payment.”




     (c) The Company shall reimburse the Purchaser for its reasonable
expenses (including legal fees and expenses) incurred in connection with
the preparation and negotiation of this Agreement and the Related
Agreements (as hereinafter defined), and expenses incurred in connection
with the Purchaser’s due diligence review of the Company and its
Subsidiaries (as defined in Section 4.2) and all related matters. Amounts
required to be paid under this Section 2(c) will be paid on the Closing
Date and shall not exceed $44,500 in the aggregate for such expenses
referred to in this Section 2(c).




     (d) The Closing Payment and the expenses referred to in the
preceding clause (c) (net of deposits previously paid by the Company)
shall be paid at closing out of funds held pursuant to the Escrow
Agreement (as defined below) and a disbursement letter (the “Disbursement
Letter”).



     3. Closing, Delivery and Payment.



          3.1 Closing. Subject to the terms and conditions herein, the
closing of the transactions contemplated hereby (the “Closing”), shall take
place on the date hereof, at such time or place as the Company and Purchaser
may mutually agree (such date is hereinafter referred to as the “Closing
Date”).



          3.2 Delivery. Pursuant to the Escrow Agreement, at the Closing on
the Closing Date, the Company will deliver to the Purchaser, among other
things, a Note in the form attached as Exhibit A representing the original
principal amount of $5,000,000 and a Warrant in the form attached as Exhibit B
in the Purchaser’s name representing 1,000,000 Warrant Shares and the Purchaser
will deliver to the Company, among other things, the amounts set forth in the
Disbursement Letter by certified funds or wire transfer.



     4. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Purchaser that the representations and
warranties set forth in this Section 4 (which representations and warranties
are supplemented by the Company’s filings under the Securities Exchange Act of
1934 made prior to the date of this Agreement (collectively, the “Exchange Act
Filings”), copies of which have been provided to the Purchaser) are true,
correct and complete in all material respects as of the date hereof (except to
the extent that such representations and warranties relate solely to an earlier
date):



          4.1 Organization, Good Standing and Qualification. Each of the
Company and each of its Subsidiaries is a corporation, partnership or limited
liability company, as the case may be, duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization. Each of the
Company and each of its Subsidiaries has the corporate power and authority to
own and operate its properties and assets, and to the extent party thereto, to
execute and deliver (i) this Agreement, (ii) the Note and the Warrant to be
issued in connection with this Agreement, (iii) the Master Security Agreement
dated as of the date hereof
among the Company,



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certain Subsidiaries of the Company, the Purchaser and
the other parties thereto (as amended, modified or supplemented from time to
time, the “Master Security Agreement”), (iv) the Registration Rights Agreement
relating to the Securities dated as of the date hereof between the Company and
the Purchaser (as amended, modified or supplemented from time to time, the
“Registration Rights Agreement”), (v) the Guaranty dated as of the date hereof
made by certain Subsidiaries of the Company, Counsel Corporation and certain of
its affiliates party thereto (as amended, modified or supplemented from time to
time, the “Guaranty”), (vi) the Stock Pledge Agreement dated as of the date
hereof among the Company, certain Subsidiaries of the Company, Counsel
Corporation (US), a Delaware corporation, Counsel Communications, L.L.C., a
Delaware limited liability company, and the Purchaser (as amended, modified or
supplemented from time to time, the “Stock Pledge Agreement”), (vii) the Funds
Escrow Agreement dated as of the date hereof among the Company, the Purchaser
and the escrow agent referred to therein, substantially in the form of Exhibit
C hereto (as amended, modified or supplemented from time to time, the “Escrow
Agreement”) and (viii) all other agreements related to this Agreement and the
Note and referred to herein (the preceding clauses (ii) through (viii),
collectively, the “Related Agreements”), to issue and sell the Note and the
shares of Common Stock issuable upon conversion of the Note (the “Note
Shares”), to issue and sell the Warrant and the Warrant Shares, and to carry
out the provisions of this Agreement and the Related Agreements and to carry on
its business as presently conducted. Each of the Company and each of its
Subsidiaries is duly qualified and is authorized to do business and is in good
standing as a foreign corporation, partnership or limited liability company, as
the case may be, in all jurisdictions in which the nature of its activities and
of its properties (both owned and leased) makes such qualification necessary,
except for those jurisdictions in which failure to do so has not, or could not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the business, assets, liabilities, condition (financial or
otherwise), properties, operations or prospects of the Company, Acceris
Communications Corp. and Acceris Communications Technologies, Inc., taken
individually or as a whole (a “Material Adverse Effect”).




          4.2 Subsidiaries. Each direct and indirect Subsidiary of the
Company, the direct owner of such Subsidiary and its percentage ownership
thereof as of the date hereof, is set forth on Schedule 4.2. For the purpose
of this Agreement, a “Subsidiary” of any person or entity means (i) a
corporation or other entity whose shares of stock or other ownership interests
having ordinary voting power (other than stock or other ownership interests
having such power only by reason of the happening of a contingency) to elect a
majority of the directors of such corporation, or other persons or entities
performing similar functions for such person or entity, are owned, directly or
indirectly, by such person or entity or (ii) a corporation or other entity in
which such person or entity owns, directly or indirectly, more than 50% of the
equity interests at such time.



          4.3 Capitalization; Voting Rights.




     (a) The authorized capital stock of the Company, as of the date
hereof consists of 310,000,000 shares, of which 300,000,000 are shares of
Common Stock, par value $0.01 per share, 19,262,095 shares of which are
issued and outstanding[, and 10,000,000 are shares of preferred stock,
par value $10.00 per share of which 619 shares
of preferred stock are issued and outstanding. The authorized
capital stock of each Subsidiary of the Company is set forth on Schedule
4.3.



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     (b) Except as disclosed on Schedule 4.3, other than: (i) the shares
reserved for issuance under the Company’s stock option plans; and (ii)
shares which may be granted pursuant to this Agreement and the Related
Agreements, there are no outstanding options, warrants, rights (including
conversion or preemptive rights and rights of first refusal), proxy or
stockholder agreements, or arrangements or agreements of any kind for the
purchase or acquisition from the Company of any of its securities. Except
as disclosed on Schedule 4.3, neither the offer, issuance or sale of any
of the Note or the Warrant, or the issuance of any of the Note Shares or
Warrant Shares, nor the consummation of any transaction contemplated
hereby will result in a change in the price or number of any securities
of the Company outstanding, under anti-dilution or other similar
provisions contained in or affecting any such securities.




     (c) All issued and outstanding shares of the Company’s Common Stock:
(i) have been duly authorized and validly issued and are fully paid and
nonassessable; and (ii) were issued in compliance with all applicable
state and federal laws concerning the issuance of securities.




     (d) The rights, preferences, privileges and restrictions of the
shares of the Common Stock are as stated in the Company’s Certificate of
Incorporation (the “Charter”). The Note Shares and Warrant Shares have
been duly and validly reserved for issuance. When issued in compliance
with the provisions of this Agreement and the Company’s Charter, the
Securities will be validly issued, fully paid and nonassessable, and will
be free of any liens or encumbrances; provided, however, that the
Securities may be subject to restrictions on transfer under state and/or
federal securities laws as set forth herein or as otherwise required by
such laws at the time a transfer is proposed.



          4.4 Authorization; Binding Obligations. All corporate, partnership
or limited liability company, as the case may be, action on the part of the
Company and each of its Subsidiaries (including the respective officers and
directors) necessary for the authorization of this Agreement and the Related
Agreements, the performance of all obligations of the Company and its
Subsidiaries hereunder and under the other Related Agreements at the Closing
and, the authorization, sale, issuance and delivery of the Note and Warrant has
been taken or will be taken prior to the Closing. This Agreement and the
Related Agreements, when executed and delivered and to the extent it is a party
thereto, will be valid and binding obligations of each of the Company and each
of its Subsidiaries, enforceable against each such person in accordance with
their terms, except:




     (a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors’ rights; and




     (b) general principles of equity that restrict the availability of
equitable or legal remedies.



The sale of the Note and the subsequent conversion of the Note into Note Shares
are not and will not be subject to any preemptive rights or rights of first
refusal that have not been properly waived or complied with. The issuance of
the Warrant and the subsequent exercise of the




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Warrant for Warrant Shares are
not and will not be subject to any preemptive rights or rights of first refusal
that have not been properly waived or complied with.




          4.5 Liabilities. Neither the Company nor any of its Subsidiaries
has actual knowledge of any contingent liabilities, except (i) current
liabilities incurred in the ordinary course of business and (ii) liabilities
disclosed in any Exchange Act Filings.



          4.6 Intentionally Omitted.



          4.7 Intentionally Omitted.



          4.8 Material Adverse Effect. Except as set forth in Schedule 4.8,
all financial statements relating to the Company and its Subsidiaries that have
been delivered by the Company to the Purchaser have been prepared in accordance
with generally accepted accounting principles as in effect in the United
States, consistently applied, as of the dates thereof (except, in the case of
unaudited financial statements, for the lack of footnotes and being subject to
year-end audit adjustments) and present fairly in all material respects, the
Company’s financial condition as of the dates thereof and results of operations
for the periods then ended. Since the date of the latest financial statements
submitted to the Purchaser on or before the Closing Date, there has not been
any change in the business, prospects, operations, results of operations,
assets, liabilities or condition (financial or otherwise) of the Company which
individually or in the aggregate has had, or could reasonably be expected to
have, individually or in the aggregate a Material Adverse Effect.



          4.9 Title to Properties and Assets; Liens, Etc. Except as accrued
for and reflected in the Company’s financial statements, each of the Company
and each of its Subsidiaries has good and marketable title to its properties
and assets, and good title to its leasehold estates, in each case subject to no
mortgage, pledge, lien, lease, encumbrance or charge, other than:




     (a) those resulting from taxes which have not yet become delinquent;




     (b) minor liens and encumbrances which do not materially detract
from the value of the property subject thereto or materially impair the
operations of the Company or any of its Subsidiaries;




     (c) those that have otherwise arisen in the ordinary course of
business;




     (d) those in favor of the Senior Creditor;




     (e) after giving effect to the transactions contemplated hereby, those in
favor of the Purchaser; and




     (f) those that have arisen in connection with debt permitted by Section
6.12(e)(i), including, but not limited to those liens in favor of Counsel
Corporation, an Ontario corporation, and its affiliates.



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All facilities, machinery, equipment, fixtures, vehicles and other properties
owned, leased or used by the Company and its Subsidiaries are in good operating
condition and repair and are reasonably fit and usable for the purposes for
which they are being used. Except as set forth on Schedule 4.9, the Company
and its Subsidiaries are in compliance with all material terms of each lease to
which it is a party or is otherwise bound.




          4.10 Intellectual Property. Each of the Company and each operating
Subsidiary owns, or holds licenses in, all trademarks, trade names, copyrights,
patents, patent rights, and licenses that are necessary to the conduct of its
business as presently conducted.



          4.11 Compliance with Other Instruments. Neither the Company nor
any of its Subsidiaries is in violation or default of (x) any term of its
Charter or Bylaws, or (y) of any provision of any indebtedness, mortgage,
indenture, contract, agreement or instrument to which it is party or by which
it is bound or of any judgment, decree, order or writ, which violation or
default, in the case of this clause (y), has had, or could reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect. Except as set forth in Schedule 4.11, the execution, delivery and
performance of and compliance with this Agreement and the Related Agreements to
which it is a party, and the issuance and sale of the Note by the Company and
the other Securities by the Company each pursuant hereto and thereto, will not,
with or without the passage of time or giving of notice, result in any such
material violation, or be in conflict with or constitute a default under any
such term or provision, or result in the creation of any mortgage, pledge,
lien, encumbrance or charge upon any of the properties or assets of the Company
or any of its Subsidiaries (other than in favor of the Purchaser pursuant to
the Master Security Agreement and Stock Pledge) or the suspension, revocation,
impairment, forfeiture or nonrenewal of any permit, license, authorization or
approval applicable to the Company, its business or operations or any of its
assets or properties.



          4.12 Litigation. Except as set forth on Schedule 4.12 hereto,
there is no action, suit, proceeding or investigation pending or, to the
Company’s knowledge, currently threatened against the Company or any of its
Subsidiaries that prevents the Company or any of its Subsidiaries from entering
into this Agreement or the other Related Agreements, or from consummating the
transactions contemplated hereby or thereby, or which has had, or could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. Except as set forth on Schedule 4.12 hereto, there is
no action, suit, proceeding or investigation by the Company or any of its
Subsidiaries currently pending or which the Company or any of its Subsidiaries
presently intends to initiate where the amount in controversy exceeds $600,000.



          4.13 Tax Returns and Payments. Each of the Company and each of its
Subsidiaries has timely filed all tax returns (federal, state and local)
required to be filed by it in all material respects. All taxes shown to be due
and payable on such returns, any assessments imposed, and all other taxes due
and payable by the Company or any of its Subsidiaries on or
before the Closing, have been paid, or will be paid prior to the time they
become delinquent, in all material respects. Neither the Company nor any of
its Subsidiaries has been advised:




     (a) that any of its returns, federal, state or other, have been or
are being audited as of the date hereof; or



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     (b) of any deficiency in assessment or proposed judgment to its
federal, state or other taxes.



The Company has no knowledge of any liability of any tax to be imposed upon its
properties or assets as of the date of this Agreement that is not adequately
provided for.




          4.14 Employee Benefits. None of the Company, any of its
Subsidiaries or any of their ERISA Affiliates (as defined in the Foothill Loan)
maintains or contributes to any Benefit Plan (as defined in the Foothill Loan).



          4.15 Registration Rights and Voting Rights. Except as set forth on
Schedule 4.15 and except as disclosed in Exchange Act Filings, neither the
Company nor any of its Subsidiaries is presently under any obligation, and
neither the Company nor any of its Subsidiaries has granted any rights, to
register any of the Company’s or its Subsidiaries’ presently outstanding
securities or any of its securities that may hereafter be issued. Except as
set forth on Schedule 4.15 and except as disclosed in Exchange Act Filings, to
the Company’s knowledge, no stockholder of the Company or any of its
Subsidiaries has entered into any agreement with respect to the voting of
equity securities of the Company or any of its Subsidiaries.



          4.16 Compliance with Laws; Permits. Except as set forth on
Schedule 4.16, neither the Company nor any of its Subsidiaries is in violation
of any applicable statute, rule, regulation, order or restriction of any
domestic or foreign government or any instrumentality or agency thereof in
respect of the conduct of its business or the ownership of its properties which
has had, or could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect. No governmental orders, permissions,
consents, approvals or authorizations are required to be obtained and no
registrations or declarations are required to be filed in connection with the
execution and delivery of this Agreement or any other Related Agreement and the
issuance of any of the Securities, except such as has been duly and validly
obtained or filed, or with respect to any filings that must be made after the
Closing, as will be filed in a timely manner. Each of the Company and its
Subsidiaries has all material franchises, permits, licenses and any similar
authority necessary for the conduct of its business as now being conducted by
it, the lack of which could, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.



          4.17 Environmental and Safety Laws. To the Company’s knowledge,
neither the Company nor any of its Subsidiaries is in violation of any
applicable statute, law or regulation relating to the environment or
occupational health and safety, and to its knowledge, no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation. To the Company’s knowledge, except as set forth on Schedule
4.17, no Hazardous Materials (as defined below) are used or have been used,
stored, or disposed of by the
Company or any of its Subsidiaries or, to the Company’s knowledge, by any
other person or entity on any property owned, leased or used by the Company or
any of its Subsidiaries. For the purposes of the preceding sentence, “Hazardous
Materials” shall mean:




     (a) materials which are listed or otherwise defined as “hazardous”
or “toxic” under any applicable local, state, federal and/or foreign laws
and regulations that govern



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the existence and/or remedy of contamination
on property, the protection of the environment from contamination, the
control of hazardous wastes, or other activities involving hazardous
substances, including building materials; or




     (b) any petroleum products or nuclear materials.



          4.18 Valid Offering. Assuming the accuracy of the representations
and warranties of the Purchaser contained in this Agreement, the offer, sale
and issuance of the Securities will be exempt from the registration
requirements of the Securities Act of 1933, as amended (the “Securities Act”),
and will have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of
all applicable state securities laws.



          4.19 Full Disclosure. Each of the Company and each of its
Subsidiaries has provided the Purchaser with all information requested by the
Purchaser in connection with its decision to purchase the Note and Warrant,
including all information the Company and its Subsidiaries believe is
reasonably necessary to make such investment decision. Neither this Agreement,
the Related Agreements, the exhibits and schedules hereto and thereto nor any
other document delivered by the Company or any of its Subsidiaries to Purchaser
or its attorneys or agents in connection herewith or therewith or with the
transactions contemplated hereby or thereby, contain any untrue statement of a
material fact nor omit to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances in which
they are made, not misleading. Any financial projections and other estimates
provided to the Purchaser by the Company or any of its Subsidiaries were based
on the Company’s and its Subsidiaries’ experience in the industry and on
assumptions of fact and opinion as to future events which the Company or any of
its Subsidiaries, at the date of the issuance of such projections or estimates,
believed to be reasonable, it being understood and acknowledged by the
Purchaser that projections and estimates are subject to significant
uncertainties and contingencies beyond the Company’s control and that no
assurances can be given that such projections will be realized.



          4.20 Insurance. Each of the Company and each of its Subsidiaries
has general commercial, product liability, fire and casualty insurance policies
with coverages which the Company believes are customary for companies similarly
situated to the Company and its Subsidiaries in the same or similar business.



          4.21 SEC Reports. Except as set forth on Schedule 4.21, the
Company has filed all proxy statements, reports and other documents required to
be filed by it under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). Except as set forth on Schedule 4.21, the Company’s Annual
Report on Form 10-KSB for its fiscal year ended December 31, 2003, each of its
Quarterly Reports on Form 10-QSB for its fiscal quarters ended
March 31, 2004 and June 30, 2004 and the Form 8-K filings which it has
made during the fiscal year 2004 to date (collectively, the “SEC Reports”),
each was, at the time of its respective filing, in substantial compliance with
the requirements of its respective form and none of the SEC Reports, nor the
financial statements (and notes thereto) included in the SEC Reports, as of
their respective filing dates, contained any untrue statement of a material
fact or omitted to state a



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material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.




          4.22 Quotation. The Company’s Common Stock is quoted on the
Over-the-Counter Bulletin Board (OTCBB) (the “Principal Market”). Except as
set forth on Schedule 4.22, the Company has not received any notice that its
Common Stock will cease to be quoted on the OTCBB or that its Common Stock does
not meet all requirements for continued quotation.



          4.23 No Integrated Offering. Neither the Company, nor any of its
Subsidiaries or affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or solicited
any offers to buy any security under circumstances that would cause the
offering of the Securities pursuant to this Agreement or any of the Related
Agreements to be integrated with prior offerings by the Company for purposes of
the Securities Act which would prevent the Company from selling the Securities
pursuant to Rule 506 under the Securities Act, or any applicable
exchange-related stockholder approval provisions, nor will the Company or any
of its affiliates or Subsidiaries take any action or steps that would cause the
offering of the Securities to be integrated with other offerings.



          4.24 Stop Transfer. The Securities are restricted securities as of
the date of this Agreement. Neither the Company nor any of its Subsidiaries
will issue any stop transfer order or other order impeding the sale and
delivery of any of the Securities at such time as the Securities are registered
for public sale or an exemption from registration is available, except as
required by state and federal securities laws.



          4.25 Dilution. The Company specifically acknowledges that its
obligation to issue the shares of Common Stock upon conversion of the Note and
exercise of the Warrant is binding upon the Company and enforceable regardless
of the dilution such issuance may have on the ownership interests of other
shareholders of the Company.



          4.26 Patriot Act. The Company certifies that, to the best of
Company’s knowledge, neither the Company nor any of its Subsidiaries has been
designated, and is not owned or controlled, by a “suspected terrorist” as
defined in Executive Order 13224. The Company hereby acknowledges that the
Purchaser seeks to comply with all applicable laws concerning money laundering
and related activities. In furtherance of those efforts, the Company hereby
represents, warrants and agrees that: (i) none of the cash or property that
the Company or any of its Subsidiaries will pay or will contribute to the
Purchaser has been or shall be derived from, or related to, any activity that
is deemed criminal under United States law; and (ii) no contribution or payment
by the Company or any of its Subsidiaries to the Purchaser, to the extent that
they are within the Company’s and/or its Subsidiaries’ control shall cause the
Purchaser to be in violation of the United States Bank Secrecy Act, the United
States International Money Laundering Control Act of 1986 or the United States
International Money
Laundering Abatement and Anti-Terrorist Financing Act of 2001. The
Company shall promptly notify the Purchaser if any of these representations
ceases to be true and accurate regarding the Company or any of its
Subsidiaries. The Company agrees to provide the Purchaser any additional
information regarding the Company or any of its Subsidiaries that the Purchaser
deems necessary or convenient to ensure compliance with all applicable laws
concerning money laundering and similar activities. The Company understands
and agrees that if at any time it is



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finally determined by a court of competent
jurisdiction or other appropriate governmental authority that any of the
foregoing representations are incorrect in any material respect or incorrect
such that the Purchaser is adversely affected, or if otherwise required by
applicable law or regulation related to money laundering similar activities,
the Purchaser may seek appropriate and reasonably necessary relief to ensure
compliance with applicable law or regulation, including, but not limited to,
segregation and/or redemption of the Purchaser’s investment in the Company.
The Company further understands that the Purchaser may release confidential
information about the Company and its Subsidiaries and, if applicable, any
underlying beneficial owners, to proper governmental authorities if the
Purchaser, in its good faith, reasonable discretion, determines that it is in
the best interests of the Purchaser in light of relevant rules and regulations
under the laws set forth in subsection (ii) above.




     5. Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Company as follows (such representations
and warranties do not lessen or obviate the representations and warranties of
the Company set forth in this Agreement):



          5.1 No Shorting. The Purchaser or any of its affiliates and
investment partners has not directly engaged in, and will not and will not
cause any person or entity to directly engage in, “short sales” of the
Company’s Common Stock as long as the Note shall be outstanding.



          5.2 Requisite Power and Authority. The Purchaser has all necessary
power and authority under all applicable provisions of law and its governing
documents and operating agreements, as applicable, to execute and deliver this
Agreement and the Related Agreements and to carry out their provisions. All
corporate action on Purchaser’s part required for the lawful execution and
delivery of this Agreement and the Related Agreements have been or will be
effectively taken prior to the Closing. Upon their execution and delivery, this
Agreement and the Related Agreements will be valid and binding obligations of
Purchaser, enforceable in accordance with their terms, except:




     (a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors’ rights; and




     (b) as limited by general principles of equity that restrict the
availability of equitable and legal remedies.



          5.3 Investment Representations. Purchaser understands that the
Securities are being offered and sold pursuant to an exemption from
registration contained in the Securities Act based in part upon Purchaser’s
representations contained in the Agreement, including, without limitation, that
the Purchaser is an “accredited investor” within the meaning
of Regulation D under the Securities Act of 1933, as amended (the
“Securities Act”). The Purchaser confirms that it has received or has had full
access to all the information it considers necessary or appropriate to make an
informed investment decision with respect to the Note and the Warrant to be
purchased by it under this Agreement and the Note Shares and the Warrant Shares
acquired by it upon the conversion of the Note and the exercise of the Warrant,
respectively. The Purchaser further confirms that it has had an opportunity to
ask questions and receive answers from the



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Company regarding the Company’s and
its Subsidiaries’ business, management and financial affairs and the terms and
conditions of the Offering, the Note, the Warrant and the Securities and to
obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify any information furnished to the Purchaser or to which the
Purchaser had access.




          5.4 Purchaser Bears Economic Risk. The Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. The Purchaser must bear the economic
risk of this investment until the Securities are sold pursuant to: (i) an
effective registration statement under the Securities Act; or (ii) an exemption
from registration is available with respect to such sale.



          5.5 Acquisition for Own Account. The Purchaser is acquiring the
Note and Warrant and the Note Shares and the Warrant Shares for the Purchaser’s
own account for investment only, and not as a nominee or agent and not with a
view towards or for resale in connection with their distribution.



          5.6 Purchaser Can Protect Its Interest. The Purchaser represents
that by reason of its, or of its management’s, business and financial
experience, the Purchaser has the capacity to evaluate the merits and risks of
its investment in the Note, the Warrant and the Securities and to protect its
own interests in connection with the transactions contemplated in this
Agreement and the Related Agreements. Further, Purchaser is aware of no
publication of any advertisement in connection with the transactions
contemplated in the Agreement or the Related Agreements.



          5.7 Accredited Investor. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities
Act.



          5.8 Withholding Tax Exemption. The Purchaser represents that in
connection with any and all interest and principal payments made by the Company
to the Purchaser under this Agreement, the Note or any Related Agreement, the
Company is not required to withhold any U.S. withholding taxes under Section
1441 or 1442 of the U.S. Internal Revenue Code.



          5.9 Legends.




     (a) The Note shall bear substantially the following legend:



“THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS NOTE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE, STATE SECURITIES LAWS. THIS NOTE AND THE COMMON
STOCK ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE OR SUCH
SHARES UNDER SAID ACT AND APPLICABLE STATE



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SECURITIES LAWS
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO ACCERIS
COMMUNICATIONS, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.”




     (b) The Note Shares and the Warrant Shares, if not issued by DWAC
system (as hereinafter defined), shall bear a legend which shall be in
substantially the following form until such shares are covered by an
effective registration statement filed with the SEC:



“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE STATE SECURITIES LAWS. THESE SHARES MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
SECURITIES ACT AND APPLICABLE STATE LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO ACCERIS COMMUNICATIONS
INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”




     (c) The Warrant shall bear substantially the following legend:



“THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE
UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT OR THE UNDERLYING
SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ACCERIS COMMUNICATIONS, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.”



     6. Covenants of the Company. The Company covenants and agrees with
the Purchaser as follows:



          6.1 Stop-Orders. The Company will advise the Purchaser, promptly
after it receives notice of issuance by the Securities and Exchange Commission
(the “SEC”), any state securities commission or any other regulatory authority
of any stop order or of any order preventing or suspending any offering of any
securities of the Company, or of the suspension of the qualification of the
Common Stock of the Company for offering or sale in any jurisdiction, or the
initiation of any proceeding for any such purpose.



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          6.2 Quotation. The Company shall maintain the quotation of its
Common Stock on the Principal Market, and will comply in all material respects
with the requirements for continued quotation.



          6.3 Market Regulations. The Company shall take all necessary
action and proceedings and make all filings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of the
Securities to the Purchaser and, upon request of the Purchaser, shall promptly
provide copies thereof to the Purchaser.



          6.4 Reporting Requirements. The Company will timely file with the
SEC all reports relating to periods closing subsequent to the date hereof
required to be filed pursuant to the Exchange Act and refrain from terminating
its status as an issuer required by the Exchange Act to file reports thereunder
even if the Exchange Act or the rules or regulations thereunder would permit
such termination.



          6.5 Use of Funds. The Company agrees that it will use the proceeds
of the sale of the Note and the Warrant for its general working capital
purposes or its Subsidiaries general working capital purposes only.



          6.6 Access to Facilities. Each of the Company and each of its
Subsidiaries will permit any representatives designated by the Purchaser (or
any successor of the Purchaser), upon reasonable notice and during normal
business hours, at such person’s expense and accompanied by a representative of
the Company, to:




     (a) visit and inspect any of the properties of the Company or any of
its Subsidiaries;




     (b) examine the corporate and financial records of the Company or
any of its Subsidiaries (unless such examination is not permitted by
federal, state or local law or by contract) and make copies thereof or
extracts therefrom; and




     (c) discuss the affairs, finances and accounts of the Company or any
of its Subsidiaries with the directors, officers and independent
accountants of the Company or any of its Subsidiaries;



provided, however, that such visits, inspections and examinations shall not
occur more than twice per fiscal year in the aggregate in the absence of an
Event of Default. In the event that Company or any of its Subsidiaries
provides any material, non-public information to the Purchaser pursuant to this
Section 6.6 or otherwise, the Purchaser shall comply with Regulation FD and all
other applicable federal securities laws in connection therewith and, upon the
request of the Company, shall sign a confidentiality agreement.




          6.7 Taxes. Each of the Company and each of its Subsidiaries will
promptly pay and discharge, or cause to be paid and discharged, when due and
payable, all lawful taxes, assessments and governmental charges or levies
imposed upon the income, profits, property or business of the Company and its
Subsidiaries except where failure to do so would not have a Material Adverse
Effect; provided, however, that any such tax, assessment, charge or levy need
not be paid if the validity thereof shall currently be contested in good faith
by appropriate



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proceedings, as determined in the good faith business judgment
of the Company, and if the Company and/or such Subsidiary shall have set aside
on its books adequate reserves with respect thereto, and provided, further,
that the Company and its Subsidiaries will pay all such taxes, assessments,
charges or levies forthwith upon the commencement of proceedings to foreclose
any lien which may have attached as security therefor.




          6.8 Insurance. Each of the Company and its Subsidiaries will keep
its assets which are of an insurable character insured by financially sound and
reputable insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in similar business similarly situated
as the Company and its Subsidiaries; and the Company and its Subsidiaries will
maintain, with financially sound and reputable insurers, insurance against
other hazards and risks and liability to persons and property to the extent and
in the manner which the Company reasonably believes is customary for companies
in similar business similarly situated as the Company and its Subsidiaries and
to the extent available on commercially reasonable terms. The Company, and each
of its Subsidiaries that is a party to the Master Security Agreement will
jointly and severally bear the full risk of loss from any loss of any nature
whatsoever with respect to the assets pledged to the Purchaser as security for
its obligations hereunder and under the Related Agreements. At the Company’s
and each of its Subsidiaries’ joint and several cost and expense in amounts and
with carriers reasonably acceptable to Purchaser, the Company and each of its
Subsidiaries shall (i) keep all its insurable properties and properties in
which it has an interest insured against the hazards of fire, flood, sprinkler
leakage, those hazards covered by extended coverage insurance and such other
hazards, and for such amounts, as is customary in the case of companies engaged
in businesses similar to the Company’s or the respective Subsidiary’s including
business interruption insurance; (ii) maintain a bond in such amounts as is
customary in the case of companies engaged in businesses similar to the
Company’s or the respective Subsidiary’s insuring against larceny, embezzlement
or other criminal misappropriation of insured’s officers and employees who may
either singly or jointly with others at any time have access to the assets or
funds of the Company or any of its Subsidiaries either directly or through
governmental authority to draw upon such funds or to direct generally the
disposition of such assets; (iii) maintain public and product liability
insurance against claims for personal injury, death or property damage suffered
by others; (iv) maintain all such worker’s compensation or similar insurance as
may be required under the laws of any state or jurisdiction in which the
Company or the respective Subsidiary is engaged in business; and (v) furnish
Purchaser with (x) copies of all policies and evidence of the maintenance of
such policies at least thirty (30) days before any expiration date, (y)
excepting the Company’s workers’ compensation policy, endorsements to such
policies naming Purchaser as “co-insured” or “additional insured” and
appropriate loss payable endorsements in form and substance satisfactory to
Purchaser, naming Purchaser as loss payee, and (z) evidence that as to
Purchaser the insurance coverage shall not be impaired or invalidated by any
act or neglect of the Company or any Subsidiary and the insurer will provide
Purchaser with at least thirty (30) days notice prior to cancellation. The
Company and each Subsidiary shall instruct the insurance
carriers that in the event of any loss thereunder, the carriers shall make
payment for such loss to the Company and/or the Subsidiary and Purchaser
jointly. In the event that as of the date of receipt of each loss recovery
upon any such insurance, the Purchaser has not declared an Event of Default
with respect to this Agreement or any of the Related Agreements, then the
Company and/or such Subsidiary shall be permitted to direct the application of
such loss recovery proceeds toward investment in property, plant and equipment
that would comprise “Collateral” secured by



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Purchaser’s security interest
pursuant to the Master Security Agreement, with any surplus funds, at the
request of the Purchaser and subject to the Intercreditor Agreement, to be
applied toward payment of the obligations of the Company to Purchaser, provided
that any such payment shall not be subject to any prepayment penalties or
premiums. In the event that Purchaser has properly declared an Event of
Default with respect to this Agreement or any of the Related Agreements, then
all loss recoveries received by Purchaser upon any such insurance thereafter
may be applied to the obligations of the Company hereunder and under the
Related Agreements, in such order as the Purchaser may determine, subject to
the Intercreditor Agreement, provided that any such payment shall not be
subject to any prepayment penalties or premiums. Any surplus (following
satisfaction of all Company obligations to Purchaser and the Senior Creditor)
shall be paid by Purchaser to the Company or applied as may be otherwise
required by law. Any deficiency thereon shall be paid by the Company or the
Subsidiary, as applicable, to Purchaser, on demand, during the continuance of
any such Event of Default.




          6.9 Intellectual Property. Each of the Company and each of its
Subsidiaries shall use commercially reasonable efforts to maintain in full
force and effect its existence, rights and franchises and all licenses and
other rights to use Intellectual Property owned or possessed by it and
reasonably deemed to be necessary to the conduct of its business.



          6.10 Properties. Each of the Company and each of its Subsidiaries
will keep its properties in good repair, working order and condition,
reasonable wear and tear excepted, and from time to time make all needful and
proper repairs, renewals, replacements, additions and improvements thereto as
deemed necessary or desirable by the Company and such Subsidiary in the
exercise of its reasonable business judgment; and each of the Company and each
of its Subsidiaries will at all times comply with each provision of all leases
to which it is a party or under which it occupies property if the breach of
such provision could, either individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.



          6.11 Confidentiality. The Company agrees that it will not
disclose, and will not include in any public announcement, the name of the
Purchaser, unless expressly agreed to by the Purchaser or unless and until such
disclosure is required by law, a court of competent jurisdiction, applicable
regulation or statutory requirement, and then only to the extent of such
requirement. Notwithstanding the foregoing, the Company may disclose
Purchaser’s identity and the terms of this Agreement to its current and
prospective debt and equity financing sources.



          6.12 Required Approvals. For so long as twenty-five percent (25%)
of the initial principal amount of the Note is outstanding, the Company,
without the prior written consent of the Purchaser (which shall not be
unreasonably withheld, delayed or conditioned), shall not, and shall not permit
any of its Subsidiaries to:




     (a) (i) directly or indirectly declare or pay any dividends, other
than dividends paid to the Parent or any of its wholly-owned
Subsidiaries, (ii) issue any preferred stock that is manditorily
redeemable prior to the one year anniversary of Maturity Date (as defined
in the Note) or (iii) redeem any of its preferred stock or other equity
interests (other than pursuant to certain ongoing dissenters’ rights
matters in the state of Florida in connection with the restructuring of
certain debt into equity in November 2003);



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     (b) liquidate, dissolve or effect a material reorganization or
merger with any person or entity other than the Company or a Subsidiary,
provided that the Company and its Subsidiaries may engage in any such
transaction (i) where the Company is the surviving entity or (ii) that
does not materially reduce the assets of the Company and its Subsidiaries
on a consolidated basis;




     (c) become subject to (including, without limitation, by way of
amendment to or modification of) any agreement or instrument which by its
terms would (under any circumstances) restrict the Company’s or any of
its Subsidiaries right to perform the provisions of this Agreement, any
Related Agreement or any of the agreements contemplated hereby or
thereby;




     (d) engage primarily in any business other than the
telecommunications and technology business or any other business not
approved in advance by the Board of Directors of the Company;




     (e) (i) create, incur, assume or suffer to exist any indebtedness
(exclusive of trade debt and debt incurred to finance the purchase of
equipment (not in excess of the amounts permitted pursuant to the terms
of the Senior Debt) whether secured or unsecured other than (u) the
Company’s indebtedness to the Purchaser, (v) the Senior Debt, (w) any
other indebtedness set forth on Schedule 6.12(e) attached hereto, (x) any
debt that is subordinate to the Obligations and in connection with which
a subordination agreement in form and substance reasonably satisfactory
to the Purchaser is in effect therewith, (y) debt incurred in connection
with certain business development loans from the State of Pennsylvania
(not in excess of $6,000,000 in principal outstanding at any time) and
(z) any debt incurred in connection with the purchase of assets in the
ordinary course of business, or any refinancings or replacements thereof
on terms no less favorable to the Company than the indebtedness being
refinanced or replaced; (ii) cancel any debt owing to it in excess of
$50,000 in the aggregate during any 12-month period; (iii) assume,
guarantee, endorse or otherwise become directly or contingently liable in
connection with any obligations of any other Person, except the
endorsement of negotiable instruments by the Company or its Subsidiaries
for deposit or collection or similar transactions in the ordinary course
of business or guarantees of indebtedness otherwise permitted to be
outstanding pursuant to this clause (e); and




     (f) create or acquire any Subsidiary after the date hereof unless
such Subsidiary that is an operating Subsidiary becomes party to the
Master Security Agreement, the Stock Pledge Agreement and the Subsidiary
Guaranty (either by executing a counterpart thereof or an assumption or
joinder agreement in respect thereof)
and, to the extent required by the Purchaser, satisfies each
condition of this Agreement and the Related Agreements as if such
Subsidiary were a Subsidiary on the Closing Date.



          6.13 Reissuance of Securities. The Company agrees to reissue
certificates representing the Securities without the legends set forth in
Section 5.8 above at such time as:




     (a) the holder thereof is permitted to dispose of such Securities
pursuant to Rule 144(k) under the Securities Act; or



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     (b) upon resale subject to an effective registration statement after
such Securities are registered under the Securities Act.



Upon request, the Company agrees to cooperate with the Purchaser in connection
with all resales pursuant to Rule 144(d) and Rule 144(k) and provide legal
opinions reasonably and customarily required to allow such resales provided the
Company and its counsel receive reasonably requested representations from the
selling Purchaser and broker, if any.




          6.14 Opinion. On the Closing Date, the Company will deliver to the
Purchaser an opinion acceptable to the Purchaser from the Company’s external
legal counsel. The Company will provide, at the Company’s expense, such other
legal opinions in the future as are deemed reasonably necessary by the
Purchaser (and acceptable to the Purchaser) in connection with the conversion
of the Note and exercise of the Warrant.



          6.15 Margin Stock. The Company will not permit any of the proceeds
of the Note or the Warrant to be used directly or indirectly to “purchase” or
“carry” “margin stock” or to repay indebtedness incurred to “purchase” or
“carry” “margin stock” within the respective meanings of each of the quoted
terms under Regulation U of the Board of Governors of the Federal Reserve
System as now and from time to time hereafter in effect.



     7. Covenants of the Purchaser. The Purchaser covenants and agrees
with the Company as follows:



          7.1 Subordination. In furtherance of the Purchaser’s
acknowledgement and agreement that this Agreement and the Purchaser’s security
interests and the exercise of its rights and remedies hereunder are subject and
subordinate to those of the Senior Creditor under the Senior Debt, whether now
or hereafter created, Laurus agrees that it shall, at the request of the
Company, execute a subsequent Intercreditor Agreement with any replacement or
successor Senior Creditor effecting and evidencing the continuing subordination
of the obligations of the Company under this Agreement, the Note and the other
Related Agreements, provided such Intercreditor Agreement shall contain
subordination and security provisions not materially more restrictive upon the
Purchaser than those contained in the Intercreditor Agreement in effect on the
date hereof.



          7.2 Confidentiality. The Purchaser agrees that it will not
disclose, and will not include in any public announcement, the name of the
Company, unless expressly agreed to by the Company or unless and until such
disclosure is required by applicable law, a
court of competent jurisdiction, applicable regulation or statutory
requirement, and then only to the extent of such requirement.



          7.3 Non-Public Information. The Purchaser agrees not to effect any
sales in the shares of the Company’s Common Stock while in possession of
material, non-public information regarding the Company if such sales would
violate applicable securities law.



          7.4 [Intentionally Omitted].



     8. Covenants of the Company and Purchaser Regarding
Indemnification.



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          8.1 Company Indemnification. The Company agrees to indemnify, hold
harmless, reimburse and defend the Purchaser, each of the Purchaser’s officers,
directors, agents, affiliates, control persons, and principal shareholders,
against any claim, cost, expense, liability, obligation, loss or damage
(including reasonable legal fees), incurred by or imposed upon the Purchaser in
connection with any third-party claim or action which results, arises out of or
is based upon: (i) any misrepresentation by the Company or any of its
Subsidiaries or breach of any warranty by the Company or any of its
Subsidiaries in this Agreement, any other Related Agreement or in any exhibits
or schedules attached hereto or thereto; or (ii) any breach or default in
performance by Company or any of its Subsidiaries of any covenant or
undertaking to be performed by Company or any of its Subsidiaries hereunder,
under any other Related Agreement or any other agreement entered into by the
Company and/or any of its Subsidiaries and Purchaser relating hereto or
thereto. Amounts payable by the Company under this Section 8.1 are subject to
verification by the Company or an independent accountant appointed by the
Company and reasonably acceptable to the Purchaser.



          8.2 Purchaser’s Indemnification. Purchaser agrees to indemnify,
hold harmless, reimburse and defend each of the Company and each Subsidiary and
each of its respective officers, directors, agents, affiliates, control persons
and principal shareholders, at all times against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees)
incurred by or imposed upon such indemnified party in connection with any
third-party claim or action which results, arises out of or is based upon: (i)
any misrepresentation by Purchaser or breach of any warranty by Purchaser in
this Agreement or in any exhibits or schedules attached hereto or any Related
Agreement; or (ii) any breach or default in performance by Purchaser of any
covenant or undertaking to be performed by Purchaser hereunder, or any other
agreement entered into by the Company and/or any of its Subsidiaries and
Purchaser relating hereto or thereto. Amounts payable by the Purchaser under
this Section 8.2 are subject to verification by the Purchaser or an independent
accountant appointed by the Purchaser and reasonably acceptable to the Company.



          8.3 Notwithstanding the foregoing, neither the Purchaser nor the Company
shall be liable to the other for any indirect, special, incidental or
consequential damages in connection with this Section 8 or any other provision
of this Agreement, the Note or any other Related Agreement.



     9. Conversion of Convertible Note.



          9.1 Mechanics of Conversion.




     (a) Provided the Purchaser has notified the Company of the
Purchaser’s intention to sell the Note Shares and the Note Shares are
included in an effective registration statement or are otherwise exempt
from registration when sold: (i) upon the conversion of the Note or part
thereof, the Company shall, at its own cost and expense, take all
necessary action (including the issuance of an opinion of counsel
reasonably acceptable to the Purchaser following a request by the
Purchaser) to assure that the Company’s transfer agent shall issue shares
of the Company’s Common Stock in the name of the Purchaser (or its
nominee) or such other persons as designated by the Purchaser in
accordance with Section 9.1(b) hereof and in such denominations to be



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specified representing the number of Note Shares issuable upon such
conversion; and (ii) the Company warrants that no instructions other than
these instructions have been or will be given to the transfer agent of
the Company’s Common Stock and that after the Effectiveness Date (as
defined in the Registration Rights Agreement) the Note Shares issued will
be freely transferable subject to the prospectus delivery requirements of
the Securities Act, any other applicable securities laws (including, but
not limited to, those relating to the possession of material non-public
information), and the provisions of this Agreement, and will not contain
a legend restricting the resale or transferability of the Note Shares.




     (b) Purchaser will give notice of its decision to exercise its right
to convert the Note or part thereof by telecopying or otherwise
delivering an executed and completed notice of the number of shares to be
converted to the Company (the “Notice of Conversion”). The Purchaser will
not be required to surrender the Note until the Purchaser receives a
credit to the account of the Purchaser’s prime broker through the DWAC
system (as defined below), representing the Note Shares or until the Note
has been fully satisfied. Each date on which a Notice of Conversion is
telecopied or delivered to the Company in accordance with the provisions
hereof shall be deemed a “Conversion Date.” Pursuant to the terms of the
Notice of Conversion, the Company will issue instructions to the transfer
agent accompanied by an opinion of counsel within one (1) business day of
the date of the delivery to the Company of the Notice of Conversion and
shall cause the transfer agent to transmit the certificates representing
the Conversion Shares to the Holder by crediting the account of the
Purchaser’s prime broker with the Depository Trust Company (“DTC”)
through its Deposit Withdrawal Agent Commission (“DWAC”) system within
three (3) business days after receipt by the Company of the Notice of
Conversion (the “Delivery Date”).




     (c) The Company understands that a delay in the delivery of the Note
Shares in the form required pursuant to Section 9 hereof beyond the
Delivery Date could result in economic loss to the Purchaser. In the
event that the Company fails to direct its transfer agent to deliver the
Note Shares to the Purchaser via the DWAC system within the time frame
set forth in Section 9.1(b) above and the Note Shares are not delivered
to the Purchaser by the Delivery Date, as compensation to the Purchaser
for such loss, the Company agrees to pay late payments to the Purchaser
for late issuance of the Note Shares in the form required pursuant to
Section 9 hereof upon conversion of the Note in the amount equal to $500
per business day after the Delivery Date. Notwithstanding the foregoing,
the Company will not owe the Purchaser any late payments if the delay in
the delivery of the Note Shares beyond the Delivery Date is solely out of
the control of the
Company and the Company is actively trying to cure the cause of the
delay. The Company shall pay any payments incurred under this Section in
immediately available funds upon demand.



Nothing contained herein or in any document referred to herein or delivered in
connection herewith 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 or dividends required
to be paid or other charges hereunder exceed the maximum amount permitted



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 by
such law, any payments in excess of such maximum shall be credited against
amounts owed by the Company to a Purchaser and thus refunded to the Company.




     10. Registration Rights. The Company hereby grants registration
rights to the Purchaser pursuant to a Registration Rights Agreement dated as of
even date herewith between the Company and the Purchaser.



     11. Miscellaneous.



          11.1 Governing Law. THIS AGREEMENT AND EACH RELATED 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. ANY ACTION
BROUGHT BY EITHER PARTY AGAINST THE OTHER CONCERNING THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT AND EACH RELATED AGREEMENT SHALL BE BROUGHT ONLY
IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE
OF NEW YORK. BOTH PARTIES AND THE INDIVIDUALS EXECUTING THIS AGREEMENT AND THE
RELATED AGREEMENTS ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE JURISDICTION
OF SUCH COURTS AND WAIVE TRIAL BY JURY. IN THE EVENT THAT ANY PROVISION OF
THIS AGREEMENT OR ANY RELATED AGREEMENT DELIVERED IN CONNECTION HEREWITH 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
AGREEMENT OR ANY RELATED AGREEMENT.



          11.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchaser
and the closing of the transactions contemplated hereby to the extent provided
therein. All statements as to factual matters contained in any certificate or
other instrument delivered by or on behalf of the Company pursuant hereto in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company hereunder solely as of the date
of such certificate or instrument.



          11.3 Successors. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, heirs,
executors and administrators of the parties hereto and shall inure to the
benefit of and be enforceable by each person who shall be a holder of the
Securities from time to time, other than the holders of Common Stock which has
been sold by the Purchaser pursuant to Rule 144 or an effective registration
statement. Purchaser may not assign its rights hereunder to a competitor of the
Company.



          11.4 Entire Agreement. This Agreement, the Related Agreements, the
exhibits and schedules hereto and thereto and the other documents delivered
pursuant hereto constitute



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the full and entire understanding and agreement
between the parties with regard to the subjects hereof and no party shall be
liable or bound to any other in any manner by any representations, warranties,
covenants and agreements except as specifically set forth herein and therein.




          11.5 Severability. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.



          11.6 Amendment and Waiver.




     (a) This Agreement may be amended or modified only upon the written
consent of the Company and the Purchaser.




     (b) The obligations of the Company and the rights of the Purchaser
under this Agreement may be waived only with the written consent of the
Purchaser.




     (c) The obligations of the Purchaser and the rights of the Company
under this Agreement may be waived only with the written consent of the
Company.



          11.7 Delays or Omissions. It is agreed that no delay or omission
to exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement or the Related
Agreements, shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of or in any similar breach, default or noncompliance
thereafter occurring. All remedies, either under this Agreement or the Related
Agreements, by law or otherwise afforded to any party, shall be cumulative and
not alternative.



          11.8 Notices. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given:




     (a) upon personal delivery to the party to be notified;




     (b) when sent by confirmed facsimile if sent during normal business
hours of the recipient, if not, then on the next business day;




     (c) three (3) business days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or




     (d) one (1) day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification of
receipt.



Attempted delivery of any notice or request hereunder by electronic
transmission (including, but not limited to, electronic mail) or communications
through the internet shall not constitute delivery hereunder. All
communications shall be sent as follows:




	 	 	 
	If to the Company, to:

	 	Acceris Communications Inc.
	

	 	Scotia Plaza
	

	 	40 King Street, Suite 3200







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	 	Toronto, Ontario, Canada M5H 3Y2
	

	 	Attention: Chief Financial
Officer

Facsimile: (416) 866-3050
	 
	 	 
	

	 	with a copy to:
	 
	 	 
	

	 	Acceris Communications Inc.
	

	 	8813 Ridge Road
	

	 	Bethesda , Maryland 20817-3235
	

	 	Attention: David Silverman
	

	 	Facsimile: (301) 365-3638
	 
	 	 
	 

	 	and:
	 
	 	 
	

	 	Neal, Gerber & Eisenberg, LLP
	

	 	Two North LaSalle Street, Suite 2200
	

	 	Chicago, Illinois 60606
	

	 	Attention: Arthur B. Muir, Esq.

Facsimile: (312) 269-1747
	 
	 	 
	If to the Purchaser, to:

	 	Laurus Master Fund, Ltd.
	

	 	c/o M&C Corporate Services Limited
	

	 	P.O. Box 309 GT
	

	 	Ugland House
	

	 	George Town
	

	 	South Church Street
	

	 	Grand Cayman, Cayman Islands
	

	 	Facsimile: 345-949-8080
	 
	 	 
	 

	 	with a copy to:
	 
	 	 
	

	 	John E. Tucker, Esq.
	

	 	825 Third Avenue 14th Floor
	

	 	New York, NY 10022
	

	 	Facsimile: 212-541-4434







or at such other address as the Company or the Purchaser may designate by
written notice to the other parties hereto given in accordance herewith.




          11.9 Attorneys’ Fees. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all reasonable
out-of-pocket fees, costs and expenses of enforcing any right of such
prevailing party under or with respect to this Agreement, including, without
limitation, such reasonable out-of-pocket fees and expenses of attorneys and
accountants, which shall include, without limitation, all reasonable
out-of-pocket fees, costs and expenses of appeals.



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          11.10 Titles and Subtitles. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.



          11.11 Facsimile Signatures; Counterparts. This Agreement may be
executed by facsimile signatures and in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same instrument.



          11.12 Broker’s Fees. Except as set forth on Schedule 11.12 hereof,
each party hereto represents and warrants that no agent, broker, investment
banker, person or firm acting on behalf of or under the authority of such party
hereto is or will be entitled to any broker’s or finder’s fee or any other
commission directly or indirectly in connection with the transactions
contemplated herein. Each party hereto further agrees to indemnify each other
party as set forth in Section 8 hereof, for any claims, losses or expenses
incurred by such other party as a result of the representation in this Section
11.12 being untrue.



          11.13 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Agreement and the Related Agreements
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.



[the remainder of this page is intentionally left blank




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     IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.



	 	 	 	 	 	 	 
	COMPANY:

	 	 	 	PURCHASER:	 	 
	 
	 	 	 	 	 	 
	ACCERIS COMMUNICATIONS INC.	 	LAURUS MASTER FUND, LTD.
	 
	 	 	 	 	 	 
	By:

	 	

	 	By:
	 	

	Name:

	 	

	 	Name:
	 	

	Title:

	 	

	 	Title:
	 	








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EXHIBIT A




FORM OF CONVERTIBLE NOTE




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A-1









 








EXHIBIT B




FORM OF WARRANT




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B-1









 








EXHIBIT C




FORM OF ESCROW AGREEMENT




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C-1