Document:

Unassociated Document

EXHIBIT 10.69

INTERCREDITOR AND SUBORDINATION AGREEMENT (SELLER)

 

INTERCREDITOR AND SUBORDINATION AGREEMENT dated as of October 29, 2012, by and among Jonathan Kaufman, an individual, and Christiana Trust, a division of WSFS Bank, as trustee of the LK Trust, a Delaware Trust (together, “Subordinated Lenders”), FUSION NBS ACQUISITION CORP., a Delaware corporation (“Issuer”), PRAESIDIAN CAPITAL OPPORTUNITY FUND III, LP, a Delaware limited partnership (“Fund III”), PRAESIDIAN CAPITAL OPPORTUNITY FUND III-A, LP, a Delaware limited partnership (“Fund III-A”) and PLEXUS FUND II, LP, a Delaware limited partnership (“Plexus” and together with Fund III and Fund III-A and each of their successors and assigns, each a “Purchaser”, and collectively, the “Purchasers”), and Fund III, as agent for the Purchasers (in such capacity, the “Agent”).

 

WHEREAS, Fusion Telecommunications International, Inc., a Delaware corporation (“Parent”), Issuer, Network Billing Systems, LLC, a New Jersey limited liability company (“NBS”), Purchasers and Agent have entered into the Securities Purchase Agreement (as hereinafter defined) on the date hereof pursuant to which, among other things, Purchasers have agreed, subject to the terms and conditions set forth in the Securities Purchase Agreement, to extend credit to the Issuer;

 

WHEREAS, in accordance with the terms of the Securities Purchase Agreement and the other Senior Loan Documents (as hereinafter defined), Issuer has granted Purchasers and Agent a first priority lien on, security interest in and right of set-off against any and all right, title and interest of Issuer in and to certain Collateral; and

 

WHEREAS, as an inducement to and as one of the conditions precedent to the agreement of Purchasers and Agent to consummate the transactions contemplated by the Securities Purchase Agreement and the other Senior Loan Documents, Purchasers and Agent require the execution and delivery of this Agreement by Subordinated Lenders and Issuer.

 

For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

 

	
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Definitions.

 

(a) Capitalized terms used but not defined herein (including, without limitation, in the preamble and recitals above) shall have the meanings given such terms in the Securities Purchase Agreement.

 

(b) The following terms shall have the following meanings:

 

“Agent” has the meaning specified in the recitals of this Agreement.

 

“Agreement” means this Intercreditor and Subordination Agreement, as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms hereof.

 

  

  

  

 

“Bankruptcy Code” means the Bankruptcy Reform Act of 1978, as codified under Title 11 of the United States Code, or any successor statutes, and the bankruptcy rules promulgated thereunder, as the same may be in effect from time to time.

 

“Collateral” means the collective reference to the “Collateral” (as defined in the Securities Purchase Agreement) and any and all other property from time to time subject to Liens or security interests to secure payment or performance of the Senior Obligations.

 

“Credit Parties” means Parent, Issuer, NBS, each other Subsidiary of Parent and any other Person that at any time is or becomes directly or indirectly liable on or in respect of, or that provides security for, any Senior Obligations, and their successors and permitted assigns.

 

“Enforcement Action” means, with respect to the Subordinated Obligations, any action to collect all or any portion of the Subordinated Obligations, to accelerate or demand payment of all or any portion of the Subordinated Obligations or to enforce any of the rights and remedies of any holder of any of the Subordinated Obligations, either pursuant to the Subordinated Loan Documents, at law, or in equity, including, but not limited to: (i) commencing or pursuing legal proceedings to collect any amounts owed with respect to the Subordinated Obligations; (ii) execution upon, or otherwise enforcing any judgment obtained with respect to, amounts owed on the Subordinated Obligations; or (iii) commencing or pursuing any judicial or non-judicial proceedings with respect to the Subordinated Obligations to foreclose upon, or to acquire title in lieu of foreclosure as to, all or any portion of the assets of Issuer.

 

“Insolvency Event” means (i) Issuer or any of its Subsidiaries commencing any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, conservatorship or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or Issuer or any of its Subsidiaries making a general assignment for the benefit of its creditors; (ii) there being commenced against Issuer or any of its Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above; (iii) there being commenced against Issuer or any of its Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets; (iv) Issuer or any of its Subsidiaries taking any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii) or (iii) above; or (v) Issuer or any of its Subsidiaries generally not paying, or being unable to pay, or admitting in writing its inability to pay, its debts as they become due.

 

  

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“Insolvency Proceeding” means the occurrence or commencement of any proceeding specified in clause (i) or clause (ii) of the definition of “Insolvency Event” in this Agreement.

 

“Issuer” has the meaning specified in the recitals of this Agreement.

 

“NBS” has the meaning specified in the recitals of this Agreement.

 

“Permitted Subordinated Debt Payments” means regularly scheduled cash payments of principal, without premium, and interest, at the non-default rate of interest, not to exceed a rate of 3% per annum, pursuant to and in accordance with the Subordinated Note.

 

“Person” shall mean any individual, firm, corporation, limited liability company, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, governmental authority or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity.

 

“Purchasers” has the meaning specified in the recitals of this Agreement.

 

“Securities Purchase Agreement” means the Securities Purchase Agreement and Security Agreement, dated as of October 29, 2012, by and among Issuer, Parent, NBS and the other parties from time to time party thereto, as such Securities Purchase Agreement and Security Agreement may be amended, restated, modified or supplemented from time to time, including, without limitation, amendments, modifications, supplements and restatements thereof giving effect to increases, renewals, extensions, refundings, deferrals, restructurings, replacements or refinancings of, or additions to, the arrangements provided in such Securities Purchase Agreement and Security Agreement (whether provided by one or more of the original Purchasers under the Securities Purchase Agreement and Security Agreement or one or more successor Purchasers).

 

“Senior Default” means any “Default” or “Event of Default” under the Securities Purchase Agreement or any other Senior Loan Document.

 

“Senior Lenders” means Purchasers, Agent and each other holder of a Senior Obligation and each of their respective successors and assigns.

 

“Senior Loan Documents” means the collective reference to the Securities Purchase Agreement, the other “Transaction Documents” (as defined in the Securities Purchase Agreement) and all other documents, instruments and agreements that from time to time evidence the Senior Obligations or secure or support payment or performance thereof, as the same may be amended, restated, modified or supplemented from time to time, including, without limitation, amendments, modifications, supplements and restatements thereof giving effect to increases, renewals, extensions, refundings, deferrals, restructurings, replacements or refinancings of, or additions to, the arrangements provided therein (whether provided by one or more Purchasers under the Securities Purchase Agreement or one or more successor Purchasers).

 

  

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“Senior Obligations” means the “Obligations”, as such term is defined in the Securities Purchase Agreement, including, without limitation, all principal, interest, fees, expenses, indemnities and reimbursement obligations at any time owed by the Credit Parties to Senior Lender pursuant to the terms of the Transaction Documents, in each instance, whether before or after the commencement of an Insolvency Proceeding and without regard to whether or not an allowed claim, and all obligations and liabilities incurred with respect to any refinancing of such Obligations, together with any amendments, restatements, modifications, renewals or extensions thereof.

 

“Subordinated Event of Default” means any default or event of default under the Subordinated Note or other Subordinated Loan Documents.

 

“Subordinated Lenders” has the meaning specified in the recitals of this Agreement.

 

“Subordinated Loan Documents” means the collective reference to the Subordinated Note and any other documents, agreements or instruments that from time to time evidence or otherwise relate to the Subordinated Obligations.

 

“Subordinated Note” means the promissory note dated as of October 29, 2012, in the aggregate original principal amount of $600,000, issued by Issuer to Subordinated Lenders, a copy of which is attached as Exhibit A hereto, as in effect as of the date hereof and as amended, supplemented, restated or otherwise modified from time to time as permitted by this Agreement and the Senior Loan Documents, including, without limitation, any notes issued in exchange or substitution therefor.

 

“Subordinated Obligations” means the collective reference to the unpaid principal of and interest on the Subordinated Note and all other Indebtedness of Issuer owing to Subordinated Lenders (including, without limitation, interest accruing at the then applicable rate provided therein after the maturity of the Subordinated Note and interest accruing at the then applicable rate provided in the Subordinated Note after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to Issuer, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Subordinated Note, this Agreement, or any other Subordinated Loan Document, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to Subordinated Lenders that are required to be paid by Issuer pursuant to the terms of any other Subordinated Loan Document); provided, however, that Subordinated Obligations shall not include obligations for compensation, employee benefits and reimbursement of related costs incurred in the Ordinary Course of Business, to the extent any of the foregoing constitutes Indebtedness, and to the extent such Indebtedness is permitted by the Securities Purchase Agreement.

 

(c) The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section and paragraph references are to this Agreement unless otherwise specified.

 

(d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

 

  

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(e) No inference in favor of, or against, any party to this Agreement shall be drawn from the fact that such party has drafted any portion of this Agreement.

 

2.   Subordination; Enforcement Action.  Issuer and each Subordinated Lender each hereby agrees, for itself and each future holder of the Subordinated Obligations, that:

 

(a) No part of the Subordinated Obligations shall have any claim to any assets of Issuer on a parity with or prior to the claim of any of the Senior Obligations.

 

(b) Unless and until the Senior Obligations have been paid in full, without the express prior written consent of Agent, (1) Subordinated Lenders shall not, directly or indirectly, take, demand, accept or receive from Issuer or any other Person, in cash or other property or by setoff or in any other manner, payment of all or any of the Subordinated Obligations, and (2) Issuer shall not make, give or permit, directly or indirectly, by setoff, redemption, purchase or in any other manner, any payment of or with respect to, or any collateral or other security for, the whole or any part of the Subordinated Obligations, including, without limitation, any guarantee, letter of credit or similar credit support to support payment of any of the Subordinated Obligations; provided, however, that, subject in all respects to the other terms and provisions hereof, (x) Subordinated Lenders may accept and retain, and Issuer may make, Permitted Subordinated Debt Payments so long as no Blockage Period is then in effect, provided that, after giving effect to such payment, the Credit Parties are in compliance on a pro forma basis with the covenants set forth in Section 9.15 of the Securities Purchase Agreement, recomputed for the most recent fiscal quarter for which financial statements have been delivered; and (y) Issuer may resume making any Permitted Subordinated Debt Payments, and may make any Permitted Subordinated Debt Payment missed during any Blockage Period, upon the cessation of a Blockage Period.  A “Blockage Period” shall exist from and after the date that any Senior Default shall have occurred, until the earlier to occur of (a) the cure or waiver of such Senior Default, as determined by Agent in its sole discretion and (b) the payment in full of the Senior Obligations.

 

(c) Unless and until the Senior Obligations have been paid in full, without the express written consent of Agent, Subordinated Lenders shall not commence any Enforcement Action.

 

(d) The expressions “prior payment in full,” “payment in full,” “paid in full” and any other similar terms or phrases when used herein with respect to the Senior Obligations shall mean (i) the indefeasible payment in full, in immediately available funds, of all of the Senior Obligations and the performance in full of all of the Senior Obligations, (ii) the termination or expiration of all Senior Loan Documents, and (iii) termination of any and all commitments to lend under the Senior Loan Documents.  Senior Obligations shall be considered to be outstanding whenever any loan commitment under any Senior Loan Document is outstanding.

 

(e) Each holder of Senior Obligations, whether now outstanding or hereafter created, incurred, assumed or guaranteed, shall be deemed to have acquired Senior Obligations in reliance upon the provisions contained in this Agreement.

 

  

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3.   Additional Provisions Concerning Subordination. Without limiting any other term or provision in this Agreement:

 

(a) Subordinated Lenders and Issuer hereby agree that upon the occurrence and for the duration of any Insolvency Event:

 

(i) all Senior Obligations shall be paid in full before any payment or distribution is made with respect to any of the Subordinated Obligations; and

 

(ii) any payment or distribution of assets of any Credit Party of any kind or character, whether in cash, property or securities, to which Subordinated Lenders would be entitled except for the provisions hereof, shall be paid or delivered by such Credit Party, or any receiver, trustee in bankruptcy, liquidating trustee, disbursing agent or other Person making such payment or distribution, directly to Agent for application against the Senior Obligations (in accordance with the terms of the applicable Senior Loan Documents), to the extent necessary to pay in full all Senior Obligations, before any payment or distribution shall be made to Subordinated Lenders, and (x) Subordinated Lenders hereby unconditionally authorize, empower and direct all trustees, receivers, custodians, conservators, or any other Persons having authority over the property of any Credit Party to effect delivery of all such payments and distributions to Agent and (y) Subordinated Lenders agree to execute and deliver to Agent such further instruments as may be requested by Agent to confirm the authorization referred to in the foregoing clause (x).

 

(b) Upon the occurrence of any Insolvency Proceeding commenced by or against any Credit Party, Subordinated Lenders irrevocably authorize and empower Agent to demand, sue for, collect and receive every payment or distribution on account of any of the Subordinated Obligations payable or deliverable in connection with such event or proceeding, until the Senior Obligations are paid in full, and give acquittance therefor;

 

(c) Subordinated Lenders irrevocably authorize and empower Agent to file claims and proofs of claim in any such Insolvency Proceeding and take such other actions, in its own name, or in the name of the Subordinated Lenders or otherwise, as Agent may deem necessary or advisable for the enforcement of the provisions of this Agreement; and, in furtherance thereof, Subordinated Lenders shall execute and deliver such powers of attorney, assignments or proofs of claim or other instruments as Agent may request; provided, however, that the foregoing authorization and empowerment imposes no obligation on Agent or any other Senior Lender to take any such action.

 

(d) Except as otherwise expressly permitted by the terms hereof, if any payment or distribution, whether consisting of money, property or securities, shall be collected or received by or come into the custody, control or possession of Subordinated Lenders in respect of the Subordinated Obligations, Subordinated Lenders shall forthwith deliver the same to Agent for application against the Senior Obligations, in the exact form received, duly endorsed to Agent, if required, in each case to be applied to the payment or prepayment of the applicable Senior Obligations in accordance with the terms of the applicable Senior Loan Documents until such Senior Obligations are paid in full.  Until so delivered, such payment or distribution shall be held in trust by Subordinated Lenders as the property of the Senior Lenders, segregated from other funds and property held by Subordinated Lenders.

 

  

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4.   Subrogation.  Until the Senior Obligations are paid in full, Subordinated Lenders shall not make or assert any claim of subrogation under applicable law or otherwise with respect to the Senior Lenders or the Senior Obligations.  Upon the payment in full of the Senior Obligations, Subordinated Lenders shall be subrogated to the rights of the Senior Lenders to receive payments or distributions of assets of Issuer and each other Credit Party in respect of the Senior Obligations until the Senior Obligations shall be paid in full.  For the purposes of such subrogation, payments or distributions to any Senior Lender of any money, property or securities to which Subordinated Lenders would be entitled except for the provisions of this Agreement shall be deemed, as between Issuer and its creditors (other than the Senior Lenders and Subordinated Lenders), to be a payment by Issuer to or on account of Subordinated Obligations (it being understood that the provisions of this Agreement are, and are intended solely, for the purpose of defining the relative rights of the Subordinated Lenders, on the one hand, and Senior Lenders, on the other hand).

 

5.   Consents, Waivers and Covenants of Subordinated Lenders.

 

(a) Subordinated Lenders consent and agree that, without the necessity of any reservation of rights against Subordinated Lenders, and without notice to or further assent by Subordinated Lenders:

 

(i) any demand for payment of any Senior Obligations made by any Senior Lender may be rescinded in whole or in part by such Senior Lender, and any Senior Obligation may be continued, and the Senior Obligations, or the liability of any Credit Party or any guarantor or any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, or any obligation or liability of any Credit Party or any other party under any Senior Loan Document, or any other agreement, may, from time to time, in whole or in part, be amended, restated, renewed, extended, increased, modified, accelerated, compromised, restructured, waived, surrendered, or released by Agent or the other Senior Lenders;

 

(ii) the Securities Purchase Agreement, the other Senior Loan Documents and the Senior Obligations may be amended, restated, modified, extended, increased, renewed, restructured, supplemented or terminated, in whole or in part, as Agent or the other Senior Lenders may deem advisable from time to time, and any collateral security at any time held by any Senior Lender for the payment of any of the Senior Obligations may be sold, exchanged, restructured, waived, surrendered or released, in each case all without notice to or further assent by Subordinated Lenders, which will remain bound under this Agreement, and Agent and the other Senior Lenders shall have the right to grant waivers or consents to any Credit Party with respect to any of the Senior Obligations or any Senior Loan Document in any manner whatsoever, all without impairing, abridging, releasing or affecting the subordination provided for herein; and

 

(iii) any refinancing of the Obligations may be consummated by any Credit Party.

 

  

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(b) Subordinated Lenders waive any and all notice of the creation, renewal, extension, increase, or accrual of any of the Senior Obligations and notice of or proof of reliance by any Senior Lender upon this Agreement.  The Senior Obligations shall be deemed conclusively to have been created, contracted or incurred in reliance upon this Agreement, and all dealings between the Credit Parties and Senior Lenders shall be deemed to have been consummated in reliance upon this Agreement.  Subordinated Lenders acknowledge and agree that each Senior Lender has relied upon the subordination provided for herein in entering into the Senior Loan Documents and in making funds available to Issuer thereunder.  Subordinated Lenders waive notice of or proof of reliance on this Agreement and protest, demand for payment and notice of default.

 

(c) Subordinated Lenders hereby consents to the Liens on the Collateral created  in favor of Senior Lenders under the Senior Loan Documents, and agrees that the grant, perfection, priority and existence of such Liens does not and shall not constitute a Subordinated Event of Default or any other default under any Subordinated Loan Document.

 

(d) Concurrently with the issuance thereof, the Subordinated Lenders shall provide Senior Lenders with a copy of any written notice of any Subordinated Event of Default or similar communication given by Subordinated Lenders to Issuer pursuant to or in connection with any of the Subordinated Loan Documents.  Upon demand by Agent, Subordinated Lenders will furnish to Senior Lenders a statement of the indebtedness owing from Issuer to Subordinated Lenders.  Agent may rely without further investigations upon such statements.

 

6.   Negative Covenants of Subordinated Lenders.  Until the payment in full of the Senior Obligations, Subordinated Lenders shall not, without the prior written consent of Agent:

 

(a) sell, assign, or otherwise transfer, in whole or in part, the Subordinated Obligations or any interest therein to any other Person (a “Transferee”) or create, incur or suffer to exist any security interest, Lien, charge or other encumbrance whatsoever upon any of the Subordinated Obligations or under any Subordinated Loan Document in favor of any Transferee unless:

 

(i) such action is made expressly subject to this Agreement; and

 

(ii) the Transferee expressly acknowledges to Senior Lenders, by a written agreement in form and substance satisfactory to Agent or by delivery of an executed counterpart of this Agreement or an intercreditor and subordination agreement substantially identical to this Agreement, the subordination provided for herein and agrees to be bound by all of the terms and provisions hereof;

 

  

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(b) permit any of the Subordinated Loan Documents or the Subordinated Obligations to be amended, restated, renewed, restructured, increased, extended, supplemented or otherwise modified in any respect, except Changes that do not adversely affect Senior Lenders’ rights under this Agreement or the Senior Loan Documents or Senior Lenders’ right to payment of the Senior Obligations; and nothing herein shall prohibit the Subordinated Lenders from converting into equity of Parent, or prohibit the Company from permitting conversion into equity of Parent, of any Subordinated Obligations;

 

(c) permit or require any Credit Party (other than Issuer) to guarantee, or otherwise become liable in respect of, any of the Subordinated Obligations;

 

(d) permit or require any Credit Party to create any Lien on any of its assets or properties to secure the payment or performance of any of the Subordinated Obligations;

 

(e) commence, or join with any creditors (other than Senior Lenders) in commencing, or otherwise cause, any Insolvency Proceeding;

 

(f) challenge the validity, enforceability, priority of, or any other term or provision of, any Senior Loan Document;

 

(g) challenge the extent, validity, creation, perfection or priority of, any Lien created or purported to be created pursuant to any Senior Loan Document or seek to avoid or subordinate any such Lien; or

 

(h) interfere in any respect with the exercise by any Senior Lender of any right or remedy under any Senior Loan Document or applicable law;

 

provided, however, that a transfer by operation of law to the estate of a deceased Subordinated Lender shall not be a default hereunder; provided, further, that it is the express intent of all parties hereto that such transfer shall be expressly subject to this Agreement, and that the Transferee of the estate expressly acknowledges to Senior Lenders, by a written agreement in form and substance satisfactory to Agent or by delivery of an executed counterpart of this Agreement or an intercreditor and subordination agreement substantially identical to this Agreement, the subordination provided for herein and agrees to be bound by all of the terms and provisions hereof.

 

7.   Senior Obligations Unconditional.  All obligations and agreements of the Subordinated Lenders hereunder shall be irrevocable, unconditional, continuing and absolute.  All rights and interests of Senior Lenders hereunder, and all agreements and obligations of the Subordinated Lenders and Issuer, shall remain in full force and effect irrespective of:

 

  

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(a) any lack of validity or enforceability of any Senior Loan Document or if all or any portion of the Senior Obligations and/or the Liens securing same are subordinated, set aside, avoided or disallowed, in each case pursuant to an Insolvency Proceeding or otherwise (as a result of the fraudulent transfer provisions under the Bankruptcy Code, under any State fraudulent conveyance or fraudulent transfer statute, or otherwise);

 

(b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Senior Obligations, or any amendment or waiver or other modification, whether by course of conduct or otherwise, of the terms of any Senior Loan Document, including, without limitation, any increase in any of the Senior Obligations resulting from the extension of additional credit to any Credit Party or otherwise;

 

(c) any exchange, release or nonperfection of any Lien upon any Collateral, or any release, amendment, waiver or other modification, whether in writing or by course of conduct or otherwise, of all or any of the Senior Obligations or any guarantee thereof;

 

(d) the existence of any claim, set-off, defense, counterclaim or other right that Subordinated Lenders, any Credit Party or any other Person may have against any Person, including, without limitation, any Senior Lender;

 

(e) any manner of application of Collateral or any other collateral, or proceeds thereof, to all or any of the Senior Obligations, or any manner of sale or other disposition of any Collateral or any other collateral for all or any of the Senior Obligations or any obligations of the Credit Parties under the Senior Loan Documents or any other assets of the Credit Parties;

 

(f) any change, restructuring or termination of the corporate or other organizational structure or existence of any Credit Party;

 

(g) any failure of any Senior Lender to disclose to Subordinated Lenders any information relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of Issuer or any of its Affiliates now or hereafter known to any Senior Lender (Subordinated Lenders hereby waiving any duty on the part of Senior Lenders to disclose such information); or

 

  

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(h) any other event or circumstance which otherwise might constitute a defense or counterclaim available to, or a discharge of, Issuer in respect of any of the Senior Obligations, or of Subordinated Lenders or Issuer in respect of this Agreement.

 

8.   Representations and Warranties.  Subordinated Lenders represent and warrant to each Senior Lender that:

 

(a) the Subordinated Note: (i) has been issued to it for good and valuable consideration; (ii) is owned by Subordinated Lenders free and clear of any security interests, Liens, charges or encumbrances whatsoever, other than the interest of Senior Lenders under this Agreement; (iii) is payable solely and exclusively to Subordinated Lenders and to no other Person and is payable without deduction for any defense, recoupment, offset or counterclaim, and (iv) constitutes the only evidence of the obligations evidenced thereby;

 

(b) Subordinated Lenders have the power and authority and the legal right to execute and deliver and to perform their obligations under this Agreement and have taken all necessary action to authorize their respective execution, delivery and performance of this Agreement;

 

(c) this Agreement has been duly executed and delivered by Subordinated Lenders and constitutes a legal, valid and binding obligation of Subordinated Lenders, enforceable against Subordinated Lenders in accordance with its terms;

 

(d) the execution, delivery and performance of this Agreement will not violate any provision of any requirement of law applicable to Subordinated Lenders or contractual obligation of Subordinated Lenders and will not result in the creation or imposition of any Lien on any of the properties or revenues of Subordinated Lenders pursuant to any requirement of law affecting, or any contractual obligation of, Subordinated Lenders, except the interest of Senior Lenders under this Agreement;

 

(e) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or governmental authority or any other Person (including, without limitation, any creditor of Subordinated Lenders), is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement; and

 

  

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(f) no pending or, to the best of its knowledge, threatened litigation, arbitration or other proceedings if adversely determined would in any way prevent the performance of the terms of this Agreement; and

 

(g) as of the date hereof, Issuer is indebted to Subordinated Lenders under the Subordinated Loan Documents in the aggregate amount of $600,000.

 

9.   No Representation by Senior Lenders.  No Senior Lender has made, and no Senior Lender does hereby nor otherwise make to Subordinated Lenders, any representations or warranties, express, or implied, nor does any Senior Lender assume any liability or obligation to or of Subordinated Lenders with respect to:

 

(a) the financial or other condition of any Credit Party or any other obligors under any instruments of guarantee with respect to the Senior Obligations;

 

(b) the enforceability, validity, value or collectibility of any of the Senior Obligations or the Subordinated Obligations, any collateral therefor, or any guarantee or security which may have been granted in connection with any of the Senior Obligations or the Subordinated Obligations; or

 

(c) the title or right of any Credit Party or any other Person to transfer any collateral or security.

 

10.   Waiver of Claims.  To the maximum extent permitted by law, each Subordinated Lender waives any claim it might have against any Senior Lender with respect to, or arising out of, any action or failure to act or any error of judgment, negligence, or mistake or oversight whatsoever on the part of any Senior Lender or its affiliates, directors, officers, employees, advisors, attorneys or agents with respect to any exercise of any rights or remedies under any of the Senior Loan Documents or any transaction relating to any of the Collateral or any guarantee.  No Senior Lender or any of its affiliates, directors, officers, employees, advisors, attorneys or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or any guarantee or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral or realize upon any guarantee upon the request of any Credit Party or Subordinated Lenders or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof or any guarantee.

 

11.   Additional Provisions Applicable After Insolvency Event or Proceeding.  Without limiting any other term or provision in this Agreement or any Senior Loan Document:

 

(a) The provisions of this Agreement shall continue in full force and effect notwithstanding the occurrence of any Insolvency Event or Insolvency Proceeding.

 

  

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(b) Each Subordinated Lender agrees that it will not, directly or indirectly (including, without limitation, as a member of any unsecured creditors’ committee), take any action in or relating to any proceeding arising from, as a result of, in connection with or relating to any Insolvency Proceeding to challenge, contest or object in any manner to (i) the extent, validity, creation, enforceability, perfection or priority of any of the Senior Obligations or any Senior Loan Document or any Liens or security interests created under any Senior Loan Document, or any term or provision of this Agreement or Subordinated Lenders’ obligations, undertakings, acknowledgments and agreements set forth in this Agreement; (ii) any pleading, motion, notice, objection or argument of or made by or on behalf of any holder of any of the Senior Obligations based on, under or in respect of Section 361, 362, 363 or 364 of the Bankruptcy Code, including, without limitation, in respect of permitting the use of any cash or other collateral by, or providing any financing to, any Credit Party under either Section 363 or 364 of the Bankruptcy Code (including, without limitation, any request for adequate protection, or in respect of the sale or other disposition of any property by any Credit Party under Section 363 of the Bankruptcy Code or pursuant to a plan of reorganization or any other arrangement (and Subordinated Lenders shall be deemed to have consented to any such sale or disposition and all of the terms applicable thereto); or (iii) the payment of interest, fees, expenses or other amounts to Senior Lenders under Sections 506(b) or 506(c) of the Bankruptcy Code or otherwise.  Each Subordinated Lender agrees that it will not seek relief from the automatic stay or from any other stay in any Insolvency Proceeding or take any action in derogation thereof, without the prior written consent of Agent.  Subordinated Lenders shall not support or vote in favor of any plan of reorganization (and they shall be deemed to have voted to reject any plan of reorganization) unless such plan (i) pays off, in cash in full, all Senior Obligations or (ii) is accepted by the Senior Lenders.  This Agreement, which the parties hereto expressly acknowledge is a “subordination agreement” under Section 510(a) of the Bankruptcy Code, shall be effective, during and after the commencement of an Insolvency Proceeding.

 

12.   Further Assurances.  Subordinated Lenders and Issuer, at their own sole cost and expense and at any time from time to time, upon the written request of Agent will promptly and duly execute and deliver such further instruments and documents and take such further actions as Agent reasonably may request for the purposes of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted.  Without limiting the generality of the foregoing, in the event of an assignment pursuant to any Senior Loan Document or in the event of a refinancing of the Obligations, Subordinated Lenders and Issuer shall, upon the request of Agent, execute a new intercreditor and subordination agreement upon the same terms as this Agreement to further evidence and confirm that the Subordinated Obligations are and shall remain junior and subordinate in right of payment to the Senior Obligations.

 

13.   Reinstatement.  The terms and provisions of this Agreement shall continue to be effective or be reinstated, and the Senior Obligations shall not be deemed to be paid in full, as the case may be, if at any time any payment of any of the Senior Obligations is rescinded or avoided, or must otherwise be returned by any Senior Lender pursuant to any Insolvency Proceeding or otherwise, all as though such payment had not been made.

 

  

13

  

 

14.   Expenses.  Subordinated Lenders shall pay or reimburse Senior Lenders, upon demand, for all of Senior Lender's reasonable and documented costs and expenses incurred resulting from any actions taken by Subordinated Lenders in connection with the enforcement of any rights and remedies of Subordinated Lenders, including, without limitation, reasonable fees and disbursements of counsel to Senior Lenders.

 

15.   Provisions Define Relative Rights.  This Agreement is intended solely for the purpose of defining the relative rights of Senior Lenders, on the one hand, and Subordinated Lenders, on the other, and the obligations of Issuer in connection with the foregoing and no other Person shall have any right, benefit or other interest under this Agreement.  Issuer hereby agrees that it will not make any payment on or in respect of any of the Subordinated Obligations, or take any other actions, in contravention of the provisions of this Agreement.

 

16.   Legend.  Subordinated Lenders will cause the Subordinated Note (and each other Subordinated Loan Document as Agent shall request) to bear upon its face the following legend:

 

“ALL INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBORDINATED TO OTHER INDEBTEDNESS PURSUANT TO, AND TO THE EXTENT PROVIDED IN, AND IS OTHERWISE SUBJECT TO THE TERMS OF, THE INTERCREDITOR AND SUBORDINATION AGREEMENT, DATED AS OF OCTOBER 29, 2012 (THE “SUBORDINATION AGREEMENT”), AS THE SAME MAY BE AMENDED, RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME, BY AND AMONG FUSION TELECOMMUNICATIONS INTERNATIONAL, INC., A DELAWARE CORPORATION AND ITS SUBSIDIARIES, PRAESIDIAN CAPITAL OPPORTUNITY FUND III, LP, A DELAWARE LIMITED PARTNERSHIP, PRAESIDIAN CAPITAL OPPORTUNITY FUND III-A, LP, A DELAWARE LIMITED PARTNERSHIP, PLEXUS FUND II, LP, A DELAWARE LIMITED PARTNERSHIP, AND THE HOLDERS FROM TIME TO TIME OF THE OBLIGATIONS ARISING UNDER THE SUBORDINATED LOAN DOCUMENTS REFERRED TO IN THE SUBORDINATION AGREEMENT, INCLUDING, WITHOUT LIMITATION, THIS NOTE, AND EACH HOLDER HEREOF, BY ITS ACCEPTANCE HEREOF, ACKNOWLEDGES AND AGREES TO BE BOUND BY THE PROVISIONS OF THE SUBORDINATION AGREEMENT.”

 

17.   Powers Coupled With An Interest.  All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until the Senior Obligations are paid in full.

 

  

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18.   Authority of Senior Lenders.  Issuer and Subordinated Lenders acknowledge and agree that the rights and responsibilities of each Senior Lender under this Agreement with respect to any action taken by any Senior Lender or the exercise or non-exercise by any Senior Lender of any option, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall be governed by the Senior Loan Documents and by such other agreements with respect thereto as may exist from time to time among, but, as between Senior Lenders, on the one hand, and Issuer and Subordinated Lenders, on the other hand, each Senior Lender shall be conclusively presumed to be acting with full and valid authority so to act or refrain from acting, and neither Issuer nor Subordinated Lenders shall be under any obligation, or entitlement, to make any inquiry respecting such authority.

 

19.   Notices.

 

(a) All notices, requests and demands to or upon any Senior Lender, Issuer or Subordinated Lender under this Agreement to be effective shall be in writing (or by fax or similar electronic transfer confirmed in writing) and shall be deemed to have been duly given or made (i) when delivered by hand or (ii) if given by mail, when deposited in the mails by certified mail, return receipt requested, or (iii) if by fax or similar electronic transfer, when sent and receipt has been confirmed, addressed as follows:

 

	If to Agent, Fund III	 
	or Fund III-A:   	c/o Praesidian Capital Opportunity Fund III, LP 

419 Park Avenue South

New York, NY 10016

Facsimile: (212) 520-2601

Attention:  Jason D. Drattell

	 	 
	with a copy to:   	Morrison Cohen LLP 

909 Third Avenue

New York, NY 10022

Facsimile: (212) 735-8708

Attention: Stephen I. Budow, Esq.

	 	 
	If to Plexus:  	Plexus Fund II, LP 

4601 Six Forks Road

Raleigh, NC 27609

Facsimile: (919) 256-6350

Attention: Michael S. Becker

 

  

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	with a copy to:  	Smith, Anderson, Blount, Dorsett, 

Mitchell & Jernigan, LLP

Wells Fargo Capital Center

150 Fayetteville Street, Suite 2300

Raleigh, NC 27601

Facsimile:  (919) 821-6800

Attention: Curtis S. Brewer, Esq.

	 	 
	If to Issuer  :  	Fusion Telecommunications International, Inc. 

420 Lexington Avenue, Suite 1718

New York, New York 10170

Facsimile:  (212) 972-7884

Attention:  Gordon Hutchins, Jr., President

	 	 
	with a copy to:  	Steven I. Weinberger, P.A. 

1200 N. Federal Highway, Suite 200

Boca Raton, FL 33432

Facsimile:  (888) 825-6417

Attention: Steven I. Weinberger, Esq.

 

(b) If to a Subordinated Lender, at its address or transmission number for notices set forth under its signature below.

 

(c) Any Senior Lender, Credit Party or Subordinated Lender may change its addresses and transmission numbers for notices by notice in the manner provided in this Section 19.

 

20.   Counterparts.  This Agreement may be executed by one or more of the parties on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.  Delivery of an executed counterpart of a signature page of this Agreement by facsimile or other electronic means shall be effective as delivery of an original executed counterpart of this Agreement.

 

  

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21.   Severability.  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

22.   Integration.  THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT OF SENIOR LENDERS, ISSUER AND SUBORDINATED LENDERS WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THERE ARE NO PROMISES OR REPRESENTATIONS BY ANY SENIOR LENDER, ISSUER OR SUBORDINATED LENDERS RELATIVE TO THE SUBJECT MATTER HEREOF NOT REFLECTED HEREIN.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

 

23.   Amendments in Writing; No Waiver; Cumulative Remedies.

 

(a) Any modification or waiver of any provision of this Agreement, or any consent to any departure by any party from the terms hereof, shall not be effective in any event unless the same is in writing and signed by Agent and Subordinated Lenders, and then such modification, waiver or consent shall be effective only in the specific instance and for the specific purpose given; provided that any such modification or waiver that directly and adversely affects the obligations of the Issuer hereunder and is sought to be enforced against the Issuer shall require the consent of the Issuer.

 

(b) No failure to exercise, nor any delay in exercising, on the part of any Senior Lender, any right, remedy power or privilege hereunder shall operate as a waiver thereof.  No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

 

(c) The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.

 

(d) If any Subordinated Lender or Issuer violates any of the terms or provisions of this Agreement, in addition to any remedies in law, at equity or otherwise, any Senior Lender may restrain or enjoin such violation in any court of competent jurisdiction and may interpose this Agreement as a defense or counterclaim in any action or proceeding by any Subordinated Lender or Issuer.

 

24.   Section Headings.  The section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.

 

  

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25.   Successors and Assigns.  This Agreement shall be binding upon the successors and assigns of Issuer and Subordinated Lenders and shall inure to the benefit of Senior Lenders and their respective successors and assigns.

 

26.   Governing Law; etc.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAW OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.

 

27.   Waiver of Jury Trial.  EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.

 

[the remainder of this page intentionally left blank]

 

  

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[Signature Page to Intercreditor and Subordination Agreement (Seller)]

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written.

 

 

	 	SENIOR LENDERS:	 
	 	 	 
	 	

PRAESIDIAN CAPITAL OPPORTUNITY FUND III, LP

	 
	 	 	 	 
	 	By:  	Praesidian Capital Opportunity GP III, LLC, its General Partner	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	Name 	 
	 	 	

Title: Manager

	 

  

	 	

PRAESIDIAN CAPITAL OPPORTUNITY FUND III-A, LP

	 
	 	 	 	 
	 	By:	Praesidian Capital Opportunity GP III-A, LLC, its General Partner	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	Name 	 
	 	 	

Title:  Manager

	 

	 	

PLEXUS FUND II, LP

	 
	 	 	 	 
	 	By:	Plexus Fund II GP, its General Partner	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	Name: Michael Becker	 
	 	 	

Title:  Manager

	 

 

 

Signatures Continue on Next Page

 

  

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[Signature Page to Intercreditor and Subordination Agreement (Seller)]

 

 

	 	ISSUER:	 
	 	 	 
	 	FUSION NBS ACQUISITION CORP.	 
	 	 	 	 
	 	
By: 

	 	 
	 	 	Name: Gordon Hutchins, Jr.	 
	 	 	Title:  President	 

 

Signatures Continue on Next Page

 

  

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[Signature Page to Intercreditor and Subordination Agreement (Seller)]

 

	 	SUBORDINATED LENDERS: 

 

  

Jonathan Kaufman

Address for Notices:

23 Brush Hill Road

Kinnelon, NJ 07405

Facsimile No.: _________________

 

  

Charles O. Posnecker IV, CTFA, Assistant

Vice President, Christiana Trust, a division

of WSFS Bank, as trustee of the LK Trust

Address for Notices:

3801 Kennett Pike C200

Greenville, DE 19807

Facsimile No.: _________________

 

  

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Exhibit A

Subordinated Note

See Attached

 

 

 

 

 

22Unassociated Document

EXHIBIT 10.70

 

INTERCREDITOR AGREEMENT

 

THIS INTERCREDITOR AGREEMENT (this “Agreement”) is entered into as of this October 29, 2012, by and among Prestige Capital Corporation, a (and together with its successors and assigns, "Prestige"), Praesidian Capital Opportunity Fund III, LP, a Delaware limited partnership (“Fund III”), Praesidian Capital Opportunity Fund III-A, LP, a Delaware limited partnership (“Fund III-A”), Plexus Fund II, LP, a Delaware limited partnership (“Plexus” and together with Fund III and Fund III-A and each of their successors and assigns, each a “New Lender”, and collectively, the “New Lenders” and together with Prestige, each a “Lender and collectively, the “Lenders”), Fund III, as agent for the New Lenders (in such capacity, the “Agent”), Fusion NBS Acquisition Corp., a Delaware corporation (“Borrower”), Fusion Telecommunications International, Inc., a Delaware corporation (“Parent”), Network Billing Systems, LLC, a New Jersey limited liability company  ("NBS") and each other direct or indirect subsidiary of Parent from time to time party hereto (Borrower, Parent, NBS and each such other subsidiary, the “Credit Parties”).

 

RECITALS

 

A.           Parent and Prestige have entered into a Purchase and Sale Agreement, accepted by Prestige on September 16, 2011 (as the same may be amended, supplemented or otherwise modified from time to time, the “Prestige Credit Agreement”) pursuant to which, among other things, Prestige has agreed, subject to the terms and conditions set forth in the Prestige Credit Agreement, to make certain advances and financial accommodations to Parent. All of Parent’s obligations to Prestige under the Prestige Credit Agreement and the other Prestige Debt Documents (as hereinafter defined) are secured by liens on and security interests in the accounts receivable and other assets of Parent.

 

B.           The New Lenders, the Agent and the Credit Parties have entered into a Securities Purchase Agreement and Security Agreement, dated as of the date hereof (as the same may be amended, supplemented or otherwise modified from time to time, the “New Lender Credit Agreement”), pursuant to which, among other things, the New Lenders have agreed, subject to the terms and conditions set forth in the New Lender Credit Agreement, to make certain loans and financial accommodations to Borrower guaranteed by Parent, NBS and other subsidiaries of Parent, from time to time party thereto.  All of the Credit Parties obligations to the New Lenders and Agent under the New Lender Credit Agreement and the other New Lender Debt Documents (as hereinafter defined) are secured by liens on and security interests in substantially all of the now existing and hereafter acquired Collateral of the Credit Parties.

 

C.           As an inducement to and as one of the conditions precedent to the agreement of New Lenders and Agent to consummate the transactions contemplated by the New Lender Credit Agreement, New Lenders and Agent have required the execution and delivery of this Agreement by the other parties hereto in order to set forth the relative rights and priorities of Lenders and Agent in the Collateral of the Credit Parties.

 

  

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NOW, THEREFORE, in order to induce New Lenders and Agent to consummate the transactions contemplated by the New Lender Credit Agreement, and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto hereby agree as follows:

 

	
1.  

	
Definitions. The following terms shall have the following meanings in this Agreement:

 

“Agent” shall mean Fund III, as Agent for the New Lenders, or any other Person appointed by the holders of the New Lender Debt as administrative agent for purposes of the New Lender Debt Documents.

 

“Bankruptcy Code” shall mean Chapter 11 of Title 11 of the United States Code, as amended from time to time and any successor statute and all rules and regulations promulgated thereunder.

 

“Collateral” means all of the assets and property of any kind whatsoever of any Credit Party, whether real, personal or mixed, tangible or intangible.

 

“Lien” shall mean any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including, without limitation, any agreement to give any of the foregoing, any conditional sale or other title retention agreement, and any lease in the nature thereof) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing.

 

“New Lender Debt” shall mean all obligations, liabilities and indebtedness of every nature of the Credit Parties from time to time owed to Agent or any New Lender under the New Lender Debt Documents, including, without limitation, the principal amount of all debts, claims and indebtedness, accrued and unpaid interest and all fees, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and from time to time hereafter owing, due or payable, whether before or after the filing of a Proceeding under the Bankruptcy Code together with (a) any amendments, modifications, renewals or extensions thereof and (b) any interest accruing thereon after the commencement of a Proceeding, without regard to whether or not such interest is an allowed claim. New Lender Debt shall be considered to be outstanding whenever any loan commitment under the New Lender Debt Document is outstanding.

 

“New Lender Debt Documents” shall mean the New Lender Credit Agreement and all other agreements, documents and instruments executed from time to time in connection therewith, as the same may be amended, supplemented, replaced or otherwise modified from time to time.

 

"Parent Collateral" shall mean all Collateral of the Parent, excluding however any capital stock or other equity interests in any direct or indirect subsidiary of Parent, including but not limited to Borrower and NBS.

 

  

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“Person” means any natural person, corporation, general or limited partnership, limited liability company, firm, trust, association, government, governmental agency or other entity, whether acting in an individual, fiduciary or other capacity.

 

“Prestige Debt” shall mean all obligations, liabilities and indebtedness of every nature of the Parent from time to time owed to Prestige under the Prestige Debt Documents, including, without limitation, the principal amount of all debts, claims and indebtedness, accrued and unpaid interest and all fees, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and from time to time hereafter owing, due or payable, whether before or after the filing of a Proceeding under the Bankruptcy Code together with (a) any amendments, modifications, renewals or extensions thereof and (b) any interest accruing thereon after the commencement of a Proceeding, without regard to whether or not such interest is an allowed claim. Prestige Debt shall be considered to be outstanding whenever any loan commitment under the Prestige Debt Document is outstanding. In no event shall the principal amount of the Prestige Debt exceed $3,000,000.

 

“Prestige Debt Documents” shall mean the Prestige Credit Agreement and all other agreements, documents and instruments executed from time to time in connection therewith, as the same may be amended, supplemented, replaced or otherwise modified from time to time.

 

“Proceeding” shall mean any voluntary or involuntary insolvency, bankruptcy, receivership, custodianship, liquidation, dissolution, reorganization, assignment for the benefit of creditors, appointment of a custodian, receiver, trustee or other officer with similar powers or any other proceeding for the liquidation, dissolution or other winding up of a Person.

 

“Uniform Commercial Code” or “UCC” means the Uniform Commercial Code (or any similar or equivalent legislation) as in effect in any applicable jurisdiction.

 

	
2.  

	
Lien Priorities.

 

2.1.Relative Priorities.

 

(a) Notwithstanding any provision in the Prestige Debt Documents to the contrary or the date, manner or order of grant, attachment or perfection of any Prestige Liens or New Lender Liens and notwithstanding any provision of the UCC, or any applicable law to the contrary, until the New Lender Debt has been paid in full in cash, the Credit Parties agree that they shall not grant (and Prestige shall not accept) any Liens on any Collateral of any Credit Party, other than the Parent Collateral.  In the event any Credit Party, in contravention of the foregoing, grants a Lien to Prestige on any Collateral of any Credit Party, other than the Parent Collateral, then, without limiting, any rights or remedies of the New Lenders and Agent, such Liens shall be subordinated for all purposes and in all respects to the Liens of the New Lenders and Agent in such Collateral, regardless of the date, manner or order of grant, attachment or perfection of any such Liens and notwithstanding any provision of the UCC, or any applicable law to the contrary, and Prestige shall promptly execute and deliver to Agent such termination statements and releases as Agent shall reasonably request to effect the release of such Liens. In furtherance of the foregoing, Prestige shall cause to be filed with the Delaware Department of State an amended UCC financing statement in the form attached hereto as Exhibit A and shall promptly furnish to Agent a filed copy.

 

  

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(b) Notwithstanding any provision in the New Lender Debt Documents to the contrary or the date, manner or order of grant, attachment or perfection of any New Lender Liens or Prestige Liens and notwithstanding any provision of the UCC, or any applicable law to the contrary, until the Prestige Debt has been paid in full in cash, the New Lenders’ and Agent’s Lien on the Parent Collateral  shall be and hereby is subordinated for all purposes and in all respects to the Liens of Prestige in the Parent Collateral regardless of the date, manner or order of grant, attachment or perfection of any such Liens and notwithstanding any provision of the UCC, or any applicable law to the contrary.

 

(c) Furthermore, until the Prestige Debt has been paid in full, the New Lenders and Agent shall not enforce their security interest in any of the Parent Collateral except with the written consent of Prestige, which consent shall not be unreasonably withheld, provided that the foregoing shall not prevent New Lenders and Agent from recovering proceeds from any liquidation of Parent Collateral remaining after payment in full of the Prestige Debt.

 

2.2. Perfection. The New Lenders and Agent, on the one hand, and Prestige, on the other hand, shall be solely responsible for perfecting and maintaining the perfection of their Liens in the Collateral of the Credit Parties or the Parent Collateral, respectively.  The foregoing provisions of this Agreement are intended solely to govern the priorities of the Liens as among the Lenders and Agent shall not impose on any Lender or Agent any obligations in respect of the disposition of proceeds of any Collateral of any Credit Party that would conflict with prior perfected claims therein in favor of any other Person or any order or decree of any court or governmental authority or any applicable law.

 

2.3. Prohibition on Contesting Liens.  The New Lenders and Agent, on the one hand, and Prestige, on the other hand, agree that they shall not (and hereby waive any right to) contest or support any other Person in contesting, in any proceeding (including any Proceeding), the priority, validity or enforceability of any Lien held by Prestige in the Parent Collateral or by any New Lender or Agent in the Collateral of any Credit Party, as the case may be; provided, however, that nothing in this Agreement, including, without limitation, the foregoing, shall be construed to prevent or impair the rights of any Lender or Agent to enforce this Agreement.

 

2.4. Exercise of Collateral Remedies.                                                      Until the payment in full of the New Lender Debt, the New Lenders and Agent shall have, and until the payment in full of the Prestige Debt, Prestige shall have, in each case, the right to enforce rights, exercise remedies (including set-off and the right to credit bid their debt) and make determinations regarding the release, disposition, or restrictions with respect to the Collateral of any Credit Party (in the case of New Lenders and the Agent) or the Parent Collateral (in the case of Prestige) without any consultation with or the consent of Prestige (in the case of the New Lenders and Agent) or any of the New Lenders or Agent (in the case of Prestige).

 

  

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2.5. Agreement to Release Liens. In the event that Prestige releases or agrees to release any of its Liens in any Parent Collateral in connection with the sale or other disposition thereof or any such Parent Collateral is sold or retained pursuant to a foreclosure or similar action, Agent and each New Lender shall promptly execute and deliver such termination statements and releases as Prestige shall reasonably request to effect the release of the Liens of New Lenders and Agent in such Parent Collateral.

 

2.6. Sale, Transfer or other Disposition of Prestige Debt or New Lender Debt.

 

(a) Neither Prestige, on the one hand, nor any New Lender or Agent, on the other hand shall sell, assign, pledge, dispose of or otherwise transfer all or any portion of the Prestige Debt (or any Prestige Debt Document) or New Lender Debt (or any New Lender Debt Document), as applicable, unless such transferee agrees in writing to be bound by the applicable terms of this Agreement.

 

(b) Notwithstanding the foregoing, the intercreditor arrangements effected hereby shall survive any sale, assignment, pledge, disposition or other transfer of all or any portion of the Prestige Debt or New Lender Debt in violation of the foregoing prohibition, and the terms of this Agreement shall be binding upon the successors and assigns of the applicable Lender or Agent, as the case may be.

 

2.7. Legends. Until the termination of this Agreement in accordance with Section 14 hereof, Prestige, will cause to be clearly, conspicuously and prominently inserted on the face of the Prestige Debt Documents, the following legend:

 

“This instrument and the rights and obligations evidenced hereby are subject to that certain Intercreditor Agreement (the “Intercreditor Agreement”) dated as of October 29, 2012 among Prestige Capital Corporation, Praesidian Capital Opportunity Fund III, LP, individually and as agent, Praesidian Capital Opportunity Fund III-A, LP, Plexus Fund II, LP, Fusion NBS Acquisition Corp., Fusion Telecommunications International, Inc. (“Parent”), and each subsidiary of Parent from time to time party hereto, as such  Intercreditor Agreement may be amended, supplemented or otherwise modified from time to time; and each holder of this instrument, by its acceptance hereof, irrevocably agrees to be bound by the provisions of the Intercreditor Agreement.”

 

  

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3.  

	
Modifications.

 

3.1. Modifications to Prestige Documents. Prestige may at any time and from time to time without the consent of or notice to New Lenders or Agent, without incurring liability to New Lenders or Agent and without impairing or releasing the obligations of New Lenders or Agent under this Agreement, change the manner or place of payment or extend the time of payment of or renew or otherwise alter any of the terms of the Prestige Debt, or amend in any manner any agreement, note, guaranty or other instrument evidencing or securing or otherwise relating to the Prestige Debt, provided however that the maximum principal amount of the Prestige Debt shall not exceed $3,000,000.

 

3.2. Modifications to New Lender Debt Documents. New Lenders and agent may at any time and from time to time without the consent of or notice to Prestige, without incurring liability to Prestige and without impairing or releasing the obligations of Prestige under this Agreement, change the manner or place of payment or extend the time of payment of or renew or otherwise alter any of the terms of the New Lender Debt, or amend in any manner any agreement, note, guaranty or other instrument evidencing or securing or otherwise relating to the New Lender Debt.

 

	
4.  

	
Waiver of Certain Rights by Lenders.

 

4.1. Marshaling. Each Lender hereby waives any rights it may have under applicable law to assert the doctrine of marshaling.

 

4.2. Rights Relating to Actions with respect to the Collateral. Each New Lender and Agent, hereby waive, to the extent permitted by applicable law, any rights which it may have to enjoin or otherwise obtain a judicial or administrative order preventing Prestige from taking, or refraining from taking, any action with respect to all or any part of the Parent Collateral. Prestige, hereby waives, to the extent permitted by applicable law, any rights which it may have to enjoin or otherwise obtain a judicial or administrative order preventing the New Lenders and Agent from taking, or refraining from taking, any action with respect to all or any part of the Collateral of the Credit Parties.  Without limitation of the foregoing, (a) each New Lender and Agent hereby agree that they have no right to direct or object to the manner in which Prestige applies the proceeds of the Parent Collateral resulting from the exercise by Prestige of rights and remedies under the Prestige Debt Documents to the Prestige Debt, and (b) Prestige hereby agrees (i) that it has no right to direct or object to the manner in which New Lenders and Agent apply the proceeds of the Collateral of the Credit Parties resulting from the exercise by New Lenders and Agent of rights and remedies under the New Lender Debt Documents to the New Lender Debt and (ii) that Agent has not assumed any obligation to act as the agent for Prestige with respect to any of the Collateral of the Credit Parties. Notwithstanding the foregoing to the contrary, nothing in this Agreement, including, without limitation, the foregoing, shall be construed to prevent or impair the rights of any Lender or Agent to enforce this Agreement.

 

  

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5.             Modification. Any modification or waiver of any provision of this Agreement, or any consent to any departure by any party from the terms hereof, shall not be effective in any event unless the same is in writing and signed by Agent and Lenders, and then such modification, waiver or consent shall be effective only in the specific instance and for the specific purpose given. Any notice to or demand on any party hereto in any event not specifically required hereunder shall not entitle the party receiving such notice or demand to any other or further notice or demand in the same, similar or other circumstances unless specifically required hereunder.

 

6.             Further Assurances. Each party to this Agreement promptly will execute and deliver such further instruments and agreements and do such further acts and things as may be reasonably requested in writing by any other party hereto that may be necessary or desirable in order to effect fully the purposes of this Agreement.

 

7.             Notices. Unless otherwise specifically provided herein, any notice delivered under this Agreement shall be in writing addressed to the respective party as set forth below and may be personally served, telecopied or sent by overnight courier service or certified or registered United States mail and shall be deemed to have been given (a) if delivered in person, when delivered; (b) if delivered by telefacsimile, on the date of transmission if transmitted on a business day before 4:00 p.m. (New York City time) or, if not, on the next succeeding business day; (c) if delivered by overnight courier, one business day after delivery to such courier properly addressed; or (d) if by United States mail, four business days after deposit in the United States mail, postage prepaid and properly addressed.

 

Notices shall be addressed as follows:

 

if to Prestige:

 

Prestige Capital Corporation

400 Kelby Street, 14th Floor

Fort Lee, NJ  07024

Facsimile:  201-944-9477

Attention:  Harvey L. Kaminski

Email:  hkaminski@prestigecapital.com

 

  

7

  

with a copy to:

 

Prestige Capital Corporation

400 Kelby Street, 14th Floor

Fort Lee, NJ 07024

Facsimile:  201-944-9477

Attention:  Alan Eliasof

Email:  aeliasof@prestigecapital.com

 

if to Agent or Fund III or Fund III-A:

 

Praesidian Capital Opportunity Fund III, LP

419 Park Avenue South

New York, NY 10016

Facsimile: 212-520-2601

Attention : Jason D. Drattell

Email: jdrattell@praesidian.com

with a copy to:

 

Morrison Cohen LLP

909 Third Avenue

New York, NY 10022

Facsimile: (917) 522-3168

Attention: Stephen I. Budow, Esq.

Email: sbudow@morrisoncohen.com

 

  

8

  

If to Plexus:

 

Plexus Fund II, LP

4601 Six Forks Road

Suite 528

Raleigh, NC 27609

Facsimile: (919) 256-6350

Attention: Michael S. Becker

Email: mbecker@plexuscap.com

with a copy to:

 

Smith, Anderson, Blount, Dorsett,

  Mitchell & Jernigan, LLP

Wells Fargo Capital Center

150 Fayetteville Street, Suite 2300

Raleigh, NC 27601

Facsimile: (919) 821-6800

Attention: Curtis S. Brewer

Email: cbrewer@smithlaw.com

if to any Credit Party:

 

(Name of Credit Party)

c/o Fusion Telecommunications International, Inc.

420 Lexington Avenue, Suite 1718

New York, NY 10170

Facsimile:  (212)972-7884

Attention: Gordon Hutchins, Jr., President

Email: dhutchins@fusiontel.com

 

  

9

  

with a copy to:

 

Steven I. Weinberger, Esq.

1200 N. Federal Highway, Suite 200

Facsimile:  (888) 825-6417

Email: steve@southfloridacorporatelaw.com

 

or in any case, to such other address as the party addressed shall have previously designated by written notice to the serving party, given in accordance with this Section 7.

 

8.             Successors and Assigns. This Agreement shall inure to the benefit of, and shall be binding upon, the respective successors and assigns of Agent, each Lender and each Credit Party.

 

9.             Relative Rights; Obligations. This Agreement shall define the relative rights of Agent and Lenders. Nothing in this Agreement shall (a) impair, as (i) among the Credit Parties, New Lenders and Agent the obligation of the Credit Parties with respect to the payment of the New Lender Debt in accordance with its terms or (i) between Parent and Prestige the obligation of Parent with respect to the payment of the Prestige Debt in accordance with its terms or (b) affect the relative rights of Agent or Lenders with respect to any other creditors of the Credit Parties.  The obligations of New Lenders and Agent are several (and not joint or joint and several) and none of such parties shall be liable in any respect for the acts or omissions of any other such party.

 

10.   Conflict. In the event of any conflict between any term, covenant or condition of this Agreement and any term, covenant or condition of any of the New Lender Debt Documents or Prestige Debt Documents, the provisions of this Agreement shall control and govern.

 

11.   Headings. The paragraph headings used in this Agreement are for convenience only and shall not affect the interpretation of any of the provisions hereof.

 

  

10

  

 

12.   Counterparts. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  Delivery of an executed counterpart of a signature page of this Agreement or any document or instrument delivered in connection herewith by telefacsimile shall be effective as delivery of a manually executed counterpart of this Agreement or such other document or instrument, as applicable.

 

13.           Severability. In the event that any provision of this Agreement is deemed to be invalid, illegal or unenforceable by reason of the operation of any law or by reason of the interpretation placed thereon by any court or governmental authority, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby, and the affected provision shall be modified to the minimum extent permitted by law so as most fully to achieve the intention of this Agreement.

 

14.           Continuation of Subordination; Termination of Agreement. This Agreement shall remain in full force and effect until the payment in full in cash of the New Lender Debt and the Prestige Debt after which this Agreement shall terminate without further action on the part of the parties hereto; provided, however, that, if after receipt of any payment of, or application of the proceeds of any Collateral of the Credit Parties (in the case of the New Lenders and Agent) or Parent Collateral (in the case of Prestige) to the repayment of, all or any part of the New Lender Debt or the Prestige Debt, as the case may be, any New Lender or Agent or Prestige, as applicable, is for any reason required to surrender such payment or proceeds to any Person for any reason, then so long as such party has or had, at the time of the receipt of such payment or proceeds, a valid, enforceable and perfected Lien on the Collateral of any Credit Party (in the case of the New Lenders and Agent) or the Parent Collateral (in the case of Prestige), the proceeds of which it was required to surrender, then the New Lender Debt or the Prestige Debt, as applicable, or any part thereof intended to be satisfied shall be reinstated and the payment in full of such debt shall be deemed not to have occurred

 

15.          Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THAT WOULD RESULT IN THE APPLICATION OF THE LAW OF ANY OTHER JURISDICTION.

 

  

11

  

 

16.           SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.

 

(a) ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PARTY ARISING OUT OF OR RELATING HERETO MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK TO THE EXTENT PERMITTED BY APPLICABLE LAW.  BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH PARTY, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY, TO THE EXTENT PERMITTED BY APPLICABLE LAW (i) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NON-EXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (ii) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (iii) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE APPLICABLE PARTY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 7; AND (iv) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (iii) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE PARTY IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.

 

(b) EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING HEREUNDER.  THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER HEREOF, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.  EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS.  EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.  THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 16(b) AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO.  IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

  

12

  

 

IN WITNESS WHEREOF, Lenders, Agent and the Credit Parties have caused this Agreement to be executed as of the date first above written.

 

	 	

LENDERS:

	 
	 	 	 
	 	

PRESTIGE CAPITAL CORPORATION

	 
	 	 	 	 
	 	
By: 

	 	 
	 	 	
Name:  Harvey L. Kaminski

	 
	 	 	

Title:  President/CEO

	 
	 	 	 	 
	 	 	 	 
	 	
PRAESIDIAN CAPITAL OPPORTUNITY FUND III, L.P., individually and as Agent

	 
	 	 	 	 
	 	By: 	Praesidian Capital Opportunity GP III, LLC,	 
	 	 	its General Partner	 
	 	 	 	 
	 	By: 	 	 
	 	 	Name:	 
	 	 	Title:	 
	 	 	 	 
	 	 	 	 
	 	
PRAESIDIAN CAPITAL OPPORTUNITY FUND III-A, L.P.

	 
	 	 	 	 
	 	By: 	Praesidian Capital Opportunity GP III-A, LLC,	 
	 	 	its General Partner	 
	 	 	 	 
	 	By: 	 	 
	 	 	Name: 	 
	 	 	Title:	 

 

  

13

  

 

	 	
PLEXUS FUND II, LP

	 
	 	 	 	 
	 	By:	Plexus Fund II GP,	 
	 	 	its General Partner	 
	 	 	 	 
	 	By:	 	 
	 	 	Name: 	 
	 	 	Title:	 
	 	 	 	 

 

  

14

  

 

	 	FUSION NBS ACQUISITION CORP.	 
	 	 	 	 
	 	By:	 	 
	 	 	Name:	 
	 	 	Title:	 
	 	 	 	 
	 	FUSION TELECOMMUNICATIONS INTERNATIONAL, INC.	 
	 	 	 	 
	 	 
By:

	 	 
	 	 	 
Name:

	 
	 	 	Title:	 
	 	 	 	 
	 	NETWORK BILLING SYSTEMS, LLC	 
	 	 	 	 
	 	 
By:

	 	 
	 	 	Name:	 
	 	 	Title:	 

 

  

15

  

 

EXHIBIT A

 

Amended UCC

 

 

(See Attached)

 

 

 

 

 

 

 

 

 

 

 

 

16

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