Document:

Exhibit
10.3

 

May 16,
2005

Acceris
Communications Inc.

9775
Business Park Avenue

San
Diego, CA 92131

USA

Attn: Mr.
Henry Y.L Toh, Chairman of the Audit Committee

Dear Mr.
Toh

 

By this
letter, Counsel Corporation and its subsidiary Counsel Corporation (US)
(collectively “Counsel”) wish to confirm in writing that, subject to the legal
Closing of the proposed transaction with North Central Equity LLC (the
“Transaction”) for the sale of substantially all of the telecommunication assets
of Acceris Communications Corp. (“the Condition Precedent”), Counsel will extend
the maturity date from April 30, 2006 to December 31, 2006 in respect of all
outstanding and future loans payable (including interest) owing to Counsel by
Acceris Communications Inc. (“Acceris”). Accordingly, the underlying respective
loan agreements will be amended effective on the signing of the Transaction to
reflect this extension. All other terms of the respective loan agreements remain
in full force and effect. 

 

We also
confirm the commitment of Counsel Corporation and its subsidiary Counsel
Communications LLC to fund, through long-term intercompany advances of equity
contributions, all capital investment, working capital or other operational cash
requirements of Acceris and its controlled subsidiaries in order for Acceris to
continue as a going concern through December 31, 2006 pursuant to the above
Condition Precedent.

 

We also
wish to advise that the compensation arrangement with Mr. Allan Silber in his
capacity as Chief Executive Officer of Acceris will be modified effective July
1, 2005 to reduce Mr. Silber’s annual compensation from $275,000 plus 100% bonus
entitlement to $137,500 plus 100% bonus entitlement. This change is in
recognition of the reduced complexity of the Acceris business following the
expected disposition of the telecommunications business.

 

 

Sincerely,

	 	 	 	 
	/s/ Allan
      Silber	 	 	/s/ Stephen
      Weintraub
	
      

    	 	 	
      

    
	
      Allan Silber

      Chairman and Chief Executive Officer
Counsel
      Corporation
	 	 	Stephen
      Weintraub
Senior Vice-President & Secretary
Counsel
      Corporation

 

cc:  
Gary Clifford
Gary
Taylor
Kelly
Murumets
Hal
Heaton
Ralph
DeMartino
Sam
Shimer

 

2Exhibit
10.4

 

SECURITY AGREEMENT

 

This Security Agreement (this “Agreement”) between Acceris
Communications Inc., a Florida corporation (“ACI”) and Acceris
Communications Corp. , a Delaware corporation (the “Company”)(ACI and the
Company are collectively, the “Debtors”), and Acceris Management and
Acquisition LLC, a Minnesota limited liability company (the “Secured
Party”) takes effect on the Execution Date. Capitalized terms used but not
otherwise defined in this Agreement shall have the meanings ascribed to them in
that certain Asset Purchase Agreement between the Debtors, Counsel Corporation
and the Secured Party (the “Purchase Agreement”). 

 

RECITALS

 

	A.    	
      If
      the Purchase Agreement is terminated before the Closing, Section 5.11 of
      the Purchase Agreement provides that the Secured Party is entitled to
      recover certain advances and fees pursuant to any written agreements
      between the Secured Party and the Debtors (collectively, the “Break Up
      Fee”). 

 

	B.    	
      As
      security for the Break Up Fee that is owed or will be owed to the Secured
      Party upon the termination of the Purchase Agreement, the Debtors have
      delivered to the Secured Party a Note whereby the principal amount will be
      equal to the Break Up Fee (the
“Note”).

 

	C.    	
      As
      a condition to entering into the Purchase Agreement, the Secured Party has
      required that the Debtors deliver this Agreement as security for their
      obligations under the Note.

 

AGREEMENT

 

In consideration of
the above recitals, and the promises set forth in this Agreement, the parties
agree as follows:

 

	1.    	
      Obligations.
      For purposes of this Agreement, “Obligations” means collectively
      the Note, this Agreement and the repayment or performance of any of the
      foregoing if any such payment or performance is at any time avoided,
      rescinded, set aside, or recovered from or repaid by Secured Party, in
      whole or in part, in any bankruptcy, insolvency, or similar proceeding
      instituted by or against the Debtors of any Obligation, or otherwise,
      including but not limited to all principal, interest, fees, expenses and
      other charges.

 

	2.    	
      Collateral.
      For purposes of this Agreement, “Collateral” means collectively all
      of the assets and property of ACI and the Company and any of the assets
      upon which Wells Fargo Foothills, Inc., a California corporation, has a
      first lien, whether now owned or hereafter acquired and wherever located,
      including without limitation the following types of assets and property:
      (a) accounts (including, but not limited to, health-care-insurance
      receivables), documents, instruments, investment property,
      letter-of-credit rights, letters of credit, chattel paper, general
      intangibles, other rights to payment, deposit accounts, money, patents,
      patent applications, trademarks, trademark applications, copyrights,
      copyright applications, trade names, other names, software, payment
      intangibles, inventory, equipment, and fixtures; (b) accessions,
      additions and improvements to, replacements of, and substitutions for any
      of the foregoing; (c) all products and proceeds of any of the
      foregoing; and (d) books, records and data in any form relating to
      any of the foregoing.

 

 

	3.    	
      Security
      Interest and Subordination. The Debtors hereby grant to the Secured
      Party a security interest (the “Security Interest”) in the
      Collateral to secure the payment and performance of the Obligations. The
      Security Interest continues in effect until this Agreement is terminated
      in writing by the Secured Party or until the Note is terminated in
      accordance with its terms. 

 

	4.    	
      Representations,
      Warranties and Covenants. The Debtors represent, warrant and agree to
      the following:

 

	4.1    	
      Principal
      Office. The Company’s chief executive office is located at the address
      specified on Schedule 1 attached to this Agreement. The
      Debtors will give the Secured Party written notice prior to any change in
      the location of the Company’s principal office. The Company’s
      organizational identification number and Federal Tax Identification Number
      are as specified on Schedule 1.

 

	4.2    	
      Organization;
      Authority. Each of the Debtors is duly organized, validly existing and
      in good standing under the laws of its state or province of its
      organization and has full power and authority to enter into this
      Agreement. ACI is a corporation organized under the laws of the State of
      Florida and its exact legal name is as set forth in this Agreement. The
      Company is a corporation organized under the laws of the State of Delaware
      and its exact legal name is as set forth in this Agreement. The Debtors
      will not change their state of organization, form of organization or name
      without the Secured Party’s prior written
consent.

 

	4.3    	
      Perfection
      of Security Interest. Subject to the Permitted Liens, the Debtors will
      execute and deliver and they irrevocably appoint the Secured Party (which
      appointment is coupled with an interest) the Debtors’ attorney-in-fact to
      execute, deliver and file in the Debtors’ name, all financing statements
      (including, but not limited to, amendments, terminations and terminations
      of other security interests in any of the Collateral), control agreements
      and other agreements which the Secured Party may at any time reasonably
      request in order to secure, protect, perfect, collect or enforce the
      Security Interest. Subject to the Permitted Liens, the Debtors have
      delivered all of the Collateral consisting of instruments, documents and
      chattel paper to the Secured Party or, at the time the Debtors acquires an
      interest therein, will deliver all after acquired Collateral consisting of
      instruments, documents and chattel paper to the Secured Party. Subject to
      the Permitted Liens, the Debtors shall, at any time and from time to time,
      take such steps as the Secured Party may reasonably request for Secured
      Party (a) to obtain an acknowledgement, in form and substance reasonably
      satisfactory to the Secured Party, of any bailee having possession of any
      of the Collateral that such bailee holds such Collateral for Secured
      Party, (b) to obtain “control” of any investment property, deposit
      accounts, letter-of-credit rights or electronic chattel paper (as such
      terms are defined in the UCC, as hereinafter defined), with any agreements
      establishing control to be in form and substance reasonably satisfactory
      to Secured Party, and (c) otherwise to insure the continued perfection and
      priority of the Security Interest in any of the Collateral and the
      preservation of the rights of the Secured Party therein.
  

 

2

 

	4.4    	
      Enforceability
      of Collateral. To the extent the Collateral consists of accounts,
      instruments, documents, chattel paper, letter-of-credit rights, letters of
      credit or general intangibles, the Collateral is enforceable in accordance
      with its terms, is genuine, complies with applicable laws concerning form,
      content and manner of preparation and execution, and all persons appearing
      to be obligated on the Collateral have authority and capacity to contract
      and are in fact obligated as they appear to be on the
      Collateral.

 

	4.5    	
      Title
      to Collateral. The Company holds, or will hold at the time the Company
      acquires an interest in after acquired Collateral, good and marketable
      title to the Collateral free of all security interests and encumbrances
      except for the Security Interest and the security interests and
      encumbrances specified on Schedule 1 (the “Permitted
      Liens”). The Debtors will keep the Collateral free of all security
      interests and encumbrances except for the Security Interest and the
      Permitted Liens. The Debtors will defend the Secured Party’s rights in the
      Collateral against the claims and demands of all other
      persons.

 

	4.6    	
      Collateral
      Location. The Debtors will keep all tangible Collateral at the
      principal office and at the locations specified on Schedule 1.
      

 

	4.7    	
      Collateral
      Use. The Debtors will use the Collateral only for business purposes.
      The Debtors will not use or keep any Collateral for any unlawful purpose
      or in violation of any federal, state or local law, statute or
      ordinance.

 

	4.8    	
      Maintenance
      of Collateral. The Debtors will maintain all tangible Collateral in
      good condition and repair. The Debtors will not commit or permit damage to
      or destruction of any of the Collateral. The Debtors will give the Secured
      Party prompt written notice of any material loss of or damage to any
      tangible Collateral and of any other happening or event that materially
      affects the existence, value or amount of the
  Collateral.

 

	4.9    	
      Disposition
      of Collateral. The Debtors will not sell or otherwise dispose of any
      Collateral or any interest in any Collateral without the prior written
      consent of the Secured Party, except that until the occurrence of an Event
      of Default (as defined in Section 5 below), the Company may sell any
      inventory constituting Collateral in the ordinary course of the Company’s
      business.

 

	         4.10   	
      Taxes,
      Assessments and Liens. Other than the Assumed Liabilities, the Debtors
      will promptly pay all taxes and other governmental charges levied or
      assessed upon or against any Collateral.

 

3

 

	4.11   	
      Records;
      Access. The Debtors will keep accurate and complete records pertaining
      to the Collateral and to the Company’s business and financial condition
      and will submit to the Secured Party all reports regarding the Collateral
      and the Debtor’s business and financial condition as and when the Secured
      Party may reasonably request. During normal business hours, the Debtors
      will permit the Secured Party and its representatives to examine or
      inspect any Collateral, wherever located, and to examine, inspect and copy
      the Company’s books and records relating to the Collateral and the
      Company’s business and financial condition.

 

	4.12   	
      Insurance.
      The Debtors will keep all tangible Collateral insured against risks of
      fire (including so-called extended coverage), theft and other risks and in
      such amounts as the Secured Party may reasonably request, with any loss
      payable to the Secured Party to the extent of its interest. Subject to the
      Permitted Liens, the Debtors assigns to the Secured Party all money due or
      to become due with respect to, and all other rights of the Debtors with
      respect to, all insurance concerning the Collateral and the Debtors direct
      the issuer of any such insurance to pay all such money directly to the
      Secured Party.

 

	4.13   	
      Collection
      Costs. The Debtors will reimburse the Secured Party on demand for all
      costs of collection of any of the Obligations and all other expenses
      incurred by the Secured Party in connection with the perfection,
      protection, defense or enforcement of the Security Interest and this
      Agreement, including all reasonable attorneys’ fees incurred by the
      Secured Party whether or not any litigation or bankruptcy or insolvency
      proceeding is commenced.

 

	4.14   	
      Financing
      Statements. The Debtors authorize the Secured Party to file one or
      more financing or continuation statements, and amendments thereto,
      relative to all or any part of the Collateral without Debtor’s signature
      where permitted by law, in each case in such form and substance as the
      Secured Party may determine. The Debtors shall pay all filing,
      registration and recording fees and any taxes, duties, imports,
      assessments and charges arising out of or in connection with the execution
      and delivery of this Agreement, any agreement supplemental hereto, any
      financing statements, and any instruments of further assurance.
      

 

	5.    	
      Events
      of Default. It shall be an “Event of Default” under this
      Agreement if any of the Debtors fails to pay any of the Obligations
      when due and any applicable grace period lapses without cure by the
      Debtors.

 

	6.    	
      Remedies
      Upon Event of Default. Upon the occurrence of an Event of Default and
      at any time thereafter, the Secured Party may exercise one or more of the
      following rights and remedies, subject to the priority of the Permitted
      Liens: (a) declare any or all unmatured Obligations to be immediately
      due and payable without presentment or any other notice or demand and
      immediately enforce payment of any or all of the Obligations;
      (b) require any of the Debtors to make the Collateral available to
      the Secured Party at a place to be designated by the Secured Party;
      (c) exercise and enforce any rights or remedies available upon
      default to a secured party under the Uniform Commercial Code as amended
      from time to time, enacted in any applicable jurisdiction (the
      “UCC”), and, if notice to the Debtors of the intended disposition
      of Collateral or any other intended action is required by law, such notice
      shall be commercially reasonable if given at least ten calendar days prior
      to the intended disposition or other action; and (d) exercise and
      enforce any other rights or remedies available to the Secured Party by law
      or agreement against the Collateral, the Debtors, or any other person or
      property. The Secured Party’s duty of care with respect to the Collateral
      in its possession will be fulfilled if the Secured Party exercises
      reasonable care in physically safekeeping the Collateral or, in the case
      of Collateral in the possession of a bailee or other third person,
      exercises reasonable care in the selection of the bailee or other third
      person. Mere delay or failure to act will not preclude the exercise or
      enforcement of any of Secured Party’s rights or remedies. All rights and
      remedies of the Secured Party are cumulative and may be exercised
      singularly or concurrently, at the Secured Party’s
  option.

 

4

 

	7.    	
      Miscellaneous.
      The following miscellaneous provisions are a part of this
      Agreement:

 

	7.1    	
      Definitions.
      Terms not otherwise defined in this Agreement shall have the meanings
      ascribed to them, if any, under the UCC and such meanings shall
      automatically change at the time that any amendment to the UCC, which
      changes such meanings, shall become
effective.

 

	7.2    	
      Notices.
      All notices under this Agreement must be in writing and will be deemed
      given when delivered or placed in the United States mail, registered or
      certified, postage prepaid, addressed to the respective party at the
      address set forth in the Management Agreement. Any party may change its
      address for notices under this Agreement by giving written notice to the
      other parties.

 

	7.3    	
      Amendments/Waivers.
      This Agreement may be waived, amended, modified or terminated and the
      Security Interest may be released only in a writing signed by the Secured
      Party. Any waiver signed by the Secured Party will be effective only in
      the specific instance and for the specific purpose
  given.

 

	7.4    	
      Applicable
      Law. This Agreement is governed by the laws of the State of Illinois
      without regard to the conflict of law principles. If any provision of this
      Agreement is held unlawful or unenforceable in any respect, such
      illegality or unenforceability will not affect other provisions or
      applications that can be given effect and this Agreement will be construed
      and enforced as if the unlawful or unenforceable provision or application
      had never been contained in or prescribed by this
    Agreement.

 

	7.5    	
      Caption
      Headings. Caption headings in this Agreement are for convenience
      purposes only and are not to be used to interpret or define the provisions
      of this Agreement.

 

	7.6    	
      Successors
      and Assigns. This Agreement is binding upon and will inure to the
      benefit of the parties and their successors and
assigns.

 

	7.7    	
      Counterparts.
      This Agreement may be executed in several counterparts, each of which will
      be an original, and all of which will constitute one and the same
      instrument.

 

[REMAINDER OF THIS PAGE BLANK. SIGNATURE PAGE FOLLOWS.]

 

5

 

The parties have
executed this Agreement to be made effective as of the Execution Date, as that
term is used and defined in the Purchase Agreement. 

 

	 	 	 
	 	DEBTORS:
	 	 
	 	ACCERIS
      COMMUNICATIONS INC.
	 
 	 
 	 
 
		By:  	/s/ 
	 	
      

       Name:
	 	Title:

 

		 	 
	 	ACCERIS
      COMMUNICATIONS CORP.
	 
 	 
 	 
 
		By:  	/s/ 
	 	
      

       Name:
	 	Title:

		 	 
	 	SECURED
      PARTY:
	 	 
	 	
      ACCERIS
      MANAGEMENT AND ACQUISITION LLC

	 
 	 
 	 
 
		By:  	/s/ 
	 	
      

       Name:
	 	Title:

[Signature Page to Security Agreement]

 

6

SCHEDULE 1

TO

SECURITY AGREEMENT

 

	
      DEBTOR’S
      CHIEF EXECUTIVE OFFICE:
	
      SECURED
      PARTY’S ADDRESS:

	 	 
	
      1001
      Brinton Road
	
      60
      South 6th Street, Suite 2535

	
      Pittsburgh,
      PA 15221 
	
      Minneapolis,
      Minnesota 55402

	
      Attn:
      Chief Operating Officer
	
      Attn:
      Elam Baer/Drew Backstrand

	
      Fax#:
      412-244-6622
	
      Fax#:
      612-455-1022 

 

The Company’s Delaware Organizational and Federal Tax Identification
Numbers:

 

Delaware Organizational Number: 3234808

 

Federal Tax Identification Number:________

 

Permitted Liens:

 

	Secured
      Party
	Collateral

	
      Wells
      Fargo Foothill, Inc.
	
      All
      of the Collateral 

	
      Laurus
	
      All
      of the collateral set forth in the Laurus Credit Documents, expressly
      subordinated to Wells Fargo Foothills, Inc. by an Intercreditor
      Agreement

 

Collateral Locations in addition to the Company’s Principal Office:

 

611 Wilshire Blvd, LA, CA
90017

9775 Business Park Avenue, San
Diego, CA 92131

1120 G Street, NW, Washington,
D. C. 20005

2153 NW
22nd Street, Miami, Florida
33124

Printers Square, 600 S.
Federal, Suite 250, Chicago, Illinois 60605

1 Main Street, Suite 411,
Eatontown, NJ 07724

500 Atrium
Drive, Somerset, NJ 

60 Hudson
Street, Suite 1508, NY, NY 10013

7

Energy Center
Fax Bay 145D, 4350 Northern Pike, Monroeville, PA 15146

Hill behind
Brinton Road office, Microwave Tower, Pittsburg, PA 15221

Green Hills
Corporate Center, 300 Grundy Road, Suite 4501, Reading, PA 19607

2323 Bryan
Street, Suite 1500, Dallas, Texas 75201

1260 East
Elgin Avenue, Salt Lake City , UT 84106

527 Fairview
Avenue, Seattle, WA 98109

485 Ardmore,
Braddock Hills, PA 15221

4351
Industrial Access Road, Douglasville, GA 30133

 

8

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