Document:

exv10w54

 

EXHIBIT 10.54

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

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

SECURED CONVERTIBLE TERM NOTE

     FOR VALUE RECEIVED, ACCERIS COMMUNICATIONS, INC., a Florida corporation
(the “Borrower”), hereby promises to pay to LAURUS MASTER FUND, LTD., c/o M&C
Corporate Services Limited, P.O. Box 309 GT, Ugland House, South Church Street,
George Town, Grand Cayman, Cayman Islands, Fax: 345-949-8080 (the “Holder”) or
its registered assigns or successors in interest, on order, the sum of Five
Million Dollars ($5,000,000), together with any accrued and unpaid interest
hereon, on October 14, 2007 (the “Maturity Date”) if not sooner paid or
converted into the common stock of the Borrower pursuant to the terms hereof.

     Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in that certain Securities Purchase Agreement dated as
of the date hereof between the Borrower and the Holder (as amended, modified or
supplemented from time to time, the “Purchase Agreement”).

The following terms shall apply to this Note:

ARTICLE I

INTEREST & AMORTIZATION

     1.1(a) Interest Rate. Subject to Sections 4.11 and 5.6 hereof,
interest payable on this Note shall accrue at a rate per annum (the “Interest
Rate”) equal to the “prime rate” published in The Wall Street Journal
from time to time, plus three percent (3%). The prime rate shall be increased
or decreased as the case may be for each increase or decrease in the prime rate
in an amount equal to such increase or decrease in the prime rate; each change
to be effective as of the day of the change in such rate. Subject to Section
1.1(b) hereof, the Interest Rate shall not be less than seven percent (7.0%).
Interest shall be (i) calculated on the basis of a 360 day year, and (ii)
payable monthly, in arrears, commencing on November 1, 2004 and on the first business

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day of each consecutive calendar month thereafter until the
Maturity Date (and on the Maturity Date), whether by acceleration or otherwise
(each, a “Repayment Date”).

     1.1 (b) Interest Rate Adjustment. The Interest Rate shall be
calculated on the last business day of each month hereafter until the Maturity
Date (each a “Determination Date”) and shall be subject to adjustment as set
forth herein. If (i) the Borrower shall have registered the shares of the
Borrower’s common stock underlying each of the conversion of the Note and that
certain warrant issued to Holder on a registration statement declared effective
by the Securities and Exchange Commission (the “SEC”), and (ii) the market
price (the “Market Price”) of the Common Stock as reported by Bloomberg, L.P.
on the Principal Market (as defined below) for the five (5) trading days
immediately preceding a Determination Date exceeds the then applicable Fixed
Conversion Price by at least twenty five percent (25%), the Interest Rate for
the succeeding calendar month shall automatically be reduced by 200 basis
points (200 b.p.) (2.0.%) for each incremental twenty five percent (25%)
increase in the Market Price of the Common Stock above the then applicable
Fixed Conversion Price. Notwithstanding the foregoing (and anything to the
contrary contained in herein), in no event shall the Interest Rate be less than
zero percent (0%).

     1.2 Minimum Monthly Principal Payments. Amortizing payments of the
aggregate principal amount outstanding under this Note at any time (the
“Principal Amount”) shall begin on January 1, 2005 and shall recur on the first
business day of each succeeding month thereafter until the Maturity Date (each,
an “Amortization Date”). Subject to Article 3 below, beginning on the first
Amortization Date, the Borrower shall make monthly payments to the Holder on
each Repayment Date, each in the amount of $147,058.82, together with any
accrued and unpaid interest to date on such portion of the Principal Amount
plus any and all other amounts which are then owing under this Note, the
Purchase Agreement or any other Related Agreement but have not been paid
(collectively, the “Monthly Amount”). Any Principal Amount that remains
outstanding on the Maturity Date shall be due and payable on the Maturity Date.

ARTICLE II

CONVERSION REPAYMENT

     2.1 (a) Payment of Monthly Amount in Cash or Common Stock. If the
Monthly Amount (or a portion thereof of such Monthly Amount if such portion of
the Monthly Amount would have been converted into shares of Common Stock but
for Section 3.2) is required to be paid in cash pursuant to Section 2.1(b),
then the Borrower shall pay the Holder an amount equal to 102% of the Monthly
Amount due and owing to the Holder on the Repayment Date in cash. If the
Monthly Amount (or a portion of such Monthly Amount if not all of the Monthly
Amount may be converted into shares of Common Stock pursuant to Section 3.2) is
required to be paid in shares of Common Stock pursuant to Section 2.1(b), the
number of such shares to be issued by the Borrower to the Holder on such
Repayment Date (in respect of such portion of the Monthly Amount converted into
in shares of Common Stock pursuant to Section 2.1(b)), shall be the number determined by dividing (x) the portion of the
Monthly Amount converted into shares of

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Common Stock, by (y) the then
applicable Fixed Conversion Price. For purposes hereof, the initial “Fixed
Conversion Price” means $0.88, which has been determined on the date of this
Note as an amount equal to 105% of the average closing price for the thirty
(30) trading days immediately prior to the date of this Note.

     (b) Monthly Amount Conversion Guidelines. Subject to Sections
2.1(a), 2.2, and 3.2 hereof, the Holder shall convert into shares of Common
Stock all or a portion of the Monthly Amount due on each Repayment Date
according to the following guidelines (the “Conversion Criteria”): (i) the
average closing price of the Common Stock as reported by Bloomberg, L.P. on the
Principal Market for the five (5) trading days immediately preceding such
Repayment Date shall be greater than or equal to 110% of the Fixed Conversion
Price and (ii) the amount of such conversion does not exceed twenty five
percent (25%) of the aggregate dollar trading volume of the Common Stock for
the twenty two (22) day trading period immediately preceding the applicable
Repayment Date. If the Conversion Criteria are not met, the Holder shall
convert only such part of the Monthly Amount that meets the Conversion
Criteria. Any part of the Monthly Amount due on a Repayment Date that the
Holder has not been able to convert into shares of Common Stock due to failure
to meet the Conversion Criteria, shall be paid by the Borrower in cash at the
rate of 102% of the Monthly Amount otherwise due on such Repayment Date, within
three (3) business days of the applicable Repayment Date.

     2.2 No Effective Registration. Notwithstanding anything to the
contrary herein, none of the Borrower’s obligations to the Holder may be
converted into Common Stock unless (i) either (x) an effective current
Registration Statement (as defined in the Registration Rights Agreement)
covering the shares of Common Stock to be issued in connection with
satisfaction of such obligations exists or (y) an exemption from registration
of the Common Stock is available to pursuant to Rule 144 of the Securities Act
and (ii) no Event of Default hereunder exists and is continuing, unless such
Event of Default is cured within any applicable cure period or is otherwise
waived in writing by the Holder in whole or in part at the Holder’s option.

     2.3 Optional Redemption in Cash. The Borrower will have the option
of prepaying this Note (“Optional Redemption”) by paying to the Holder a sum of
money equal to one hundred twenty percent (120%) of the outstanding principal
amount of this Note together with accrued but unpaid interest thereon and any
and all other sums due, accrued or payable to the Holder arising under this
Note, the Purchase Agreement, or any Related Agreement (the “Redemption
Amount”) outstanding on the day written notice of redemption (the “Notice of
Redemption”) is given to the Holder. The Notice of Redemption shall specify the
date for such Optional Redemption (the “Redemption Payment Date”) which date
shall be seven (7) business days after the date of the Notice of Redemption
(the “Redemption Period”). A Notice of Redemption shall not be effective with
respect to any portion of this Note for which the Holder has a pending election
to convert pursuant to Section 3.1, or for conversions initiated or made by the
Holder pursuant to Section 3.1 during the Redemption Period. The Redemption
Amount shall be determined as if such Holder’s conversion elections had been
completed immediately prior to the date of the Notice of Redemption. On the
Redemption Payment Date, the

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Redemption Amount must be paid in good funds to
the Holder. In the event the Borrower fails to pay the Redemption Amount on
the Redemption Payment Date as set forth herein, then such Redemption Notice
will be null and void.

ARTICLE III

CONVERSION RIGHTS

     3.1. Holder’s Conversion Rights. The Holder shall have the right,
but not the obligation, to convert all or any portion of the then aggregate
outstanding principal amount of this Note, together with interest and fees due
hereon, into shares of Common Stock subject to the terms and conditions set
forth in this Article III. The Holder may exercise such right by delivery to
the Borrower of a written notice of conversion not less than one (1) business
day prior to the date upon which such conversion shall occur.

     3.2 Conversion Limitation. Notwithstanding anything contained
herein to the contrary, the Holder shall not be entitled to convert pursuant to
the terms of this Note an amount that would be convertible into that number of
Conversion Shares which would exceed the difference between the number of
shares of Common Stock beneficially owned by such Holder or issuable upon
exercise of warrants held by such Holder and 4.99% of the outstanding shares of
Common Stock of the Borrower. For the purposes of the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Exchange Act and Regulation 13d-3 thereunder. The Holder may void
the Conversion Share limitation described in this Section 3.2 upon 75 days
prior notice to the Borrower or without any notice requirement upon an Event of
Default.

     3.3 Mechanics of Holder’s Conversion. (a) In the event that the
Holder elects to convert this Note into Common Stock, the Holder shall give
notice of such election by delivering an executed and completed notice of
conversion (“Notice of Conversion”) to the Borrower and such Notice of
Conversion shall provide a breakdown in reasonable detail of the Principal
Amount, accrued interest and fees being converted. On each Conversion Date (as
hereinafter defined) and in accordance with its Notice of Conversion, the
Holder shall make the appropriate reduction to the Principal Amount, accrued
interest and fees as entered in its records and shall provide written notice
thereof to the Borrower within two (2) business days after the Conversion Date.
Each date on which a Notice of Conversion is delivered or telecopied to the
Borrower in accordance with the provisions hereof shall be deemed a Conversion
Date (the “Conversion Date”). No more than twenty five (25) Notices of
Conversion may be delivered by the Holder in any calendar quarter without the
express written consent of the Borrower. A form of Notice of Conversion to be
employed by the Holder is annexed hereto as Exhibit A.

     (b) Pursuant to the terms of the Notice of Conversion, the Borrower will
issue instructions to the transfer agent accompanied by an opinion of counsel
within one (1) business day of the date of the delivery to Borrower of the Notice of Conversion
and shall cause the transfer agent to transmit the certificates representing
the Conversion Shares to the Holder by

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crediting the account of the Holder’s
designated broker with the Depository Trust Corporation (“DTC”) through its
Deposit Withdrawal Agent Commission (“DWAC”) system within three (3) business
days after receipt by the Borrower of the Notice of Conversion (the “Delivery
Date”). In the case of the exercise of the conversion rights set forth herein
the conversion privilege shall be deemed to have been exercised and the
Conversion Shares issuable upon such conversion shall be deemed to have been
issued upon the date of receipt by the Borrower of the Notice of Conversion.
The Holder shall be treated for all purposes as the record holder of such
Common Stock, unless the Holder provides the Borrower written instructions to
the contrary.

     3.4 Conversion Mechanics.

     (a) The number of shares of Common Stock to be issued upon each conversion
of this Note shall be determined by dividing that portion of the principal and
interest and fees to be converted, if any, by the then applicable Fixed
Conversion Price. In the event of any conversions of outstanding principal
amount under this Note in part pursuant to this Article III, such conversions
shall be deemed to constitute conversions of outstanding principal amount
applying to Monthly Amounts for the remaining Repayment Dates in chronological
order.

     (b) The Fixed Conversion Price and number and kind of shares or other
securities to be issued upon conversion is subject to adjustment from time to
time upon the occurrence of certain events, as follows:

     A. Stock Splits, Combinations and Dividends. If the shares of
Common Stock are subdivided or combined into a greater or smaller number of
shares of Common Stock, or if a dividend is paid on the Common Stock in shares
of Common Stock, the Fixed Conversion Price or the Conversion Price, as the
case may be, shall be proportionately reduced in case of subdivision of shares
or stock dividend or proportionately increased in the case of combination of
shares, in each such case by the ratio which the total number of shares of
Common Stock outstanding immediately after such event bears to the total number
of shares of Common Stock outstanding immediately prior to such event.

     B. During the period the conversion right exists, the Borrower will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of Common Stock upon the full conversion of
this Note. The Borrower represents that upon issuance, such shares will be
duly and validly issued, fully paid and non-assessable. The Borrower agrees
that its issuance of this Note shall constitute full authority to its officers,
agents, and transfer agents who are charged with the duty of executing and
issuing stock certificates to execute and issue the necessary certificates for
shares of Common Stock upon the conversion of this Note.

     C. Share Issuances. Subject to the provisions of this Section 3.4,
if the Borrower shall at any time prior to the conversion or repayment in full
of the Principal Amount issue any shares of Common Stock or securities
convertible into Common Stock to a person other than the

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Holder (except (i)
pursuant to Subsections A or B above; (ii) pursuant to options, warrants, or
other obligations to issue shares outstanding on the date hereof as disclosed
to Holder in writing; or (iii) pursuant to options or warrants issued or that
may be issued under any employee, officer or director stock option plans, or
other options or warrants issued to employees, officers, directors, customers,
distributors, channel partners or other business partners of the Borrower
approved by the Borrower’s Board of Directors and in the ordinary course of
business, incentive stock option and/or any qualified stock option plan adopted
by the Borrower) for a consideration per share (the “Offer Price”) less than
the Fixed Conversion Price in effect at the time of such issuance, then the
Fixed Conversion Price shall be immediately reset pursuant to the formula
below. For purposes hereof, the issuance of any security of the Borrower
convertible into or exercisable or exchangeable for Common Stock shall result
in an adjustment to the Fixed Conversion Price at the time of issuance of such
securities.

     If the Corporation issues any additional shares pursuant to Section 3.4
above then, and thereafter successively upon each such issue, the Fixed
Conversion Price shall be adjusted by multiplying the then applicable Fixed
Conversion Price by the following fraction:

	 	 	 	 	 
	

	 	A + B	 	 
	

	 	 	 	 
	

	 	
	 	 
	

	 	(A + B) + [((C – D) x B) / C]	 	 

	 	 	A = Total amount of shares convertible pursuant to this Note.
	 
	 	 	B = Actual shares sold in the offering
	 
	 	 	C = Fixed Conversion Price per share
	 
	 	 	D = Offering price per share

     D. Reclassification, etc. If the Borrower at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to the
unpaid Principal Amount and accrued interest thereon, shall thereafter be
deemed to evidence the right to purchase an adjusted number of such securities
and kind of securities as would have been issuable as the result of such change
with respect to the Common Stock immediately prior to such reclassification or
other change.

     3.5 Issuance of New Note. Upon any partial conversion of this
Note, a new Note containing the same date and provisions of this Note shall, at
the request of the Holder, be issued by the Borrower to the Holder for the
principal balance of this Note and interest which shall not have been converted
or paid. Subject to the provisions of Article IV, the Borrower will pay no
costs, fees or any other consideration to the Holder for the production and
issuance of a new Note.

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ARTICLE IV

EVENTS OF DEFAULT

     Upon the occurrence and continuance of an Event of Default beyond any
applicable grace period, the Holder may make all sums of principal, interest
and other fees then remaining unpaid hereon and all other amounts payable
hereunder immediately due and payable. In the event of such an acceleration,
the amount due and owing to the Holder shall be 120% of the outstanding
principal amount of the Note (plus accrued and unpaid interest and fees, if
any) (the “Default Payment”). Any Default Payment required hereunder shall not
be subject to the prepayment premiums set forth in Section 2.3 above. Subject
to the Intercreditor Agreement, the Default Payment shall be applied first to
any fees due and payable to Holder pursuant to the Note or the Related
Agreements, then to accrued and unpaid interest due on the Note and then to
outstanding principal balance of the Note.

     The occurrence of any of the following events set forth in Sections 4.1
through 4.10, inclusive, is an “Event of Default”:

     4.1 Failure to Pay Principal, Interest or other Fees. (i) The
Borrower fails to pay when due any installment of principal, interest or other
fees hereon in accordance herewith and such failure shall continue for a period
of three (3) business days following the date upon which any such payment was
due or (ii) the Borrower fails to pay when due any amount in excess of $300,000
due under any other indebtedness of the Borrower for borrowed money and such
failure (a) shall continue beyond any applicable grace or cure period without
waiver by or consent of the lender thereof, (b) occurs at the final maturity of
the obligations thereunder or results in the acceleration of maturity of the
Borrower’s obligations thereunder and (c) is not being actively disputed in
good faith by the Borrower.

     4.2 Breach of Covenant. The Borrower breaches any covenant or any
other term or condition of this Note or the Purchase Agreement in any material
respect, or the Borrower or any of its Subsidiaries breaches any covenant or
any other term or condition of any Related Agreement in any material respect
and, in any such case, such breach, if subject to cure, continues for a period
of fifteen (15) days after the occurrence thereof.

     4.3 Breach of Representations and Warranties. Any representation
or warranty made by the Borrower in this Note or the Purchase Agreement, or by
the Borrower or any of its Subsidiaries in any Related Agreement, shall, in any
such case, be false or misleading in any material respect on the date that such
representation or warranty was made or deemed made.

     4.4 Receiver or Trustee. The Borrower or any of its Subsidiaries
shall make an assignment for the benefit of creditors, or apply for or consent
to the appointment of a receiver or trustee for it or for a substantial part of
the property or business; or such a receiver or trustee shall otherwise be appointed and not removed within 45 calendar
days of the date of appointment.

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     4.5 Judgments. Any money judgment, writ or similar final process
shall be entered or filed against the Borrower’s and it Subsidiaries’ property
or other assets for more than $600,000, and shall remain unvacated, unbonded or
unstayed for a period of thirty (30) days and thereafter be reasonably likely
to have a Material Adverse Effect.

     4.6 Bankruptcy. Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings or relief under any bankruptcy law
or any law for the relief of debtors shall be instituted by or against the
Borrower or any of its Subsidiaries and shall not be timely controverted or
dismissed within 45 calendar days thereafter.

     4.7 Stop Trade. An SEC stop trade order or Principal Market
trading suspension of the Common Stock shall be in effect for five (5)
consecutive days or five (5) days during a period of ten (10) consecutive days,
excluding in all cases a suspension of all trading on a Principal Market,
provided that the Borrower shall not have been able to cure such trading
suspension within thirty (30) days of the notice thereof or list the Common
Stock on another Principal Market within sixty (60) days of such notice. The
“Principal Market” for the Common Stock shall include the NASD OTC Bulletin
Board, NASDAQ SmallCap Market, NASDAQ National Market System, American Stock
Exchange, or New York Stock Exchange (whichever of the foregoing is at the time
the principal trading exchange or market for the Common Stock, or any
securities exchange or other securities market on which the Common Stock is
then being listed or traded.

     4.8 Failure to Deliver Common Stock or Replacement Note. The
Borrower shall fail (i) to timely deliver Common Stock to the Holder pursuant
to and in the form required by this Note, and Section 9 of the Purchase
Agreement, if such failure to timely deliver Common Stock shall not be cured
within two (2) business days or (ii) to deliver a replacement Note to Holder
within seven (7) business days following the required date of such issuance
pursuant to this Note, the Purchase Agreement or any Related Agreement (to the
extent required under such agreements).

     4.9 Default Under Related Agreements or Other Agreements. The
occurrence and continuance of any Event of Default (as defined in the Purchase
Agreement or any Related Agreement).

     4.10 Change in Control. There shall be a change in control in the
record or beneficial ownership of an aggregate of more than forty percent (40%)
of the outstanding shares of Common Stock of the Borrower, in one or more
transactions, compared to the ownership of outstanding shares of Common Stock
of the Borrower on the date hereof, without the prior written consent of
Holder, which consent shall not be unreasonably withheld (other than (i) the
sale of the Borrower’s equity securities in a public offering or to venture
capital or other private
equity investors so long as the Borrower identifies the strategic investor
and provides the general details thereof to Holder prior to the closing of the
issuance, investment or sale to strategic investors and (ii) the dissolution,
liquidation or merger of the Borrower with any other person or

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entity where the
Borrower is the surviving entity or the successor entity is solvent and
expressly assumes all of the duties and obligations of the Borrower under this
Agreement and Related Agreements).

DEFAULT RELATED PROVISIONS

     4.11 Default Interest Rate. Following the occurrence and during
the continuance of an Event of Default, the Borrower shall pay interest on this
Note in an amount equal to one and one half percent (1.5%) per month, and all
outstanding obligations under this Note, including unpaid interest, shall
continue to accrue such default interest from the date of such Event of Default
until the date such Event of Default is cured or waived. Default interest
accruing under this Section 4.11 shall supercede (and not be in addition to)
interest accruing under Section 1.1(a) hereof.

     4.12 Conversion Privileges. The conversion privileges set forth in
Article III shall remain in full force and effect immediately from the date
hereof and until this Note is paid in full.

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

ARTICLE V

MISCELLANEOUS

     5.1 Failure or Indulgence Not Waiver. No failure or delay on the
part of the Holder hereof in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.

     5.2 Notices. Any notice herein required or permitted to be given
shall be in writing and shall be deemed effectively given: (a) upon personal
delivery to the party notified, (b) when sent by confirmed telex or facsimile
if sent during normal business hours of the recipient, if not, then on the next
business day, (c) five days after having been sent by registered or certified
mail, return receipt requested, postage prepaid, or (d) one day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. Attempted delivery of any notice or
request hereunder by electronic transmission (including, but not limited to,
electronic mail) or communications through the internet shall not constitute
delivery hereunder. All communications shall be sent to the Borrower at the
address
provided in the Purchase Agreement executed in connection herewith, and to
the Holder at the address provided in the Purchase Agreement for such Holder,
with a copy to John E. Tucker, Esq., 825 Third Avenue,
14th Floor, New York, New York 10022, facsimile number (212) 541-4434, or at such
other address as the Borrower or the Holder may designate by ten days advance
written

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notice to the other parties hereto. A Notice of Conversion shall be
deemed given when made to the Borrower pursuant to the Purchase Agreement.

     5.3 Amendment Provision. The term “Note” and all reference
thereto, as used throughout this instrument, shall mean this instrument as
originally executed, or if later amended or supplemented, then as so amended or
supplemented, and any successor instrument issued pursuant to Section 3.5
hereof, as it may be amended or supplemented.

     5.4 Assignability. This Note shall be binding upon the Borrower
and its successors and assigns, and shall inure to the benefit of the Holder
and its successors and assigns, and may be assigned by the Holder in accordance
with the requirements of the Purchase Agreement. This Note shall not be
assigned by the Borrower without the consent of the Holder.

     5.5 Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of laws. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought
only in the state courts of New York or in the federal courts located in the
state of New York. Both parties and the individual signing this Note on behalf
of the Borrower agree to submit to the jurisdiction of such courts. The
prevailing party shall be entitled to recover from the other party its
reasonable out-of-pocket attorney’s fees and costs. In the event that any
provision of this Note is invalid or unenforceable under any applicable statute
or rule of law, then such provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or unenforceability
of any other provision of this Note. Nothing contained herein shall be deemed
or operate to preclude the Holder from bringing suit or taking other legal
action against the Borrower in any other jurisdiction to collect on the
Borrower’s obligations to Holder, to realize on any collateral or any other
security for such obligations, or to enforce a judgment or other court in favor
of the Holder.

     5.6 Maximum Payments. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate
of interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Borrower to the Holder and thus refunded to the
Borrower.

     5.7 Security Interest and Guarantee. The Holder has been granted a
security interest (i) in certain assets of the Borrower and its Subsidiaries as
more fully described in the Master Security Agreement dated as of the date hereof and (ii) pursuant to
the Stock Pledge Agreement dated as of the date hereof. The obligations of the
Borrower under this Note are guaranteed by certain Subsidiaries of the Borrower
pursuant to the Guaranty dated as of the date hereof.

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     5.8 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates that
the rule of construction that ambiguities are to be resolved against the
drafting party shall not be applied in the interpretation of this Note to favor
any party against the other.

     5.9 Cost of Collection. In the event of an Event of Default, the
Borrower shall pay to Holder its reasonable out-of-pocket costs of collection,
including the reasonable out-of-pocket fees of one special counsel engaged in
connection therewith.

[Balance of page intentionally left blank; signature page follows.]

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     IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in its
name effective as of this 14th day of October, 2004.

	 	 	 	 	 
	

	 	ACCERIS COMMUNICATIONS INC.
	 	 			
	

	 	By:	 	 
	

	 	 	 	

	

	 	Name:	 	 
	

	 	 	 	

	

	 	Title:	 	 
	

	 	 	 	

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EXHIBIT A

NOTICE OF CONVERSION

(To be executed by the Holder in order to convert all or part of the Note into
Common Stock

[Name and Address of Holder]

The Undersigned hereby converts $             of the principal due on [specify
applicable Repayment Date] under the Convertible Term Note issued by Acceris
Communications Inc. dated October 14, 2004 by delivery of Shares of Common
Stock of Acceris Communications Inc. on and subject to the conditions set forth
in Article III of such Note.

	1.	 	Date of Conversion                               
	 
	2.	 	Shares To Be Delivered:                           

	 	 	 
	

	 	 
	 
	 	 

	 	 	 	 	 
	 	 	[HOLDER]
	 				
	

	 	By:
	 	

	

	 	Name:
	 	

	

	 	Title:
	 	

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-13exv10w55

 

EXHIBIT 10.55

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

ACCERIS COMMUNICATIONS, INC. AND CERTAIN OF ITS SUBSIDIARIES

MASTER SECURITY AGREEMENT

To: Laurus Master Fund, Ltd.

c/o M&C Corporate Services Limited

P.O. Box 309 GT

Ugland House

South Church Street

George Town

Grand Cayman, Cayman Islands

Date: October 14, 2004

To Whom It May Concern:

     1. To secure the payment of all Obligations (as hereafter defined),
Acceris Communications, Inc., a Florida corporation (the “Company”), each of
the other undersigned parties (other than Laurus Master Fund, Ltd, “Laurus”))
and each other entity that is required to enter into this Master Security
Agreement (each an “Assignor” and, collectively, the “Assignors”) hereby
assigns and grants to Laurus, subject to the rights of any senior secured
creditors of Assignee, their permitted successors, assigns or replacements,
including any lender hereafter providing a secured credit facility to any one
or more of the undersigned in an aggregate principal amount of up to
$18,000,000, a continuing security interest in all of the following property
now owned or at any time hereafter acquired by any Assignor, or in which any
Assignor now have or at any time in the future may acquire any right, title or
interest (the “Collateral”): all cash, cash equivalents, accounts, accounts
receivable, deposit accounts, inventory, equipment, goods, documents,
instruments (including, without limitation, promissory notes), contract rights,
general intangibles (including, without limitation, payment intangibles and an
absolute right to license on terms no less favorable than those currently in
effect among our affiliates), chattel paper, supporting obligations, investment
property (including, without limitation, all equity interests owned by any
Assignor), letter-of-credit rights, trademarks, trademark applications,
tradestyles, patents, patent applications, copyrights, copyright applications
and other intellectual property in which any Assignor now has or hereafter may
acquire any right, title or interest, all proceeds and products thereof
(including, without limitation, proceeds of insurance) and all additions,
accessions and substitutions thereto or therefore. In the event any Assignor
wishes to finance the acquisition in the ordinary course of business of any
hereafter acquired equipment and have obtained a commitment from a financing

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source to finance such equipment from an unrelated third party, Laurus
agrees to release its security interest on such hereafter acquired equipment so
financed by such third party financing source. Except as otherwise defined
herein, all capitalized terms used herein shall have the meaning provided such
terms in the Securities Purchase Agreement referred to below.

     2. The term “Obligations” as used herein shall mean and include all debts,
liabilities and obligations owing by each Assignor to Laurus arising under, out
of, or in connection with: (i) that certain Securities Purchase Agreement dated
as of the date hereof by and between the Company and Laurus (the “Securities
Purchase Agreement”) and (ii) the Related Agreements referred to in the
Securities Purchase Agreement (the Securities Purchase Agreement and each
Related Agreement, as each may be amended, modified, restated or supplemented
from time to time, are collectively referred to herein as the “Documents”), and
in connection with any documents, instruments or agreements relating to or
executed in connection with the Documents or any documents, instruments or
agreements referred to therein or otherwise, and in connection with any other
indebtedness, obligations or liabilities of any Assignor to Laurus, whether now
existing or hereafter arising, direct or indirect, liquidated or unliquidated,
absolute or contingent, due or not due and whether under, pursuant to or
evidenced by a note, agreement, guaranty, instrument or otherwise, in each
case, irrespective of the genuineness, validity, regularity or enforceability
of such Obligations, or of any instrument evidencing any of the Obligations or
of any collateral therefor or of the existence or extent of such collateral,
and irrespective of the allowability, allowance or disallowance of any or all
of the Obligations in any case commenced by or against any Assignor under Title
11, United States Code, including, without limitation, obligations or
indebtedness of each Assignor for post-petition interest, fees, costs and
charges that would have accrued or been added to the Obligations but for the
commencement of such case.

     3. Each Assignor hereby jointly and severally represents, warrants and
covenants to Laurus that:

     (a) it is a corporation, partnership or limited liability company,
as the case may be, validly existing, in good standing and organized
under the respective laws of its jurisdiction of organization set forth
on Schedule A, and each Assignor will provide Laurus thirty (30) days’
prior written notice of any change in any of its respective jurisdiction
of organization;

     (b) its legal name is as set forth in its respective Certificate of
Incorporation or other organizational document (as applicable) as amended
through the date hereof and as set forth on Schedule A, and it will
provide Laurus thirty (30) days’ prior written notice of any change in
its legal name;

     (c) its organizational identification number (if applicable) is as
set forth on Schedule A hereto, and it will provide Laurus thirty (30)
days’ prior written notice of any change in any of its organizational
identification number;

     (d) it is the lawful owner of the respective Collateral and it has
the sole right to grant a security interest therein and will defend the
Collateral against all claims and demands of all persons and entities;

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     (e) it will keep its respective Collateral free and clear of all
attachments, levies, taxes, liens, security interests and encumbrances of
every kind and nature (“Encumbrances”), except (i) Encumbrances securing
liens in favor of any senior secured creditor of the Assignors, (ii)
Encumbrances securing the Obligations, (iii) Encumbrances permitted under
the Securities Purchase Agreement, (iv) to the extent said Encumbrance
does not secure indebtedness in excess of $50,000 and such Encumbrance is
removed or otherwise released within ten (10) days of the creation
thereof, (v) Encumbrances created in the ordinary course of business or
pursuant to customary customer servicing and license agreements, and (vi)
Encumbrances waived or consented to by the Senior Creditor.

     (f) it will, at its and the other Assignors joint and several cost
and expense keep the Collateral in good state of repair (ordinary wear
and tear excepted) and will not waste or destroy the same or any part
thereof other than ordinary course discarding of items no longer used or
useful in its or such other Assignors’ business;

     (g) it will not without Laurus’ prior written consent, sell,
exchange, lease or otherwise dispose of the Collateral, whether by sale,
lease or otherwise, except (i) for the sale of inventory in the ordinary
course of business, (ii) as expressly permitted under the Securities
Purchase Agreement, (iii) as expressly waived or consented to by the
Senior Creditor, (iv) for the disposition or transfer in the ordinary
course of business during any fiscal year of obsolete and worn-out
equipment or equipment no longer necessary for its ongoing needs and (v)
sales of assets pursuant to arms-length transactions, only to the extent
(for purposes of subsections (iv) and (v) only) that:

     (i) the proceeds of any such sale, disposition or transfer are
used to acquire replacement Collateral which is subject to Laurus’
perfected security interest, or are used to repay Obligations or to
pay general corporate expenses, provided that any such repayment
shall not be subject to any prepayment penalties or premiums; and

     (ii) following the occurrence of an Event of Default which
continues to exist the proceeds of which are remitted to Laurus to
be held as cash collateral for the Obligations;

     (h) it will insure or cause the Collateral to be insured in Laurus’
name against loss or damage by fire, theft, burglary, pilferage, loss in
transit and such other hazards as Laurus shall specify in amounts and
under policies by insurers acceptable to Laurus and all premiums thereon
shall be paid by such Assignor and the policies delivered to Laurus. If
any such Assignor fails to do so, Laurus may procure such insurance and
the cost thereof shall be promptly reimbursed by the Assignors, jointly
and severally, and shall constitute Obligations;

     (i) it will at all reasonable times allow Laurus or Laurus’
representatives reasonable access to and the right of inspection of the
Collateral during regular business hours on reasonable prior notice, not
to exceed twice during any calendar year in the absence of an Event of
Default;

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     (j) such Assignor (jointly and severally with each other Assignor)
hereby indemnifies and saves Laurus harmless from all loss, costs,
damage, liability and/or expense, including reasonable attorneys’ fees,
that Laurus may sustain or incur to enforce payment, performance or
fulfillment of any of the Obligations and/or in the enforcement of this
Master Security Agreement or in the prosecution or defense of any action
or proceeding either against Laurus or any Assignor concerning any matter
growing out of or in connection with this Master Security Agreement,
and/or any of the Obligations and/or any of the Collateral except to the
extent caused by Laurus’ own gross negligence or willful misconduct (as
determined by a court of competent jurisdiction in a final and
nonappealable decision).

     4. The occurrence of any of the following events or conditions shall
constitute an “Event of Default” under this Master Security Agreement:

     (a) any covenant, warranty, representation or statement made or
furnished to Laurus by the Assignor or on the Assignor’s behalf was
breached in any material respect or false in any material respect when
made or furnished, as the case may be, and, in the case of a covenant, if
subject to cure, shall not be cured for a period of fifteen (15) days;

     (b) the loss, theft, substantial damage, destruction, sale or
encumbrance to or of any of the Collateral or the making of any levy,
seizure or attachment thereof or thereon except to the extent:

     (i) such loss is covered by insurance proceeds which are used
to replace the item or repay Laurus; or

     (ii) said levy, seizure or attachment does not secure
indebtedness in excess of $100,000 and such levy, seizure or
attachment has not been removed or otherwise released within ten
(10) days of the creation or the assertion thereof; or

     (iii) such sale or encumbrance is expressly permitted pursuant
to the Securities Purchase Agreement and the express terms of this
Master Security Agreement.

     (c) any Assignor shall become insolvent, cease operations, dissolve,
terminate our business existence, make an assignment for the benefit of
creditors, suffer the appointment of a receiver, trustee, liquidator or
custodian of all or any part of Assignors’ property, except as expressly
permitted pursuant to the Securities Purchase Agreement;

     (d) any proceedings under any bankruptcy or insolvency law shall be
commenced by or against any Assignor that is not dismissed within sixty
(60) days;

     (e) the Company shall repudiate, purport to revoke or fail to
perform any or all of its obligations under any Note (after passage of
applicable cure period, if any); or

     (f) an Event of Default shall have occurred and be continuing under
and as defined in any Document.

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     5. Upon the occurrence and during the continuance of any Event of Default
and at any time thereafter, Laurus may declare all Obligations immediately due
and payable and Laurus shall have the remedies of a secured party provided in
the Uniform Commercial Code as in effect in the State of New York, this
Agreement and other applicable law. Upon the occurrence of any Event of
Default and at any time thereafter, Laurus will have the right to take
possession of the Collateral and during the continuance of same maintain such
possession on our premises or to remove the Collateral or any part thereof to
such other premises as Laurus may desire. Upon Laurus’ request, each of the
Assignors shall assemble or cause the Collateral to be assembled and make it
available to Laurus at a place designated by Laurus. If any notification of
intended disposition of any Collateral is required by law, such notification,
if mailed, shall be deemed properly and reasonably given if mailed at least ten
(10) business days before such disposition, postage prepaid, addressed to any
Assignor either at such Assignor’s address shown herein or at any address
appearing on Laurus’ records for such Assignor. Any proceeds of any
disposition of any of the Collateral shall be applied by Laurus to the payment
of all expenses in connection with the sale of the Collateral, including
reasonable attorneys’ fees and other legal expenses and disbursements and the
reasonable expense of retaking, holding, preparing for sale, selling, and the
like, and any balance of such proceeds may be applied by Laurus toward the
payment of the Obligations in such order of application as Laurus may elect,
and each Assignor shall be liable for any deficiency. Notwithstanding anything
to the contrary contained herein, all of Laurus’ rights and remedies hereunder
shall be subject and subordinate to the rights of senior secured creditors of
Assignor, whether now existing or hereafter created.

     6. If any Assignor defaults in the performance or fulfillment of any of
the terms, conditions, promises, covenants, provisions or warranties on such
Assignor’s part to be performed or fulfilled under or pursuant to this Master
Security Agreement, Laurus may, at its option without waiving its right to
enforce this Master Security Agreement according to its terms, immediately or
at any time thereafter and without notice to any Assignor, perform or fulfill
the same or cause the performance or fulfillment of the same for each
Assignor’s joint and several account and at each Assignor’s joint and several
cost and expense, and the cost and expense thereof (including reasonable
attorneys’ fees) shall be added to the Obligations and shall be payable on
demand with interest thereon at the highest rate permitted by law.

     7. Each Assignor appoints Laurus, any of Laurus’ officers, employees or
any other person or entity whom Laurus may designate as our attorney,; to file
financing statements against us covering the Collateral (and, in connection
with the filing of any such financing statements, describe the Collateral as
“all assets and all personal property, whether now owned and/or hereafter
acquired” (or any substantially similar variation thereof)) and during the
existence of an Event of Default, with power to execute such documents in each
of our behalf and to supply any omitted information and correct patent errors
in any documents executed by any Assignor or on any Assignor’s behalf to sign
our name on public records; and to do all other things Laurus deem necessary to
carry out this Master Security Agreement. Each Assignor hereby ratifies and
approves all acts of the attorney and neither Laurus nor the attorney will be
liable for any acts of commission or omission, nor for any error of judgment or
mistake of fact or law other than gross negligence or willful misconduct (as
determined by a court of competent jurisdiction in a final and non-appealable
decision). This power being coupled with an interest, is irrevocable so long
as any Obligations remains unpaid.

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     8. No delay or failure on Laurus’ part in exercising any right, privilege
or option hereunder shall operate as a waiver of such or of any other right,
privilege, remedy or option, and no waiver whatever shall be valid unless in
writing, signed by Laurus and then only to the extent therein set forth, and no
waiver by Laurus of any default shall operate as a waiver of any other default
or of the same default on a future occasion. Laurus’ books and records
containing entries with respect to the Obligations shall be admissible in
evidence in any action or proceeding, shall be binding upon each Assignor for
the purpose of establishing the items therein set forth and shall constitute
prima facie proof thereof. Laurus shall have the right to enforce any one or
more of the remedies available to Laurus, successively, alternately or
concurrently. Each Assignor agrees to join with Laurus in executing financing
statements or other instruments to the extent required by the Uniform
Commercial Code in form satisfactory to Laurus and in executing such other
documents or instruments as may be required or deemed necessary by Laurus for
purposes of affecting or continuing Laurus’ security interest in the
Collateral. Notwithstanding anything to the contrary herein, in connection
with any disposition, sale, pledge or transfer of any Collateral by any
Assignor that is expressly permitted herein, Laurus hereby irrevocably
authorizes the Company or its agent to file in any jurisdiction any amendment
terminating or releasing any financing statement, in whole or in part, relating
to such Collateral without the signature of Laurus.

     9. This Master Security Agreement shall be governed by and construed in
accordance with the laws of the State of New York and cannot be terminated
orally. All of the rights, remedies, options, privileges and elections given
to Laurus hereunder shall inure to the benefit of Laurus’ successors and
assigns. The term “Laurus” as herein used shall include Laurus, any parent of
Laurus’, any of Laurus’ subsidiaries and any co-subsidiaries of Laurus’ parent,
whether now existing or hereafter created or acquired, and all of the terms,
conditions, promises, covenants, provisions and warranties of this Agreement
shall inure to the benefit of each of the foregoing, and shall bind the
representatives, successors and assigns of each Assignor. Laurus and each
Assignor hereby (a) waive any and all right to trial by jury in litigation
relating to this Agreement and the transactions contemplated hereby and each
Assignor agrees not to assert any counterclaim in such litigation, (b) submit
to the nonexclusive jurisdiction of any New York State court sitting in the
borough of Manhattan, the city of New York and (c) waive any objection Laurus
or each Assignor may have as to the bringing or maintaining of such action
with any such court.

     10. It is understood and agreed that any person or entity that desires to
become an Assignor hereunder, or is required to execute a counterpart of this
Master Security Agreement after the date hereof pursuant to the requirements of
any Document, shall become an Assignor hereunder by (x) executing a Joinder
Agreement in form and substance satisfactory to Laurus, (y) delivering
supplements to such exhibits and annexes to such Documents as Laurus shall
reasonably request and (z) taking all actions as specified in this Agreement as
would have been taken by such Assignor had it been an original party to this
Agreement, in each case with all documents required above to be delivered to
Laurus and with all documents and actions required above to be taken to the
reasonable satisfaction of Laurus.

     11. All notices from Laurus to any Assignor shall be sufficiently given if
mailed or delivered to such Assignor’s address set forth below.

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     12. Laurus hereby acknowledges and agrees that all of Laurus’ Liens on the
Collateral and the exercise of all of its rights and remedies hereunder are
subject and subordinate to those of any senior secured creditor (or creditors)
that provides (or provide) a credit facility whether now or hereafter created,
to any one or more of the undersigned, so long as the aggregate principal
amount of such credit facility shall equal up to $18,000,000 and Laurus
agrees that it shall, at the request of one or more of the undersigned,
execute a subordination agreement, reasonably acceptable to Laurus and such
senior creditor (or creditors) effecting and evidencing such subordination.

	 	 	 	 	 
	 	 	Very truly yours,
	

	 	 	 	 
	 	 	ACCERIS COMMUNICATIONS INC.,

a Florida corporation
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	

	

	 	Name:	 	 
	

	 	 	 	

	

	 	Title:	 	 
	

	 	 	 	

	

	 	Address:	 	 
	 
	 	 	 	 
	 	 	ACCERIS COMMUNICATIONS

TECHNOLOGIES, INC., a Delaware

corporation
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	

	

	 	Name:	 	 
	

	 	 	 	

	

	 	Title:	 	 
	

	 	 	 	

	

	 	Address:	 	 
	 
	 	 	 	 
	 	 	ACCERIS COMMUNICATIONS
CORP., a

Delaware corporation
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	

	

	 	Name:	 	 
	

	 	 	 	

	

	 	Title:	 	 
	

	 	 	 	

	

	 	Address:	 	 
	 
	 	 	 	 
	 	 	MIBRIDGE, INC., a Utah corporation
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	

	

	 	Name:	 	 
	

	 	 	 	

	

	 	Title:	 	 
	

	 	 	 	

	

	 	Address:	 	 

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	 	 	ACKNOWLEDGED:
	 
	 	 	 	 
	 	 	LAURUS MASTER FUND, LTD.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	

	

	 	Name:	 	 
	

	 	 	 	

	

	 	Title:	 	 
	

	 	 	 	

	

	 	Address:	 	 

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SCHEDULE A

Entity

Jurisdiction of Organization

Organization Identification Number

[Assignors]

Acceris Communications Inc.

Jurisdiction of Organization: Florida

Organization ID No.: 59-2291344

Acceris Communications Technologies, Inc.

Jurisdiction of Organization: Delaware

Organization ID No.: 75-3116142

Acceris Communications Corp.

Jurisdiction of Organization: Delaware

Organization ID No.: 13-4119107

Mibridge, Inc.

Jurisdiction of Organization: Utah

Organization ID No.:

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