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Letter of Intent for a Joint Venture Agreement
Between Teliphone Inc. and Intelco Communication, Inc.

Dated July 14, 2006

By and between:

Teliphone Inc. “Teliphone” a Canadian Corporation having offices located at 1080
Beaver Hall, Suite 1555, Montreal, Quebec, Canada H2Z 1S8, hereby represented by
George Metrakos, its President & CEO, duly authorized as he so declares,

And

Intelco Communications, “Intelco”, a Canadian corporation having offices located
at 4150 Ste-Catherine St West, suite 200, Montreal, Quebec, Canada, H3Z 2Y5,
hereby represented by Serge Farman, its Executive Vice-President, duly
authorized as he so declares,

And

3901823 Canada Inc., “3901823”, a Canadian corporation (and majority shareholder
of Intelco) having offices located at 4150 Ste-Catherine St West, suite 200,
Montreal, Quebec, Canada, H3Z 2Y5, hereby represented by Serge Farman, its
Executive Vice-President, duly authorized as he so declares,

Collectively known as “the Parties”

And

Benoit Laliberté, businessman, domiciled at 220 de la coulée, Mont-St-Hilaire,
Qc, Canada. (Benoit Laliberté signature required for investment as described in
section 5 and personal guarantee in item 2.7).

Whereas the parties wish to set forth the guidelines in this Letter of Intent
(LOI) and subsequent Agreement in order to merge their operations and for
Teliphone to provide to Intelco a white-label version of its VoIP platform.

1.  
Intent & Objective:

1.1.  
To leverage Intelco’s global distribution channel of pre-paid calling cards and
telecommunications services by introducing Teliphone’s VoIP services to their
existing and future client base.

 
 

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1.2.  
To leverage Teliphone’s technology and experience with its initial clients in
order to provide Intelco with a proven VoIP product to sell to the global
market.

1.3.  
To immediately (within 3-6 months) turn Teliphone’s current operations to cash
flow positive by merging operations with Intelco and thereby reducing
Teliphone’s required cash outflows over the next 12 months.

2.  
White-Label Version of Teliphone`s VoIP platform for Intelco

Actual costs and in-kind contributions made for this white-label platform are
presented in tabular form in Appendix A.

2.1.  
Teliphone will provide to Intelco a white label version of its VoIP platform for
use by Intelco for promotion of its line of VoIP products without commercial
restriction to the global marketplace.

2.2.  
Intelco will pay Teliphone 1$ per month per active subscriber as a software
license fee. The minimum amount paid will be based on a ramp-up period as
described in item 2.6 below and the maximum will be $12,000 per month. These
amounts will remain as an advance from Teliphone for 12 months from the signing
of this LOI and will be converted as described in section 6.

2.3.  
Above and beyond the twelve thousandth customer, Teliphone will receive $0.15
per Intelco subscriber per month. In return, Teliphone will ensure that all of
the necessary resources within Teliphone’s team and technology is in place in
order to meet Intelco’s requirements for modifications of their white label
platform.

2.4.  
Intelco’s customers’ traffic will be passed entirely on Intelco’s network (ie.
Intelco assumes DID costs, call origination and call termination costs).

2.5.  
Teliphone will invoice any actual variable costs that may be incurred by
Teliphone in order to supply service to these customers (ie. E9-1-1 PSAP call
services).

2.6.  
The following period will comprise the minimum amounts being charged per
subscriber per month for the software license fee as described in item 2.2
above:

2.6.1.  
Month 1:0$

2.6.2.  
Month 2:The greater of 1$/subscriber and $1,000

2.6.3.  
Month 3:The greater of 1$/subscriber and $2,000

2.6.4.  
Month 4:The greater of 1$/subscriber and $3,500

2.6.5.  
Month 5 and onwards:The greater of 1$/subscriber and $5,000 *

* During this period, as described in 2.2 above, the maximum paid by Intelco
will be $12,000. As described in 2.5, above and beyond the twelve thousandth
customer, Intelco will pay only $0.15 per subscriber per month for the software
license fee.

2.7.  
New technological developments created by Benoit Laliberté (Personal commitment)

Benoit Laliberté personally commits to making available any and all new
technological developments where he is directly or indirectly involved in
creating to the disposal of Intelco via their Teliphone white label
 
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platform for a no-cost license, with no royalties on future sales for the use by
Intelco as it sees fit to commercialize.

3.  
Usage of Intelco’s Infrastructure

Actual costs and in-kind contributions made for these operational expenses are
presented in tabular form in Appendix A.

3.1.  
Intelco will provide the following services to Teliphone:

3.1.1.  
Rent. Teliphone will move from its current offices at 1080 Beaver Hall, to
Intelco’s offices located at 4150 Ste-Catherine street, Montreal. This is valued
at $2,500 per month.

3.1.2.  
Telecom network fixed costs. Intelco will provide to Teliphone usage of
origination and termination of call traffic across its entire network of PRI’s.
These are valued at the current market price of $0.007 per minute. The amounts
charged will be the greater of the actual charges and $7,000 per month.

3.1.3.  
Telecom network variable costs. Intelco will invoice any actual variable costs
that may be incurred by Teliphone across its network (ie. Monthly DID costs, any
additional origination or termination costs that are incurred that are not part
of Intelco’s fixed cost operations).

NOTE: Teliphone will port over all of its Montreal and Toronto DID’s and
subsequent origination and termination traffic to Intelco and subsequently
cancel its 5 Montreal and 1 Toronto PRI’s with Rogers Business Solutions.
Teliphone will, however, maintain its own PRI’s for cities which it deems
necessary and that are not part of Intelco’s network.

3.1.4.  
Hosting and co-location services. Intelco will provide the following to
Teliphone within its own in-house data center (valued at $2,500 per month):

3.1.4.1.  
4 full cabinets for Teliphone’s existing hardware equipment

3.1.4.2.  
The necessary bandwidth for Teliphone’s operations (currently 2 MB per month)

3.1.4.3.  
60 Amps continuous at 120Volts electrical power supply with back-up UPS.

3.2.  
New hardware will be acquired in September 2006 in order to house both
Teliphone’s and Intelco’s VoIP customers. This equipment is estimated to require
½ cabinet of space and will be located within Intelco’s cabinets located at
Teleglobe, along with Teliphone’s telecom equipment.

3.3.  
Any amounts forwarded to Teliphone by Intelco will remain as an advance from
Intelco for 12 months from the signing of this LOI and will be converted as
described in section 6.

4.  
Establishment of a Line of Credit

4.1.  
3901823 will provide Teliphone a $75,000 a line of credit with the following
disbursements:

4.1.1.  
$25,000 at the signing of this LOI

4.1.2.  
$25,000 at the installation of Teliphone’s equipment within Intelco’s data
center and a notarized and executed lean on the assets as described in 4.3.

4.1.3.  
$25,000 when Teliphone’s equipment is able to handle the activation of new
Intelco’s clients.

 
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4.2.  
The totality of the line of credit must be repaid by Teliphone by December 21,
2006. If any amounts are outstanding at this time, then Teliphone will be
considered in default, at which time Teliphone will have 10 days to remit all
outstanding amounts back to 3901823.

4.3.  
In the event that Teliphone does not reimburse the full outstanding amount to
3901823 by December 31, 2006, Intelco will receive ownership of Teliphone’s
current assets (cash, pre-paid deposits and accounts receivable), capital assets
(property, plant and equipment) and intellectual property in order for Intelco’s
VoIP program to continue under 3901823’s ownership. A first level lien on the
assets will be notarized and signed after signing of this LOI.

4.4.  
Teliphone agrees to sign over the $56,000 of receivables pertaining to its 2004
and 2005 research and development tax credits which it estimates to receive by
October 1, 2006 to 3901823 in order to guarantee a major part of these
disbursements. Teliphone will forward any cash received from this funding
directly to 3901823 upon receipt.

5.  
Investment in Teliphone by Benoit Laliberté.

5.1.  
Benoit Laliberté agrees to provide to Teliphone an additional $30,000 for use by
Teliphone in order to cover any additional cash flow requirements by Teliphone
as required during the transition phase. The following disbursements will be
taken on Benoit Laliberté’s credit card:

5.1.1.  
$15,000 in July 2006

5.1.2.  
$15,000 in August 2006

6.  
Conversion of Amounts Owing after 12 Months of Merged Operations

6.1.  
Based on the values of in-kind contributions that will be made over the next 12
months, Teliphone will have an outstanding advance from Intelco when both
advances are netted.

6.1.1.  
The netted $ value will be converted to options exercisable into Class A voting
shares of the common stock of Teliphone. The valuation that will be used is
$1,000,000, which means that each $10,000 of netted investment in Teliphone will
be equal to 1%. It is estimated that the net advance will be $75,000, or options
on 7.5%. These shares will be in the name of Intelco.

6.2.  
Subsequent to this conversion, both Teliphone and Intelco will commence to
invoice each other for their respective services being offered, with payments
due within 30 days upon receipt of invoice.

7.  
3901823 Acquisition of Voting, Class A Common Shares of Teliphone

7.1.  
OSK currently holds 104 class A common voting shares, representing all of the
outstanding shares of Teliphone.

7.2.  
Teliphone will issue from treasury an additional 35 class A voting shares to
3901823. The resulting ownership will be OSK 74.8% and 3901823, 25.2%.

7.3.  
In consideration of this new minor position, Intelco will be awarded one seat on
Teliphone’s Board of Directors. The newly appointed board member will be
provided full access to Teliphone’s financial reporting information as required.

 
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8.  
Additional considerations of this LOI

8.1.  
Intelco will gain a ‘first right of refusal’ in the event that an offer to
purchase Teliphone is made in the future or on the issuance of any new shares.

8.2.  
Teliphone will assign its Telecommunications Services Agreement Kore Wireless
Canada Inc. to Intelco pending assignment and re-negotiation of terms by Kore
Wireless Canada Inc.

8.3.  
Teliphone will immediately enter into discussions with its long term debt
holders to restructure its long term debt and advances (particularly from its
Parent Company OSK Capital II Corp and affiliated company 3894517 Canada Inc. /
United American Corporation).

 
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Agreed and signed in Montreal, Quebec, Canada,
 
 
 
/s/ Bassim Kano
Basso Kano
Executive Vice President
Intelco Communication    
/s/ George Metrakos
George Metrakos 
President & CEO
Teliphone Inc.
 
 
/s/ Serge Farman
Serge Farman
Executive Vice President
3901823 Canada Inc.
 
 
 
/s/ Benoit Laliberte'
Benoit Laliberté
For personal guarantee as outlined in item 2.7 and section 5.
 

 
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Appendix A. - Summary of In-kind and Cash disbursements

Disbursement
Estimated $ Value
Payment consideration
     
Teliphone
   
Software license
$1.00 / subscriber / month
Advance from Teliphone
Network (variable) (1)
At cost
Net 30 days upon presentation of invoice
Network (fixed) (2)
At cost
Advance from Teliphone
     
Intelco
   
Rent
$2,500 per month
Advance from Intelco
Network (variable) (3)
At cost
Net 30 days upon presentation of invoice
Network (fixed) (4)
At cost
Advance from Intelco
Co-location services
$2,500 per month
Advance from Intelco

(1)  
These represent any incremental costs that Teliphone must incur in order to
house Intelco’s clients, such as E9-1-1 PSAP services or DID’s on any of
Teliphone’s PRI’s that Intelco does not have, such as Gatineau, Hull, Pont-Viau,
Chomedy, Granby or St-Hyacinthe.

(2)  
These represent any costs incurred by Teliphone for passing traffic on
Teliphone’s PRI’s for Intelco, such as per minute origination and termination
costs (current price of $0.007 per minute). PRI’s include Granby, St-Hyacinthe,
Chomedy/Pont-Viau or Gatineau/Hull.

(3)  
These represent DID costs incurred by Intelco for Teliphone’s customers over
Intelco’s Montreal, Toronto, Quebec City or any other of their US or Canadian
PRI’s.

(4)  
These represent any costs incurred by Intelco for passing Teliphone traffic on
Intelco’s PRI’s including Montreal, Toronto, Quebec City or any other of their
US or Canadian PRI’s (current price of $0.007 per minute).