Exhibit 10.29

 

THIS CONVERTIBLE PROMISSORY NOTE AND THE SECURITIES OF THE COMPANY ISSUABLE IN
CERTAIN CIRCUMSTANCES ON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THIS CONVERTIBLE PROMISSORY NOTE
NOR THE SECURITIES OF THE COMPANY ISSUABLE HEREUNDER MAY BE TRANSFERRED IN THE
ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN
EXEMPTION THEREFROM.

 

I-LINK INCORPORATED
CONVERTIBLE PROMISSORY NOTE

 

$7,500,000

 

December 10, 2002

 

FOR VALUE RECEIVED, I-Link Incorporated (the “Maker”) promises to pay to Counsel
Corporation (US), a Delaware corporation, or its assigns (the “Payee”), in the
lawful money of the United States of America (“Dollars” or “$”) the principal
sum of Seven Million Five Hundred ThousandDollars ($7,500,000) (the “Loan”) on
March 1, 2004 the “Maturity Date”), together with interest thereon from the date
hereof to the Maturity Date as provided below.

 

1. Interest.  The outstanding principal amount of this Note, together with
unpaid interest, shall bear interest at the rate of ten percent (10%) per annum,
compounded quarterly.  Interest on the outstanding principal amount of this Note
shall be calculated on the basis of a year of 360 days and actual days elapsed. 
Interest shall be payable on the last day of each quarter, commencing on March
31, 2003, and on the Maturity Date (each an “Interest Payment Date”), provided
that the Payee may, in its sole discretion, elect to allow interest to accrue
and become payable on the Maturity Date.

 

2. Time and Place of Payments.  The Maker may, from time to time, in its
discretion, make one or more periodic payments of principal or interest to the
Payee.  All principal and interest due hereunder is payable in Dollars in
immediately payable funds at the Payee’s principal office (or at such other
office of the Payee as may be designated from time to time in writing by the
Payee) for the account of the Payee, not later than 11:00 a.m., New York City
time, on the due date therefor. If any payment of principal or interest on or
with respect to this Note becomes due and payable on a Saturday, Sunday or any
other day on which commercial banks are required or authorized by law or
regulation to be closed in New York City, such amount shall be payable on the
next succeeding day which is not a Saturday, Sunday or other day on which
commercial banks are so required or authorized to be closed and, with respect to
any such payment of principal, interest shall continue to accrue during any such
extension period at the applicable rate of interest in effect immediately prior
to such extension.

 

3. Defaults and Remedies.

 

a.               The following events shall be “Events of Default” hereunder:

 

(i)                                     the Maker defaults on the Maturity Date
in the payment of the principal amount of this Note;

 

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(ii)                                  the Maker defaults on any Interest Payment
Date in the payment of interest on this Note and such default continues for five
(5) days;

 

(iii)                               the Maker defaults under any other written
agreement between the Maker and the Payee or any affiliate of the Payee;

 

(iv)                              a court of competent jurisdiction enters a
decree or order in an involuntary case under any present or future federal or
state bankruptcy, insolvency or similar law or appoints a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings, or for the winding-up or
liquidation of the affairs of the Maker, which decree or order shall have
remained in force undischarged or unstayed for a period of 30 days;

 

(v)                                 the Maker consents to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or relating to
it or of or relating to all or substantially all of its property; or

 

(vi)                              the Maker admits in writing its inability to
pay its debts generally as they become due, files a petition to take advantage
of any applicable insolvency or reorganization statue, makes an assignment for
the benefit of its creditors, or voluntarily suspends payment of its
obligations;

 

b.              if an Event of Default, other than the Event of Default
specified in Sections 3(a)(iv), (v) or (vi), occurs and is continuing, the Payee
may, at its option and in addition to any right, power or remedy permitted by
law or equity or herein granted, by notice to the Maker declare to be due and
payable immediately the principal amount of this Note, and upon any such
declaration the same shall become and shall be immediately due and payable,
together with all accrued and unpaid interest thereon.  If an Event of Default
specified in Sections 3(a)(iv), (v) or (vi) hereof occurs, the principal amount
of this Note shall automatically become and be immediately due and payable,
without any declaration or other act on the part of the Payee, together with all
accrued and unpaid interest thereon.  The Payee by notice to the Maker may
rescind an acceleration and its consequences if all existing Events of Default
have been cured or waived.

 

4. Conversion.

 

a.                                       The Payee shall have the right, at its
option, at any time, subject to the terms and conditions hereof, to convert the
unpaid principal amount of this Note or any portion hereof (together with
interest accrued on the principal amount of this Note or portion thereof to be
converted) into shares of the Maker’s common stock, par value $.007 per share
(the “Common Stock”), at the price of $0.08375 per share (the “Conversion
Price”).

 

b.                                      As a condition to its right to receive
any securities into which this Note is convertible, the Payee shall surrender
this Note at the office of the Company, and shall give written notice to the
Company at such office that the Payee elects to

 

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convert all or part of this Note and shall state therein the amount of this Note
that the Payee is converting.  The Company shall, as soon as practicable
thereafter, issue and deliver at such office to the Payee, (i) a certificate or
certificates for the number of shares the Company’s common stock to which such
Payee shall be entitled as aforesaid, and (ii) to the extent the Payee has
converted this Note in part and not in full, a new convertible note, identical
in terms to this Note except that the principal amount thereof shall equal the
principal amount hereof less the amount converted by the Payee.  Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of surrender of this Note for conversion, in whole or in part, and the
Payee shall be treated for all purposes as the record Payee of such shares of
common stock, as the case may be, that the Payee is entitled to receive upon
such conversion on such date pursuant hereto.

 

c.                                       The Conversion Price shall be subject
to adjustment from time to time as set forth below.

 

(i)            If the Maker shall issue, after the date of this Note (the “Issue
Date”), any Additional Stock (as defined below) without consideration or for a
consideration per share less than the higher of the Conversion Price in effect
immediately prior to the issuance of such Additional Stock or the Fair Marker
Value of the Common Stock (as defined below), the Conversion Price in effect
immediately prior to each such issuance shall forthwith be reduced to whichever
of the following Conversion Prices is lower:

 

(x)            the Conversion Price (calculated to the nearest 1/100 of a cent)
determined by dividing (1) the sum of (A) the product derived by multiplying the
Conversion Price in effect immediately prior to such issuance by total number of
shares of Common Stock issued and outstanding on a fully-diluted basis
immediately prior to such issuance, plus (B) the consideration, if any, received
by the Maker upon such issuance of Additional Stock by (2) the total number of
shares of Common Stock issued and outstanding on a fully-diluted basis
immediately after such issuance; or

 

(y)           the Conversion Price (calculated to the nearest 1/100 of a cent)
determined by multiplying the Conversion Price in effect immediately prior to
such issuance by a fraction, the numerator of which shall be (1) the sum of (A)
the total number of shares of Common Stock issued and outstanding on a
fully-diluted basis immediately prior to such issuance, multiplied by the Fair
Market Value of the Common Stock determined as of the date of such issuance plus
(B) the amount of consideration, if any, received by the Maker upon such
issuance of Additional Stock and the denominator of which shall be (2) the
product of the Fair Market Value of the Common Stock, multiplied by the total
number of shares of Common Stock issued and outstanding on a fully-diluted basis
immediately after such issuance.

 

(A)          In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor before
deducting any reasonable discounts, commissions or other expenses allowed, paid
or incurred by the Maker for any underwriting or otherwise in connection with
the issuance and sale thereof.

 

(B)           In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be

 

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deemed to be the fair value thereof as determined in good faith by the Board of
Directors of the Maker.

 

(C)           In the case of the issuance of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities, the following provisions shall
apply for all purposes of this subparagraph 4(c)(i)(C) and subparagraph
4(c)(i)(D)):

 

(1)           The aggregate maximum number of shares of Common Stock deliverable
upon exercise (assuming the satisfaction of any conditions to exercisability,
including without limitation, the passage of time, but without taking into
account potential antidilution adjustments) of such options to purchase or
rights to subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in subparagraphs 4(c)(i)(A) and
(B)), if any, received by the Maker upon the issuance of such options or rights
plus the minimum exercise price provided in such options or rights (without
taking into account potential antidilution adjustments) for the Common Stock
covered thereby.

 

(2)           The aggregate maximum number of shares of Common Stock deliverable
upon conversion of or in exchange (assuming the satisfaction of any conditions
to convertibility or exchangeability, including, without limitation, the passage
of time, but without taking into account potential antidilution adjustments) for
any such convertible or exchangeable securities or upon the exercise of options
to purchase or rights to subscribe for such convertible or exchangeable
securities and subsequent conversion or exchange thereof, shall be deemed to
have been issued at the time such securities were issued or such options or
rights were issued and for a consideration equal to the consideration, if any,
received by the Maker for any such securities and related options or rights
(excluding any cash received on account of accrued interest or accrued
dividends), plus the minimum additional consideration, if any, to be received by
the Maker (without taking into account potential antidilution adjustments) upon
the conversion or exchange of such securities or the exercise of any related
options or rights (the consideration in each case to be determined in the manner
provided in subparagraphs 4(c)(i)(A) and (B)).

 

(3)           In the event of any change in the number of shares of Common Stock
deliverable or in the consideration payable to the Maker upon exercise of such
options or rights or upon conversion of or in exchange for such convertible or
exchangeable securities, (excluding a change resulting solely from the
antidilution provisions thereof if such change results from an event which gives
rise to an antidilution adjustment under this paragraph 4(c)), the Conversion
Price, to the extent in any way affected by or computed using such options,
rights or securities, shall be recomputed to reflect such change, but no further
adjustment shall be made for the actual issuance of Common Stock or any payment
of such consideration upon the exercise of any such options or rights or the
conversion or exchange of such securities.

 

(4)           Upon the expiration of any such options or rights, the termination
of any such rights to convert or exchange or the expiration of any options or
rights related to such convertible or exchangeable securities, the Conversion
Price, to the extent in any way affected by or computed using such options,
rights or securities or options or rights related to such securities, shall be
recomputed to reflect the issuance of only the number of shares of Common Stock
(and convertible or exchangeable securities which remain in effect) actually
issued upon the exercise of such options or rights, upon the conversion or
exchange of such securities or upon the exercise of the options or rights
related to such securities.

 

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(5)           The number of shares of Common Stock deemed issued and the
consideration deemed paid therefor pursuant to subparagraphs 4(c)(i)(C)(1) and
(2) shall be appropriately adjusted to reflect any change, termination or
expiration of the type described in either subparagraphs 4(c)(i)(C)(3) and (4).

 

(D)          “Additional Stock” shall mean any shares of Common Stock issued (or
deemed to have been issued pursuant to subparagraphs 4(c)(i)(C)) by the Maker
after the Issue Date other than

 

(1)           Common Stock issued pursuant to a transaction described in
subparagraphs 4(c)(i)(E) hereof; or

 

(2)           shares of Common Stock issuable or issued pursuant to a stock
option, warrant, conversion right, or purchase right outstanding as of the Issue
Date.

 

(E)           “Fair Market Value of the Common Stock” shall mean the average of
the closing prices of the Common Stock on all securities exchanges on which the
Common Stock may at the time be listed, or, if there has been no sales on any
such exchange on any day, the average of the highest bid and lowest asked prices
on all such exchanges at the end of such day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such
security is not quoted in the NASDAQ System, the average of the highest bid and
lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 21 days
consisting of the day as of which “Fair Market Value” is being determined and
the 20 consecutive Business Days prior to such day.  If at any time such
security is not listed on any securities exchange or quoted in the NASDAQ System
or the over-the-counter market, the “Fair Market Value” shall be the fair value
thereof determined in good faith by the Board of Directors of the Maker.

 

(F)           In the event the Maker should at any time or from time to time
after the Issue Date fix a record date for the effectuation of a split or
subdivision of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock or other securities or rights
convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
“Common Stock Equivalents”) without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price shall be appropriately decreased so that the number of shares of Common
Stock issuable on conversion of this Note shall be increased in proportion to
such increase in the aggregate of shares of Common Stock outstanding and those
issuable with respect to such Common Stock Equivalents.

 

(G)           If the number of shares of Common Stock outstanding at any time
after the Issue Date is decreased by a combination of the outstanding shares of
Common Stock, then, following the record date of such combination, the
Conversion Price shall be appropriately increased so that the number of shares
of Common Stock issuable on conversion of this Note shall be decreased in
proportion to such decrease in outstanding shares.

 

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(ii)           In the event the Maker shall declare a distribution payable in
securities of other persons, evidences of indebtedness issued by the Maker or
other persons, assets (excluding cash dividends) or options or rights not
referred to in subparagraph 4(c)(i), then, in each such case for the purpose of
this subparagraph 4(c)(ii), the Payee shall be entitled to a proportionate share
of any such distribution as though it was the holder of the number of shares of
Common Stock of the Maker into which this Note is convertible as of the record
date fixed for the determination of the holders of Common Stock of the Maker
entitled to receive such distribution.

 

(iii)          If at any time or from time to time there shall be a
recapitalization of the Common Stock (other than a subdivision, combination or
merger or sale of assets transaction provided for elsewhere in this paragraph
4(c)) provision shall be made so that the Payee shall thereafter be entitled to
receive upon conversion of this Note the number of shares of stock or other
securities or property of the Maker or otherwise, to which a holder of Common
Stock deliverable upon conversion would have been entitled on such
recapitalization.  In any such case, appropriate adjustment shall be made in the
application of the provisions of this paragraph 4(c) with respect to the rights
of the Payee after the recapitalization so that the provisions of this paragraph
4(c) (including adjustment of the Conversion Price then in effect and the number
of shares issuable upon conversion of this Note) shall be applicable after that
event as nearly equivalent as may be practicable.

 

(iv)          The Maker will not, by amendment of its Certificate of
Incorporation or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Maker, but will at
all times in good faith assist in the carrying out of all the provisions of this
paragraph 4(c) and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the Payee against
impairment.

 

(v)           No fractional shares shall be issued upon the conversion of this
Note, and the number of shares of Common Stock to be issued shall be rounded to
the nearest whole share.

 

(vi)          Upon the occurrence of each adjustment or readjustment of the
Conversion Price pursuant to this paragraph 4(c), the Maker, at its expense,
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to the Payee a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based.  The Maker shall, upon the written request
at any time of the Payee, furnish or cause to be furnished to the Payee a like
certificate setting forth (a) such adjustment and readjustment, (b) the
Conversion Price at the time in effect, and (c) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of this Note.

 

(vii)         In the event of any taking by the Maker of a record of the holders
of any class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend (other than a cash dividend) or other
distribution, any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any other right, the Maker shall mail to Payee, at least twenty (20) days prior
to the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution or right.

 

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(viii)        The Maker shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of this Note, such number of its shares of Common Stock
as shall from time to time be sufficient to effect the conversion of the
outstanding principal amount of this Note and all accrued and unpaid interest;
and if at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of the outstanding principal
amount of this Note and all accrued and unpaid interest, in addition to such
other remedies as shall be available to the Payee, the Maker will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes, including, without limitation, engaging
in best efforts to obtain the requisite stockholder approval of any necessary
amendment to these provisions.

 

5. Restrictions.  The Payee hereby acknowledges that the shares of the Company’s
common stock issuable upon conversion of this Note will constitute “restricted
securities” under the Securities Act of 1933, as amended. Each certificate
representing shares of the Company’s common stock issued upon conversion of this
Note shall be stamped or otherwise imprinted with a legend reading substantially
as follows:

 

“THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THESE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE,
AND MAY NOT BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER OF THESE SHARES TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT AND SUCH STATE SECURITIES LAWS.”

 

6. Stock Fully Paid.  The Company covenants and agrees that all shares of
capital stock which may be issued pursuant to the terms hereof will, upon
issuance in accordance with the terms hereof (or upon exercise of any warrant
issuable hereunder), be duly authorized, validly issued, fully paid and
nonassessable, free and clear of any and all encumbrances (other than
encumbrances created or granted by the Payee), and of all taxes and charges with
respect to the issue thereof, and that the issuance thereof shall not give rise
to any preemptive rights on the part of any other person or entity.

 

7. Par Value.  Before taking any action which would cause an adjustment reducing
the Conversion Price below the then par value of the shares of Common Stock
issuable upon conversion of the Note, the Company will take any corporate action
which may, in the opinion of its counsel, be necessary in order that the Company
may validly and legally issue fully paid and nonassessable shares of Common
Stock at such adjusted Conversion Price.

 

8. Taxes.  The Company shall pay all documentary, stamp or other transactional
taxes attributable to the issuance or delivery of shares of the Company’s common
stock pursuant to the terms hereof.

 

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9. Reservation of Shares.  The Company shall reserve, free from preemptive
rights, out of its treasury stock or its authorized but unissued shares of
common stock, sufficient shares of common stock to provide for the conversion of
this Note.

 

10. Fractional Shares.  No fractional shares of common stock of the Company will
be issued in connection with the conversion of this Note, but in lieu of such
fractional shares, the Maker shall make a cash payment therefor equal in amount
to the product of the applicable fraction multiplied by the Conversion Price
then in effect.

 

11. Waivers.  The Maker hereby waives presentment, demand for payment, notice of
dishonor and any and all other notices or demands in connection with the
delivery, acceptance, performance, default or enforcement of this Note and
hereby consents to any waivers or modifications that may be granted or consented
to by the Payee of this Note.  No waiver by the Payee of any breach of any
covenant of the Maker herein contained or any term or condition hereof shall be
construed as a waiver of any subsequent breach of the same or of any other
covenant, term or condition herein.

 

12. Enforcement.  In the event that any Payee of this Note shall institute any
action for the enforcement or the collection of this Note, there shall be
immediately due and payable, in addition to the unpaid balance of this Note, all
late charges, and all costs and expenses of such action, including reasonable
attorneys’ fees.  The Maker waives the right to interpose any setoff,
counterclaim or defense of any nature or description whatsoever.

 

13. Replacement of Note.  Upon receipt by the Maker of evidence satisfactory to
them of the loss, theft, destruction or mutilation of this Note, and (in case of
loss, theft or destruction) of an indemnity reasonably satisfactory to it, and
upon reimbursement to the Maker of all reasonable expenses incidental thereto,
and upon surrender and cancellation of this Note if mutilated, the Maker will
make and delivery a new Note of like tenor in lieu of this Note.

 

14. Amendments.  This Note may not be changed, modified, amended, or terminated
except by a writing duly executed by the Maker and the Payee.

 

15. Governing Law.  This Note shall be governed by, construed in accordance
with, the laws of the State of New York.

 

16. Assignment.  This Note may not be assigned, in whole or in part, by
operation of law or otherwise, by the Maker without the prior written consent of
the Payee in its sole and absolute discretion, and any purported assignment
without the express prior written consent of the Payee shall be void ab initio. 
The Payee may assign any or all of its rights and interests hereunder to any
party.  Subject to the foregoing, this Note shall be binding upon, and inure to
the benefit of, the successors and assigns of the Payee and the Maker.

 

IN WITNESS WHEREOF, the Maker has executed this Note by its duly authorized
officers as of the day and year first above written.

 

I-LINK INCORPORATED

 

By:

 

 

Name:

Title:

 

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