**Exhibit 10.29**

 

THISCONVERTIBLE PROMISSORY NOTE AND THE SECURITIES OF THE COMPANY ISSUABLE INCERTAIN CIRCUMSTANCES ON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDERTHE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THIS CONVERTIBLE PROMISSORYNOTE NOR THE SECURITIES OF THE COMPANY ISSUABLE HEREUNDER MAY BE TRANSFERRED INTHE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANEXEMPTION THEREFROM.

 

**I-LINK INCORPORATEDCONVERTIBLE PROMISSORY NOTE**

 
| $7,500,000 |   | December 10, 2002 |
|------------|--------|-------------------|

 

FOR VALUE RECEIVED, I-Link Incorporated (the “Maker”) promises to payto 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 withinterest thereon from the date hereof to the Maturity Date as provided below.

 

1. Interest.  Theoutstanding principal amount of this Note, together with unpaid interest, shallbear interest at the rate of ten percent (10%) per annum, compoundedquarterly.  Interest on the outstandingprincipal amount of this Note shall be calculated on the basis of a year of 360days and actual days elapsed.  Interestshall 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 thePayee may, in its sole discretion, elect to allow interest to accrue and becomepayable on the Maturity Date.

 

2. Time and Place of Payments. The Maker may, from time to time, in its discretion, make one or moreperiodic payments of principal or interest to the Payee.  All principal and interest due hereunder ispayable 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 inwriting 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 orinterest 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 bylaw or regulation to be closed in New York City, such amount shall be payableon the next succeeding day which is not a Saturday, Sunday or other day onwhich commercial banks are so required or authorized to be closed and, withrespect to any such payment of principal, interest shall continue to accrueduring any such extension period at the applicable rate of interest in effectimmediately prior to such extension.

 

3. Defaults and Remedies.

 

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

 

(i)                                     theMaker defaults on the Maturity Date in the payment of the principal amount ofthis Note;

 

----

 

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

 

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

 

(iv)                              acourt of competent jurisdiction enters a decree or order in an involuntary caseunder any present or future federal or state bankruptcy, insolvency or similarlaw or appoints a conservator or receiver or liquidator in any insolvency,readjustment of debt, marshalling of assets and liabilities or similarproceedings, 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 fora period of 30 days;

 

(v)                                 theMaker consents to the appointment of a conservator or receiver or liquidator inany insolvency, readjustment of debt, marshalling of assets and liabilities orsimilar proceedings of or relating to it or of or relating to all orsubstantially all of its property; or

 

(vi)                              theMaker admits in writing its inability to pay its debts generally as they becomedue, files a petition to take advantage of any applicable insolvency orreorganization statue, makes an assignment for the benefit of its creditors, orvoluntarily suspends payment of its obligations;

 

b.              if an Event of Default, other than theEvent of Default specified in Sections 3(a)(iv), (v) or (vi), occurs and iscontinuing, the Payee may, at its option and in addition to any right, power orremedy permitted by law or equity or herein granted, by notice to the Makerdeclare to be due and payable immediately the principal amount of this Note,and upon any such declaration the same shall become and shall be immediatelydue and payable, together with all accrued and unpaid interest thereon.  If an Event of Default specified in Sections3(a)(iv), (v) or (vi) hereof occurs, the principal amount of this Note shallautomatically become and be immediately due and payable, without any declarationor other act on the part of the Payee, together with all accrued and unpaidinterest thereon.  The Payee by noticeto the Maker may rescind an acceleration and its consequences if all existingEvents of Default have been cured or waived.

 

4. Conversion.

 

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

 

b.                                      Asa condition to its right to receive any securities into which this Note isconvertible, 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 Payeeelects to 

 

----

 

convert all or part of this Note and shallstate therein the amount of this Note that the Payee is converting.  The Company shall, as soon as practicablethereafter, issue and deliver at such office to the Payee, (i) a certificate orcertificates for the number of shares the Company’s common stock to which suchPayee shall be entitled as aforesaid, and (ii) to the extent the Payee hasconverted this Note in part and not in full, a new convertible note, identicalin terms to this Note except that the principal amount thereof shall equal theprincipal amount hereof less the amount converted by the Payee.  Such conversion shall be deemed to have beenmade immediately prior to the close of business on the date of surrender ofthis Note for conversion, in whole or in part, and the Payee shall be treatedfor all purposes as the record Payee of such shares of common stock, as thecase may be, that the Payee is entitled to receive upon such conversion on suchdate pursuant hereto.

 

c.                                       TheConversion Price shall be subject to adjustment from time to time as set forthbelow.

 

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

 

(x)            theConversion Price (calculated to the nearest 1/100 of a cent) determined bydividing (1) the sum of (A) the product derived by multiplying the ConversionPrice in effect immediately prior to such issuance by total number of shares ofCommon Stock issued and outstanding on a fully-diluted basis immediately priorto such issuance, plus (B) the consideration, if any, received by the Makerupon such issuance of Additional Stock by (2) the total number of shares ofCommon Stock issued and outstanding on a fully-diluted basis immediately aftersuch issuance; or

 

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

 

(A)          Inthe case of the issuance of Common Stock for cash, the consideration shall bedeemed to be the amount of cash paid therefor before deducting any reasonablediscounts, commissions or other expenses allowed, paid or incurred by the Makerfor any underwriting or otherwise in connection with the issuance and salethereof.

 

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

 

----

 

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

 

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

 

(1)           Theaggregate maximum number of shares of Common Stock deliverable upon exercise(assuming the satisfaction of any conditions to exercisability, includingwithout limitation, the passage of time, but without taking into accountpotential antidilution adjustments) of such options to purchase or rights tosubscribe for Common Stock shall be deemed to have been issued at the time suchoptions or rights were issued and for a consideration equal to theconsideration (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 orrights plus the minimum exercise price provided in such options or rights(without taking into account potential antidilution adjustments) for the CommonStock covered thereby.

 

(2)           Theaggregate maximum number of shares of Common Stock deliverable upon conversionof or in exchange (assuming the satisfaction of any conditions toconvertibility or exchangeability, including, without limitation, the passageof time, but without taking into account potential antidilution adjustments)for any such convertible or exchangeable securities or upon the exercise ofoptions to purchase or rights to subscribe for such convertible or exchangeablesecurities and subsequent conversion or exchange thereof, shall be deemed tohave been issued at the time such securities were issued or such options orrights 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 accrueddividends), plus the minimum additional consideration, if any, to be receivedby the Maker (without taking into account potential antidilution adjustments)upon the conversion or exchange of such securities or the exercise of anyrelated options or rights (the consideration in each case to be determined inthe manner provided in subparagraphs 4(c)(i)(A) and (B)).

 

(3)           Inthe event of any change in the number of shares of Common Stock deliverable orin the consideration payable to the Maker upon exercise of such options orrights or upon conversion of or in exchange for such convertible orexchangeable securities, (excluding a change resulting solely from theantidilution provisions thereof if such change results from an event whichgives rise to an antidilution adjustment under this paragraph 4(c)), theConversion Price, to the extent in any way affected by or computed using suchoptions, rights or securities, shall be recomputed to reflect such change, butno further adjustment shall be made for the actual issuance of Common Stock orany payment of such consideration upon the exercise of any such options orrights or the conversion or exchange of such securities.

 

(4)           Uponthe expiration of any such options or rights, the termination of any suchrights to convert or exchange or the expiration of any options or rightsrelated to such convertible or exchangeable securities, the Conversion Price,to the extent in any way affected by or computed using such options, rights orsecurities or options or rights related to such securities, shall be recomputedto reflect the issuance of only the number of shares of Common Stock (andconvertible or exchangeable securities which remain in effect) actually issuedupon the exercise of such options or rights, upon the conversion or exchange ofsuch securities or upon the exercise of the options or rights related to suchsecurities.

 

----

 

(5)           Thenumber of shares of Common Stock deemed issued and the consideration deemedpaid therefor pursuant to subparagraphs 4(c)(i)(C)(1) and (2) shall beappropriately adjusted to reflect any change, termination or expiration of thetype described in either subparagraphs 4(c)(i)(C)(3) and (4).

 

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

 

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

 

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

 

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

 

(F)           Inthe event the Maker should at any time or from time to time after the IssueDate fix a record date for the effectuation of a split or subdivision of theoutstanding shares of Common Stock or the determination of holders of CommonStock entitled to receive a dividend or other distribution payable inadditional shares of Common Stock or other securities or rights convertibleinto, or entitling the holder thereof to receive directly or indirectly,additional shares of Common Stock (hereinafter referred to as “Common StockEquivalents”) without payment of any consideration by such holder for theadditional shares of Common Stock or the Common Stock Equivalents (includingthe additional shares of Common Stock issuable upon conversion or exercisethereof), then, as of such record date (or the date of such dividenddistribution, split or subdivision if no record date is fixed), the ConversionPrice shall be appropriately decreased so that the number of shares of CommonStock issuable on conversion of this Note shall be increased in proportion tosuch increase in the aggregate of shares of Common Stock outstanding and thoseissuable with respect to such Common Stock Equivalents.

 

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

 

----

 

(ii)           Inthe event the Maker shall declare a distribution payable in securities of otherpersons, evidences of indebtedness issued by the Maker or other persons, assets(excluding cash dividends) or options or rights not referred to in subparagraph4(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 distributionas though it was the holder of the number of shares of Common Stock of theMaker into which this Note is convertible as of the record date fixed for thedetermination of the holders of Common Stock of the Maker entitled to receivesuch distribution.

 

(iii)          Ifat any time or from time to time there shall be a recapitalization of theCommon Stock (other than a subdivision, combination or merger or sale of assetstransaction provided for elsewhere in this paragraph 4(c)) provision shall bemade so that the Payee shall thereafter be entitled to receive upon conversionof this Note the number of shares of stock or other securities or property ofthe Maker or otherwise, to which a holder of Common Stock deliverable uponconversion would have been entitled on such recapitalization.  In any such case, appropriate adjustmentshall be made in the application of the provisions of this paragraph 4(c) withrespect to the rights of the Payee after the recapitalization so that theprovisions of this paragraph 4(c) (including adjustment of the Conversion Pricethen in effect and the number of shares issuable upon conversion of this Note) shallbe applicable after that event as nearly equivalent as may be practicable.

 

(iv)          TheMaker will not, by amendment of its Certificate of Incorporation or through anyreorganization, recapitalization, transfer of assets, consolidation, merger,dissolution, issue or sale of securities or any other voluntary action, avoidor seek to avoid the observance or performance of any of the terms to beobserved or performed hereunder by the Maker, but will at all times in goodfaith 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 inorder to protect the Conversion Rights of the Payee against impairment.

 

(v)           Nofractional shares shall be issued upon the conversion of this Note, and thenumber of shares of Common Stock to be issued shall be rounded to the nearestwhole share.

 

(vi)          Uponthe occurrence of each adjustment or readjustment of the Conversion Pricepursuant to this paragraph 4(c), the Maker, at its expense, shall promptlycompute such adjustment or readjustment in accordance with the terms hereof andprepare and furnish to the Payee a certificate setting forth such adjustment orreadjustment and showing in detail the facts upon which such adjustment orreadjustment is based.  The Maker shall,upon the written request at any time of the Payee, furnish or cause to befurnished to the Payee a like certificate setting forth (a) such adjustment andreadjustment, (b) the Conversion Price at the time in effect, and (c) thenumber of shares of Common Stock and the amount, if any, of other propertywhich at the time would be received upon the conversion of this Note.

 

(vii)         Inthe event of any taking by the Maker of a record of the holders of any class ofsecurities for the purpose of determining the holders thereof who are entitledto receive any dividend (other than a cash dividend) or other distribution, anyright to subscribe for, purchase or otherwise acquire any shares of stock ofany 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 datespecified therein, a notice specifying the date on which any such record is tobe taken for the purpose of such dividend, distribution or right, and theamount and character of such dividend, distribution or right.

 

----

 

(viii)        TheMaker shall at all times reserve and keep available out of its authorized butunissued shares of Common Stock, solely for the purpose of effecting theconversion of this Note, such number of its shares of Common Stock as shallfrom time to time be sufficient to effect the conversion of the outstandingprincipal amount of this Note and all accrued and unpaid interest; and if atany time the number of authorized but unissued shares of Common Stock shall notbe sufficient to effect the conversion of the outstanding principal amount ofthis Note and all accrued and unpaid interest, in addition to such otherremedies as shall be available to the Payee, the Maker will take such corporateaction as may, in the opinion of its counsel, be necessary to increase itsauthorized but unissued shares of Common Stock to such number of shares asshall be sufficient for such purposes, including, without limitation, engagingin best efforts to obtain the requisite stockholder approval of any necessaryamendment to these provisions.

 

5. Restrictions.  ThePayee hereby acknowledges that the shares of the Company’s common stockissuable upon conversion of this Note will constitute “restricted securities”under the Securities Act of 1933, as amended. Each certificate representingshares of the Company’s common stock issued upon conversion of this Note shallbe stamped or otherwise imprinted with a legend reading substantially asfollows:

 

“THE SHARES OF COMMON STOCK REPRESENTED BYTHIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, ASAMENDED.  THESE SHARES HAVE BEENACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE,AND MAY NOT BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERREDWITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THESECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR ANOPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE SHARES TO THE EFFECTTHAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT AND SUCH STATE SECURITIESLAWS.”

 

6. Stock Fully Paid.  TheCompany covenants and agrees that all shares of capital stock which may beissued pursuant to the terms hereof will, upon issuance in accordance with theterms hereof (or upon exercise of any warrant issuable hereunder), be dulyauthorized, validly issued, fully paid and nonassessable, free and clear of anyand 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 theissuance thereof shall not give rise to any preemptive rights on the part ofany other person or entity.

 

7. Par Value.  Beforetaking any action which would cause an adjustment reducing the Conversion Pricebelow the then par value of the shares of Common Stock issuable upon conversionof the Note, the Company will take any corporate action which may, in theopinion of its counsel, be necessary in order that the Company may validly andlegally issue fully paid and nonassessable shares of Common Stock at suchadjusted Conversion Price.

 

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

 

----

 

9. Reservation of Shares. The Company shall reserve, free from preemptive rights, out of itstreasury 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 inconnection with the conversion of this Note, but in lieu of such fractionalshares, the Maker shall make a cash payment therefor equal in amount to theproduct of the applicable fraction multiplied by the Conversion Price then ineffect.

 

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

 

12. Enforcement.  In theevent that any Payee of this Note shall institute any action for theenforcement or the collection of this Note, there shall be immediately due andpayable, in addition to the unpaid balance of this Note, all late charges, andall costs and expenses of such action, including reasonable attorneys’ fees.  The Maker waives the right to interpose anysetoff, 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 ordestruction) of an indemnity reasonably satisfactory to it, and uponreimbursement to the Maker of all reasonable expenses incidental thereto, andupon surrender and cancellation of this Note if mutilated, the Maker will makeand delivery a new Note of like tenor in lieu of this Note.

 

14. Amendments.  ThisNote may not be changed, modified, amended, or terminated except by a writingduly executed by the Maker and the Payee.

 

15. Governing Law.  ThisNote shall be governed by, construed in accordance with, the laws of the Stateof New York.

 

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

 

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

 
| I-LINK INCORPORATED |
|---------------------|
|                |
| By:                 |   |   |
| Name:               |
| Title:              |

 

----