Document:

Exhibit
10.1

 

THE
MANUFACTURERS LIFE

INSURANCE COMPANY

 

-
and -

 

PRIMUS
TELECOMMUNICATIONS

CANADA INC.

 

-
and -

 

3082833
NOVA SCOTIA COMPANY

 

 

 

AMENDED
AND RESTATED LOAN AGREEMENT

 

 

 

FOGLER,
RUBINOFF LLP

Suite 4400, Royal Trust Tower

Toronto-Dominion Centre

Toronto, Ontario

M5K 1G8

 

 

TABLE OF
CONTENTS

 

	
  Article 1 INTERPRETATION

  	
   

  
	
   

  	
   

  
	
  1.1

  	
  INTERPRETATION

  	
   

  
	
  1.2

  	
  SCHEDULES

  	
   

  
	
  1.3

  	
  ACCOUNTING PRINCIPLES

  	
   

  
	
  1.4

  	
  BUSINESS
  DAY

  	
   

  
	
  1.5

  	
  PERMITTED LIENS

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 2 THE LOAN

  	
   

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  CREDIT

  	
   

  
	
  2.2

  	
  ADVANCE

  	
   

  
	
  2.3

  	
  LETTERS OF CREDIT

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 3 PAYMENT OF PRINCIPAL AND INTEREST

  	
   

  
	
   

  	
   

  
	
  3.1

  	
  PAYMENT OF INTEREST

  	
   

  
	
  3.2

  	
  INTEREST ON CHARGES

  	
   

  
	
  3.3

  	
  YEAR

  	
   

  
	
  3.4

  	
  MAXIMUM INTEREST RATE

  	
   

  
	
  3.5

  	
  PLACE AND MANNER OF PAYMENT

  	
   

  
	
  3.6

  	
  NO
  SET-OFF

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 4 PREPAYMENT AND REPAYMENT

  	
   

  
	
   

  	
   

  
	
  4.1

  	
  PREPAYMENT OF PRINCIPAL

  	
   

  
	
  4.2

  	
  NOTICE OF PREPAYMENT

  	
   

  
	
  4.3

  	
  REPAYMENT OF PRINCIPAL

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 5 SECURITY

  	
   

  
	
   

  	
   

  
	
  5.1

  	
  SECURITY FOR ADVANCE

  	
   

  
	
  5.2

  	
  NO
  PREJUDICE

  	
   

  
	
  5.3

  	
  FORM OF SECURITY

  	
   

  
	
  5.4

  	
  REGISTRATION OF SECURITY

  	
   

  
	
  5.5

  	
  RANKING OF SECURITY

  	
   

  
	
  5.6

  	
  SUPPLEMENTAL SECURITY

  	
   

  
	
  5.7

  	
  PARAMOUNTCY

  	
   

  
	
  5.8

  	
  PROHIBITED SECURITY

  	
   

  
	
  5.9

  	
  CHANGE OF ENTITY

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 6 REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  
	
  6.1

  	
  REPRESENTATIONS AND
  WARRANTIES

  	
   

  
	
  6.2

  	
  SURVIVAL OF
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 7 CONDITIONS OF CLOSING

  	
   

  
	
   

  	
   

  
	
  7.1

  	
  CLOSING CONDITIONS

  	
   

  
	
  7.2

  	
  CONDITIONS FOR
  SUBSEQUENT ADVANCES

  	
   

  
	
  7.3

  	
  MATERIAL INACCURACY

  	
   

  
	
  7.4

  	
  CONDITIONS
  SOLELY FOR LENDERS’ BENEFIT

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 8 COVENANTS

  	
   

  
	
   

  	
   

  
	
  8.1

  	
  POSITIVE COVENANTS

  	
   

  
	
  8.2

  	
  NEGATIVE COVENANTS

  	
   

  
	
  8.3

  	
  AGENT ENTITLED TO
  PERFORM COVENANTS

  	
   

  
	
  8.4

  	
  CERTAIN PERMITTED
  TRANSACTIONS

  	
   

  

 

i

 

	
  Article 9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  
	
  9.1

  	
  SURVIVAL

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 10 EVENTS OF DEFAULT

  	
   

  
	
   

  	
   

  
	
  10.1

  	
  DEFAULT

  	
   

  
	
  10.2

  	
  ACCELERATION

  	
   

  
	
  10.3

  	
  CONSULTANT

  	
   

  
	
  10.4

  	
  REMEDIES CUMULATIVE

  	
   

  
	
  10.5

  	
  BENEFIT OF SECURITY; SET-OFF;
  SHARING OF PAYMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 11 FEES

  	
   

  
	
   

  	
   

  
	
  11.1

  	
  EXPENSES

  	
   

  
	
  11.2

  	
  ARRANGEMENT FEE

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 12 THE AGENT

  	
   

  
	
   

  	
   

  	
   

  
	
  12.1

  	
  APPOINTMENT

  	
   

  
	
  12.2

  	
  INDEMNITY FROM LENDERS

  	
   

  
	
  12.3

  	
  EXCULPATION

  	
   

  
	
  12.4

  	
  RELIANCE ON INFORMATION

  	
   

  
	
  12.5

  	
  KNOWLEDGE AND REQUIRED
  ACTION

  	
   

  
	
  12.6

  	
  REQUEST FOR INSTRUCTIONS

  	
   

  
	
  12.7

  	
  EXCHANGE OF INFORMATION

  	
   

  
	
  12.8

  	
  THE AGENT, INDIVIDUALLY

  	
   

  
	
  12.9

  	
  RESIGNATION AND TERMINATION

  	
   

  
	
  12.10

  	
  ACTIONS BY LENDERS

  	
   

  
	
  12.11

  	
  PROVISIONS FOR
  BENEFIT OF LENDERS ONLY

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 13 GENERAL

  	
   

  
	
   

  	
   

  
	
  13.1

  	
  NO WAIVER OF RIGHTS

  	
   

  
	
  13.2

  	
  NO WAIVER OF DEFAULTS

  	
   

  
	
  13.3

  	
  NOTICES

  	
   

  
	
  13.4

  	
  METHOD OF PAYMENT

  	
   

  
	
  13.5

  	
  SUCCESSORS AND ASSIGNS

  	
   

  
	
  13.6

  	
  GOVERNING
  LAW

  	
   

  
	
  13.7

  	
  ENTIRE AGREEMENT

  	
   

  
	
  13.8

  	
  MODIFICATION

  	
   

  
	
  13.9

  	
  HEADINGS

  	
   

  
	
  13.10

  	
  NUMBER

  	
   

  
	
  13.11

  	
  WORDS AND PHRASES

  	
   

  
	
  13.12

  	
  PERMISSIBLE FORMS OF
  WRITING

  	
   

  
	
  13.13

  	
  STATUTORY REFERENCES

  	
   

  
	
  13.14

  	
  SEVERABLE PROVISIONS

  	
   

  
	
  13.15

  	
  EXECUTION OF
  ADDITIONAL DOCUMENTS

  	
   

  
	
  13.16

  	
  OTHER DEFINITIONAL TERMS

  	
   

  
	
  13.17

  	
  COUNTERPARTS

  	
   

  
	
  13.18

  	
  CONFLICT

  	
   

  
	
  13.19

  	
  CONFIDENTIALITY

  	
   

  
				

 

ii

 

AMENDED
AND RESTATED LOAN AGREEMENT

 

THIS AGREEMENT dated as of the
     day of April, 2004

 

AMONG:

 

PRIMUS TELECOMMUNICATIONS CANADA INC.,

a company amalgamated under the laws of the Province of Ontario

 

(hereinafter called the “Borrower”)

 

- and -

 

3082833 NOVA SCOTIA COMPANY

a unlimited liability company amalgamated under the laws of Nova Scotia

 

(hereinafter called the “Shareholder”)

 

- and -

 

THE MANUFACTURERS LIFE INSURANCE COMPANY,

a corporation incorporated under the laws of Canada and each other
financial institution or person which is now or hereafter becomes a signatory
hereto

 

(hereinafter called the “Lenders”)

 

- and -

 

THE MANUFACTURERS LIFE INSURANCE COMPANY,

a corporation incorporated under the laws of Canada

 

(hereinafter called the “Agent”)

 

 

WHEREAS a predecessor to the Borrower, a predecessor to the Shareholder, the
Lenders and the Agent entered into a loan agreement dated for reference
February 11th, 2003 to provide the Borrower with a secured
non-revolving term loan credit facility;

 

AND WHEREAS the aforesaid loan agreement was amended by a First Amendment to the
Loan Agreement dated March 18th, 2003 and by a Second Amendment
to the Loan Agreement dated December 8, 2003;

 

AND WHEREAS the Borrower has requested and the Lenders have agreed to increase the
principal available under the secured non-revolving term loan credit facility
and to extend the maturity date thereof;

 

 

AND WHEREAS the parties hereto desire to set forth the terms and conditions that
shall govern the establishment and continuation of the said secured term loans
and to amend and restate the aforesaid loan agreement;

 

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants and
agreements hereinafter set out and other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged) it is agreed by the
parties hereto as follows:

 

ARTICLE 1

INTERPRETATION

 

1.1          Interpretation

 

In this agreement, unless there is something in the subject matter or context
inconsistent therewith, the following words and phrases shall have the
following meanings respectively:

 

(a)           “Act” means the Business
Corporations Act (Ontario) as in effect on the date hereof;

 

(b)           “Advances” means the principal amount of all outstanding
advances or drawings of the Loan;

 

(c)           “Affiliate” of any Person means any other Person which,
directly or indirectly, is in control of, is controlled by or is under common
control with such Person, and for the purposes of this definition, “control” (including with correlative
meanings the terms “controlled by”
and “under common control with”)
means the power to direct or cause the direction of the management and policies
of any Person, whether through the ownership of shares or by contract or otherwise;

 

(d)           “Agent” means The Manufacturers Life Insurance
Company as agent for the Lenders in the manner and to the extent described here
as such, its successors and permitted assigns;

 

(e)           “Annual Business Plan”  means, in respect of any Fiscal Year, the annual business plan with
respect to the operations of the Borrower for such Fiscal Year, approved by the
board of directors of the Borrower containing a forecasted balance sheet,
statement of profits and losses and statement of changes in financial position
and such other information that is, or can be, prepared internally by the
Borrower, as is reasonably requested by any Lender, all in such detail as such
Lender may reasonably require;

 

(f)            “Applicable Law” shall mean, with respect to any Person,
property, transaction, event or other matter, any law, rule, statute,
regulation, order, judgment, decree, treaty, directive or other requirement
having the force of law relating or applicable to such Person, property,
transaction, event or other matter, and shall

 

2

 

also include any interpretation thereof by any Person having
jurisdiction over it or charged with its administration or interpretation;

 

(g)           “Arm’s Length” has the meaning specified in the definition
of “Non-Arm’s Length”;

 

(h)           “Associate” has the meaning given in the Act;

 

(i)            “Business” means the business of the provision of
telecommunication, internet services and equipment and professional,
advertising and other services and products offered to the Borrower’s
customers;

 

(j)            “Business Day” means any day other than a Saturday, Sunday
or a day on which financial institutions generally are closed for business in
Toronto, Ontario;

 

(k)           “Capital Expenditures” as used herein means any expenditures made which,
in accordance with GAAP, are chargeable to a capital or a fixed asset account
and include, without limitation, real estate, Capital Lease Obligations and
expenditures made in connection with the acquisition of fixed assets, machinery
and/or equipment;

 

(1)           “Capital Lease Obligations” of any Person at any time means any
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) personal property which obligations
are required to be classified and accounted for as liabilities on a balance
sheet prepared in accordance with GAAP;

 

(m)          “Cash and Cash Equivalents” means cash held in specie or on deposit in
banks, trust companies or other financial institutions where the funds on
deposit can be withdrawn immediately or within 6 months of the date of
determination;

 

(n)           “CLEC” means Globility and MIPPS or either of them;

 

(o)           “Closing Date” means April 2, 2004, or such earlier or
later date as may be mutually agreed upon by the parties hereto;

 

(p)           “Consolidated” means, when used to describe the calculation
of any amount relating to any Person and/or its subsidiaries, consolidated in
accordance with GAAP;

 

(q)           “Consolidated Net Income” means, in respect of any Person for any
fiscal period, the consolidated net earnings of such Person for such fiscal
period after deductions on account of income taxes, as classified and
calculated in accordance with GAAP;

 

(r)            “Current Assets” of any Person at any time means the value of
all assets (calculated on a consolidated basis) of such Person at that time
which, in accordance with GAAP, would normally be regarded as current, save and
except

 

3

 

for any portion thereof recorded on account of (i) deferred income
taxes and (ii) deferred marketing costs;

 

(s)           “Current Liabilities” of any Person at any time means the aggregate
of all liabilities (calculated on a consolidated basis) of such Person at that
time which, in accordance with GAAP, would normally be regarded as current
other than:

 

(i)            accrued income tax liabilities of up to
$10,000,000;

 

(ii)           the principal amount of the Loan then outstanding;

 

(iii)          obligations to vendors in connection with acquisitions approved by the
Lenders in accordance with Section 8.2(k) hereof during the term of this
Agreement as the same may be amended, modified, supplemented or restated from
time to time; and

 

(iv)          deferred revenue and accrued carrier costs of acquired companies whose
acquisition was approved by the Lenders in accordance with Section 8.2(k)
hereof;

 

(t)            “Current Ratio” at any time means the fraction, the numerator
of which shall be Current Assets at that time and the denominator of which
shall be Current Liabilities at that time;

 

(u)           “Dollars” or “$”
and all statements of or reference to dollar amounts mean lawful money of
Canada, except as otherwise specifically provided;

 

(v)           “EBITDA” means, in respect of any Person and in
respect of any fiscal period, the Consolidated Net Income calculated on a
consolidated basis for such fiscal period plus:

 

(i)            amounts deducted in calculating the
Consolidated Net Income in respect of depreciation and amortization; plus

 

(ii)           amounts deducted in calculating the Consolidated Net Income in respect
of Interest Expense; plus

 

(iii)          amounts deducted in calculating the Consolidated Net Income in respect
of income taxes, whether or not deferred; plus

 

(iv)          amounts deducted in calculating Consolidated Net Income in respect of
intercorporate fees permitted hereunder;

 

from which total shall be excluded any addition or deduction, as the
case may be, relating to:

 

(v)           any gain or loss attributable to the sale, conversion or other
disposition of assets other than in the ordinary course of business; and

 

4

 

(vi)          any other extraordinary, non-recurring or unusual items, all calculated
in accordance with GAAP;

 

(w)          “Environmental Laws” means all Applicable Laws relating in full or
in part to the protections of the environment, product liability and employee and
public health and safety, and includes, without limitation, those Environmental
Laws relating to the storage, generation, use, handling, manufacture,
processing, labelling, advertising, sale, display, transportation, treatment,
release and disposal of Hazardous Substances;

 

(x)            “Event of Default”, “Events
of Default” and “Default” have the respective meanings set
out in Article 10 hereof;

 

(y)           “Financial Statements” means the audited consolidated financial
statements of the Shareholder for the fiscal years ending December 31,
2002 and 2003, respectively;

 

(z)            “Forward Subscription
Agreement” means the Forward
Subscription Agreement between the Borrower and the Immediate Parent dated the
1st day of March, 2004;

 

(aa)         “GAAP” means, subject to Section 1.3, generally
accepted accounting principles in Canada, consistently applied from period to
period;

 

(bb)         “Globility” means Globility Communications Corporation, a
company incorporated under the laws of Canada, its successors and assigns;

 

(cc)         “Globility Guarantee and
Security Agreement” means
the guarantee and general security agreement dated the date hereof given by the
Borrower to the Agent as security for the $3 million dollar non-revolving term
loan provided to Globility by the Lenders;

 

(dd)         “Governmental Authority” means any government, regulatory authority,
governmental department, agency, commission, board, tribunal, crown corporation
or court or other law, rule or regulation-making entity having or purporting to
have jurisdiction on behalf of any nation, or province or state or other
subdivision thereof or any municipality, district or other subdivision thereof;

 

(ee)         “Hazardous Substance” means any solid, liquid, gas, odor, heat,
sound, vibration or radiation, or combination thereof, that may impair the
natural environment, injure or damage human or other animal life, plant life,
or property or impair the health of any individual including, without
limitation, useful products such as petroleum, asbestos-containing materials,
lead-based paint, polychlorinated biphenyl-containing fluids, urea-formaldehyde
foam and any substance named or listed as hazardous, toxic, adulterated,
misbranded, or dangerous in any Environmental Law;

 

5

 

(ff)           “Immediate Parent” means Primus Telecommunications
International, Inc., a Delaware corporation, its successors and assigns;

 

(gg)         “Indentures” means:

 

(i)            Indenture, dated October 15, 1999,
between Ultimate Parent and Wachovia Bank, N.A.;

 

(ii)           Indenture, dated February 24, 2000, between Ultimate Parent and
Wachovia Bank, N.A.;

 

(iii)          Indenture dated January 16, 2004, among Ultimate Parent,
Intermediate Parent and Wachovia Bank, N.A.; and

 

(iv)          Indenture dated September 15, 2003, between Ultimate Parent and
Wachovia Bank, N.A.

 

(hh)         “Intercorporate Note” means the promissory note dated
January 1, 2000 between the Borrower as debtor and the Shareholder as
holder in the original principal amount of Cdn. $98,000,000.00 as amended by an
amendment to promissory note dated February 11, 2003;

 

(ii)           “Interest Expense” means, for any period, the aggregate of the
amounts paid or payable by any Person during such period on account of interest
for borrowed money (net of interest income), including the interest portion of
Capital Lease Obligations, the amortization of deferred financing fees, all as
determined in accordance with GAAP;

 

(jj)           “Intermediate Parent” means Primus Telecommunications Holding,
Inc., a Delaware Corporation, its successors and assigns;

 

(kk)         “Lenders” means The Manufacturers Life Insurance
Company and each other financial institution or person which is now or becomes
a signatory hereto and “Lender” means
any one of them;

 

(ll)           “Leverage Ratio” of a Person at any time means the fraction,
the numerator of which is Total Debt of such Person and the denominator of
which shall be EBITDA for the most recently completed four fiscal quarters of
such Person;

 

(mm)       “Lien” shall mean any mortgage, charge, pledge, hypothecation, lien (statutory
or otherwise), security interest or other encumbrance of any nature however
arising, or any other security agreement or other arrangement creating in
favour of any creditor a right in respect of any particular property that is
prior to the right of any other creditor in respect of such property, and
includes any blocked account arrangement, title retention and the right of a
lessor relative to a Capital Lease Obligation;

 

(nn)         “Loan” has the meaning set out in Section 2.1
hereof;

 

6

 

(oo)         “Loan Agreement” or “Agreement”
means this agreement entitled “Loan Agreement” and all instruments
supplemental hereto or in amendment or confirmation hereof. The expressions
“Article”, “Section”, “Subsection” and “Schedule” followed by a number or
letter mean and refer to the specified Article, Section, Subsection or
Schedule of this Agreement, respectively;

 

(pp)         “Loan Documents” means this Agreement, the Promissory Note,
the Security, and any and all documents, trust deeds, intercreditor agreements,
certificates and instruments delivered by either Obligor or the Parents to the
Lenders or the Agent whether on, before or after execution hereof, including
any and all amendments, replacements and supplements thereto or thereof made
from time to time;

 

(qq)         “Loan Interest Rate” or means seven and three quarters (7.75%)
percent per annum;

 

(rr)           “Make Whole Premium” has the meaning set out on Schedule A
hereof;

 

(ss)         “Material Adverse Effect” means a material adverse effect (i) on or in
relation to the financial condition, operations, assets, liabilities, business,
prospects or properties of the Obligors, or on or in relation to the Borrower’s
ability to carry on the Business (or a significant portion thereof), or (ii) on
or in relation to the ability of an Obligor to perform its obligations under
the Loan Documents or under any Material Contracts to which it is a party, and “Material Adverse Change” means any event,
change, circumstance or occurrence which has or may have a Material Adverse
Effect;

 

(tt)           “Material Contract” means each agreement, arrangement or
understanding entered into by any of the Obligors, whether written, oral or
established by custom or practice, which, if not complied with, could
reasonably be expected to have a Material Adverse Effect;

 

(uu)         “Maturity Date” means April    , 2006;

 

(vv)         “Mipps” means Mipps Inc., a company amalgamated under
the laws of the Province of Ontario, its successors and assigns;

 

(ww)       “Non-Arm’s Length Person” and similar phrases have the meaning
attributed thereto for the purposes of the Income
Tax Act (Canada), and “Arm’s
Length” shall have the opposite meaning;

 

(xx)          “Notes” means the indebtedness issued by the Parents
under the Indentures;

 

(yy)         “Obligors” means the Borrower and the Shareholder and “Obligor” means any of them;

 

(zz)          “Operating Lease
Obligations” means the
obligations to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) personal

 

7

 

property or real property, which obligations are not required to be
classified and accounted for as Capital Lease Obligations in accordance with
GAAP;

 

(aaa)       “Parents” means the Immediate Parent, the Intermediate Parent and the Ultimate
Parent;

 

(bbb)      “Permitted Encumbrances” means, collectively:

 

(i)            Liens for taxes, assessments, governmental
charges or levies not at the time due and delinquent in respect of which each
Obligor has set aside on its books reserves considered by the Lenders, acting
reasonably, to be adequate therefor;

 

(ii)           Liens given to a public utility or any municipality or governmental or
other public authority when required by such utility or other authority in
connection with the operations of the Business, all in the ordinary course of
the Business;

 

(iii)          the Lien created by the Term Debenture;

 

(iv)          Liens with respect to additional debt permitted pursuant to
subsection 8.2(n)(iii) hereof;

 

(v)           statutory Liens incurred in the ordinary course of business in
connection with workers compensation, unemployment insurance and other types of
social security statutory obligations; and

 

(vi)          the Liens described in Schedule B;

 

(ccc)       “Person” means any individual, sole proprietorship, partnership, limited
partnership, joint venture, unincorporated association, unincorporated syndicate,
unincorporated organization, trust, body corporate, Governmental Authority, and
a natural person in such person’s capacity as trustee, executor, administrator
or other legal representative;

 

(ddd)      “Restricted Subsidiary” shall have the meaning set forth in the
Indentures;

 

(eee)       “Security” means the documents listed in Section 5.1 of this Agreement and
all other documents and instruments provided from time to time by the Obligor
and/or the Parents as security for the Loan;

 

(fff)         “Shareholder” means 3082833 Nova Scotia Company, its
successors and assigns;

 

(ggg)      “Term Debenture” means the debenture in the principal amount of $237,227,000 dated the 1st
day of March, 2004 issued by the Borrower in favour of the Shareholder;

 

8

 

(hhh)      “Total Debt” of any Person means the aggregate (calculated on a consolidated basis),
without duplication, at the date of determination, of all liabilities,
obligations and indebtedness of such Person and its subsidiaries, of any kind
or nature, now or hereafter owing, arising, due or payable, howsoever
evidenced, created, incurred, acquired or owing, whether primary, secondary,
direct, fixed or otherwise; provided that Total Debt shall not include
(i) the Intercorporate Note, or (ii) any indebtedness that is specifically
subordinated and postponed to the obligations of the Borrower, on terms
satisfactory to the Agent to the obligations of the Borrower to the Agent and
the Lenders;

 

(iii)          “Ultimate Parent” means Primus Telecommunications Group,
Incorporated, a Delaware corporation, its successors and assigns;

 

1.2          Schedules

 

The Schedules listed below and attached hereto form part of this
agreement:

 

	
  Schedule A

  	
   

  	
  Lenders’
  Make Whole Premium

  
	
  Schedule B

  	
   

  	
  Permitted
  Liens

  
	
  Schedule C

  	
   

  	
  Promissory
  Note

  
	
  Schedule 6.1
  (j)

  	
   

  	
  Material
  Adverse Changes

  
	
  Schedule 6.1
  (l)

  	
   

  	
  Taxes

  
	
  Schedule 6.1
  (m)

  	
   

  	
  Outstanding
  Obligations

  
	
  Schedule 6.1
  (o)

  	
   

  	
  Leased
  Property

  
	
  Schedule 6.1
  (q)

  	
   

  	
  Insurance

  
	
  Schedule 6.1
  (r)

  	
   

  	
  Guarantees

  
	
  Schedule 6.1
  (u)

  	
   

  	
  Intellectual
  Property

  
	
  Schedule 6.1
  (z)

  	
   

  	
  Restrictions
  on Business

  
	
  Schedule 6.1
  (cc)

  	
   

  	
  Labour
  Matters

  
	
  Schedule 7.1
  (i)

  	
   

  	
  Litigation

  
	
  Schedule 8.1(k)(iv)

  	
   

  	
  Compliance
  Certificates

  
	
  Schedule 8.2(o)

  	
   

  	
  Management
  Fees

  

 

1.3           Accounting Principles

 

Any reference to GAAP includes the current accounting principles
recommended by the Canadian Institute of Chartered Accountants in the “CICA
Handbook” at the relevant time, or in the event that the matter is not covered
in the CICA Handbook, principles having general acceptance among accounting
professionals in Canada at the particular time. Accounting principles as they
exist as of the date of this Agreement shall be consistently applied over the
term of this Agreement unless otherwise required or recommended by the Canadian
Institute of Chartered Accountants.

 

1.4           Business
Day

 

If any action required by
this Agreement is to be taken on a day which is not a Business Day, such action
shall be taken on the next following Business Day, except in the case

 

9

 

of
any payment required to be made hereunder in which case such payment shall be
made on the immediately preceding Business Day.

 

1.5           Permitted
Liens

 

Except as expressly provided therein, any reference in any of the Loan
Documents to a Permitted Lien is not intended to and shall not be interpreted
as subordinating or postponing, or as an agreement to subordinate or postpone,
any Lien created by any of the Loan Documents to any Permitted Lien.

 

ARTICLE 2

THE LOAN

 

2.1           Credit

 

Subject to the terms and conditions hereof, including the Borrower’s
fulfilment of the conditions precedent set out herein, the Lenders hereby agree
to make available to the Borrower, on a non-revolving basis the sum of
forty-two million ($42,000,000) dollars (the “Loan”).
All Advances to the Borrower shall be denominated in Cdn. Dollars. Advances
shall each be in multiples of not less than one million ($1,000,000) dollars
and shall be made available on not less than five (5) Business Days notice from
the Borrower to the Agent provided that an Event of Default has not occurred
and provided further that all conditions for such Advance have been satisfied.
No Advances shall be permitted on or after the commencement of the twenty third
month following the Closing Date.

 

2.2           Advance

 

The indebtedness resulting from each Advance of the Loan shall be
evidenced by the delivery of a grid promissory note in the form attached as
Schedule C. Entries recorded by the Agent on the reverse of the promissory
note (the “Entries”) shall be prima
facie evidence of the amount of the Loan owing hereunder.

 

2.3           Letters of Credit

 

The parties acknowledge and agree that:

 

(a)           Notwithstanding the provisions of Section 2.1, the Borrower may
request certain letters of credit to be issued by Manulife Bank of Canada to
constitute an availment of the Loan;

 

(b)           the applicable letters of credit shall be one or more Letters of Credit
(the “Letters of Credit”) issued
by Manulife Bank of Canada on behalf of the Borrower or a Corporation
designated by the Borrower, provided that (i) the face amount outstanding at
any time of the issued Letters of Credit shall not exceed in aggregate five
million ($5,000,000) dollars ( the “Letter of
Credit Carve-out”), (ii) no Letters of Credit shall have an
expiration date later than the Maturity Date

 

10

 

and (iii) the form and content of each Letter of Credit shall be
acceptable to each of the Borrower, the Lender and Manulife Bank of Canada;

 

(c)           the ability of the Borrower to utilize the Loan by way of Advances
pursuant to Section 2.1 of the Loan Agreement and the availability of the
Loan shall be reduced at any time by the aggregate of the face amounts of the
Letters of Credit outstanding at such time;

 

(d)           any drawdown on any Letter of Credit will be reimbursed to Manulife
Bank of Canada by way of an Advance made pursuant to the Loan Agreement on the
same terms and conditions as any other Advance made pursuant to the Loan
Agreement, and the amount of any such Advance shall no longer be available for
utilization by way of Letter of Credit and the Letter of Credit Carve-out will
be reduced by the amount of such Advance;

 

(e)           to the extent the Lenders are obliged to reimburse Manulife Bank of
Canada with respect to any drawdown made under any Letter of Credit issued as
set out in Section 2.3(d) above, any Advances made to so reimburse
Manulife Bank of Canada shall be secured by the Security. Notwithstanding the
terms hereof, if Manulife Bank of Canada requires any additional indemnity or
other document executed to support the issuance of any Letter of Credit the
Borrower agrees to provide such indemnities and other documents in connection
therewith; and

 

(f)            the Borrower shall pay a fee to the Lenders
in an amount equal to two (2.0%) percent per annum of the face value of Letter
of Credit payable on the date of issuance thereof with the minimum fee for each
Letter of Credit issued pursuant to the provisions of this Section 2.3
being two (2.0%) percent of the face value of each Letter of Credit.

 

ARTICLE 3

PAYMENT OF PRINCIPAL AND INTEREST

 

3.1           Payment of Interest

 

Interest on all Advances shall accrue and the Borrower shall be liable
for and pay interest in respect of Advances made available to it, commencing on
and from the date of Advance and continuing while the Loan or any part thereof
is outstanding, both before and after maturity, demand, Default and judgment,
at the Loan Interest Rate. Interest as aforesaid shall be calculated daily from
the date of the First Advance and shall be payable monthly on the last day of
each month in arrears.

 

3.2           Interest on Charges

 

Unless otherwise specifically provided herein, if any amount payable to
the Agent or the Lenders hereunder or under any other Loan Document (including
any amount payable under Sections 2.3, 3.1, 3.2, 10.2(b) and Article 11)
is not paid when due, such amount will be subject to and bear interest payable
on demand, at the Loan Interest Rate calculated as described

 

11

 

in Section 3.1, with, in the case of overdue
interest, interest on interest at such rate, compounded monthly, plus, to the
extent permitted by Applicable Law, an additional 2% per annum. Such interest
shall be calculated daily and compounded monthly in arrears both before and
after maturity, the occurrence of an Event of Default, demand and judgement.

 

3.3           Year

 

Unless otherwise specified,
all annual rates of interest referred to herein are based on a calendar year of
three hundred and sixty-five (365) or three hundred and sixty-six (366) days,
as the case may be. For the purposes hereof, whenever interest is calculated on
the basis of a period of other than three hundred and sixty-five (365) days,
each rate of interest determined pursuant hereto expressed as an annual rate
for the purposes of the Interest Act (Canada)
is equivalent to such rate as so determined multiplied by the number of days in
the calendar year in which the same is ascertained and divided by the number of
days in the relevant interest period under consideration. The rates of interest
stipulated in this Agreement are intended to be nominal rates and not effective
rates or yields.

 

3.4           Maximum Interest Rate

 

Notwithstanding anything herein to the contrary, in no event shall any
interest rate or rates referred to above (together with other fees payable
hereunder which are construed by a court of competent jurisdiction to be
interest or in the nature of interest) exceed the maximum interest rate
permitted by Applicable Law. If such maximum interest rate would be exceeded by
the terms hereof, the rates of interest payable hereunder shall be reduced to
the extent necessary so that such rates (together with any other fees which are
construed by a court of competent jurisdiction to be interest or in the nature
of interest) equal the maximum interest rate permitted by applicable law, and
any overpayment of interest received by the Agent or the Lenders theretofore
shall be applied, forthwith after determination of such overpayment, to pay all
then outstanding interest, and thereafter to pay outstanding principal on the
Loan (and any Lender’s Make Whole Premium related thereto), as if the same were
a prepayment of principal and treated accordingly hereunder.

 

3.5           Place and Manner of Payment

 

All payments of principal,
interest (including under Section 3.6) and all other amounts payable to
the Lenders shall be made by the Borrower to the Lenders at the Lenders’
addresses shown on the execution pages hereof by 2:00 p.m. (Toronto time) on
the day specified herein for payment. Payments received after 2:00 p.m.
(Toronto time) shall be considered as having been received on the next Business
Day following receipt. The Lenders shall promptly notify the Borrower, the
Agent and the other Lenders of any failure to receive payment. If any Lender so
chooses, the Borrower shall make arrangements to authorize the Lender to debit
automatically, by mechanical, electronic or manual means, any bank accounts
maintained by the Borrower with such Lender (if any) for all amounts payable by
the Borrower to such Lender under this Agreement, including the repayment of
principal and the payment of interest and any other amounts due hereunder. Such
Lender shall notify the Borrower as to the particulars of those debits in the
normal course.

 

12

 

3.6           No Set-Off

 

All payments to be made by the Borrower or any other party pursuant to
this Agreement are to be made in freely transferable, immediately available
funds and without set-off, withholding or deduction of any kind whatsoever
except to the extent required by Applicable Law, and if any such set-off,
withholding or deduction is so required and is made, the Borrower or any other
party will, as a separate and independent obligation to each Lender, be
obligated to pay to each Lender all such additional amounts as may be required
to fully indemnify and save harmless such Lender from such set-off, withholding
or deduction and as will result in the effective receipt by such Lender of all
the amounts otherwise payable to it in accordance with the terms of this
Agreement.

 

ARTICLE 4

PREPAYMENT AND REPAYMENT

 

4.1           Prepayment of Principal

 

(a)           The Borrower may not, except in accordance with paragraph (b) of this
Section 4.1, prepay any amount of the Loan.  Amounts prepaid under said paragraph (b) cannot thereafter be
drawn down or re-borrowed by the Borrower.

 

(b)           The Borrower shall have the right, at any time, to prepay in whole or
in part, all or any portion of the principal amount of the Loan then outstanding;
provided that in connection therewith (i) the Borrower pays all accrued and
unpaid interest on the principal portion of the Loan so prepaid to the date of
payment, including all accrued and unpaid additional interest thereon under
Sections 3.1 and 3.2, (ii) the minimum principal amount prepaid shall not be
less than one million ($1,000,000) dollars, (iii) the Borrower provides written
notice of such prepayment as required under Section 4.2, and (iv) the
Borrower pays to the Lenders an additional amount, calculated by the Agent,
equal to the Make Whole Premium (calculated in accordance with Schedule A,
which calculation shall be conclusive, absent manifest error), calculated based
on the amount of principal so prepaid or such lesser amount as is set out below:

 

	
  PREPAYMENT DATE

  	
   

  	
  MAKE WHOLE PREMIUM

  
	
   

  	
   

  	
   

  
	
  Before
  1st Anniversary of Loan

  Agreement

  	
   

  	
  100%
  of Make Whole Premium

  
	
   

  	
   

  	
   

  
	
  After
  1st Anniversary and before

  18 months

  	
   

  	
  70%
  of Make Whole Premium

  
	
   

  	
   

  	
   

  
	
  After
  18 Months

  	
   

  	
  60%
  of Make Whole Premium

  

 

13

 

4.2           Notice of Prepayment

 

The Borrower shall give written notice to the Agent and the Lenders at
least fifteen (15) days prior to the Borrower prepaying any principal amounts
under the Credit. If a notice of prepayment is given, the Borrower shall prepay
the amount designated in the notice of prepayment on the date so designated
therein, together with accrued interest to the date of such prepayment and any
applicable Make Whole Premium. Each notice of prepayment shall be irrevocable
and binding upon the Borrower. All prepayments shall be made rateably amongst
the Lenders. The Borrower shall indemnify the Agent and the Lenders against any
loss or expense incurred by the Agent and the Lenders as a result of any
failure on the part of the Borrower to prepay the amounts specified on the
dates specified for such prepayment, including, without limitation, any loss or
expense incurred by reason of the liquidation or re-employment of deposits or
other funds.

 

4.3           Repayment of Principal

 

Unless the Loan shall have
been accelerated or otherwise required to be paid at an earlier date pursuant
to the terms hereof, the Borrower shall repay the Loan in full and all other
amounts due pursuant to this Agreement on the Maturity Date.

 

ARTICLE 5

SECURITY

 

5.1           Security for Advance

 

As evidence of the Advances and/or continuing security for the due
payment and performance of the Loan and as an additional inducement otherwise
to the Lenders to extend the Loan to the Borrower on the terms contemplated by
this Agreement and the other Loan Documents, the applicable Obligors shall, and
where applicable, the Parents shall on or before the Closing Date (and
thereafter if and as the context below indicates or implies) to execute and
deliver to the Agent and the Lenders, the following documents in form and
content satisfactory to the Agent and the Lenders:

 

(a)           the Loan Agreement;

 

(b)           the promissory note in the form attached as Schedule C;

 

(c)           a general security agreement of the Borrower;

 

(d)           a hypothec of the Borrower;

 

(e)           a general assignment of book debts;

 

(f)            guarantees executed by each of the Parents
and the Shareholder;

 

(g)           a subordination and postponement agreement executed by each of the
Parents with respect to all indebtedness of the Obligors;

 

14

 

(h)           a subordination and postponement agreement executed by the Shareholder
with respect to all indebtedness of the Borrower owing to it;

 

(i)            fire and all risk insurance in an amount and
on terms satisfactory to the Lender in accordance with the provisions of this
Agreement which policies will note the Lender as loss payee as its interest may
appear;

 

(j)            landlord waiver agreements from landlords, in
a form satisfactory to the Agent shall have been executed by the landlords of
real property leased to the Obligors at the following premises: 151 Front
Street West, Toronto; 555 West Hastings Street, Vancouver; 605 1st
Street SW, Calgary; 740 Rue Notre Dame, Montreal and 5343 Dundas Street West,
Suite 400, Toronto, and copies of each shall have been delivered to the Agent;

 

(k)           such other security as the Lender reasonably requests and is permitted
pursuant to the Subordination Agreement.

 

5.2           No Prejudice

 

Nothing contained herein or in any Security, nor any act of the Agent
or the Lenders with respect to any such Security shall in any way prejudice or
affect the rights, remedies or powers of the Agent or the Lenders with respect
to any other security at any time held by the Agent or the Lenders.

 

5.3           Form of Security

 

The Security shall be in
such form as is satisfactory to the Agent and its legal counsel.

 

5.4           Registration of Security

 

The Borrower shall cause the Security (and instruments supplemental or
ancillary thereto) to be registered or filed from time to time in all places
where, in the opinion of counsel to the Agent and the Lenders, registration or
filing is required or advisable to protect any interest created thereby. The
Agent on behalf of the Lenders may, at the reasonable expense of the Borrower,
register, file or record the Security or notices in respect thereof in all
offices where such registration, filing or recording is, in the reasonable
opinion of the Agent or its counsel, necessary or of advantage to the creation,
perfection and preservation of the security interests arising pursuant thereto.
The Agent on behalf of the Lenders may, at the Borrower’s expense, renew such
registrations, filings and recordings from time to time as and when required to
keep them in full force and effect. Each Obligor acknowledges that unless
otherwise expressly indicated, the forms of security have been prepared based
upon the laws of the Province of Ontario, in effect at the date of execution
thereof and that such laws may change, and that the laws of other jurisdictions
may require the execution and delivery of different forms of security
instruments in order to grant to the Lenders the rights intended to be granted
by the Security. Each Obligor shall, on request from the Agent from time to
time, execute and deliver to the Agent on behalf of the Lenders such additional
security instruments and will amend or supplement any Security theretofore
provided to the Lenders:

 

15

 

(a)           to reflect any changes in such laws, whether arising as a result of
statutory amendments, court decisions or otherwise;

 

(b)           to facilitate the registration of appropriate forms of Security in all
appropriate jurisdictions; or

 

(c)           if any entity having delivered security amalgamates with any other
Person or enters into any corporate reorganization,

 

in
each case in order to confer on the Agent and the Lenders such security
interests with such priority, as are intended to be created by the Security.

 

The Borrower will pay or
indemnify the Agent and the Lenders against any and all stamp duties,
registration fees and similar taxes or charges which may be payable or
determined to be payable in connection with the execution, delivery,
performance, registration or enforcement of this Agreement or any other
document or any of the transactions contemplated hereby or thereby.

 

5.5           Ranking of Security

 

Subject to the Permitted Encumbrances, the Security shall be a first
charge over the assets of the Borrower.

 

5.6           Supplemental Security

 

All real or personal property other than shares acquired by the
Borrower, or any subsidiary thereof on or after the date of execution of the
Security (the “After-Acquired Property”)
shall be made, contemporaneously with the closing of such acquisition(s),
subject to security interests of the same nature and rank as real or personal
property of a similar type or nature already subject to the Security and the
Borrower, or any subsidiary thereof on request by the Agent on behalf of the
Lenders, shall forthwith execute, deliver and register at their own expense,
such instruments supplemental to the Security in form and substance
satisfactory to the Agent on behalf of the Lenders as may be necessary or
desirable to ensure that, subject to the Permitted Encumbrances, the Security constitutes
in favour of the Lenders an effective charge over such After-Acquired Property
having an identical ranking to the real or personal property of a similar type
or nature already subject to the Security.

 

5.7           Paramountcy

 

In the event of any conflict between the provisions of any Security and
the provisions of this Loan Agreement, the provisions of this Loan Agreement
shall be paramount.

 

5.8           Prohibited Security

 

Notwithstanding anything herein or in the Security to the contrary, the
Obligors acknowledge that neither the Agent nor any Lender has any intent to
take security over any asset of any Obligor which (i) requires the consent of
any other Person which cannot be obtained, (ii) is prohibited by or contrary to
Applicable Law, or (iii) would render the transaction herein

 

16

 

contemplated
void. In respect of any security having or which may have the effect described
in clauses (ii) and (iii), the Agent and the Lenders hereby disclaim any such
security, for so long as same is prohibited by or contrary to Applicable Law or
would render the transaction hereby contemplated void. In respect of any
security described in clause (i) or in respect of which clause (i) may become
applicable, the Borrower shall cause all requisite consents to be obtained on
or before the Closing Date (or forthwith after the need for such consent is
identified, if the need for such consent did not exist on the Closing Date),
and if not so obtained on or before the Closing Date, the Borrower shall obtain
all requisite consents as soon as possible after the Closing Date, so that in
each instance, the relevant asset may be subjected absolutely and
unconditionally to the security in favour of the Agent and the Lenders
contemplated in Section 5.1, and until such consent is obtained, the
security interest therein shall be deemed to have been created and given to the
Agent on behalf of the Lenders effective upon the relevant Obligor acquiring an
interest therein, subject to the conditional defeasance of such security
interest therein if (i) any such consent is not obtained, (ii) the Person
required to consent in connection therewith objects in writing to such security
interest, and (iii) the Agent, in response to such objection, determines to
resolve such objection by renouncing such security interest, whereupon the
Borrower shall (and shall cause each relevant Obligor to) hold, and the
Borrower and relevant Obligor shall be deemed ab
initio to have always held, the relevant asset as trustee for and on
behalf of the Agent and the Lenders, and the Borrower shall not (and shall
cause each relevant Obligor not to) encumber, dispose of or otherwise deal with
such asset, except with the written consent of the Agent on behalf of the
Lenders.

 

5.9           Change of Entity

 

Without limiting the generality of the restriction contained in
Section 8.2(b), each Obligor acknowledges and agrees that, if it
amalgamates with any other company or companies, it is the intention of the
parties hereto that the mortgages, charges and security interests created by
the Security, to the extent given by such Obligor, shall: (a) extend to all
collateral and charged premises owned at the time of amalgamation by each of
the amalgamating companies and the amalgamated company, and to any collateral
and charged premises thereafter owned or acquired by the amalgamated company,
such that the term “Obligor” when
used herein would apply to each of the amalgamating companies and the
amalgamated company; and (b) secure the Indebtedness thereafter arising of the
amalgamated company to the Agent and the Lenders; and (c) attach to all such
additional collateral and charged premises at the time of amalgamation and to
any collateral and charged premises thereafter owned or acquired by the amalgamated
company at the time at which such collateral and charged premises become owned
or otherwise acquired.

 

ARTICLE 6

REPRESENTATIONS AND WARRANTIES

 

6.1           Representations and
Warranties

 

The Obligors jointly and severally make and give to the Agent and the
Lenders the representations and warranties set out below, upon each of which
the Agent and the Lenders have relied in entering into this Agreement, in
making the Loan available hereunder and in otherwise performing their
obligations hereunder.

 

17

 

(a)           Valid Incorporation

 

Each Obligor is a company duly incorporated or continued, and validly
subsisting under the laws of the jurisdiction of its incorporation. Each
Obligor is duly qualified to carry on the Business in all jurisdictions in
which the Business is carried on by it and where the failure to be so qualified
would have a Material Adverse Effect on the Borrower, and is in good standing
in all material respects under the laws of each of such jurisdictions.

 

(b)           Subsidiaries

 

Primus has no subsidiaries other than Primus Telecommunications Europe
(Holdings) Limited, Echo Online Internet, Inc., and Telesonic Communications
Inc. and the Business in Canada is conducted solely by the Borrower.

 

(c)           Authorized and Issued Capital

 

The authorized and issued capital of the Borrower and the Shareholder
and the registered and beneficial owners of such issued capital are as follows:

 

Borrower:

 

	
  Authorized Capital

  	
   

  	
  Issued Capital

  	
   

  	
  Registered & Beneficial Owner

  
	
  unlimited common shares

  	
   

  	
  825,104 common shares

  	
   

  	
  Shareholder

  

 

Shareholder:

 

	
  Authorized Capital

  	
   

  	
  Issued Capital

  	
   

  	
  Registered & Beneficial Owner

  
	
  unlimited common shares

  	
   

  	
  1,262 common shares

  	
   

  	
  Immediate Parent

  

 

(d)           Corporate Authority

 

Each Obligor has the corporate power and authority to carry on the
Business in the manner presently carried on, and each Obligor has the power and
authority to own its property, to enter into this Agreement, to provide the
Security and do all such acts and things as are required hereunder or
thereunder to be done, preserved or performed.

 

(e)           Security Authorization

 

The execution and delivery of this Agreement and the issuance of the
Security and other Loan Documents have been duly authorized by all necessary
action on the part of the Obligors and, where applicable the Parents. This
Agreement and the Security constitute valid and legally binding obligations of
the Obligors and

 

18

 

where applicable, the Parents enforceable in accordance with the terms
thereof and this Agreement.

 

(f)            Ranking of Security

 

By virtue of the Security, the Lenders have, subject only to the
Permitted Encumbrances and any exceptions specifically set out in the Security:

 

(i)             a valid first fixed and floating specific
charge and security interest in all assets, property and undertaking of the
Borrower; and

 

(ii)            a valid assignment of all insurance on the
inventory, machinery, equipment, chattels, lands and buildings of the Borrower.

 

(g)           No Defaults

 

No Obligor is in default or in breach of, or aware of any state of
facts which after notice or lapse of time, or both, would constitute a breach
of the obligations of an Obligor in any material respect under any material
contract or other instrument to which an Obligor is a party or will be a party
on the Closing Date or by which it may be bound, including contracts with any
customers.

 

(h)           Litigation

 

There are no actions or proceedings pending against any Obligor or, to
the best of its knowledge, threatened against or affecting an Obligor before
any court or administrative agency which could result in a Material Adverse
Effect.

 

(i)            No Conflict

 

Neither the execution and delivery of the Loan Documents, the
consummation of the transactions therein contemplated nor compliance with the
terms and provisions of the Loan Documents will conflict with or result in a
breach of any of the terms, conditions and provisions of the articles and other
constating documents of an Obligor or any predecessor of any of them, or of any
law or any regulation or order to which an Obligor is subject, or, of any
agreement to which any Obligor is a party or will be a party on the Closing
Date or by which an Obligor may be bound.

 

(j)            Financial Statements

 

The Financial Statements present fairly the financial position of the
respective companies delivering same in respect of the Business as at the date
of such statements and the results of the operations and changes in financial
position of each of them in accordance with GAAP. Except as set out in Schedule 6.1(j),
since February 29, 2004, there has been no Material Adverse Change in the
business operations, affairs or conditions of the Borrower relating to the
Business or of the Parents, financial or otherwise, or arising as a result of
any legislative or

 

19

 

regulatory change, revocation of any licence or right to do business,
fire, explosion, accident, casualty, labour trouble, flood, drought, riot,
storm, condemnation, act of God or otherwise.

 

(k)           Conduct of Business

 

The Business has been conducted in compliance in all material respects
with all Laws. No Obligor is in material breach of any Applicable Law to the
extent that its ability to carry on the Business is impaired or which affects
in any way the value of its properties and assets and each is duly licensed,
registered or qualified to do business in all jurisdictions in which it owns or
leases property or carries on business, to enable the Business to be carried on
as now conducted and all property and assets to be owned, leased and operated,
and all such licenses, registrations and qualifications are valid and
subsisting and in good standing.

 

(1)           Taxes

 

Except as set out on Schedule 6.1(1), no Obligor is in default in
the filing of any tax returns required to be filed by it and each has paid all
taxes which are due and payable and has paid all assessments and reassessments
greater than one-hundred thousand ($100,000) dollars and all other taxes,
governmental charges, penalties, interests and fines due and payable by it on
or before the date hereof. Except as set out on Schedule 6.1(1), there are
no actions, suits, proceedings, investigations or claims now threatened or
pending against any Obligor, in respect of taxes, governmental charges or assessments
or any matters under discussion with any Governmental Authority relating to
taxes, governmental charges or assessments asserted by any such Governmental
Authority. Each Obligor has withheld from each payment made to any of its past
or present officers, directors and employees, amounts in respect of all taxes
(including but not limited to income tax), and other deductions required to be
withheld therefrom and has paid the same to the proper tax or other receiving
officers within the time required under any Applicable Law; and, except for
taxes contested in good faith, has set up, or caused to be set up, an adequate
reserve for the payment of all taxes required to be paid in respect of the
period covered by such returns and has paid all instalments of income taxes
when due.

 

(m)          Outstanding Obligations

 

Except as described in Schedule 6.1(m) hereto and any amounts
payable to the Shareholder, to the Parents or to any Restricted Subsidiary from
time to time, there are no bonds, purchase money mortgages, debentures,
security agreements, promissory notes, Capital Lease Obligations, (having a
principal amount outstanding in excess of three-hundred thousand ($300,000)
dollars) conditional sales contracts (having a principal amount outstanding in
excess of twenty-five thousand ($25,000) dollars), or other evidences of
secured indebtedness

 

20

 

outstanding affecting the Business or the property or assets of the
Obligors other than the notes evidencing the Loan, the Security, and the Term
Debenture. As of the Closing Date, (i) there is no intercorporate indebtedness
of the Borrower to the Shareholder and/or either of the Parents other than the
indebtedness evidenced by the Intercorporate Note and the Term Debenture, (ii)
the Term Debenture has not been amended, (iii) the Intercorporate Note is
unsecured; (iv) save and except for the amendment dated February 11, 2003,
the Intercorporate Note has not been amended, and (v) as of December 31,
2003 the principal amount outstanding under the Intercorporate Note was
$60,530,420.

 

(n)           Title to Assets

 

Each Obligor owns, possesses, and has good and marketable title to
their respective undertaking, property and assets free and clear of any and all
liens, claims or demands of any nature howsoever arising, except for the
Security and the Permitted Encumbrances.

 

(o)           Leased Property

 

Except for the leases described on Schedule 6.1(o) hereto, the
Borrower is not a party to nor is bound by any lease or agreement in the nature
of a lease or providing for an Operating Lease Obligation, whether as lessor or
lessee in which the annual rental exceeds two-hundred thousand ($200,000)
dollars. Each lease described on Schedule 6.1(o) is in good standing and
in full force and effect without amendment thereto. No Obligor is in breach of
any of the material covenants, conditions or agreements contained in each such
lease. Except as noted on Schedule 6.1(o), the entering into of this Loan
Agreement, the granting of the Security and the performance of the obligations
hereunder and thereunder will not result in the violation of any of the terms
of such leases and agreements.

 

(p)           Real Property

 

No Obligor has entered into or is bound by any agreement to acquire
real property. No Obligor is the owner in fee simple of real property. The uses
to which the real property owned or subject to the lease(s) described on
Schedule 6.1(o) have been put are not in breach of any statutes, by-laws,
zoning by-laws, ordinances, regulations, covenants, restrictions or official
plans, other than minor variances or breaches of which the Borrower is not
aware and which do not materially affect the conduct of the Business. Neither
Obligor is currently under notice from any Governmental Authority or any
landlord in respect of any such breaches or breaches of the leases. There are
no outstanding work orders relating to the properties owned or subject to the
leases or agreements described on Schedule 6.1(o) hereto from or required
by any police or fire department, sanitation, health, environmental or factory
authorities or from any other federal, provincial or municipal authority or any
matters under discussion with any such departmental authorities relating to
work orders and no Obligor has received notice of any such work orders.

 

21

 

(q)           Insurance

 

The property and undertaking of the Obligors is insured against loss or
damage and attached hereto as Schedule 6.1(q) is a true and
complete schedule setting out particulars of all such insurance policies.
No Obligor is in default with respect to any of the provisions contained in any
such insurance policy and nor has it failed to give any notice or present any
claim under any insurance policy in a due and timely fashion.

 

(r)            Guarantees

 

Except as listed on Schedule 6.1(r), no Obligor is a party to or
bound by any agreement of guarantee, indemnification, assumption, endorsement
or any other like commitment of the obligations, liabilities (contingent or
otherwise) or indebtedness of any other Person.

 

(s)           Securities

 

No Person has any agreement or option or any right or privilege
(whether by law, pre-emptive or contractual), capable of becoming an agreement,
including convertible securities, warrants or convertible obligations of any
nature, for the purchase of any properties or assets of an Obligor (except
sales of inventory in the ordinary course of business) or for the purchase,
subscription, allotment or issuance of any of the unissued shares in the
capital of any Obligor.

 

(t)            Loan Proceeds

 

The proceeds of the Loan shall be used for general corporate purposes.

 

(u)           Intellectual Property

 

Other than applications for patents and trade marks which are
proceeding and in respect of which no Obligor has reason to believe that such
applications will be unsuccessful or opposed, each Obligor has taken or caused
to be taken all necessary action to secure all rights to the licenses,
trademarks and patents necessary or desirable in connection with its business,
including those set out in Schedule 6.1(u), and such licences, trade marks
and patents, together with all other disclosures on Schedule 6.1(u),
constitute all of the intellectual property necessary to enable it to carry on
or as is otherwise desirable in connection with its business as presently
carried on, without interference from or fear of any claim whatsoever by any
Person. There is no intellectual property necessary or useful to the Business,
other than that disclosed in Schedule 6.1(u), that is owned by any Person,
other than the Borrower. No Obligor is in breach, in any material respect, of
any Material IP Agreement (as defined in Section 8.2(q))or has received
any notice of termination in respect of any Material IP Agreement. No Obligor
has any current plans to pursue any course of action which might in any way
whatsoever result in a breach of any Material IP Agreement.

 

22

 

(v)           Material /Facts

 

All
information furnished in writing by it to the Agent for the purposes of or in
connection with this Agreement or any transaction contemplated hereby does not,
and all such information hereafter furnished in writing by the Obligors to the
Agents or the Lenders will not, contain any inaccurate statement of a material
fact. To the knowledge of the Borrower, all material information relating to
the Business has been provided to the Agent.

 

(w)          Assets in Good Condition

 

All
of the assets and properties of the Obligors, that are necessary for the
operation of the Business are in good working condition, consistent with
prudent business practice and industry standards, ordinary wear and tear
excepted, and are able to serve the function for which they are currently being
used and are subject to the Security. There are no tangible assets, including
real or personal property, necessary for or to the on-going operation of the
Business which are not owned by the Borrower (or leased as set out on Schedule 6.1(o))
and charged pursuant to the Security.

 

(x)            Inventories

 

All
inventories are of currently merchantable quality and do not include any items
which are no longer useable or saleable for any reason (including, without
limitation, as a consequence of changes of advertising claims, recipes or
physical deterioration) that is not fully provided for.

 

(y)           No Default

 

No
Default or Event of Default has occurred and is continuing or will occur as a
result of the completion of the transactions contemplated by this Agreement.

 

(z)            No Restriction on Business

 

Except
for the contracts described on Schedule 6.1(z), no Obligor is a party to
and no property of the Obligors is subject to or bound by any exclusive
purchase contract, futures contract, covenant not to compete, take or pay or
other agreement which restricts its ability to conduct its business and which
is having or may reasonably be expected to have a Material Adverse Effect.

 

(aa)         No Excluded Assets

 

There
are no assets, including real, personal and intangible property, necessary to
or useful in a material respect in connection with the on-going operation of
the Business which are not owned or leased by or licensed to the Obligors and
in which the interest of the Obligors therein is not charged pursuant to the
Security.

 

23

 

(bb)         Exclusive Contracts

 

No
Obligor is party to nor is any of its property subject to or bound by any
Material Contract, the substance of which may involve without limitation, an
exclusive purchase contract, a futures contract, a covenant not to compete,
take or pay or other agreement, or which restricts its ability to conduct
business in the ordinary course and which is having or may reasonably be
expected to have a Material Adverse Effect on the condition or business of
either of them.

 

(cc)         Labour Matters

 

Except
as set forth in Schedule 6.1(cc), there are no strikes or other labour
disputes against any Obligor that are pending or threatened. All payments due
from the Obligors on account of workers compensation, Canada Pension Plan,
Quebec Pension Plan, employee health plans, social security and insurance of
every kind and employee income tax source deductions and vacation pay have been
paid. Except as set forth in Schedule 6.1(cc), no Obligor has any
obligation under any collective bargaining agreement. To the knowledge of the
Borrower, there is no organizing activity involving any Obligor by any labour
union or group of employees. Except as set forth in Schedule 6.1(cc), no labour
organization or group of employees has made a pending demand for recognition
and there are no complaints or charges against any Obligor pending or
threatened to be filed with any Governmental Authority or arbitrator based on,
arising out of, in connection with, or otherwise relating to the employment or
termination of employment by the Borrower of any individual. Hours worked by
and payment made to employees of the Obligors have not been in violation of any
Laws. The Obligors are in material compliance with the terms and conditions of
all collective bargaining agreements, consulting agreements, management
agreements and employee agreements and all other labour agreements. Except for
the benefit plans as set forth on Schedule 6.1(cc), there are no pension
plans, employee benefit plans, written employment agreements with respect to
which any Obligor is bound.

 

(dd)         No Hazardous Substances

 

Other
than as disclosed to the Agent in the documents delivered to the Agent relating
to the environmental audits and site reconnaissances carried out prior to the
date hereof.

 

(i)            no
claims, demands, liabilities, investigations, litigation, administrative
proceedings, whether pending or threatened, or judgments or orders relating to
any Environmental Laws, including any law relating to Hazardous Substances,
have been asserted or, to the best of its knowledge, threatened against any
Obligor or in relation to any of its property, currently or formerly owned,
leased or operated. The Obligors currently operate the Business in compliance
in all material respects with all Environmental Laws; and

 

24

 

(ii)           no
Hazardous Substances (including asbestos and urea formaldehyde foam) are or
have been stored by the Obligors or were otherwise located by it in violation
in any material respect of any Environmental Law and no underground storage
tanks are located by it on any real property owned or leased by any Obligor and
no part of any real property or ground water in, on or under such property is
presently contaminated by any hazardous substances or materials caused by it.
No Hazardous Substances are stored or located in violation of any Environmental
Law and no underground storage tanks are located on any real property currently
leased or used by any Obligor and no part of any real property or ground water
in, on or under such property or any property adjacent to its property, is
presently contaminated by any Hazardous Substances. The Obligors have and
maintain all material permits, licences, authorizations, and other
documentation required by all applicable environmental laws required to carry
on the Business.

 

(ee)         Term Debenture

 

The Term Debenture is in good standing and the
Borrower has not committed any event of default thereunder.

 

6.2           Survival of Representations and Warranties

 

Each
of the representations and warranties contained in Section 6.1 shall
survive the closing of this Agreement until the full repayment of the Loan.

 

ARTICLE 7

CONDITIONS OF CLOSING

 

7.1           Closing Conditions

 

The
Lenders shall not be called upon to make any Advances if the Agent and the
Lenders shall not have received on or prior to the Closing Date, in form and
content and dated as of a date acceptable to the Agent, the following
documents, or the Agent and the Lenders shall not otherwise be satisfied with
respect to any of the following matters:

 

(a)           Security

 

The
Loan Documents and the Security referred to in Section 5.1 hereof shall
have been duly authorized, executed, delivered to the Agent and registered wheresoever
required to protect and preserve the charges contained therein and registration
particulars shall have been provided to counsel for the Agent.

 

(b)           Corporate Proceedings

 

Certified
copies of all proceedings by the directors and, if applicable, by the
shareholders of the Obligors where required, necessary to authorize the
execution

 

25

 

and
delivery of this Agreement and, the Security and performance of their
respective provisions shall have been executed and delivered to the Agent.

 

(c)           Constating Documents

 

Certified
copies of all constating documents of the Obligors shall have been executed and
delivered to the Agent.

 

(d)           Opinion of Counsel

 

A
corporate opinion from Goodmans LLP, counsel for the Obligors, in form and
substance satisfactory to the Agent and its counsel shall have been executed
and delivered to the Agent and its counsel. A corporate opinion from counsel
for the Parents, in form and substance satisfactory to the Agent and its counsel
shall have been executed and delivered.

 

(e)           Compliance with Agreement

 

The
Obligors shall be in compliance with all of the terms, covenants and conditions
of this Agreement which are binding upon them and an Event of Default shall not
have occurred.

 

(f)            Report on Loan Documents

 

The
Agent and the Lenders shall have received a satisfactory opinion from its
counsel as to the form, content, and legal sufficiency of the Loan Documents.

 

(g)           Forecasts

 

The
Lenders shall be satisfied with the Borrower’s Annual Business Plan for 2004.

 

(h)           Landlord Waivers

 

Landlord
waiver agreements from landlords, in a form satisfactory to the Agent shall
have been executed by the landlords of real property leased to the Obligors at
the following premises: 151 Front Street West, Toronto; 555 West Hastings
Street, Vancouver; 605 1st Street SW, Calgary; 740 Rue Notre Dame,
Montreal and 5343 Dundas Street West, Suite 400, Toronto, and copies of each
shall have been delivered to the Agent.

 

(i)            Litigation

 

Except
as set out in Schedule 7.1(i), there shall be no action or proceeding or
investigation pending or threatened against any Obligor which would, if
successful, result in the payment by any Obligor of more than one million
($1,000,000) dollars or have a Material Adverse Effect upon the ability of any
Obligor to perform its respective obligations under this Agreement.

 

26

 

(j)            No Substantial Damage

 

There
shall have been no substantial damage by fire or other hazard to the property
or assets of any Obligor prior to the Closing Date.

 

(k)           No Material Adverse Change

 

There
shall have been no Material Adverse Change since February 29, 2004 in the
affairs, assets, liabilities, financial condition or prospects of the Business
or of the Obligors or the Parents.

 

(1)           Governmental Approvals

 

Any
and all government and/or regulatory approvals shall have been obtained, if
necessary, to the execution of this Agreement, the Security and satisfactory
evidence of same delivered to the Agent for review and approval.

 

(m)          Financial Position

 

The
Lenders shall have made such investigations of the financial position of the
Obligors and the Parents and their respective property and assets and such
other matters relating to the Obligors and the Parents and the Business so as
to have satisfied itself as to the current financial position and future
profitability of the Business and other matters pertaining to the Obligors and
the Parents having a bearing on the Loan and the Security.

 

(n)           Insurance

 

The
Agent shall have received certified copies of insurance policies required to be
maintained pursuant to this Agreement on all assets of the Obligors; and the
Lender shall be named on such policies as a loss payee as its interest may
appear.

 

(o)           Textron

 

All
security interests granted by the Obligors to Textron Financial Canada Limited
shall be discharged and all obligations of the Obligors to Textron Financial
Canada Limited shall have been satisfied.

 

(p)           Intellectual Property Licences

 

The
Lender shall have received an agreement in its favour from Primus
Telecommunications, Inc. in form and substance satisfactory to the Agent which
ensures that the Lenders and any assignees of the Security and any purchasers
of the collateral secured thereby have the right to continue to use the Primus
trademarks in Canada.

 

27

 

(q)           Stand-by Fees

 

Standby
Fees due pursuant to the Loan Agreement for the period ending on the Closing
Date are paid in full. For greater certainty the Lenders acknowledge that no
standby fees are payable by the Borrower for any period after the Closing Date.

 

(r)            Letter of Credit

 

The
Letter of Credit in the principal amount of $2,000,000 issued at the request of
the Borrower by Manulife Bank of Canada shall be returned for cancellation.

 

7.2           Conditions for Subsequent Advances

 

The
Lenders shall not be called upon to make any Advances following the Closing
Date if the Agent and the Lenders shall have not received in form and content
acceptable to the Agent on the date of each subsequent Advance the following
documents, or the Agent and the Lenders shall not be satisfied with respect of
any of the following matters:

 

(a)           Representations and Warranties

 

A
certificate of the president of each Obligor confirming the representations and
warranties set out in Article 6 hereof shall be true and correct as of the
date of such Advance.

 

(b)           No Default

 

The
Obligors shall be in compliance with all of the terms, covenants and conditions
of this agreement which are binding upon them and an Event of Default shall not
have occurred and be continuing.

 

7.3           Material Inaccuracy

 

If
at any time prior to the Closing Date or the date of any other Advance, the
Lenders or their professional advisors shall have been apprised of or shall
have determined on their own behalf that there is a material inaccuracy in
written information given by the Borrower, or any Obligor or other persons
acting for or on behalf of the Borrower or any Obligor, to the Lenders or
others on their behalf concerning the Borrower or the Business, the Lenders,
acting reasonably, may terminate this Agreement by written notice to the
Borrower, and all monies advanced hereunder, if any, prior to that time shall,
together with all other amounts then due to the Lenders on an acceleration of
the Loan, be repayable forthwith and the Borrower shall pay all reasonable
legal fees incurred by the Lender until the date of repayment.

 

7.4           Conditions Solely for Lenders’ Benefit

 

All
conditions precedent to the Loan set forth in Section 7.1 and
Section 7.2 are imposed solely and exclusively for the benefit of the
Lenders and their successors and assigns, and no other Person is entitled to
require satisfaction of such conditions. Notwithstanding the non-fulfilment of
any condition referred to above, the Lenders may, in their sole and unfettered
discretion, make Advances of the Loan, and the making of the Advances by the
Lenders, either

 

28

 

before
or after the fulfilment of all applicable conditions, will not constitute an
approval, acceptance or waiver by the Lenders of any other condition or
Default.

 

ARTICLE 8

COVENANTS

 

8.1           Positive Covenants

 

The
Obligors jointly and severally covenant and agree that so long as any portion
of the Loan shall be outstanding, the Borrower shall, unless varied or waived
in whole or in part from time to time in writing by the Lenders:

 

(a)           Payment

 

Punctually
make or cause to be made all payments pursuant to Article 2,
Article 3 and Article 4 hereof and all other sums required to be paid
by it hereunder, on the dates, at the places and in the manner mentioned
herein.

 

(b)           Business Licences

 

Do
or cause to be done all things necessary to keep in full force and effect all
contracts, rights, franchises, leases, licenses and qualifications required for
the Borrower to carry on the Business in each jurisdiction in which it carries
on business or owns property.

 

(c)           Comply with Security

 

Comply
at all times with all of the terms, provisions and obligations of the Loan
Documents.

 

(d)           Comply with Agreements

 

Comply
with all of the terms, provisions and obligations contained in the Term
Debenture, the Capital Lease Obligations and the Operating Lease Obligations
and do, observe and perform or cause to be done, observed or performed all of
its obligations under all agreements, leases, licences, contracts and
indentures and do, observe and perform or cause to be done, observed and
performed all matters necessary to be done, observed or performed whether under
Applicable Law or otherwise, in each case where non-compliance would have a
Material Adverse Effect.

 

(e)           Maintain Authority

 

Continue
to have good right and lawful authority to mortgage and charge its undertaking,
properties, rights and assets as provided in and by this Agreement.

 

29

 

(f)            Business Operations

 

Carry
on and conduct the Business (including the collection of accounts receivable on
a timely basis) in a proper and efficient manner and keep or cause to be kept
proper books of record and account and make or cause to be made therein entries
properly recording all dealings and transactions in relation to its business
all in accordance with GAAP, and at all reasonable times furnish or cause to be
furnished to the Lenders or its duly authorized agent or attorney such
information relating to its business as the Lenders may reasonably require.

 

(g)           Employee Benefit Plans

 

Pay
and/or remit all employee and employer contributions under any pension plan and
employee benefit plan operated or maintained by each Obligor and, in all other
material respects, remain in compliance with the terms thereof in accordance
with such terms and applicable regulatory requirements and the rules of such
plans.

 

(h)           Taxes

 

Pay
or cause to be paid all rents, taxes, tax instalments, rates, levies or
assessments, ordinary or extraordinary, government fees, dues or other
obligations to pay money validly levied, assessed or imposed upon the Obligors
or upon their respective undertaking, property and assets or any part thereof
as and when the same become due and payable, save and except when and so long
as the validity of any such rents, taxes, rates, levies, assessments, fees,
dues or obligations to pay is in good faith contested by the Borrower, as the
case may be, provided that in such case the Borrower shall satisfy the Lenders,
and, if reasonably required, furnish security satisfactory to the Lenders, that
any such contestation will involve no forfeiture of any part of the property or
assets of the Borrower, and exhibit to the Lenders, when required, the receipts
and vouchers establishing such payment and duly observe and conform to all
requirements of any governmental or municipal authority relative to any of its
undertaking, property and assets and all covenants, terms and conditions upon
or under which any of its undertaking, property and assets are held.

 

(i)            Maintain Security

 

Fully
and effectually maintain and keep maintained the Security as valid and
effective security at all times.

 

(j)            Obtain Discharge

 

Obtain
and register discharges of all security granted to third parties other than the
Lenders or the Agent and to lessors under Capital Lease Obligations and
Permitted Encumbrances as soon as possible after the obligations secured by
such security are discharged and, in any event, no later than 3 months
following the payment in full of all amounts owing pursuant to such Capital
Lease Obligations and Permitted Encumbrances.

 

30

 

(k)           Financial Statements

 

Furnish
to the Agent and the Lenders:

 

(i)            Monthly Statements – as soon as possible and, in any event, within thirty (30) days after
the end of each month a monthly income statement and a calculation of EBITDA
for the prior month;

 

(ii)           Quarterly Statements - as soon as possible and, in any event, within forty-five (45) days
after the end of each quarter a quarterly and fiscal year to date financial
report consisting of consolidated and, if applicable unconsolidated unaudited
financial statements of the Borrower and the Shareholder and any subsidiaries
of the Borrower conducting any portion of its business in Canada, consisting of
a balance sheet, a statement of retained earnings, a statement of income and a
statement of changes in financial position on a consolidated basis, along with
a comparison to budget and the previous fiscal year and comments on any
significant variances from budget and a calculation of EBITDA for each month
during the quarter;

 

(iii)          Annual Financial Statements - as soon as practicable and in any event
within ninety (90) days after the end of each fiscal year of the Borrower, the
audited consolidated financial statements of the Borrower and, if applicable,
the unaudited non-consolidated financial statements of the Borrower and any
subsidiaries of the Borrower conducting any portion of its business in Canada,
and in each case, consisting of a balance sheet, a statement of retained
earnings, a statement of income and a statement of changes in financial
position as at the end of and for the period commencing with the end of the
previous fiscal year and ending with the end of the current fiscal year,
setting forth, in each case, in comparative form, the figures for the previous
fiscal year;

 

(iv)          Quarterly Compliance Certificates - within forty-five (45) days of each quarter
(commencing with the quarter ending March 31, 2004), a compliance
certificate in the form attached as part of Schedule 8.1(k)(iv) hereto
signed by the president and the vice-president, finance of the Borrower or any
other senior officer of the Borrower acceptable to the Lender certifying, among
other things, in their capacity as officers, compliance with all of the
financial covenants contained herein and in the Senior Facility Agreement and
setting forth in reasonable detail the calculations set forth in Sections
8.1(t), (u), (v), (w) and 8.2(z) hereof; or if not in compliance, setting forth
in reasonable detail the reasons for such non-compliance and the steps that
will be taken to correct it;

 

(v)           Business plan and budget - as soon as practicable and, in any event not later than thirty (30)
days prior to the end of each fiscal year an Annual Business Plan and a capital
and operating budget for each of the twelve

 

31

 

(12)
months in the forthcoming fiscal year with respect to the (A) balance sheet,
and (B) statement of earnings, together with such other information as may be
reasonably requested by the Lender and (C) statement of changes in financial
position; and

 

(vi)          Other information - such other information respecting the affairs and property of the
Obligors and the Business as may reasonably be requested by the Lenders.

 

(1)           Leases

 

Pay
all rents and do, observe and perform in all material respects all other
obligations and all matters and things that are necessary or expedient to be
done, observed or performed under or by virtue of any leases or licences
forming part of the assets, property, undertaking of each Obligor, including
all leases described in Schedule 6.1(o) hereof;.

 

(m)          Corporate Existences

 

At
all times maintain their corporate existence and diligently preserve all of the
rights, powers, privileges and goodwill owned by them.

 

(n)           Inspections

 

Permit
the authorized agents of the Agent and the Lenders to inspect from time to time
the contracts, facilities, property, plant, books and records of each Obligor
at all times upon reasonable notice whether or not such times are during normal
business hours so as not to unduly interfere with the Business.

 

(o)           Insurance

 

Insure
and keep insured with insurers acceptable to the Agent all buildings, plant,
structures, machinery, equipment, apparatus, materials and supplies of the
Obligors as are customarily insured by companies operating or owning similar
properties against loss or damage by such perils as are customarily insured
against by companies carrying on a similar business or operating or owning
similar properties and maintain fire and extended coverage, third party
liability, and business interruption insurance in amounts satisfactory to the
Agent; to obtain insurance reviews on an annual basis at the expense of the
Borrower, from Intech or another consultant satisfactory to the Agent and to
update insurance coverages in accordance with such consultant’s reports; and in
respect to all such policies the Lenders shall be named as loss payees as its
interests may appear; and on a timely basis pay all premiums and all other sums
of money payable for maintaining such insurance and give to the Agent evidence
of such insurance, the payment of such premiums and such assignments to the
Lenders at such times as the compliance certificates to be delivered to the
Agent and the Lenders pursuant to Section 8.1(k) are due, and deliver an
acknowledgement from the insurer that such policies may not be terminated or
cancelled without at least thirty (30) days’ prior

 

32

 

notice
to the Agent; provided that, if premiums on the insurance required to be
maintained by the Borrower pursuant to this agreement are not paid, then such
premiums may be paid by the Lender and treated in all respects as part of the
principal monies secured by the Loan and shall bear interest at the Loan
Interest Rate; to complete all proof of loss forms in connection with any loss
in such manner and at such time or times as the Agent requires.

 

(p)           Repair

 

Maintain
and keep all property and assets owned or held under lease by the Obligors and
used in the Business in good repair, working order and condition, reasonable
wear and tear excepted, and from time to time make all needed repairs, renewals
and replacements, and defend the same against all claims to preserve the
Security, continue to own, and will continue to be lawfully in possession of or
have a right of possession to all of its property and assets from time to time
and will continue to have good, right and lawful authority to mortgage, pledge
and charge its property and assets as provided for herein.

 

(q)           Government Approvals

 

Comply
in all material respects with all Applicable Laws and obtain and maintain in
good standing all leases, licenses, permits and approvals from any and all
Governmental Authorities required from time to time with respect to carrying on
the Business.

 

(r)            Default

 

Notify
the Lenders and the Agent immediately by telephone, and within five (5)
Business Days thereof in writing, upon obtaining knowledge of:

 

(i)            any Event of Default hereunder; or

 

(ii)           any event which but for notice or lapse of time or both would be an Event
of Default hereunder.

 

(s)           Litigation

 

Give
to the Agent and the Lenders notice, including reasonable particulars, of any
action, suit or proceedings, to the knowledge of the Borrower, pending or
threatened against or affecting an Obligor before any court or before any
governmental department, commission or agency, or any arbitrator, in Canada or
elsewhere, which:

 

(i)            could
involve a claim for money damages exceeding one million ($1,000,000) dollars
(excluding any portion of such claim the payment of which would be covered by
any insurance policy then in effect); or

 

(ii)           could
result in any Material Adverse Effect.

 

33

 

(t)            Minimum EBITDA

 

Maintain
EBITDA calculated on a consolidated basis of no less than four million
($4,000,000) dollars per month measured at the end of each month commencing
March 31, 2004 until the Loan is repaid in full.

 

(u)           Leverage Ratio

 

Maintain
at all times a Leverage Ratio, calculated on a consolidated basis commencing
March 31, 2004 until the Loan is repaid in full, of not more than 2:1 at
the end of each quarter.

 

(v)           Current Ratio

 

Maintain
at all times a Current Ratio, calculated on a consolidated basis, of no less
than 0.75:1 at all times.

 

(w)          Forecasted EBITDA

 

Maintain
at all times forecasted EBITDA of no less than forty-eight million
($48,000,000) dollars calculated on a consolidated basis for the twelve month
period ending on the anniversary of the date of calculation.

 

(x)            Cash Balance

 

Maintain
at the end of each quarter a cash balance, consisting of Cash and Cash
Equivalents of not less than five million ($5,000,000) dollars.

 

(y)           Environmental Laws

 

Conduct
its business so as to comply in all respects with all applicable Environmental
Laws and regulations, including, without limitation, environmental, land use,
occupational safety or health laws, rules, regulations, requirements or permits
in all jurisdictions in which it is or may at any time be doing business,
including without limitation, the Canadian
Environmental Protection Act (Canada), the Environmental Protection Act (Ontario),
the Clean Air Act (U.S.), the Clean Water Act (U.S.), the Solid Waste Management Act (U.S.), the Occupational Safety and Health Act (U.S.),
the Consumer Product Safety Act (U.S.)
and the Hazardous Materials Transportation
Act (U.S.); provided however, that nothing contained in this
subsection shall prevent the Borrower from contesting, in good faith by
appropriate legal proceedings, any such law, regulation, interpretation thereof
or application thereof, provided further, that the Borrower shall comply with
the order of any court or other governmental body of applicable jurisdiction
relating to such laws unless it shall currently be prosecuting an appeal or
proceedings for review and shall have secured a stay of enforcement or
execution or other arrangement postponing enforcement or execution pending such
appeal or proceedings for review.

 

34

 

(z)            Environmental claim

 

Notify
the Agent and the Lenders as soon as practicable and in any event within five
(5) days of receipt of any notice in connection therewith, if any Obligor:

 

(i)            receives
notice of any violation or potential violation of any Environmental Laws which
may have occurred or been committed or is about to occur or be committed;

 

(ii)           receives
notice that any administrative or judicial complaint or order has been issued
or filed or is about to be issued or filed against an Obligor alleging
violations of any Environmental Laws or requiring the taking of any action in
connection with any Hazardous Substance;

 

(iii)          learns
of the enactment of any Environmental Laws or the issuance of any environmental
orders which may have a Material Adverse Effect on the Business; or

 

(iv)          knows
that any Hazardous Substance has been brought onto any part of the premises
occupied by an Obligor in violation of Environmental Laws or that there is any
actual, threatened or potential release of any Hazardous Substance on, from, in
or under any part of such premises.

 

(aa)         Hazardous Substances Indemnity

 

Shall,
and shall cause each Obligor to, at all times defend, indemnify and hold
harmless the Agent and the Lenders and their respective directors, officers,
employees and agents, against any and all claims, liabilities, suits, actions,
debts, damages, costs, losses, obligations, judgments, charges and expenses, of
any nature whatsoever suffered or incurred by the Agent and the Lenders,
whether upon realization of the Security, or as a lender, or as successor to or
assignee of any right or interest of any Obligor, or as a result of any order,
investigation or action by any governmental authority relating to any business
or property, or as mortgagee in possession or successor or
successor-in-interest of any Obligor, or as a result of any taking of
possession of all or any real property by foreclosure, power of sale, deed in
lieu of foreclosure or by any other means relating to any Obligor under or on
account of any applicable Environmental Law (including without limitation the
assertion of any Lien thereunder) with respect to:

 

(i)            the
Release of a Hazardous Substance, the threat of the Release of any Hazardous
Substance, or the presence of any Hazardous Substance affecting the real or
personal property interest of any Obligor (other than the presence of a
Hazardous Substance that is in compliance with Environmental Law), whether or
not the Hazardous Substance originates or emanates from the property of any
Obligor or any contiguous real property or personal property located thereon,
including any loss of value of such property as a result of any of the
foregoing;

 

35

 

(ii)           any
costs of removal or remedial action incurred by any governmental authority or
any costs incurred by any other Person or damages from injury to, destruction
of, or loss of natural resources in relation to, the real property or personal
property of the Obligors or any contiguous real property or personal property
located thereon, including reasonable costs of assessing such injury,
destruction or loss incurred pursuant to Environmental Law;

 

(iii)          liability
for personal injury or property damage arising by reason of any civil law
offences or quasi-criminal offences or under any statutory law or common tort
law theory including, without limitation, damages assessed for the maintenance
of a public or private nuisance or for the carrying on of a dangerous activity
at, near or with respect to the real or personal property of any Obligor or
elsewhere; and/or

 

(iv)          any
other matter relating to the environment and Environmental Law affecting the
property or the operations and activities of any Obligor within the
jurisdiction of any Governmental Authority.

 

(bb)         Further Assurances

 

At
any and all times and at its expense, do, execute, acknowledge and deliver or
will cause to be done, executed, acknowledged and delivered all further acts,
deeds, conveyances, mortgages, transfers and assurances in law as the Lenders
shall reasonably require to carry out the intent of this Agreement.

 

(cc)         Parent and Shareholder Distributions

 

Notify
the Lender contemporaneously with the making of any distributions to the
Parents or the Shareholder permitted pursuant to Sections 8.2(h) and 8.2(k)
hereof if the aggregate of all such distributions exceed forty-eight million
($48,000,000) dollars in any rolling twelve month period calculated as at the
date of the distribution.

 

(dd)         Forward Subscription Agreement

 

Enforce
on a timely basis all of the obligations of the Immediate Parent pursuant to
the Forward Subscription Agreement.

 

(ee)         Globility Guarantee and Security Agreement

 

Perform
on a timely basis all of the covenants and honor all obligations contained in
the Globility Guarantee and Security Agreement.

 

36

 

8.2           Negative Covenants

 

The
Obligors jointly and severally covenant and agree that so long as any portion
of the Loan shall be outstanding, neither the Borrower, nor where applicable,
the Shareholder, shall, without the prior written consent of the Lenders:

 

(a)           Representations and Warranties

 

Cause
or permit to exist any facts or things which would render untrue at any time
during which this Agreement is in effect, any representation or
warranty set forth in Article 6 hereof as at the date of any Advance.

 

(b)           Reorganization

 

Enter
into any transaction that changes the current corporate structure of the
Obligors (whether by way of reconstruction, reorganization, consolidation,
amalgamation, merger, transfer, sale, lease or otherwise) or cause the existing
Business (other than that portion currently carried on by the Borrower’s
subsidiaries) to be conducted by any Subsidiary or Person controlled by the
Borrower (including the Borrower’s existing subsidiaries).

 

(c)           Articles of Amendment

 

Effect
any change to the constating documents of any Obligor.

 

(d)           Fiscal Year

 

Change
its fiscal year end from December 31.

 

(e)           Change of Name

 

Change
its name.

 

(f)            Business Plan

 

Amend
or deviate in any material manner from the Annual Business Plan provided to the
Lender.

 

(g)           Liens

 

Except
for Permitted Encumbrances, as otherwise permitted herein or as provided for in
the Senior Facility Agreement, create, issue, incur or suffer to exist any Lien
on all or any part of the property, assets or undertaking of any Obligor, nor
dispose of all or any part of the assets subject to the Security if the
proceeds of such disposition exceed one hundred thousand ($100,000) dollars in
any single instance with an aggregate limit of one million ($1,000,000) dollars,
out of the ordinary course of business without the prior written approval of
the Lenders,

 

37

 

provided
that the Lenders shall provide partial releases, as are required in connection
with the deminumus exceptions outlined above.

 

(h)           Loans

 

Except
as otherwise permitted herein, lend money to or invest money in any Person,
whether by loan, acquisition of shares, acquisition of debt obligations,
incorporation or in any other manner whatsoever or guarantee, endorse or
otherwise become surety for or upon the obligations of others except by
endorsement of negotiable instruments for deposit or collection in the ordinary
course of the Business in the aggregate in excess of one million ($1,000,000)
dollars, provided however that nothing herein shall prevent the making of
advances to the Shareholder or the Parents if at the time of such advance there
shall be no default under any of the financial covenants contained in
subsections 8.1(t), 8.1(u), 8.1(v), 8.1(w), 8.1(x) or 8.2(z).

 

(i)            Disposal of Assets

 

Except
as otherwise permitted in Section 8.4 hereof, attempt to sell or sell or
otherwise dispose of all or substantially all or any portion of the property
necessary to conduct the Business, or the assets or undertaking of each Obligor
by conveyance, transfer or lease or sale in bulk.

 

(j)            Capital Expenditures

 

Incur
or make commitments to incur Capital Expenditures in excess of twenty-five
million ($25,000,000) dollars in any fiscal year (other than as permitted pursuant
to Section 8.1(k) hereof, provided that after the occurrence of a
Default or Event of Default which is continuing or to the extent a Default or
Event of Default would occur as a result thereof, no Capital Expenditures in
excess of one-hundred thousand ($100,000) dollars shall be permitted without
the consent of the Lenders.

 

(k)           Acquisitions

 

All
or substantially all the acquired assets or shares of any Person, or a division
of any Person where total acquisition costs exceed five million ($5,000,000)
dollars without first obtaining the written consent of the Lender.

 

(1)           Deleted Intentionally.

 

(m)          Expansion

 

Carry
on any business other than the Business, reasonable expansions thereof, make
acquisitions (other than as permitted pursuant to Section 8.2(k) hereof),
or change in any manner, the nature of the Business.

 

38

 

(n)           Additional Debt

 

Except
as otherwise permitted herein or with the written consent of the Lenders, incur
any additional debt for borrowed money or Operating Lease Obligations
(including rentals of new locations for the Business in excess of two-hundred
thousand ($200,000) dollars per annum per location but not including renewals
at market rates), nor enter into any Capital Lease Obligations nor assume,
directly or indirectly, any additional indebtedness for borrowed money, except:

 

(i)            loans
from direct or indirect shareholders or any Restricted Subsidiary;

 

(ii)           any
subordinated shareholders’ loans and any other subordinated debt on terms
approved by the Agent, provided that the Agent and the Lenders have received
any such postponement and subordination agreements from such lenders as the
Agent and the Lenders reasonably require;

 

(iii)          other
indebtedness for Capital Lease Obligations not exceeding at any one time two
million ($2,000,000) dollars in the aggregate;

 

(iv)          the
assumption of indebtedness in relation to an acquisition permitted pursuant to
Section 8.2(k) hereof; and

 

(v)           indebtedness
not exceeding two million ($2,000,000) dollars incurred for the purpose of
completing an acquisition permitted pursuant to section 8.2(k) hereof.

 

(o)           Non-Arm’s Length Transactions

 

Except
as otherwise permitted herein or for bona fide commercial transactions with
respect to the CLEC which have commercial value of not more than five million
($5,000,000) dollars which transactions have been approved by all shareholders
of CLEC and ongoing service contracts between CLEC and the Borrower at prices
not less advantageous to the Borrower than prices for similar services from
arm’s length third parties and management fees set out on Schedule 8.2(o),
make any loan to, or enter into any contracts or other arrangements (written or
oral) material to its business or operations with, any of the officers, directors
or shareholders of either Obligor or any member of their immediate families, or
any firm or corporation in which such persons have an ownership interest, or
any Affiliate of the foregoing or engage in any business relationship with
respect to the sale of products produced or services provided by or to the
Business to or from any Shareholder.

 

(p)           Sale of Shares

 

Sell
or permit a sale or issuance of shares, options or other securities of the
Borrower or any subsidiary thereof.

 

39

 

(q)           Intellectual Property

 

Permit
any licenses, trademarks or patents of any Obligor to fall into default prior
to the expiry thereof where same may be expected to have a Material Adverse
Effect, or commit any breach (or do any act or expend any funds in furtherance
of any course of action which may result in a breach) of any patent, trademark
or other intellectual licencing arrangement necessary or material to the
Business (collectively, the “Material IP
Agreements”); provided that the Borrower shall seek the Agent’s
prior written consent on behalf of the Lenders to any course of action that may
permit any termination of such rights under the Material IP Agreements, or
result in any adverse claim against the Borrower thereunder or in connection
therewith, and in connection with any proposed course of action, the Borrower
shall provide the Lenders with all such opinions as the Lenders shall, acting
reasonably, require in connection therewith in order to permit the Lenders to
make their own determination (with the assistance of counsel) as to the
propriety of the Borrower’s proposed course of action.

 

(r)            Material Contracts

 

Enter
into, revise, supplement, restate, replace or terminate any Material Contract,
except in the ordinary course of business, or assign its interest in any
Material Contract.

 

(s)           Auditors

 

Change
its auditors from Deloitte & Touche LLP or another accounting firm
acceptable to the Lenders, acting reasonably.

 

(t)            Articles

 

Amend
its Articles of Incorporation.

 

(u)           Change of Control

 

Permit
a change of control of the Borrower or the Shareholder.

 

(v)           Distributions, Dividends, Loan Repayments to Affiliates

 

Except
as otherwise permitted herein, make any loan repayments, or payments of
interest to Affiliates, declare any dividends or otherwise make any
distributions if after the making of such payment or distribution any Obligor
would be in Default of any terms of this Agreement.

 

(w)          Negative Pledge

 

Except
as set out in Section 8.4 hereof, the Shareholder shall not assign nor
pledge, encumber or in any way permit a Lien to attach to the issued and
outstanding shares of the Borrower.

 

40

 

(x)            Intercorporate Note

 

Transfer,
assign, pledge, encumber or in any way permit a Lien to attach to the
Intercorporate Note except for a transfer, assignment, pledge, encumbrance or
Lien to or in favour of the Ultimate Parent or any Restricted Subsidiary.

 

(y)           Amendments

 

Modify,
amend supplement or in any way alter the terms of the Term Debenture, the
Forward Subscription Agreement or the Intercorporate Note.

 

(z)            Margin

 

Permit
the aggregate of (i) the amount of the Loan outstanding and (ii) three million
($3,000,000) dollars to exceed the aggregate of:

 

(i)            sixty-five
(65%) percent of accounts receivable from customers which are less than nintey
(90) days old and unbilled charges for usage consumed or utilized by customers
during the prior forty-five (45) days of Primus (which for greater certainty
shall not include any amounts owing to Primus from any Affiliate of Primus or
CLEC); and

 

(ii)           twenty-five
million ($25,000,000) dollars.

 

8.3           Agent Entitled to Perform Covenants.

 

If
any Obligor fails to perform any covenant on its part to be performed
hereunder, the Agent on behalf of the Lenders may in its sole and unfettered
discretion perform any of such covenants capable of being performed by it and,
if any such covenant requires the payment or expenditure of money, the Agent on
behalf of the Lenders may make payments or expenditures with its own funds, or
with money borrowed by or advanced to it for such purpose, but shall be under
no obligation to do so; and all sums so expended or advanced shall be at once
payable by the Borrower on demand and form part of the Indebtedness and shall bear
interest at the combined rate of interest set out in Sections 3.1 and 3.2 until
paid, and shall be payable out of any funds coming into the possession of the
Agent and/or the Lenders in priority to the Indebtedness secured hereby;
provided, however, that no such performance or payment shall be deemed to
relieve the Borrower from any default or breach hereunder.

 

8.4           Certain Permitted
Transactions.

 

Notwithstanding
anything to the contrary set forth in this Agreement, any other Loan Document
or any agreement executed in connection herewith or therewith, until such time
as an event of default shall have occurred as a result of a default under any
financial covenant contained in clauses (t), (u), (v), (w) or (x) of
Section 8.1 or subsection (z) of Section 8.2 hereof or an event
of default as a result of a failure to pay principal or interest to the Lenders
when due hereunder, nothing contained in this Agreement, any other Loan
Document, or any agreement executed in connection herewith or therewith shall
impose any encumbrance or restriction of any kind on the ability of any
Borrower, either Parent or any Restricted Subsidiary to (i) pay dividends or
make any other distributions permitted by applicable law on its capital stock,
(ii) pay any indebtedness owed to either Parent or any Restricted Subsidiary,
(iii) make loans or

 

41

 

advances
to either Parent or any Restricted Subsidiary, or (iv) transfer to either
Parent or to any Restricted Subsidiary any of its property or assets that do
not secure the Loan.

 

ARTICLE 9

SURVIVAL OF REPRESENTATIONS AND WARRANTIES

 

9.1           Survival.

 

All
representations, warranties, covenants and agreements made herein and any
certificate, opinion or other document delivered by or on behalf of the
Obligors shall conclusively be deemed to have been relied upon by the Agent and
the Lenders, notwithstanding any prior or subsequent investigation by the Agent
and the Lenders and shall survive the making of all advances and the fulfilment
of all other transactions and deliveries contemplated hereunder, all of which
shall continue in full force and effect so long as any amount of principal or
interest under the Loan remains outstanding and unpaid. All statements
contained in any certificate or other document delivered to the Agent and
Lenders under this Agreement or in connection with any of the transactions
contemplated hereunder shall be deemed to be representations and warranties by
the party making the same.

 

ARTICLE 10

EVENTS OF DEFAULT

 

10.1         Default

 

It
shall be an Event of Default (in each case, a “Default”) upon the happening of
any one or more of the following events:

 

(a)           Payment Default

 

The
Borrower fails to pay any instalment of interest or principal or other amount
hereunder when due, with or without demand therefor having been made by or on
behalf of the Lender.

 

(b)           Financial Covenants

 

The
Borrower fails to be in compliance with any of the covenants contained in
Sections 8.1(t), 8.1(u), 8.1(v), 8.1(w), 8.1(x) or Section 8.2(z).

 

(c)           Security or Covenant Default

 

The
Borrower or any subsidiary fails to perform or be in compliance with any of the
other terms or covenants of this Agreement or of any document constituting the
Security and such failure or non-compliance continues unremedied for a period
often (10) days after written notice thereof shall have been given by the Agent
to the Borrower.

 

42

 

(d)           Other Borrower Payment Obligations

 

The
Borrower fails to pay, within ten (10) days of the date such payment is due,
any principal or interest in respect of the the Capital Lease Obligations,
whether or not such obligation is declared to be due and payable prior to the
express maturity thereof, provided however that the failure to pay any disputed
portion of any Capital Lease Obligation in the context of a bona fide dispute
with the lessor under any applicable capital lease shall not be an Event of
Default under paragraph 10.1(d) hereof.

 

(e)           Other Obligations

 

Any
Obligor has committed an event of default as defined and contained in (i) the
Globility Guarantee and Security Agreement (including the obligation to post
cash collateral as set out therein), (ii) the Intercorporate Note or any other
indebtedness for borrowed monies owed to the Shareholder, any of the Parents or
any subsidiary of any of them, (iii) any Capital Lease Obligation, Operating
Lease Obligation or any conditional sales contract, or (iv) any instrument,
indenture or document evidencing any of the above, or any other agreement for
borrowed money and has failed to remedy the same within any curative period
provided for therein and such event of default involves a payment obligation in
excess of fifty thousand ($50,000) dollars or has not been waived by the
applicable lender or security holder, and such event of default is continuing.

 

(f)            Parent Obligations

 

Any
Parent commits an event of default (as such term is defined in the Indentures)
with respect to any indebtedness under the Notes and any action is taken by a
creditor to accelerate and enforce its rights with respect to such
indebtedness.

 

(g)           Liquidation

 

An
order is made or a resolution is passed for the winding-up, dissolution or
liquidation of any Obligor or if a petition is filed or other process taken
diligently for the winding-up, dissolution or liquidation of any Obligor and
such petition is not diligently disputed by the Obligor in good faith within
ten (10) days of notification thereof.

 

(h)           Insolvency

 

Any
Obligor commits or threatens to commit an act of bankruptcy or becomes
insolvent or goes into liquidation or makes a general assignment for the
benefit of its creditors or otherwise acknowledges its insolvency or if a
bankruptcy petition is filed or presented against any Obligor and is not
diligently contested in good faith and discharged within thirty (30) days after
it is filed or presented.

 

A
court having jurisdiction enters a decree or order for (i) relief in respect of
either Parent in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (ii) appointment of
a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of either

 

43

 

Parent
or for all or substantially all of the property and assets of either Parent, or
(iii) the winding up or liquidation of the affairs of either Parent and, in
each case, such decree or order shall remain unstayed and in effect for a
period of 30 consecutive days.

 

(i)            CCAA

 

Any
proceedings with respect to any Obligor are taken with respect to a compromise
or arrangement under the Companies Creditors
Arrangement Act (or any Act substituted therefor) or similar
legislation of any other jurisdiction.

 

Either
Parent (i) commences a voluntary case under any applicable bankruptcy,
insolvency or other similar law now as hereafter in effect, or consents to the
entry of an order for relief in an involuntary case under any such law, (ii)
consents to the appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of either Parent
or for all or substantially all of the property and assets of either Parent or
(iii) effects any general assignment for the benefit of creditors.

 

(j)            Distress

 

An
encumbrancer or landlord takes possession of any part of the property or leased
premises of any Obligor, or if a distress or execution or any similar process
becomes enforceable or is enforced against any Obligor in connection with a
debt or claim in excess of one-hundred thousand ($100,000) dollars, except
where same is being contested actively and diligently in good faith by
appropriate and timely proceedings, or if a custodian or sequestrator or a
receiver or receiver and manager or any other officer with similar powers is
appointed for any Obligor or for any part of the property of any Obligor.

 

(k)           False Representation

 

Any
representation or warranty contained herein or made in any certificate or other
document delivered by any Obligor or Parent or any persons acting for or on
behalf of any of them to the Agent or the Lenders shall have been determined by
the Agent, acting reasonably, to be false or is incorrect in any material
respect as of its date of making unless the Obligor and/or the Parent shall
have taken steps within ten (10) days of determining that such representation
or warranty is false or misleading, or having received written notice to that
effect from the Agent, to make such representation or warranty true and
correct.

 

(l)            Cease to Carry on Business

 

Any
Obligor shall cease to carry on in the ordinary course the Business or a
substantial part thereof.

 

44

 

(m)          Default

 

Any
Obligor defaults in observing or performing any of the agreements or covenants
in any material lease, licence, debenture, deed of trust or agreement whereby
any material property or rights of such Obligor may become liable for
forfeiture or where any such material lease, licence, debenture, deed of trust
or agreement would be subject to termination, the affected Obligor fails to
cure such default within any curative period provided for therein, and such
default has not been waived.

 

(n)           Share Ownership

 

Any
shares of the Borrower cease to be wholly owned, directly or indirectly, by the
Ultimate Parent or any Restricted Subsidiary.

 

(o)           Employment

 

Any
Obligor fails to meet its obligations to remit any withholding taxes in respect
of employee obligations within three (3) Business Days of the payment date
therefor.

 

10.2         Acceleration

 

At
any time any one or more Events of Default shall have occurred and be
continuing:

 

(a)           all
indebtedness of the Borrower to the Lenders hereunder shall, at the option of
the Lenders, immediately become due and payable upon written notice to but
without requirement for presentment, demand, protest or other notice of any
kind to the Borrower;

 

(b)           all
indebtedness of the Borrower to the Lenders hereunder, if the same shall have
become immediately due and payable pursuant to this Section 10.2, shall be
paid as if the same were a prepayment pursuant to Article 4 and, in
particular, the Borrower shall be responsible for the Make Whole Premium and
all expenses payable pursuant to Article 11 hereof;

 

(c)           the
Borrower shall pay to the Lenders as additional security for the obligations of
Globility to the Lenders or the Agent pursuant to the Globility Guarantee and
Security Agreement cash collateral in an amount equal to the aggregate of (i)
the principal amount of the loan advanced by the Lenders to Globility (ii) all
interest thereon for the period commencing on the date of the Event of Default
and ending on the Maturity Date and (iii) all other amounts payable to the
Lenders or the Agent pursuant to the loan agreement between the Lenders, the
Agent, Globility and MIPPS Inc. dated the date hereof;

 

(d)           all
Security and other Loan Documentation shall thereupon, at the option of the
Lenders, become enforceable by the Agent on behalf of the Lenders.

 

45

 

10.3         Consultant

 

The
Obligors agree that, at any time while an Event of Default has occurred and is
continuing, upon written request delivered by the Agent, they shall appoint a
financial consultant (hereinafter referred to as the “Consultant”), for the purposes of reviewing their respective
operations from time to time. The terms of the Consultant’s scope of duties
shall be settled by the Borrower with the consent of the Agent, provided that
such terms may be settled by the Agent if agreement with the Borrower is not reached
within fifteen (15) days of the date of the notice. The Obligors consent at all
times to a free exchange of information between the Agent and the Consultant,
whether or not the Obligors are apprised of the occurrence of such exchange of
information or the particulars of any such information exchanged at any time.

 

10.4         Remedies Cumulative

 

The
rights and remedies of the Agent and the Lenders hereunder are cumulative and
in addition to and not in substitution for any rights or remedies provided by
law.

 

10.5         Benefit of Security; Set-Off; Sharing of Payment

 

All
Security shall be held by the Agent for the rateable benefit of all of the
Lenders, and all proceeds therefrom which are distributable to the Lenders
shall be applied for the rateable benefit of the Lenders irrespective of any
priority to which any Lender may otherwise be entitled. Notwithstanding the
foregoing or any other provision of this Agreement, if there shall exist at any
time any amount payable by any Lender to any other Lender or the Agent pursuant
to any provision of the Loan Documents, then such amount shall be taken into
account when calculating, and an appropriate portion thereof shall be paid
from, any proceeds of Security otherwise payable to such first Lender.

 

ARTICLE 11

FEES

 

11.1         Expenses

 

Whether
or not any monies are advanced under the Loan, the Borrower agrees to pay from
time to time all reasonable out-of-pocket expenses, disbursements and
reasonable legal expenses of the Agent and the Lenders in connection with its
due diligence on the Obligors and the Parents, the preparation of this
agreement and the Loan Documents, and reasonable costs in connection with the
ongoing maintenance and enforcement of the Security and renewals of
registrations when necessary. On the Closing Date, the legal fees and
disbursements and other disbursements incurred by the Agent or the Lenders to
such date shall be paid by the Borrower.

 

11.2         Arrangement
Fee

 

An
arrangement fee of four-hundred thousand ($400,000) dollars for services
rendered up to and including the Closing Date shall be payable by the Borrower
to the Lenders on the Closing Date. The Lenders acknowledge receipt of
two-hundred thousand ($200,000)

 

46

 

dollars
towards payment of this fee. The balance of such fee shall be paid by the
Borrower to the Lenders on the Closing Date.

 

ARTICLE 12

THE AGENT

 

12.1         Appointment

 

The
Lenders hereby appoint the Agent to act as their agent as herein specified and,
except as may be specifically provided to the contrary herein, each of the
Lenders hereby irrevocably authorizes the Agent, as the agent of such Lender,
to take such action on its behalf under or in connection with the Loan
Documents and to exercise such powers thereunder as are delegated to the Agent
by the terms thereof and such other powers as are reasonably incidental thereto
which it may be necessary for the Agent to exercise in order that the
provisions of the Loan Documents are carried out. The Lenders hereby
acknowledge and agree that the Agent is the holder of an irrevocable power of
attorney (within the meaning of the Civil Code of Quebec) from the Lenders for
the purpose of holding any of the Security or any other security granted by any
Person with respect to the liabilities of the Borrower under the Loan
Documents, and the Agent hereby agrees to act in such capacity. The Agent may
perform any of its duties under the Loan Documents by or through its agents.
The Borrower shall not be concerned to enquire whether the powers which the Agent
is purporting to exercise have become exercisable or otherwise as to the
propriety or regularity of any other action on the part of the Agent, and
accordingly insofar as the Borrower is concerned, the Agent shall for all
purposes hereof be deemed to have authority from the Lenders to exercise the
powers and take the actions which are in fact exercised and taken by it.

 

12.2         Indemnity from Lenders

 

The
Lenders agree to rateably indemnify the Agent (to the extent that the Agent is
not promptly reimbursed by the Borrower on demand) from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any nature or kind whatsoever which
may be imposed on, incurred by, or asserted against the Agent in its capacity
as agent hereunder which in any way relate to or arise out of the Loan
Documents or any action taken or omitted by the Agent under the Loan Documents;
provided that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements which result from the Agent’s gross negligence or
wilful misconduct. Without limitation, each Lender agrees to reimburse the
Agent promptly upon demand for its rateable share of out-of-pocket expenses
(including all fees and disbursements of legal counsel) incurred by the Agent
in connection with the preparation of the Loan Documents and the determination
or preservation of any rights of the Agent or the Lenders under, or the
enforcement of, or legal advice in respect of rights or responsibilities under,
the Loan Documents, to the extent that the Agent is not promptly reimbursed for
such expenses by the Borrower on demand.

 

47

 

12.3        Exculpation

 

The
Agent shall have no duties or responsibilities except those expressly set forth
in the Loan Documents. Neither the Agent nor any of its officers, directors,
employees or agents shall be liable for any action taken or omitted to be taken
under or in connection with the Loan Documents, unless such act or omission
constitutes gross negligence or wilful misconduct. The duties of the Agent
shall be mechanical and administrative in nature; the Agent shall not have by
reason of the Loan Documents a fiduciary relationship with any Lender (unless
and to the extent that the Agent receives money or property on behalf of a
Lender) and nothing in the Loan Documents, express or implied, is intended to
or shall be construed as to impose upon the Agent any obligation except as
expressly set forth therein. None of the Lenders shall have any duties or
responsibilities to any of the other Lenders except as expressly set forth in
the Loan Documents. The Agent shall not be responsible for any recitals, statements,
representations or warranties in any of the Loan Documents or which may be
contained in any other document subsequently received by the Agent or the
Lenders from or on behalf of any Obligor or for the authorization, execution,
effectiveness, genuineness, validity or enforceability of any of the Loan
Documents, and shall not be required to make any inquiry concerning the
performance or observance by any Obligor of any of the terms, provisions or
conditions of any of the Loan Documents. Each of the Lenders severally
represents and warrants to the Agent that it has made and will continue to make
such independent investigation of the financial condition and affairs of the
Obligors as such Lender deems appropriate in connection with its entering into
of any of the Loan Documents and the making and continuance of any Advances
hereunder, that such Lender has and will continue to make its own appraisal of
the creditworthiness of the Obligors and that such Lender in connection with
such investigation and appraisal has not relied upon any information provided
to such Lender by the Agent.

 

12.4        Reliance on Information

 

The
Agent shall be entitled to rely upon any writing, notice, statement,
certificate, facsimile, telex or other document or communication believed by it
to be genuine and correct and to have been signed, sent or made by the proper
person or persons, and, with respect to all legal matters pertaining to the
Loan Documents and its duties thereunder, upon the advice of counsel selected
by it.

 

12.5        Knowledge and Required Action

 

The
Agent shall not be deemed to have knowledge or notice of the occurrence of any
Default or Event of Default (other than the non-payment of any principal,
interest or other amount to the extent the same is required to be paid to the
Agent for the account of the Lenders) unless the Agent has received notice from
a Lender or the Borrower specifying such Default or Event of Default and
stating that such notice is given pursuant to this Section 12.5. In the event
that the Agent receives such a notice, it shall give prompt notice thereof to
the Lenders, and shall also give prompt notice to the Lenders of each
non-payment of any amount required to be paid to the Agent for the account of
the Lenders. The Agent shall, subject to Section 12.6, take such action with
respect to such Default or Event of Default as shall be directed by the Lenders
in accordance with Article 12; provided that, unless and until the Agent shall
have received such direction, the Agent may, but shall not be obliged to, take
such action, or refrain from taking

 

48

 

such
action, with respect to such Default or Event of Default as it shall deem
advisable in the best interest of the Lenders; and provided further that the
Agent in any case shall not be required to take any such action which it
determines to be contrary to the Loan Documents or to any Applicable Law.

 

12.6        Request for Instructions

 

The
Agent may at any time request instructions from the Lenders with respect to any
actions or approvals which, by the terms of any of the Loan Documents, the
Agent is permitted or required to take or to grant, and the Agent shall be
absolutely entitled to refrain from taking any such action or to withhold any
such approval and shall not be under any liability whatsoever as a result
thereof until it shall have received such instructions from the Lenders who
have committed to advance 50.1% of the Loan. No Lender shall have any right of
action whatsoever against the Agent as a result of the Agent acting or
refraining from acting under the Loan Documents in accordance with instructions
from all the Lenders. The Agent shall in all cases be fully justified in
failing or refusing to take or continue any action under the Loan Documents unless
it shall have received further assurances to its satisfaction from all the
Lenders of their indemnification obligations under Section 12.2 against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take such action, and unless it shall be secured in respect
thereof as it may deem appropriate.

 

12.7        Exchange of Information

 

The
Borrower agrees that each Lender and the Agent may provide to the other Lenders
or the Agent such information concerning the financial position and property
and operations of the Obligors as, in the opinion of such Lender or the Agent,
is relevant to the ability of each of the Obligors to fulfil its respective
obligations under or in connection with the Loan Documents.

 

12.8        The Agent, Individually

 

With
respect to the share of the Loan made available by it and the Loan Documents to
which it is a party, the Agent shall have the same rights and powers hereunder
as any other Lender and may exercise such rights and powers as though it were
not the Agent, and the term “Lenders”
shall, unless the context clearly otherwise indicates, include the Agent in its
individual capacity.

 

12.9        Resignation and Termination

 

If
at any time (i) the Agent shall deem it advisable, in its sole discretion, it
may deliver to each of the Lenders and the Borrower written notification of its
resignation insofar as it acts on behalf of the Lenders pursuant to this
Article 12, or (ii) the Agent is in default of any of its obligations hereunder
and the Lenders shall deem it advisable, in their sole discretion, they may
deliver to the Agent and the Borrower written notification of the termination
of the Agent’s authority to act on behalf of the Lenders pursuant to this
Article 12, such resignation or termination to be effective upon the date of
the appointment by the Lenders of a successor which shall assume all of the
rights, powers, privileges and duties of the Agent hereunder, which appointment
shall be promptly made from among the remaining Lenders and written notice

 

49

 

thereof
shall be given to the Borrower concurrently with such appointment. If in the
case of notice of resignation by the Agent no appointment of a successor Agent
has been made by the Lenders within thirty (30) days after such notice has been
delivered, the resigning Agent may make such appointment.

 

12.10      Actions by Lenders

 

Any
approval (including without limitation any approval of or authorization for any
amendment to any of the Loan Documents), instruction or other expression of the
Lenders hereunder may be obtained by an instrument in writing signed in one or
more counterparts by all the Lenders (which instrument in writing, for greater
certainty, may be delivered by facsimile as provided in Section 13.3).

 

12.11      Provisions for Benefit of
Lenders Only

 

The
provisions of this Article 12 shall be operative as between the Lenders and the
Agent only, and the Borrower shall not have any rights under or be entitled to
rely for any purposes upon such provisions.

 

ARTICLE 13

GENERAL

 

13.1        No Waiver of Rights

 

No
course of dealing between any Obligor and the Lenders and no delay on the part
of the Agent or any Lender under this Agreement or any other agreement between
the Agent, the Lenders and the Obligor shall operate as a waiver of any rights
of the Agent or the Lenders hereunder.

 

13.2        No Waiver of Defaults

 

No
failure or delay on the part of the Agent or any Lender in exercising any right
or privilege hereunder and no waiver as to any default by the Shareholder or
any Obligor shall operate as a waiver thereof unless made in writing and signed
by the appropriate officer of the Agent. Any written waiver by the Agent or the
Lenders will not preclude the further or other exercise by the Agent or the
Lenders of any right, power or privilege hereunder or extend or apply to any
further default by any Obligor. For greater certainty, any failure or delay on
the part of the Agent or the Lenders in requiring strict compliance with any
time period prescribed herein, will not preclude the Agent or the Lenders from
reasserting the strict compliance with any such time period whereupon the
Obligors shall so comply.

 

13.3        Notices

 

Any
notice to be given hereunder shall be in writing and may be effectively given
by delivering the same at the addresses hereinafter set forth or by sending the
same by prepaid registered mail, or telefax to the Lenders or the Borrower at
such addresses. Any notice so mailed shall be deemed to have been received on
the third (3rd) Business Day following the

 

50

 

mailing
thereof and if given by delivery or telefax, the same shall be deemed to have
been received upon delivery or upon transmission (with appropriate answer
back). The delivery, mailing, and telefax address of the parties for the
purpose hereof shall be:

 

(a)           as to the Borrower and the Shareholder:

 

5343
Dundas Street West

Suite
400

Toronto,
ON M9B 6K5

 

Attention:                        President

Telecopier:                    (416) 236-7391

 

(b)          as to the Lenders and the Agent:

 

The
Manufacturers Life Insurance Company

200
Bloor St. East NT - 6

Toronto,
ON M4W 1E5

 

Attention:                        Assistant Vice-President

Telecopier:                    416-926-5737

 

13.4        Method of Payment

 

All
payments to be made by the Borrower to the Lenders hereunder shall be made by
means of cheque of immediately available funds to such bank accounts as the
Lenders advise from time to time.

 

13.5        Successors and Assigns

 

This
Agreement shall be binding upon and enure to the benefit of the parties hereto
and their successors and assigns; provided however, the Borrower shall not
assign any of its rights or obligations hereunder without the prior written
consent of the Lenders. In addition to any transfer required to be made to any
other Lender hereunder or required by Applicable Law to be made to any Person,
a Lender may assign or transfer any part of its rights and obligations in
respect of its commitment to make Advances hereunder or any portion of the Loan
held by it, to such Persons, at such times and upon such terms as it may determine,
without any obligation to obtain any consent of any Obligor or Parent; provided
that:

 

(i)            so long as no Event of Default has occurred
and is then continuing, (A) such Lender shall have first received the prior
written consent of the Agent and each other Lender permitting it to do so; (B)
such Lender shall have received the prior consent of the Borrower acting
reasonably; (C) the proposed assignee or transferee shall not be a non-resident
of Canada as such term is defined in the Income
Tax Act (Canada); and (D) such Lender shall not assign or transfer
its rights to a competitor of the Business; it being agreed that the foregoing
restrictions shall not apply where an Event of Default has occurred and is
continuing; and

 

51

 

(ii)           the assigning or transferring Lender (the “Assignor”) shall obtain from the assignee
(the “Assignee”) an undertaking of
the Assignee, addressed to the parties to this Agreement (as such parties may
be constituted at such time), whereby the Assignee agrees to be bound by this
Agreement in the place and stead of the Assignor to the extent of the rights
and obligations of the Assignor in respect of the amount of the Loan agreed to
be advanced by such Lender that has been assigned or transferred to the
Assignee.

 

13.6        Governing Law

 

This
Agreement, the Security and all certificates and other documentation delivered
to the Agent or the Lenders shall be construed and interpreted in accordance
with the laws of the Province of Ontario except as expressly stated in any
other document and each Obligor agrees to attorn to the jurisdiction of the
Province of Ontario.

 

13.7        Entire Agreement

 

This
Agreement embodies the entire agreement and understanding between the parties
hereto and supersedes all prior agreements and undertakings whether oral or
written relative to the subject matter hereof, including the Loan Agreement
dated for reference February 11, 2003 and the First Amendment to the Loan
Agreement dated March 18, 2003 and by a Second Amendment to the Loan Agreement
dated December 8, 2003 (the “Original Loan
Agreement”), the term sheet from the Lender dated February 9, 2004
and the Offer to Finance dated February 19, 2004.

 

This
Agreement is and shall for all purposes be deemed to be an amendment and
restatement of the provisions of the Original Loan Agreement. This Agreement
shall supersede the Original Loan Agreement insofar as it constitutes the
entire agreement between the parties concerning the subject matter of this
Agreement, but does not constitute a novation of the Original Loan Agreement.
All principal amounts outstanding under the Original Loan Agreement and
interest accrued thereon shall be deemed to be principal amounts outstanding
and interest accrued thereon under this Agreement.

 

13.8        Modification

 

Except
as specifically set out herein, no term or provision hereof may be changed,
modified, waived, terminated or discharged, in whole or in part, except by a
writing which is dated and signed by the Borrower and the Agent on behalf of the
Lenders.

 

13.9        Headings

 

The
division of this Agreement into sections and subsections and the insertion of
headings are for convenience and reference only and shall not affect the
construction or interpretation of this Agreement.

 

52

 

13.10      Number

 

Words
importing the singular number only shall include the plural and vice versa,
words importing the masculine gender shall include the feminine and neuter
genders and words importing persons shall include firms and corporations and
vice versa.

 

13.11      Words and Phrases

 

Words
such as “hereunder”, “hereto”, “hereof, and “herein” shall, unless the context
clearly indicates to the contrary, refer to the whole of this Agreement and not
to any particular article, section, subsection, paragraph or schedule hereof.
Words importing the singular include the plural thereof, and vice versa, and
words importing gender include the masculine, feminine and neuter genders and
words importing individual persons shall include firms and corporations and
vice versa. The word “including” shall mean including, without limitation.

 

13.12      Permissible Forms of Writing

 

In
this Agreement, the words “in writing “ or “written” means any form of written
communication, and shall include a communication by means of telecopier or
facsimile device.

 

13.13      Statutory References

 

Any
reference in this Agreement to any Act or Statute or section thereof shall be
deemed to be a reference to such Act or Statute or section as it exists now.

 

13.14      Severable Provisions

 

The
provisions of this Agreement are severable, and if any one or more provisions
may be determined to be unreasonable or illegal or otherwise unenforceable, in
whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
In the event that any provision of this Agreement is found to be unenforceable,
the parties agree to reform such provision, to the maximum extent permitted by
law and if a court indicates what reforms would make such provision
enforceable, the parties will abide by what that court determines.

 

13.15      Execution of Additional
Documents

 

From
time to time, the Obligors shall, at the request of the Agent or the Lenders,
execute and deliver such additional transfers, instruments, documents and other
assurances as may, in the opinion of counsel for the Agent or the Lenders, be
reasonably required effectually to carry out the intent of this agreement. Such
additional transfers, instruments, documents and other assurances shall be in
form satisfactory to counsel for the Agent and the Lenders.

 

13.16      Other Definitional Terms

 

The
terms “this Agreement”, “hereby”, “herein”, “hereunder”, “hereto” and similar
expressions refer to this Agreement and not to any particular section,
subsection or portion

 

53

 

thereof and include every amendment or instrument supplementary thereto
or an implementation hereof.

 

13.17      Counterparts

 

This
Agreement may be executed in two or more counterparts, each of which shall be
deemed to be an original and all of which together shall constitute one and the
same agreement.

 

13.18      Conflict

 

To
the extent that any term, condition, representation, covenant or other
provision contained in the Security or other instruments delivered pursuant to
this Agreement is at any time inconsistent or conflicts with any term,
condition, representation, covenant or other provision contained in this
Agreement, then this Agreement shall govern and the Borrower shall be deemed
not to be in default under such first-mentioned term, condition,
representation, covenant or other provision, so long as it complies with the
terms, conditions, representations, covenants and other provisions contained in
this Agreement. For greater certainty, to the extent the Security contains any
covenants, representations, warranties or events of default which are not in
any way addressed or contained in this Agreement, such covenants,
representations, warranties or events of default shall not be considered
inconsistent with or conflict with this Agreement.

 

13.19      Confidentiality

 

Except
as required by law and other than to its employee and professional advisors,
there shall be no public announcements or disclosures by any Obligor regarding
this transaction or the identity of the Lender. Prior to making any required
disclosure with respect to the transaction contemplated by this Loan Agreement,
the Agent will provide a draft copy of the disclosure materials and provide the
Agent with the opportunity to comment thereon.

 

[THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK]

 

54

 

IN WITNESS WHEREOF the parties hereto have executed this
Agreement as of the date first above written.

 

	
   

  	
  THE
  MANUFACTURERS LIFE INSURANCE

  COMPANY

  
	
   

  	
   

  
	
   

  	
  Per:

  	
  /s/ Vipon Ghai

  
	
   

  	
   

  	
  Name:  Vipon Ghai

  
	
   

  	
   

  	
  Title:    AVP

  
	
   

  	
   

  
	
   

  	
  Per:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PRIMUS
  TELECOMMUNICATIONS

  CANADA INC.

  
	
   

  	
   

  
	
   

  	
  Per:

  	
  /s/ Edmund Chislett

  
	
   

  	
   

  	
  Name: Edmund Chislett

  
	
   

  	
   

  	
  Title: President

  
	
   

  	
   

  	
   

  
	
   

  	
  Per:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  3082833
  NOVA SCOTIA COMPANY

  
	
   

  	
   

  
	
   

  	
  Per:

  	
  /s/ Edmund Chislett

  
	
   

  	
   

  	
  Name: Edmund Chislett

  
	
   

  	
   

  	
  Title: President

  
	
   

  	
   

  	
   

  
	
   

  	
  Per:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

55

 

SCHEDULE A

MAKE WHOLE PREMIUM

 

In
the Loan Agreement and this Schedule:

 

“Make Whole Premium” means the present value of the Monthly
Cashflow Shortfall Amounts until the Maturity Date discounted utilizing the
Monthly Discount Rate. The Make Whole Premium shall not be less than zero.

 

“Monthly Cashflow Shortfall Amounts” means the amounts calculated at the end of
each month, commencing the month in which prepayment is made until the Maturity
Date, being the product of the Monthly Loan Principal Differential multiplied
by the Monthly Interest Differential.

 

“Monthly Loan Principal Differential” means the differential calculated at the end
of each month, commencing the month in which prepayment is made until the
Maturity Date of the Loan, between (i) the Loan balance outstanding owing to
the Lender at the end of each month without regard for the prepayment; and (ii)
the Loan balance owing to the Lender outstanding at the end of each month after
giving effect to the prepayment.

 

“Monthly Interest Differential” means the differential between (i) the Loan
Interest Rate divided by 12; and (ii) the Monthly Discount Rate. In the event
that the Monthly Interest Differential is less than zero, the Make Whole
Premium shall be zero.

 

“Maturity Date” has the meaning set out in Section l.l(uu) of the Loan Agreement.

 

“Monthly Discount Rate” means the Monthly Equivalent Reinvestment
Rate divided by 12.

 

“Monthly Equivalent Reinvestment Rate” means the annual interest rate compounded
monthly that is equivalent to the Reinvestment Rate compounded monthly.

 

“Reinvestment Rate” means the Government of Canada Bond Rate plus 50 basis points.

 

“Government of Canada Bond Rate” means the average annual yield to maturity on
a Government of Canada bond, compounded semi-annually, with a term equal to the
then remaining term to the Maturity Date of the Loan, as published in a
nationally recognized financial business publication, in effect at the close of
business (Toronto time) two (2) business days prior to the date of
determination.

 

“Loan Interest Rate” has the meaning set out in Section 1.1(qq) of
the Loan Agreement.

 

 

SCHEDULE
B

 

PERMITTED
LIENS

 

PERSONAL PROPERTY
SECURITY ACT (Ontario)

 

(a)           Primus Telecommunications Canada Inc.

 

	
  Secured Party(ies)

  	
   

  	
  Debtor(s)

  	
   

  	
  Reference File No. &

  Registration Number

  (Registration Period)

  	
   

  	
  Collateral Classification

  	
   

  	
  General Collateral

  Description

  	
   

  	
  Comments

  
	
  1.   3082833 Nova Scotia Company

  	
   

  	
  Primus Telecommunications Canada Inc.

  	
   

  	
  603432432- 20040301 1515 1590 8834 (10 years)

  	
   

  	
  Accounts, Other

  	
   

  	
   

  	
   

  	
  Subject to a postponement and subordination
  agreement.

  
	
  2.   Xerox Canada Ltd.

  	
   

  	
  Primus Telecommunications Canada Inc.

  	
   

  	
  600044625- 20031007 1235 1715 2595 (6 years)

  	
   

  	
  Equipment, Other

  	
   

  	
   

  	
   

  	
  Subject to an estoppel letter dated March 22, 2004.

  
	
  3.   Xerox Canada Ltd.

  	
   

  	
  Primus Telecommunications Canada Inc.

  	
   

  	
  887957811- 20021003 1242 1715 0619 (5 years)

  	
   

  	
  Equipment, Other

  	
   

  	
   

  	
   

  	
  Subject to an estoppel letter dated March 22, 2004.

  
	
  4.   Canlinc North Supply Ltd.

  	
   

  	
  Primus Telecommunications Canada Inc.

  	
   

  	
  887801121- 20020930 1714 1462 9009 (5 years)

  	
   

  	
  Equipment, Other

  	
   

  	
  Purchase Money Security Interest

  	
   

  	
   

  
	
  5.   Xerox Canada Ltd.

  	
   

  	
  Primus Telecommunications Canada Inc.

  	
   

  	
  884948922- 20020703 1310 1715 0131 (5 years)

  	
   

  	
  Equipment, Other

  	
   

  	
   

  	
   

  	
  Subject to an estoppel letter dated March 22, 2004.

  
	
  6.   Lucent Technologies Inc.

  	
   

  	
  Primus Telecommunications Canada Inc.

  	
   

  	
  884425104- 20020617 1226 1590 0953 (5 years)

  	
   

  	
  Other

  	
   

  	
  Lucent Technologies Inc. reserves a purchase money
  security interest in all products and licensed materials, and any and all
  proceeds of them until any and all payments and charges due Lucent
  Technologies Inc. under are paid in full, including, without limitation,
  prices for products, fees for licensed materials, taxes and duties.

  	
   

  	
   

  

 

 

	
  Secured Party(ies)

  	
   

  	
  Debtor(s)

  	
   

  	
  Reference File No. &

  Registration Number

  (Registration Period)

  	
   

  	
  Collateral Classification

  	
   

  	
  General Collateral

  Description

  	
   

  	
  Comments

  
	
  7.   Xerox Canada Ltd.

  	
   

  	
  3362426 Canada Inc.

  Primus Telecommunications Canada

  	
   

  	
  879298083- 20020102 1738 1715 8940 (5 years)

  	
   

  	
  Equipment, Other

  	
   

  	
   

  	
   

  	
  Subject to an estoppel letter dated March 22, 2004.

  
	
  8.   Lucent Technologies Canada
  Corp.

  	
   

  	
  Primus Telecommunications Canada Inc.

  	
   

  	
  874414548- 20010713 1712 1462 5759 (5 years)

  	
   

  	
  Equipment, Accounts, Other

  	
   

  	
   

  	
   

  	
  Subject to an estoppel letter dated March 25, 2004.

  
	
  9.   Citicapital Technology
  Finance Ltd.

  	
   

  	
  Primus Telecommunications Canada Inc.

  	
   

  	
  868115106- 20001205 1757 1531 8988 (3 years)

  	
   

  	
  Equipment, Accounts, Other

  	
   

  	
  All present and future acquired telephone and
  communication systems, including without limitation, all related equipment
  components, attachments, accessories, replacements and proceeds, supplied by Bell
  Canada or its affiliates

  	
   

  	
  Will be discharged.

  

 

(b)           Windsor Information Network Company Limited

 

	
  Secured Party(ies)

  	
   

  	
  Debtor(s)

  	
   

  	
  Reference File No. &

  Registration Number

  (Registration Period)

  	
   

  	
  Collateral Classification

  	
   

  	
  General Collateral

  Description

  	
   

  	
  Comments

  
	
  1    National Leasing Group Inc.
  L#2099878

  	
   

  	
  Windsor Information Network Company Limited

  	
   

  	
  868380606- 20001215 1207 6005 3716 (4 years)

  	
   

  	
  Equipment

  	
   

  	
   

  	
   

  	
   

  

 

 

REGISTRY OF PERSONAL AND MOVEABLE
REAL RIGHTS (Quebec)

 

	
  Secured Party(ies)

  	
   

  	
  Debtor(s)

  	
   

  	
  Registration Number

  (Registration Period)

  	
   

  	
  General Collateral Description

  	
   

  	
  Comments

  
	
  1.   Citicapital Technology
  Finance Ltd./Citicapital Finanncement de Technologie

  	
   

  	
  Primus Telecommunications Canada Inc.

  	
   

  	
  02-0041596-0001 Date of Registration: February 1,
  2002 Date of Expiry: February 1, 2006

  	
   

  	
  All present and future acquired telephone and
  communication systems, including without limitation, all related equipment
  components, attachments, accessories, replacements and proceeds, supplied by
  Bell Canada or its affiliates.

  	
   

  	
  Subject to an estoppel letter dated March 26, 2004.

  
	
  2.   Citicapital Technology
  Finance Ltd./Citicapital Finanncement de Technologie

  	
   

  	
  Primus Telecommunications Canada Inc.

  	
   

  	
  02-0041596-0002 Date of Registration: February 1,
  2002 Date of Expiry: February 1, 2006

  	
   

  	
  All present and future acquired telephone and
  communication systems, including without limitation, all related equipment
  components, attachments, accessories, replacements and proceeds, supplied by
  Bell Canada or its affiliates.

  	
   

  	
  Subject to an estoppel letter dated March 26, 2004.

  

 

 

Schedule 6.1 (j)

Material Adverse Changes

 

Nil.

 

 

Schedule 6.1 (I)

Taxes

 

London
Telecom Network Inc (LTNI) Notice of Assessment for 1997 and 1998 Taxation
Years

 

Nature of Assessment:

 

Canada
Customs and Revenue Agency (CCRA) has filed an assessment against LTNI (a
wholly owned subsidiary of Primus Telecommunications Canada Inc. (PTCI), that
was amalgamated with PTCI in December 31, 2000) disallowing the deductibility
of a number of expenses for the 1997 and 1998 taxation years. Notices of
objection have been filed and the matter is before the Appeals Division of
CCRA.

 

The
company has retained the law firm of Couzin Taylor and accounting firm of Ernst
& Young to represent them in this matter.

 

At
this date the ultimate resolution of this matter is uncertain. The issues are
complex and could potentially go through a formal legal process prior to
finalization.

 

Assessed Amounts

 

Federal
Assessment (April
2001 Mailing Date)

 

	
   

  	
   

  	
  1998

  	
   

  	
  1997

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tax 

  	
   

  	
  $

  	
  2,909,794

  	
   

  	
  $

  	
  2,300,193

  	
   

  
	
  Penalties 

  	
   

  	
  1,560,120

  	
   

  	
  1,150,096

  	
   

  
	
  Interest 

  	
   

  	
  1,371,151

  	
   

  	
  1,275,256

  	
   

  
	
   

  	
   

  	
  $

  	
  5,841,065

  	
   

  	
  $

  	
  4,725,545

  	
   

  
	
  Accrued Interest

  (per 2/21/04 statement)

  	
   

  	
  1,432,599

  	
   

  	
  1,159,000

  	
   

  
	
   

  	
   

  	
  $

  	
  7,273,664

  	
   

  	
  $

  	
  5,884,545

  	
   

  

 

Ontario Assessment
(May 13, 2002 reassessment date)

 

	
   

  	
   

  	
  1998

  	
   

  	
  1997

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tax

  	
   

  	
  $

  	
  1,565,828

  	
   

  	
  $

  	
  1,255,222

  	
   

  
	
  Penalties

  	
   

  	
  965,492

  	
   

  	
  612,250

  	
   

  
	
  Interest

  	
   

  	
  1,184,543

  	
   

  	
  1,030,354

  	
   

  
	
   

  	
   

  	
  $

  	
  3,716,766

  	
   

  	
  $

  	
  2,897,826

  	
   

  
	
  Accumulated
  Interest net of payments

  	
   

  	
  531,616

  	
   

  	
  (1,651,538

  	
  )

  
	
  Balance per
  February 21, 2004 statement

  	
   

  	
  $

  	
  4,248,382

  	
   

  	
  $

  	
  1,246,288

  	
   

  

 

Primus
Telecommunications Canada Inc. (“PTCI”) Notice of Assessment for June 3, 2003
Taxation Year

 

 

Nature of Assessment:

 

CCRA
has filed an assessment against PTCI disallowing the use of certain non-capital
losses. At the time of filing its tax return for the June 3, 2003 taxation
year, PTCI made a formal request to the CCRA to amend its tax returns for prior
years to recognize certain expenses that should have been deducted in those
years and update non-capital losses accordingly. The requested amendments were
incompletely processed. A Notice of Objection has been filed and the matter is
before the Appeals Division of the CCRA. At this date the ultimate timing for
resolution of this matter is uncertain. Given the nature of this assessment,
PTCI believes that the matter will be resolved without any further payment of
taxes by PTCI.

 

Assessed Amount:

 

Federal
Assessment (February 27, 2003 Mailing Date)

 

	
   

  	
   

  	
  2003

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Tax

  	
   

  	
  $

  	
  1,198,119

  	
   

  
	
  Penalties

  	
   

  	
  60,110

  	
   

  
	
  Interest

  	
   

  	
  54,058

  	
   

  
	
   

  	
   

  	
  $

  	
  1,312,289

  	
   

  

 

1497884
Ontario Limited Notices of Assessments for December 31, 2002 and June 3, 2003
Taxation Years.

 

Nature of Assessment:

 

CCRA has filed assessments
against 1497884 Ontario Limited disallowing the inclusion of certain expenses
in the December 31, 2002 tax return that should have been included in the
December 2000 and 2001 taxation years. A Notice of Objection has been filed and
the matter is before the Appeals Division of the CCRA. At this date the
ultimate timing for resolution of this matter is uncertain. Given the nature of
this assessment, 1497884 Ontario Limited believes that the matter will be
resolved with minimal or no further payment of taxes.

 

Assessed Amount:

 

Federal
Assessment December 31, 2002 (December 19, 2003 Mailing Date)

 

	
   

  	
   

  	
  2002

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Tax

  	
   

  	
  $

  	
  193,680

  	
   

  
	
  Interest

  	
   

  	
  12,626

  	
   

  
	
   

  	
   

  	
  $

  	
  206,306

  	
   

  

 

 

Federal Assessment June 3,
2003 (January 14, 2004 Mailing Date)

 

	
   

  	
   

  	
  2003

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Tax

  	
   

  	
  $

  	
  215

  	
   

  
	
  Interest

  	
   

  	
  7

  	
   

  
	
   

  	
   

  	
  $

  	
  222

  	
   

  

 

2

 

Schedule 6.1 (m)

Outstanding Obligations

 

There
are no bonds, purchase money mortgages, debentures, security agreements,
promissory notes, Capital Lease Obligations, (having a principal amount
outstanding in excess of $300,000) conditional sales contracts (having a
principal amount outstanding in excess of $25,000), or other evidences of
secured indebtedness outstanding affecting the Business or the property or
assets of the Obligors other than the notes evidencing the Loan, the Security,
the Senior Facility and the Senior Facility Security except as described below:

 

1.             Promissory Note in the amount of
C$237,227,000.00 dated March 1, 2004 given by the Shareholder in favour of the
Immediate Parent that matures on March 1, 2014.

 

2.             Promissory Note in the amount of
C$98,000,000.00 dated January 1, 2000 given by the Borrower in favour of the
Shareholder that matures on January 1, 2006.

 

3.             Promissory Note in the amount of
C$98,000,000.00 dated January 1, 2000 given by the Shareholder in favour of the
Immediate Parent that matures on January 1, 2006.

 

4.             Debenture in the amount of C$237,227,000.00
dated March 1, 2004 given by the Borrower in favour of the Shareholder that
matures on March 1, 2014.

 

 

Schedule 6.1 (o)

Leased Property

 

Operating
leases greater than $200,000 are as follows:

 

	
  Location of Leased Property

  	
   

  	
  Square Feet

  	
   

  	
  Annual Rent

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Floor 15, 16,
  17, 1188 West Georgia St. Vancouver, BC

  	
   

  	
  16,885

  	
   

  	
  $

  	
  417,693

  	
   

  
	
  135 St. Francis
  Street, Edmundston, NB

  	
   

  	
  10,954

  	
   

  	
  270,405

  	
   

  
	
  Unit 604A, 607
  & 610, 151 Front Street W. Toronto, ON

  	
   

  	
  7,670

  	
   

  	
  645,936

  	
   

  
	
  Suite 110, 401,
  500 & 600, 5343 Dundas Street W. Toronto

  	
   

  	
  54,473

  	
   

  	
  1,415,064

  	
   

  
	
  Suite 700, 710
  Dorval Dr. Oakville, ON

  	
   

  	
  14,916

  	
   

  	
  546,246

  	
   

  
	
  Suite 3625, 1
  Place Ville Marie, Montreal

  	
   

  	
  5,291

  	
   

  	
  209,047

  	
   

  
							

 

 

DRAFT

 

Schedule 6.1 (q)

Insurance

 

Please see attached.

 

 

	
  

  	
   

  	
  800 King Farm Boulevard, Suite 200

  
	
   

  	
   

  	
  Rockville,
  Maryland 20850

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •

  	
  301-984-5900

  
	
   

  	
   

  	
  •

  	
  800-800-2860

  
	
   

  	
   

  	
  •

  	
  301-692-4474

  
	
   

  	
   

  	
  •

  	
  www.hrh.com

  

 

SUMMARY OF INSURANCE

 

FOR

 

PRIMUS TELECOMMUNICATIONS

CANADA INC.

 

 

	
   

  	
  Presented By:

  
	
   

  	
   

  
	
   

  	
  William B. Hocknell, CPCU, ARM

  
	
   

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  Elaine M. Lewis, CPCU

  
	
   

  	
  Account Manager

  

 

 

This summary of insurance is a brief
overview of your insurance coverage. The information contained herein does not
replace or alter the insurance policy coverages, terms, and/or conditions.
Please read your policies carefully.

 

March 26,2004

 

 

NAMED INSUREDS

 

Primus Telecommunications,
Inc.

Trescom International, Inc.

Trescom W.S.A. Inc.

St. Thomas & San Juan
Telephone Co.

d/b/a
Trescom International Caribbean Div.

STSJ Overseas Telephone Co.,
d/b/a Trescom P.R.

STSJ Overseas Telephone Co.,
d/b/a P.R. Telecom

Interisland Telephone Corp.

Global Telephone Holdings,
Inc.

OTC Network Assets, Inc.

Trescom Network Services,
Inc.

Intex Telecommunications,
Inc.

Least Cost Routing, Inc.

Rate Reduction Center

Rockwell Communications
Corp.

STSJ Network Assets, Inc.

Puerto Rico Telecom Corp.

Total Telecommunications,
Inc.

Telegroup, Inc.

Globalserve Communications,
Inc.

iPrimus Canada

3082833 Nova Scotia Company

ACC

Primus Telecommunications
Canada

Primus Canada

London Telecom Network, Inc.

Wintel CNC Communications,
Inc.

Totalline Communications,
Inc.

3271684 Canada, Inc.

LTN Data Services, Inc.

LTG Holdings, LTD.

Telephone Savings Network,
Ltd.

3620221 Canada, Inc.

Infinity Online, Inc.

3271684 Canada, Inc.

Wincom

Windsor Information Network
Co., Ltd.

MIPPS Inc.

Globility Communications
Corporation

 

 

COMMERCIAL PACKAGE POLICY

 

	
  Company:

  	
   

  	
  Chubb Insurance Co. of Canada

  
	
  Policy Number:

  	
   

  	
  35397868

  
	
  Policy Term:

  	
   

  	
  12/23/03 to 12/23/04

  
	
  Policy Premium:

  	
   

  	
  $85,025 Canadian Funds

  

 

All Limits Shown are in Canadian Dollars

 

PROPERTY
SECTION

 

	
  LIMIT

  	
   

  	
  COVERAGE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Premises Excel Worksheet
  is being updated and these limits may change.

  
	
   

  	
   

  	
   

  
	
  $

  	
  30,610,000

  	
   

  	
  Personal Property
  including Electronic Data Processing Property

  
	
   

  	
   

  	
   

  
	
  $

  	
  1,000

  	
   

  	
  Deductible

  
	
   

  	
   

  	
   

  
	
  $

  	
  27,745,000

  	
   

  	
  Business Income and Extra
  Expense *This coverage is provided by Federal Ins. Co. Policy #35374271 for 

  
	
   

  	
   

  	
   

  	
  Primus Telecommunications
  and is paid for under the Primus Package.

  

 

COVERAGE EXTENSIONS

 

	
  LIMIT

  	
   

  	
  COVERAGE

  
	
   

  	
   

  	
   

  
	
  $

  	
  250,000

  	
   

  	
  Blanket Limit of
  Insurance, Covered Premises

  
				

 

The Blanket Limit of
Insurance shown above applies over all of the Coverages shown below. This
Blanket Limit of Insurance applies separately at each covered premises shown in
the Declarations and is subject to the Property Deductible shown in the
Declarations. At time of loss, the first Named Insurance may elect to apportion
this Blanket Limit of Insurance to one or any combination of the Coverages
shown.

 

Accounts
Receivable

Electronic
Data Processing Property

Leasehold
Interest – Undamaged

Personal
Property of Employees

Consequential
Loss

Extra
Expense

Fire
Department Services Charges

Outdoor
Trees, Shrubs, Plants Lawns

Valuable
Papers

Fine
Arts

Tenant’s
Improvements & Betterments

 

 

Additional Coverage

 

The
Limits of Insurance shown are provided for the Coverages shown at no additional
cost including the Limits of Insurance shown below. These Limits of Insurance
apply separately at each of your premises unless otherwise shown.

 

	
  $

  	
  250,000

  	
   

  	
  Debris Removal

  
	
   

  	
   

  	
   

  
	
  $

  	
  50,000

  	
   

  	
  Deferred Payments

  
	
   

  	
   

  	
   

  
	
  $

  	
  5,000

  	
   

  	
  Exhibition, Fairs or Trade
  Show

  
	
   

  	
   

  	
   

  
	
  $

  	
  50,000

  	
   

  	
  Installation

  
	
   

  	
   

  	
   

  
	
  $

  	
  10,000

  	
   

  	
  In Transit – Accounts
  Receivable, Fine Arts, Valuable Papers

  
	
   

  	
   

  	
   

  
	
  $

  	
  50,000

  	
   

  	
  In Transit – Electronic
  Data Processing Property

  
	
   

  	
   

  	
   

  
	
  $

  	
  10,000

  	
   

  	
  Inventory or Appraisals

  
	
   

  	
   

  	
   

  
	
  $

  	
  5,000

  	
   

  	
  Loss Prevention Expenses

  
	
   

  	
   

  	
   

  
	
  $

  	
  20,000

  	
   

  	
  Money & Securities –
  On Premises

  
	
   

  	
   

  	
   

  
	
  $

  	
  10,000

  	
   

  	
  Money & Securities –
  Off Premises

  
	
   

  	
   

  	
   

  
	
  $

  	
  25,000

  	
   

  	
  Pollutant Clean-up or
  Removal

  
	
   

  	
   

  	
   

  
	
  $

  	
  10,000

  	
   

  	
  Processing Water

  

 

 

BUSINESS
PACKAGE

 

GENERAL LIABILITY

 

	
  LIMIT

  	
   

  	
  COVERAGE

  
	
   

  	
   

  	
   

  
	
  $

  	
  1,000,000

  	
   

  	
  Each Occurrence

  
	
   

  	
   

  	
   

  
	
  $

  	
  2,000,000

  	
   

  	
  Products/Completed
  Operations Aggregate

  
	
   

  	
   

  	
   

  
	
  $

  	
  1,000,000

  	
   

  	
  Advertising Injury and
  Personal Injury

  
	
   

  	
   

  	
   

  
	
  $

  	
  10,000  

  	
   

  	
  Medical Expense

  

 

ADDITIONAL INSUREDS/LOSS PAYEES
SCHEDULE

 

	
   

  	
   

  	
   

  	
   

  	
  With Respect to:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  Hyland Pacific Management

  	
   

  	
  1750-1188 W Georgia St,
  Ste 1525, Vancouver

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  Harbour Centre Complex Limited

  	
   

  	
  555 West Hastings St, Ste
  2050 & 2060, Vancouver

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

  	
  Brunswick Shopping Centre,
  Ltd

  	
   

  	
  135 St. Frances Street,
  Edmundston, NB

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4

  	
   

  	
  The RACO Group of
  Companies

  	
   

  	
  151 Front St, Ste
  610,607,604, Toronto

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5

  	
   

  	
  Oxford Development Group,
  Inc.

  	
   

  	
  Park Place Mall, 501-1st
  Ave, Storage Area S11, Lethbridge, AB

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6

  	
   

  	
  Hanover Property Management, Ltd

  	
   

  	
  504, 206-7th
  Ave, SW, Calgary AB

  230, 605-1st St, SW, Calgary AB

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7

  	
   

  	
  Industrial Alliance Life
  Ins. Co.

  	
   

  	
  255 Racine Est,
  Chicoutimi, PQ

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8

  	
   

  	
  Teletech Financial
  Corporation

  	
   

  	
  5343 Dundas St, Toronto
  (leased equipment)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9

  	
   

  	
  General Electric Capital
  Corporation

  	
   

  	
  Loss Payee

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10

  	
   

  	
  CitiCapital Technology
  Finance, Ltd

  	
   

  	
  5343 Dundas Street,
  Toronto (leased equipment)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11

  	
   

  	
  The Manufacturers Life
  Ins. Co.

  	
   

  	
  ?

  

 

BUSINESS AUTOMOBILE COVERAGE

 

	
  Company:

  	
   

  	
  Chubb Insurance Co. of Canada

  
	
  Policy Number:

  	
   

  	
  CO3376261

  
	
  Policy Term

  	
   

  	
  07/01/03 to 07/01/04

  
	
  Premium:

  	
   

  	
  $3,264.32 Canadian **

  

 

All Limits Shown are in Canadian Dollars

 

	
  LIMIT

  	
   

  	
  COVERAGE

  
	
   

  	
   

  	
   

  
	
  $

  	
  1,000,000

  	
   

  	
  Liability
  – Bodily Injury and Property Damage

  
	
   

  	
   

  	
   

  
	
  $

  	
   

  	
  Accident
  Benefits

  
	
   

  	
   

  	
   

  
	
  $

  	
  1,000,000

  	
   

  	
  Uninsured
  Motorist Coverage

  
	
   

  	
   

  	
   

  
	
  $

  	
  0

  	
   

  	
  Direct
  Compensation Property Damage Deductible

  
	
   

  	
   

  	
   

  
	
  $

  	
  500

  	
   

  	
  Collision
  Deductible

  

 

	
  Vehicles

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  2000

  	
   

  	
  Ford Focus

  	
   

  	
  #80255

  
	
  2

  	
   

  	
  2000

  	
   

  	
  Ford Focus

  	
   

  	
  #80256

  
	
  3

  	
   

  	
  1999

  	
   

  	
  Honda Odyssey

  	
   

  	
  #00912

  
	
  4

  	
   

  	
  2000

  	
   

  	
  Ford Windstar

  	
   

  	
  #68811

  

 

**Endorsement
pending to add MIPPS vehicles to policy.

 

 

PREMIUM SUMMARY

 

	
  COMMERCIAL
  PACKAGE POLICY

  Estimated Premium

  	
   

  	
  $

  	
  85,025 CA

  
	
   

  	
   

  	
   

  
	
  BUSINESS
  AUTOMOBILE POLICY

  	
   

  	
  $

  	
  3,264 CA

  
	
   

  	
   

  	
   

  
	
  TOTAL
  PREMIUM

  	
   

  	
  $

  	
  88,289 CA

  

 

 

Schedule 6.1 (r)

Guarantees

 

Nil.

 

 

SCHEDULE 6.1(U)

 

Intellectual Property

 

TRADEMARKS

 

PRIMUS
TELECOMMUNICATIONS CANADA INC.

(formed by the amalgamation of the following
companies on Dec. 30, 1999 London Telecom Network Inc., Wintel Communications
Inc., Totalline Communications Inc., LTN Marketing Inc., Telephone Savings
Network Ltd., Eashreach Communications Inc. and Globalserve Communications
Inc.)

 

Owned

 

	
  TRADE-MARK

  	
   

  	
  SERVICES

  	
   

  	
  STATUS

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  800-LTN-FLAT

  	
   

  	
  Services:  telecommunication services, namely, long
  distance voice and data transmission services

  	
   

  	
  Appln.:

  Filed:

  Regn. No.:

  Regn. Date:

  Renewal
  Due:

  	
  869,332

  February 12, 1998

  TMA 513,635

  July 29, 1999

  July 29,
  2014

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  800-363-FLAT

  	
   

  	
  telecommunication
  services, namely, long distance voice and data transmission services

  	
   

  	
  Appln.:

  Filed:

  Regn. No.:

  Regn. Date:

  Renewal
  Due:

  	
  869,331

  February 12, 1998

  TMA 515,437

  August 26, 1999

  August 26,
  2014

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BPS

  	
   

  	
  phone
  service carried over high speed internet connection

  	
   

  	
  Appln.:

  Filed:

  	
  1,196,778

  November 19, 2003

  
	
   

  	
   

  	
   

  	
   

  	
  Status:  Awaiting examination

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BROADBAND PHONE SERVICE BPS

  	
   

  	
  phone
  service carried over high speed internet connection

  	
   

  	
  Appln.:

  Filed:

  	
  1,196,294

  November 14, 2003

  
	
   

  	
   

  	
   

  	
   

  	
  Status:  Awaiting examination

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BROADBAND VOICE SERVICE BVS

  	
   

  	
  phone
  service carried over high speed internet connection

  	
   

  	
  Appln.:

  File:

  	
  1,196,296

  November 14, 2003

  
	
   

  	
   

  	
   

  	
   

  	
  Status:  Awaiting examination

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BVS

  	
   

  	
  phone
  service carried over high speed internet connection

  	
   

  	
  Appln.:

  Filed:

  	
  1,196,779

  November 19, 2003

  
	
   

  	
   

  	
   

  	
   

  	
  Status:  Awaiting examination

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  COMPARE AND REWARD

  	
   

  	
  Telecommunication
  services, namely long distance telephone services

  	
   

  	
  Appln.:

  Filed:

  Regn. No.:

  Regn. Date:

  Renewal Due:

  	
  1,157,584

  November 5, 2002

  TMA 603,341

  February 26, 2004

  February 26, 2019

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EASYREACH COMMUNICATIONS

  	
   

  	
  Telecommunications
  services

  	
   

  	
  Appln.:

  Filed:

  Regn. No.:

  Regn. Date:

  Renewal
  Due:

  	
  843,831

  April 30, 1997

  TMA 498,070

  July 30, 1998

  July 30,
  2013

  

 

 

	
  TRADE-MARK

  	
   

  	
  SERVICES

  	
   

  	
  STATUS

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GLOBALSERVE

  	
   

  	
  1) Internet
  provider; registration of domain names; World Wide Web (WWW) development and
  publishing; consulting and training in the fields of programming and software
  development; office automation and telecommunications, namely making recommendations
  for selection of internal cable systems. (2) Conducting wireless
  communications, and on-line commerce; and consulting in the field of hardware
  development ancillary to electronic communication

  	
   

  	
  Appln.:

  Filed:

  Regn. No.:

  Regn. Date:

  Renewal
  Due:

  	
  798,806

  December 4, 1995

  TMA 468,136

  January 2, 1997

  January 2,
  2013

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LONDON TELECOM

  	
   

  	
  provision of
  telecommunication services

  	
   

  	
  Appln.:

  Filed:

  Regn. No.:

  Regn. Date:

  Renewal
  Due:

  	
  719,836

  January 4, 1993

  TMA 423,877

  February 25, 1994

  February 25,
  2009

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LONDON 0TELECOM NETWORK

  	
   

  	
  provision of
  telecommunication services

  	
   

  	
  Appln.:

  Filed:

  Regn. No.:

  Regn. Date:

  Renewal
  Due:

  	
  719,835

  January 4, 1993

  TMA 423,876

  February 25, 1994

  February 25,
  2009

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  telecommunication
  services

  	
   

  	
  Appln.:

  Filed:

  Regn. No.:

  Regn. Date:

  Renewal
  Due:

  	
  789,507

  August 8, 1995

  TMA 465,850

  November 6, 1996

  November 6,
  2011

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  telecommunications
  services

  	
   

  	
  Appln.:

  Filed:

  Regn. No.:

  Regn. Date:

  Renewal
  Due:

  	
  860,690

  November 5, 1997

  TMA 535,474

  October 23, 2000

  October 23,
  2015

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PARLEZ HAUTE VITESSE

  	
   

  	
  telecommunication
  services, voice services carried over high speed internet connection

  	
   

  	
  Appln.:

  Filed:

  	
  1,209,715

  March 15, 2004

  
	
   

  	
   

  	
   

  	
   

  	
  Status:  Awaiting examination

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PRIMUS ANYTIME CONFERENCING SERVICES

  	
   

  	
  teleconferencing
  services, namely, a service enabling user initiated or operator assisted
  telephone, video or web based conferences between two or more parties at two
  or more locations via telephone, data, internet and/or computer networks and
  related conference bridging equipment carried over or connected to public
  and/or private telecommunications networks

  	
   

  	
  Appln.:

  Filed:

  	
  1,179,941

  June 11, 2003

  
	
  Status:  Awaiting examination

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  

 

 

	
  TRADE-MARK

  	
   

  	
  SERVICES

  	
   

  	
  STATUS

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PRIMUS ANYTIME PLUS CONFERENCING SERVICES

  	
   

  	
  teleconferencing
  services, namely, a service enabling user initiated or operator assisted
  telephone, video or web based conferences between two or more parties at two
  or more locations via telephone, data, internet and/or computer networks and
  related conference bridging equipment carried over or connected to public
  and/or private telecommunications networks

  	
   

  	
  Appln.:

  Filed:

  	
  1,179,938

  June 11, 2003

  
	
  Status:  Awaiting examination

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PRIMUS CONFERENCING SERVICES

  	
   

  	
  teleconferencing
  services, namely, a service enabling user initiated or operator assisted
  telephone, video or web based conferences between two or more parties at two
  or more locations via telephone, data, internet and/or computer networks and
  related conference bridging equipment carried over or connected to public
  and/or private telecommunications networks

  	
   

  	
  Appln.:

  Filed:

  	
  1,179,935

  June 11, 2003

  
	
  Status:  Awaiting examination

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PRIMUS DATA SAFE

  	
   

  	
  computer
  software for use in database management, namely data storage via the internet
  operation of computer based database storage and retrieval system

  	
   

  	
  Appln.:

  Filed:

  	
  1,209,721

  March 15, 2004

  
	
  Status:  Awaiting examination

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PRIMUS E-CARE

  	
   

  	
  allow
  customers to manage services on-line and in real time such as set-up
  automatic monthly payments, make on-time payments, sign-up to receive monthly
  statements, make changes to current services and sign up for new services

  	
   

  	
  Appln.:

  Filed:

  	
  1,196,295

  November 14, 2003

  
	
  Status:  Awaiting examination

  
	
   

  
	
   

  
	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PRIMUS ONE TIME CONFERENCING SERVICES

  	
   

  	
  teleconferencing
  services, namely, a service enabling user initiated or operator assisted
  telephone, video or web based conferences between two or more parties at two
  or more locations via telephone, data, internet and/or computer networks and
  related conference bridging equipment carried over or connected to public
  and/or private telecommunications networks

  	
   

  	
  Appln.:

  Filed:

  	
  1,179,942

  June 11, 2003

  
	
  Status:  Awaiting examination

  
	
   

  	
   

  

 

 

	
  TRADE-MARK

  	
   

  	
  SERVICES

  	
   

  	
  STATUS

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PRIMUS WEBTIME CONFERENCING SERVICES

  	
   

  	
  teleconferencing
  services, namely, a service enabling user initiated or operator assisted
  telephone, video or web based conferences between two or more parties at two
  or more locations via telephone, data, internet and/or computer networks and
  related conference bridging equipment carried over or connected to public
  and/or private telecommunications networks

  	
   

  	
  Appln.:

  Filed:

  	
  1,179,944

  June 11, 2003

  
	
  Status:  Awaiting examination

  
	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  telecommunication
  services namely inter-exchange telephone calling services

  	
   

  	
  Appln.:

  Filed:

  Regn. No.:

  Regn. Date:

  Renewal
  Due:

  	
  751,926

  April 8, 1994

  TMA 451,154

  December 1, 1995

  December 1,
  2010

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SERVICE ELECTRONIQUE PRIMUS

  	
   

  	
  allow
  customers to manage services on-line and in real time such as set-up
  automatic monthly payments, make on-time payments, sign-up to receive monthly
  statements, make changes to current services and sign up for new services

  	
   

  	
  Appln.:

  Filed:

  	
  1,209,720

  March 15, 2004

  
	
  Status:  Awaiting examination

  
	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SERVICE ELECTRONIQUE WIN-TEL

  	
   

  	
  allow
  customers to manage services on-line and in real time such as set-up
  automatic monthly payments, make on-time payments, sign-up to receive monthly
  statements, make changes to current services and sign up for new services

  	
   

  	
  Appln.:

  Filed:

  	
  1,209,724

  March 15, 2004

  
	
  Status:  Awaiting examination

  
	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TALKBROADBAND

  	
   

  	
  telecommunication
  services namely, voice services carried over high speed internet connection

  	
   

  	
  Appln.:

  Filed:

  	
  1,203,001

  January 8, 2004

  
	
  Status:  Awaiting examination

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TELE-FRIEND

  	
   

  	
  services
  respecting a telephone discount referral program

  	
   

  	
  Appln.:

  Filed:

  Regn. No.:

  Regn. Date:

  Renewal
  Due:

  	
  734,181

  August 3, 1993

  TMA 436,619

  December 2, 1994

  December 2,
  2009

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  telecommunications
  services

  	
   

  	
  Appln.:

  Filed:

  Regn. No.:

  Regn. Date:

  Renewal
  Due:

  	
  860,691

  November 5, 1997

  TMA 504,990

  December 3, 1998

  December 3,
  2013

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  voice and
  data telecommunications services

  	
   

  	
  Appln.:

  Filed:

  Regn. No.:

  Regn. Date:

  Renewal
  Due:

  	
  867,564

  January 26, 1998

  TMA 522,250

  January 26, 2000

  January 26,
  2015

  

 

 

	
  TRADE-MARK

  	
   

  	
  SERVICES

  	
   

  	
  STATUS

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  voice and
  data telecommunications services

  	
   

  	
  Appln.:

  Filed:

  Regn. No.:

  Regn. Date:

  Renewal
  Due:

  	
  867,563

  January 26, 1998

  TMA 522,632

  February 1, 2000

  February 1,
  2015

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  WIN-TEL

  	
   

  	
  telecommunication
  services, namely data and voice telecommunications, namely delivery of
  messages by electronic transmission of data and messages by facsimile
  transmission, telegram transmission, electronic mail services, electronic
  voice message service, namely, the recordal, storage and subsequent delivery
  of voice messages by telephone

  	
   

  	
  Appln.:

  Filed:

  	
  1,209,722

  March 15, 2004

  
	
  Status:  Awaiting examination

  
	
   

  	
   

  
	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  WIN-TEL E-CARE

  	
   

  	
  allow
  customers to manage services on-line and in real time such as set-up
  automatic monthly payments, make on-time payments, sign-up to receive monthly
  statements, make changes to current services and sign up for new services

  	
   

  	
  Appln.:

  Filed:

  	
  1,209,723

  March 15, 2004

  
	
  Status:  Awaiting examination

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  telecommunications
  services, namely interexchange telephone calling services

  	
   

  	
  Appln.:

  Filed:

  Regn. No.:

  Regn. Date:

  Renewal
  Due:

  	
  798,307

  November 27, 1995

  TMA 473,151

  March 20, 1997

  March 20,
  2012

  

 

Licensed

 

	
  TRADE-MARK

  	
   

  	
  SERVICES

  	
   

  	
  STATUS

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PRIMUS

  	
   

  	
  Services:  Communication services, namely,
  transmission of voice, video and data by electronic means, international and
  domestic long distance telephone services

  	
   

  	
  Appln.:

  Filed:

  	
  1,102,123

  May 7, 2001

  
	
  Status:  In examination stage.

  
	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PRIMUS & DESIGN

  	
   

  	
  Services:  Communication services, namely,
  transmission of voice, video and data by electronic means, international and
  domestic long distance telephone services

  	
   

  	
  Appln.:

  Filed:

  	
  1,102,122

  May 7, 2001

  
	
  Status:  In examination stage.

  
	
  

  	
   

  	
   

  
	
   

  
							

 

PATENTS

 

Nil.

 

 

Schedule 6.1 (z)

Restrictive Covenants

 

Nil.

 

 

Schedule 6.1 (cc)

Labour Matters

 

Nil.

 

 

Schedule 7.1(k)

Litigation

 

PRIMUS TELECOMMUNICATIONS CANADA INC.

 

March 2004

 

SOLICITOR
CLIENT PRIVILEGE

 

(All $ amounts are CDN)

 

1.                Martin Steinwald
and Mercedes Essebag and Michel Hanna and Lucette Cloutier (the “Plaintiffs”)
v. 3694798 Canada Inc (“Numbered Co.”) and PTCI.

 

Background: The Plaintiffs came to the employ of Numbered Co. and PTCI through a
series of commercial transactions. Subsequent to the commercial transactions,
the Plaintiffs signed employment agreements with Numbered Co and then on a
later date, when presented with new employment agreements by PTCI, refused to
sign said agreements (the Plaintiffs were not satisfied with terms thereof). On
a later date, the Plaintiffs allege that the terms were eventually settled by
PTCI in their favour. Due to a company-wide restructuring, the Plaintiffs’
employment was terminated shortly thereafter.

 

Status: The Plaintiffs have filed a Statement of Claim dated August 2,
2001. The documents were served in person on legal counsel for PTCI August 9,
2001. The Plaintiffs are claiming $337,500., $337,500., $60,000, and $60,000
respectively, (total = $795,000) for dismissal from employment without cause,
damage to reputation, damages suffered (to due restrictive covenants etc.). In
addition the Plaintiffs are asking the court to declare the restrictive
covenants null and void or to reduce the covenants.

 

Evaluation: Management believes the claim is unfounded. The matter has been
forwarded to outside counsel.

 

Outside Counsel: Marie-Hélène Riverin, avocate, Lavery, de Billy, Tel: (418) 266-3082, Cell
Phone: (418) 952-9608, Fax: (418) 688-3458

 

Amount Reserved: $60,000

 

2.                3540057 CANADA
INC. V. 3252647 CANADA INC. (AMALGAMATED INTO 3694798 CANADA INC.) AND 3694798
CANADA INC.  (PRIMUS CANADA IN MONTREAL
HEREINAFTER THE “DEFENDANTS”).  CLAIM
BROUGHT IN MONTREAL, QUEBEC.

 

Background: According to the Share Purchase Agreement (the “Agreement”) entered
into on or around June 13 2002, Primus acquired the shares of 3694798
Canada Inc.(“3694798”), one of the companies being sued by 3540057 Canada Inc.
(“3540057”). 3540057 entered into a Service Agreement with 3252647 Canada Inc.
(“3252647”), the second company being sued by 3540057, on or around
October 29, 1999. In its action, 3540057 is suing 3252647 and 3694798 for
unpaid invoices dated January 2001, May 2001, and June 2001. On or
around June 13, 2000, the Service Agreement was amended and 3252647 was
replaced with

 

 

3694798
as the party to the Service Agreement with 3540057, and on that same day, Primus
acquired all issued and outstanding shares in the capital of 3694798, as
evidenced by the Agreement. Pursuant to the Agreement, the vendor (and the
guarantors) warranted to Primus that, except as set forth in the Agreement and
on the Closing Data Balance Sheet, 3694798 has no outstanding indebtedness,
liabilities or obligations, and there is no existing condition, situation or
set of circumstances which would be expected to result in any such liabilities.
The invoices 3540057 is claiming payment of are dated in 2001. However, one of
the exhibits supports that the invoices are for billing charges that were
incurred prior to the signing of the Agreement, but had never been invoiced to
3694798. If this is the case, we will be able to invoke warranty regarding no
outstanding indebtedness etc. in the Agreement as a defense. Amount being
claimed is $174,000.

 

Status:  Awaiting a trial date.

 

Evaluation: Management is reasonably confident that this case has no merit.

 

Outside Counsel: Tetiana Gerych: Phillips Friedman Kolter,
Montreal Quebec. Telephone (514) 878-4676.

 

Amount Reserved: None

 

3.    Home
Service Club of Canada (“HSC”) v. ACC Long Distance (“ACC”) and Primus
Telecommunications Canada Inc.

 

Background: In 1993, HSC and ACC entered into an agreement whereby HSC and ACC
would market long distance services to HSC members and ACC would pay HSC a
residual commission if HSC’s members subscribed for ACC’s services. The
agreement was terminated in 1999 but according to the agreement, ACC was
obligated to continue to provide residual commissions for a period after
termination. On or about the same time of the termination of the agreement,
Primus Canada began the acquisition of ACC and various other entities. ACC was
responsible to pay affinity residuals until the billing system migration in
August 2000. There were some issues with the migration of billing systems
and this file was not migrated.

 

Status: No court
claim filed.

 

Evaluation:  The senior executive for residential services has calculated that at a
maximum Primus Canada’s exposure to HSC is $50,000.00.

 

Outside Counsel: Peter Ruby, Goodmans LLP. Toronto, Ontario,
(416) 979-2211.

 

Amount Reserved: $50,000.

 

4.              Steve Adessky (“Adessky”)
vs. Gabriel Hiltser (“Hiltser”) and 3694798 Canada Inc. (formerly 3393101)

 

Background: Adessky (former employee of Hiltser and what was then 3393101) is
claiming against Hiltser and 3393101 for an issue with respect to some personal
loans made

 

 

to
Adessky in 1999 and 2000 and with respect to a t-4 and salary for the year 2000
- (prior to primus purchasing the shares of 3694798). 3393101 was amalgamated
with other companies to form 3694798. Primus Telecommunications Canada, Inc.
then acquired the shares of 3694798 on June 13, 2000. The total claim is
$85,004.23.

 

Evaluation and Status: Management believes this claim is unfounded
and will rely on reps and warranties in the share purchase agreement. Quebec
counsel has advised that she believes the matter will be settled shortly
between Adessky and Hiltser without the involvement of Primus Canada. The
defendants have examined the plaintiff and we are now waiting for undertakings
from the plaintiff.

 

Outside Counsel: Tetiana Gerych: Phillips Friedman Kolter,
Montreal Quebec. Telephone (514) 878-4676.

 

Amount Reserved:  
None

 

5.    Martin
Richards Design & Contracting
Inc. v Primus Canada

 

Background: The Plaintiffs subscribed for Primus Canada’s domain name hosting and
registration services in 2001. Despite notices sent by Primus Canada to the
Plaintiffs, the Plaintiffs allowed the domain name to lapse in 2002. The amount
claimed is $100, 000.00 in Canadian funds plus special damages in an amount not
yet ascertained.

 

Evaluation and Status: Currently being determined. We are gathering
evidence to support our defense that the onus was on the Plaintiffs to renew
their domain name and subsequently will file a Statement of Defense.

 

Outside Counsel: Peter Ruby, Goodmans LLP. Toronto, Ontario,
(416) 979-2211.

 

HUMAN
RESOURCES:

 

1.              Godwin Amega (“Amega”) vs.
Primus Canada.

 

Background: Amega was hired on a six (6) month contract in a bilingual customer
service position for the Vancouver office. During his first three months of
employment it became evident that his performance was not meeting Primus
Canada’s expectations. The plaintiff received numerous customer complaints even
after additional training was provided. The contract was terminated within the
first three months on August 30, 2002. Filed with the Canadian Human
Rights Commission. Amega believes that he was terminated because of his ethnic
background. 1.) Request full reinstatement including salary plus rise in
standard of living with two months salary for lost wages or 2.) Request of 2
years full time salary plus an additional amount to be determined at later date
to compensate for psychological suffering.

 

Status and Evaluation: Management believes the claim is unfounded.
The matter has been forwarded to outside counsel. Outside counsel has requested
the case be dismissed. The Human Rights Commission is proceeding with the
investigation.

 

Outside counsel: Joe Conforti, Goodmans LLP, Phone:   (416) 597-4125

 

 

Amount Reserved: None

 

2.              Mona Harripersad
(“Harripersad” ) v. Primus Canada

 

Background: Decision was made to terminate plaintiffs employment based on
performance. Harripersad is claiming $9,000.00 for unjust dismissal. Indication
in May 2002 that this issue was forwarded to the Canada Labour Board. No
contact has been received to date from Canada Labour Board. Full severance was
not paid due to lack of signed release documentation. The additional $500.00
offered on a gratuitous basis was not accepted by Harripersad.

 

Evaluation and Status: Management is confident that performance
concerns were addressed adequately prior to decision to terminate. Uncertain as
to whether further action is pending.

 

Amount Reserved: None

 

3.              Malika Chbani (“Chbani”) v.
Primus Canada

 

Background: Chbani has filed a complaint with the Canadian Human Rights Commission
claiming adverse differential treatment because of national or ethnic origin
(Arabic) and religion (Muslim). Specifically, Chbani claims two directors’
attitudes changed after September 11, 2001. Chbani was hired as a Customer
Service Representative in the Vancouver, British Columbia, Primus Canada office
in 1998. In response to an internal job opportunity, Chbani was transferred to
the Primus Canada Oakville office in February 2001. Subsequent to that
Chbani, applied for and took another position in the Toronto office, Primus
Canada in Feb 2002. Chbnai resigned February 2003 and in her resignation
letter cited her resignation was due to the fact that she had reconciled with
her family and was moving back to Vancouver.

 

Evaluation and Status: Management believes this complaint is
unfounded, based on inaccurate details provided, as well as the breadth of the
complaint. This matter has been forwarded to outside counsel. Primus Canada has
communicated a willingness to participate in mediation, as requested by the
Commission.

 

 

Schedule 8.2(o)

Management Fees

 

Described
below are the current management fees and other Inter-Company transactions
between the Obligors and the Parents:

 

Management Fees

 

Description
– The Borrower is charged a fee to reflect their prorated share of the Parents
Selling, General and Administrative expenses. The proration is based on
revenues. The fee is marked up 15%. The Borrower is also charged back for
certain direct costs paid on their behalf by the Parents.

 

Cost
in 2003 - $3,360,481

 

Start
Date – January 1, 2000

End
Date – ongoing

 

Inter-company Loan

 

Description
– Term promissory notes with no interest or principal repayment requirements
until the end of the term. Prepayments may be made without notice, premium or
penalty.

 

Amounts
and interest rates on the notes are as follows:

 

•                  The Shareholder owes the Immediate Parent
$108,707,512 at December 31, 2003 bearing interest at 18% per annum compounded annually.

 

•                  The Borrower owes the Shareholder
$115,655,958 at December 31, 2003 bearing interest at 18.5% per annum compounded annually.

 

Start
Date – January 1, 2000

End
Date – January 1, 2006

 

Note
– a second promissory note for up to $25,000,000 was entered into on
January 1, 2001. The principal for this note has been fully repaid. There
is $637,876 in interest charged on this note that remains unpaid at
December 31, 2002.

 

Inter-company Transactions

 

Description
– The Ultimate Parent provides the following services to the Borrower on an
ongoing basis:

 

•                  International Long Distance – transfer price
based on the Ultimate Parent’s costs

 

•                  Internet Transit and Connecting Private Line
Circuits – on a cost flow through basis calculated on a cost per megabit with
the number of megabits determined based on the monthly traffic at the 95%
percentile.

 

 

Network Management

 

Description
The Borrower is charged a fee to reflect their prorated Share of the Parents
expenses related to the operation of the international telecommunications
network.

 

Cost
in 2003 - $2,326,752

 

Start
Date – January 1, 2000

End
Date – ongoing

 

Trademark Licensing Agreement

 

Effective
January 31, 2003 the Borrower entered into a Trademark Licensing Agreement
with Primus Telecommunications IHC, Inc. which requires payment of licensing
fees of 2.5% of revenues.  In 2003 the
Borrower incurred $7,543,756 in expenses associated with this agreement.

 

•                  Software licenses– cost of license allocated
either based on number of users for usage based licenses or shared evenly
between all user countries.

 

The
Borrower also provides services to the Ultimate Parent based on the Borrowers
costs.

 

Note
– the Ultimate Parent is investigating the income tax benefits of including a
markup of up to 15% in some of the above transactions and may change the terms
to minimize income taxes payable for the Obligors.

 

 

SCHEDULE 8.1(k)(iv)

 

COMPLIANCE CERTIFICATE

 

	
  TO:

  	
   

  	
  THE MANUFACTURERS LIFE INSURANCE COMPANY (“Manulife”)

  
	
   

  	
   

  	
   

  
	
  AND TO:

  	
   

  	
  [INSERT]

  
	
   

  	
   

  	
   

  
	
  FROM:

  	
   

  	
  PRIMUS TELECOMMUNICATIONS CANADA INC. (the “Borrower”)

  
	
   

  	
   

  	
   

  
	
  RE:

  	
   

  	
  AMENDED AND RESTATED LOAN AGREEMENT DATED AS OF
  april      , 2004, (the “LOAN AGREEMENT”) AMONG, THE BORROWER, 3082833
  NOVA SCOTIA COMPANY AND MANULIFE

  

 

All capitalized terms used in this Certificate shall have the meaning
ascribed thereto in the Loan Agreement unless otherwise indicated.

 

 

We,
                                                       ,
President, and
                                 ,
Vice-President, Finance, of the Borrower, do hereby certify in our capacity as
officers of, and for and on behalf of the Borrower, and without personal
liability, that [during the fiscal quarter of
the Borrower from                                       ,
to                                       
or the fiscal year of the Borrower ended •,
20   (the “Period”)]:

 

1.                                      Calculations:   For the purposes of the calculation of
the Borrower’s compliance with certain covenants contained in the Loan
Agreement for the Period, the following was utilized:

 

	
  (a)

  	
   

  	
  Current Assets

  	
   

  	
  =

  	
   

  	
  $

  	
  •

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  Current Liabilities

  	
   

  	
  =

  	
   

  	
  $

  	
  •

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
    

  
	
  (c)

  	
   

  	
  EBITDA

  	
   

  	
  =

  	
   

  	
  $

  	
  •

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (d)

  	
   

  	
  Interest Expense

  	
   

  	
  =

  	
   

  	
  $

  	
  •

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (e)

  	
   

  	
  Total Debt

  	
   

  	
  =

  	
   

  	
  $

  	
  •

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (f)

  	
   

  	
  Amounts paid to Shareholder and/or Parent and characterization of
  payments:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $•
  Interest

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $•
  Loan Repayment

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $•
  Fees

  

 

ii

 

	
   

  	
   

  	
  $•
  Advances

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $•
  Dividends

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $•
  Other

  

 

2.                                      Minimum
EBITDA - Section 8.1 (t): EBITDA for each of the three months in the
Period was as follows:

 

	
  (a)

  	
   

  	
  Month 1:

  	
   

  	
  •

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  Month 2:

  	
   

  	
  •

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (c)

  	
   

  	
  Month 3:

  	
   

  	
  •

  

 

3.                                      Leverage
Ratio - Section 8.1(u): The Leverage Ratio at the end of the Period
was •.

 

4.                                      Current
Ratio - Section 8.1(v): The Current Ratio at the end of the Period was
•.

 

5.                                      Forecasted
EBITDA – Section 8.1 (w): Forecasted EBITDA for the twelve month
period ending on the 1st anniversary of the last day of the Period is greater
than/less than [delete one] $48,000,000.

 

6.                                      Cash
Balance- Section 8.1 (x) – The cash balance at the end of the Period
calculated in accordance with Section 8.1 (x) was $•.

 

7.                                      Distributions
- Sections 8.2(h)  and (v): No
distributions or payments of any kind have been made contrary to Sections
8.2(h) or (v) of the Loan Agreement.

 

8.                                      Capital
Expenditures - Section 8.2(j):   Capital
Expenditures during the current fiscal year to the end of the current Period
are $•.

 

9.                                      Margin
– Section 8.2(z).   The trade
accounts receivable of the Borrower as defined in section 8.2(z) at the
end of the Period was •.

 

10.                                 All
representations and warranties contained in the Loan Agreement are true and
correct as of the date hereof and there exists no Event of Default under the
Loan Agreement or the Senior Facility Agreement as of the date hereof.

 

[If any of the above items are not in
compliance with the Loan Agreement, provide reasonable details of
non-compliance and corrective measures.]

 

iii

 

	
  CERTIFIED
  this          day of

  	
          , 200•.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Vice-President, Finance

  

 

iv

 

[LOGO]

Nova Scotia

 

CERTIFICATE OF STATUS

 

Registry
Number

3082833

 

I hereby certify that according
to the records of this office 3082833 NOVA SCOTIA COMPANY

 

was formed by virtue of
amalgamation on January 31, 2004 under the Companies Act of Nova Scotia as an
unlimited liability company 

 

and is a valid and subsisting
company.

 

I further certify that according
to the records of this office 3082833 NOVA SCOTIA COMPANY

 

was registered under the
Corporations Registration Act of Nova Scotia on January 31, 2004 and the
certificate is still in force.

 

 

	
      /s/
  [ILLEGIBLE]

  	
   

  	
  April 7, 2004

  
	
  Agent of the
  Registrar of Joint Stock Companies

  	
  Date of Issue

  

 

1

 

	
  Request ID:

  	
   

  	
  006006018

  	
   

  	
  Province of
  Ontario

  	
   

  	
  Date Report
  Produced:  2004/04/07

  
	
  Demande no
  :

  	
   

  	
   

  	
   

  	
  Province de
  l’Ontario

  	
   

  	
  Document
  Prodult le:

  
	
  Transaction
  ID:

  	
   

  	
  23375434

  	
   

  	
  Ministry of
  Consumer and Business Services

  	
   

  	
  Time Report
  Produced:  12:47:44

  
	
  Transaction
  no :

  	
   

  	
   

  	
   

  	
  Ministère des Services aux consommateurs
  et aux entreprises

  	
   

  	
  Imprimé à :

  
	
  Category ID:

  	
   

  	
  CT

  	
   

  	
  Companies
  and Personal Property Security Branch

  	
   

  	
   

  
	
  Catégorie :

  	
   

  	
   

  	
   

  	
  Direction
  des compagnies et des sûretés mobilières

  	
   

  	
   

  

 

CERTIFICATE OF STATUS

ATTESTATION DU STATUT JURIDIQUE

 

	
  This is to
  certify that according to the records of the Companies and Personal Property
  Security Branch

  	
   

  	
  D’après les dossiers de la Direction des
  compagnies et des sûretés mobilières,
  nous attestons que la société

  

 

PRIMUS TELECOMMUNICATIONS CANADA INC.

 

	
  Ontario
  Corporation Number

  	
   

  	
  Numéro
  matricule de la société (Ontario)

  

 

001575460

 

	
  is a
  corporation incorporated, amalgamated or continued under the laws of the
  Province of Ontario.

  	
   

  	
  est une société
  constituée
  constituee, prorogée ou née d’une fusion aux termes des lois de la Province de
  l’Ontario.

  

 

	
  The
  corporation came into existence on

  	
   

  	
  La société a été fondée le

  

 

JUNE 04 JUIN, 2003

 

	
  and has not
  been dissolved.

  	
   

  	
  et n’est pas
  dissoute.

  

 

 

 

	
  Dated

  	
  Fait le

  	
   

  
	
   

  
	
  APRIL 07 AVRIL, 2004

  
	
   

  	
  /s/ [ILLEGIBLE]

  	
   

  
	
   

  
	
   

  	
  Director

  
	
   

  	
  Directrice

  
					

 

The issuance of this
certificate in electronic form is authorized by the Director of Companies and
Personal Property Security Branch

 

La délivrance du présent
certificat sous forme électronique est autorisée per la Directrice de la Direction
des compagnies et des sûretés mobilières.

 

 

Delaware

 

The First State

 

I, HARRIET
SMITH WINDSOR, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY
THAT “PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED” IS DULY INCORPORATED UNDER
THE LAWS OF THE STATE OF DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL
CORPORATE EXISTENCE NOT HAVING BEEN CANCELLED OR DISSOLVED SO FAR AS THE
RECORDS OF THIS OFFICE SHOW AND IS DULY AUTHORIZED TO TRANSACT BUSINESS.

 

THE FOLLOWING
DOCUMENTS HAVE BEEN FILED:

 

CERTIFICATE OF
INCORPORATION, FILED THE FOURTH DAY OF FEBRUARY, A.D. 1994, AT 11 O’CLOCK A.M.

 

CERTIFICATE OF
AMENDMENT, FILED THE THIRTIETH DAY OF MARCH, A.D. 1995, AT 4:30 O’CLOCK P.M.

 

CERTIFICATE OF
AMENDMENT, CHANGING ITS NAME FROM “GLOBAL TELECOMMUNICATIONS, INC.” TO “PRIMUS
TELECOMMUNICATIONS GROUP, INCORPORATED”, FILED THE TWENTY-FIRST DAY OF
DECEMBER, A.D. 1995, AT 3:30 O’CLOCK P.M.

 

CERTIFICATE OF
AMENDMENT, FILED THE TWNETY-EIGHTH DAY OF FEBRUARY, A.D. 1996, AT 1:45 O’CLOCK
P.M.

 

CERTIFICATE OF
AMENDMENT, FILED THE FOURTH DAY OF NOVEMBER, A.D. 1996, AT 11 O’CLOCK A.M.

 

 

	
   

  	
   

  	
  /s/ Harriet
  Smith Windsor

  
	
  2375835    8310

  040214537

  	
  [SEAL]

  	
  Harriet Smith Windsor, Secretary of State

  AUTHENTICATION:   3007305

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DATE:   03-23-04

  

 

1

 

Delaware

 

The First State

 

CERTIFICATE OF
AMENDMENT, FILED THE FOURTH DAY OF NOVEMBER, A.D. 1996, AT 12 O’CLOCK P.M.

 

RESTATED
CERTIFICATE, FILED THE FIFTH DAY OF JUNE, A.D. 1998, AT 3:15 O’CLOCK P.M.

 

CERTIFICATE OF
DESIGNATION, FILED THE THIRTIETH DAY OF DECEMBER, A.D. 1998, AT 9:25 O’CLOCK
A.M.

 

CERTIFICATE OF
CHANGE OF REGISTERED AGENT, FILED THE SEVENTH DAY OF MAY A.D. 1999, AT 9
O’CLOCK A.M.

 

CERTIFICATE OF
AMENDMENT, FILED THE TWELFTH DAY OF JULY, A.D. 2000, AT 12:30 O’CLOCK P.M.

 

CERTIFICATE OF
DESIGNATION, FILED THE THIRTIETH DAY OF DECEMBER, A.D. 2002, AT 4 O’CLOCK P.M.

 

CERTIFICATE OF
CHANGE OF REGISTERED AGENT, FILED THE TWENTY-FIRST DAY OF FEBRUARY, A.D. 2003,
AT 9:54 O’CLOCK A.M.

 

CERTIFICATE OF
CHANGE OF REGISTERED AGENT, FILED THE THIRD DAY OF NOVEMBER, A.D. 2003, AT 4:42
O’CLOCK P.M.

 

AND I DO
HEREBY FURTHER CERTIFY THAT THE AFORESAID CERTIFICATES ARE THE ONLY
CERTIFICATES ON RECORD OF THE AFORESAID CORPORATION.

 

AND I DO
HEREBY FURTHER CERTIFY THAT THE SAID “PRIMUS

 

	
   

  	
   

  	
  /s/ Harriet
  Smith Windsor

  
	
  2375835    8310

  040214537

  	
  [SEAL]

  	
  Harriet Smith Windsor, Secretary of State

  

  AUTHENTICATION:   3007305

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DATE:   03-23-04

  

 

2

 

Delaware

 

The First State

 

TELECOMMUNICATIONS GROUP,
INCORPORATED” WAS INCORPORATED ON THE FOURTH DAY OF FEBRUARY, A.D. 1994.

 

AND I DO
HEREBY FURTHER CERTIFY THAT THE ANNUAL REPORTS HAVE BEEN FILED TO DATE.

 

AND I DO
HEREBY FURTHER CERTIFY THAT THE FRANCHISE TAXES HAVE BEEN PAID TO DATE.

 

 

	
   

  	
   

  	
  /s/ Harriet
  Smith Windsor

  
	
  2375835    8310

  040214537

  	
  [SEAL]

  	
  Harriet Smith Windsor, Secretary of State

  

  AUTHENTICATION:   3007305

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DATE:   03-23-04

  

 

3

 

Delaware

 

The First State

 

I, HARRIET
SMITH WINDSOR, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY
THAT “PRIMUS TELECOMMUNICATIONS HOLDING, INC.” IS DULY INCORPORATED UNDER THE
LAWS OF THE STATE OF DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL CORPORATE
EXISTENCE NOT HAVING BEEN CANCELLED OR DISSOLVED SO FAR AS THE RECORDS OF THIS
OFFICE SHOW AND IS DULY AUTHORIZED TO TRANSACT BUSINESS.

 

THE FOLLOWING
DOCUMENTS HAVE BEEN FILED:

 

CERTIFICATE OF
INCORPORATION, FILED THE TWENTY-NINTH DAY OF OCTOBER, A.D. 2003, AT 2:18
O’CLOCK P.M.

 

AND I DO
HEREBY FURTHER CERTIFY THAT THE AFORESAID CERTIFICATES ARE THE ONLY
CERTIFICATES ON RECORD OF THE AFORESAID CORPORATION.

 

AND I DO
HEREBY FURTHER CERTIFY THAT THE SAID “PRIMUS TELECOMMUNICATIONS HOLDING, INC.”
WAS INCORPORATED ON THE TWENTY-NINTH DAY OF OCTOBER, A.D. 2003.

 

AND I DO
HEREBY FURTHER CERTIFY THAT THE ANNUAL REPORTS HAVE BEEN FILED TO DATE.

 

AND I DO
HEREBY FURTHER CERTIFY THAT THE FRANCHISE TAXES HAVE BEEN PAID TO DATE.

 

 

	
   

  	
   

  	
  /s/ Harriet
  Smith Windsor

  
	
  3721213    8310

  040214531

  	
  [SEAL]

  	
  Harriet Smith Windsor, Secretary of State

  

  AUTHENTICATION:   3007296

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DATE:   03-23-04

  

 

1

 

Delaware

 

The First State

 

I, HARRIET
SMITH WINDSOR, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY
THAT “PRIMUS TELECOMMUNICATIONS INTERNATIONAL, INC.” IS DULY INCORPORATED UNDER
THE LAWS OF THE STATE OF DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL
CORPORATE EXISTENCE NOT HAVING BEEN CANCELLED OR DISSOLVED SO FAR AS THE
RECORDS OF THIS OFFICE SHOW AND IS DULY AUTHORIZED TO TRANSACT BUSINESS.

 

THE FOLLOWING
DOCUMENTS HAVE BEEN FILED:

 

CERTIFICATE OF
INCORPORATION, FILED THE TWENTY-SIXTH DAY OF JANUARY, A.D. 1996, AT 9 O’CLOCK
A.M.

 

CERTIFICATE OF
CHANGE OF REGISTERED AGENT, FILED THE NINTH DAY OF DECEMBER, A.D. 2002, AT 9
O’CLOCK A.M.

 

CERTIFICATE OF
CHANGE OF REGISTERED AGENT, FILED THE SECOND DAY OF MAY, A.D. 2003, AT 5:48
O’CLOCK P.M.

 

CERTIFICATE OF
CHANGE OF REGISTERED AGENT, FILED THE THIRD DAY OF NOVEMBER, A.D. 2003, AT 4:23
O’CLOCK P.M.

 

AND I DO
HEREBY FURTHER CERTIFY THAT THE AFORESAID CERTIFICATES ARE THE ONLY
CERTIFICATES ON RECORD OF THE AFORESAID CORPORATION.

 

AND I DO HEREBY
FURTHER CERTIFY THAT THE SAID “PRIMUS

 

 

	
   

  	
   

  	
  /s/ Harriet
  Smith Windsor

  
	
  2586455    8310

  040214528

  	
  [SEAL]

  	
  Harriet Smith Windsor, Secretary of State

  

  AUTHENTICATION:   3007294

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DATE:   03-23-04

  

 

1

 

Delaware

 

The First State

 

TELECOMMUNICATIONS
INTERNATIONAL, INC.” WAS INCORPORATED ON THE TWENTY-SIXTH DAY OF JANUARY, A.D.
1996.

 

AND I DO
HEREBY FURTHER CERTIFY THAT THE ANNUAL REPORTS HAVE BEEN FILED TO DATE.

 

AND I DO
HEREBY FURTHER CERTIFY THAT THE FRANCHISE TAXES HAVE BEEN PAID TO DATE.

 

	
   

  	
   

  	
  /s/ Harriet
  Smith Windsor

  
	
  2586455    8310

  040214528

  	
  [SEAL]

  	
  Harriet Smith Windsor, Secretary of State

  

  AUTHENTICATION:   3007294

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DATE:   03-23-04

  

 

2Exhibit 10.19

 

[    ] = Confidential Treatment Requested Under
17 C.F.R. §§ 200.80(b)(4) and 240.24b-2; Text Omitted and Filed
Separately with the Securities and Exchange Commission

 

THIRD AMENDMENT TO
RESEARCH COLLABORATION

AND LICENSE AGREEMENT DATED MAY 31, 1991

 

This Third Amendment
dated this 3rd day of November, 1997 between Merck & Co., Inc. (“Merck”)
and Vical Incorporated (“Vical”).

 

WHEREAS on May 31, 1991
Merck and Vical entered into a Research Collaboration and License Agreement, as
amended on April 27, 1994 and December 13, 1995 (the “Agreement”) under
which Merck obtained an exclusive license under VICAL PATENT RIGHTS and VICAL
KNOW-HOW to develop, make, have made, use and sell LICENSED PRODUCTS in the
TERRITORY (all as defined therein) upon the terms and conditions set forth
therein; and

 

WHEREAS the parties wish
to further amend the Agreement to provide that Merck shall have rights to
vaccine products for the treatment of patients infected with Human
Immunodeficiency Virus and Hepatitis B Virus upon the terms and conditions
of the Agreement as amended hereby;

 

NOW, THEREFORE, in
consideration of the premises and covenants set forth herein, the parties
hereto agree as follows:

 

1.             This Third Amendment
shall be effective as of the date set forth above.

 

2.             Article 1.3 of the
Agreement is amended by adding at the end thereof the following sentence:

 

“LICENSED PRODUCT
shall also mean TREATMENT VACCINE(S).”

 

3.             The Agreement is
amended by adding to Article 1 a new section as follows:

 

1

 

1.14         TREATMENT
VACCINE(S) shall mean a bulk or finished vaccine for the treatment of (i) Human
Immunodeficiency Virus (HIV-1) and/or diseases caused by infection with HIV-1
in humans and (ii) Hepatitis B Virus (“HBV”) and/or diseases caused by
infection with HBV in humans, which utilizes the Technology or technology which
is developed by VICAL during and as a result of the RESEARCH COLLABORATION
PROGRAM.

 

4.             The Agreement is
amended by adding Article 8.3(g) as follows:

 

8.3(g)          Merck shall make the non-refundable research
milestone payments provided for in Schedule E to the Third Amendment for
the first TREATMENT VACCINE for HIV-1 and/or diseases caused by infection with
HIV-1 in humans and the first TREATMENT VACCINE for HBV and/or diseases caused
by infection with HBV in humans.

 

5.             Article 8.4 is hereby
amended to be replaced in its entirely as follows:

 

8.4(a)          Except as set forth in Article 8.4(b) with
respect to royalties for TREATMENT VACCINE(S), in consideration of the license
granted in Article 3, MERCK shall pay royalties to VICAL in each calendar
year in the amount of [...***...] of
NET SALES by MERCK, its AFFILIATES or permitted sublicensees of each LICENSED
PRODUCT which is covered by VALID PATENT RIGHTS.

 

8.4(b)          In consideration of the license granted in
Article 3 for TREATMENT VACCINE(S), royalties shall be payable to VICAL in each
calendar year as follows:

 

8.4(b)(i)      for sales outside the United States, its
territories and possessions by MERCK, its AFFILIATES or permitted sublicensees
for each TREATMENT VACCINE:

 

[    ] =
Confidential Treatment Requested; Text Filed Separately with the Securities and
Exchange Commission

 

2

 

(A)              the
sale of which is covered by VALID PATENT RIGHTS in the country of sale, for the
term of the relevant VALID PATENT RIGHTS in the following amounts:

 

For annual NET SALES less than or equal

	
  to [...***...]

  	
   

  	
  [...***...]
  of NET SALES

  

 

For annual NET SALES greater than [...***...],       [...***...] of NET SALES for that portion of
NET SALES greater than [...***...]

 

(B)               the
sale of which is not covered by VALID PATENT RIGHTS in the country of sale, in
the amount of [...***...] of NET SALES
for a period of five (5) years from the date of first commercial sale in such
country.  MERCK shall pay royalties to
VICAL pursuant to this section 8.4(b)(i)(B) and such royalties shall be in
lieu of patent royalties and shall not be additive where patents later issue in
a country.

 

8.4(b)(ii)     For sales in the United States, its territories
and possessions, whether or not covered by a claim of VALID PATENT RIGHTS:

 

For annual NET SALES less than or equal

	
  to [...***...]

  	
   

  	
  [...***...]

  
	
   

  	
   

  	
   

  
	
  For annual NET SALES greater than [...***...]
  and

  	
   

  	
   

  
	
  less than or equal to [...***...],
  for that portion

  	
   

  	
  [...***...]

  
	
  of NET SALES greater than [...***...]

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  For annual NET SALES greater than [...***...]
  or

  	
   

  	
   

  
	
  equal to [...***...], for
  that portion of

  	
   

  	
  [...***...]

  
	
  NET SALES greater than [...***...]

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  For annual NET SALES greater than [...***...],

  	
   

  	
  [...***...]

  
	
  for that portion of NET SALES greater than [...***...]

  	
   

  	
   

  

 

(A)              In
the event the sale of TREATMENT VACCINE is covered by VALID PATENT RIGHTS in
the country of sale, the royalty set forth in 8.4(b)(ii) shall be payable for
the life of such VALID PATENT RIGHTS.

 

[    ] = Confidential Treatment Requested; Text Filed Separately
with the Securities and Exchange Commission

 

3

 

(B)               In
the event the sale of TREATMENT VACCINE are not covered by VALID PATENT RIGHTS
in the country of sale, royalties shall begin on the date of first commercial
sale and shall be payable for a period of five (5) years from first commercial
sale.  The royalties payable under this
section shall be in lieu of patent royalties and shall not be additive where
patents later issue in a country.

 

8.4(c)          For purposes of calculating royalties due to
Vical under Articles 8.4(b)(i)(A) and 8.4(b)(ii), the sales level tiers
set forth therein will be adjusted cumulatively, using the U.S. Pharmaceutical
Price Index for sales in the U.S., its territories and possessions and the
corresponding European index for sales outside the U.S.  Said adjustments will be made based on the
change in each such Index from the effective date of this Third Amendment as compared
to the dates of the first commercial Ex-U.S. and U.S. sales, respectively, of
each TREATMENT VACCINE.  Thereafter, the
sales level tiers will be adjusted as of each anniversary date of such first
commercial sale, based on the change in the weighted average selling price of
each TREATMENT VACCINE for, respectively, U.S. and Ex-U.S. sales, based on a
comparison of the two prior years weighted average selling price.  It is understood that for the first
anniversary, the weighted average selling price at launch will be compared to
the weighted average selling price over the first year, in each case.

 

6.             Article 8.5 is
amended by adding the following at the beginning thereof:

 

“Other than for TREATMENT VACCINE(S),. . .”

 

7.             Article 8.8 is hereby
amended to be replaced in its entirety as follows:

 

4

 

8.8(a)          Except for royalties for TREATMENT VACCDE(S),
which is addressed in Article 8.8(b), if MERCK is required to pay cumulative
royalties in excess of [...***...] of
Net Sales for additional licenses required to commercialize a particular
LICENSED PRODUCT, the royalties payable to VICAL herewith with respect to such
LICENSED PRODUCT shall be reduced by [...***...]
of the additional royalties beyond such [...***...]
figure; provided however, that in no event shall the royalties due VICAL
hereunder, after taking into account the above reduction, be reduced below [...***...].

 

8.8(b)          If MERCK is required to pay cumulative
royalties in excess of [...***...] for
licenses required to commercialize a particular TREATMENT VACCINE (including
the royalties set forth under this Agreement), the royalties payable to VICAL
with respect to such TREATMENT VACCINE shall be reduced by [...***...] of the royalties beyond such [...***...] figure; provided, however, that in
no event shall the royalties due VICAL with respect to any country, after
taking into account the above reduction, be reduced by more than [...***...]. 
Unused royalty credits may be carried into subsequent royalty periods.

 

8.             The Agreement is
amended by adding Articles 8.10, 8.11 and 8.12 thereto as follows:

 

8.10             Within
thirty (30) days of the date of this Third Amendment, Merck will purchase duly
issued and validly authorized unregistered shares of VICAL common stock having
an aggregate purchase price of $5,000,000 (five million dollars) on the terns
and subject to the conditions of the Stock Purchase

 

[    ] = Confidential Treatment Requested; Text Filed Separately
with the Securities and Exchange Commission

 

5

 

Agreement dated of even date herewith, between VICAL and MERCK, at a
price per share equal to the greater of $16.00 per share or 125% of the average
of VICAL’s per share closing price for the twenty (20) trading days prior to,
but not including, the Effective Date of the Third Amendment.

 

8.11             VICAL
is hereby granted an option (the “OPTION) to co-promote TREATMENT VACCINE(S) in
the United States to a select target audience that will be agreed upon by the
parties.  With respect to each TREATMENT
VACCINE, the OPTION will be exercisable by VICAL at any time prior to MERCK’s
completion of Phase III clinical trials for such TREATMENT VACCINE.  Prior to exercising its OPTION with respect
to a TREATMENT VACCINE, VICAL will establish, to MERCK’s reasonable
satisfaction, that at the estimated time of the first PLA filing in the United
States for such TREATMENT VACCINE, VICAL will have a sales force of at least [...***...] professional representatives who
will be available to make at least 6 detail calls per day on at least 200 days
per year with respect to such TREATMENT VACCINE.  The parties will enter into a co-promotion agreement for such
co-promotion by VICAL within six (6) months of the exercise of the OPTION.  The co-promotion agreement will contain
reasonable terms and conditions, consistent with industry standards and the
terms of this Agreement.  The
co-promotion agreement will contain the financial terms set forth on
Schedule F of this Third Amendment.

 

8.12             In
the event a TREATMENT VACCINE is also capable of being used for the prevention
of the same human infectious disease, in its sole discretion VICAL

 

[    ] = Confidential Treatment Requested; Text Filed Separately
with the Securities and Exchange Commission

 

6

 

may choose to have royalty payments made under Article 8.4(a) and
Article 8.5 or, alternatively, under Articles 8.4(b) and 8.11
(co-promotion option).

 

9.             The effectiveness of
this Third Amendment is subject to the execution and delivery of the Stock
Purchase Agreement dated as of even date herewith, between VICAL and MERCK and
payment by MERCK of the $5,000,000 (five million dollars) thereunder.

 

10.           Except as amended
hereby, all other terms and conditions of the Agreement shall remain unchanged
and shall continue in full force and effect. 
Capitalized terms in this Third Amendment shall have the meaning set
forth in the Agreement.

 

IN WITNESS WHEREOF, the
parties hereto have had this Third Amendment executed by their authorized
representatives as set forth below.

 

	
  MERCK & CO.,
  INC.

  	
  VICAL
  INCORPORATED

  
	
   

  
	
   

  
	
  BY:

  	
  /s/ Raymond Gilmartin

  	
   

  	
  BY:

  	
  /s/ Alain B.
  Schreiber, M.D.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TITLE:

  	
  Chairman,
  President and

  Chief Executive Officer

  	
   

  	
  TITLE:

  	
  Alain B.
  Schreiber, M.D.

  President & C.E.O.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DATE:

  	
  November 3, 1997

  	
   

  	
  DATE:

  	
  October 27, 1997

  	
   

  
										

 

7

 

SCHEDULE E -
MILESTONES FOR TREATMENT PRODUCTS

 

	
  [...***...]*

  	
   

  	
  $

  	
  1.0M

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [...***...]*

  	
   

  	
  $

  	
  1.5M

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [...***...]

  	
   

  	
  [...***...]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [...***...]

  	
   

  	
  [...***...]

  	
   

  

 

*If the milestone
is paid on the identified date, it will be paid only once and credited against
the milestone due when the event is achieved.

 

“Major Market
Country” shall mean the United States, EC countries, Canada, or Japan.

 

[    ] = Confidential Treatment Requested; Text Filed Separately
with the Securities and Exchange Commission

 

8

 

SCHEDULE F –
CO-PROMOTION FINANCIAL TERMS

 

1.             All
sales made by VICAL under the Co-Promotion Agreement will be booked by Merck.

 

2.             VICAL
will, in addition to the royalties set forth in Article 8.4(b), receive
the following amounts in consideration for its Co-Promotion efforts:

 

A.            If VICAL
provides between [...***...] and [...***...] sales representatives for the
co-promotion VICAL will receive the following royalty increment on U.S. NET SALES:

 

	
  For annual U.S. NET SALES less than [...***...]

  	
   

  	
  [...***...]

  
	
   

  	
   

  	
   

  
	
  For annual U.S. NET SALES equal to or greater than [...***...] and less than or equal to [...***...] for that portion of U.S. NET
  SALES equal to or greater than [...***...]

  	
   

  	
  [...***...]

  
	
   

  	
   

  	
   

  
	
  For annual U.S. NET SALES greater than [...***...] for that portion of U.S. NET SALES greater than [...***...]

  	
   

  	
  [...***...]

  

 

B.            If VICAL
provides 50 or more sales representatives for the co-promotion, VICAL will
receive the following royalty increment on U.S. NET SALES:

 

	
  For annual U.S. NET SALES less than [...***...]

  	
   

  	
  [...***...]

  
	
   

  	
   

  	
   

  
	
  For annual U.S. NET SALES equal to or greater than [...***...] and less than or equal to [...***...] for that portion of U.S. NET
  SALES equal to or greater than [...***...]

  	
   

  	
  [...***...]

  
	
   

  	
   

  	
   

  
	
  For annual U.S. NET SALES greater than [...***...] for that portion of U.S. NET SALES greater than [...***...]

  	
   

  	
  [...***...]

  

 

3.             It is
understood that with respect to each TREATMENT VACCINE, the size of VICAL’s
sales force for such TREATMENT VACCINE on the date that VICAL exercises its
option will determine permanently the level of incremental royalty that VICAL
will receive on U.S. sales of such TREATMENT VACCINE, notwithstanding that
VICAL may subsequently increase the size of such sales force.

 

4.             It is
understood that all costs related to the VICAL sales force, including training,
will be for the account of VICAL.

 

5.             For
purposes of calculating the royalty increment described in Paragraph 2,
above, the Sales level tiers set forth therein will be adjusted cumulatively,
using the U.S. Pharmaceutical Price Index. 
Said adjustments will be made based on the change in such Index from the
effective date of this Third Amendment as compared to the date of the First
Commercial sale of each TREATMENT VACCINE in the U.S.  Thereafter, the

 

[    ] = Confidential Treatment Requested; Text Filed Separately
with the Securities and Exchange Commission

 

9

 

sales level tiers will be adjusted as of each anniversary date of such
first commercial sale based on the change in the weighted average selling price
of each TREATMENT VACCINE, based on a comparison of the two prior years
weighted average selling price.  It is
understood that for the first anniversary, the weighted average selling price
at launch will be compared to the weighted average selling price over the first
year in each case.

 

10

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