Document:

Exhibit 10.28

 

ASSET PURCHASE
AGREEMENT

 

Between

 

BUYERS UNITED INC.,

 

I-LINK COMMUNICATIONS
INC.,

 

And

 

I-LINK INCORPORATED

 

 

Dated December 6,
2002

 

 

Table of Contents

 

	
  Heading

  	
   

  
	
   

  
	
  ARTICLE I. 
  DEFINITIONS/PURCHASE & SALE/CLOSING

  
	
  1.1

  	
   

  	
  Definitions

  
	
  1.2

  	
   

  	
  Transfer and Sale of Assets

  
	
  1.3

  	
   

  	
  Purchase
  Price

  
	
  1.4

  	
   

  	
  Deliveries
  and Effective Date

  
	
  1.5

  	
   

  	
  Time and Place of Closing

  
	
   

  
	
  ARTICLE II. REPRESENTATIONS AND WARRANTIES
  OF ILC I-LINK

  
	
  2.1

  	
   

  	
  Organization

  
	
  2.2

  	
   

  	
  Authorization
  of Transaction

  
	
  2.3

  	
   

  	
  Non-contravention

  
	
  2.4

  	
   

  	
  Permits; Compliance with Law

  
	
  2.5

  	
   

  	
  Litigation;
  Orders

  
	
  2.6

  	
   

  	
  Periodic Reports

  
	
  2.7

  	
   

  	
  Subsequent
  Events

  
	
  2.8

  	
   

  	
  Employee Plans

  
	
  2.9

  	
   

  	
  Environmental
  Regulation, Etc.

  
	
  2.10

  	
   

  	
  Employment
  Practices

  
	
  2.11

  	
   

  	
  Taxes

  
	
  2.12

  	
   

  	
  Title to Assets

  
	
  2.13

  	
   

  	
  Intellectual
  Property

  
	
  2.14

  	
   

  	
  Assigned Contracts

  
	
  2.15

  	
   

  	
  No
  Brokers

  
	
  2.16

  	
   

  	
  Warranties

  
	
  2.17

  	
   

  	
  Investment
  Intent

  
	
   

  
	
  ARTICLE
  III. REPRESENTATIONS AND WARRANTIES OF BUYER

  
	
  3.1

  	
   

  	
  Organization and Related Matters

  
	
  3.2

  	
   

  	
  Capitalization

  
	
  3.3

  	
   

  	
  Authorization

  
	
  3.4

  	
   

  	
  Non-contravention

  
	
  3.5

  	
   

  	
  Legal Proceedings

  
	
  3.6

  	
   

  	
  Periodic
  Reports

  
	
  3.7

  	
   

  	
  Buyer
  Securities

  
	
  3.8

  	
   

  	
  No Brokers

  
	
   

  
	
  ARTICLE
  IV. COVENANTS WITH RESPECT TO CONDUCT OF BUSINESS PRIOR TO THE CLOSING

  
	
  4.1

  	
   

  	
  Access and Control

  
	
  4.2

  	
   

  	
  Material
  Adverse Changes

  
	
  4.3

  	
   

  	
  Conduct of the Business

  
	
  4.4

  	
   

  	
  Notification
  of Certain Matters

  
	
  4.5

  	
   

  	
  Consents

  
	
  4.6

  	
   

  	
  Preservation
  of the Business Prior to the Closing

  
	
  4.7

  	
   

  	
  Offers of Employment

  
	
   

  
	
  ARTICLE V. ADDITIONAL COVENANTS

  
	
  5.1

  	
   

  	
  Non-solicitation

  
	
  5.2

  	
   

  	
  Nondisclosure
  of Proprietary Data

  
	
  5.3

  	
   

  	
  Tax
  Cooperation

  
	
  5.4

  	
   

  	
  Tax
  Matters

  
				

 

i

 

	
  5.5

  	
   

  	
  Post-Effective
  Date Financial Statement

  
	
  5.6

  	
   

  	
  Redemption
  Covenant

  
	
   

  
	
  ARTICLE VI. CONDITIONS OF PURCHASE

  
	
  6.1

  	
   

  	
  General Conditions

  
	
  6.2

  	
   

  	
  Deliveries of Seller

  
	
  6.3

  	
   

  	
  Deliveries of Buyer

  
	
   

  
	
  ARTICLE
  VII. TERMINATION OF OBLIGATIONS; SURVIVAL

  
	
  7.1

  	
   

  	
  Termination
  of Agreement

  
	
  7.2

  	
   

  	
  Effect of Termination

  
	
  7.3

  	
   

  	
  Survival of Representations and Warranties

  
	
   

  
	
  ARTICLE
  VIII. INDEMNIFICATION

  
	
  8.1

  	
   

  	
  Obligations of Sellers

  
	
  8.2

  	
   

  	
  Obligations of Buyer

  
	
  8.3

  	
   

  	
  Procedure

  
	
  8.4

  	
   

  	
  Survival

  
	
  8.5

  	
   

  	
  Not
  exclusive Remedy

  
	
  8.6

  	
   

  	
  Offset

  
	
   

  
	
  ARTICLE IX. GENERAL

  
	
  9.1

  	
   

  	
  Amendments; Waivers

  
	
  9.2

  	
   

  	
  Schedules; Exhibits; Integration

  
	
  9.3

  	
   

  	
  Best
  Efforts; Further Assurances

  
	
  9.4

  	
   

  	
  Governing
  Law

  
	
  9.5

  	
   

  	
  No
  Assignment

  
	
  9.6

  	
   

  	
  Headings

  
	
  9.7

  	
   

  	
  Counterparts

  
	
  9.8

  	
   

  	
  Publicity and Reports

  
	
  9.9

  	
   

  	
  Confidentiality

  
	
  9.10

  	
   

  	
  Parties in Interest

  
	
  9.11

  	
   

  	
  Notices

  
	
  9.12

  	
   

  	
  Expenses

  
	
  9.13

  	
   

  	
  Remedies;
  Waiver

  
	
  9.14

  	
   

  	
  Attorney’s
  Fees

  
	
  9.15

  	
   

  	
  Knowledge Convention

  
	
  9.16

  	
   

  	
  Representation
  by Counsel; Interpretation

  
	
  9.17

  	
   

  	
  Specific Performance

  
	
  9.18

  	
   

  	
  Severability

  

 

ii

 

ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE
AGREEMENT is entered into as of December 6, 2002,
among Buyers United Inc., a Delaware corporation (“Buyer”), I-Link
Communications Inc., a Utah corporation (“ILC”), and I-Link Incorporated, a Florida
corporation (“I-Link”).  ILC and
I-Link are herein sometimes referred to as the “Sellers”.

 

R E C I T A L S

 

WHEREAS,
Sellers desire to sell, and Buyer desires to buy, certain assets in accordance
with the terms and conditions of this Agreement.

 

A G R E E M E N T

 

In
consideration of the mutual promises contained herein and intending to be
legally bound the parties agree as follows:

 

ARTICLE I.  DEFINITIONS/PURCHASE & SALE/CLOSING

 

1.1          Definitions.

 

For all
purposes of this Agreement, except as otherwise expressly provided, the terms
defined in this Article I have the meanings assigned to them in this Article I
and include the plural as well as the singular, all accounting terms not
otherwise defined herein have the meanings assigned under generally accepted
accounting principles, all references in this Agreement to designated
“Articles,” “Sections” and other subdivisions are to the designated Articles,
Sections and other subdivisions of the body of this Agreement, pronouns of
either gender or neuter shall include, as appropriate, the other pronoun forms,
and the words “herein,” “hereof” and “hereunder” and other words of similar
import refer to this Agreement as a whole and not to any particular Article,
Section or other subdivision.

 

As used in
this Agreement and the Exhibits and Schedules delivered pursuant to this
Agreement, the following definitions shall apply, except as otherwise expressly
provided.

 

“Accepting Employees”
shall have the meaning set forth in Section 4.7.

 

“Acquired
Assets” means all tangible and intangible assets of Sellers relating
to or used in the operation of the Business, together with the business as a
going concern associated with such assets, including the following (but
specifically excluding the Excluded Assets):

 

(a)           all customer
accounts served by the Business (the “Customer Accounts”);

 

(b)           all customer data
associated with the Customer Accounts, including all associated letters of
authorization, customer service records, all related computer tapes and/or
records, accounts receivable status and history reports and all customer
service and provisioning history;

 

(c)           all fixed assets,
switches, machinery, equipment and other tangible personal property (including
all furnishings and fixtures, materials, supplies and other miscellaneous
items) located at the premises of ILC and each of its switch sites and
colocation facilities; and all other fixed assets, switches, machinery,
equipment and other tangible personal property related to or

 

 

used in
connection with the Business, including all furnishings and fixtures,
materials, supplies and other miscellaneous items of tangible personal property
whether located at the foregoing premises, switch sites or colocation
facilities of ILC or at the premises of any customer or supplier, all as the
same existed or was constituted on the Effective Date;

 

(d)           all right, title and
interest in and to the Assigned Contracts and any related leasehold improvements;

 

(e)           all claims and
rights against third parties relating to the Acquired Assets, including
insurance claims, rights under manufacturers’ and vendors’ warranties, rights
of recovery, credits, and Business-related setoff rights existing on the
Closing Date;

 

(f)            all financial,
commercial, marketing and administrative books and records relating to the
Business in any form or medium, including, computer databases, correspondence
files, administrative guidelines, personnel records relating to Accepting Employees
and employee manuals and all accounting and tax files and records used in
connection with or relating to the Business, as well as files relating to
litigation that has been settled, closed, or otherwise dismissed; provided,
however, that Sellers shall enjoy a continuing right of reasonable access
during normal business hours to such assets for purposes of claims resolution,
litigation, and administration;

 

(g)           all computer systems
and non-proprietary software, and all electronic databases and other data
processing and storage materials (regardless of format or medium), used in or
related to the Business;

 

(h)           the Carrier
Identification Codes of ILC;

 

(i)            all Know-how,
Trademarks, copyrights, copyright registrations and applications for
registration, designs, and trade secrets that are licensed to or owned by
Sellers; and

 

(j)            all materials,
supplies, personal property and other assets, tangible or intangible, used in
or relating to the Business, including the goodwill of the Business as a going
concern.

 

“Action”
means any action, complaint, petition, investigation, suit or other proceeding,
whether civil or criminal, in law or in equity, or before any arbitrator or
Governmental Entity.

 

“Affiliate”
means a Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, a specified
Person.

 

“Affiliated
Group” means any affiliated group within
the meaning of Code Section 1504(a).

 

“Allocation
Schedule” is the schedule identified in Section 6.1(d).

 

“Agreement”
means this Agreement by and among Buyer, ILC and I-Link as amended or
supplemented together with all Exhibits and Schedules attached or incorporated
by reference.

 

“Approval”
means any approval, authorization, consent, qualification or registration, or
any waiver of any of the foregoing, required to be obtained from, or any
notice, statement or other communication required to be filed with or delivered
to, any Governmental Entity or any other Person.

 

“Assigned
Contracts” means the Contracts listed in Section 2.14 of the
Disclosure Schedule.

 

“Associate”
of a Person means a corporation or organization (other than a Party to this
Agreement) of which such Person is an officer or partner or is, directly or
indirectly, the beneficial owner of 10% or more of any class of equity
securities; any trust or other estate in which such Person has a substantial
beneficial interest or as to which such Person serves as trustee or in a
similar capacity; and any

 

2

 

relative or spouse of such
Person or any relative of such spouse who has the same home as such Person or
who is a director or officer of any Party or its Affiliates.

 

“Assumed
Liabilities” means, and is strictly limited to, those liabilities
and obligations of Sellers and any of their Affiliates set forth on Exhibit B
to this Agreement.

 

“BP Event”
means the occurrence of one of the following during the 14-month period
commencing January 1, 2003:

 

(a)                                  Big
Planet, Inc., notifies Buyer that it is terminating the Wholesale Service
Provider and Distribution Agreement with Sellers dated February 1, 2000, as
amended by Amendment No. 1 dated February 15, 2001, by Amendment No. 2 dated
February 22, 2001, by Amendment No. 3 dated March 1, 2001, and Amendment No. 4
dated September 10, 2001 (the “BP Agreement”), unless the BP Agreement is
replaced by a new agreement between Big Planet, Inc., and Buyer with
substantially similar terms on price and service as the BP Agreement;

 

(b)                                 Big
Planet, Inc. issues a statement or other communication for general distribution
to its customers and members recommending that they use a provider other than
Buyer for the same services provided under the BP Agreement; or

 

(c)                                  If
Big Planet, Inc., demands a reduction in the wholesale rate charged for
services under the BP Agreement, Sellers and Buyer shall mutually agree to a
course of action and the impact on distribution of the Earnout Shares.  If the Parties are unable to reach agreement
on such course of action and impact on or before the date specified by Big
Planet, Inc., for responding to its demand (including any extensions thereof
granted by Big Planet, Inc.), then Buyer, at its election, may declare the
occurrence of a BP Event by written notice to Sellers; provided, that if Buyer
accedes to the demand and Big Planet takes action to promote the service and
increase the customer base of Buyer, then Buyer and Sellers shall mutually
agree on the date on which the BP Event shall be deemed to have occurred (the
“Deemed Event”) which shall not be less than four nor more than seven months
following the date Big Planet implements the action to promote the service.

 

“Business”
means the operation of the real-time Internet Protocol communications network
(RTIP Network) consisting of a nationwide dedicated network of ILC equipment
and leased telecommunications lines integrated through licensed software,
applications that use the RTIP Network including, but not limited to, I-Link
One Number service, wholesale and retail distribution of RTIP Network service
and applications, and also shall be deemed to include any of the following
incidents of such business: income, cash flow, operations, condition (financial
or other), assets, anticipated revenues, prospects and liabilities.

 

“Buyer
Reports” means the periodic reports of Buyer described in Section
3.6.

 

“Buyer
Securities” has the meaning set forth in Section 1.3.

 

“Closing”
means the consummation of the purchase and sale of the Acquired Assets under
this Agreement, and “Closing Date” is the date of the Closing,
which shall be the date that is three business days following the date on which
all of the items contemplated by Section 6.1 have been obtained or waived.

 

 “Code” means the Internal Revenue Code of
1986, as amended.

 

“Contract”
means any agreement, arrangement, bond, commitment, franchise, indemnity,
indenture, instrument, lease, license or understanding, whether or not in
writing.

 

“CRS”
is Cohne, Rappaport & Segal, P.C.

 

3

 

“Disclosure
Schedule” means the Disclosure Schedule dated the date of this
Agreement, as the same shall be amended from time to time up and through the
Closing, and delivered by Sellers to Buyer. 
The Sections of the Disclosure Schedule shall be numbered to correspond
to the applicable Sections of this Agreement and, together with all matters
under each such heading, shall be deemed to qualify only that Section.

 

“Distributor”
means a wholesale or retail distributor of services and applications sold in
the Business under distributor agreements with Sellers, whether written or
oral, under which services and applications included in the Business are sold
to other Persons.

 

“Earnout
Shares” means 75,000 shares of the Buyer Securities to be held and
disbursed in accordance with Section 1.5.

 

“Effective
Date” means the date on which each of the items specified in Section
1.4 have been delivered as provided therein.

 

“Employee
Benefit Plan” means any “employee benefit plan” (as such term is
defined in ERISA Section 3(3)) and any other material employee benefit plan,
program or arrangement of any kind.

 

“Employee
Pension Benefit Plan” has the meaning set forth in ERISA Section
3(2).

 

“Employee
Welfare Benefit Plan” has the meaning set forth in ERISA Section
3(1).

 

“Encumbrance”
means any claim, charge, easement, encumbrance, lease, covenant, security
interest, lien, option, pledge, rights of others, or restriction (whether on
voting, sale, transfer, disposition or otherwise), whether imposed by
agreement, understanding, law, equity or otherwise, except for any restrictions
on transfer generally arising under any applicable federal or state securities
law.

 

“Equity
Securities” means, with respect to any Party, the common stock and
any other capital stock of the Party or other equity interest in the Party or
any securities or notes convertible into or exchangeable for capital stock of
or other equity interest in the Party or any other rights, warrants or options
to acquire any of the foregoing securities of the Party.

 

“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, and the
related regulations and published interpretations.

 

“ERISA
Affiliate” means each entity that is
treated as a single employer with I-Link for purposes of Code Section 414.

 

“Escrow
Agreement” is the escrow agreement described in Section 8.1(c).

 

“Excluded
Assets” means (a) cash, (b) cash equivalents, (c) the accounts
receivable, billed and unbilled as of the Effective Date, associated with the
Customer Accounts, (d) any deposits or pre-payments made by Seller with respect
to any of the Assigned Contracts, and (e) the personal property, Contracts,
Intellectual Property and other assets listed in Exhibit A.

 

“Financial
Statements” has the meaning set forth in Section 2.6.

 

“GAAP”
means generally accepted accounting principles in the United States, as in
effect from time to time.

 

“Gross Margin”
is revenue for the applicable period less variable carrier costs.

 

“Governmental
Entity” means any government or any agency, bureau, board,
commission, court, department, official, political subdivision, tribunal or
other instrumentality of any government, whether

 

4

 

federal, state or local,
domestic or foreign, including the Federal Communications Commission and state
public utility and public service commissions, and any industry self-regulatory
or administrative agency, including the North American Numbering Plan
Administrator.

 

“Hazardous
Substance” means (but shall not be limited to) substances that are
defined or listed in, or otherwise classified pursuant to, any applicable Laws
as “hazardous substances,” “hazardous materials,” “hazardous wastes” or “toxic
substances,” or any other formulation intended to define, list or classify
substances by reason of deleterious properties such as ignitibility,
corrosivity, reactivity, radioactivity, carcinogenicity, reproductive toxicity
or “EP toxicity,” and petroleum and drilling fluids, produced waters and other
wastes associated with the exploration, development, or production of crude
oil, natural gas or geothermal energy.

 

“I-Link
Reports” means the periodic reports of I-Link described in Section
2.6.

 

“Indemnifiable
Claim” means any Loss for or against which any party is entitled to
indemnification under this Agreement; “Indemnified Party” means the party
entitled to indemnity hereunder; and “Indemnifying Party” means the party
obligated to provide indemnification hereunder.

 

“Intellectual
Property” means all (i) Patents, (ii) Know-how, (iii) Trademarks and
(iv) copyrights, copyright registrations and applications for registration,
inventions, designs, industrial and utility models (including registrations and
applications for registration thereof), trade secrets and all other
intellectual property rights whether registered or not, in each case which are
licensed to or owned by Sellers.

 

“Know-how”
means all product specifications, processes, product designs, plans, ideas,
concepts, manufacturing, engineering and other manuals and drawings, technical
information, data, research records, all promotional literature, customer and
supplier lists and similar data and information, and all other confidential or
proprietary technical and business information that is owned by Sellers.

 

“Knowledge”
has the meaning set forth in Section 9.15.

 

“Law”
means any constitutional provision, statute or other law, rule, regulation, or
interpretation of any Governmental Entity and any Order.

 

“Loss”
means any action, cost, damage, disbursement, expense, liability, loss, deficiency,
diminution in value, obligation, penalty or settlement of any kind or nature,
whether foreseeable or unforeseeable, including but not limited to, interest or
other carrying costs, penalties, legal, accounting and other professional fees
and expenses incurred in the investigation, collection, prosecution and defense
of claims and amounts paid in settlement, that may be imposed on or otherwise
incurred or suffered by the specified person.

 

“Management
Agreement” is the agreement identified in Section 4.1.

 

“Material
Adverse Effect” means an adverse effect that a reasonable person
would attach importance to in evaluating the Party to which it relates and the
transactions herein contemplated.

 

“Multiemployer
Plan” has the meaning set forth in ERISA Section
3(37).

 

“Net Tax
Benefit” has the meaning set forth in Section 8.4(c).

 

“Order”
means any decree, injunction, judgment, order, ruling, assessment or writ.

 

“Party”
means a signatory to this Agreement and “Parties” means all the signatories to this
Agreement.

 

5

 

“Patent”
means all patents and patent applications (including, without limitation, all
reissues, divisions, continuations, continuations-in-part, renewals and
extensions of the foregoing), which are owned by Sellers or their Affiliates.

 

“Permit”
means any license, permit, franchise, consent, registration, certificate of
authority and other approval (including, without limitation, those relating to
Federal Communications Commission and state public service commission
certifications and Carrier Identification Codes issued by the North American
Numbering Plan Administrator), or order, or any waiver of the foregoing,
required to be issued by any Governmental Entity.

 

“Person”
means an association, a corporation, an individual, a partnership, a trust or
any other entity or organization, including a Governmental Entity.

 

“PBGC”
means the Pension Benefit Guaranty Corporation.

 

“Purchase
Price” has the meaning set forth in Section 1.3.

 

“Tax”
means any foreign, federal, state, county or local income, sales and use,
excise, franchise, real and personal property, transfer, gross receipt, capital
stock, production, business and occupation, disability, employment, payroll,
severance or withholding tax or charge imposed by any Governmental Entity, any
interest and penalties (civil or criminal) related thereto or to the nonpayment
thereof, and any Loss in connection with the determination, settlement or
litigation of any Tax liability.

 

“Tax Return”
means a report, return or other information required to be supplied to a
Governmental Entity with respect to Taxes including, where permitted or
required, combined or consolidated returns for any group of entities that
includes ILC.

 

“Trademarks”
shall mean trademarks, service marks, trade names, trade dress, labels, logos
and all other names and slogans associated with any products or services, or
embodying associated goodwill, whether or not registered, and any applications
or registrations there for owned by Sellers.

 

“Transaction
Costs” has the meaning set forth in Section 9.12.

 

“WARN Act”
means the Worker Adjustment and Retraining Notification Act, 29 USC Section
2101, et seq., and the rules and regulations adopted there under.

 

1.2.         Purchase and Sale of Assets.

 

On and subject to the terms and conditions of
this Agreement, the Buyer agrees to purchase from Sellers, and Sellers agrees
to sell, transfer, convey, and deliver to the Buyer, all of the Acquired Assets
at the Closing for the consideration specified below in this Article 1.

 

1.3.         Purchase Price.

 

Subject to the
terms and conditions of this Agreement, Buyer agrees to (i) except as otherwise provided
herein, deliver to
Sellers at the Closing 205,000 shares of the Series B Convertible
Preferred Stock (the “Buyer Securities”), described in Exhibit C attached
hereto, and (ii) assume at
the Closing the Assumed Liabilities. 
The Buyer will not assume or have any responsibility, however, with
respect to any other obligation or liability of Sellers or their Affiliates not
included in the Assumed Liabilities.  The
$2,050,000 value of the Buyer Securities plus the value of the Assumed
Liabilities is the “Purchase Price”.

 

1.4          Deliveries and Effective Date.

 

The date this Agreement is signed by all Parties is the “Effective
Date.”  On the Effective Date,
immediately following the execution of this Agreement:

 

6

 

(a)           The
Parties shall deliver the instruments, certificates, and other items described
in Sections 6.2 and 6.3 to CRS.

 

(b)           The Parties shall
sign and deliver to one another the Management Agreement contemplated by
Section 4.1 and Transition Services Agreement attached as Exhibit D.

 

(c)           The Parties shall
sign and deliver to one another a license agreement of even date herewith
pertaining to certain intellectual property that is not part of the Acquired
Assets.

 

1.5          Time and Place of
Closing.

 

(a)                                  The
Closing will take place at the offices of CRS in Salt Lake City, Utah,
commencing at 10:00 a.m. local time on the date specified for the Closing, or
on such other date as the Parties may mutually agree.  At the Closing, CRS shall deliver to Buyer the items listed in
Section 6.2, to Sellers the items listed in Section 6.3 (except for the Earnout
Shares), and to the agent named in the Escrow Agreement the Escrow Agreement
and 25,000 shares of the Buyer Securities to be placed in escrow there under.

 

(b)           If no BP Event has
occurred prior to the Closing, CRS shall deliver to Sellers at the Closing that
number of Earnout Shares equal to the product obtained by multiplying the total
number of Earnout Shares by a fraction, the numerator of which is the number of
full calendar months that have elapsed from and including January 2003 through
the calendar month ending immediately preceding the calendar month in which the
Closing occurs, and the denominator of which is 14.  Thereafter, so long as no BP Event has occurred, CRS shall
deliver to Sellers on the first day of each calendar month beginning with the
month immediately following the month in which the Closing occurs,
one-fourteenth (1/14) of the Earnout Shares until all Earnout Shares have been
delivered to Seller.  If a BP Event
occurs, CRS shall deliver to Sellers within 30 days following the end of the
Measurement Period (as defined for “N” below) that number of Earnout Shares
determined on the basis of the following formula:

 

	
  M

  	
  =

  	
  A x

  	
  N

  	
   

  
	
  D

  	
   

  

 

Where            M            is the number of Earnout Shares to
be delivered to Seller.

 

A             is the number of Earnout Shares
that have not been delivered to Sellers as of the date of the BP Event.

 

N             is the lesser of:  (i) actual cumulative gross margin
pertaining to services provided and sold under the BP Agreement during the
period (the “Measurement Period”) beginning with the first day of the month in
which the BP Event or Deemed Event occurs, whichever is later, and continuing
for a number of full calendar months equal to the number of months within the
period commencing with the month the BP Event occurs through February 2004;
and, (ii) the value for D.

 

D             is the sum of the assumed monthly
gross margins during the Measurement Period, where the assumed gross margin in
the first month is the lower of the gross margin under the BP Agreement for the
month of January 2003 and the gross margin pertaining to services provided and
sold under the BP Agreement for the month immediately preceding the month in
which the BP Event occurs, reduced by three percent, and the assumed monthly
gross margin in each successive month of the Measurement Period is three
percent less than the assumed gross margin for the previous month.

 

7

 

(c)           Any of the Earnout
Shares that are not delivered to Sellers under the provisions of Section 1.5(b)
by the later of March 1, 2004 and 30 days following the end of the Measurement
Period as defined for “N,” above, shall be returned to the Buyer, cancelled,
and treated for all purposes as a reduction of the Purchase Price.

 

ARTICLE
II.  REPRESENTATIONS AND WARRANTIES OF ILC AND
I-LINK

 

ILC and I-Link,
jointly and severally as to each representation and warranty set forth in this
Article II, represent, warrant and agree as follows:

 

2.1          Organization.

 

ILC is a
corporation duly organized, validly existing, and in good standing under the
laws of the state of Utah.  I-Link is a
corporation duly organized, validly existing, and in good standing under the
laws of the state of Florida.

 

2.2          Authorization of Transaction.

 

Each of ILC
and I-Link has full power and authority (including full corporate power and authority)
to execute and deliver this Agreement and to perform its obligations
hereunder.  The execution and delivery
of this Agreement and the performance by Sellers and the consummation of the
transactions contemplated hereunder have been duly authorized by the respective
boards of directors of ILC and I-Link and no other corporate proceedings on the
part of ILC or I-Link are necessary to authorize this Agreement and the
transactions contemplated hereunder. 
Except as contemplated by Section 4.5, no consent of any Person not a
Party to this Agreement nor consent of or filing with (including any waiting
period) any Governmental Entity is required to be obtained or performed on the
part of ILC to execute, deliver and perform its obligations hereunder.  This Agreement constitutes the legally valid
and binding obligation of each of ILC and I-Link, enforceable against Sellers
in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws and
equitable principles relating to or limiting creditor’s rights generally.

 

2.3          Non-contravention.

 

Except as
described in Section 2.3 of the Disclosure Schedule, neither the execution and
the delivery of this Agreement, nor the consummation of the transactions
contemplated hereby (including performance by Sellers), will (a) violate any
constitution, statute, regulation, rule, Order, decree, charge, or other
restriction of any Governmental Entity to which any of ILC and I-Link is
subject or any provision of the charter or bylaws of ILC and I-Link or (b)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument or other arrangement to which any of ILC or I-Link is a
party or by which it or they are bound or to which any of its or their assets
is subject (or result in the imposition of any Encumbrance upon any of its or
their assets), except where the violation, conflict, breach, default,
acceleration, termination, modification, cancellation, failure to give notice,
or Encumbrance could not reasonably be expected to have a Material Adverse
Effect on any of ILC or I-Link or on the ability of the Parties to consummate
the transactions contemplated by this Agreement.  Except as contemplated by Section 4.5, ILC and I-Link do not need
to give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any Governmental Entity in order for the Parties to consummate
the transactions contemplated by this Agreement, except where the failure to
give notice, to file, or to obtain any authorization, consent or approval could
not reasonably be expected to have a Material Adverse Effect on any of ILC or
I-Link or on the ability of the Parties to consummate the transactions
contemplated by this Agreement.

 

8

 

2.4          Permits;
Compliance with Law.

 

Except as
disclosed in Section 2.4 of the Disclosure Schedule, ILC holds all Permits
required for the conduct of the Business and is operating in compliance
therewith and all such Permits are valid and in full force and effect, except
where the failure to hold any such Permit or to operate in compliance therewith
or the invalidity or ineffectiveness thereof could not reasonably be expected
to have a Material Adverse Effect on the Business, and no suspension,
cancellation or termination of such Permits has been threatened or is
imminent.  ILC is organized and has
conducted the Business in compliance with all Laws applicable to it, except
where the failure to comply with such Laws could not reasonably be expected to
have a Material Adverse Effect on the Business or the ability of the Parties to
consummate the transactions contemplated by this Agreement.

 

2.5          Litigation;
Orders.

 

Except as set
forth in Section 2.5 of the Disclosure Schedule, there is no Order or Action
pending or, to the Knowledge of Sellers, threatened against or affecting any of
ILC or I-Link, or any director, officer, agent, employee, consultant, or other
Person acting on the behalf of any of ILC or I-Link, or any properties of any
of the foregoing, which (individually or in the aggregate) could reasonably be
expected to have a Material Adverse Effect on the Business, or on the ability
of the Parties to consummate the transactions contemplated by this
Agreement.  There is no Order of any
Governmental Entity outstanding against any of ILC or I-Link.  There is no matter as to which ILC or I-Link
has received any notice, claim or assertion, or, to the Knowledge of Sellers,
which otherwise has been threatened or is reasonably expected to be threatened
or initiated, against or affecting any director, officer, employee, agent or
representative of any of ILC or I-Link or any other Person, nor to the
Knowledge of ILC or any director or officer of I-Link, is there any reasonable
basis there for, in connection with which any such Person has or may reasonably
be expected to have any right to be indemnified by ILC or I-Link.

 

2.6          PERIODIC REPORTS.

 

I-Link has delivered to Buyer its quarterly reports on form 10-Q for
the quarterly periods ended March 31, June 30, and September 30, 2002, and its
annual report on Form 10-K for the year ended December 31, 2001, all as filed
with the Securities and Exchange Commission under the Securities Exchange Act
of 1934, as amended.  To the Knowledge
of I-Link, each such report (a) does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not
misleading with respect to the period covered by the report, and (b) the
financial information presented in the report (the “Financial Statements”)
fairly presents in all material respects the financial condition, results of
operations, and cash flows of I-Link as of, and for, the periods presented in
the report.

 

2.7          Subsequent
Events.

 

Except as
described in Section 2.7 of the Disclosure Schedule, since September 30, 2002,
there has not been:

 

(a)           Any material adverse
change in the Business, the operations or future prospects of the Business, or
the Acquired Assets;

 

(b)           Any damage,
destruction or loss, whether covered by insurance or not, materially and
adversely affecting the Acquired Assets or the Business;

 

(c)           Any borrowing or
lending of money or guarantee of any obligation by Sellers;

 

9

 

(d)           Any amendment to or
termination of any agreement which, if not so amended or terminated, would be
required to be disclosed on the Disclosure Schedule;

 

(e)           Any disposition of
any material properties or assets used in the Business;

 

(f)            Any engagement by
ILC in activities outside the ordinary course of the Business; or

 

(g)           The incurring of any
liability (absolute or contingent) relating to the Business except liabilities
incurred in the ordinary course of the Business.

 

2.8          Employee Plans.

 

Section 2.8 of
the Disclosure Schedule lists each Employee Benefit Plan that any of the
Sellers or their Affiliates maintains or to which any of the Sellers
contributes or has any obligation to contribute.

 

(a)           Each such Employee
Benefit Plan (and each related trust, insurance contract, or fund) has been
maintained, funded and administered in accordance with the terms of such
Employee Benefit Plan and complies in form and in operation in all material
respects with the applicable requirements of ERISA, the Code, and other applicable
laws.

 

(b)           All required reports
and descriptions (including annual reports (IRS Form 5500), summary annual
reports, and summary plan descriptions) have been timely filed and/or
distributed in accordance with the applicable requirements of ERISA and the
Code with respect to each such Employee Benefit Plan.  The requirements of COBRA have been met in all material respects
with respect to each such Employee Benefit Plan that is an Employee Welfare
Benefit Plan subject to COBRA.

 

(c)           All contributions
(including all employer contributions and employee salary reduction
contributions) which are due have been made within the time periods prescribed
by ERISA and the Code to each such Employee Benefit Plan that is an Employee
Pension Benefit Plan and all contributions for any period ending on or before
the Effective Date which are not yet due have been made to each such Employee
Pension Benefit Plan or accrued in accordance with the past custom and practice
of the Sellers and their Affiliates. 
All premiums or other payments for all periods ending on or before the
Effective Date have been paid with respect to each such Employee Benefit Plan
that is an Employee Welfare Benefit Plan.

 

(d)           Each such Employee
Benefit Plan which is intended to meet the requirements of a “qualified plan”
under Code §401(a), has received a determination from the Internal Revenue
Service that such Employee Benefit Plan is so qualified, and the none of the
directors or officers of Sellers is aware of any facts or circumstances that
could adversely affect the qualified status of any such Employee Benefit Plan.

 

(e)           The market value of
assets under each such Employee Benefit Plan which is an Employee Pension
Benefit Plan equals or exceeds the present value of all vested and non-vested
liabilities there under (determined in accordance with then current funding
assumptions).

 

(f)            With respect to
each Employee Benefit Plan that any of the Sellers and any ERISA Affiliate
maintains, to which any of them contributes, or has any obligation to contribute,
or with respect to which any of them has any material liability or potential
liability:

 

(i)                                                                                     No
such Employee Benefit Plan that is an Employee Pension Benefit Plan has been
completely or partially terminated or been the subject of a Reportable Event as
to which notices would be required to be filed with the PBGC.  No proceeding by the PBGC to

 

10

 

terminate any
such Employee Pension Benefit Plan has been instituted or, to the Knowledge of
Sellers, threatened.

 

(ii)                                                                                  There
have been no Prohibited Transactions with respect to any such Employee Benefit
Plan.  No fiduciary has any liability
for material breach of fiduciary duty or any other material failure to act or
comply in connection with the administration or investment of the assets of any
such Employee Benefit Plan.  No action,
suit, proceeding, hearing, or investigation with respect to the administration
or the investment of the assets of any such Employee Benefit Plan (other than
routine claims for benefits) is pending or, to the Knowledge of Sellers,
threatened.

 

(iii)                                                                               None
of the Sellers has incurred any material liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due) to the PBGC (other than with respect to PBGC premium payments not yet due)
or otherwise under Title IV of ERISA (including any withdrawal liability as
defined in ERISA §4201) or under the Code with respect to any such Employee
Benefit Plan which is an Employee Pension Benefit Plan, or under COBRA with
respect to any such Employee Benefit Plan which is an Employee Welfare Benefit
Plan.

 

(g)           None of the Sellers
and any ERISA Affiliate contributes to, has any obligation to contribute to, or
has any material liability (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due),
including any withdrawal liability (as defined in ERISA §4201), under or with
respect to any Multiemployer Plan.

 

(h)           None of the Sellers
maintains, contributes to, or has an obligation to contribute to, or has any
material liability or potential liability with respect to, any Employee Welfare
Benefit Plan providing medical, health, or life insurance or other welfare-type
benefits for current or future retired or terminated employees of the Sellers
(or any spouse or other dependent thereof) other than in accordance with COBRA.

 

2.9          Environmental
Regulation, Etc.

 

With respect
to environmental matters, Sellers:

 

(a)                                  Have
no liability under any applicable Law or common law cause of action relating to
or arising from environmental conditions on property leased, used or operated
by Sellers that could reasonably be expected to have a Material Adverse Effect
on the financial condition of Sellers and any property leased, used or operated
by Sellers, and any facilities and operations of Sellers thereon have at all
times in the past complied with, presently comply with and will continue to
comply with all applicable environmental and health and safety Laws to the
extent that failure to comply could reasonably be expected to have a Material
Adverse Effect on Sellers or the Business;

 

(b)           Has never entered
into or been subject to any judgment, consent decree, compliance Order, or
administrative Order with respect to any environmental or health and safety
matter or received any request for information, notice, demand letter,
administrative inquiry, or formal or informal complaint or claim with respect
to any environmental or health and safety matter or the enforcement of any
environmental Law,

 

(c)           Has no reason to
believe that any of the items enumerated in clause (b) of this Section will be
forthcoming, and

 

(d)           Has never sent waste
containing any Hazardous Substance to any location for storage, treatment or
disposal.

 

11

 

2.10        Employment
Practices.

 

Neither Seller
is a party to, or in the process of negotiating, any collective bargaining or
labor agreement or union contract. 
There is no

 

(a)           Charge, complaint or
suit pending or, to the Knowledge of Sellers, threatened against either Seller
respecting employment, hiring for employment, terminating from employment,
employment practices, employment discrimination, terms and conditions of
employment, safety, wrongful termination, or wages and hours;

 

(b)           Unfair labor
practice charge or complaint pending or, to the Knowledge of Sellers,
threatened against, or decision or Order in effect and binding on, either
Seller before the National Labor Relations Board;

 

(c)           Grievance or
arbitration proceeding arising out of or under collective bargaining agreements
pending or, to the Knowledge of Sellers, threatened against either Seller;

 

(d)           Strike, labor
dispute, slow-down, work stoppage or other interference with work pending or,
to the Knowledge of Sellers, threatened against either Seller; or

 

(e)           To the Knowledge of
Sellers, union organizing activities or union representation question
threatened or existing with respect to any groups of employees of either
Seller.

 

2.11        Taxes.

 

(a)           ILC and I-Link have
filed, or will have filed prior to the Effective Date, all Tax Returns that
each was required to file as of the Effective Date.  All such Tax Returns were correct and complete in all material
respects.  All Taxes owed by either ILC
or I-Link (whether or not shown on any Tax Return) have been paid.  Except as specified in Section 2.11 of the
Disclosure Schedule, neither ILC nor I-Link is currently the beneficiary of any
extension of time within which to file any Tax Return and has not requested
such an extension.  No claim has ever
been made by an authority in a jurisdiction where ILC or I-Link does not file
Tax Returns that it is or may be subject to taxation by that jurisdiction.  There is no Encumbrance on any of the
Acquired Assets that arose in connection with any failure (or alleged failure)
to pay any Tax.  ILC and I-Link have
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other Person.

 

(b)           Neither ILC nor
I-Link has been a member of an Affiliated Group filing a consolidated Tax
Return, other than a group the common parent of which is I-Link.  The Affiliated Group that includes Sellers
has filed all income Tax Returns that it was required to file for each taxable
period during which Sellers were members of the group.  All such Tax Returns were correct and
complete in all respects.  All income
Taxes owed by such Affiliated Group (whether or not shown on any Tax Return)
have been paid for each taxable period during which Sellers were members of the
group.  None of the directors or
officers of Sellers, expects any Governmental Entity to assess any additional
income Taxes against the Affiliated Group for any taxable period during which
Sellers were members of the group.  There
is no dispute or claim concerning any income Tax liability of the Affiliated
Group for any taxable period during which Sellers were members of the group
either (a) claimed or raised by any Governmental Entity in writing, or (b) as
to which Sellers, have Knowledge. 
Except as disclosed in Section 2.11 of the Disclosure Schedule, the
Affiliated Group has not waived any statute of limitations in respect of any
income Taxes or agreed to any extension of time with respect to an income Tax
assessment or deficiency for any taxable period during which Sellers were
members of the group.

 

12

 

(c)           The tax returns of
the Affiliated Group have never been audited by a Governmental Entity, nor are
any such audits in process or pending. 
The Affiliated Group has disclosed on its federal income tax returns all
positions taken therein that could give rise to a substantial understatement
penalty within the meaning of Code Section 6662.  No consent to the application of Code Section 341 has been filed
with respect to any of the Acquired Assets (collapsible corporation).  Books and records exist and are readily
available to support tax returns for which the statute of limitations has not
yet expired.

 

2.12        Title to Assets.

 

Sellers will have at Closing good record and marketable fee title to
all the Acquired Assets, free and clear of all Encumbrances, except for the
following Encumbrances, none of which (except for the Encumbrance described in
clause (c)) could reasonably be expected to have a Material Adverse Effect on ILC:  (a) the lien of current taxes not yet due
and payable, (b) such imperfections of title, liens and easements as do not
materially detract from the value of or interfere with the value or the present
or presently contemplated future use of the properties subject thereto or
affected thereby, or otherwise materially impair the present or presently
contemplated future business operations at or with such properties, and (c)
liens securing debt which is reflected on the most recent balance sheet
included in the Financial Statements. 
All of the leases necessary in any material respect for the operation of
the Business are valid, subsisting and enforceable and afford peaceful and
undisturbed possession of the subject matter of the lease, and no material
default by Sellers exists under any of the provisions thereof.

 

2.13        Intellectual Property.

 

Sellers have
exclusive ownership of, or licenses to use, all Intellectual Property used, or
to be used, in the Business.  Except as
described in Section 2.13 of the Disclosure Schedule, there are no claims or
demands of any other Person pertaining to any of such Intellectual Property and
no proceedings have been instituted, or are pending or, to the Knowledge of
Sellers, threatened, which challenge the rights of Sellers in respect
thereof.  ILC has the right to use, free
and clear of claims or rights of other Persons, all Patents and Know-how,
designs, manufacturing or other processes, computer software (subject to
applicable licenses), systems, surveys, data compilations, research results,
and other information required for or incident to the Business as presently
conducted or contemplated, except where the failure to have such a right would
not have a Material Adverse Effect on the Business.  All Patents, Trademarks and registered copyrights that are owned
by, or licensed to, Sellers and used or to be used by ILC in the Business are
listed in Section 2.13 of the Disclosure Schedule.  All of such Patents, Trademarks and registered copyrights have
been duly registered in, filed in, or issued by, the United States Patent and
Trademark Office, the United States Register of Copyrights, or the
corresponding offices of other jurisdictions as identified in Section 2.13 of
the Disclosure Schedule, have been properly maintained and renewed in
accordance with all applicable provisions of law in the United States and each
such jurisdiction, and are valid and in full force and effect.  All such Trademarks are in commercial use in
the Business.  All licenses or other
agreements under which ILC is granted rights in Intellectual Property used in
the Business are listed in Section 2.13 of the Disclosure Schedule.  Except as set forth in Section 2.13 of the
Disclosure Schedule, all said licenses or other agreements are in full force
and effect and there is no default by any party thereto.  To the Knowledge of Sellers, the Business,
activities, services and applications of ILC do not infringe any Patent or
other Intellectual Property of any other Person, except where such infringement
would not have a Material Adverse Effect on ILC or the Business.  Except as described in Section 2.13 of the
Disclosure Schedule, no Action charging ILC with infringement of any adversely
held Intellectual Property has been filed or is, to the Knowledge of Sellers, threatened
to be filed.  Sellers have not made
unauthorized use of any confidential information or trade secrets of any
Person, including without limitation any former employer of any past or present
employee of Sellers.  Except as
described in Section 2.13 of the Disclosure Schedule, neither ILC nor, to the
Knowledge of Sellers, any of its employees have any agreements or arrangements
with any Persons other than Sellers related to confidential information or
trade secrets of such Persons or restricting in any way any such employee’s
engagement in the Business.

 

13

 

2.14        Assigned Contracts.

 

Section 2.14
of the Disclosure Schedule contains a true, complete and accurate list,
categorized by subject matter, of the following Assigned Contracts to which
Sellers are a party :

 

(a)           Purchase Orders and
sale orders, and all agreements to or with each customer or supplier for the
sale of products or services;

 

(b)           All Contracts for
construction or for the purchase of equipment, machinery and other items;

 

(c)           All Contracts
relating to the rental or use of equipment, other personal property or
fixtures;

 

(d)           All Contracts with
Distributors;

 

(e)           All Contracts
pertaining to the licensing or use of computer software that is used or useful
in the Business;

 

(f)            Each Contract upon
which the Business is substantially dependent or which is otherwise material to
the Business; and

 

(g)           All other Contracts
affecting the Business, except those which: 
(A) are cancelable on 30 days’ or less notice without any penalty or
other financial obligation, or (B) if not so cancelable, involve annual
aggregate payments by or to Sellers of $25,000 or less.

 

Except as set forth in Section
2.14 of the Disclosure Schedule, (i) each Contract was entered into in the
ordinary course of the Business, (ii) is in full force and effect on the date
of this Agreement and is valid, binding and enforceable in accordance with its
terms, (iii) Sellers are not in material breach or default under any of the
Contracts and has not received any notice or claim of any such breach or
default from any Person, (iv) to the Knowledge of Sellers, the relationship of
Sellers with the Persons who are parties to the Contracts is good and there has
been no expression of any intention to terminate or materially modify any such
relationships, (v) to the Knowledge of Sellers, there is no breach or default
under any Contract by any other Person who is a party thereto, which could
reasonably be expected to have a Material Adverse Effect on the Business, (vi)
to the Knowledge of Sellers, no event or action has occurred, is pending or is
threatened, which, after the giving or receipt of notice, and/or passage of
time or otherwise, could constitute or result in any such breach or default by
Sellers or any other Person who is a party under any of the Contracts, which
would have a Material Adverse Effect on the Business, and (vii) no material
amount claimed to be payable to Sellers under any of the Contracts is being
disputed by any Person who is a party thereto. 
Except as described in Section 2.14 of the Disclosure Schedule, Sellers
have the contractual right to terminate each Contract between Sellers and a
Distributor by giving no more than 90 days prior written notice of termination
without risk of incurring a Loss, except as limited by any applicable Law.  True and correct copies of each document or
instrument set forth on the Disclosure Schedule pursuant to this Section 2.14
have been made available to Buyer.

 

14

 

2.15        No Brokers.

 

Sellers have
no liability or obligation to pay any fees or commissions to any broker,
finder, agent, commercial banker or other Person with respect to this Agreement
or the transactions contemplated by this Agreement.

 

2.16        Warranties.

 

Sellers will
have no material liability after the Effective Date pursuant to the terms of
express written warranties in favor of its customers, which is not fully
covered by insurance or reserved on the Financial Statements relating to any
service or application distributed or sold by ILC prior to the Effective
Date.  ILC’s standard terms and
conditions of sale, including warranties, are included in Section 2.16 of the
Disclosure Schedule.

 

2.17        Investment Intent.

 

Sellers are
accredited investors within the meaning of Rule 501(a)(3) of Regulation D
promulgated under the Securities Act of 1933, as amended, and are acquiring the
Buyer Securities for their own respective accounts for investment purposes only
and not with a view to or for sale in connection with the distribution thereof.

 

ARTICLE
III.  REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer
represents, warrants and agrees as follows:

 

3.1          Organization
and Related Matters.

 

Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the state of Delaware.  Buyer has all necessary corporate power and authority to carry on
its business as now being conducted. 
Buyer has the necessary corporate power and authority to execute,
deliver, and perform this Agreement and the transactions contemplated hereby.

 

3.2          Capitalization.

 

The entire
authorized capital stock of Buyer consists of (a) 100,000,000 shares of common
tock, $0.0001 par value, of which only 5,930,262 shares are issued and
outstanding, and (b) 15,000,000 shares of preferred stock, $0.0001 par value,
of which (i) 1,870,000 are designated Series A 8% cumulative convertible
preferred stock with a liquidation value of $3,740,000, and (ii) 1,234,500 are
designated Series B 8% cumulative convertible preferred stock, of which 563,800
shares are issued and outstanding with a liquidation value of $5,638,000.  All of the issued and outstanding shares of
common stock, Series A 8% cumulative convertible preferred stock, and Series B
8% cumulative convertible preferred stock have been duly authorized and are
validly issued, fully paid, and non-assessable and were issued in conformity
with applicable Laws.  Except as
provided above in this Section 3.2, and except as described in Buyer’s Reports,
there are no Equity Securities and no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other rights, contracts, agreements or commitments that could
require Buyer to issue, sell, or otherwise cause to become outstanding any of
its authorized but unissued Equity Securities. 
There are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or similar rights with respect to Buyer.  There are no preemptive rights in respect of
any Equity Securities of Buyer.

 

15

 

3.3          Authorization.

 

Buyer has full
power and authority (including full corporate power and authority) to execute
and deliver this Agreement and to perform its obligations hereunder.  The execution and delivery of this Agreement
and the performance by Buyer and the consummation of the transactions
contemplated hereunder have been duly authorized by the board of directors of
Buyer and no other corporate proceedings on the part of Buyer are necessary to
authorize this Agreement and the transactions contemplated hereunder.  Except as contemplated by Section 4.5, no
consent of any Person not a Party to this Agreement nor consent of or filing
with (including any waiting period) any Governmental Entity is required to be
obtained or performed on the part of Buyer to execute, deliver and perform its
obligations hereunder.  This Agreement
constitutes the legally valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws and equitable principles relating to or limiting creditor’s rights
generally.

 

3.4          Non-contravention.

 

Neither the
execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby (including performance by Buyer), will (a)
violate any constitution, statute, regulation, rule, Order, decree, charge, or
other restriction of any Governmental Entity to which Buyer is subject or any
provision of the charter or bylaws of Buyer or (b) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument or other
arrangement to which Buyer is a party or by which it is bound or to which any
of its assets is subject (or result in the imposition of any Encumbrance upon
any of its assets), except where the violation, conflict, breach, default,
acceleration, termination, modification, cancellation, failure to give notice,
or Encumbrance could not reasonably be expected to have a Material Adverse
Effect on Buyer or on the ability of the Parties to consummate the transactions
contemplated by this Agreement.  Except
as contemplated by Section 4.5, Buyer does not need to give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
Governmental Entity in order for the Parties to consummate the transactions
contemplated by this Agreement, except where the failure to give notice, to
file, or to obtain any authorization, consent or approval could not reasonably
be expected to have a Material Adverse Effect on Buyer or on the ability of the
Parties to consummate the transactions contemplated by this Agreement.

 

16

 

3.5          Legal Proceedings.

 

There is no
Order or Action pending or to the Knowledge of Buyer, threatened against Buyer
that individually or when aggregated with one or more other Actions has or
might reasonably be expected to have a Material Adverse Effect on the ability
of the Parties to consummate the transactions contemplated by this Agreement.

 

3.6                               Periodic Reports.

 

Buyer has delivered to Sellers its quarterly reports on form 10-QSB for
the quarterly periods ended March 31, June 30, and September 30, 2002, and its
annual report on Form 10-KSB for the year ended December 31, 2001, all as filed
with the Securities and Exchange Commission under the Securities Exchange Act
of 1934, as amended.  To the Knowledge
of Buyer, each such report (a) does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not
misleading with respect to the period covered by the report, and (b) the
financial information presented in the report fairly presents in all material
respects the financial condition, results of operations, and cash flows of
Buyer as of, and for, the periods presented in the report.

 

3.7          Buyer
Securities.

 

The Buyer
Securities to be issued to Sellers to purchase the Acquired Assets at the Closing
shall be, when issued, duly authorized and validly issued, fully paid, and
non-assessable, and not issued in violation of the preemptive or other rights
of any Person.

 

3.8          No Brokers.

 

Buyer does not
have any liability or obligation to pay any fees or commissions to any broker,
finder, agent, commercial banker or other Person with respect to this Agreement
or the transactions contemplated by this Agreement.

 

ARTICLE IV.  COVENANTS
WITH RESPECT TO CONDUCT OF

BUSINESS PRIOR TO THE CLOSING

 

4.1          Access and Control.

 

Prior to the
Closing, ILC shall, and the I-Link shall cause ILC to, authorize and permit
Buyer and its representatives (which term shall be deemed to include its
independent accountants and counsel) to have reasonable access during normal
business hours, upon reasonable notice and in such manner as will not
unreasonably interfere with the business activities of Sellers, to all of the
properties, books, records, operating instructions and procedures, and all
other information with respect to the Business as Buyer may from time to time
reasonably request, and to make copies of such books, records and other
documents and to discuss the Business with such other Persons, including,
without limitation, the directors, officers, employees, accountants, counsel,
suppliers, customers, and creditors of Sellers, as Buyer considers necessary or
appropriate for the purposes of familiarizing itself with the Business and
obtaining any necessary Approvals of or Permits for the transactions
contemplated by this Agreement. 
Concurrently with the signing of this Agreement the Buyer and Sellers
shall enter into the Management Agreement in the form attached hereto as
Exhibit E, pursuant to which Buyer will assume management of certain aspects of
the Business as provided in said agreement, and Sellers agree Buyer shall have
the right to use the Acquired Assets during the term of the Management
Agreement to provide services to Buyer’s customers, and all such customers and
accounts receivable from such customers shall be the exclusive property of
Buyer notwithstanding any provision contained in the Management Agreement.

 

17

 

4.2          Material Adverse Changes.

 

Prior to the
Closing, Sellers will promptly notify Buyer of any event of which it or they
obtains Knowledge which has had or could reasonably be expected to have a
Material Adverse Effect on the Business or which if known as of the date hereof
would have been required to be disclosed to Buyer.

 

4.3          Conduct of the Business.

 

Prior to the
Closing, Sellers agree with and for the benefit of Buyer that they shall not
without the prior consent in writing of Buyer, which may not be unreasonably
withheld:

 

(a)           Except as required
by their terms, amend, terminate, renew or renegotiate any Contract included in
the Acquired Assets or default (or take or omit to take any action that, with
or without the giving of notice or passage of time, would constitute a default)
in any of its obligations under any Contract included in the Acquired Assets or
take any action that would jeopardize the continuance of its material supplier
or customer relationships;

 

(b)           Terminate, amend or
fail to renew any existing insurance coverage;

 

(c)           Terminate or fail to
renew or preserve any Permits;

 

(d)           Other than as
permitted by the Management Agreement or in the ordinary course of the
Business, incur or agree to incur any obligation or liability (absolute or
contingent) related to the Business that individually calls for payment by ILC
of more than $25,000 in any specific case or $250,000 in the aggregate;

 

(e)           Sell, transfer,
mortgage, encumber or otherwise dispose of any Acquired Assets or any
liabilities, except (i) for dispositions of property not greater than $5,000 in
the aggregate, (ii) in the ordinary course of the Business, or (iii) as
contemplated by the Management Agreement;

 

(f)            Dispose of or
permit to lapse any rights to the use of any Intellectual Property included in
the Acquired Assets or subject to the License Agreement or dispose of or
disclose any such Intellectual Property not a matter of public knowledge;

 

(g)           Make any Tax
election or make any change in any method or period of accounting or in any
accounting policy, practice or procedure; or

 

(h)           Agree to or make any
commitment to take any actions prohibited by this Section 4.3.

 

4.4          Notification of Certain Matters.

 

Each Party shall give prompt notice to the other Parties of (a) the
occurrence, or failure to occur, of any event that would be likely to cause any
of its representations or warranties contained in this Agreement to be untrue
or inaccurate in any material respect at any time from the date of this
Agreement to the Closing Date, and (b) any failure of the Party to comply with
or satisfy, in any material respect, any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement.  No such notification shall affect the
representations or warranties of the Parties or the conditions to their
respective obligations hereunder.

 

18

 

4.5          Consents

 

(a)           Sellers and Buyer
each agree to cooperate and use their best efforts to obtain all Approvals from
all third parties (including Governmental Entities) that may be necessary to
consummate the transactions contemplated by this Agreement.

 

(b)           Immediately
following the Effective Date, Buyer shall, with the reasonable assistance of
and in consultation with Sellers, prepare and file, or cause to be prepared and
filed, any and all applications necessary to obtain the Approval of all
relevant Governmental Entities for Buyer to purchase the Acquired Assets and
operate the Business.  Buyer and Sellers
shall prosecute such applications with all reasonable diligence and otherwise
use their reasonable best efforts (including, with respect to Buyer, providing
financial assurance to a Governmental Entity, to the extent required) to obtain
grants of approval as expeditiously as practicable.  Each of Buyer and Sellers shall bear their own expenses of prosecuting
such applications; provided, that Buyer shall bear all fees payable by Buyer
and/or Sellers to any Governmental Entity and local counsel fees, where
necessary as determined in the sole discretion of Buyer, in connection with the
filing and prosecution of the applications necessary to obtain such approvals.

 

(c)           In the event the
North American Numbering Plan Administrator fails or refuses to transfer
control of the Carrier Identification Codes directly from Sellers to Buyer, (i)
Sellers agree to transfer the Carrier Identification Codes to a subsidiary of
I-Link that has no assets, liabilities, or business operations, (ii) agree
after such transfer to sell all of the capital stock of such subsidiary to
Buyer for no consideration in addition to the Purchase Price, (iii) use its
best efforts to obtain approval from the North American Numbering Plan
Administrator for transfer of control of the Carrier Identification Codes
resulting from the sale of the subsidiary stock to Buyer, and (iv) upon
obtaining such approval transfer and convey the capital stock of such
subsidiary to Buyer.

 

(d)           Sellers and Buyer
each agree to cooperate and use their best efforts to obtain all Approvals of
third parties with respect to all material Assigned Contracts that may be
necessary or which may be reasonably requested by Buyer to consummate the
transactions contemplated by this Agreement.

 

4.6          Preservation of the Business Prior to the Closing.

 

During the
period beginning on the date hereof and ending on the Closing Sellers will use
their respective best efforts to preserve the Business and to preserve the
goodwill of customers, suppliers, and others having business relations with
Sellers.

 

4.7          Offers of
Employment.

 

Sellers agree
and acknowledge that Buyer has, and may continue to make, offers of employment
to persons employed by Sellers.  Any
person who accepts such an offer of employment with Buyer shall be an
“Accepting Employee” and shall be employed by Buyer on such terms and
conditions as Buyer and each such Accepting Employee may mutually agree.  In the event Buyer shall employ within 45
days following the Effective Date any former employee of Sellers that was
included in Seller’s reduction of staff that began on the Effective Date and
received severance or payment of unused vacation time from Seller, then Buyer
shall reimburse Sellers for the severance and vacation time payments made by
Sellers to the employee within 10 days following the date the employee
commences employment with Buyer.

 

ARTICLE V.  ADDITIONAL COVENANTS

 

5.1          Non-solicitation.

 

(a)           Sellers each
agree that from and after the date of this Agreement Buyer shall be entitled to
the goodwill and going concern value of the Business and to protect and
preserve the same to the maximum extent permitted by law.  Sellers each also acknowledge that their

 

19

 

management
contributions to the Business have been uniquely valuable and involve
proprietary information that would be competitively unfair to make available to
any competitor of the Business.  For
these and other reasons and as an inducement to Buyer to enter into this
Agreement, Sellers each agree for themselves and their respective Affiliates
that for a period of three years after the date hereof (the “Restricted
Period”), it will not, directly or indirectly, for its own benefit or as agent
for another solicit for the purpose participating in or effecting any present
or future business enterprise involving any service or application that is the
same as or similar to any service or application that is part of the Business,
any Person who was a Distributor or customer (including their successors) of
ILC at any time during the three-year period prior to and ending on the
Effective Date.

 

(b)           Nothing contained
herein shall limit during the Restricted Period the right of Sellers or their
Affiliates (or their respective officers and directors) as an investor to hold
and make investments in securities of any corporation or limited partnership
that is registered on a national securities exchange or admitted to trading
privileges thereon or actively traded in a generally recognized
over-the-counter market, provided such Person’s equity interest therein does
not exceed five percent of the outstanding shares or interests in such
corporation or partnership.

 

(c)           In addition, to
protect Buyer against any efforts by Sellers to cause employees of Buyer to
terminate their employment, each agrees that during the Restricted Period it
will not directly or indirectly (i) induce any employee of Buyer with a then
current compensation of more than $40,000 annually to leave Buyer or to accept
any other employment or position, or (ii) assist any other entity in hiring any
such employee.

 

(d)           Each of Sellers
recognizes and agrees that a breach of any of the covenants set forth in this
Section 5.1 could cause irreparable harm to Buyer, that Buyer’s remedies at law
in the event of such breach would be inadequate, and that, accordingly, in the
event of such breach a restraining order or injunction or both may be issued
against it, in addition to any other rights and remedies that are available to
Buyer.  If this Section 5.1 is more
restrictive than permitted by the Laws of the jurisdiction in which Buyer seeks
enforcement hereof, this Section 5.1 shall be limited to the extent required to
permit enforcement under such Laws. 
Without limiting the generality of the foregoing, the Parties intend
that the covenants contained in the preceding portions of this Section 5.1
shall be construed as a series of separate covenants, one for each city, county,
state or other location specified. 
Except for geographic coverage, each such separate covenant shall be
deemed identical in terms.  If, in any
judicial proceeding, a court shall refuse to enforce any of the separate
covenants deemed included in this Section 5.1, then such unenforceable covenant
shall be deemed eliminated from these provisions for the purpose of those
proceedings to the extent necessary to permit the remaining separate covenants
to be enforced.

 

(e)           For income tax
purposes only, Buyer and Sellers agree that no portion of the Purchase Price
shall be allocated to the covenants in this Section 5.1.

 

5.2          Nondisclosure of Proprietary Data.

 

None of
Sellers shall divulge or otherwise disclose, directly or indirectly, to Persons
other than Buyer, any confidential information concerning the Business.

 

5.3          Tax Cooperation.

 

After the
Effective Date, the Parties shall, and shall cause their respective directors
and officers to, cooperate fully with each other in the preparation of all Tax
Returns and shall provide, or cause to be provided to each other any records
and other information requested by such parties in connection therewith.  The Parties shall, and shall cause their
respective directors and officers to, cooperate fully with the other Parties in
connection with any Tax investigation, audit or other proceeding.  Any information obtained pursuant to this
Section 5.3 or pursuant to any other Section hereof providing for the sharing
of information or the review of any Tax Return or other schedule relating to
Taxes shall be subject to Section 9.9.

 

20

 

5.4          Tax Matters.

 

(a)           Each of the Sellers
agrees to indemnify the Buyer from and against the entirety of any Losses Buyer
suffer resulting from, arising out of, relating to, in the nature of, or caused
by any liability of Sellers for Taxes that is attributable to any period ending
on or before the Effective Date and for Taxes of any Person other than Sellers
(i) under Reg. §1.1502-6 (or any similar provision of state, local or foreign
law), (ii) as a transferee or successor, (iii) by contract, or (iv) otherwise.

 

(c)           I-Link will include
the income of ILC from the Business (including any deferred income triggered
into income by Reg. §1.1502-13 and Reg. §1.1502-14 and any excess loss accounts
taken into income under Reg. §1.1502-19) on I-Link’s consolidated federal
income Tax Returns for all periods through the Effective Date and pay any
federal income Taxes attributable to such income.  I-Link will take no position on such returns that relates to the
Business that would adversely affect the Buyer after the date of this
Agreement.  The income of the Business
will be apportioned to the period up to and including the Effective Date and
the period after the Effective Date by closing all transactions and accruals
pertaining to the Business on the books Sellers as of the end of the Effective
Date.  Buyer and Sellers shall file all
Tax Returns (including amended returns and claims for refund) and information reports
in a manner consistent with the Allocation Schedule contemplated by Section
6.2(h).

 

(d)           Sellers will allow
Buyer to participate at its own expense in any audits of I-Link’s consolidated
federal income Tax Returns to the extent that such returns relate to the
Acquired Assets, Assumed liabilities, or the treatment for Tax purposes of the
transactions contemplated by this Agreement. 
I-Link will not settle any such audit in a manner that would adversely
affect Buyer’s Tax treatment of the transactions contemplated by this Agreement
without the prior written consent of the Buyer, which consent shall not
unreasonably be withheld.

 

5.5          Post-Effective Date Financial Statement.

 

Sellers shall deliver to Buyer at Buyer’s sole cost and expense an
audited balance sheet as of December 31, 2002, and audited statements of
operations and cash flows for each of the years in the two-year period ended
December 31, 2002, together with the notes and audit report of
PriceWaterhouseCoopers LLP pertaining thereto, for the entity, business
segment, or other operating unit identified by Buyer as being necessary for
Buyer to comply with its financial reporting obligation under the Securities
Exchange Act of 1934 and the regulations adopted there under.

 

5.6          Redemption Covenant.

 

The Buyer
covenants and agrees that it will not exercise its right to redeem the Buyer
Securities under Part 5 of the Certificate of Designation of the Series B
Convertible Preferred Stock as on file with the Secretary of State of the State
of Delaware on the Effective Date prior to December 6, 2007.

 

ARTICLE
VI.  CONDITIONS OF PURCHASE

 

6.1          General
Conditions.

 

The
obligations of the Parties to effect the Closing shall be subject to the
following conditions unless waived in writing by the Party or Parties that
benefit from such condition:

 

(a)           No Law or Order
shall have been enacted, entered, issued, promulgated or enforced by any
Governmental Entity, at or prior to the Closing Date, which prohibits or
restricts, or would (if successful) prohibit or restrict, the transactions
contemplated by this Agreement, or

 

21

 

(with respect
to obligations of Buyer only) which would not permit the Business as presently
conducted to continue unimpaired following the Closing Date.  No Governmental Entity shall have notified
any Party to this Agreement that consummation of the transactions contemplated
by this Agreement would constitute a violation of any Laws of any jurisdiction
or that it intends to commence an Action to restrain or prohibit such
transactions or force divestiture or rescission, unless such Governmental
Entity shall have withdrawn such notice and abandoned any such Action prior to
the time which otherwise would have been the Closing Date, unless counsel known
to have expertise as to such matters on behalf of the Party against whom such
Action was or would be instituted renders to the Parties a favorable opinion
that such Action is or would be without merit.

 

(b)           All Approvals
contemplated by Section 4.5 that are reasonably required to be obtained from
any Governmental Entity for the operation of the Business by Buyer shall have
been received by Buyer.  To the extent
required by any material Assigned Contract, all Approvals contemplated by
Section 4.5 that are reasonably required to be obtained from any third party
for the assignment of such material Assigned Contracts included in the Acquired
Assets and operation of the Business shall have been received and delivered to
Buyer.

 

(c)           Sellers shall
deliver to CRS duly executed releases and waivers from Winter Harbor, LLC,
Counsel Communications, Inc. (formerly Counsel Springwell Communications LLC)
and Counsel Corporation (US) of all rights and Encumbrances in and to the
Acquired Assets in form and substance acceptable to Buyer and its counsel, and
duly executed UCC termination statements for each jurisdiction where there is a
UCC financing statement filing affecting any of the Acquired Assets.

 

(d)           Sellers shall
deliver to Buyer a schedule, subject to Buyer’s written acceptance on the
Closing Date, that allocates the Purchase Price to the Acquired Assets for all
purposes, including Tax and financial reporting purposes (the “Allocation
Schedule”).

 

(e)           The Parties shall
execute and deliver the Escrow Agreement, together with all instruments
required thereby.

 

(f)            The Parties and
WorldxChange Corp. shall execute and deliver a mutual service agreement
containing in substance those terms set forth on Exhibit F attached hereto.

 

(g)           Sellers shall
deliver to Buyer such additional bills of sale, assignments, documents of
transfer and other instruments as Buyer may reasonably request to confirm in
Buyer all right title and interest in and to the Acquired Assets.

 

6.2          Deliveries
of Sellers.

 

On the Effective Date, Sellers shall deliver or cause to be delivered
in accordance with Section 1.4 of this Agreement duly executed bills of sale in
the form attached hereto as Exhibit G.

 

6.3          Deliveries of Buyer.

 

On the
Effective Date, Buyer shall deliver or cause to be delivered pursuant to
Section 1.4 of this Agreement:

 

(a)           Duly executed
assumption of liabilities for the Assumed Liabilities in the form attached
hereto as Exhibit H.

 

(b)           Certificates
representing the Buyer Securities issued in the names or names designated by
the Sellers in writing prior to the Effective Date.

 

22

 

ARTICLE
VII.  TERMINATION OF OBLIGATIONS; SURVIVAL

 

7.1          Termination of Agreement.

 

Anything
herein to the contrary notwithstanding, this Agreement and the transactions
contemplated by this Agreement may be terminated by any Party if the Closing
does not occur on or before the close of business on May 31, 2003 (unless
extended by mutual consent in writing of Buyer and Sellers), provided that such
failure is not due to the action or inaction of, or breach of this Agreement
by, such Party.  This Agreement and the
transactions contemplated by this Agreement may also be terminated at any time
before the Closing by mutual consent in writing of Buyer and Sellers.

 

7.2          Effect of Termination.

 

In the event
that this Agreement shall be terminated pursuant to Section 7.1, all further
obligations of the Parties under this Agreement shall terminate without further
liability of any Party to another; provided that the obligations of the Parties
contained in Section 9.9 (Confidentiality) and Section 9.12 (Expenses) shall
survive any such termination.  A
termination under Section 7.1 shall not relieve any Party of any liability for
a breach of, or for any misrepresentation under this Agreement, or be deemed to
constitute a waiver of any available remedy (including specific performance if
available) for any such breach or misrepresentation.

 

7.3          Survival of Representations and Warranties.

 

All
representations and warranties contained in or made pursuant to this Agreement
shall expire on the date that is two years following the Closing Date, except
that (i) the representations and warranties contained in Sections 2.1
(Organization), 2.15 (No Brokers), 3.1 (Organization), 3.2 (Capitalization) and
3.4 (No Brokers) shall survive the Closing and shall remain in full force and
effect indefinitely, (ii) the representations and warranties contained in
Section 2.11 (Taxes) shall continue through the expiration of the applicable
statute of limitations as the same may be extended (or, if a claim has been
asserted prior to such expiration, until three months after the date of its
final resolution), (iii) the agreements made in this Section 7.3 and Article V
shall be continuing, and (iv) if a claim or notice is given under Article VIII
(Indemnification) with respect to any representation or warranty prior to the
applicable expiration date, such representation or warranty shall continue
indefinitely until such claim is finally resolved.

 

ARTICLE
VIII.  INDEMNIFICATION

 

8.1          Obligations
of Sellers.

 

(a)           Each of ILC and
I-Link agree, jointly and severally, to indemnify and hold harmless Buyer and
its directors, officers, stockholders, employees, Affiliates, agents and
assigns from and against any and all Losses directly or indirectly a result of,
or based upon or arising from, (i) any inaccuracy in or breach or
non-performance of any of the representations, warranties, covenants or
agreements made by Sellers in or pursuant to this Agreement, (ii) any other matter
as to which Sellers in other provisions of this Agreement have agreed to
indemnify Buyer, (iii) any claim that the provisions of the WARN Act were not
satisfied, including, but not limited to, any Losses arising from a claim or
determination that the Buyer failed to satisfy any duty or obligation under the
WARN Act arising from Seller’s reduction of staff, (iv) Sellers’ ownership of
the Acquired Assets, operation of the Business, or other activities during the
period prior to the Effective Date, except for any of the Assumed Liabilities,
and (v) claims of stockholders of I-Link based on any transaction, practice, or
action the Sellers effected or participated in, including, but not limited to,
the transactions contemplated by this Agreement.

 

23

 

(b)           Sellers shall have
no liability under this Section 8.1 for any Losses, until the aggregate amount
of all Losses resulting to Buyer and its directors, officers, stockholders,
employees, Affiliates, agents and assigns exceeds $25,000 (the “Allowance”),
after which Sellers shall be liable, jointly and severally, for the entire
amount of the Allowance and any additional Losses in excess of the Allowance.

 

(c)           On the Effective
Date Sellers shall deliver to the escrow agent named in the Escrow Agreement a
certificate representing 25,000 shares of the Buyer Securities, duly endorsed
for transfer or with executed stock powers attached, which will be held and
distributed as provided in the Escrow Agreement in the form adopted by the
Parties prior to Closing.  In the event
Sellers are liable to Buyer under this Section 8.1 for any Losses arising from
Indemnifiable Claims, the amount payable to Buyer shall be satisfied
exclusively by surrender to Buyer and cancellation of Buyer Securities up to a
liquidation value of $250,000 in aggregate Losses on Indemnifiable Claims, and
for any Losses in excess of $250,000 shall be satisfied in cash or cash
equivalents.

 

8.2          Obligations
of Buyer.

 

(a)           Buyer agrees to
indemnify and hold harmless Sellers and their respective directors, officers,
stockholders, employees, Affiliates, agents and assigns from and against any
and all Losses directly or indirectly a result of, or based upon or arising
from, (i) any inaccuracy in or breach or non-performance of any of the
representations, warranties, covenants or agreements made by Buyer in or
pursuant to this Agreement, (ii) the Assumed Liabilities, and (iii) any other
matter as to which Buyer in other provisions of this Agreement has agreed to indemnify
Sellers.

 

(b)           Buyer shall have no
liability under this Section 8.2 for any Losses, until the aggregate amount of
all Losses resulting to Sellers and their respective directors, officers,
stockholders, employees, Affiliates, agents and assigns exceeds $25,000 (the
“Allowance”), after which Buyer shall be liable for the entire amount of the
Allowance and any additional Losses in excess of the Allowance.

 

8.3          Procedure.

 

(a)           Each party entitled
to be indemnified pursuant to Sections 8.1 and 8.2 (an “Indemnified Party”)
shall notify the indemnifying party (“Indemnifying Party”) in writing of any
action against such Indemnified Party in respect of which the Indemnifying
Party is or may be obligated to provide indemnification pursuant to Sections
8.1 and 8.2 promptly after the receipt of notice of the commencement
thereof.  The omission of an Indemnified
Party so to notify the Indemnifying Party of any such action shall not relieve
the Indemnifying Party from any liability which the Indemnifying Party may have
to such Indemnified Party except to the extent the Indemnifying Party shall
have been materially prejudiced by the omission of such Indemnified Party so to
notify the Indemnifying Party, pursuant to this Section 8.3.  In case any such action shall be brought
against any Indemnified Party and it shall notify the Indemnifying Party of the
commencement thereof, the Indemnifying Party shall be entitled to participate
therein and, to the extent that the Indemnifying Party may wish, to assume the
defense thereof, with counsel reasonably satisfactory to such Indemnified
Party, and after notice from the Indemnifying Party to such Indemnified Party
of its election so to assume the defense thereof, the Indemnifying Party will
not be liable to such Indemnified Party under Sections 8.1 and 8.2 for any
legal or other expense subsequently incurred by such Indemnified Party in
connection with the defense thereof nor for any settlement thereof entered into
without the consent of the Indemnifying Party; provided, however, that (i)
if the Indemnifying Party shall elect not to assume the defense of such claim
or action or (ii) if the Indemnified Party reasonably determines (A) that there
may be a conflict between the positions of the Indemnifying Party and of the
Indemnified Party in defending such claim or action or (B) that there may be
legal defenses available to such Indemnified Party different from or in
addition to those available to the Indemnifying Party, then separate counsel
for the Indemnified Party shall be entitled to participate in and conduct the

 

24

 

defense, in
the case of clauses 8.3(a)(i) and (ii)(A) above, or such different defenses, in
the case of clause 8.3(a)(ii)(B) above, and the Indemnifying Party shall be
liable for any reasonable legal or other expenses incurred by the Indemnified
Party in connection with the defense; provided, however, that an Indemnifying
Party shall not be liable for the fees or expenses of more than one counsel to
the Indemnified Parties in connection with any one action or related actions in
respect of which indemnification is sought hereunder.  The Indemnifying Party shall not settle or compromise any action
without the prior written consent of the Indemnified Party, unless (x) such
settlement does not impose any restrictions or limitations on the assets or
operations of the business of such Indemnified Party, (y) all relief provided
is paid or satisfied in full by the Indemnifying Party or an affiliate thereof,
and (z) there is no finding or admission of any violation of law or the rights
of any Person other than the claiming party by any Indemnified Party.

 

(b)           Any amounts payable
by the Indemnifying Party to or on behalf of an Indemnified Party in respect of
a Loss shall be adjusted as follows:

 

(i)            If such Indemnified
Party is liable for any additional Taxes as a result of the payment of amounts
in respect of an Indemnifiable Claim, the Indemnifying Party will pay to the
Indemnified Party in addition to such amounts in respect of the Loss within ten
days after being notified by the Indemnified Party of the payment of such
liability (x) an amount equal to such additional Taxes (the “Tax Reimbursement
Amount”) plus (y) any additional amounts required to pay additional Taxes imposed
with respect to the Tax Reimbursement Amount and with respect to amounts
payable under this clause (y), with the result that the Indemnified Party shall
have received from the Indemnifying Party, net of the payment of Taxes, an
amount equal to the Loss.

 

(ii)           The Indemnified
Party shall reimburse the Indemnifying Party an amount equal to the net
reduction in any year in the liability for Taxes (that are based upon or
measured by income) of the Indemnified Party or any member of a consolidated or
combined tax group of which the Indemnified Party is, or was at any time, part,
which reduction is actually realized with respect to any period after the
Effective Date and which reduction would not have been realized but for the
amounts paid (or any audit adjustment or deficiency with respect thereto, if
applicable) in respect of a Loss, or amounts paid by the Indemnified Party
pursuant to this subsection (a “Net Tax Benefit”).  The amount of any Net Tax Benefit shall be paid not later than 15
days after the date on which such Net Tax Benefit shall be realized.

 

8.4          Survival.

 

This Article
VIII shall survive any termination of this Agreement.  Any matter as to which a claim has been asserted by notice to the
other Party that is pending or unresolved at the end of any applicable
limitation period shall continue to be covered by this Article VIII
notwithstanding any applicable statute of limitations (which the parties hereby
waive) until such matter is finally terminated or otherwise resolved by the
Parties or by a court of competent jurisdiction and any amounts payable
hereunder are finally determined and paid.

 

8.5          Not Exclusive
Remedy.

 

This Article VIII shall not be deemed to preclude or otherwise limit in
any way the exercise of any other rights or pursuit of other remedies for the
breach of this Agreement or with respect to any misrepresentation.

 

8.6          Offset.

 

If any matter
as to which Buyer may be able to assert a claim hereunder is pending or
unresolved at the time any payment is due from Buyer to Sellers under this
Agreement on the Buyer Securities, Buyer

 

25

 

shall have the right, in
addition to other rights and remedies (whether under this Agreement or
applicable Law), to withhold from such payment an amount equal to the amount of
the claim (provided it is then asserted in accordance with the provisions
hereof) until such matters are resolved; provided that Buyer shall not be
entitled to withhold any such payment unless and until the amount of its
potential claims exceeds the dollar amounts of the liability limitation set
forth in Section 8.1(b).  If it is
finally determined that such claims are covered by this Article VIII, the
amount of such claims may be offset against the retained payments and the
remainder, if any, shall be delivered to Sellers pursuant to this Agreement
together with interest on such remainder payable from the date such remainder
was withheld until paid at the rate of 6% per annum.

 

ARTICLE
IX.  GENERAL

 

9.1          Amendments;
Waivers.

 

This Agreement
and any Schedule or Exhibit hereto may be amended only by agreement in writing
of all parties.  No waiver of any
provision nor consent to any exception to the terms of this Agreement shall be
effective unless in writing and signed by the Party to be bound and then only
to the specific purpose, extent and instance so provided.

 

9.2          Schedules; Exhibits; Integration.

 

Each Schedule
and Exhibit delivered pursuant to the terms of this Agreement shall be in
writing and shall constitute a part of this Agreement, although Schedules and
Exhibits need not be attached to each copy of this Agreement.  This Agreement, together with such Schedules
and Exhibits, constitutes the entire agreement among the Parties pertaining to
the subject matter hereof and supersedes all prior agreements and
understandings of the Parties in connection herewith, including, but not
limited to, the letter of intent dated November 6, 2002, among Buyer and
Counsel Springwell Communications LLC.

 

9.3          Best Efforts;
Further Assurances.

 

(a)           Each Party will use its best efforts
to cause all conditions to its obligations hereunder to be timely satisfied and
to perform and fulfill all obligations on its part to be performed and
fulfilled under this Agreement, to the end that the transactions contemplated
by this Agreement shall be effected substantially in accordance with its terms
as soon as reasonably practicable.  The
Parties shall cooperate with each other in such actions and in securing
requisite Approvals.  Each Party shall
execute and deliver both before and after Closing such further certificates,
agreements, instruments of transfer, and other documents and take such other
actions as may be necessary or appropriate to consummate or implement the
transactions contemplated hereby or to evidence such events or matters.

 

(b)           As used in this Agreement, the term
“best efforts” shall not mean efforts which require the performing Party to do
any act that is unreasonable under the circumstances, to make any capital
contribution or to expend any funds other than reasonable out-of-pocket
expenses incurred in satisfying its obligations hereunder, including but not
limited to the fees, expenses and disbursements of its accountants, actuaries,
counsel and other professionals.

 

9.4          Governing Law.

 

(a)           This Agreement, the legal relations
among the Parties and any Action, whether contractual or non-contractual,
instituted by any Party with respect to matters arising under or growing out of
or in connection with or in respect of this Agreement, including but not limited
to the negotiation, execution, interpretation, coverage, scope, performance,
breach, termination, validity or enforceability of this Agreement, shall be
governed by and construed in accordance with the laws of the state of Utah
applicable to contracts made and performed in such state and without regard to
conflicts of law doctrines, except to the extent that certain matters are
preempted by federal law.

 

26

 

(b)           Each Party hereby irrevocably submits
to and accepts for itself and its properties, generally and unconditionally,
the exclusive jurisdiction of and service of process pursuant to the laws of
the state of Utah and the rules of its courts, waives any defense of forum non
conveniens and agrees to be bound by any judgment rendered thereby arising
under or out of in respect of or in connection with this Agreement or any
related document or obligation.  Each
Party further irrevocably designates and appoints the individual identified in
or pursuant to Section 9.12 hereof to receive notices on its behalf, as its
agent to receive on its behalf service of all process in any such Action before
any body, such service being hereby acknowledged to be effective and binding
service in every respect.  A copy of any
such process so served shall be mailed by registered mail to each Party at its
address provided in Section 9.12; provided that, unless otherwise provided
by applicable law, any failure to mail such copy shall not affect the validity
of the service of such process.  If any
agent so appointed refuses to accept service, the designating Party hereby
agrees that service of process sufficient for personal jurisdiction in any
action against it in the applicable jurisdiction may be made by registered or
certified mail, return receipt requested, to its address provided in Section
9.12.  Each Party hereby acknowledges
that such service shall be effective and binding in every respect.  Nothing herein shall affect the right to
serve process in any other manner permitted by Law or shall limit the right of
any Party to bring any Action against any other Party in any other
jurisdiction, except to the extent expressly otherwise provided in this Section
9.4.

 

9.5          No Assignment.

 

Neither this
Agreement nor any rights or obligations under it are assignable.

 

9.6          Headings.

 

The
descriptive headings of the Articles, Sections and subsections of this
Agreement are for convenience only and do not constitute a part of this
Agreement.

 

9.7          Counterparts.

 

This Agreement
and any amendment hereto or any other agreement (or document) delivered
pursuant hereto may be executed in one or more counterparts and by different
Parties in separate counterparts.  All
of such counterparts shall constitute one and the same agreement (or other
document) and shall become effective (unless otherwise provided therein) when
each Party has signed one or more counterparts and the signature pages
delivered to the other Parties.

 

9.8          Publicity and
Reports.

 

I-Link and
Buyer shall coordinate all publicity relating to the transactions contemplated
by this Agreement and no Party shall issue any press release, publicity
statement or other public notice relating to this Agreement, or the
transactions contemplated by this Agreement, without, in the case of Sellers, I-Link,
and ILC obtaining the prior consent of Buyer and, in the case of Buyer,
obtaining the prior consent of I-Link, except to the extent that independent
legal counsel to I-Link or Buyer, as the case may be, shall deliver a written
opinion to the other Party (I-Link and ILC being considered a single Party for
such purpose) that a particular action is required by applicable law.

 

9.9          Confidentiality.

 

All
information disclosed in writing and designated in writing as confidential by
any Party whether before or after the date hereof in connection with the
transactions contemplated by or the discussions and negotiations preceding this
Agreement to any other Party shall be kept confidential by such other Party and
shall not be used, directly or through an Affiliate, by any Party other than as
contemplated by this Agreement, except to the extent that such information (i)
was known by the recipient when received, (ii) is or hereafter becomes lawfully
obtainable from other sources, (iii) is necessary or appropriate to disclose to
a Governmental Entity having jurisdiction over the Party, (iv) as may otherwise

 

27

 

be required by law or (v) to
the extent such duty as to confidentiality is waived in writing by the other Party.  If this Agreement is terminated in
accordance with its terms, each Party (ILC and I-Link being considered a single
Party for such purpose) shall use all reasonable efforts to return upon written
request from the other Party all documents (and reproductions thereof) received
by it or its representatives from such other Party (and, in the case of
reproductions, all such reproductions made by the receiving Party) that include
information not within the exceptions contained in the first sentence of this Section
9.9, unless the recipients provide assurances reasonably satisfactory to the
requesting Party that such documents have been destroyed.

 

9.10        Parties in
Interest.

 

This Agreement
shall be binding upon and inure to the benefit of each Party, and nothing in
this Agreement, express or implied, is intended to confer upon any other Person
any rights or remedies of any nature whatsoever under or by reason of this
Agreement, except for Sections 8.l and 8.2 (which are intended to be for the
benefit of the Persons provided for therein and may be enforced by such
Persons).  Nothing in this Agreement is
intended to relieve or discharge the obligation of any third Person to any
Party to this Agreement.

 

9.11        Notices.

 

Any notice or
other communication hereunder must be given in writing and (a) delivered in
person, (b) transmitted by telex, telefax or telecommunications mechanism,
provided that any notice so given is also mailed as provided in clause (c), or
(c) mailed (postage prepaid), receipt requested as follows:

 

	
  If to Buyer,
  addressed to:

  	
  Buyers
  United, Inc.

  14870 Pony Express Road

  Bluffdale, Utah 84065

  Telecopy:  (801) 320-3312

  Attention:  Paul Jarman, Executive
  Vice President

  
	
   

  	
   

  
	
  With a copy
  to:

  	
  Cohne,
  Rappaport & Segal, P.C.

  525 East 100 South, 5th Floor

  Salt Lake City, Utah 84102

  Telecopy:  (801) 355-1813

  Attention:  Mark E. Lehman, Esq.

  
	
   

  	
   

  
	
  If to ILC,
  addressed to:

  	
  I-Link
  Communications Inc.

  13751 S. Wadsworth Park Drive, Suite 200

  Draper, Utah 84020

  Telecopy:  (801) 576-5000

  Attention:  Helen Seltzer, President

  
	
   

  	
   

  
	
  If to
  I-Link, addressed to:

  	
  I-Link
  Incorporated

  13751 S. Wadsworth Park Drive, Suite 200

  Draper, Utah 84020

  Telecopy:  (801) 576-5000

  Attention:  Helen Seltzer, President

  

 

or to such other address or to
such other Person as a Party shall have last designated by such notice to the
other Parties.  Each such notice or
other communication shall be effective (i) if given by facsimile, when
transmitted to the applicable number so specified in (or pursuant to) this
Section 9.11 and an appropriate answerback is received, (ii) if given by mail,
three days after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iii) if given by any other means,
when actually received at such address.

 

28

 

9.12        Expenses.

 

ILC and I-Link
(taken as a single Party for purposes of this Section 9.12) and Buyer shall
each pay their own expenses incident to the negotiation, preparation and
performance of this Agreement and the transactions contemplated hereby,
including but not limited to the fees, expenses and disbursements of their
respective accountants and counsel (“Transaction Costs”).

 

9.13        Remedies; Waiver.

 

To the extent
permitted by Law, all rights and remedies existing under this Agreement and any
related agreements or documents are cumulative to and not exclusive of, any
rights or remedies otherwise available under applicable Law.  No failure on the part of any Party to
exercise or delay in exercising any right hereunder shall be deemed a waiver
thereof, nor shall any single or partial exercise preclude any further or other
exercise of such right or any other right.

 

9.14        Attorney’s
Fees.

 

In the event
of any Action by any Party arising under or out of, in connection with or in
respect of this Agreement, including any participation in bankruptcy
proceedings to enforce against a Party a right or claim in such proceedings,
the prevailing party shall be entitled to reasonable attorney’s fees, costs and
expenses incurred in such Action. 
Attorney’s fees incurred in enforcing any judgment in respect of this
Agreement are recoverable as a separate item. 
The Parties intend that the preceding sentence be severable from the
other provisions of this Agreement, survive any judgment and, to the maximum
extent permitted by law, not be deemed merged into such judgment.

 

9.15        Knowledge
Convention.

 

Whenever any
statement herein or in any Schedule, Exhibit, certificate or other documents
delivered to any Party pursuant to this Agreement is made to the Knowledge of
such Party, such Party makes such statement based upon actual knowledge of the
officers of such Party having responsibility for such matters without
conducting an independent investigation of the subject matter thereof.

 

9.16        Representation By Counsel; Interpretation.

 

ILC, I-Link,
and Buyer acknowledge that each Party has been represented by counsel in
connection with this Agreement and the transactions contemplated by this
Agreement.  Accordingly, any applicable
rule of Law or any legal decision that would require interpretation of any
claimed ambiguities in this Agreement against the Party that drafted it has no
application and is expressly waived. 
The provisions of this Agreement shall be interpreted in a reasonable
manner to effect the intent of the Parties.

 

9.17        Specific Performance.

 

I-Link, ILC,
and Buyer acknowledge that, in view of the uniqueness of the Business and the
transactions contemplated by this Agreement, each such Party would not have an
adequate remedy at law for money damages in the event that this Agreement has
not been performed in accordance with its terms, and therefore agrees that the
other Party shall be entitled to specific enforcement of the terms hereof in
addition to any other remedy to which it may be entitled, at law or in equity.

 

9.18        Severability.

 

If any
provision of this Agreement is determined to be invalid, illegal or
unenforceable by any Governmental Entity, the remaining provisions of this
Agreement to the extent permitted by Law shall remain in full force and effect
provided that the economic and legal substance of the transactions contemplated
is not affected in any manner materially adverse to any Party.  In the event of any such determination, the Parties
agree to negotiate in good faith to modify this Agreement to fulfill as closely
as possible the original intents and purposes hereof.  To the extent permitted by Law, the Parties hereby to the

 

29

 

same extent waive any provision
of Law that renders any provision hereof prohibited or unenforceable in any
respect.

 

IN WITNESS WHEREOF,
each of the Parties hereto has caused this Agreement to be executed by its duly
authorized officers as of the day and year first above written.

 

	
  BUYERS UNITED, INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Theodore
  Stern, Chief Executive Officer

  
	
   

  
	
   

  
	
  I-LINK COMMUNICATIONS INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Gary J.
  Wasserson, Director

  
	
   

  
	
   

  
	
  I-LINK INCORPORATED

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Gary J.
  Wasserson, Director

  

 

30Exhibit 10.29

 

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

 

I-LINK INCORPORATED

CONVERTIBLE PROMISSORY NOTE

 

	
  $7,500,000

  	
   

  	
  December 10, 2002

  

 

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

 

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

 

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

 

3. Defaults and Remedies.

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

4. Conversion.

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

	
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