Document:

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                                                                    Exhibit 10.3

                              FREEI NETWORKS, INC.

                            SUMMARY PLAN DESCRIPTION
                                       FOR
                        FREEI NETWORKS, INC. 401(k) PLAN

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                                TABLE OF CONTENTS

                                        I
                            INTRODUCTION TO YOUR PLAN

                                       II
                       GENERAL INFORMATION ABOUT YOUR PLAN

1.   General Plan Information ................................................1
2.   Employer Information ....................................................2
3.   Plan Administrator Information ..........................................2
4.   Plan Trustee Information ................................................3
5.   Service of Legal Process ................................................3

                                       III
                           PARTICIPATION IN YOUR PLAN

1.   Eligibility Requirements. ...............................................3
2.   Participation Requirements ..............................................4

                                       IV
                           CONTRIBUTIONS TO YOUR PLAN

1.   Employer Contributions to the Plan ......................................4
2.   Participant Salary Reduction Election....................................5
3.   Your Share of Employer Contributions.....................................6
4.   Compensation.............................................................7
5.   Forfeitures..............................................................7
5.   Transfers From Qualified Plans (Rollovers)...............................7
7.   Directed Investments ....................................................8

                                        V
                            BENEFITS UNDER YOUR PLAN

1.   Distribution of Benefits Upon Normal Retirement..........................8
2.   Distribution of Benefits Upon Late Retirement ...........................8
3.   Distribution of Benefits Upon Death......................................8
4.   Distribution of Benefits Upon Disability.................................9
5.   Distribution of Benefits Upon Termination of Employment..................9
6.   Vesting in Your Plan.....................................................10

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7.   Benefit Payment Options .................................................10
8.   Hardship Distribution of Benefits........................................11
9.   Treatment of Distributions From Your Plan................................12
10.  Domestic Relations Order.................................................12
11.  Pension Benefit Guaranty Corporation.....................................13

                                       VI
                              YEAR OF SERVICE RULES

1.   Year of Service and Hour of Service .....................................13
2.   1-Year Break in Service .................................................14

                                       VII
                           YOUR PLAN'S TOP HEAVY RULES

1.   Explanation of Top Heavy Rules ..........................................15

                                      VIII
                                      LOANS

1.   Loan Requirements........................................................15

                                       IX
                    CLAIMS BY PARTICIPANTS AND BENEFICIARIES

1.   The Claims Review Procedure..............................................17

                                        X
                            STATEMENT OF ERISA RIGHTS

1.   Explanation of Your ERISA Rights.........................................18

                                       XI
                     AMENDMENT AND TERMINATION OF YOUR PLAN

1.   Amendment................................................................19
2.   Termination..............................................................19

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                        FREEI NETWORKS, INC. 401(K) PLAN

                            SUMMARY PLAN DESCRIPTION

                                        I
                            INTRODUCTION TO YOUR PLAN

       Freei Networks, Inc. wishes to recognize the efforts its employees have
made to its success and to reward them by adopting a 401(k) Profit Sharing Plan
and Trust. This 401(k) Profit Sharing Plan and Trust will be for the exclusive
benefit of eligible employees and their beneficiaries.

       Your Plan is a "salary reduction plan." It is also called a "401(k)
plan." Under this type of plan, you may choose to reduce your compensation and
have these amounts contributed to this Plan on your behalf.

       The purpose of this Plan is to reward eligible employees for long and
loyal service by providing them with retirement benefits.

       Between now and your retirement, your Employer intends to make
contributions for you and other eligible employees. When you retire, you will be
eligible to receive the value of the amounts which have accumulated in your
account.

       This Summary Plan Description is a brief description of your Plan and
your rights, obligations, and benefits under that Plan. Some of the statements
made in this Summary Plan Description are dependent upon this Plan being
"qualified" under the provisions of the Internal Revenue Code. This Summary Plan
Description is not meant to interpret, extend, or change the provisions of your
Plan in any way. The provisions of your Plan may only be determined accurately
by reading the actual Plan document, including the Adoption Agreement.

       A copy of your Plan and the Adoption Agreement are on file at your
Employer's office and may be read by you, your beneficiaries, or your legal
representatives at any reasonable time. If you have any questions regarding
either your Plan, the Adoption Agreement or this Summary Plan Description, you
should ask your Plan's Administrator. In the event of any discrepancy between
this Summary Plan Description and the actual provisions of the Plan, the Plan
will govern.

                                       II
                       GENERAL INFORMATION ABOUT YOUR PLAN

       There is certain general information which you may need to know about
your Plan. This information has been summarized for you in this Section.

1.     General Plan Information

       Freei Networks, Inc. 401(k) Plan Is the name of your Plan.

       Your Employer has assigned Plan Number 001 to your Plan.

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       The provisions of your Plan become effective on February 1, 1999, which
is called the Effective Date of the Plan.

       Your Plan's records are maintained on a twelve-month period of time. This
is known as the Plan Year. The Plan Year begins on January I and ends on
December 31, except that the Plan Year beginning on February 1, 1999 is a short
Plan Year ending on December 31, 1999.

       Certain valuations and distributions are made on the Anniversary Date of
your Plan. This date is December 31.

       The contributions made to your Plan will be held and invested by the
Trustee of your Plan.

       Your Plan and Trust will be governed by the laws of the State of
Washington.

2.     Employer Information

       Your Employer's name, address and identification number are:

       Freei Networks, Inc.
       909 South 336th Street, Suite 201
       Federal Way, Washington 98003
       91-1930473

       Your Plan allows other employers to adopt its provisions. You or your
beneficiaries may examine or obtain a complete list of employers, if any, who
have adopted your Plan by making a written request to the Administrator.

3.     Plan Administrator Information

       The name, address and business telephone number of your Plan's
Administrator are:

       Freei Networks, Inc.
       909 South 336th Street, Suite 201
       Federal Way, Washington 98003
       (253) 796-6501

       Your Plan's Administrator keeps the records for the Plan and is
responsible for the administration of the Plan. The Administrator has
discretionary authority to construe the terms of the Plan and make
determinations on questions which may affect your eligibility for benefits. Your
Plan's Administrator will also answer any questions you may have about your
Plan.

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4.     Plan Trustee Information

       The names of your Plan's Trustees are:

       Robert McCausland
       Donna Hyder

       The Trustees will collectively be referred to as Trustee throughout this
Summary Plan Description.

       The principal place of business of your Plan's Trustee is:

       909 South 336th Street, Suite 201
       Federal Way, Washington 98003

       Your Plan's Trustee has been designated to hold and invest Plan assets
for the benefit of you and other Plan participants. The trust fund established
by the Plan's Trustee will be the funding medium used for the accumulation of
assets from which benefits will be distributed.

5.     Service of Legal Process

       The name and address of your Plan's agent for service of legal process
are:

       Freei Networks, Inc.
       909 South 336th Street, Suite 201
       Federal Way, Washington 98003

       Service of legal process may also be made upon the Trustee or
Administrator.

                                       III
                           PARTICIPATION IN YOUR PLAN

       Before you become a member or a "participant" in the Plan, there are
certain eligibility and participation rules which you must meet. These rules are
explained in this Section.

1.     Eligibility Requirements

       You will participate in the Plan at, of the Effective Date of the Plan
which is February 1 1999 if you were employed on such date, Otherwise, you will
be eligible to participate in the Plan if you have completed three months and
have attained age 21.

       You should review the Article In this Summary entitled "YEAR OF SERVICE
RULES" for a, further explanation of these eligibility requirements.

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2.     Participation Requirements

       Once you have satisfied your Plan's eligibility requirements, your next
step will be to actually become a member or a "participant" in the Plan. You
will become a participant on a specified day of the Plan Year. This day is
called the Effective Date of Participation.

       Your effective Date of Participation is the First of each Calendar
Quarter, provided you satisfy the eligibility requirements.

                                       IV
                           CONTRIBUTIONS TO YOUR PLAN

1.     Employer Contributions to the Plan

       Each year, your Employer will contribute to your Plan the following
amounts:

              (a)    The total amount of the salary reduction you elected to
       defer. (See the Section in this Article entitled "Participant Salary
       Reduction Election.")

              (b)    A discretionary matching contribution equal to a percentage
       of the amount of the salary reduction you elected to defer, which
       percentage will be determined each year by the Employer.

       However, in applying this matching percentage, only salary reductions up
       to 6% of your compensation will be considered.

              For a participant to qualify for a matching contribution, the
              following conditions apply:

              - If you are actively employed on the last day of the Plan Year,
              you will share regardless of the number of Hours of Service
              credited during the Plan Year.

              - If you terminate employment (not actively employed on the last
              day of the Plan Year), you will receive a matching contribution
              regardless of the number of Hours of Service credited for the Plan
              Year.

                     - You will share in the matching contribution for the year
                     regardless of the number of Hours of Service credited in
                     the year of your death, disability or retirement.

              (c)    On behalf of each participant, a special discretionary
       contribution equal to a percentage of your compensation. This
       contribution is not required, but if such a contribution is made the
       percentage contributed will be determined each year by the, Employer.

              (d)    A discretionary amount in addition to the special
       contribution, which amount, if any, will be determined each year by your
       Employer.

       For a participant to qualify for the discretionary and special
contributions, the following conditions apply:

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              - If you are actively employed on the last day of the Plan Year,
              you will share regardless of the number of Hours of Service
              credited during the Plan Year.

              - If you terminate employment (not actively employed on the last
              day of the Plan Year), you must be credited with more than 500
              Hours of Service.

              - You will share for the year regardless of the number of Hours of
              Service credited in the year of your death, disability or
              retirement.

2.     Participant Salary Reduction Election

       As a participant, you may elect to defer up to 18% of your compensation
each year instead of receiving that amount in cash. However, your total
deferrals in any taxable year may not exceed a dollar limit which is set by law.
The limit for 1999 is $10,000. This limit will be increased in future years for
cost of living changes.

       You may elect to defer your salary as of January 1, April 1, July 1,
October 1. Such election will become effective as soon as administratively
feasible. Your election will remain in effect until you modify or terminate it.
You may modify your election as of January 1, April 1, July 1, October 1 of any
year. The modification will become effective as soon as administratively
feasible.

       The amount you elect to defer, and any earnings on that amount, will not
be subject to income tax until it is actually distributed to you. This money
will, however, be subject to Social Security taxes at all times.

       You should also be aware that the annual dollar limit is an aggregate
limit which applies to all deferrals you may make under this plan or other cash
or deferred arrangements (including tax-sheltered 403(b) annuity contracts,
simplified employee pensions or other 401(k) plans in which you may be
participating). Generally, if your total deferrals under all cash or deferred
arrangements for a calendar year exceed the annual dollar limit, the excess must
be included in your income for the year. For this reason, it is desirable to
request in writing that these excess deferrals be returned to you. If you fail
to request such a return, you may be taxed a second time when the excess
deferral is ultimately distributed from the Plan.

       You must decide which plan or arrangement you would like to have return
the excess. If you decide that the excess should be distributed from this Plan,
you should communicate this in writing to the Administrator no later than the
March 1st following the close of the calendar year in which such excess
deferrals were made. The Administrator may then return the excess deferral and
any earnings to you by April 15th.

       In the event you receive a hardship distribution from your deferrals to
this Plan or any other plan maintained by your Employer, you will not be allowed
to make additional salary reductions for a period of twelve (12) months after
you receive the distribution, Furthermore, the dollar limitation set by law with
respect to your taxable year following the year in which you received the
distribution will be reduced by your salary reductions, If any, for the taxable
year of the distribution.

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       You will always be 100% vested in the amount you deferred. This means
that you will always be entitled to all of the deferred amount. This money will,
however, be affected by any investment gains or losses. If the Trustee invested
this money and there was a gain, the balance in your account would increase, Of
course, if there was a loss, the balance in your account would decrease.

       Distributions from your deferred account are not permitted before age
59 1/2 EXCEPT in the event of:

              (a)    death;

              (b)    disability;

              (c)    termination of employment; or

              (d)    reasons of proven financial hardship (See the Section in
       Article V entitled "Hardship Distribution of Benefits").

       In addition, if you are a highly compensated employee (generally owners,
officers or individuals receiving wages in excess of certain amounts established
by law), a distribution from your deferred account of certain excess
contributions may be required to comply with the law. The Administrator will
notify you when a distribution is required.

3.     Your Share of Employer Contributions

       Your Employer will allocate the amount you elect to defer to an account
maintained on your behalf.

       If you are eligible, your Employer will also allocate the matching
contribution and the special contribution made to the Plan on your behalf. (See
the Section in this Article entitled "Employer Contributions to the Plan.")

       Your Employees discretionary contribution will be "allocated" or divided
among participants eligible to share in the contribution for the Plan Year. Your
share of the contribution will depend upon how much compensation you received
during the year and the compensation received by other eligible participants.

       Your share of your Employer's discretionary contribution is determined by
the following fraction:

                                                      Your Compensation
                      Employer's           X
              Discretionary Contribution      ---------------------------------
                                                   Total Compensation of All
                                                   Participants Eligible to
                                                             Share

       For example:

       Suppose the Employer's discretionary contribution for the Plan Year is
       $20,000. Employee A's compensation for the Plan Year is $25,000. The
       total compensation of

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       all participants eligible to share, including Employee A, is $250,000.
       Employee A's share will be:

                         $20,000     X     $25,000    or   $2,000
                                        ------------
                                          $250,000

       In addition to the Employer's contributions made to your account, your
account, will be credited annually with a share of the investment earnings or
losses of the trust fund.

       You should also be aware that the law imposes certain limits on how much
money may be allocated to your account for a year. These limits are extremely
complex, but generally no more than the lesser of $30,000 or 25% of your
compensation may be allocated to you (excluding earnings) in any year. The
Administrator will inform you if these limits have affected you.

4.     Compensation

       For the purposes of your Plan, compensation has a special meaning.
Compensation is defined as your total salary, wages and other amounts which are
includible in your income for purposes of income taxes that is paid during the
Plan Year.

       In addition, salary reduction contributions to any cafeteria plan, tax
sheltered annuity, SEP or 401(k) plan will be included as compensation for Plan
purposes.

       For the first year of your participation in the Plan, your compensation
will be recognized for benefit purposes for the entire Plan Year.

       For the Plan Year beginning in 1997 and for Plan Years thereafter, the
Plan, by law, cannot recognize compensation in excess of $160,000. This amount
will be adjusted in future years for cost of living increases. It will also be
applied to certain highly compensated employees and their family members as if
they were a single participant. If you or a member of your family may be
affected by this rule, ask your Administrator for further details.

5.     Forfeitures

       Forfeitures are created when participants terminate employment before
becoming entitled to their full benefits under the Plan, Your account may grow
from the forfeitures of other participants. Forfeitures will be "allocated" or
divided among participants eligible to share for a Plan Year. However, a portion
of forfeited amounts will be used to reduce your Employers contributions to the
Plan.

6.     Transfers From Qualified Plans (Rollovers)

       At the discretion of the Administrator, you may be permitted to deposit
into your Plan distributions you have received from other plans. Such a deposit
Is called a "rollover" and may result in tax savings to you. You should consult
qualified counsel to determine if a rollover is in your best interest.

                                        7

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       Your rollover will be placed in a separate account called a
"participant's rollover account." The Administrator may establish rules for
investment.

       You will always be 100% vested in your "rollover account." This means
that you will always be entitled to all of your rollover contributions. Rollover
contributions will be affected by any investment gains or losses, If the Trustee
invested this money and there was a gain, the balance in your account would
increase. Of course, if there was a loss from an investment, the balance in your
account would decrease.

7.     Directed Investments

       The Administrator may establish rules for investment of your account
balance. If the Administrator approves, you may direct the investment of your
account balance.

                                        V
                            BENEFITS UNDER YOUR PLAN

1.     Distribution of Benefits Upon Normal Retirement

       Your Normal Retirement Date is the first day of the month coinciding with
or next following your 65th birthday (Normal Retirement Age).

       At your Normal Retirement Age, you will be entitled to 100% of your
account balance. Payment of your benefits will begin as soon as practicable
following your Normal Retirement Date.

2.     Distribution of Benefits Upon Late Retirement

       You may remain employed past your Plan's Normal Retirement Date and
retire instead on your Late Retirement Date. Your Late Retirement Date is the
first day of the month coinciding With or next following the date you choose to
retire after first having reached your Normal Retirement Date, On your Late
Retirement Date, you will be entitled to 100% of your account balance. Actual
benefit payments will begin as soon as practicable following your Late
Retirement Date.

3.     Distribution of Benefits Upon Death

       Your beneficiary will be entitled to a single lump-sum distribution of
100% of your account balance upon your death.

       If you are married at the time of your death, your spouse will be the
beneficiary of the death benefit, unless you otherwise elect in writing on a
form to be furnished to you by the Administrator. IF YOU WISH TO DESIGNATE A
BENEFICIARY OTHER THAN YOUR SPOUSE, HOWEVER, YOUR SPOUSE MUST IRREVOCABLY
CONSENT TO WAIVE ANY RIGHT TO THE DEATH BENEFIT YOUR SPOUSE'S CONSENT MUST BE IN
WRITING, BE WITNESSED BY A NOTARY OR A PLAN REPRESENTATIVE AND ACKNOWLEDGE THE
SPECIFIC NONSPOUSE BENEFICIARY.

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       If, however,

              (a)    your spouse has validly waived any right to the death
       benefit in the manner outlined above,

              (b)    your spouse cannot be located, or

              (c)    you are not married at the time of your death,

then your death benefit will be paid to the beneficiary of your own choosing in
a single lump sum. You may designate the beneficiary on a form to be supplied to
you by the Administrator. If you change your designation, your spouse must again
consent to the change.

       Regardless of the method of distribution selected, your entire death
benefit must generally be paid to your beneficiaries within five years after
your death (the "5-year rule"). However, if your designated beneficiary is a
person (instead of your estate or most trusts), then you or your beneficiary may
elect to have minimum distributions begin within one year of your death and it
may be paid over the designated beneficiary's life expectancy (the "1-year
rule"). If your spouse is the beneficiary, then under the "1-year rule" the
start of payments may be delayed until the year in which you would have attained
age 70 1/2, The election to have death benefits distributed under the "1 -year
rule" instead of the "5-year rule" must be made no later than the time at which
minimum distributions must commence under the "l-year rule" (or, in the case of
a surviving spouse, the "5-year rule," if earlier).

       Since your spouse participates in these elections and has certain rights
in the death benefit, you should immediately report any change in your marital
status to the Administrator.

4.     Distribution of Benefits Upon Disability

       Under your Plan, disability is defined as a physical or mental condition
resulting from bodily injury, disease, or mental disorder which renders you
incapable of continuing any gainful occupation with your Employer. Your
disability will be determined by a licensed physician chosen by the
Administrator. However, if your condition constitutes total disability under the
federal Social Security Act, then the Administrator may deem that you are
disabled for purposes of the Plan.

       If you become disabled while a participant, you will be entitled to 100%
of your account balance. Payment of your disability benefits will be made to you
as if you had retired. (See the Section in this Article entitled "Benefit
Payment Options.")

5.     Distribution of Benefits Upon Termination of Employment

       Your Plan is designed to encourage you to stay with your Employer until
retirement. Payment of your account balance under your Plan is generally only
available upon your death, disability or retirement.

       If your employment terminates for reasons other than those listed above,
you will, be entitled to receive only your "vested percentage" of your account
balance and the remainder

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of your account will be forfeited. Only contributions made by your Employer are
subject to forfeiture. (See the Section in this Article entitled "Vesting in
Your Plan.")

       If you so elect, the Administrator will direct the Trustee to distribute
your vested benefit to you before the date it would normally be distributed
(upon your death, disability or retirement). If your vested benefit under the
Plan at the time of any prior distribution exceeded $3,500 or currently exceeds
$3,500, you must give written consent before the distribution may be made.
Amounts of $3,500 or less will be distributed without the need for consent.

       Under the Plan's administrative procedures, if the value of your vested
account is zero, any non-vested account balance will be forfeited immediately.

6.     Vesting in Your Plan

       Your "vested percentage" in your account is determined under the
following schedule and is based on vesting Years of Service. You will always,
however, be 100% vested upon your Normal Retirement Age. (See the Section in
this Article entitled "Distribution of Benefits Upon Normal Retirement.")

<TABLE>
<CAPTION>

                                Vesting Schedule
              Years of Service                         Percentage

<S>                   <C>                                 <C>
                      2                                    20%
                      3                                    40%
                      4                                    60%
                      5                                    80%
                      6                                   100%

</TABLE>

       Regardless of this vesting schedule, you are always 100% vested in your
salary reduction amounts contributed to the Plan.

       Additionally, you are always 100% vested in your Employer's special
contributions made to the Plan.

7.     Benefit Payment Options

       At the time you are entitled to receive a distribution under the Plan,
the Administrator will direct the distribution of your benefits to you in one
lump-sum cash payment.

       GENERALLY, WHENEVER A DISTRIBUTION IS TO BE MADE TO YOU ON OR BEFORE
AN ANNIVERSARY DATE, IT MAY BE POSTPONED BY THE PLAN FOR A PERIOD OF UP TO 180
DAYS, FOR ADMINISTRATIVE CONVENIENCE. HOWEVER, UNLESS YOU ELECT IN WRITING TO
DEFER THE RECEIPT OF BENEFITS, NO DISTRIBUTION MAY BEGIN LATER THAN THE 60TH DAY
AFTER THE CLOSE OF THE PLAN YEAR IN WHICH THE LATEST OF THE FOLLOWING EVENTS
OCCURS;

              (a)    the date on which you reach the age of 65 or your Normal
       Retirement Age;

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<PAGE>

              (b)    the 10th anniversary of the year in which you became a
       participant in the Plan;

              (c)    the date you terminated employment with your Employer.

       Regardless of whether you elect to delay the receipt of benefits, there
are other rules which generally require minimum payments to begin no later than
the April 1st following the year in which you reach age 70 1/2. You should see
the Administrator if you feel you may be affected by this rule.

8.     Hardship Distribution of Benefits

       The Administrator may direct the Trustee to distribute up to 100% of your
account balance in the event of immediate and heavy financial need. This
hardship distribution is not in addition to your other benefits and will
therefore reduce the value of the benefits you will receive at normal
retirement.

       Withdrawal will be authorized only if the distribution is to be used for
one of the following purposes:

              (a)    The payment of medical expenses (described in Section
       213(d) of the Internal Revenue Code) previously incurred by you or your
       dependent or necessary for you or your dependent to obtain medical care;

              (b)    The costs directly related to the purchase of your
       principal residence (excluding mortgage payments);

              (c)    The payment of tuition and related educational fees for the
       next twelve (12) months of post-secondary education for yourself, your
       spouse or dependent;

              (d)    The payment necessary to prevent your eviction from your
       principal residence or foreclosure on the mortgage of your principal
       residence.

       There are restrictions placed on hardship distributions which are made
from certain accounts. These accounts are generally the accounts which receive
your salary reduction contributions and other Employer contributions which are
used to satisfy special rules that apply to 401(k) plans. Any hardship
distribution from these accounts will be limited to your salary reduction
contributions. Ask your Administrator if you need further details.

       In addition, a distribution will be made from these accounts only if you
certify and agree that all of the following conditions are satisfied:

              (a)    The distribution is not in excess of the amount of your
       immediate and heavy financial need;

              (b)    You have obtained all distributions, other than hardship
       distributions, and all nontaxable loans currently available under all
       plans maintained by your Employer;

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<PAGE>

              (c)    That your elective contributions and employee contributions
       will be suspended for at least twelve (12) months after your receipt of
       the hardship distribution; and

              (d)    That you will not make elective contributions for your
       taxable year immediately following the taxable year of the hardship
       distribution, except to the extent permitted by the Plan.

9.     Treatment of Distributions From Your Plan

       Whenever you receive a distribution from your Plan, it will normally be
subject to income taxes. You may, however, reduce, or defer entirely, the tax
due on your distribution through use of one of the following methods:

              (a)    The rollover of all or a portion of the distribution to an
       Individual Retirement Account (IRA) or another qualified employer plan.
       This will result in no tax being due until you begin withdrawing funds
       from the IRA or other qualified employer plan. The rollover of the
       distribution, however, MUST be made within strict time frames (normally,
       within 60 days after you receive your distribution). Under certain
       circumstances all or a portion of a distribution may not qualify for this
       rollover treatment. In addition, most distributions will be subject to
       mandatory federal income tax withholding at a rate of 20%. This will
       reduce the amount you actually receive. For this reason, if you wish to
       roll over all or a portion of your distribution amount, the direct
       transfer option described in paragraph (b) below would be the better
       choice.

              (b)    You may request that a direct transfer of all or a portion
       of your distribution amount be made to either an Individual Retirement
       Account (IRA) or another qualified employer plan willing to accept the
       transfer. A direct transfer will result in no tax being due until you
       withdraw funds from the IRA or other qualified employer plan. Like the
       rollover, under certain circumstances all or a portion of the amount to
       be distributed may not qualify for this direct transfer. If you elect to
       actually receive the distribution rather than request a direct transfer,
       then in most cases 20% of the distribution amount will be withheld for
       federal income tax purposes.

              (c)    The election of favorable income tax treatment under
       "10-year forward averaging," "5-year forward averaging" or, if you
       qualify, "capital gains" method of taxation.

       WHENEVER YOU RECEIVE A DISTRIBUTION, THE ADMINISTRATOR WILL DELIVER TO
YOU A MORE DETAILED EXPLANATION OF THESE OPTIONS. HOWEVER, THE RULES WHICH
DETERMINE WHETHER YOU QUALIFY FOR FAVORABLE TAX TREATMENT ARE VE RY COMPLEX. YOU
SHOULD CONSULT WITH QUALIFIED TAX COUNSEL BEFORE MAKING A CHOICE.

10.    Domestic Relations Order

       As a general rule, your interest in your account, including your "vested
interest," may not be alienated. This means that your interest may not be sold,
used as collateral for a

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loan, given away or otherwise transferred. In addition, your creditors may not
attach, garnish or otherwise interfere with your account.

       There is an exception, however, to this general rule. The Administrator
may be required by law to recognize obligations you incur as a result of court
ordered child support or alimony payments. The Administrator must honor a
"qualified domestic relations order." A "qualified domestic relations order" is
defined as a decree or order issued by a court that obligates you to pay child
support or alimony, or otherwise allocates a portion of your assets in the Plan
to your spouse, former spouse, child or other dependent. If a qualified domestic
relations order is received by the Administrator, all or a portion of your
benefits may be used to satisfy the obligation. The Administrator will determine
the validity of any domestic relations order received.

11.    Pension Benefit Guaranty Corporation

       Benefits provided by your Plan are NOT insured by the Pension Benefit
Guaranty Corporation (PBGC) under Title IV of the Employee Retirement Income
Security Act of 1974 because the insurance provisions under ERISA are not
applicable to your Plan.

                                       VI
                              YEAR OF SERVICE RULES

1.     Year of Service and Hour of Service

       The term "Year of Service" is used throughout this Summary Plan
Description and throughout your Plan. A Year of Service for eligibility purposes
is defined as follows:

       You will have completed a Year of Service if, at the end of your first
twelve consecutive months of employment with your Employer, you have been
credited with 1000 Hours of Service.

       You will have completed a Year of Service for vesting purposes if you are
credited with 1000 Hours of Service during a Plan Year, even if you were not
employed on the first or last day of the Plan Year.

       An "Hour of Service" has a special meaning for Plan purposes. You will be
credited with an Hour of Service for:

              (a)    each hour for which you are directly or indirectly
       compensated by your Employer for the performance of duties during the
       Plan Year;

              (b)    each hour for which you are directly or indirectly
       compensated by your Employer for reasons other then performance of duties
       (such as vacation, holidays, sickness, disability, lay-off, military
       duty, jury duty or leave of absence during the Plan Year); and

              (c)    each hour for back pay awarded or agreed to by your
       Employer.

       You will not be credited for the same Hours of Service both under (a) or
(b), as the case may be, and under (c).

                                       13

<PAGE>

2.     1-Year Break in Service

       A 1-Year Break in Service is a computation period during which you have
not completed more than 500 Hours of Service with your Employer.

       A 1-Year Break in Service does NOT occur, however, in the computation
period in which you enter or leave the Plan for reasons of:

              (a)    an authorized leave of absence;

              (b)    certain maternity or paternity absences.

       The Administrator will be required to credit you with Hours of Service
for a maternity or paternity absence. These are absences taken on account of
pregnancy, birth, or adoption of your child. No more than 501 Hours of Service
will be credited for this purpose and these Hours of Service will be credited
solely to avoid your incurring a 1-Year Break in Service. The Administrator may
require you to furnish proof that your absence qualifies as a maternity or
paternity absence.

       These break in service rules may be illustrated by the following
examples:

       Employee A works 300 hours in a Plan Year. At the end of the Plan Year,
Employee A will have a 1-Year Break in Service because she has worked less than
501 hours in a Plan Year. Employee B works 300 hours in a Plan Year and takes an
authorized leave of absence for which he is credited with an additional 250
hours. Employee B will NOT have a 1-Year Break in Service because he is credited
with more than 500 hours in a Plan Year.

       If you are reemployed after a 1-Year Break in Service and were vested in
any portion of your account derived from Employer contributions, you will
receive credit for all Years of Service credited to you before your 1-Year Break
in Service.

       If you do not have a "vested Interest" in the Employer contributions
allocated to your account when you terminate your employment, you will lose
credit for your pre-break Years of Service when your consecutive 1-Year Breaks
in Service equal or exceed the greater of 5 years, or your pre-break Years of
Service, For example:

       Employee B terminated employment on January 1, 2000 with 2 Years of
Service, Employee B was not vested at the time of his termination of employment.
Employee B returns to work on January 1, 2003. Employee B will be credited with
his 2 pre-break Years of Service because his period of termination (3 years) did
not exceed 5 years.

                                       14

<PAGE>

                                       VII
                           YOUR PLAN'S TOP HEAVY RULES

1.     Explanation of Top Heavy Rules

       A 401(k) Profit Sharing Plan that primarily benefits "key employees" is
called a "top heavy plan." Key employees are certain owners or officers of your
Employer. A Plan is a "top heavy plan" when more than 60% of the contributions
or benefits have been allocated to key employees.

       Each year, the Administrator is responsible for determining whether your
Plan is a "top heavy plan."

       If your Plan becomes top heavy in any Plan Year, then non-key employees
will be entitled to certain "top heavy minimum benefits," and other special
rules will apply. Among these top heavy rules are the following:

              (a)    Your Employer may be required to make a contribution equal
       to 3% of your compensation to your account;

              (b)    If you are a participant in more than one Plan, you may not
       be entitled to minimum benefits under both Plans.

                                      VIII
                                      LOANS

       You may apply to the Administrator for a loan from the Plan. Your
application must be in writing on forms which the Administrator will provide to
you. The Administrator may also request that you provide additional information,
such as financial statements, tax returns and credit reports. After considering
your application, the Administrator may, in its discretion, determine that you
qualify for the loan. The Administrator will inform the Trustee that you
qualify. The Trustee may then review the Administrator's determination and make
a loan to you if it is a prudent investment for the Plan.

1.     Loan Requirements

       There are various rules and requirements that apply for any loan. These
rules are outlined in this Section. In addition, your Employer has established a
written loan program which explains these requirements in more detail. You can
request a copy of the loan program from the Administrator. Generally, the rules
for loans include the following:

              (a)    Loans must be made available to all participants and their
       beneficiaries on a uniform and non-discriminatory basis.

              (b)    All loans must be adequately secured. You may use up to
       one-half (1/2) of your vested account balance under the Plan as security
       for the loan. If more security is required, your principal residence may
       be used, if permitted by State law. The Plan may also require that
       repayments on the loan obligation be by payroll deduction.

                                       15

<PAGE>

              (c)    All loans must bear a reasonable rate of interest. The
       interest rate must be one a bank or other professional lender would
       charge for making a loan in a similar circumstance.

              (d)    All loans must have a definite repayment period which
       provides for payments to be made not less frequently than quarterly, and
       for the loan to be amortized on a level basis over a reasonable period of
       time, not to exceed five (5) years. However, if you use the loan to
       acquire your principal residence, you may repay the loan over a
       reasonable period of time that may be longer than five (5) years.

              (e)    The amount the Plan may loan to you is limited by rules
       under the internal Revenue Code. All loans, when added to the outstanding
       balance of all other loans from the Plan, will be limited to the lesser
       of:

              (1)    $50,000 reduced by the excess, if any, of your highest
              outstanding balance of loans from the Plan during the one-year
              period prior to the date of the loan over your current outstanding
              balance of loans; or

              (2)    1/2 of your vested account balance.

              Also, no loan in an amount less than $1,000 will be made.

              (f)    If you fail to make payments when they are due under the
       loan, you will be considered to be "in default." The Trustee would then
       have authority to take all reasonable actions to collect the balance
       owing on the loan. This could include filing a lawsuit or foreclosing on
       the security for the loan. Under certain circumstances, a loan that is in
       default may be considered a distribution from the Plan, and could result
       in taxable income to you. In any event, your failure to repay a loan will
       reduce the benefit you would otherwise be entitled to from the Plan.

              (g)    Loans will not be made to any "shareholder-employees"
       unless exemptions for such loans are obtained from the Department of
       Labor. A shareholder-employee is a participant who owns more than 5% of
       your Employer's outstanding capital stock during any year in which your
       Employer elects to be taxed as a small business corporation.

                                       IX
                    CLAIMS BY PARTICIPANTS AND BENEFICIARIES

       Benefits will be paid to participants and their beneficiaries without the
necessity of formal claims. You or your beneficiaries, however, may make a
request for any Plan benefits to which you may be entitled. Any such request
must be made in writing, and it should be made to the Administrator. (See the
Article in this Summary entitled "GENERAL INFORMATION ABOUT YOUR PLAN.")

       Your request for Plan benefits will be considered a claim for Plan
benefits, and it will be subject to a full and fair review, If your claim is
wholly or partially denied, the Administrator will furnish you with a written
notice of this denial. This written notice must be

                                       16

<PAGE>

provided to you within a reasonable period of time (generally 90 days) after the
receipt of your claim by the Administrator. The written notice must contain the
following information:

              (a)    the specific reason or reasons for the denial;

              (b)    specific reference to those Plan provisions on which the
       denial is based;

              (c)    a description of any additional information or material
       necessary to correct your claim and an explanation of why such material
       or information is necessary; and

              (d)    appropriate information as to the steps to be taken if you
       or your beneficiary wishes to submit your claim for review.

       If notice of the denial of a claim is not furnished to you in accordance
with the above within a reasonable period of time, your claim will be deemed
denied. You will then be permitted to proceed to the review stage described in
the following paragraphs.

       If your claim has been denied, and you wish to submit your claim for
review, you must follow the Claims Review Procedure.

1.     The Claims Review Procedure

              (a)    Upon the denial of your claim for benefits, you may file
       your claim for review, in writing, with the Administrator.

              (b)    YOU MUST FILE THE CLAIM FOR REVIEW NO LATER THAN 60 DAYS
       AFTER YOU HAVE RECEIVED WRITTEN NOTIFICATION OF THE DENIAL OF YOUR CLAIM
       FOR BENEFITS OR, IF NO WRITTEN DENIAL OF YOUR CLAIM WAS PROVIDED, NO
       LATER THAN 60 DAYS AFTER THE DEEMED DENIAL OF YOUR CLAIM.

              (c)    You may review all pertinent documents relating to the
       denial of your claim and submit any issues and comments, in writing, to
       the Administrator.

              (d)    Your claim for review must be given a full and fair review.
       If your claim is denied, the Administrator must provide you with written
       notice of this denial within 60 days after the Administrator's receipt of
       your written claim for review. There may be times when this 60-day period
       may be extended. This extension may only be made, however, where there
       are special circumstances which are communicated to you in writing within
       the 60-day period. If there is an extension, a decision will be made as
       soon as possible, but not later than 120 days after receipt by the
       Administrator of your claim for review.

              (e)    The Administrator's decision on your claim for review will
       be communicated to you in writing and will include specific references to
       the pertinent Plan provisions on which the derision was based.

                                       17

<PAGE>

              (f)    If the Administrator's decision on review is not furnished
       to you within the time limitations described above, your claim will be
       deemed denied on review.

              (g)    If benefits are provided or administered by an insurance
       company, insurance service, or other similar organization which is
       subject to regulation under the insurance laws, the claims procedure
       relating to these benefits may provide for review. If so, that company,
       service, or organization will be the entity to which claims are
       addressed. If you have any questions regarding the proper person or
       entity to address claims, you should ask the Administrator.

                                        X
                            STATEMENT OF ERISA RIGHTS

1.     Explanation of Your ERISA Rights

       As a participant in this Plan you are entitled to certain rights and
protections under the Employee Retirement Income Security Act of 1974, also
called ERISA. ERISA provides that all Plan participants are entitled to:

              (a)    examine, without charge, all Plan documents, including:

              (1)    insurance contracts;

              (2)    collective bargaining agreements; and

              (3)    copies of all documents filed by the Plan with the U.S.
              Department of Labor, such as detailed annual reports and Plan
              descriptions.

                     This examination may take place at the Administrators
       office and at other specified employment locations of the Employer (See
       the Article in this Summary entitled "GENERAL INFORMATION ABOUT YOUR
       PLAN");

              (b)    obtain copies of all Plan documents and other Plan
       information upon written request to the Plan Administrator. The
       Administrator may make a reasonable charge for the copies;

              (c)    receive a summary of the Plan's annual financial report.
       The Administrator is required by law to furnish each participant with a
       copy of this summary annual report;

              (d)    obtain a statement jelling you whether you have a right to
       receive a retirement benefit at Normal Retirement Age and, if so, what
       your benefits would be at Normal Retirement Age if you stop working under
       the Plan now. If you do not have a right to a retirement benefit, the
       statement will tell you how many years you have to work to get a right to
       a retirement benefit. THIS STATEMENT MUST BE REQUESTED IN WRITING AND IS
       NOT REQUIRED TO BE GIVEN MORE THAN ONCE A YEAR. The Plan must provide the
       statement free of charge.

       In addition to creating rights for Plan participants, ERISA imposes
duties upon the people who are responsible for the operation of the Plan. The
people who operate your

                                       18

<PAGE>

Plan, called "fiduciaries" of the Plan, have a duty to do so prudently and in
the interest of you and other Plan participants and beneficiaries. No one,
including your employer or any other person, may fire you or otherwise
discriminate against you in any way to prevent you from obtaining a pension
benefit or exercising your rights under ERISA.

       If your claim for a retirement benefit is denied in whole or in part, you
must receive a written explanation of the reason for the denial. You have the
right to have the Administrator review and reconsider your claim. (See the
Article in this Summary entitled "CLAIMS BY PARTICIPANTS AND BENEFICIARIES.")

       Under ERISA, there are steps you can take to enforce the above rights.
For instance, if you request materials from the Plan and do not receive them
within 30 days, you may file suit in a federal court. In such a case, the court
may require the Administrator to provide the materials and pay you up to $110.00
a day until you receive the materials, unless the materials were not sent
because of reasons beyond the control of the Administrator.

       If you have a claim for benefits which is denied or ignored, in whole or
in part, you may file suit in a state or federal court.

       If the Plan's fiduciaries misuse the Plan's money, or if you are
discriminated against for asserting your rights, you may seek assistance from
the U.S. Department of Labor, or you may file suit in a federal court. The court
will decide who should pay court costs and legal fees. If you are successful,
the court may order the person you have sued to pay these costs and fees. If you
lose, the court may order you to pay these costs and fees if, for example, it
finds your claim is frivolous.

       If you have any questions about this statement, or about your rights
under ERISA, you should contact the nearest Regional Office of the U.S.
Department of Labor's Pension and Welfare Benefits Administration.

                                       XI
                     AMENDMENT AND TERMINATION OF YOUR PLAN

1.     Amendment

       Your Employer has the right to amend your Plan at any time. In no event,
however, will any amendment:

              (a)    authorize or permit any part of the Plan assets to be used
       for purposes other than the exclusive benefit of participants or their
       beneficiaries; or

              (b)    cause any reduction in the amount credited to your account;
       or

              (c)    cause any part of your Plan assets to revert to the
       Employer.

2.     Termination

       Your Employer has the right to terminate the Plan at any time. Upon
termination, all amounts credited to your accounts will become 100% vested.

                                       19<PAGE>

                                                                    Exhibit 10.4

                              EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT is entered into by and between FREEI NETWORKS,
INC., a Washington corporation (the "Company"), and Robert McCausland the
undersigned individual ("Executive").

                                     RECITAL

     The Company and Executive desire to enter into an Employment Agreement
setting forth the terms and conditions of Executive's employment with the
Company.

                                    AGREEMENT

     NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the Company and Executive agree as follows:

     1. EMPLOYMENT.

     (a) TERM. The Company hereby employs Executive to serve as President of the
Company and Chief Executive Officer and to serve in such additional or different
position or positions as the Company may determine in its sole discretion. The
term of employment shall be for a period of three (3) years ("Employment
Period"), to commence on the date hereof. The term shall be for the Employment
Period unless earlier terminated as set forth herein.

     (b) DUTIES AND RESPONSIBILITIES. Executive will be reporting to the
Company's Board of Directors. Within the limitations established by the By-laws
of the Company, the Executive shall have each and all of the duties and
responsibilities of President and CEO and such other or different duties on
behalf of the Company, as may be assigned from time to time by the Company's
Board.

     (c) LOCATION. The initial principal location at which Executive shall
perform services for the Company shall be 909 S. 336th Ave Suite #110, Federal
Way, Washington 98002.

     2. COMPENSATION.

     (a) BASE SALARY. Executive shall be paid a base salary ("Base Salary") at
the annual rate of $120,000 payable in biweekly installments consistent with
Company's payroll practices. The annual Base Salary shall be reviewed on or
before January 1 of each year, unless Executive's employment hereunder shall
have been terminated earlier pursuant to this Agreement, by the Board of
Directors of the Company to determine if such Base Salary should be increased
for the following year in recognition of services to the Company.

                                       1

<PAGE>

     (b) PAYMENT. Payment of all compensation to Executive hereunder shall be
made in accordance with the relevant Company policies in effect from time to
time, including normal payroll practices, and shall be subject to all applicable
employment and withholding taxes.

     3. OTHER EMPLOYMENT BENEFITS.

     (a) BUSINESS EXPENSES. Upon submission of itemized expense statements in
the manner specified by the Company, Executive shall be entitled to
reimbursement for reasonable business and travel expenses duty incurred by
Executive in the performance of his duties under this Agreement.

     (b) BENEFIT PLANS. Executive shall be entitled to participate in the
Company's medical and dental plans, life and disability insurance plans and
retirement plans pursuant to their terms and conditions. Executive shall be
entitled to participate in any other benefit plan offered by the Company to its
employees during the term of this Agreement (other than stock option or stock
incentive plans, which are governed by Section 3(d) below). Nothing in this
Agreement shall preclude the Company or any affiliate of the Company from
terminating or amending any employee benefit plan or program from time to time.

     (c) Vacation. Executive shall be entitled to three (3) weeks of vacation
each year of full employent, exclusive of legal holidays, as long as the
scheduling of Executive's vacation does not interfere with the Company's
normal business operations.

     (d) FOUNDER' STOCK. Executive shall be entitled to retain his founder's
stock, subject to the following terms:

         (i) Executive initially owned 11,400,000 shares of founders stock.
2,850,000 shares vested on August 13, 1999 when the Company executed a stock
purchase agreement with Sequoia Capital and its affiliates. The remaining
8,550,000 shares will fully vest in the event of an initial public offering.
Executive's termination of employment by the Company, the stile of
substantially all the Company's assets or the merger of the Company into
another entity (each a "Vesting Event"). In the absence of a Vesting Event,
the 8,550,000 shares will vest in equal amounts of 237,500 per month.

     (e) NO OTHER BENEFITS. Executive understands and acknowledges that the
compensation specified in Sections 2 and 3 of this Agreement shall be in lieu
or any and all other compensation, benefits and plans.

     4. EXECUTIVE'S BUSINESS ACTIVITIES. Executive shall devote the substantial
portion of his entire business time, attention and energy exclusively to the
business and affairs of the Company and its affiliates, as its business and
affairs now exist and as they hereafter may be changed. Executive may serve as a
member of the Board of Directors of other organizations that do not compete with

                                        2

<PAGE>

the Company, and may participate in other professional, civic, governmental
organizations and activities that do not materially affect his ability to carry
out his duties hereunder.

     5. TERMINATION OF EMPLOYMENT.

     (a) FOR CAUSE. Notwithstanding anything herein to the contrary, the Company
may terminate Executive's employment hereunder for cause for any one of the
following reasons: (i) conviction of a felony, or a misdemeanor where
imprisonment is imposed, (ii) commission of any act of theft, fraud, dishonesty,
or falsification of any employment or Company records, (iii) improper disclosure
of the Company's confidential or proprietary information, (iv) any action by the
Executive which has a detrimental effect on the Company's reputation or
business, (v) Executive's failure or inability to perform any reasonable
assigned duties after written notice from the Company of, and a reasonable
opportunity to cure, such failure or inability, (vi) any breach of this
Agreement, which breach is not cured within ten (10) days following written
notice of such breach, (vii) a course of conduct amounting to gross
incompetence, (viii) chronic and unexcused absenteeism, (ix) unlawful
appropriation of a corporate opportunity, or (x) misconduct in connection with
the performance of any of Executive's duties, including, without limitation,
misappropriation of funds or property of the Company, securing or attempting to
secure personally any profit in, connection with any transaction entered into,
on behalf of the Company, misrepresentation to the Company, or any violation of
law or regulations on Company premises or to which the Company is subject.
Upon termination of Executive's employment with the Company for cause, the
Company shall be under no further obligation to Executive, except to pay all
accrued but unpaid base salary and accrued vacation to the date of termination
thereof, and to fully vest executive's founder's shares.

     (b) WITHOUT CAUSE. The Company may terminate Executive's employment
hereunder at any time without cause, provided, however, that Executive shall be
entitled to severance pay in the amount of one year (12) months of Base
Salary in addition to accrued but unpaid Base Salary and accrued vacation, less
deductions required by law, but if, and only if, Executive executes a valid and
comprehensive release of any and all claims that the Executive may have against
the Company in a form provided by the Company and Executive executes such form
within seven (7) days of tender.

     (c) RESIGNATION. UPON TERMINATION OF EMPLOYMENT, EXECUTIVE SHALL BE DEEMED
TO HAVE RESIGNED FROM THE BOARD OF DIRECTORS OF THE COMPANY IF HE IS A
DIRECTOR.

     (d) COOPERATION. After notice of termination, Executive shall cooperate
with the Company, as reasonably requested by the Company, to effect a transition
of Executive's responsibilities and to ensure that the Company is aware of all
matters being handled by Executive.

     6. DISABILITY OF EXECUTIVE. The Company may terminate this Agreement
without liability if Executive shall be permanently prevented from properly
performing his essential duties hereunder with reasonable accommodation by
reason of illness or other physical or mental incapacity for a

                                       3

<PAGE>

period of more than 120 consecutive days. Upon such termination, Executive shall
be entitled to all accrued but unpaid Base Salary and vacation.

     7. DEATH OF EXECUTIVE. In the event of the death of Executive during the
Employment Period, the Company's obligations hereunder shall automatically cease
and terminate; provided, however, that within 15 days the Company shall pay to
the Executive's heirs or personal representatives Executive's Base Salary and
accrued vacation accrued to the date of death.

     8. CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENTS. Executive is
simultaneously executing a Confidential Information and Invention Assignment
Agreement (the "Confidential Information and Invention Assignment Agreement").
The obligations under the Confidential Information and Invention Assignment
Agreement shall survive termination of this Agreement for any reason.

     9. EXCLUSIVE EMPLOYMENT. During employment with the Company, Executive
will not do anything to compete with the Company's present or contemplated
business, nor will he or she plan or organize any competitive business
activity. Executive will not enter into any agreement which conflicts with
his duties or obligations to the Company. Executive will not during his
employment or within one (1) year after it ends, without the Company's
express written consent, directly or indirectly, solicit or encourage any
employee, agent, independent contractor, supplier, customer, consultant on
any other person or company to terminate or alter a relationship with the
Company.

     10. ASSIGNMENT AND TRANSFER. Executive's rights and obligations under this
Agreement shall not be transferable by assignment or otherwise, and any
purported assignment, transfer or delegation thereof shall be void. This
Agreement shall inure to the benefit of, and be binding upon and enforceable by,
any purchaser of substantially all of Company's assets, any corporate successor
to Company or any assignee thereof.

     11. NO INCONSISTENT OBLIGATIONS. Executive is aware or no obligations,
legal or otherwise, inconsistent with the terms of this Agreement or with his
undertaking employment with the Company. Executive will not disclose to the
Company, or use, or induce the Company to use, any proprietary information or
trade secrets of others. Executive represents and warrants that he or she has
returned all property and confidential information belonging to all prior
employers.

     12. MISCELLANEOUS.

     (a) ATTORNEYS' FEES. Should either party hereto, or any heir, personal
representative, successor or assign, of either party hereto, resort to legal
proceedings in connection with this Agreement or Executive's employment with
the Company, the party or parties prevailing in such legal proceedings shall be
entitled, in addition to such other relief as may be granted, to recover its or
their reasonable attorneys' fees and costs in such legal proceedings from the
non-prevailing party or parties; provided, however, that nothing herein is
intended to affect the provisions of Section 13(l).

                                        4

<PAGE>

     (b) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington without regard to conflict
of law principles.

     (c) ENTIRE AGREEMENT. Except for the attached exhibits and the Confidential
Information and Invention Assignment Agreement, this Agreement contains the
entire agreement and understanding between the parties hereto and supersedes any
prior or contemporaneous written or oral agreements, representations and
warranties between them respecting the subject matter hereof.

     (d) AMENDMENT. This Agreement may be amended only by a writing signed by
Executive and by a duly authorized representative of the Company.

     (e) Severability. If any term, provision, covenant or condition of this
Agreement, or the application thereof to any person, place or circumstance,
shall be held to be invalid, unenforceable or void, the remainder of this
Agreement and such term, provision, covenant or condition as applied to other
persons, places and circumstances shall remain in full force and effect.

     (f) CONSTRUCTION. The headings and captions of this Agreement are provided
for convenience only and are intended to have no effect in construing or
interpreting this Agreement. The language in all parts of this Agreement shall
be in all cases construed according to its fair meaning and not strictly for or
against the Company or Executive.

     (g) RIGHTS CUMULATIVE. The rights and remedies provided by this Agreement
are cumulative, and the exercise of any right or remedy by either party
hereto (or by its successor), whether pursuant to this Agreement, to any other
agreement, or to law, shall not preclude or waive its right to exercise any or
all other rights and remedies.

     (h) NONWAIVER. No failure or neglect of either party hereto in any instance
to exercise any right, power or privilege hereunder or under law shall
constitute a waiver of any other right, power or privilege or of the same right,
power or privilege in any other instance. All waivers by either party hereto
must be contained in a written instrument signed by the party to be charged and,
in the case of the Company, by an officer of the Company (other than Executive)
or other person duly authorized by the Company.

     (i) REMEDY FOR BREACH; ATTORNEYS' FEES. The parties hereto agree that, in
the event of breach or threatened breach of any covenants of Executive, the
damage or imminent damage to the value and the goodwill of the Company's
business shall be inestimable, and that therefor any remedy at law or in damages
shall be inadequate. Accordingly, the parties hereto agree that the Company
shall be entitled to injunctive relief against Executive in the event of any
breach or threatened breach of any of such provisions by Executive, in addition
to any other relief (including damages) available to the Company under this
Agreement or under law. The prevailing party in any action instituted pursuant
to this Agreement shall be entitled to recover from the other party its
reasonable attorneys' fees and other expenses incurred in such action.

                                       5

<PAGE>

     (j) NOTICES. Any notice, request, consent or approval required or permitted
to be given under this Agreement or pursuant to law shall be sufficient if in
writing, and if and when sent by certified or registered mail, with postage
prepaid, to Executive's residence (as noted in the Company's records), or to the
Company's principal office, as the case may be.

     (k) ASSISTANCE IN LITIGATION. Executive shall, during and after termination
of employment, upon reasonable notice, furnish such information and proper
assistance to the Company as may reasonably be required by the Company in
connection with any litigation in which it or any of its subsidiaries or
affiliates is, or may become a party; provided, however, that such assistance
following termination shall be furnished at mutually agreeable times and for
mutually agreeable compensation.

     (l) ARBITRATION. Any controversy, claim or dispute arising out of or
relating to this Agreement or the employment relationship, either during the
existence of the employment relationship or afterwards, between the parties
hereto, their assignees, their affiliates, their attorneys, or agents, shall
be settled by arbitration in Seattle, Washington. Such arbitration shall be
conducted in accordance with the then prevailing commercial arbitration rules
of the American Arbitration Association (but the arbitration shall be in
front of an arbitrator appointed by JAMS/Endispute ("JAMS")), with the
following exceptions if in conflict: (a) one arbitrator shall be chosen by
JAMS; (b) each party to the arbitration will pay its pro rata share of the
expenses and fees of the arbitrator(s), together with other expenses of the
arbitration incurred or approved by the arbitrator(s); and (c) arbitration
may proceed in the absence of any party if written notice (pursuant to the
JAMS' rules and regulations) of the proceedings has been given to such party.
The parties agree to abide by all decisions and awards rendered in such
proceedings. Such decisions and awards rendered by the arbitrator shall be
final and conclusive and may be entered in any court having jurisdiction
thereof as a basis of judgment and of the issuance of execution for its
collection. All such controversies, claims or disputes shall be settled in
this manner in lieu of any action at law or equity; provided however, that
nothing in this subsection shall be construed as precluding the Company from
bringing an action for injunctive relief or other equitable relief or relief
under the Confidential Information and Invention Assignment Agreement. The
arbitrator shall not have the right to award punitive damages, consequential
damages, lost profits or speculative damages to either party. The parties
shall keep confidential the existence of the claim, controversy or disputes
from third parties (other than the arbitrator), and the determination
thereof, unless otherwise required by law or necessary for the business of
the Company. The arbitrator(s) shall be required to follow applicable law. IF
FOR ANY REASON THIS ARBITRATION CLAUSE BECOMES NOT APPLICABLE, THEN EACH
PARTY, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW , HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY
ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER MATTER INVOLVING THE PARTIES HERETO.

                                        6

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date set forth below.

FREEI NETWORKS, INC.

By:  /s/ Robert (Bob) McCausland
   -----------------------------
   Robert (Bob) McCausland
   -----------------------------

EXECUTIVE:

Name: /s/ Robert (Bob) McCausland
     ---------------------------

Title: President / CEO
      --------------------------

Date: 11-11-99
     ---------------------------

                                        7

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