-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IhknwekMtbCaunjmE8ROOObyjZ1uAlKPc1Ilk8fD6gpGE1YRTNuRD5kC/8Tj5IqQ KMvgVkNoF1cjg5yVjS0ang== 0000849145-98-000008.txt : 19980817 0000849145-98-000008.hdr.sgml : 19980817 ACCESSION NUMBER: 0000849145-98-000008 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: I LINK INC CENTRAL INDEX KEY: 0000849145 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 592291344 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-17973 FILM NUMBER: 98687084 BUSINESS ADDRESS: STREET 1: 13751 S WADSWORTH PK DR STREET 2: STE 200 CITY: DRAPER STATE: UT ZIP: 84020 BUSINESS PHONE: 8015765000 MAIL ADDRESS: STREET 1: 13751 S WADSWORTH PK DR STREET 2: STE 200 CITY: DRAPER STATE: UT ZIP: 84020 FORMER COMPANY: FORMER CONFORMED NAME: MEDCROSS INC DATE OF NAME CHANGE: 19920703 10QSB 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________________ to Commission file number: 0-17973 I-LINK INCORPORATED (Exact name of registrant as specified in its charter) FLORIDA 59-2291344 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 13751 S. WADSWORTH PARK DRIVE, SUITE 200, DRAPER, UTAH 84020 (Address of principal executive offices) (801) 576-5000 (Registrant's telephone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter time period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. ______________ As of August 4, 1998, the registrant had outstanding 18,510,400 shares of $0.007 par value common stock. PART I Item 1 Financial Statements I-LINK INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
ASSETS June 30, 1998 December 31, (Unaudited) 1997 --------------- --------------- Current assets: Cash and cash equivalents $ 930,176 $ 1,643,805 Accounts receivable, less allowance for doubtful accounts of $883,000 and $1,385,000 as of June 30, 1998 and December 31, 1997, respectively 4,083,391 3,233,207 Certificates of deposit restricted 1,136,661 1,628,500 Other current assets 201,689 321,488 Net assets of discontinued operations 487,371 - ---------- ---------- Total current assets 6,839,288 6,827,000 Furniture, fixtures and equipment, net 4,855,601 3,551,917 Other assets: Intangible assets, net 10,867,230 12,314,080 Certificates of deposit restricted 217,624 259,000 Other assets 1,035,484 705,502 Net assets of discontinued operations - 595,377 ---------- ---------- Total assets $ 23,815,227 $ 24,252,876 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 6,044,381 $ 4,833,452 Accrued liabilities 3,859,395 2,770,997 Current portion of long-term debt 10,921,141 2,008,416 Current portion of obligations under capital leases 137,742 169,315 ---------- ---------- Total current liabilities 20,962,659 9,782,180 Long-term debt - 1,854,341 Obligations under capital leases - 67,159 ---------- ---------- Total liabilities 20,962,659 11,703,680 ---------- ---------- Commitments and contingencies (notes 6, 7 and 8) Stockholders' equity: Preferred stock, $10 par value, authorized 10,000,000 shares, issued and outstanding 83,215 and 119,926 at June 30, 1998 and December 31, 1997, respectively, liquidation preference of $19,357,000 at June 30, 1998 832,150 1,199,260 Common stock, $.007 par value, authorized 75,000,000 shares, issued and outstanding 17,918,016 and 16,036,085 at June 30, 1998 and December 31, 1997, respectively 125,425 112,251 Additional paid-in capital 78,550,981 70,511,697 Deferred compensation ( 1,492,143) ( 2,289,765) Accumulated deficit (75,163,845) (56,984,247) ---------- ---------- Total stockholders' equity 2,852,568 12,549,196 ---------- ---------- Total liabilities and stockholders' equity $ 23,815,227 $ 24,252,876 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements 1 I-LINK INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three months Ended June 30, Six Months Ended June 30, ----------------------------------- ----------------------------------- 1998 1997 1998 1997 --------------- --------------- --------------- --------------- Revenues: Telecommunication services $ 4,134,967 $ 2,267,609 $ 8,915,944 $ 4,414,825 Marketing services, net 963,962 720,490 2,305,209 720,490 Technology licensing and development 374,660 - 580,610 - ---------- ---------- ---------- ---------- Total revenues 5,473,589 2,988,099 11,801,763 5,135,315 ---------- ---------- ---------- ---------- Operating costs and expenses: Telecommunication network expense 4,612,334 4,014,708 9,510,550 7,065,790 Marketing services 1,343,072 640,739 3,210,957 640,739 Selling, general and administrative 2,520,506 2,239,431 4,932,092 4,351,917 Provision for doubtful accounts 675,000 270,000 1,448,662 345,000 Depreciation and amortization 1,039,099 515,050 2,049,826 813,151 Research and development 576,060 74,246 1,144,155 345,334 ---------- ---------- ---------- ---------- Total operating costs and expenses 10,766,071 7,754,174 22,296,242 13,561,931 ---------- ---------- ---------- ---------- Operating loss ( 5,292,482) ( 4,766,075) (10,494,479) ( 8,426,616) ---------- ---------- ---------- ---------- Other income (expense): Interest expense ( 5,459,535) ( 37,679) ( 7,640,577) ( 373,271) Interest and other income 18,172 56,416 63,464 140,724 ---------- ---------- ---------- ---------- Total other income (expense) ( 5,441,363) 18,737 ( 7,577,113) ( 232,547) ---------- ---------- ---------- ---------- Loss from continuing operations (10,733,845) ( 4,747,338) (18,071,592) ( 8,659,163) Loss from discontinued operations (less applicable income tax provision of $0 for the three and six month periods ended June 30, 1998 and 1997) ( 100,564) ( 95,561) ( 108,006) ( 90,477) ---------- ---------- ---------- ---------- Net loss $(10,834,409) $( 4,842,899) $(18,179,598) $( 8,749,640) ========== ========== ========== ========== Net loss per common share - basic and diluted: Loss from continuing operations $( 0.66) $( 0.47) $( 1.14) $( 0.87) Loss from discontinued operations ( 0.01) ( 0.01) ( 0.01) ( 0.01) ---------- ---------- ---------- ---------- Net loss per common share $( 0.67) $( 0.48) $( 1.15) $( 0.88) ========== ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements 2 I-LINK INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
Preferred Stock Common Stock ------------------------ ------------------------ Additional Deferred Paid-in Accumulated Shares Amount Shares Amount Compensation Capital Deficit --------- -------------- ------------ ----------- --------------- -------------- --------------- Balance at December 31, 1997 119,926 $ 1,199,260 16,036,085 $ 112,251 $( 2,289,765) $ 70,511,697 $(56,984,247) Conversion of preferred stock into common stock (36,711) ( 367,110) 1,482,391 10,377 - 356,733 - Amortization of deferred compensation on stock options issued for services - - - - 524,027 - - Forfeiture of stock options issued for services - - - - 273,595 ( 273,595) - Exercise of stock options - - 399,540 2,797 - 682,146 - Warrants issued in connection with certain convertible notes payable - - - - - 7,274,000 - Net loss - - - - - - (18,179,598) ------- ---------- ---------- ------- ---------- ---------- ---------- Balance at June 30, 1998 83,215 $ 832,150 17,918,016 $ 125,425 $( 1,492,143) $ 78,550,981 $(75,163,845) ======= ========== ========== ======= ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements 3 I-LINK INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended June 30, --------------------------------- 1998 1997 --------------- --------------- Cash flows from operating activities: Net loss $(18,179,598) $( 8,749,640) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 2,049,826 813,431 Provision for doubtful accounts 1,448,662 345,000 Provision for asset valuation - 213,944 Amortization of discount on notes payable 7,274,000 - Amortization of deferred compensation on stock options issued for services 524,027 200,000 Interest expense associated with issuance of convertible notes - 320,000 Increase (decrease) from changes in operating assets and liabilities, net of effects of acquisitions and dispositions: Accounts receivable ( 2,298,846) ( 2,249,589) Other assets ( 210,184) ( 214,747) Accounts payable and accrued liabilities 2,299,326 4,142,186 Discontinued operations ( 16,847) 138,687 ---------- ---------- Net cash used in operating activities ( 7,109,634) ( 5,040,728) ---------- ---------- Cash flows from investing activities: Purchases of furniture, fixtures and equipment ( 1,906,659) ( 483,992) Cash received from the purchase of I-Link Communications, Inc. - 435,312 Maturity of restricted certificates of deposit 533,215 - Investing activities of discontinued operations 310,000 - ---------- ---------- Net cash used in investing activities ( 1,063,444) ( 48,680) ---------- ---------- Cash flows from financing activities: Proceeds from issuance of notes payable and warrants 7,768,000 2,000,000 Payment of long-term debt ( 709,616) ( 96,293) Payment of capital lease obligations ( 98,732) ( 89,431) Proceeds from exercise of common stock warrants and options 684,943 22,499 Financing activities of discontinued operations ( 170,465) ( 71,208) ---------- ---------- Net cash provided by financing activities 7,474,130 1,765,567 ---------- ---------- Decrease in cash and cash equivalents ( 698,948) ( 3,323,841) Cash and cash equivalents at beginning of period 1,727,855 4,500,227 ---------- ---------- Total cash and cash equivalents at end of period $ 1,028,907 $ 1,176,386 ========== ========== Cash and cash equivalents at end of period: Continuing operations $ 930,176 $ 1,106,622 Discontinued operations 98,731 69,764 ---------- ---------- Total cash and cash equivalents at end of period $ 1,028,907 $ 1,176,386 ========== ========== Supplemental schedule of non-cash investing and financing activities: Common stock issued in connection with the acquisition of I-Link Communications, Inc. $ - $ 2,414,583 Common stock issued in connection with the acquisition of I-Link Worldwide, Inc. - 8,875,000 Stock warrants issued in connection with litigation settlement - 821,000 Stock options issued for services - 4,400,000
The accompanying notes are an integral part of these consolidated financial statements 4 I-LINK INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ____________ NOTE 1 - DESCRIPTION OF BUSINESS, PRINCIPLES OF CONSOLIDATION AND LIQUIDITY The consolidated financial statements include the accounts of I-Link Incorporated and its subsidiaries (the "Company"). The Company's principal operation is the development, sale and delivery of enhanced communications products and services utilizing its own private intranet and both owned and leased network switching and transmission facilities. The Company provides unique communications solutions through its use of proprietary technology developed by its wholly-owned subsidiaries I-Link Systems, Inc. (formerly I-Link Worldwide, Inc.), MiBridge, Inc. and Vianet Technologices, Inc. Telecommunications services are marketed primarily through independent representatives to subscribers throughout the United States. All significant intercompany accounts and transactions have been eliminated in consolidation. On March 23, 1998, the Company's Board of Directors approved a plan to dispose of the Company's medical services businesses in order to focus its efforts on the sale of telecommunication services and technology licensing. The Company intends to sell all of the assets of the medical services subsidiaries, with the proceeds being used to satisfy outstanding obligations of the medical services subsidiaries. The Company recognized a $1,007,453 loss on disposal of these subsidiaries during the quarter ended December 31, 1997. The results of the medical services operations have been classified as discontinued operations for all periods presented in the Consolidated Statements of Operations. The assets and liabilities of the discontinued operations have been classified in the Consolidated Balance Sheets as "Net assets - discontinued operations". Discontinued operations have also been segregated for all periods presented in the Consolidated Statements of Cash Flows. The interim financial data are unaudited; however, in the opinion of the management of the Company, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of (a) the results of operations for the three-month and six-month periods ended June 30, 1998 and 1997, (b) the financial position at June 30, 1998, and (c) cash flows for the six-month periods ended June 30, 1998 and 1997. The year-end balance sheet was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. The financial statements should be read in conjunction with the Company's annual report on Form 10-K for the year ended December 31, 1997 and its quarterly report on Form 10-Q for the three months ended March 31, 1998. The results of operations for the three-month and six-month periods ended June 30, 1998 are not necessarily indicative of those to be expected for the entire year. The Company incurred a net loss from continuing operations of $18,071,592 and $10,733,845 for the six and three-month periods ended June 30, 1998, and as of June 30, 1998 had an accumulated deficit of $75,163,845 and negative working capital of $14,123,371. The Company anticipates that revenues generated from its continuing operations will not be sufficient during 1998 to fund its ongoing operations, the continued expansion of its private telecommunications network facilities, and anticipated growth in subscriber base. To provide a portion of the required capital, the Company has entered into two financing arrangements (see Note 4). In January 1998, the Company signed a term loan agreement with Winter Harbor providing aggregate borrowings of $5.768 million. During the second quarter of 1998, Winter Harbor increased its loan to the Company by an additional $2.0 million. On July 9, 1998 the Company obtained a $10 million equity investment from JNC Opportunity Fund Ltd. ("JNC"). The Company anticipates that additional funds will be necessary from public or private financing markets to fund continued operations and to successfully integrate and finance the planned expansion of the business communications services and to discharge the financial obligations of the Company. NOTE 2 - NET LOSS PER SHARE The Company has adopted SFAS No. 128, "Earnings per Share" for 1998 and 1997. The standard requires presentation of basic and diluted earnings per share. Basic earnings per share is computed based on the weighted average number of common shares outstanding during the period. Options, warrants, convertible preferred stock and convertible debt are included in the calculation of diluted earnings per share, except when their effect would be anti-dilutive. As the Company had a net loss from continuing operations for the six-month and three- month periods ended June 30, 1998 and 1997, basic and diluted loss per share are the same. 5 I-LINK INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ____________ NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Basic and diluted loss per common share were calculated as follows:
Three months Ended June 30, Six Months Ended June 30, ----------------------------------- ----------------------------------- 1998 1997 1998 1997 --------------- --------------- --------------- --------------- Loss from continuing operations $(10,733,845) $( 4,747,338) $(18,071,592) $( 8,659,163) Cumulative preferred stock dividends not paid in the current period ( 540,460) ( 288,776) ( 902,224) ( 577,923) ---------- ---------- ---------- ---------- Loss from continuing operations applicable to common stock $(11,274,305) $( 5,036,114) $(18,973,816) $( 9,237,086) ========== ========== ========== ========== Loss from discontinued operations $( 100,564) $( 95,561) $( 108,006) $( 90,477) ========== ========== ========== ========== Weighted average shares outstanding 17,102,887 10,627,597 16,616,545 10,617,597 ========== ========== ========== ========== Loss from continuing operations $( 0.66) $( 0.47) $( 1.14) $( 0.87) Loss from discontinued operations ( 0.01) ( 0.01) ( 0.01) ( 0.01) ---------- ---------- ---------- ---------- Net loss per common share $( 0.67) $( 0.48) $( 1.15) $( 0.88) ========== ========== ========== ==========
Recently issued financial accounting standards Effective January 1, 1998, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," which requires the prominent display of comprehensive income and its components. There were no items of other comprehensive income during the periods being reported on and accordingly, no additional disclosures are required. Also effective for the year ended December 31, 1998 the Company will adopt Statement of Financial Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and Related Information." SFAS No. 131 establishes standards for reporting information about operating segments in annual and interim financial statements. Interim disclosures are not required in the year of adoption. The Company does not expect that the effect on year-end disclosures, if any, that SFAS No. 131 will have on its financial statements will be significant. In addition, the Accounting Standards Executive Committee issued Statement of Position No. 98-1 (SOP 98-1), "Accounting for the Cost of Computer Software Developed or Obtained for Internal Use". The SOP was issued to address the diversity in practice regarding whether and under what conditions the costs of internal-use software should be capitalized. SOP 98-1 is effective for financial statements for years beginning after December 15, 1998. The Company has not determined the effect which SOP 98-1 will have on its consolidated financial position or results of operations. RECLASSIFICATIONS Certain balances in the June 30, 1997 financial statements have been reclassified to conform to the current year presentation. These changes had no effect on previously reported net loss, total assets, liabilities or stockholders' equity. 6 I-LINK INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ____________ NOTE 3 - DISCONTINUED OPERATIONS Net assets of the Company's discontinued operations (excluding intercompany balances which have been eliminated against the net equity of the discontinued operations) are as follows as of June 30, 1998 and December 31, 1997:
(Unaudited) 1997 --------------- --------------- Assets: Current assets: Cash and cash equivalents $ 98,731 $ 84,050 Accounts receivable 1,126,786 1,033,376 Inventory 555,291 555,939 Other 26,882 24,951 ---------- ---------- Total current assets 1,807,690 1,698,316 ---------- ---------- Furniture, fixtures and equipment, net 415,496 958,153 Intangible assets 391,757 391,757 Other non-current assets 7,996 8,706 ---------- ---------- Total assets 2,622,939 3,056,932 ---------- ---------- Liabilities: Current liabilities: Accounts payable and accrued liabilities 1,681,886 1,781,541 Notes payable 241,661 412,126 ---------- ---------- Total current liabilities 1,923,547 2,193,667 Other liabilities 212,021 267,888 ---------- ---------- Total liabilities 2,135,568 2,461,555 ---------- ---------- Net assets $ 487,371 $ 595,377 ========== ==========
Revenues of the discontinued operations were $375,063 and $962,928 and $582,298 and $1,179,555 for the three-month and six-month periods ending June 30, 1998 and 1997, respectively. NOTE 4 - CAPITAL FINANCING During the first and second quarters of 1998 the company obtained an aggregate Of $7.768 million in new interim debt financing from Winter Harbor, L.L.C. As consideration for Winter Harbor's Commitment to make the loan, the Company agreed to issue 6,740,000 warrants to purchase common stock of the Company at exercise prices ranging from $5.50 to $7.22 based upon 110% of the closing price of the common stock on the day loan funds were advanced. The warrants have exercise periods of 7.5 years from issuance. The Company also agreed to extend the exercise period on all warrants previously issued to Winter Harbor (10,800,000) to seven and one-half years. Pursuant to the terms of the loan agreement with Winter Harbor, the initial borrowings of $5,768,000 were payable upon demand by Winter Harbor no earlier than May 15, 1998, and were collateralized by essentially all of the assets of the Company's subsidiaries. Because the loan was not repaid by May 15, 1998, the total loan, including additional borrowings of $2,000,000 obtained in the second quarter, continues on a demand basis with interest accruing at prime plus four percent. Additionally, Winter Harbor has the right to elect at any time until the loan is repaid to convert the unpaid balance of the loan into additional shares of the Company's Series M Preferred Stock, reduce the exercise price of the 6,740,000 Loan Warrants to $2.50 per share, and receive an additional 5,000,000 warrants to purchase common stock of the Company at an exercise price of $2.50 per share. 7 I-LINK INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ____________ NOTE 4 - CAPITAL FINANCING, CONTINUED During the six-month period ended June 30, 1998, the Company recorded $7,274,000 as a discount against the new debt representing the relative fair value attributed to the new warrants, the change of the exercise period on prior warrants and the equity instruments associated with the assumed conversion of the debt into equity. The debt discount was amortized over the original terms of the respective borrowings. Amortization of debt discount was $7,274,000 and $5,213,000 for the six-month and three-month periods ended June 30, 1998. In March 1998 the Company entered into a written agreement with a private investor under which the investor agreed to provide to the Company a credit facility of $10 million to $20 million. Subsequently, the investor defaulted on its obligations to make the loans to the Company in the time-frames provided for in the agreement. Despite continued representations from the investor that it intends to provide the funding to the Company, the investor remains in default. The Company has declared the investor in breach of the written agreement. On July 9, 1998 the Company obtained a $10 million equity investment, net of $530,000 in closing costs, from JNC Opportunity Fund Ltd. ("JNC"). The terms of the equity investment were amended on July 28, 1998. Under the original terms of the equity investment, JNC purchased shares of the Company's newly created 5% Series E Convertible Preferred Stock (the "Series E Preferred Stock"), which were convertible into the Company's common shares at a conversion price of the lesser of 110% of the market price of the Company's publicly traded common shares as of the date of closing, and 90% of the market price at the time of conversion. In addition, JNC obtained a warrant to purchase 275,000 shares of the Company's common stock at an exercise price equal to 120% of the market price of the Company's publicly traded common shares as of the date of closing. On July 28, 1998, the terms of the equity investment were amended to provide a floor to the conversion price, and to effect the amendment the Company created a 5% Series F Convertible Preferred Stock (the "Series F Preferred Stock") with which the Series E Preferred Shares originally issued to JNC were exchanged. Pursuant to the amendment, the Series F Preferred Shares are convertible into common shares at a conversion price of the lesser of $4.00 per common share or 87% of the market price of the Company's common shares at the time of conversion, subject to a $2.50 floor. In the event the market price remains below $2.50 for five consecutive trading days, the floor will be re-set to the lower rate, provided, however, that the floor shall not be less than $1.25. JNC also received an additional warrant to purchase 100,000 shares of the Company's common stock at an exercise price of $4.00 per common share. The Series F Preferred shares may be converted at any time, are automatically converted at the end of three years, and are subject to specific provisions that would prevent any issuance of I-Link common stock at a discount if and to the extent that such shares would equal or exceed in the aggregate 20% percent of the number of common shares outstanding prior to the July 9, 1998 $10 million placement absent shareholder approval as contemplated by the Nasdaq Stock Market Non-Quantitative Designation Criteria. In addition, the Company issued warrants to purchase 75,000 shares of the Company's common stock at a price of $4.89 per share to two individuals as a brokerage fee in connection with the JNC equity investment. NOTE 5 - INCOME TAXES The Company recognized no income tax benefit from the losses generated in the first quarter of 1998 and 1997 because of the uncertainty of the realization of the related deferred tax asset. 8 I-LINK INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ____________ NOTE 6 - LEGAL PROCEEDINGS On May 12, 1998, I-Link and MCI Telecommunications, a unit of MCI Communications Corp., agreed to a settlement of the arbitration action filed in November 1997 by I-Link against MCI and a related counterclaim by MCI against I-Link. Pursuant to the terms of the settlement all claims and counterclaims shall be dismissed, I-Link shall pay to MCI over a six-month period the sum of $2,083,425 representing agreed actual long-distance usage by I-Link prior to the termination of its relationship with MCI, and payment on the Company's existing note payable to MCI (outstanding principal balance as of June 30, 1998 of approximately $2.39 million) will be restructured to provide for a fixed monthly payment of $250,436 over the term of the note, in place of the original escalating monthly payment schedule. NOTE 7 - COMMITMENTS EMPLOYMENT AND CONSULTING AGREEMENTS The Company has entered into employment and consulting agreements with two consultants and eleven of its employees, primarily executive officers and management personnel. These agreements generally continue over the entire term unless terminated by the employee or consultant of the company, and provide for salary continuation for a specified number of months. Certain of the agreements provide additional rights, including the vesting of unvested stock options in the event a change of control of the Company occurs or termination of the contract without cause. The agreements contain non-competition and confidentiality provisions. As of June 30, 1998, if the contracts were to be terminated by the Company, the Company's liability for salary continuation would be approximately $1,700,000. PURCHASE COMMITMENTS The Company has commitments to purchase long-distance telecommunications capacity on lines from a national provider in order to provide long-distance telecommunications services to the Company's customers who reside in areas not yet serviced by the Company's dedicated telecommunications network. The Company's escalating minimum monthly commitments range from between $750,000 and $1,200,000 over the term of the agreement which expires in December 1999. If the agreement were terminated prior to December 1999, the Company would be obligated to pay 50% of the remaining monthly minimum usage amounts. NOTE 8 - TERMINATION OF MARKETING AGREEMENT During the second quarter of 1998, the Company terminated its telecommunications marketing agreement with its principal reseller account as the Company decided to concentrate its resources on lines of business which produce higher profit margins. Revenues from subscribers signed up by this reseller account represented approximately 21 percent of total telecommunication services revenues for the quarter ended March 31, 1998. While revenues (and related expenses) from this reseller account ended in the second quarter of 1998, it is anticipated that future growth in the Network Marketing Channel will exceed the lost revenues such that total revenues will continue to grow. 9 _ITEM 2- MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the information contained in the financial statements of the Company and the notes thereto appearing elsewhere herein and in conjunction with the information contained in the Company's Form 10-K for the year ended December 31, 1997 and Form 10-Q for the quarter ended March 31, 1998. FORWARD LOOKING INFORMATION This report contains certain forward-looking statements and information relating to the Company that is based on the beliefs of management as well as assumptions made by and information currently available to management. When used in this document, the words "anticipate", "believe", "estimate", "expect", and "intended" and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements. Such statements reflect the current view of the Company respecting future events and are subject to certain risks and uncertainties as noted. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected, or intended. Among many factors that could cause actual results to differ materially are the following: the Company's ability to finance and manage expected rapid growth; the Company's ability to attract support and motivate a rapidly growing number of independent representatives; competition in the long distance telecommunications and ancillary industries; the Company's ongoing relationship with its long distance carriers and vendors; dependence upon key personnel; subscriber attrition; the adoption of new, or changes in, accounting policies, litigation, federal and state governmental regulation of the long distance telecommunications and internet industries; the Company's ability to maintain, operate and upgrade its information systems and network; the Company's success in deploying it's Communication Engine network in internet telephony and the Company's success in the offering of other enhanced service products. Actual events, transactions and results may materially differ from the anticipated events, transactions or results described in such statements. The Company's ability to consummate such transactions and achieve such results is subject to certain risks and uncertainties. Such risks and uncertainties include, but are not limited to, the existence of demand for and acceptance of the Company's products and services, regulatory approvals and developments, economic conditions, the impact of competition and pricing, results of the Company's financing efforts and other factors affecting the Company's business that may be beyond the Company's control. The Company undertakes no obligation and does not intend to update, revise or otherwise publicly release the result of any revisions to these forward-looking statements that may be made to reflect future events or circumstances. OPERATIONS In January 1997 the Company acquired I-Link Communications (formerly Family Telecommunications, Inc. and referred to herein as "ILC") and in August 1997 the Company acquired MiBridge, Inc. In 1997, the Company launched operations of a network marketing program through I-Link Worldwide, L.L.C., to market its products. In December 1997, the Company made the decision to dispose of the operations of the subsidiaries of the Company operating in the medical services industry in order to concentrate on its telecommunications and technology sectors. Accordingly, medical services operations during the six and 10 three-month periods ending June 30, 1998 and 1997 have been reported as discontinued operations. In the first quarter of 1998, the Company formed ViaNet Technologies, Ltd. ("ViaNet"). ViaNet, headquartered in Ramat Hasharon, Israel, operates as a wholly owned subsidiary of I-Link. The subsidiary will focus on research and development of new communications access devices. ViaNet is I-Link's third research and development group. The technology that distinguishes I-Link from other telecommunications companies is the capability to carry high volumes of long-distance traffic at significantly reduced cost and provide enhanced services through its proprietary combination of IP and compression technologies, while maintaining the ease of use, high quality, and reliability of traditional phone systems. During the first and second quarters of 1998, the Company benefited from the commercial deployment of its technology through its Communication Engines established at its facilities in Los Angeles, Dallas/Ft. Worth, Phoenix and Salt Lake City, and steadily increased the commercial telecommunications traffic carried over its Communications Engines. This permitted the Company to announce a new 4.9-cent-per-minute long-distance calling rate to customers whose long-distance calls both originate and terminate in the more than 25 calling areas located in these metropolitan markets. The Company intends to continue to expand the geographic areas covered by its Communications Engines. During the second quarter of 1998, the Company announced the development of a communications product that would increase the telephone line capacity in any household or business. Initially dubbed "C4" (Customer Communications Control Center), the product will provide home and small business customers the capacity of up to 24 phone lines using the existing telephone lines and wires that are connected to their homes or offices today. In addition, C4 will provide around-the-clock Internet access and access to the enhanced services I-Link currently offers, including voice mail, fax, paging, e-mail, conference calling and follow-me-anywhere one-number service. C4 uses existing telecommunications networks, including the standard copper-wire lines currently installed in nearly every home and business, as well as high-speed data lines and infrastructure that have been announced or are being installed by local and long-distance telecommunications companies. The C4 should undergo early field trials in the fourth quarter of 1998 and will ship in 1999. Continuing the Company's efforts to provide state of the art quality services to its customers, the Company furthered the development of its enhanced services billing (ESB) platform during the second quarter of 1998. The ESB system is an integrated software solution providing order entry, provisioning, fulfillment, billing, collections and customer service capabilities for both retail and wholesale telecommunication markets. ESB will provide among other things the following specific features: (1) easy product definition for products and services, (2) quick access to on-line customer information, (3) tracking of provisioning and fulfillment status, (4) convergent billing of products and services, (5) seamless integration with third party credit card, collections and telecommunication tax providers, (6) facilitation of import/export files and (6) designs for future selling of packet and byte billing increments. These automated features will enhance our customer service and handling procedures. In early 1998 the Company determined that it would refocus the resources of the Company to concentrate on those channels of distribution of its products which had higher profit margins (primarily the Network Marketing Channel) and accordingly terminated certain relationships, including its single largest reseller account, which accounted for 21% of the Company's telecommunication 11 services revenues during the first quarter of 1998. The loss of these revenues was the primary cause of the decrease in telecommunications service revenue in the second quarter of 1998. Telecommunications service revenue from other channels, including Network Marketing, continued to increase during the second quarter of 1998. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents as of June 30, 1998 were $930,176, restricted certificates of deposits were $1,136,661 and the working capital deficit was $14,123,371. Cash used by operating activities during the six-month period ended June 30, 1998 was $7,109,634 as compared to $5,040,728 during the same period ended June 30, 1997. The increase in cash used by operating activities in 1998 was primarily due to an increase in accounts receivable and the increased operating loss as the Company continued to developed its infrastructure and product base. Net cash used by investing activities in the six-month period ended June 30, 1998 was $1,063,444 as compared to net cash used of $48,680 in the same period ended June 30, 1997. Cash used by investing activities in 1998 was attributable to the purchase of furniture, fixtures and equipment of $1,906,659 which was offset by $310,000 received from sale of certain assets from discontinued operations and $533,215 from matured restricted certificates of deposit. In the first six months of 1997 cash used by investing activities was primarily due to purchase of furniture, fixtures and equipment of $483,992 which was offset by cash received of $435,312 in the acquisition of ILC. Financing activities provided net cash of $7,474,130 in the first six months of 1998 as compared to cash provided of $1,765,567 in the same period of 1997. Cash provided in 1998 included proceeds of $7,768,000 from notes payable and warrants and $684,943 in proceeds from exercises of common stock warrants and options. Payments on long-term debt and capital lease obligations of $808,348 from continuing operations and $170,465 from discontinued operations offset these proceeds. During the same six months in 1997, financing activities provided cash of $1,765,567 including $2,000,000 in proceeds from issuance of notes payable and warrants and $22,499 from the exercise of common stock warrants and options which sources were offset by repayments of $185,724 on long-term debt and capital lease obligations from continuing operations and $71,208 from discontinued operations. The Company incurred a net loss from continuing operations of $18,071,592 for the first six months 1998, and as of June 30, 1998 had an accumulated deficit of $75,163,845. The Company anticipates that revenues generated from its continuing operations will not be sufficient during 1998 to fund its operations, continued expansion of its private telecommunications network facilities and anticipated growth in subscriber base. To provide a portions of its capital needs, the Company has entered into two financing arrangements as described below. The Company anticipates that additional funds will be necessary from public or private financing markets to fund continued operations and to successfully integrate and finance the planned expansion of the business communications services and to discharge the financial obligations of the Company. CURRENT POSITION/FUTURE REQUIREMENTS During 1998, the Company plans to use available cash to fund the development and marketing of I-Link products and services. During the second quarter of 1998 12 revenues from continuing operations decreased $854,585 from the first quarter of 1998 primarily due to decreases of $646,010 in telecommunication services and $377,285 in marketing services, both of which were offset by an increase of $168,710 in technology licensing and development. The decrease in telecommunication services resulted from the Company's decision in early 1998 to refocus the resources of the Company to concentrate on the those channels of distribution of its products which produce higher profit margins (primarily the Network Marketing Channel). The effect of this decision was the Company's termination of several reseller accounts during the second quarter of 1998 including the Company's single largest reseller account. Terminating these relationships resulted in decreased revenues of $852,000 in the second quarter as compared to the first quarter of 1998. However, this decrease in revenue was offset by an increase in telecommunication services revenue in the Network Marketing Channel of $360,000 which represents growth of telecommunication services revenue from this channel in the second quarter as compared to the first quarter of 1998. The decrease from marketing services revenue was primarily due to the Company's decision to discontinue sale of the V-Phone and Net Link 1+ products ($179,340) during the second quarter and a cyclical decrease in revenues from national conventions and training, promotional and presentation materials ($197,945) (the Company's national conventions are held in the first and third quarters). The Company anticipates that revenue from all sources of continuing operations will continue to grow in 1998 and will increasingly contribute to the cash requirements of the Company. The Company released several new products in late 1997 and early 1998 such as V-Link and has deployed several of its Communication Engines, all of which continue to increase revenues and profit margins. The Company also believes that revenue and cash flows from software sales and development will continue to increase in 1998 due to maturation of its products and royalty and licensing agreements. The Company anticipates that cash requirements for operations and the continued market penetration and deployment of I-Link products and services will be at increasingly higher levels than those experienced in 1997. The Company also expects that expenditures for research and development will continue at approximately the same level as the first six months for the remainder of 1998 as it continues development of new technology. In March 1998, the Company committed approximately $2.2 million (of which $529,000 had been paid as of June 30, 1998) to development of a new internal information system that will encompass nearly all computer systems. In order to provide for capital expenditure and working capital needs, during the second quarter of 1998 the Company obtained a total of $2 million (in addition to $5.768 million in the first quarter) in new interim debt financing from Winter Harbor, L.L.C. Pursuant to the terms of the loan agreement with Winter Harbor, (which bears interest at prime plus four), the Company agreed to issue 1,740,000 warrants to purchase common stock of the Company at exercise prices ranging from $6.12 to $6.67 based upon 110% of the closing price of the common stock on the day loan funds were advanced. The warrants expire seven and one-half years from the grant date. The loan is due upon demand and collateralized by essentially all of the assets of the Company's subsidiaries. Additionally, Winter Harbor has the right to elect at any time until the loan (including the $5.768 loan in the first quarter of 1998) is repaid to convert the unpaid balance of the loan into additional shares of the Company's Series M Preferred Stock, reduce the exercise price of the 6,740,000 Loan Warrants (including 5,000,000 warrants issued in connection with the $5.768 million loan in the first quarter of 1998) to $2.50 per share, and receive an additional 5,000,000 warrants to purchase common stock of the Company at an exercise price of $2.50 per share. 13 On July 9, 1998, the Company obtained a $10 million equity investment which resulted in net proceeds to the Company of $9.470 million. The terms of the equity investment were amended on July 28, 1998. Under the original terms of the equity investment, JNC Opportunity Fund Ltd. ("JNC") purchased shares of the Company's newly created 5% Series E Convertible Preferred Stock (the "Series E Preferred Stock"), which were convertible into the Company's common shares at a conversion price of the lesser of 110% of the market price of the Company's publicly traded common shares as of the date of closing, and 90% of the market price at the time of conversion. In addition, JNC obtained a warrant to purchase 275,000 shares of the Company's common stock at an exercise price equal to 120% of the market price of the Company's publicly traded common shares as of the date of closing. On July 28, 1998, the terms of the equity investment were amended to provide a floor to the conversion price, and to effect the amendment the Company created a 5% Series F Convertible Preferred Stock (the "Series F Preferred Stock") with which the Series E Preferred Shares originally issued to JNC were exchanged. Pursuant to the amendment, the Series F Preferred Shares are convertible into common shares at a conversion price of the lesser of $4.00 per common share or 87% of the market price of the Company's common shares at the time of conversion, subject to a $2.50 floor. In the event the market price remains below $2.50 for five consecutive trading days, the floor will be re-set to the lower rate, provided, however, that the floor shall not be less than $1.25. JNC also received an additional warrant to purchase 100,000 shares of the Company's common stock at an exercise price of $4.00 per common share. The Series F Preferred shares may be converted at any time, are automatically converted at the end of three years, and are subject to specific provisions that would prevent any issuance of I-Link common stock at a discount if and to the extent that such shares would equal or exceed in the aggregate 20% percent of the number of common shares outstanding prior to the recent $10 million placement absent shareholder approval as contemplated by the Nasdaq Stock Market Non-Quantitative Designation Criteria. In March 1998, the Company entered into a written agreement with a private investor under the terms of which the investor agreed to provide to the Company a credit facility of from $10 million to $20 million. Subsequently, the investor defaulted in its obligations to make the loans to the Company in the time frames provided for in the agreement. Despite continued representations from the investor that it intends to provide the funding to the Company, the investor remains in default. The Company has declared the investor in breach of the written agreement. The Company anticipates that additional funds will be necessary from public or private financing markets to fund continued operations and to successfully integrate and finance the planned expansion of the business communications services and to discharge the financial obligations of the Company. The availability of such capital sources will depend on prevailing market conditions, interest rates, and financial position and results of operations of the Company. There can be no assurance that such financing will be available, that the Company will receive any proceeds from the exercise of outstanding options and warrants or that the Company will not be required to arrange for additional debt, equity or other type of financing. THREE-MONTH PERIOD ENDED JUNE 30, 1998 COMPARED TO THE THREE-MONTH PERIOD ENDED JUNE 30, 1997 In December 1997, the Company made the decision to dispose of the operations of the subsidiaries of the Company operating in the medical services industry in order to concentrate on its telecommunications and technology sectors. 14 Accordingly, medical services operations during the three-month periods ending March 31, 1998 and 1997 have been reported as discontinued operations. REVENUES Telecommunication services revenue increased $1,867,358 to $4,134,967 in the second quarter of 1998 as compared to $2,267,609 in the second quarter of 1997. The increase is due primarily to the new customers obtained through the Network Marketing channel which began generating revenue in the third quarter of 1997. Marketing services revenue, which includes revenue recognized from independent representatives for training, promotional and presentation materials, V-Phone and Netlink 1+ product sales, and ongoing administrative support was $963,962 in the second quarter of 1998 as compared to $720,490 in the same quarter of 1997. The network marketing channel and its related product offerings began late in the second quarter of 1997. Technology licensing and development revenue was $374,660 in the second quarter of 1998. These revenues are from the licensing and development of technology through MiBridge, Inc., which was acquired in September 1997. Accordingly there was no such revenue in the second quarter of 1997. OPERATING COSTS AND EXPENSES Telecommunication network expense increased $597,626 in the second quarter of 1998 to $4,612,334 as compared to $4,014,708 for the same quarter of 1997. These expenses include the costs related to the continuing development and deployment of the Company's communication network and expenses related to the telecommunication services revenue. The increase in expense was primarily due to the increase in telecommunication services revenue. The Company expects that telecommunications network expense will increase as telecommunication services revenue increases but at a lesser rate of growth as the Company benefits from economies of scale and increased traffic on the Company's enhanced IP (Internet protocol) telephony network. Marketing service costs were $1,343,072 in the second quarter of 1998 as compared to $640,739 for the same quarter of 1997. The expenses relate directly to the Company's marketing services revenue that began late in the second quarter of 1997. Marketing services expense includes commissions and the costs of providing training, promotional and presentation materials and ongoing administrative support to independent representatives. Selling, general and administrative expense increased $281,075 to $2,520,506 in the second quarter of 1998 as compared to $2,239,431 in the second quarter of 1997. The increase was primarily due to increased overhead and personnel costs associated with growing the Company's telecommunication business. The provision for doubtful accounts increased $405,000 to $675,000 in the second quarter of 1998 as compared to $270,000 in the same quarter of 1997. This increase is primarily due to the following: (1) growth in the Company's telecommunication services revenue and (2) an increase in uncollectible accounts receivable associated with the Company's decision in early 1998 to concentrate its resources on those channels of distribution of its products with higher profit margins (primarily Network Marketing), the effect of which was to terminate relationships with several reseller accounts in the second quarter of 1998, including the Company's single largest reseller account. 15 Depreciation and amortization increased $524,049 to $1,039,099 in the second quarter of 1998 as compared to $515,050 in the second quarter of 1997. The increase is primarily due to increased amortization associated with intangible assets recorded in the third quarter of 1997 with the release from escrow of the final 1,000,000 shares of common stock in connection with the 1996 acquisition of I-Link Worldwide Inc. and the third quarter 1997 acquisition of MiBridge. This resulted in $12,336,410 of additional intangible assets. Depreciation expense also increased due to continued acquisition of telecommunication equipment. Research and development increased $501,814 to $576,060 in the second quarter of 1998 as compared to $74,246 in the same period of 1997. The increase is associated with the Company's acquisition of MiBridge, Inc in the third quarter of 1997 and the formation of a wholly-owned Israeli subsidiary, ViaNet, in early 1998 to increase the Company's research and development efforts. Interest expense increased $5,421,856 to $5,459,535 in the second quarter of 1998 as compared to $37,679 in the same quarter of 1997. The net increase is primarily due to $5,213,000 (non-cash) in amortization of debt discount related to certain warrants granted in connection with $7,768,000 in loans to the Company from Winter Harbor L.L.C. and interest on the same loans of $235,909. Interest and other income decreased $38,244 to $18,172 in the second quarter of 1998 as compared to $56,416 in the same quarter of 1997. The decrease was primarily due to a decrease in the average balance of cash on hand in the second quarter of 1998 as compared to the same quarter of 1997. SIX-MONTH PERIOD ENDED JUNE 30, 1998 COMPARED TO THE SIX-MONTH PERIOD ENDED JUNE 30, 1997 In December 1997, the Company made the decision to dispose of the operations of the subsidiaries of the Company operating in the medical services industry in order to concentrate on its telecommunications and technology sectors. Accordingly, medical services operations during the six-month periods ending June 30, 1998 and 1997 have been reported as discontinued operations. REVENUES Telecommunications service revenue increased $4,501,119 to $8,915,944 in the first six months of 1998 as compared to $4,414,825 in the first six months of 1997. The increase is due primarily to the new customers obtained through the Network Marketing channel which began generating revenues in the third quarter of 1997. Marketing services revenue, which includes revenues recognized from independent representatives for training, promotional and presentation materials, V-Phone and Netlink 1+ product sales, and ongoing administrative support was $2,305,209 in the first six months of 1998 as compared to $720,490 in the same period of 1997. The network marketing channel and its related product offerings began late in the second quarter of 1997. Technology licensing and development revenue was $580,610 in the first six months of 1998. These revenues are from the licensing and development of technology through MiBridge, Inc., which was acquired in September 1997. Accordingly there was no such revenue in the first quarter of 1997. 16 OPERATING COSTS AND EXPENSES Telecommunication network expenses increased $2,444,760 in the first six months of 1998 to $9,510,550 as compared to $7,065,790 for the same period in 1997. These expenses include the costs related to the continuing development and deployment of the Company's communication network and expenses related to the telecommunication services revenue. The increase in expense was primarily due to the increase in telecommunications services revenue. The Company expects that telecommunications network expense will increase as telecommunication services revenue increases but at a lesser rate of growth as the Company benefits from economies of scale and increased traffic on the Company's enhanced IP (Internet protocol) telephony network. Marketing service costs were $3,210,957 in the first six months of 1998 as compared to $640,739 for the same period in 1997. The expenses relate directly to the Company's marketing service revenue that began late in the second quarter of 1997 and accordingly expenses incurred in the first six months of 1998 and 1997 are not directly comparable. Marketing service expenses include commissions and the costs of providing training, promotional and presentation materials and ongoing administrative support to independent representatives. Selling, general and administrative expense increased $580,175 to $4,932,092 in the first six months of 1998 as compared to $4,351,917 in the first six months in 1997. The increase was primarily due to increased administrative expense associated with the launch of the Network Marketing channel late in the second quarter of 1997 and general increases in overhead and personnel expenses associated with growing the Company's telecommunication business. The provision for doubtful accounts increased $1,103,662 to $1,448,662 in the six months of 1998 as compared to $345,000 in the same period in 1997. This increase is primarily due to the following: (1) growth in the Company's telecommunication services revenue and (2) an increase in uncollectible accounts receivable associated with the Company's decision in early 1998 to concentrate its resources on those channels of distribution of its products with higher profit margins (primarily Network Marketing), the effect of which was to terminate relationships with several reseller accounts in the second quarter of 1998, including the Company's single largest reseller account. Depreciation and amortization increased $1,236,675 to $2,049,826 in the first quarter of 1998 as compared to $813,151 in the first six months of 1997. The increase is primarily due to increased amortization associated with intangible assets recorded in the third quarter of 1997 with the release from escrow of the final 1,000,000 shares of common stock in connection with the 1996 acquisition of I-Link Worldwide Inc. and the third quarter 1997 acquisition of MiBridge. This resulted in $12,336,410 of additional intangible assets. Depreciation expense also increased due to continued acquisition of telecommunication equipment. Research and development increased $798,821 to $1,144,155 in the first six months of 1998 as compared to $345,334 in the same period in 1997. The increase is associated with the Company's acquisition of MiBridge, Inc in the third quarter of 1997 and the formation of a wholly-owned Israeli subsidiary, ViaNet, in early 1998 to increase the Company's research and development efforts. Interest expense increased $7,267,306 to $7,640,577 in the first six months of 1998 as compared to $373,271 in the same period in 1997. The net increase is primarily due to $7,274,000 (non-cash) in amortization of debt discount related to certain warrants granted in connection with $7,768,000 in loans to the 17 Company in the first six months of 1998 as compared to $320,000 (non-cash) on certain convertible notes in the same period of 1997. Interest and other income decreased $77,260 to $63,464 in the first six months of 1998 as compared to $140,724 in the same period of 1996. The decrease was primarily due to a decrease in the average balance of cash on hand in the first six months of 1998. 18 PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS On May 12, 1998, I-Link and MCI Telecommunications, a unit of MCI Communications Corp., agreed to a settlement of the arbitration action filed in November 1997 by I-Link against MCI and a related counterclaim by MCI against I-Link. Pursuant to the terms of the settlement all claims and counterclaims shall be dismissed, I-Link shall pay to MCI over a six-month period the sum of $2,083,425 representing agreed actual long-distance usage by I-Link prior to the termination of its relationship with MCI, and payment on the Company's existing note payable to MCI (outstanding principal balance as of June 30, 1998 of approximately $2.39 million) will be restructured to provide for a fixed monthly payment of $250,436 over the term of the note, in place of the original escalating monthly payment schedule. The Company is also involved in litigation relating to claims arising out of its operations in the normal course of business, none of which are expected, individually or in the aggregate, to have a material adverse affect on the Company. ITEM 6(A) - EXHIBITS Exhibit Number Item 3.7 Articles of Amendment to the Company's Amended and Restated Articles of Incorporation, establishing the terms of Series F Preferred Stock. 10.28 Agreement dated April 14, 1998, by and between the Company and Winter Harbor, L.L.C. ("Winter Harbor"). 10.29 Pledge Agreement dated April 14, 1998, by and between the Company and Winter Harbor. 10.30 Security Agreement dated April 14, 1998, by and among certain of the Company's subsidiaries and Winter Harbor. 10.31 Form of Promissory Notes issued to Winter Harbor. 10.32 Convertible Preferred Stock Purchase Agreement dated June 30, 1998 by and between the Company and JNC Opportunity Fund Ltd. ("JNC"). 10.33 Registration Rights Agreement dated June 30, 1998 by and between the Company and JNC. 10.34 Warrant to purchase 250,000 shares of Common Stock of the Company, dated June 30, 1998, issued to JNC. 10.35 Exchange Agreement dated July 28, 1998 by and between the Company and JNC. 10.36 Warrant to purchase 100,000 shares of Common Stock of the Company, dated July 28, 1998, issued to JNC ITEM 6(B) - REPORTS ON FORM 8-K None 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunder duly authorized. I-Link Incorporated (Registrant) Date: August 13, 1998 By: /s/ John W. Edwards John W. Edwards President, Chief Executive Officer By: /s/ Karl S. Ryser, Jr. Karl S. Ryser, Jr. Chief Financial Officer, Chief Accounting Officer, and Treasurer < EX-3 2 ARTICLES OF AMENDMENT TO THE AMENDED AND RESTATED ARTICLES OF INCORPORATION OF I-LINK INCORPORATED Pursuant to Article III of the Amended and Restated Articles of Incorporation of the Corporation (the "Articles of Incorporation"), and the provisions of Section 607.0602 of the Florida Business Corporation Act, the board of directors of the Corporation (the "Board of Directors") has resolved to amend Article III of the Articles of Incorporation. 1. The name of the corporation is I-Link Incorporated. 2. Article III is hereby amended by adding Section III(j), which shall read in its entirety as follows: "(j) Of the 10,000,000 shares of Preferred Stock authorized hereunder, 1,000 shares of Preferred Stock shall be designated as 5% Series F Convertible Preferred Stock (the "Series F Preferred Stock"). Section 1. Designation, Amount and Par Value. The series of preferred stock shall be designated as 5% Series F Convertible Preferred Stock (the "Preferred Stock") and the number of shares so designated shall be 1,000 (which shall not be subject to increase without the consent of the holders of the Preferred Stock (each, a "Holder" and collectively, the "Holders")); Each share of Preferred Stock shall have a par value of $10 and a stated value of $10,000 (the "Stated Value"). Section 2. Dividends. (a) Holders shall be entitled to receive, when and as declared by the Board of Directors out of funds legally available therefor, and the Company shall pay, cumulative dividends at the rate per share (as a percentage of the Stated Value per share) equal to 5% per annum, payable on a quarterly basis on March 31, June 30, September 30 and December 31 of each year during the term hereof (each a "Dividend Payment Date"), commencing on September 30, 1998, in cash or shares of Common Stock (as defined in Section 8) at, subject to the terms and conditions set forth herein, the option of the Company. Dividends on the Preferred Stock shall be calculated on the basis of a 360-day year, shall accrue daily commencing on the Original Issue Date (as defined in Section 8), and shall be deemed to accrue from such date whether or not earned or declared and whether or not there are profits, surplus or other funds of the Company legally available for the payment of dividends. Any dividends not paid on any Dividend Payment Date shall continue to accrue and shall be due and payable upon conversion of the Preferred Stock. A party that holds shares of Preferred Stock on a Dividend Payment Date will be entitled to receive such dividend payment and any other accrued and unpaid dividends which accrued prior to such Dividend Payment Date, without regard to any sale or disposition of such Preferred Stock subsequent to the applicable record date. All overdue accrued and unpaid dividends and other amounts due herewith shall entail a late fee at the rate of 15% per annum (to accrue daily, from the date such dividend is due hereunder through and including the date of payment). Except as otherwise provided herein, if at any time the Company pays less than the total amount of dividends then accrued on account of the Preferred Stock, such payment shall be distributed ratably among the Holders based upon the number of shares held by each Holder. Payment of dividends on the Preferred Stock is further subject to the provisions of Section 5(c)(i). The Company shall provide the Holders notice of its intention to pay dividends in cash or shares of Common Stock not less than 10 Trading Days prior to any Dividend Payment Date for so long as shares of Preferred Stock are outstanding. If dividends are paid in shares of Common Stock, the number of shares of Common Stock issuable on account of such dividend shall equal the cash amount of such dividend on such Dividend Payment Date divided by the Conversion Price (as defined below) on such date. (b) Subject to Section 5(a)(iii)(B) and notwithstanding anything to the contrary contained herein, the Company may not issue shares of Common Stock in payment of dividends on the Preferred Stock (and must deliver cash in respect thereof) if: (i) the number of shares of Common Stock at the time authorized, unissued and unreserved for all purposes is insufficient to pay such dividends in shares of Common Stock; (ii) such shares of Common Stock are not registered for resale pursuant to an effective registration statement that names the recipient of such dividend as a selling stockholder thereunder and may not be sold without volume restrictions pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended (the "Securities Act"), as determined by counsel to the Company pursuant to a written opinion letter, addressed to the Company's transfer agent in the form and substance acceptable to the Holders and such transfer agent; (iii) the Common Stock is not then listed or quoted on the Nasdaq SmallCap Market ("NASDAQ") or on the New York Stock Exchange, American Stock Exchange or the Nasdaq National Market (each, a "Subsequent Market"); (iv) the Company has failed to timely satisfy its conversion obligations hereunder; or (v) the issuance of such shares of Common Stock would result in the recipient thereof beneficially owning, as determined in accordance with Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the 'Exchange Act"), more than 4.999% of the then issued and outstanding shares of Common Stock. (c) So long as any Preferred Stock shall remain outstanding, neither the Company nor any subsidiary thereof shall redeem, purchase or otherwise acquire directly or indirectly any Junior Securities (as defined in Section 8), nor shall the Company directly or indirectly pay or declare any dividend or make any distribution (other than a dividend or distribution described in Section 5) upon, nor shall any distribution be made in respect of, any Junior Securities (as defined in Section 8), nor shall any monies be set aside for or applied to the purchase or redemption (through a sinking fund or otherwise) of any Junior Securities or shares pari passu with the Preferred Stock, except for repurchases effected by the Company on the open market, pursuant to a direct stock purchase plan. Section 3. Voting Rights. Except as otherwise provided herein and as otherwise required by law, the Preferred Stock shall have no voting rights. However, so long as any shares of Preferred Stock are outstanding, the Company shall not and shall cause its subsidiaries not to, without the affirmative vote of the Holders of all of the shares of the Preferred Stock then outstanding, (a) alter or change adversely the powers, preferences or rights given to the Preferred Stock, (b) alter or amend this Certificate of Designation, (c) authorize or create any class of stock ranking as to dividends or distribution of assets upon a Liquidation (as defined in Section 4) senior to or otherwise pari passu with or senior to the Preferred Stock, (d) amend its Certificate of Incorporation, bylaws or other charter documents so as to affect adversely any rights of any Holders, (e) increase the authorized number of shares of Preferred Stock, or (f) enter into any agreement with respect to the foregoing. Section 4. Liquidation. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a "Liquidation"), the Holders shall be entitled to receive out of the assets of the Company, whether such assets are capital or surplus, for each share of Preferred Stock an amount equal to the Stated Value plus all due but unpaid dividends per share, whether declared or not, before any distribution or payment shall be made to the holders of any Junior Securities, and if the assets of the Company shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders shall be distributed among the Holders ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. A sale, conveyance or disposition of all or substantially all of the assets of the Company or the effectuation by the Company of a transaction or series of related transactions in which more than 33% of the voting power of the Company is disposed of, or a consolidation or merger of the Company with or into any other company or companies shall not be treated as a Liquidation, but instead shall be subject to the provisions of Section 5. The Company shall mail written notice of any such Liquidation, not less than 45 days prior to the payment date stated therein, to each record Holder. Section 5. Conversion. (a)(i) Conversions at Option of Holder. Each share of Preferred Stock shall be convertible into shares of Common Stock (subject to the limitations set forth in Section 5(a)(iii) hereof) at the Conversion Ratio (as defined in Section 8) at the option of the Holder, at any time and from time to time, from and after the Original Issue Date. Holders shall effect conversions by surrendering the certificate or certificates representing the shares of Preferred Stock to be converted to the Company, together with the form of conversion notice attached hereto as Exhibit A (a "Conversion Notice"). Each Conversion Notice shall specify the number of shares of Preferred Stock to be converted and the date on which such conversion is to be effected, which date may not be prior to the date the Holder delivers such Conversion Notice by facsimile (the "Conversion Date"). If no Conversion Date is specified in a Conversion Notice, the Conversion Date shall be the date that the Conversion Notice is deemed delivered hereunder. If the Holder is converting less than all shares of Preferred Stock represented by the certificate or certificates tendered by the Holder with the Conversion Notice, or if a conversion hereunder cannot be effected in full for any reason, the Company shall promptly deliver to such Holder (in the manner and within the time set forth in Section 5(b)) a certificate for such number of shares as have not been converted. (ii) Automatic Conversion. Subject to the provisions in this paragraph and Section 5(a)(iii)(B), all outstanding shares of Preferred Stock for which conversion notices have not previously been received or for which redemption has not been made or required hereunder shall be automatically converted on the third anniversary of the Original Issue Date at the Conversion Price on such date. The conversion contemplated by this paragraph shall not occur at such time as (a) (1) an Underlying Securities Registration Statement (as defined in Section 8) is not then effective or (2) the Holder is not permitted to resell Underlying Shares pursuant to Rule 144(k) promulgated under the Securities Act, without volume restrictions, as evidenced by an opinion letter of counsel acceptable to the Holder and the transfer agent for the Common Stock; (b) there are not sufficient shares of Common Stock authorized and reserved for issuance upon such conversion; or (c) the Company shall have defaulted on its covenants and obligations hereunder or under the Purchase Agreement or Registration Rights Agreement. Notwithstanding the foregoing, the three-year period for conversion under this Section shall be extended (on a day-for-day basis) for any Trading Days that the Purchaser is unable to resell Underlying Shares under an Underlying Securities Registration Statement due to (a) the Common Stock not being listed for trading on the NASDAQ or any Subsequent Market, (b) the failure of an Underlying Securities Registration Statement to be declared effective by the Securities and Exchange Commission (the "Commission") by the Filing Date (as defined in the Registration Rights Agreement), or (c) if an Underlying Securities Registration Statement shall have been declared effective by the Commission, (x) the failure of such Underlying Securities Registration Statement to remain effective during the Effectiveness Period (as defined in the Registration Rights Agreement) as to all Underlying Shares, or (y) the suspension of the Holder's ability to resell Underlying Shares thereunder. (iii) Certain Conversion Restrictions. (A) The Holder agrees not to convert shares of Preferred Stock to the extent such conversion would result in the Holder beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules thereunder) in excess of 4.999% of the then issued and outstanding shares of Common Stock, including shares issuable upon conversion of the shares of Preferred Stock held by such Holder after application of this Section. To the extent that the limitation contained in this Section applies, the determination of whether shares of Preferred Stock are convertible (in relation to other securities owned by a Holder) and of which shares of Preferred Stock are convertible shall be in the sole discretion of the Holder, and the submission of shares of Preferred Stock for conversion shall be deemed to be the Holder's determination of whether such shares of Preferred Stock are convertible (in relation to other securities owned by the Holder) and of which portion of such shares of Preferred Stock are convertible, in each case subject to such aggregate percentage limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. Nothing contained herein shall be deemed to restrict the right of the Holder to convert shares of Preferred Stock at such time as such conversion will not violate the provisions of this Section. The provisions of this Section will not apply to any conversion pursuant to Section 4(a)(ii) hereof, and may be waived by a Holder (but only as to itself and not to any other Holder) upon not less than 75 days prior notice to the Company (in which case, the Holder shall make such filings with the Commission, including under Rule 13D or 13G, as are required by applicable law), and the provisions of this Section shall continue to apply until such 75th day (or later, if stated in the notice of waiver). Other Holders shall be unaffected by any such waiver. (B) If on any Conversion Date (A) the Common Stock is listed for trading on the NASDAQ or the Nasdaq National Market, (B) the Conversion Price then in effect is such that the aggregate number of shares of Common Stock that would then be issuable upon (i) conversion in full of all then outstanding shares of Preferred Stock, as payment of dividends thereon in shares of Common Stock, and (ii) exercise of the Additional Warrant (as defined in the Exchange Agreement), if the exercise price of the Additional Warrant is less than the closing sales price of the Common Stock on the Original Issue Date, together with any shares of the Common Stock previously issued upon conversion of shares of Preferred Stock, as payment of dividends thereon and exercise of the Additional Warrant, if the exercise price of the Additional Warrant is less than the closing sales price of the Common Stock on the Original Issue Date, would equal or exceed 20% of the number of shares of the Common Stock outstanding on the Original Issue Date (such number of shares as would not equal or exceed such 20% limit, the "Issuable Maximum"), and (C) the Company shall not have previously obtained the vote of shareholders (the "Shareholder Approval"), if any, as may be required by the applicable rules and regulations of The Nasdaq Stock Market (or any success entity) applicable to approve the issuance of shares of Common Stock in excess of the Issuable Maximum in a private placement whereby shares of Common Stock are deemed to have been issued at a price that is less than the greater of book or fair market value of the Common Stock, then the Company shall issue to the Holder so requesting a conversion a number of shares of Common Stock equal to the Issuable Maximum and, with respect to the remainder of the aggregate Stated Value of the shares of Preferred Stock then held by such Holder for which a conversion in accordance with the Conversion Price would result in an issuance of Common Stock in excess of the Issuable Maximum (the "Excess Stated Value"), the converting Holder shall have the option to require the Company to either (1) use its best efforts to obtain the Shareholder Approval applicable to such issuance as soon as is possible, but in any event not later than the 60th day after such request, or (2)(i) issue and deliver to such Holder a number of shares of Common Stock as equals (x) the Excess Stated Value, plus accrued dividends on all shares of Preferred Stock being converted, divided by (y) the closing sale price of the Common Stock on the Original Issue Date, and (ii) cash in an amount equal to the product of (x) the Per Share Market Value on the Conversion Date and (y) the number of shares of Common Stock in excess of such Holder's pro rata portion of the Issuable Maximum that would have otherwise been issuable to the Holder in respect of such conversion but for the provisions of this Section (such amount of cash being hereinafter referred to as the "Discount Equivalent"), or (3) pay cash to the converting Holder in an amount equal to the Mandatory Redemption Amount (as defined in Section 8) for the Excess Stated Value. If the Company fails to pay the Discount Equivalent or the Mandatory Redemption Amount, as the case may be, in full pursuant to this Section within seven (7) days after the date payable, the Company will pay interest thereon at a rate of 18% per annum to the converting Holder, accruing daily from the Conversion Date until such amount, plus all such interest thereon, is paid in full. (b) (i) Not later than three (3) Trading Days after any Conversion Date, the Company will deliver to the Holder (i) a certificate or certificates which shall be free of restrictive legends and trading restrictions (other than those required by Section 3.1(b) of the Purchase Agreement) representing the number of shares of Common Stock being acquired upon the conversion of shares of Preferred Stock (subject to the limitations set forth in Section 5(a)(iii) hereof), (ii) one or more certificates representing the number of shares of Preferred Stock not converted, (iii) a bank check in the amount of accrued and unpaid dividends (if the Company has elected to pay accrued dividends in cash), and (iv) if the Company has elected and is permitted hereunder to pay accrued dividends in shares of Common Stock, certificates, which shall be free of restrictive legends and trading restrictions (other than those required by Section 3.1 (b) of the Purchase Agreement), representing such shares of Common Stock; provided, however, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon conversion of any shares of Preferred Stock until certificates evidencing such shares of Preferred Stock are either delivered for conversion to the Company or any transfer agent for the Preferred Stock or Common Stock, or the Holder of such Preferred Stock notifies the Company that such certificates have been lost, stolen or destroyed and provides a bond (or other adequate security) reasonably satisfactory to the Company to indemnify the Company from any loss incurred by it in connection therewith. The Company shall, upon request of the Holder, if available, use its best efforts to deliver any certificate or certificates required to be delivered by the Company under this Section electronically through the Depository Trust Corporation or another established clearing corporation performing similar functions. If in the case of any Conversion Notice such certificate or certificates, including for purposes hereof, any shares of Common Stock to be issued on the Conversion Date on account of accrued but unpaid dividends hereunder, are not delivered to or as directed by the applicable Holder by the third (3rd) Trading Day after the Conversion Date, the Holder shall be entitled by written notice to the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Company shall immediately return the certificates representing the shares of Preferred Stock tendered for conversion. (ii) If the Company fails to deliver to the Holder such certificate or certificates pursuant to Section 5(b)(i), including for purposes hereof, any shares of Common Stock to be issued on the Conversion Date on account of accrued but unpaid dividends hereunder, by the third (3rd) Trading Day after the Conversion Date, the Company shall pay to such Holder, in cash, as liquidated damages and not as a penalty, $5,000 for each day after such third (3rd) Trading Day until such certificates are delivered. Nothing herein shall limit a Holder's right to pursue actual damages for the Company's failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holders from seeking to enforce damages pursuant to any other Section hereof or under applicable law. Further, if the Company shall not have delivered any cash due in respect of conversions of Preferred Stock or as payment of dividends thereon by the third (3rd) Trading Day after the Conversion Date, the Holder may, by notice to the Company, require the Company to issue Underlying Shares pursuant to Section 5(c), except that for such purpose the Conversion Price applicable thereto shall be the lesser of the Conversion Price on the Conversion Date and the Conversion Price on the date of such Holder demand. Any such Underlying Shares will be subject to the provision of this Section. (iii) In addition to any other rights available to the Holder, if the Company fails to deliver to the Holder such certificate or certificates pursuant to Section 5(b)(i), including for purposes hereof, any shares of Common Stock to be issued on the Conversion Date on account of accrued but unpaid dividends hereunder, by the third (3rd) Trading Day after the Conversion Date, and if after such third (3rd) Trading Day the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Holder of the Underlying Shares which the Holder anticipated receiving upon such conversion (a "Buy-In"), then the Company shall pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (x) the Holder's total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the aggregate stated value of the shares of Preferred Stock for which such conversion was not timely honored. For example, if the Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of $10,000 aggregate stated value of the shares of Preferred Stock, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In. (c)(i) The conversion price for each share of Preferred Stock (the "Conversion Price") in effect on any Conversion Date shall be the lesser of (a) $4.00 (the "Initial Conversion Price") and (b) 87% (the "Discount Rate") multiplied by the average of the three (3) lowest Per Share Market Values during the twenty two (22) Trading Day period immediately preceding the applicable Conversion Date, provided, that such twenty two (22) Trading Day period shall be extended for the number of Trading Days, if any, during such period in which (A) trading in the Common Stock was suspended from the NASDAQ or a Subsequent Market, or (B) after the date declared effective by the Commission, the Underlying Securities Registration Statement is not effective, or (C) after the date declared effective by the Commission, the Prospectus included in the Underlying Securities Registration Statement may not be used by the Holder for the resale of Underlying Shares, provided, however, that the Conversion Price shall not be less than the Floor (as defined in Section 8). The Floor (x) shall be decreased by 2% as of any Event Date (as defined below) and on each monthly anniversary thereof in accordance with this Section, (y) shall simultaneously be adjusted by the same ratio as the adjustments to the Conversion Price as a result of the provisions of Section 5(c)(ii)-(v), and (z) shall not apply in the event that the Common Stock is no longer listed on the NASDAQ or on a Subsequent Market. If: (a) an Underlying Securities Registration Statement is not filed on or prior to the Filing Date (if the Company files such Underlying Securities Registration Statement without affording the Holder the opportunity to review and comment on the same as required by Section 3(a) of the Registration Rights Agreement, the Company shall not be deemed to have satisfied this clause (a)), or (b) the Company fails to file with the Commission a request for acceleration in accordance with Rule 12d1-2 promulgated under the Securities Exchange Act of 1934, as amended, within five (5) days of the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that an Underlying Securities Registration Statement will not be "reviewed," or not subject to further review, or (c) the Underlying Securities Registration Statement is not declared effective by the Commission on or prior to the Effectiveness Date (as defined in the Registration Rights Agreement), or (d) such Underlying Securities Registration Statement is filed with and declared effective by the Commission but thereafter ceases to be effective as to all Registrable Securities (as defined in the Registration Rights Agreement) at any time prior to the expiration of the "Effectiveness Period" (as defined in the Registration Rights Agreement), without being succeeded within ten (10) days by a subsequent Underlying Securities Registration Statement filed with and declared effective by the Commission, or (e) trading in the Common Stock shall be suspended from the NASDAQ or a Subsequent Market for more than three (3) Business Days (which need not be consecutive days), (f) the conversion rights of the Holders are suspended for any reason or (g) an amendment to the Underlying Securities Registration Statement is not filed by the Company with the Commission within ten (10) days of the Commission's notifying the Company that such amendment is required in order for the Underlying Securities Registration Statement to be declared effective (any such failure or breach being referred to as an "Event," and for purposes of clauses (a), (c), (f) the date on which such Event occurs, or for purposes of clause (b) the date on which such five (5) day period is exceeded, or for purposes of clauses (d) and (g) the date which such 10 day-period is exceeded, or for purposes of clause (e) the date on which such three (3) Business Day-period is exceeded, being referred to as "Event Date"), then each of the Initial Conversion Price and the Discount Rate shall be decreased by 2% on the Event Date and each monthly anniversary thereof until the earlier to occur of the second month anniversary after the Event Date and such time as the applicable Event is cured (i.e., the Discount Rate would decrease to 85% as of the Event Date and 83% as of the one month anniversary of such Event Date). Commencing on the second month anniversary after the Event Date, the Holder shall have the option to either (x) require further cumulative 2% discounts to continue or (y) require the Company to pay to the Holder 2% of the aggregate Stated Values of the shares of Preferred Stock then held by such Holder, in cash, as liquidated damages and not as a penalty, on the first day of each monthly anniversary of the Event Date, until such time as the applicable Event is cured. Any decrease in the Initial Conversion Price and the Discount Rate pursuant to this Section shall remain in effect notwithstanding the fact that the Event causing such decrease has been subsequently cured and further monthly decreases have ceased. The provisions of this Section are not exclusive and shall in no way limit the Company's obligations under the Registration Rights Agreement. (ii) If the Company, at any time while any shares of Preferred Stock are outstanding, shall (a) pay a stock dividend or otherwise make a distribution or distributions on shares of its Junior Securities or pari passu securities payable in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of Common Stock any shares of capital stock of the Company, the Initial Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section 5(c)(ii) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification. (iii) If the Company, at any time while any shares of Preferred Stock are outstanding, shall issue rights, warrants or options to all holders of Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Per Share Market Value at the record date mentioned below, then the Initial Conversion Price shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to the issuance of such rights, warrants or options, plus the number of shares of Common Stock which the aggregate offering price of the total number of shares so offered would purchase at such Per Share Market Value, and the denominator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to such issuance plus the number of shares of Common Stock offered for subscription or purchase. Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights or warrants. However, upon the expiration of any right, warrant or option to purchase shares of Common Stock the issuance of which resulted in an adjustment in the Conversion Price pursuant to this Section 5(c)(iii), if any such right, warrant or option shall expire and shall not have been exercised, the Conversion Price shall immediately upon such expiration shall be recomputed and effective immediately upon such expiration shall be increased to the price which it would have been (but reflecting any other adjustments in the Conversion Price made pursuant to the provisions of this Section 5 upon the issuance of other rights or warrants) had the adjustment of the Conversion Price made upon the issuance of such rights, warrants, or options been made on the basis of offering for subscription or purchase only that number of shares of Common Stock actually purchased upon the exercise of such rights, warrants or options actually exercised. (iv) If the Company or any subsidiary thereof, as applicable with respect to Common Stock Equivalents (as defined below), at any time while any shares of Preferred Stock are outstanding, shall issue shares of Common Stock or rights, warrants, options or other securities or debt that is convertible into or exchangeable for shares of Common Stock ("Common Stock Equivalents") entitling any Person to acquire shares of Common Stock at a price per share less than the Conversion Price, then the Conversion Price shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to the issuance of shares of Common Stock or such Common Stock Equivalents plus the number of shares of Common Stock which the offering price for such shares of Common Stock or Common Stock Equivalents would purchase at the Conversion Price, and the denominator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to such issuance plus the number of shares of Common Stock so issued or issuable, provided, that for purposes hereof, all shares of Common Stock that are issuable upon exercise or exchange of Common Stock Equivalents shall be deemed outstanding immediately after the issuance of such Common Stock Equivalents. Such adjustment shall be made whenever such shares of Common Stock or Common Stock Equivalents are issued. (v) If the Company, at any time while shares of Preferred Stock are outstanding, shall distribute to all holders of Common Stock (and not to Holders) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security (excluding those referred to in Sections 5(c)(ii)-(iv) above), then in each such case the Initial Conversion Price at which each share of Preferred Stock shall thereafter be convertible shall be determined by multiplying the Initial Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Per Share Market Value of Common Stock determined as of the record date mentioned above, and of which the numerator shall be such Per Share Market Value of the Common Stock on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors in good faith; provided, however, that in the event of a distribution exceeding ten percent (10%) of the net assets of the Company, if the Holders of a majority in interest of the Preferred Stock dispute such valuation, such fair market value shall be determined by a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Company) (an "Appraiser") selected in good faith by the Holders of a majority in interest of the shares of Preferred Stock then outstanding; and provided, further, that the Company, after receipt of the determination by such Appraiser shall have the right to select an additional Appraiser, in good faith, in which case the fair market value shall be equal to the average of the determinations by each such Appraiser. In either case the adjustments shall be described in a statement provided to the Holders of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above. (vi) All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. (vii) Whenever the Conversion Price is adjusted pursuant to Section 5(c)(i),(ii),(iii),(iv), or (v) the Company shall promptly mail to each Holder, a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. (viii) In case of any reclassification of the Common Stock, or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property (other than compulsory share exchanges which constitute Change of Control Transactions), the Holders of the Preferred Stock then outstanding shall have the right thereafter to convert such shares only into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such reclassification or share exchange, and the Holders of the Preferred Stock shall be entitled upon such event to receive such amount of securities, cash or property as a holder of the number of shares of the Common Stock of the Company into which such shares of Preferred Stock could have been converted immediately prior to such reclassification or share exchange would have been entitled. This provision shall similarly apply to successive reclassifications or share exchanges. (ix) If (a) the Company shall declare a dividend (or any other distribution) on its Common Stock, (b) the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock, (c) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (d) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share of exchange whereby the Common Stock is converted into other securities, cash or property, or (e) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of Preferred Stock, and shall cause to be mailed to the Holders at their last addresses as they shall appear upon the stock books of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided, however, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. Holders are entitled to convert shares of Preferred Stock during the 20-day period commencing the date of such notice to the effective date of the event triggering such notice. (x) If the Company (i) makes a public announcement that it intends to enter into a Change of Control Transaction (as defined in Section 8) or (ii) any person, group or entity (including the Company, but excluding a Holder or any affiliate of a Holder) publicly announces a bona fide tender offer, exchange offer or other transaction to purchase 33% or more of the Common Stock (such announcement being referred to herein as a "Major Announcement" and the date on which a Major Announcement is made, the "Announcement Date"), then, in the event that a Holder seeks to convert shares of Preferred Stock on or following the Announcement Date, the Conversion Price shall, effective upon the Announcement Date and continuing through the earlier to occur of the consummation of the proposed transaction or tender offer, exchange offer or other transaction and the Abandonment Date (as defined below), be equal to the lower of (x) the average Per Share Market Value on the five Trading Days immediately preceding (but not including) the Announcement Date and (y) the Conversion Price that would otherwise have been in effect on the Conversion Date for such Preferred Stock but for the application of this section. "Abandonment Date" means with respect to any proposed transaction or tender offer, exchange offer or other transaction for which a public announcement as contemplated by this paragraph has been made, the date upon which the Company (in the case of clause (i) above) or the person, group or entity (in the case of clause (ii) above) publicly announces the termination or abandonment of the proposed transaction or tender offer, exchange offer or another transaction which caused this paragraph to become operative. (d) The Company covenants that it will at all times reserve and keep available out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of Preferred Stock and payment of dividends on Preferred Stock, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holders, not less than such number of shares of Common Stock as shall (subject to any additional requirements of the Company as to reservation of such shares set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5(a) and Section 5(c)) upon the conversion of all outstanding shares of Preferred Stock and payment of dividends hereunder. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable and freely tradeable, subject to the legend requirements of Section 3.1 (b) of the Purchase Agreement. (e) Upon a conversion hereunder the Company shall not be required to issue stock certificates representing fractions of shares of Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the Per Share Market Value at such time. If the Company elects not, or is unable, to make such a cash payment, the Holder of a share of Preferred Stock shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock. (f) The issuance of certificates for shares of Common Stock on conversion of Preferred Stock shall be made without charge to the Holders thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of such shares of Preferred Stock so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. (g) Shares of Preferred Stock converted into Common Stock shall be canceled. The Company may not reissue any shares of Preferred Stock. (h) Any and all notices or other communications or deliveries to be provided by the Holders of the Preferred Stock hereunder, including, without limitation, any Conversion Notice, shall be in writing and delivered personally, by facsimile or sent by a nationally recognized overnight courier service, addressed to the attention of the Chief Financial Officer of the Company at the facsimile telephone number or address of the principal place of business of the Company as set forth in the Purchase Agreement. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile or sent by a nationally recognized overnight courier service, addressed to each Holder at the facsimile telephone number or address of such Holder appearing on the books of the Company, or if no such facsimile telephone number or address appears, at the principal place of business of the Holder. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 8:00 p.m. (Eastern Standard Time), (ii) the date after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section later than 8:00 p.m. (Eastern Standard Time) on any date and earlier than 11:59 p.m. (Eastern Standard Time) on such date, (iii) upon receipt, if sent by a nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. Section 6. Optional Redemption. (a) The Company shall have the right, exercisable at any time upon 20 Trading Days' notice (an "Optional Redemption Notice") to the Holders of the Preferred Stock given at any time after the Original Issue Date to redeem all or any portion of the shares of Preferred Stock which have not previously been converted or redeemed, at a price equal to the Optional Redemption Price (as defined below), provided, that the Company shall not be entitled to deliver an Optional Redemption Notice to the Holders if: (i) the number of shares of Common Stock at the time authorized, unissued and unreserved for all purposes is insufficient to satisfy the Company's conversion obligations of all shares of Preferred Stock then outstanding, or (ii) the Underlying Shares then outstanding are not registered for resale pursuant to an effective Underlying Securities Registration Statement and may not be sold without volume restrictions pursuant to Rule 144 promulgated under the Securities Act, as determined by counsel to the Company pursuant to a written opinion letter, addressed to the Company's transfer agent in the form and substance acceptable to the Holders and such transfer agent, or (iii) the Common Stock is not then listed for trading on the NASDAQ or a Subsequent Market. The entire Optional Redemption Price shall be paid in cash. Holders may convert (and the Company shall honor such conversions in accordance with the terms hereof) any shares of Preferred Stock, including shares subject to an Optional Redemption Notice, during the period from the date thereof through the 20th Trading Day after the receipt of an Optional Redemption Notice. (b) If any portion of the Optional Redemption Price shall not be paid by the Company by the 20th Trading Day after the delivery of an Optional Redemption Notice, interest shall accrue thereon at the rate of 15% per annum until the Optional Redemption Price plus all such interest is paid in full. In addition, if any portion of the Optional Redemption Price remains unpaid after the date due, the Holder of the Preferred Stock subject to such redemption may elect, by written notice to the Company given at any time thereafter, to either (i) demand conversion of all or any portion of the shares of Preferred Stock for which such Optional Redemption Price, plus interest thereof, has not been paid in full (the "Unpaid Redemption Shares"), in which event the Per Share Market Value for such shares shall be the lower of the Per Share Market Value calculated on the date the Optional Redemption Price was originally due and the Per Share Market Value as of the Holder's written demand for conversion, or (ii) invalidate ab initio such redemption, notwithstanding anything herein contained to the contrary. If the Holder elects option (i) above, the Company shall within three (3) Trading Days of its receipt of such election deliver to the Holder the shares of Common Stock issuable upon conversion of the Unpaid Redemption Shares subject to such Holder conversion demand and otherwise perform its obligations hereunder with respect thereto; or, if the Holder elects option (ii) above, the Company shall promptly, and in any event not later than three (3) Trading Days from receipt of Holder's notice of such election, return to the Holder all of the Unpaid Redemption Shares. (c) The "Optional Redemption Price" shall equal the sum of (i) the product of (A) the number of shares of Preferred Stock to be redeemed and (B) the product of (1) the average Per Share Market Value for the five (5) Trading Days immediately preceding (x) the date of the Optional Redemption Notice or (y) the date of payment in full by the Company of the Optional Redemption Price, whichever is greater, and (2) the Conversion Ratio calculated on the date of the Optional Redemption Notice, and (ii) all other amounts, costs, expenses and liquidated damages due in respect of such shares of Preferred Stock. Section 7. Redemption Upon Triggering Events. (a) Upon the occurrence of a Triggering Event, each Holder shall (in addition to all other rights it may have hereunder or under applicable law), has the right, exercisable at the sole option of such Holder, to require the Company to redeem all or a portion of the Preferred Stock then held by such Holder for a redemption price, in cash, equal to the sum of (i) the Mandatory Redemption Amount plus (ii) the product of (A) the number of Underlying Shares issued in respect of conversions or as payment of dividends hereunder and then held by the Holder and (B) the Per Share Market Value on the date such redemption is demanded or the date the redemption price hereunder is paid in full, whichever is greater. If the Company fails to pay the redemption price hereunder in full pursuant to this Section within seven (7) days after the date of a demand therefor, the Company will pay interest thereon at a rate of 15% per annum, accruing daily from such seventh day until the redemption price, plus all such interest thereon, is paid in full. For purposes of this Section, a share of Preferred Stock is outstanding until such date as the Holder shall have received Underlying Shares upon a conversion (or attempted conversion) thereof. A "Triggering Event" means any one or more of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgement, decree or order of any court, or any order, rule or regulation of any administrative or governmental body): (i) the failure of an Underlying Securities Registration Statement to be declared effective by the Commission on or prior to the 180th day after the Original Issue Date; (ii) if, during the Effectiveness Period, the effectiveness of the Underlying Securities Registration Statement lapses for any reason, or the Holder shall not be permitted to resell Registrable Securities under the Underlying Securities Registration Statement; (iii) the failure of the Common Stock to be listed for trading on the NASDAQ or on a Subsequent Market or the suspension of the Common Stock from trading on the NASDAQ or on a Subsequent Market, in either case, for more than three (3) days (which need not be consecutive days); (iv) the Company shall fail for any reason to deliver certificates representing Underlying Shares issuable upon a conversion hereunder that comply with the provisions hereof prior to the 10th day after the Conversion Date or the Company shall provide notice to any Holder, including by way of public announcement, at any time, of its intention not to comply with requests for conversion of any Preferred Stock in accordance with the terms hereof; (v) the Company shall be a party to any Change of Control Transaction, shall agree to sell (in one or a series of related transactions) all or substantially all of its assets (whether or not such sale would constitute a Change of Control Transaction) or shall redeem more than a de minimis number of shares of Common Stock or other Junior Securities (other than redemptions of Underlying Shares); (vi) an Event shall not have been cured to the satisfaction of the Holders prior to the expiration of thirty (30) days from the Event Date relating thereto; (vii) the Company shall fail for any reason to deliver the certificate or certificates required pursuant to Section 5(b)(iii) or the cash pursuant to a Buy-In within seven (7) days after notice is deemed delivered hereunder; or (viii) the Company shall fail to have available a sufficient number of authorized and unreserved shares of Common Stock to issue to such Holder upon a conversion hereunder. Section 8. Definitions. For the purposes hereof, the following terms shall have the following meanings: "Change of Control Transaction" means the occurrence of any of (i) an acquisition after the date hereof by an individual or legal entity or "group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of in excess of 33% of the voting securities of the Company, (ii) a replacement of more than one-half of the members of the Company's board of directors which is not approved by those individuals who are members of the board of directors on the date hereof in one or a series of related transactions, (iii) the merger of the Company with or into another entity, consolidation or sale of all or substantially all of the assets of the Company in one or a series of related transactions, unless following such transaction, the holders of the Company's securities continue to hold at least 33% of such securities following such transaction or (iv) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in (i), (ii) or (iii). "Common Stock" means the Company's common stock, par value $.007 per share, and stock of any other class into which such shares may hereafter have been reclassified or changed. "Conversion Ratio" means, at any time, a fraction, the numerator of which is Stated Value plus accrued but unpaid dividends (including any accrued but unpaid late fees thereon) but only to the extent not paid in shares of Common Stock in accordance with the terms hereof, and the denominator of which is the Conversion Price at such time. "Exchange Agreement" means the Exchange Agreement, dated as of July 28, 1998, between the Company and the original Holder of the Preferred Stock. "Floor" shall initially mean $2.50 (the "Initial Floor"), provided, that, if at any time after the Original Issue Date, the average Per Share Market Value for any five (5) consecutive Trading Days (such five Trading Day average, the "Reset Price") is lower than the Initial Floor, the Floor shall be reset to the Reset Price. After such initial reset, if any, subsequent resets of the Floor may occur and shall be based upon the then most recent Reset Price. Notwithstanding the foregoing, subject to the adjustments contemplated in Sections 5(c)(i)-(v), the Floor shall not be less than $1.25. "Junior Securities" means the Common Stock and all other equity securities of the Company which are junior in rights and liquidation preference to the Preferred Stock. "Mandatory Redemption Amount" for each share of Preferred Stock means the sum of (i) the greater of (A) 130% of the Stated Value and all accrued dividends with respect to such share, and (B) the product of (a) the Per Share Market Value on the Trading Day immediately preceding (x) the date of the Triggering Event or the Conversion Date, as the case may be, or (y) the date of payment in full by the Company of the applicable redemption price, whichever is greater, and (b) the Conversion Ratio calculated on the date of the Triggering Event, or the Conversion Date, as the case may be, and (ii) all other amounts, costs, expenses and liquidated damages due in respect of such shares of Preferred Stock. "Original Issue Date" shall mean the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers of any particular shares of Preferred Stock and regardless of the number of certificates which may be issued to evidence such Preferred Stock. "Per Share Market Value" means on any particular date (a) the closing bid price per share of the Common Stock on such date on the NASDAQ or on such Subsequent Market on which the Common Stock is then listed or quoted, or if there is no such price on such date, then the closing bid price on the NASDAQ or on such Subsequent Market on which the Common Stock is then listed or quoted on the date nearest preceding such date, or (b) if the Common Stock is not then listed or quoted on the NASDAQ or on a Subsequent Market, the closing bid price for a share of Common Stock in the over-the-counter market, as reported by the National Quotation Bureau Incorporated or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (c) if the Common Stock is not then reported by the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices), then the average of the "Pink Sheet" quotes for the relevant conversion period, as determined in good faith by the Holder, or (d) if the Common Stock is not then publicly traded the fair market value of a share of Common Stock as determined by an Appraiser selected in good faith by the Holders of a majority of the shares of the Preferred Stock. "Person" means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency. "Purchase Agreement" means the Convertible Preferred Stock Purchase Agreement, dated as of June 30, 1998, between the Company and the original Holder of the Preferred Stock. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of June 30, 1998, between the Company and the original Holder of the Preferred Stock. "Trading Day" means (a) a day on which the Common Stock is traded on the NASDAQ or on such Subsequent Market on which the Common Stock is then listed or quoted, as the case may be, or (b) if the Common Stock is not listed on the NASDAQ or on a Subsequent Market, a day on which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided, however, that in the event that the Common Stock is not listed or quoted as set forth in (a), (b) and (c) hereof, then Trading Day shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close. "Underlying Securities Registration Statement" means a registration statement that meets the requirement of the Registration Rights Agreement and registers the resale of all Underlying Shares by the recipient thereof, who shall be named as a "selling stockholder" thereunder. "Underlying Shares" means, collectively, the shares of Common Stock into which the Shares are convertible and the shares of Common Stock issuable upon payment of dividends thereon in accordance with the terms hereof. EXHIBIT A NOTICE OF CONVERSION (To be Executed by the Registered Holder in order to Convert shares of Preferred Stock) The undersigned hereby elects to convert the number of shares of 5% Series F Convertible Preferred Stock indicated below, into shares of Common Stock, par value $.007 per share (the "Common Stock"), of I-Link Incorporated (the "Company") according to the conditions hereof, as of the date written below. If shares are to be issued in the name of a person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the Holder for any conversion, except for such transfer taxes, if any. Conversion calculations: ________________________________________________ Date to Effect Conversion ________________________________________________ Number of shares of Preferred Stock to be Converted ________________________________________________ Number of shares of Common Stock to be Issued ________________________________________________ Applicable Conversion Price ________________________________________________ Signature ________________________________________________ Name ________________________________________________ Address 3. The foregoing amendment was duly adopted by the Board of Directors without the requirement of shareholder action by meeting held on July 21, 1998, pursuant to the provisions of the Florida Business Corporation Act. IN WITNESS WHEREOF, I-Link Incorporated has caused these Articles of Amendment to the Amended and Restated Articles of Incorporation to be executed by its President and attested to by its Secretary this 28th day of July, 1998. I-LINK INCORPORATED By:_________________________ John W. Edwards, President ATTEST: ________________________ David E. Hardy, Secretary 19 EX-10 3 AGREEMENT THIS AGREEMENT is made and entered into as of April 14, 1998, by and between I-LINK, INCORPORATED, a Florida corporation (the "Borrower"), and WINTER HARBOR, L.L.C., a Delaware limited liability company (the "Lender"). Recitals 1. The Lender has lent to the Borrower $5,768,000 in four installments on a demand loan basis (three of which are evidenced by demand promissory notes (the "Notes")), which installments were made on January 26, 1998, February 23, 1998, March 3, 1998, and March 24, 1998 (collectively, the "Loans"). In connection with the Loans, the Lender was granted warrants to acquire, in the aggregate, 5,000,000 shares of common stock of the Borrower at an exercise price of 110% of the closing price of such stock on the day each installment was made (the "1998 Warrants"). 2. The Borrower has requested that the Lender not demand payment on the Loans before the earlier of May 15, 1998, and the date on which the Borrower consummates a loan transaction with another lender or consummates the sale of any debt or equity securities, in either case in an amount yielding net cash proceeds to the Borrower of not less than $6,000,000 (the earlier of such dates being referred to hereinafter as the "Demand Date".) Subject to the terms and conditions of this Agreement, the Lender has agreed to such request. Agreements IN CONSIDERATION of the foregoing recitals, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: A. Demand. The Lender agrees that it will not make demand on the Loans prior to the Demand Date. However, the Lender shall be deemed to have made demand on the Demand Date, so that the outstanding principal amount due under the Loans, together with all interest accrued through the date of payment (the "Amount Outstanding") shall be automatically due and payable on the Demand Date without further notice, demand or action by the Lender. B. Security. As security for the Borrowers obligations under the Loans, the Borrower shall execute and deliver to the Lender, promptly following the execution hereof, a pledge agreement in form and substance satisfactory to the Lender pursuant to which the Borrower shall pledge to the Lender all of the issued and outstanding equity interests in each of its subsidiaries. In addition, the Borrower shall cause each such subsidiary to execute and deliver, promptly following the execution hereof, (a) a guaranty in form and substance satisfactory to the Lender, pursuant to which such subsidiaries guaranty the obligations of the Borrower under the Loans, and (b) a security agreement in form and substance satisfactory to the Lender, pursuant to which such subsidiaries grant security interests to the Lender in substantially all of their assets to secure their obligations under such guaranty and the obligations of the Borrower under the Loans. C. Amendment of Existing Warrants. The Lender and the Borrower have entered into (a) a Warrant Agreement dated as of June 6, 1997, pursuant to which the Borrower issued to the Lender warrants to acquire 500,000 shares of common stock of the Borrower, (b) a First Amendment Warrant Agreement dated as of August 18, 1997, pursuant to which the Borrower issued to the Lender warrants to acquire 300,000 shares of common stock of the Borrower, and (c) a Warrant Agreement dated as of October 10, 1997, pursuant to which the Borrower issued to the Lender warrants to acquire 10,000,000 shares of common stock of the Borrower (collectively, the "Existing Warrants".) The Existing Warrants all have exercise periods which expire on or prior to September 30, 2002. In consideration of the Lender's agreement not to make demand on the Loans prior to the Demand Date, the Borrower agrees that each of the Existing Warrants is hereby amended to provide that the exercise period thereunder shall extend to October 15, 2005. D. Timely Payment of Amount Outstanding. If the Borrower pays the Amount Outstanding in full in cash on the Demand Date, then the Lender shall have the following rights and the Borrower shall take the following actions: 1. the Borrower shall issue to the Lender the 1998 Warrants, which warrants shall give the Lender the right to acquire 5,000,000 shares of the Borrower's common stock, for an exercise period extending until October 15, 2005, pursuant to a warrant agreement in substantially the form of the Existing Warrant described in Clause 3(c); the exercise price for 1,734,000 of such shares shall be $5.50 per share; the exercise price for 953,500 of such shares shall be $5.95 per share; the exercise price for 1,229,000 of such shares shall be $5.98 per share; and the exercise price for the remaining 1,083,500 of such shares shall be $7.22 per share; and 2. the Borrower shall pay to the Lender on the Demand Date an amount equal to the lesser of $300,000 and the Lender's legal, due diligence and transaction costs in connection with the transactions contemplated by this Agreement and all prior transactions between the Borrower and the Lender. E. Non-Payment by Demand Date. If the Borrower fails to pay the Amount Outstanding in full in cash on the Demand Date, then the Lender shall have available to it the following rights and remedies: 1. at the Lender's option: a) the interest rate payable on the Loans shall increase to a rate equal to the prime rate as set forth in the Wall Street Journal (Western Edition) plus four (4) percentage points; or b) the Borrower shall issue to the Lender: (a) that number of shares of the Borrower's Series M Preferred Stock equal to the quotient of the Amount Outstanding divided by $2,500.00 as payment in full of the Loans, and upon such issuance the Notes shall be cancelled; and (b) warrants to acquire 10,000,000 shares of the Borrower's common stock, at an exercise price of $2.50 per share, for an exercise period extending until October 15, 2005, pursuant to a warrant agreement in substantially the form of the Existing Warrant described in Clause 3(c); and 2. the Borrower shall issue to the Lender a promissory note in form and substance satisfactory to the Lender in an amount equal to the lesser of $300,000 and the Lender's legal, due diligence and transaction costs in connection with the transactions contemplated by this Agreement and all prior transactions between the Borrower and the Lender, which note shall be convertible, at the option of the Lender, into shares of common stock of the Borrower at a conversion rate equal to 110% of the market price of such stock on the date of the issuance of the note. F. Representations and Warranties. The Borrower hereby represents and warrants to the Lender as follows: 1. Organization, Qualifications and Corporate Power . a) The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Florida. The Borrower has the requisite corporate power and authority to own and hold its properties, to carry on its business as conducted or presently proposed to be conducted, to execute, deliver and perform this Agreement, to issue and deliver to the Lender the warrants required to be issued pursuant hereto (the "New Warrants"), and to issue and deliver to the Lender the shares of capital stock issuable pursuant to this Agreement and the shares of capital stock upon exercise of the New Warrants (collectively, the "Underlying Shares", and, together with the New Warrants, the "Securities"). The Borrower is duly qualified to conduct business as a foreign corporation in good standing under the laws of the State of Utah and each other jurisdiction where the failure to so qualify could have a material adverse effect on the financial condition, results of operations, properties, assets, prospects or business of the Borrower or any of its subsidiaries (a "Material Adverse Effect"). b) The Borrower does not own, directly or indirectly, any shares of capital stock, partnership interests or other participation rights or other interests in the nature of an equity interest in any corporation, partnership, company, trust or other entity, or any option, warrant or other security convertible into or exchangeable for any of the foregoing, other than (a) the shares of capital stock of I-Link Systems, Inc., a Utah corporation ("I-Link Systems"), (b) the shares of capital stock of I-Link Communications, Inc., a Utah corporation ("I-Link Communications"), (c) the shares of capital stock of MiBridge, Inc., a Utah corporation ("MiBridge"), and (d) the membership interests of I-Link Worldwide, L.L.C., a Delaware limited liability company ("Worldwide"). Each of I-Link Systems, I-Link Communications and MiBridge is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Utah, and Worldwide is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware. Each of I-Link Systems, I-Link Communications, MiBridge and Worldwide has the requisite corporate or limited liability company (as appropriate) power and authority to own and hold its properties and to carry on its business as conducted or presently proposed to be conducted. Each of I-Link Systems, I-Link Communications, MiBridge and Worldwide is duly qualified to conduct business as a foreign corporation or limited liability company (as appropriate) in good standing under the laws of each jurisdiction where the failure to so qualify could have a Material Adverse Effect. 2. Authorization of Agreements . a) The execution, delivery and performance by the Borrower and its subsidiaries of this Agreement and the agreements, documents and instruments to be executed and delivered pursuant hereto (collectively, the "Transaction Documents") and the issuance, sale and delivery of the Securities to the Lender have been duly authorized by all requisite corporate or limited liability company action of the Borrower and its subsidiaries, including, but not limited to, the requisite action by the Board of Directors of the Borrower and the requisite approval or consent of the Borrower's shareholders, and will not (with due notice or lapse of time or both) violate, be in conflict with or constitute a default under any provision of law, rule or regulation, any order of any court or other governmental agency, the Articles of Incorporation or Bylaws or other organizational documents of the Borrower or any of its subsidiaries, or any provision of any indenture, mortgage, note, deed of trust, agreement or other instrument to which the Borrower, any of its subsidiaries or any of their respective properties or assets is bound, or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, mortgage, note, deed of trust, agreement or other instrument, or result in the creation or imposition of any lien, charge, restriction, claim or encumbrance of any nature whatsoever upon any of the properties or assets of the Borrower or any of its subsidiaries. b) The Underlying Shares have been duly and validly reserved for issuance and, upon issuance in accordance with the terms of the Borrower's Articles of Incorporation, as amended, this Agreement and the New Warrants, will be duly and validly issued, fully paid and non- assessable, and will be free of restrictions on transfer other than restrictions on transfer under applicable state and federal securities laws. The issuance, sale and delivery of the Securities are not subject to any preemptive right of any shareholder of the Borrower or to any right of first refusal or other right in favor of any person. 3. Validity . This Agreement has been duly executed and delivered by the Borrower and constitutes the legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, subject to the effect of bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors' rights generally and except as the availability of equitable remedies may be limited by general principles of equity. The other Transaction Documents, when executed in accordance with the terms of this Agreement, will be duly executed and delivered by the Borrower and its subsidiaries and will constitute the legal, valid and binding obligation of the Borrower and its subsidiaries, enforceable in accordance with their respective terms, subject to the effect of bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors' rights generally and except as the availability of equitable remedies may be limited by general principles of equity. 4. Litigation; Claims; Investigations . Except as set forth on Schedule I attached hereto, there is no action, suit, proceeding or investigation pending or threatened against the Borrower or any of its subsidiaries and there are no suits, actions or claims, or any investigations or inquiries by any administrative agency or governmental body, or legal, administrative or arbitration proceedings pending against or threatened against the Borrower or any of its subsidiaries or affecting any of the Borrower's or any of its subsidiaries' properties, rights, assets or business, or to which the Borrower or any of its subsidiaries is a party or, in the case of threatened proceedings, is reasonably likely to become a party. There is no outstanding order, writ, judgment, injunction or decree of any court, administrative agency, governmental body or arbitration tribunal against or affecting the Borrower, any of its subsidiaries or any of the properties, rights, assets or business of the Borrower or any of its subsidiaries. 5. Compliance . Neither the Borrower nor any of its subsidiaries is in violation of or default under any provision of its Articles of Incorporation or Bylaws or other organizational document. Neither the Borrower nor any of its subsidiaries is in material violation of or default under (i) any provision of any instrument, mortgage, deed of trust, loan, contract, commitment, judgment, decree, order or obligation to which it is a party or by which it or any of its properties or assets are bound or (ii) any provision of any federal, state or local law, statute, rule, order or governmental regulation. 6. Governmental Consents . No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal or state governmental authority on the part of the Borrower or any of its subsidiaries is required in connection with the execution, delivery and performance of this Agreement and the offer, sale or issuance of the Securities. 7. Disclosure . No representation or warranty made by the Borrower contained in this Agreement or in any other Transaction Document or in any certificate or instrument furnished or to be furnished pursuant hereto contains or will contain any untrue statement of a material fact, or omits or will omit to state any material fact known to the Borrower required to make the statements herein or therein contained not misleading. The Borrower is not aware of any impending or contemplated event or occurrence that would cause any of the foregoing representations not to be true and complete on the date of such event or occurrence as if made on that date. G. Arbitration . To the fullest extent not prohibited by law, any controversy, claim or dispute arising out of or relating to this Agreement, including the determination of the scope or applicability of this agreement to arbitrate, shall be settled by final and binding arbitration in accordance with the terms and conditions of the arbitration provisions of the Shareholders Agreement by and among the Borrower, the Lender and certain other shareholders of the Borrower, dated as of October 10, 1997. H. Expenses . The Borrower shall pay all expenses of the Lender, including but not limited to travel, legal and accounting fees and expenses, incurred in connection with the transactions contemplated under this Agreement. I. Survival of Agreements . All covenants, agreements, representations, and warranties made herein shall survive the execution and delivery hereof and remain in full force and effect, notwithstanding any investigation made at any time by or on behalf of either party hereto. J. Parties in Interest . All representations, covenants, and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and permitted assigns of the parties hereto, whether so expressed or not. K. Notices . All notices, requests, consents, and other communications hereunder shall be in writing and shall be deemed effectively given and received upon delivery in person, or one business day after delivery by national overnight courier service, or by telecopier transmission with acknowledgment of transmission receipt, or three business days after deposit via certified or registered mail, return receipt requested, in each case addressed as follows: (a) if to the Company, at I-LINK INCORPORATED 13751 South Wadsworth Park Drive Suite 200 Draper, Utah 84020 Attention: John W. Edwards, President Telecopier: 801-576-5075 with copy to: David E. Hardy, Esq. 60 E. South Temple Suite 2200 Salt Lake City, Utah 84111 Telecopier: (801) 364-6664 (b) if to the Lender, at Winter Harbor, L.L.C. c/o First Media, L.P. 11400 Skipwith Lane Potomac, Maryland 20854 Attention: Ralph W. Hardy, Jr. Telecopier: (301) 983-2425 with copies to: Ralph W. Hardy, Jr., Esq. and Timothy J. Kelley, Esq. Dow, Lohnes & Albertson, PLLC 1200 New Hampshire Avenue, N.W. Washington, D.C. 20036 Telecopier: (202) 776-2222 or, in any such case, at such other address or addresses as shall have been furnished in writing by such party to the other. L. Governing Law . THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN THE STATE OF DELAWARE WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW. 1. Entire Agreement . This Agreement constitutes the sole and entire agreement of the parties with respect to the subject matter hereof. M. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. N. No Waivers; Amendments . No failure or delay on the part of any party in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to any party at law or in equity or otherwise. Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Lender. O. Severability . If any provision of this Agreement shall be declared void or unenforceable by a judicial or administrative authority, the validity of any other provision and of the entire Agreement shall not be affected thereby. P. Headings . The Section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Q. Tax Reporting. The Borrower agrees that it will not claim any deduction for interest expense with respect to the Loans in excess of a deduction for the stated cash interest payable on the Loans. [remainder of page intentionally left blank] IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above. WINTER HARBOR, L.L.C. By: First Media, L.P. its General Manager/Member By: First Media Corporation its sole General Partner By: /s Ralph W. Hardy Name: Ralph W. Hardy Title: Secretary I-LINK INCORPORATED By: /s John Edwards Name: John Edwards Title: President SCHEDULE I Proceedings EX-10 4 PLEDGE AGREEMENT THIS PLEDGE AGREEMENT is made and entered into as of April 14, 1998, by and between I-LINK INCORPORATED, a Florida corporation (the "Pledgor"), and Winter Harbor, L.L.C., a Delaware limited liability company (the "Pledgee"). RECITALS The Pledgee has lent to the Pledgor $5,768,000 in four installments on a demand loan basis (three of which are evidenced by demand promissory notes (the "Notes")), which installments were made on January 26, 1998, February 23, 1998, March 3, 1998, and March 24, 1998 (collectively, the "Loans"). The Pledgor has requested that the Pledgee not demand payment on the Loans before the earlier of May 15, 1998, and the date on which the Pledgor consummates a loan transaction with another lender or consummates the sale of any debt or equity securities, in either case in an amount yielding net cash proceeds to the Pledgor of not less than $6,000,000 (the earlier of such dates being referred to hereinafter as the "Demand Date"). The Pledgor and the Pledgee have entered into that certain Agreement dated as of even date herewith (as the same may be extended, amended, restated or modified from time to time, the "Agreement"), pursuant to which the Pledgee has agreed to such request. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Agreement. As security for the Loans and the Agreement, the Pledgor has agreed to enter into this Pledge Agreement. AGREEMENTS In consideration of Loans, credit or other financial accommodation extended or continued from time to time to the Pledgor by the Pledgee, the Pledgor does hereby agree as follows: 1. Pledge. (a) The Pledgor hereby grants to the Pledgee, as security for the Loans and the obligations of the Pledgor under the Agreement, a first priority security interest in, and pledges, assigns, hypothecates and transfers to the Pledgee, all of the Pledgor's interests in and right and title to, all of the issued and outstanding shares of capital stock of each of I-Link Systems, Inc., I-Link Communications, Inc. and MiBridge, Inc. and all of the issued and outstanding limited liability company interests of I-Link Worldwide, L.L.C. (together, the "Collateral"). (b) The Pledgor covenants and agrees with the Pledgee that from and after the date of this Pledge Agreement and until the Loans and obligations of the Pledgor under the Agreement are fully paid and satisfied: (i) At any time and from time to time, upon the reasonable written request of the Pledgee, and at the sole expense of the Pledgor, the Pledgor will promptly and duly execute and deliver any and all such instruments and documents and take such action as the Pledgee may reasonably deem desirable to obtain the full benefits of this Pledge Agreement and of the rights and powers herein granted, including, without limitation, the execution and filing of any financing or continuation statements under the Uniform Commercial Code with respect to the lien and security interest granted hereby. The Pledgor also hereby authorizes the Pledgee to file any such financing or continuation statement without the signature of the Pledgor to the extent permitted by applicable law. If any of the Collateral shall be or become evidenced by any Instrument (as defined in Section 9-105(1)(i) of the UCC), the Pledgor agrees to pledge such Instrument to the Pledgee and shall duly endorse such Instrument in a manner satisfactory to the Pledgee and deliver the same to the Pledgee. (ii) For the Pledgee's further security, the Pledgor agrees that the Pledgee shall have a special property interest in all of the Pledgor's books and records pertaining to the Collateral and, upon reasonable notice from the Pledgee, the Pledgor shall permit any representative of the Pledgee to inspect such books and records and will provide photocopies thereof to the Pledgee. (iii) The Pledgor will not change its name, identity or corporate structure in any manner which might make any financing or continuation statement filed in connection herewith seriously misleading within the meaning of Section 9-402(7) of the UCC (or any other then applicable provision of the UCC) unless the Pledgor shall have given the Pledgee at least 30 days prior written notice thereof and shall have taken all action (or made arrangements to take such action substantially simultaneously with such change if it is impossible to take such action in advance) necessary or reasonably requested by the Pledgee to amend such financing statement or continuation statement so that it is not seriously misleading or to file a new appropriate financing statement. The Pledgor will not change its principal place of business or remove its records from its office located at 13751 South Wadsworth Park Drive, Suite 200, Draper, Utah 84020, unless it gives the Pledgee at least 30 days prior written notice thereof and has taken such action as is necessary to cause the security interest of the Pledgee in the Collateral to continue to be perfected. (c) The Pledgor and the Pledgee agree that the Collateral shall be subject to the terms and conditions hereinafter set forth as collateral security for the Loans and the obligations of the Pledgor to the Pledgee under the Agreement. 2. Representations and Warranties. The Pledgor represents and warrants to the Pledgee as follows: (a) the Collateral constitutes all of the capital stock of each of I-Link Systems, Inc. ("Systems"), I-Link Communications, Inc. ("Communications") and MiBridge, Inc. ("MiBridge") and the limited liability company interests of I-Link Worldwide, L.L.C. ("Worldwide"); (b) the Collateral is validly issued, fully paid and nonassessable and is not subject to any liens, charges or encumbrances whatsoever, except for the security interest granted pursuant hereto; (c) there are no existing options, warrants or other rights to purchase any of the Collateral; (d) the execution, delivery and performance of this Pledge Agreement will not conflict with, result in a breach of or constitute a default under any indenture or agreement to which the Pledgor, Systems, Communications, MiBridge or Worldwide is a party or by which any of them is bound, or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever on any of their respective property or assets; (e) this Pledge Agreement constitutes the legal, valid and binding obligation of the Pledgor, enforceable in accordance with its terms; (f) the Pledgor has all requisite power and authority to enter into this Pledge Agreement and to carry out the transactions contemplated hereby; and (g) no consent or approval of any person or entity is or will be required in connection with the execution, delivery and performance of this Pledge Agreement. 3. Term. The Collateral shall constitute security for the Loans and the performance by the Pledgor of its obligations and liabilities under the Agreement until the principal and interest due on the Loans are paid in full and the Agreement shall have terminated, at which time the Pledgee shall deliver prepare, execute, deliver and file all documents necessary to evidence the termination of the security interest pursuant hereto, and this Pledge Agreement shall thereupon terminate. 4. Voting. While the Collateral continues to be pledged to the Pledgee, such Collateral shall remain in the name of the Pledgor, and the Pledgor shall have and exercise all rights of ownership, including the right to vote the Collateral; provided, however, that the Pledgor shall not vote the Collateral in any manner that is inconsistent with the provisions of the Agreement or this Pledge Agreement. If the Pledgor does not pay the full amount outstanding on the Demand Date (an "Event of Default") the Pledgee shall be entitled to the remedies set forth in Section 6 hereof. 5. Adjustments. The Pledgor agrees that in the event that during the term of this Pledge Agreement any dividend, distribution, reclassification, readjustment or other change is declared or made with respect to the Collateral, or any subscription, warrant or other option is exercisable with respect to the Collateral, it shall cause all new, substituted or additional shares, limited liability company interests or other securities issued by reason of any such change or option to be pledged to the Pledgee in the same manner as the Collateral originally pledged hereunder. There likewise shall be pledged to the Pledgee, to be added to the pledged property and subject to the pledge, any and all additional issued shares of Systems, Communications and MiBridge and limited liability company interests of Worldwide to the Pledgor by way of dividend, splits, rights, new securities or otherwise, to the end that all the issued and outstanding shares of Systems, Communications and MiBridge and limited liability company interests of Worldwide will be pledged to Pledgee. 6. Remedies. If an Event of Default shall occur, the Pledgee may, after fifteen days prior notice to the Pledgor, sell, assign and deliver the whole or, from time to time, any part of the Collateral or any interest or part thereof, at any private sale or at public auction, for cash, or credit or for other property, for immediate or future delivery, and for such price or prices and on such terms as the Pledgee reasonably may determine to be commercially reasonable. The Pledgee shall give the Pledgor reasonable notice of the time and place of any public sale of the Collateral or the time after which any private sale or other intended disposition thereof is to be made. The requirement of reasonable notice shall be met if notice of such sale or other intended disposition is mailed, by certified or registered mail, return receipt requested, to the Pledgor at the address set forth in Section 9 at least fifteen days prior to the time of such sale or other intended disposition. The Pledgor hereby waives and releases any and all right or equity of redemption whether before or after sale hereunder. At any such sale the Pledgee may bid for and purchase for its own account the whole or any part of the Collateral so sold, free from any such right or equity of redemption. Upon completion of the sale, Pledgee shall deliver the Collateral, or any portion thereof, to the purchaser or purchasers thereof. The net proceeds of any such sale shall be applied as follows: (i) First, to the expenses of the sale and enforcement of this Pledge Agreement, including but not limited to, attorneys' fees and expenses, including attorneys' fees out of court, in trial, on appeal, in bankruptcy proceedings, or otherwise; (ii) Second, to the payment of the Pledgor's obligations under the Agreement, including, without limitation, the payment of interest and principal under the Loans; and (iii) Third, only after payment in full of the above, to the payment to the Pledgor of any excess proceeds, along with any Collateral remaining unsold, subject to the receipt of notice of and the provisions of any other agreement between the parties with respect to the disposition of said excess proceeds or unsold Collateral. Notwithstanding the sale or other disposition of the Collateral by the Pledgee hereunder, the Pledgor shall remain liable for any deficiency. 7. Encumbrances. During the term of this Pledge Agreement specified in Section 3, the Pledgor shall not sell, assign, transfer or otherwise dispose of, grant any option to any individual or entity other than the Pledgee with respect to, or mortgage, pledge or otherwise encumber any of the Collateral. 8. Miscellaneous. 8.1 Transfer taxes, if any, applicable to any transfer of the Collateral upon the occurrence of an Event of Default or upon termination of this Pledge Agreement shall be payable by the person or persons to whom the shares are being transferred; provided, however, that the Pledgor agrees to reimburse the Pledgee promptly for all such transfer taxes which the Pledgee may be required to pay. 5 8.2 No single or partial exercise of any power hereunder shall preclude other or future exercise thereof or the exercise of any other power. The holder of the Loans may proceed against any portion of the security held therefor in such order and in such manner as the holder may see fit, without waiver of any rights with respect to any other security. 8.3 The Pledgee may deal in any manner with the Loans, the Agreement or any other agreement required thereby without notice to or the consent of the Pledgor, including, without limitation, in the following manner: (a) to modify, supplement or otherwise change any terms of the Loans, the Agreement or any such other agreement (subject to any right of the Pledgor to consent to any modification of or supplement or change to any such terms); to grant any extension or renewal of the Loans, the Agreement or such other agreement; to grant any other waiver or indulgence with respect to the Loans, the Agreement or such other agreement; and to effect any release, compromise or settlement with respect to the Loans, the Agreement or such other agreement; and (b) to consent to the substitution, exchange or release of all or any part of any other security (other than the Collateral) at any time held by the Pledgee as security or surety for the obligations secured hereby. 9. Notices. All notices required to be sent hereunder shall be in writing and shall be sent by registered mail, return receipt requested, to the parties as follows: To the Pledgor: I-Link Incorporated 13751 South Wadsworth Park Drive Suite 200 Draper, Utah 84020 Attention: John W. Edwards, President To the Pledgee: Winter Harbor, L.L.C. 11400 Skipwith Lane Potomac, Maryland 20854 Attention: Ralph W. Hardy, Jr. Addresses may be changed by notice in writing to the other parties. 10. Choice of Law, etc. This Pledge Agreement shall be construed and enforced under and governed by the laws of the State of Delaware, other than the conflicts of law provisions thereof. This Pledge Agreement embodies the entire agreement and understanding between the parties and supersedes all prior agreements and understandings relating to the subject matter hereof, and this Pledge Agreement may not be modified or amended or any term or provision hereof waived or discharged except in writing signed by the party against whom such amendment, modification, waiver or discharge is sought to be enforced. This Pledge Agreement shall be binding on the successors, assigns, and legal representatives of the parties hereto and shall inure to the benefit of and be enforceable by their successors, assigns, and legal representatives; provided, however, that neither the Collateral nor this Pledge Agreement may be assigned or transferred in whole or in part, voluntarily or involuntarily, by the Pledgor without the prior written consent of the Pledgee, and the Pledgee may assign this Pledge Agreement and all of its rights hereunder without any consent of the Pledgor. The headings of this Pledge Agreement are for the purpose of reference only and shall not limit or otherwise affect the meaning hereof. The Pledgor shall take such further actions as may be reasonably requested by the Pledgee from time to time in order to perfect the security interest of the Pledgee hereunder and to assure and confirm onto the Pledgee its rights, powers and remedies hereunder. IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to be executed on their behalf all as of the day and year first above mentioned. I-LINK INCORPORATED By: /s John Edwards John Edwards, President WINTER HARBOR, L.L.C. By: First Media L.P. its General Manager/Member By: First Media Corporation its sole General Partner By: /s Ralph W. Hardy Name: Ralph W. Hardy Title: Secretary EX-10 5 SECURITY AGREEMENT THIS SECURITY AGREEMENT is made and entered into as of April 14, 1998, by and among I-LINK SYSTEMS, INC., a Utah corporation with its principal place of business at 13751 South Wadsworth Park Drive, Suite 200, Draper, UT 84020 ("Systems"), I-LINK COMMUNICATIONS, INC., a Utah corporation, with its principal place of business at 13751 South Wadsworth Park Drive, Suite 200, Draper, UT 84020 ("Communications"), MIBRIDGE, INC., a Utah corporation, with its principal place of business at 13751 South Wadsworth Park Drive, Suite 200, Draper, UT 84020 ("MiBridge"), I-LINK WORLDWIDE, L.L.C., a Delaware limited liability company, with its principal place of business at 13751 South Wadsworth Park Drive, Suite 200, Draper, UT 84020 ("Worldwide" and together with Systems, Communications and MiBridge, collectively, the "Debtors" and individually, a "Debtor"), and WINTER HARBOR, L.L.C., a Delaware limited liability company with its principal place of business at 11400 Skipwith Lane, Potomac, Maryland 20854 (the "Secured Party"). RECITALS A. I-Link Incorporated, a Florida corporation (the "Company"), owns all of the issued and outstanding shares of the capital stock of each of Systems, Communications and MiBridge and all of the issued and outstanding limited liability company interests of Worldwide. The Secured Party has lent to the Company $5,768,000 in four installments on a demand loan basis (three of which are evidenced by demand promissory notes (the "Notes")), which installments were made on January 26, 1998, February 23, 1998, March 3, 1998, and March 24, 1998 (collectively, the "Loans"). The Company has requested that the Secured Party not demand payment on the Loans before the earlier of May 15, 1998, and the date on which the Company consummates a loan transaction with another lender or consummates the sale of any debt or equity securities, in either case in an amount yielding net cash proceeds to the Company of not less than $6,000,000 (the earlier of such dates being referred to hereinafter as the "Demand Date"). The Company and the Secured Party have entered into an Agreement dated as of even date herewith (as the same may be extended, amended, restated or modified from time to time, the "Agreement"), which is hereby incorporated herein by this reference, pursuant to which the Secured Party has agreed to such request. All capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Agreement. The proceeds of the Loans have been provided to the Guarantors for the acquisition of assets, for capital expenditures and for working capital purposes. B. The Debtors have guaranteed the Loans and the obligations of the Company under the Agreement pursuant to the terms of a Subsidiary Guaranty dated as of even date herewith (the "Guaranty"). C. The Company and the Debtors share an identity of interests as members of a consolidated group of companies engaged in substantially similar businesses. The Company provides certain centralized financial, accounting and management services to the Debtors, and the Lender's extensions of credit to the Borrower have facilitated the expansion and will enhance the overall financial strength and stability of the Company's consolidated group, including the Debtors. Accordingly, the Debtors will derive substantial benefits as a result of the Lender's extensions of credit to the Company, which benefits are hereby acknowledged by the Debtors, and the Debtors, therefore, desire to enter into this Security Agreement. AGREEMENTS In consideration of the foregoing Recitals, and of the Lender's agreement not to make demand on the Loans until the Demand Date, which will be of material economic benefit to the Debtors, the Debtors and the Secured Party agree as follows: 1. GRANT OF SECURITY INTEREST. In order to secure the payment and performance of all of the obligations of the Debtors under the Guaranty and the payment and performance of the Loans and of all of the obligations of the Company to the Secured Party under the Agreement, plus interest accrued thereon (being hereinafter collectively referred to as the "Obligations"), the Debtors hereby grant to the Secured Party a first priority perfected security interest in all of their respective right, title and interest in and to all of their personal property, both tangible and intangible and of every kind and description, whether now or hereafter existing, or now owned or hereafter acquired, and wherever located, and all proceeds, products, replacements, additions, accessions and/or substitutes therefor, including, without limitation, all goods, machinery, equipment, furniture, furnishings, fixtures, inventory, accounts, chattel paper, instruments and general intangibles, as such terms may be defined in the Uniform Commercial Code in the jurisdiction in which such assets are located (other than equipment leased to any Debtor and any leases which by their terms prohibit the grant of security interests in, or assignments of, such Debtor's leasehold interest therein), and the proceeds and products of any and all of the foregoing assets and properties described in this Section 1, including proceeds of insurance policies relating to any and all of the foregoing assets and properties. All of the foregoing shall be hereinafter referred to as the "Collateral." 2. WARRANTIES AND COVENANTS OF THE DEBTORS. Each of the Debtors represents, warrants and covenants that: (a) the Collateral (and all records pertaining thereto) will at all times be kept in their current locations and no Debtor will change the location at which any of the Collateral is usually kept or the location of its chief executive office or principal place of business without giving thirty days prior written notice to the Secured Party; (b) The Debtors own and have possession of the Collateral; (c) all the Collateral is genuine and enforceable and free from material liens, adverse claims, charges, encumbrances, taxes or assessments, other than the liens created hereby, and the Debtors shall defend the same against all claims and demands of all persons at any time claiming against the same or any interests therein adverse to the Secured Party; (d) all items of the Collateral comply with applicable laws, including, where applicable, Federal Reserve Regulations and any state consumer credit and usury laws; (e) no financing statement covering any of the Collateral, and naming any secured party other than the Secured Party, is on file in any public office; (f) The Debtors will, at their sole cost and expense, maintain, replace, repair, service and take other action as may be necessary from time to time to keep and preserve their inventory, machinery and equipment in general repair and good working order and any inventory, machinery or equipment which wears out or is destroyed will be replaced or restored if necessary for the operation of the businesses of any of the Debtors in the ordinary course. The Debtors will within 10 days notify the Secured Party of any event comprising significant loss or decrease in the value of the Collateral in excess of $5,000; (g) The Debtors will comply with all laws, rules and regulations relating to, and shall pay prior to delinquency, all license fees, registration fees, taxes and assessments and all other charges, which may be levied upon or assessed against, or which may become security interests, liens or other encumbrances upon the ownership, operation, possession or maintenance of the Collateral; provided that no Debtor shall be required to comply with any such law, rule or regulation or to pay any such tax or assessment or other such charge, the validity of which is being contested by any Debtor in good faith by appropriate proceedings commenced and prosecuted with due diligence and with respect to which adequate reserves have been established and are being maintained in accordance with generally accepted accounting principles; (h) The Debtors will execute and at their expense file and refile such financing statements, continuation statements and other documents in such offices as the Secured Party may deem necessary or appropriate in order to protect or preserve the Secured Party's security interest in the Collateral; (i) No Debtor will sell, offer to sell, hypothecate or otherwise dispose of any material part of the Collateral (including proceeds) subject hereto, or any part thereof or interest therein at any time other than in the ordinary course of business and in exchange for Collateral of like value in which the Secured Party shall have a security interest; (j) The Debtors will at all times keep accurate records with respect to the Collateral which are as complete and comprehensive as those which are customarily maintained by those engaged in similar businesses, and the Secured Party will have the right to inspect such records at such times and from time to time as the Secured Party may reasonably request; (k) The Debtors will provide any service and do any other acts or things necessary to keep the Collateral free and clear of all defenses, rights of offset and counterclaims; the Secured Party may, at any time prior to termination hereof, require the Debtors from time to time to deliver to the Secured Party (i) schedules describing all the Collateral subject hereto and (ii) instruments and chattel paper included in the Collateral, appropriately assigned and endorsed to the Secured Party; (l) The Debtors will maintain insurance on the Collateral in accordance with sound business practice. In the event of failure to provide and maintain insurance as herein provided, the Secured Party may, at its option, provide such insurance and the Debtors hereby promise to pay the Secured Party on demand the amount of any disbursements made by the Secured Party for such purpose. Risk of loss or damage shall accrue to the Debtors to the extent of any deficiency in any effective insurance. The Debtors shall furnish to the Secured Party certificates or other evidence satisfactory to the Secured Party of compliance with the foregoing insurance provisions. The Debtors shall give immediate written notice to the Secured Party and to the insurers of any loss or damage to the Collateral or any part thereof in excess of $5,000 and shall promptly file all necessary or appropriate proof of loss with the insurers. Any amounts collected or received under any such insurance policies may be applied by the Debtors either to the replacement or restoration of the Collateral or to any of the Obligations secured hereby in the manner provided in Section 7 hereof; and (m) The Debtors shall not change their respective names, identity or corporate or limited liability company structure, voluntarily or involuntarily. 3. AUTHORITY TO COLLECT. Except as otherwise hereinafter set forth, unless and until the Company fails to pay the outstanding principal amount and accrued interest under the Loans in full in cash on the Demand Date ("Event of Default"), the Debtors shall continue to collect, and upon the occurrence of such an event, the Debtors may, at the direction of the Lender, continue to collect, at their own expense, all amounts due and to become due under any accounts, chattel paper, instruments or general intangibles and in connection therewith may take such action as they may deem necessary, advisable, convenient or proper for the enforcement, collection, adjustment, settlement or compromise thereof. 4. REMEDIES. Upon the occurrence of an Event of Default, the Secured Party shall have the right to declare immediately due and payable all of the Obligations, without other notice or demand. The Secured Party shall have all the rights and remedies of a secured party under the Uniform Commercial Code and all other rights, privileges, powers and remedies provided by law or equity. Without limiting the generality of the foregoing, after the occurrence of an Event of Default: (a) the Secured Party shall have the power to notify the account debtor or debtors obligated under any accounts, chattel paper, instruments and general intangibles of the assignment of such accounts, chattel paper, and general intangibles to the Secured Party and of its security interest therein and to direct such account debtor or debtors to make payment of all amounts due or to become due to any Debtor thereunder directly to the Secured Party and, upon such notification to the account debtor or debtors, to enforce collection of any thereof in the same manner and to the same extent as any Debtor might have done. The funds so collected shall be held as security for the payment of the Obligations secured hereby and applied in the manner provided in Section 7 hereof. The Debtors hereby constitute and appoint the Secured Party as their true and lawful attorney, in the place and stead of the Debtors and with full power of substitution, either in the Secured Party's own name or in the name of any Debtor, to ask for, demand, collect, receive and give acquittance for any and all monies due or to become due under and by virtue of any account, chattel paper, instruments and general intangibles, to endorse checks, drafts, orders and other instruments for the repayment of monies payable to any Debtor on account thereof, and to settle, compromise, prosecute or defend any action, claim or proceeding with respect thereto and to sell, assign, pledge, transfer and make any agreement respecting, or otherwise deal with, the same; provided, however, that nothing herein contained shall be construed as requiring or obligating the Secured Party to make any demand, or to make any inquiry as to the nature or sufficiency of any payment received by it, or to present or file any claim or notice or to take any action with respect to any account, chattel paper, instruments or general intangible or the monies due or to become due thereunder or the property covered thereby, and no action taken or omitted to be taken by the Secured Party with respect to any account, chattel paper, instruments or general intangible shall give rise to any defense, counterclaim or set off in favor of any Debtor or to any claim or action against the Secured Party; (b) The Debtors will deliver to the Secured Party from time to time, as requested by the Secured Party, current lists of the Collateral; (c) No Debtor will dispose of the Collateral, except on terms approved in writing by the Secured Party; 5 (d) The Debtors will collect, assemble and deliver all of the Collateral and books and records pertaining thereto, to the Secured Party at a reasonably convenient place designated by the Secured Party; and (e) the Secured Party may, to the extent permitted by law, enter onto any Debtor's premises and take possession of the Collateral, and assign, sell, lease or otherwise dispose of any Debtor's interests in the Collateral for the account of any Debtor and the Debtors shall then be liable for the difference between the payments and other amounts due under the Agreement and amounts received pursuant to such assignment or contract of sale or lease or other disposition of any Debtor's interests in the Collateral and the amount of such difference shall then be immediately due and payable. The Secured Party may, in its sole discretion, designate a custodian or agent to take physical possession of the Collateral. The Secured Party shall give the Debtors reasonable notice of the time and place of any public sale of the Collateral or the time after which any private sale or other intended disposition thereof is to be made. The requirement of reasonable notice shall be met if notice of the sale or other intended disposition is mailed, by first class mail, postage prepaid, to the Debtors at their respective addresses set forth in Section 15 hereof or such other address as the Debtors may by notice have furnished the Secured Party in writing for such purpose, at least fifteen days prior to the time of such sale or other intended disposition. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Debtor, and the Debtors hereby waive (to the extent permitted by law) all rights of redemption, stay and/or appraisal which they now have or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. 5. POWERS OF THE SECURED PARTY. The Debtors appoint the Secured Party their true attorney in fact to perform any of the following powers, which are coupled with an interest, and are irrevocable until termination of this Security Agreement and may be exercised by the Secured Party's officers and employees, or any of them, upon the occurrence of an Event of Default hereunder: (a) to perform any obligation of any Debtor hereunder in such Debtor's respective name or otherwise; (b) to give notice of the Secured Party's rights in the Collateral, to enforce the same, and make extension agreements with respect thereto; (c) to release persons liable on the Collateral and to give receipts and acquittance and compromise disputes in connection therewith; (d) to release security; (e) to resort to security in any order; (f) to prepare, execute, file, record or deliver notes, assignments, schedules, designation statements, financing statements, continuation statements, termination statements, statements of assignment and applications or registration or like papers to perfect, preserve or release the Secured Party's interest in the Collateral; (g) to verify facts concerning the Collateral by inquiry of obligors thereon, or otherwise; (h) to endorse, collect, deliver and receive payment under instruments for the payment of money constituting or relating to Collateral; (i) to prepare, adjust, execute, deliver and receive payment under insurance claims; (j) to exercise all rights, powers and remedies which any Debtor would have, but for this Security Agreement, under all of the Collateral subject to this Security Agreement; and (k) to do all acts and things and execute all documents in the names of any Debtor or otherwise, deemed by the Secured Party as necessary, proper and convenient in connection with the preservation, perfection or enforcement of its rights hereunder. 6. REMITTANCES. The Debtors agree that upon the occurrence and during the continuance of an Event of Default all cash or proceeds received by any Debtor as a result of the sale, lease or other disposition of any Collateral, whether received by any Debtor in the exercise of its collection rights hereunder or otherwise, shall be, at Secured Party's discretion, remitted to the Secured Party or deposited to an account for the beneit of the Secured Party (according to its instructions) in the form received (properly endorsed to the order of the Secured Party or for collection in accordance with the Secured Party's instructions) not later than the banking business day following the day of receipt, to be held as security for the payment of the Obligations secured hereby and applied by the Secured Party as provided in Section 7 hereof. The Debtors agree not to commingle any such collections or proceeds with any of its other funds or property and agree to hold the same upon an express trust for the Secured Party until remitted to the Secured Party. 7. APPLICATION OF PROCEEDS. Except as expressly provided elsewhere in this Security Agreement, all proceeds of the sale of the Collateral by the Secured Party hereunder, and all other monies received by the Secured Party pursuant to the terms of this Security Agreement (whether through the exercise by the Secured Party of its rights of collection or otherwise), including, but not limited to, any awards or other amounts payable upon any condemnation or taking by eminent domain, shall be applied, as promptly as is practicable after the receipt thereof by the Secured Party as follows: FIRST: to the payment of all fees and expenses incurred by the Secured Party or any custodian appointed hereunder, if not previously paid by any Debtor, and all expenses incurred by the Secured Party in connection with any sale of the Collateral, including, but not limited to, the expenses of taking, advertising, processing, preparing and storing the Collateral to be sold, all court costs and fees and expenses of counsel to the Secured Party in connection therewith, to the payment of all expenses to be paid by any Debtor pursuant to Section 16 of this Security Agreement, and to the payment of all amounts for which the Secured Party is entitled to indemnification hereunder and all advances made by the Secured Party hereunder to the account of any Debtor and the payment of all costs and expenses paid or incurred by the Secured Party in connection with the exercise of any right or remedy hereunder, to the extent that such advances, costs and expenses shall not theretofore have been reimbursed to the Secured Party by any Debtor; SECOND: to the payment to the Secured Party of the interest then due and payable on the Loans; THIRD: to the payment to the Secured Party of the principal then due and payable on the Loans; FOURTH: to the payment to the Secured Party of any other amount owing to the Secured Party under the Agreement and any other documents related thereto or under any other agreement of the Company or any Debtor with the Secured Party; and FIFTH: only if all of the foregoing have been paid in full, to the Debtors. Notwithstanding the sale or other disposition of any Collateral by the Secured Party hereunder, the Debtors, jointly and severally, shall remain liable for any deficiency. 8. RIGHTS CUMULATIVE. The rights, privileges, powers and remedies of the Secured Party shall be cumulative and no single or partial exercise of any of them shall preclude the further or other exercise of the same or any other of them. No delay or failure of the Secured Party in exercising any right, power, privilege or remedy hereunder shall affect such right, power, privilege or remedy. No single or partial exercise of any right, power, privilege or remedy or any abandonment or discontinuance of steps to enforce such right, power, privilege or remedy shall affect such right, power, privilege or remedy. Any waiver, permit, consent or approval of any kind by the Secured Party of any default hereunder, or any such waiver of any provisions or conditions hereof, must be in writing and shall be effective only to the extent set forth in writing and shall not constitute a waiver of any subsequent or other default. Failure of the Secured Party to insist upon strict performance or compliance by any Debtor of any covenants, warranties or agreements in this Security Agreement shall not constitute a waiver of any subsequent or other failure to perform or comply with any covenants, warranties or agreements. 9. CONTINUING AGREEMENT. This is a continuing agreement and shall remain in full force and effect and be binding upon the Debtors and the successors and assigns of the Debtors until all of the Obligations shall have been fully satisfied and discharged. 10. REINSTATEMENT OF AGREEMENT. If the Secured Party shall have proceeded to enforce its rights under this Security Agreement and such proceedings shall have been discontinued or abandoned for any reason prior to the issuance of any judgment or award, then the Debtors and the Secured Party shall be restored respectively to their positions and rights hereunder, and all rights, remedies and powers of the Debtors and the Secured Party shall continue as though no such proceeding had been initiated. In the event of litigation arising under this Security Agreement, the prevailing party shall be entitled to, in addition to all other damages and remedies, reasonable attorneys' fees. 11. ASSIGNMENT. The Secured Party may assign and transfer any of the Obligations of the Debtors and may deliver the Collateral, or any part thereof, to the assignee or transferee of any such obligation, who shall become vested with all the rights, remedies, powers, security interests and liens herein granted to the Secured Party in respect thereto; and the Secured Party shall thereafter be relieved and fully discharged from any liability or obligation under this Security Agreement. No Debtor shall have the right to assign this Security Agreement without the prior written consent of the Secured Party. 12. DUTIES WITH RESPECT TO COLLATERAL. With respect to the Collateral, the Secured Party shall be under no duty to send notices, perform services, pay for insurance, taxes or other charges or take any action of any kind in connection with the management thereof and its only duty with respect thereto shall be to use reasonable care in its custody and preservation while in its possession, which shall not include any steps necessary to preserve rights against prior parties. 13. PERFORMANCE OF OBLIGATIONS BY THE SECURED PARTY. If any Debtor shall fail to do any act or thing which it has covenanted to do hereunder, or if any representation or warranty of any Debtor shall be breached, the Secured Party may (but shall not be obligated to) perform such act or thing on behalf of any Debtor or cause it to be done or remedy any such breach, and there shall be added to the liabilities of the Debtors hereunder the cost or expense incurred by the Secured Party in so doing, and any and all amounts expended by the Secured Party in taking any such action shall be repayable to it upon demand being made to the Debtors therefore and shall bear interest at the rate provided for in the Notes, from and including the date advanced to the date of repayment. 14. MISCELLANEOUS. After due consideration and consultation with their attorneys, the Debtors voluntarily and knowingly, to the extent permitted by law, agree as follows: (a) the Debtors waive presentment, protest, notice of protest, notice of dishonor and notice of nonpayment with respect to the Collateral to which the Secured Party is entitled hereunder; (b) the Debtors waive any right to direct the application of payments or security for the Obligations of the Debtors hereunder, or the indebtedness of customers of any Debtor, and any right to require proceedings against others or to require exhaustion of the security; (c) the Debtors consent to the extension or forbearance of the terms of the Obligations or indebtedness of customers, the release or substitution of security, and the release of guarantors, if any; and (d) the Debtors waive notice or a judicial hearing prior to the exercise by the Secured Party of any right or remedy provided by this Security Agreement and also waive their rights, if any, to set aside or invalidate any sale duly consummated in accordance with the provisions of this Security Agreement on the grounds that the sale was consummated without a prior judicial hearing. 15. NOTICES. All notices or demands of any kind which may be required or which the Secured Party desires to serve upon any Debtor under the terms of this Security Agreement shall be served upon such Debtor by personal service or by mailing a copy thereof by first class mail, postage prepaid, addressed to such Debtor, at the respective addresses set forth in Section 11.1 of the Agreement with the respective addresses of the Debtors being the address of the Company in the Agreement. Service by mail shall be determined to be effective when deposited in the mails. 16. EXPENSES. The Debtors agree to pay on demand all fees, costs and expenses of the Secured Party, or of any custodian or agent designated by the Secured Party, including the fees and out-of-pocket expenses of legal counsel, independent public accountants and other outside experts retained by the Secured Party in connection with the negotiation, administration or enforcement of this Security Agreement or any other instrument or document delivered pursuant hereto. 17. LAW APPLICABLE. This Security Agreement shall be governed by and construed in accordance with the laws of the State of Delaware other than the conflicts of law provisions thereof. 18. SEVERABILITY OF PROVISIONS. If any provision of this Security Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or any remaining provisions of this Security Agreement. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 11 IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed as of the day and year first written above. WINTER HARBOR, L.L.C. By: First Media, L.P. its General Manager/Member By: First Media Corporation its sole General Partner By: /s Ralph W. Hardy Name: Ralph W. Hardy Title: Secretary I-LINK COMMUNICATIONS, INC. By: /s John Edwards John Edwards, President I-LINK SYSTEMS, INC. By: /s John Edwards John Edwards, President MIBRIDGE, INC. By: /s John Edwards John Edwards, President I-LINK WORLDWIDE, L.L.C. By: I-Link Incorporated, its member By: /s John Edwards John Edwards, President EX-10 6 FORM OF PROMISSORY NOTE $___________ ___________________, 1998 FOR VALUE RECEIVED, the undersigned, I-LINK INCORPORATED, a Florida corporation (the "Maker"),promises to pay to the order of WINTER HARBOR, L.L.C., a Delaware limited partnership (the "Payee"), upon demand by Payee, the principal sum of $__________, together with interest thereon at a rate equal to the prime rate as set forth in the Wall Street Journal (Western Edition) plus one (1) percentage point. 1. Prepayments. This Note may be voluntarily prepaid in whole or in part without premium or penalty at any time and from time to time; provided, however, that each partial prepayment shall be in the aggregate principal amount of not less than $100,000 or an integral multiple of $50,000 in excess thereof. In making a prepayment in whole, the Maker shall pay all accrued interest through the date of such prepayment. 2. Payment on Business Days. If any payment of principal or interest on this Note shall become due on a Saturday, Sunday or public holiday, such payment may be made on the next succeeding business day, and such extension of time in such case shall be included in the computation of interest in connection with such payment. 3. Form of Payment. All payments made pursuant to the terms of this Note shall be made in lawful money of the United States of America and shall be payable to the Payee at its principal office located at 11400 Skipwith Lane, Potomac, Maryland 20854 or at such other place as the Payee shall have designated to the Maker in writing. 4. Choice of Law. This Note shall be governed by and construed in accordance with the laws of the State of Delaware with the exception of the conflicts of laws provisions thereof. 5. Events of Default. Upon the occurrence of any Event of Default, the Payee may at its option by written notice to the Maker declare the entire unpaid principal amount of this Note, together with all unpaid interest and all other amounts payable hereunder, immediately due and payable. 6. Collection Expenses. If at any time the indebtedness evidenced by this Note is collected through legal proceedings or this Note is placed in the hands of attorneys for collection, the Maker and each endorser of this Note hereby jointly and severally agree to pay all costs and expenses (including reasonable attorneys' fees) incurred by the holder of this Note in collecting or attempting to collect such indebtedness. 7. Waivers. To the extent permitted by law, except as otherwise provided herein, the Maker and each endorser of this Note, and their respective successors and assigns, hereby severally waive presentment; protest and demand; notice of protest, demand, dishonor and nonpayment; diligence in collection, and any relief whatever from the valuation or appraisement laws of any state. IN WITNESS WHEREOF, the Maker has executed this Note as of the date and year first above written. I-LINK INCORPORATED By:_________________________________ John Edwards, President EX-10 7 CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT Between I-LINK INCORPORATED and JNC OPPORTUNITY FUND LTD. June 30, 1998 CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of June 30, 1998, between I-Link Incorporated, a Florida corporation (the "Company"), and JNC Opportunity Fund Ltd., a Cayman Islands corporation (the "Purchaser"). WHEREAS, subject to the terms and conditions set forth in this Agreement, the Company desires to issue and sell to the Purchaser and the Purchaser desires to purchase from the Company, shares of the Company's 5% Series [A] Convertible Preferred Stock, par value [$ ] per share (the "Preferred Stock"), which are convertible into shares of the Company's common stock, par value $.007 per share (the "Common Stock"). IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy are hereby acknowledged, the Company and Purchaser agree as follows: ARTICLE I PURCHASE AND SALE OF PREFERRED STOCK 1.1 The Closing. (a) The Closing. (i) Subject to the terms and conditions set forth in this Agreement, the Company shall issue and sell to the Purchaser and the Purchaser shall purchase 1,000 shares of Preferred Stock (the "Shares") for an aggregate purchase price of $10,000,000. The closing of the purchase and sale of the Shares (the "Closing") shall take place at the offices of Robinson Silverman Pearce Aronsohn & Berman LLP (the "Escrow Agent"), 1290 Avenue of the Americas, New York, New York 10104, immediately following the execution hereof or such later date as the parties shall agree. The date of the Closing is hereinafter referred to as the "Closing Date." (ii) Prior to the Closing, the parties shall deliver or shall cause to be delivered to the Escrow Agent such items as are required to be delivered by them in accordance with and subject to the terms and conditions of the Escrow Agreement, dated as of the date hereof, by and among the Company, the Purchaser and the Escrow Agent, in the form of Exhibit E (the "Escrow Agreement"), including the following: (A) the Company shall deliver (1) stock certificates representing the Shares, registered in the name of the Purchaser, (2) a Common Stock purchase warrant, in the form of Exhibit D, registered in the name of the Purchaser, pursuant to which the Purchaser shall have the right at any time and from time to time thereafter through the fifth anniversary of the Closing Date to acquire 250,000 shares of Common Stock at an exercise price per share (subject to adjustment as provided therein) of $[ ] (the "Warrant"), (3) the legal opinion of Hardy & Allen, outside counsel to the Company, substantially in the form of Exhibit C, and (4) all other documents, instruments and writings required to have been delivered at or prior to the Closing Date by the Company pursuant to this Agreement, including an executed Registration Rights Agreement, dated the date hereof, between the Company and the Purchaser, in the form of Exhibit - ------------- 1 120% of the average of the Per Share Market Values for the five (5) Trading Days immediately preceding the Original Issue Date. B (the "Registration Rights Agreement"), and the Irrevocable Transfer Agent Instructions, in the form of Exhibit F, delivered to and acknowledged by the Company's transfer agent (the "Transfer Agent Instructions"); and (B) the Purchaser shall deliver (1) $10,000,000 in United States dollars in immediately available funds by wire transfer to an account designated in writing by the Company for such purpose, and (2) all documents, instruments and writings required to have been delivered at or prior to the Closing Date by the Purchaser pursuant to this Agreement, including, without limitation, an executed Registration Rights Agreement. 1.2 Form of Preferred Stock. The Preferred Stock shall have the rights preferences and privileges set forth in Exhibit A, and shall be incorporated into a Certificate of Designation ("Certificate of Designation"), in form and substance mutually agreed to by the parties. For purposes of this Agreement, "Conversion Price," "Original Issue Date," "Conversion Date" and "Trading Day" shall have the meanings set forth in Exhibit A; "Business Day" shall mean any day except Saturday, Sunday and any day which shall be a federal legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close. ARTICLE II REPRESENTATIONS AND WARRANTIES 2.1 Representations, Warranties and Agreements of the Company. The Company hereby makes the following representations and warranties to the Purchaser: (a) Organization and Qualification. The Company is a corporation, duly incorporated, validly existing and in good standing under the laws of the State of Florida, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Company has no subsidiaries other than as set forth in Schedule 2.1(a) (collectively the "Subsidiaries"). Each of the Subsidiaries is an entity, duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the full power and authority to own and use its properties and assets and to carry on its business as currently conducted. Each of the Company and the Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not, individually or in the aggregate, (x) adversely affect the legality, validity or enforceability of the Securities (as defined below) or any of this Agreement, the Certificate of Designation, the Registration Rights Agreement, the Warrant or the Escrow Agreement (collectively, the "Transaction Documents"), (y) have or result in a material adverse effect on the results of operations, assets, prospects, or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (z) adversely impair the Company's ability to perform fully on a timely basis its obligations under any of the Transaction Documents (any of (x), (y) or (z), a "Material Adverse Effect"). (b) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents, and otherwise to carry out its obligations thereunder. The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company. Each of the Transaction Documents has been duly executed by the Company and, when delivered (or filed, as the case may be) in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms. Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective certificate of incorporation, by-laws or other charter documents. (c) Capitalization. The number of authorized, issued and outstanding capital stock of the Company is set forth in Schedule 2.1(c). No shares of Common Stock are entitled to preemptive or similar rights, nor is any holder of the Common Stock entitled to preemptive or similar rights arising out of any agreement or understanding with the Company by virtue of any of the Transaction Documents. Except as disclosed in Schedule 2.1(c), there are no outstanding options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or, except as a result of the purchase and sale of the Shares and the Warrant, securities, rights or obligations convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire any shares of Common Stock, or contracts, commitments, understandings, or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. To the knowledge of the Company, except as specifically disclosed in the SEC Documents (as defined below) or Schedule 2.1(c), no Person or group of related Persons beneficially owns (as determined pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) or has the right to acquire by agreement with or by obligation binding upon the Company beneficial ownership of in excess of 5% of the Common Stock. A "Person" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. (d) Issuance of the Shares and the Warrant. The Shares and the Warrant are duly authorized, and, when issued and paid for in accordance with the terms hereof, shall have been validly issued, fully paid and nonassessable, free and clear of all liens, encumbrances and rights of first refusal of any kind (collectively, "Liens"). The Company has on the date hereof and will, at all times while the Shares and the Warrant are outstanding, maintain an adequate reserve of duly authorized shares of Common Stock, reserved for issuance to the holders of the Shares, to enable it to perform its conversion, exercise and other obligations under this Agreement, the Certificate of Designation and the Warrant. Such number of reserved and available shares of Common Stock is not less than the sum of (i) 200% of the number of shares of Common Stock which would be issuable upon conversion in full of the Shares, assuming such conversion occurred on the Original Issue Date or the Filing Date (as defined in the Registration Rights Agreement), whichever yields a lower Conversion Price, (ii) the number of shares of Common Stock issuable upon exercise of the Warrant, and (iii) the number of shares Common Stock which would be issuable upon payment of dividends on the Shares, assuming each Share is outstanding for three years and all dividends are paid in shares of Common Stock (such number of shares, the "Initial Minimum"). All such authorized shares of Common Stock shall be duly reserved for issuance to the holders of such Shares and Warrant. The shares of Common Stock issuable upon conversion of the Shares, as payment of dividends thereon and upon exercise of the Warrant are collectively referred to herein as the "Underlying Shares." The Shares, the Warrant and the Underlying Shares are collectively, the "Securities." When issued in accordance with the Certificate of Designation and the Warrant, in accordance with their respective terms, the Underlying Shares shall have been duly authorized, validly issued, fully paid and nonassessable, free and clear of all Liens. (e) No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated thereby do not and will not (i) conflict with or violate any provision of its certificate of incorporation, bylaws or other charter documents (each as amended through the date hereof), or (ii) subject to obtaining the Required Approvals (as defined below), conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, indenture or instrument (evidencing a Company debt or otherwise) to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject (including Federal and state securities laws and regulations), or by which any property or asset of the Company is bound or affected, except in the case of each of clauses (ii) and (iii), as could not, individually or in the aggregate, have or result in a Material Adverse Effect. The business of the Company is not being conducted in violation of any law, ordinance or regulation of any governmental authority, except for violations which, individually or in the aggregate, could not have or result in a Material Adverse Effect. (f) Consents and Approvals. Neither the Company nor any Subsidiary is required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other Federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than (i) the filing of the Certificate of Designation with the Secretary of State of Florida, (ii) the filings required pursuant to Section 3.12, (iii) the filing of the Underlying Securities Registration Statement with the Securities and Exchange Commission (the "Commission") meeting the requirements set forth in the Registration Rights Agreement and covering the resale of the Underlying Shares by the Purchaser, (iv) the application(s) to the Nasdaq SmallCap Market (the "NASDAQ") for the listing of the Underlying Shares with the NASDAQ (and with any other national securities exchange or market on which the Common Stock is then listed), (v) applicable Blue Sky filings and, and (vi) in all other cases where the failure to obtain such consent, waiver, authorization or order, or to give such notice or make such filing or registration could not have or result in, individually or in the aggregate, a Material Adverse Effect (the consents, waivers, authorizations, orders, notices and filings referred to in (i)-(vi) of this Section are, collectively, the "Required Approvals"). (g) Litigation; Proceedings. Except as specifically disclosed in the SEC Documents, there is no action, suit, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries or any of their respective properties before or by any court, governmental or administrative agency or regulatory authority (Federal, state, county, local or foreign) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, individually or in the aggregate, have or result in a Material Adverse Effect. (h) No Default or Violation. Neither the Company nor any Subsidiary (i) is in default under or in violation of (and no event has occurred which has not been waived which, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound, (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is in violation of any statute, rule or regulation of any governmental authority, except as could not individually or in the aggregate, have or result in a Material Adverse Effect. (i) Private Offering. Assuming the accuracy of the representations and warranties of the Purchaser set forth in Sections 2.2(b)-(g), the offer, issuance and sale of the Securities to the Purchaser as contemplated hereby are exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"). Neither the Company nor any Person acting on its behalf has taken any action could subject the offering, issuance or sale of the Securities to the registration requirements of the Securities Act. (j) SEC Documents; Financial Statements. The Company has filed all reports required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the three years preceding the date hereof (or such shorter period as the Company was required by law to file such material) (the foregoing materials being collectively referred to herein as the "SEC Documents" and, together with the Schedules to this Agreement the "Disclosure Materials") on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Documents prior to the expiration of any such extension. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Documents, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. All material agreements to which the Company is a party or to which the property or assets of the Company are subject have been filed as exhibits to the SEC Documents as required. The financial statements of the Company included in the SEC Documents comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with generally accepted accounting ("GAAP") principles applied on a consistent basis during the periods involved, except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. Since December 31, 1997, except as specifically disclosed in the SEC Documents, (a) there has been no event, occurrence or development that has had or that could have or result in a Material Adverse Effect, (b) the Company has not incurred any liabilities (contingent or otherwise) other than (x) liabilities incurred in the ordinary course of business consistent with past practice and (y) liabilities not required to be reflected in the Company's financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (c) the Company has not altered its method of accounting or the identity of its auditors and (d) the Company has not declared or made any payment or distribution of cash or other property to its stockholders or officers or directors (other than in compliance with existing Company stock option plans) with respect to its capital stock, or purchased, redeemed (or made any agreements to purchase or redeem) any shares of its capital stock. The Company last filed audited financial statements with the Commission on [April 15, 1998], and has not received any comments from the Commission in respect thereof. (k) Investment Company. The Company is not, and is not an Affiliate (as defined in Rule 405 under the Securities Act) of, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (l) Certain Fees. Except for certain fees payable by the Company to Wharton Capital Partners, Ltd. and Alpine Capital Partners, Inc., no fees or commissions will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, or bank with respect to the transactions contemplated by this Agreement. The Purchaser shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by this Agreement. The Company shall indemnify and hold harmless the Purchaser, its employees, officers, directors, agents, and partners, and their respective Affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorney's fees) and expenses suffered in respect of any such claimed or existing fees, as such fees and expenses are incurred. (m) Solicitation Materials. Neither the Company nor any Person acting on the Company's behalf has (i) distributed any offering materials in connection with the offering and sale of the Securities, or (ii) solicited any offer to buy or sell the Securities by means of any form of general solicitation or advertising. (n) Form S-3 Eligibility. The Company is eligible to register securities for resale with the Commission under Form S-3 promulgated under the Securities Act. (o) Exclusivity. The Company shall not issue and sell the Shares to any Person other than the Purchaser other than with the specific prior written consent of the Purchaser. (p) Seniority. No class of equity securities of the Company is senior to the Shares in right of payment, whether upon liquidation or dissolution, or otherwise. (q) Listing and Maintenance Requirements Compliance. The Company has not, in the two years preceding the date hereof, received notice (written or oral) from the NASDAQ or any other stock exchange, market or trading facility on which the Common Stock is or has been listed (or on which it has been quoted) to the effect that the Company is not in compliance with the listing or maintenance requirements of such exchange or market. The Company is in compliance with all such maintenance requirements. (r) Patents and Trademarks. The Company has, or has rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and rights (collectively, the "Intellectual Property Rights") which are necessary or material for use in connection with its business, and which the failure to so have would have a Material Adverse Effect. To the best knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. (s) Registration Rights; Rights of Participation. Except as set forth on Schedule 6(b) to the Registration Rights Agreement, (i) the Company has not granted or agreed to grant to any Person any rights (including "piggy-back" registration rights) to have any securities of the Company registered with the Commission or any other governmental authority which has not been satisfied and (ii) no Person, has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. (t) Regulatory Permits. The Company and its Subsidiaries possess all certificates, authorizations and permits issued by the appropriate Federal, state or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Documents, except where the failure to possess such permits could not, individually or in the aggregate, have or result in a Material Adverse Effect ("Material Permits"), and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit. (u) Title. The Company and the Subsidiaries have good and marketable title in fee simple to all real property and personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all Liens, except for liens, claims or encumbrances as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its Subsidiaries. Any real property and facilities held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries. (v) Disclosure. The Company confirms that it has not provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Company understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions in securities of the Company. All disclosure provided to the Purchaser regarding the Company, its business and the transactions contemplated hereby, including the Schedules to this Agreement, furnished by or on behalf of the Company are true and correct and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. 2.2 Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the Company as follows: (a) Organization; Authority. The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation with the requisite corporate power and authority, to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations thereunder. The purchase by the Purchaser of the Securities hereunder has been duly authorized by all necessary action on the part of the Purchaser. Each of this Agreement, the Registration Rights Agreement and the Escrow Agreement has been duly executed and delivered by the Purchaser and constitutes the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Investment Intent. The Purchaser is acquiring the Securities for its own account for investment purposes only and not with a view to or for distributing or reselling such Securities or any part thereof or interest therein, without prejudice, however, to the Purchaser's right, subject to the provisions of this Agreement and the Registration Rights Agreement, at all times to sell or otherwise dispose of all or any part of such Securities pursuant to an effective registration statement under the Securities Act and in compliance with applicable state securities laws or under an exemption from such registration. (c) Purchaser Status. At the time the Purchaser was offered the Shares and the Warrant, it was, and at the date hereof it is, and at each exercise date under the Warrant, it will be, an "accredited investor" as defined in Rule 501(a) under the Securities Act. (d) Experience of the Purchaser. The Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. (e) Ability of the Purchaser to Bear Risk of Investment. The Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment. (f) Access to Information. The Purchaser acknowledges receipt of the Disclosure Materials and further acknowledges that it has reviewed the Disclosure Materials and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (ii) access to information about the Company and the Company's financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information which the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment and to verify the accuracy and completeness of the information contained in the Disclosure Materials. Neither such inquiries nor any other investigation conducted by or on behalf of such Purchaser or its representatives or counsel shall modify, amend or affect such Purchaser's right to rely on the truth, accuracy and completeness of the Disclosure Materials and the Company's representations and warranties contained in the Transaction Documents. (g) General Solicitation. The Purchaser is not purchasing the Securities as a result of or subsequent to any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar. (h) Reliance. The Purchaser understands and acknowledges that (i) the Securities are being offered and sold to it without registration under the Securities Act in a private placement that is exempt from the registration provisions of the Securities Act and (ii) the availability of such exemption, depends in part on, and the Company will rely upon the accuracy and truthfulness of, the foregoing representations and the Purchaser hereby consents to such reliance. The Company acknowledges and agrees that the Purchaser makes no representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Section 2.2. ARTICLE III OTHER AGREEMENTS OF THE PARTIES 3.1 Transfer Restrictions. (a) Securities may only be disposed of pursuant to an effective registration statement under the Securities Act, to the Company or pursuant to an available exemption from or in a transaction not subject to the registration requirements of the Securities Act. In connection with any transfer of Securities other than pursuant to an effective registration statement or to the Company, except as otherwise set forth herein, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred securities under the Securities Act. Notwithstanding the foregoing, the Company hereby consents to and agrees to register on the books of the Company and with any transfer agent for the securities of the Company any transfer of Securities by the Purchaser to an Affiliate of the Purchaser or to funds under common management with the Purchaser, and any transfer among any such Affiliates or funds, provided that transferee certifies to the Company that it is an "accredited investor" as defined in Rule 501(a) under the Securities Act and that it is acquiring the Securities solely for investment purposes. Any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a Purchaser under this Agreement and the Registration Rights Agreement. (b) The Purchaser agrees to the imprinting, so long as is required by this Section 3.1(b), of the following legend on the Securities: NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. Underlying Shares shall not contain the legend set forth above nor any other legend if the conversion of Shares, the payment of dividends thereon, and exercise of the Warrant or other issuances of Underlying Shares as contemplated hereby, by the Certificate of Designation or the Warrant occurs at any time while an Underlying Securities Registration Statement is effective under the Securities Act or, in the event there is not an effective Underlying Securities Registration Statement at such time, if in the opinion of counsel to the Company such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company shall cause its counsel to issue the legal opinion included in the Transfer Agent Instructions to the Company's transfer agent on the day that the Underlying Securities Registration Statement is declared effective by the Commission. The Company agrees that it will provide the Purchaser, upon request, with a certificate or certificates representing Underlying Shares, free from such legend at such time as such legend is no longer required hereunder. The Company may not make any notation on its records or give instructions to any transfer agent of the Company which enlarge the restrictions of transfer set forth in this Section. 3.2 Acknowledgment of Dilution. The Company acknowledges that the issuance of the Underlying Shares upon (i) conversion of the Shares and payment of dividends thereon in accordance with the terms of the Certificate of Designation, and (ii) exercise of the Warrant in accordance with its terms, may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligation to issue Underlying Shares upon (x) conversion of the Shares and payment of dividends thereon in accordance with the terms of the Certificate of Designation, and (y) exercise of the Warrant in accordance with its terms, is unconditional and absolute, subject to the limitations set forth herein in the Certificate of Designation or pursuant to the Warrant, regardless of the effect of any such dilution. 3.3 Furnishing of Information. As long as the Purchaser owns Securities, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange Act. As long as the Purchaser owns Securities, if the Company is not required to file reports pursuant to such sections, it will prepare and furnish to the Purchaser and make publicly available in accordance with Rule 144(c) promulgated under the Securities Act annual and quarterly financial statements, together with a discussion and analysis of such financial statements in form and substance substantially similar to those that would otherwise be required to be included in reports required by Section 13(a) or 15(d) of the Exchange Act, as well as any other information required thereby, in the time period that such filings would have been required to have been made under the Exchange Act. The Company further covenants that it will take such further action as any holder of Securities may reasonably request, all to the extent required from time to time to enable such Person to sell Underlying Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act, including the legal opinion referenced above in this Section. Upon the request of any such Person, the Company shall deliver to such Person a written certification of a duly authorized officer as to whether it has complied with such requirements. 3.4 Blue Sky Laws. In accordance with the Registration Rights Agreement, the Company shall qualify or exempt the issuance and sale of the Underlying Shares under the securities or Blue Sky laws of such jurisdictions as the Purchaser may reasonably request and shall continue such qualification or exemption at all times until the Purchaser notifies the Company in writing that it no longer owns Securities; provided, however, that neither the Company nor its Subsidiaries shall be required in connection therewith to qualify as a foreign corporation where they are not now so qualified or to take any action that would subject the Company to general service of process in any such jurisdiction where it is not then subject. 3.5 Integration. The Company shall not, and shall use its best efforts to ensure that, no Affiliate shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities to the Purchaser. 3.6 Increase in Authorized Shares. At such times as the Company would be, if a notice of conversion or exercise (as the case may be) were to be delivered on such date, precluded from (a) issuing 200% of the number of Underlying Shares as would then be issuable upon a conversion in full of the Shares and as payment of any accrued and unpaid dividends in respect thereof in shares of Common Stock, or (b) honoring the exercise in full of the Warrant, in either case, due to the unavailability of a sufficient number of shares of authorized but unissued or reserved Common Stock, the Board of Directors of the Company shall promptly (and in any case, within 30 Business Days from such date) prepare and mail to the stockholders of the Company proxy materials requesting authorization to amend the Company's Certificate of Incorporation to increase the number of shares of Common Stock which the Company is authorized to issue to at least such number of shares as reasonably requested by the Purchaser in order to provide for such number of authorized and unissued shares of Common Stock to enable the Company to comply with its conversion exercise and reservation of shares obligations as set forth in this Agreement, the Certificate of Designation and the Warrant (the sum of (x) the number of shares of Common Stock then authorized, (y) the number of shares of Common Stock then outstanding plus all shares of Common Stock issuable upon exercise of all outstanding options, warrants and convertible instruments, and (z) the sum of (i) 200% of the number of Underlying Shares as are then issuable upon a conversion in full of all Shares and as payment of dividends thereon, and (ii) the number of Underlying Shares as are issuable upon exercise in full of the Warrant, shall be a reasonable number). In connection therewith, the Board of Directors shall (a) adopt proper resolutions authorizing such increase, (b) recommend to and otherwise use its best efforts to promptly and duly obtain stockholder approval to carry out such resolutions (and hold a special meeting of the stockholders no later than the 60th day after delivery of the proxy materials relating to such meeting) and (c) within five (5) Business Days of obtaining such stockholder authorization, file an appropriate amendment to the Company's Certificate of Incorporation to evidence such increase. 3.7 Listing and Reservation of Underlying Shares. (a) The Company shall (i) not later than the fifth Business Day following the Closing Date prepare and file with the NASDAQ (or such other national securities exchange or market or trading or quotation facility on which the Common Stock is then listed) an additional shares listing application covering a number of shares of Common Stock which is at least equal to the number of shares required to be reserved pursuant to Section 2.1(d), (ii) take all steps necessary to cause such shares to be approved for listing in the NASDAQ (as well as on any such other national securities exchange or market or trading or quotation facility on which the Common Stock is then listed) as soon as possible thereafter, and (iii) provide to the Purchaser evidence of such listing, and the Company shall maintain the listing of its Common Stock thereon. If the number of Underlying Shares as are issuable upon conversion in full of the then outstanding Shares, as payment of dividends thereon, and upon exercise of the then unexercised portion of the Warrant exceeds 85% of the number of Underlying Shares previously listed on account thereof with NASDAQ (and such other required exchanges), the Company shall take the necessary actions to immediately list a number of Underlying Shares as equals the sum of (x) 200% of the number of Underlying Shares then issuable upon conversion of the Shares and as payment of dividends thereon and (y) the number of Underlying Shares as are then issuable upon exercise of the Warrant. (b) The Company shall maintain a reserve of Common Stock for issuance upon conversion of the Shares and for payment of dividends thereupon in shares of Common Stock pursuant to the terms of the Certificate of Designation and upon exercise of the Warrant in accordance with its terms, in such amount as may be required to fulfill obligations in full under the Transaction Documents, which reserve shall include a number of shares of Common Stock equal to no less than the Initial Minimum. 3.8 Conversion Procedures. The Transfer Agent Instructions, Conversion Notice (as defined in Exhibit A) and Notice of Exercise under the Warrant set forth the totality of the procedures with respect to the conversion of the Shares and exercise of the Warrant, including the form of legal opinion, if necessary, that shall be rendered to the Company's transfer agent and such other information and instructions as may be reasonably necessary to enable the Purchaser to convert its Shares and exercise the Warrant as contemplated in the Certificate of Designation and the Warrant (as applicable). 3.9 Notice of Breaches. (a) Each of the Company and the Purchaser shall give prompt written notice to the other of any breach by it of any representation, warranty or other agreement contained in any Transaction Document, as well as any events or occurrences arising after the date hereof which would reasonably be likely to cause any representation or warranty or other agreement of such party, as the case may be, contained therein to be incorrect or breached as of the Closing Date. However, no disclosure by either party pursuant to this Section shall be deemed to cure any breach of any representation, warranty or other agreement contained in any Transaction Document. (b) Notwithstanding the generality of Section 3.9(a), the Company shall promptly notify the Purchaser of any notice or claim (written or oral) that it receives from any lender of the Company to the effect that the consummation of the transactions contemplated by the Transaction Documents violates or would violate any written agreement or understanding between such lender and the Company, and the Company shall promptly furnish by facsimile to the holders of the Securities a copy of any written statement in support of or relating to such claim or notice. 3.10 Conversion and Exercise Obligations of the Company. The Company shall honor conversions of the Shares and exercises of the Warrant and shall deliver Underlying Shares in accordance with the respective terms, conditions and time periods set forth in the respective Certificate of Designation and the Warrant. 3.11 Right of First Refusal; Subsequent Registrations. (a) The Company shall not, directly or indirectly, without the prior written consent of the Purchaser, offer, sell, grant any option to purchase, or otherwise dispose of (or announce any offer, sale, grant or any option to purchase or other disposition) any of its or its Affiliates' equity or equity-equivalent securities or a transaction intended to be exempt or not subject to registration under the Securities Act (a "Subsequent Placement") for a period of 180 days after the Closing Date, except (i) the granting of options or warrants to employees, officers and directors, and the issuance of shares upon exercise of options granted, under any stock option plan heretofore or hereinafter duly adopted by the Company, (ii) shares of Common Stock issued upon exercise of any currently outstanding warrants and upon conversion of any currently outstanding convertible securities of the Company, in each case disclosed in Schedule 2.1(c), and (iii) shares of Common Stock issued upon conversion of Preferred Stock and as payment of dividends thereon and upon exercise of the Warrant in accordance with the Certificate of Designation or the Warrant, respectively, unless (A) the Company delivers to the Purchaser a written notice (the "Subsequent Placement Notice") of its intention effect such Subsequent Placement, which Subsequent Placement Notice shall describe in reasonable detail the proposed terms of such Subsequent Placement, the amount of proceeds intended to be raised thereunder, the Person with whom such Subsequent Placement shall be effected, and attached to which shall be a term sheet or similar document relating thereto and (B) the Purchaser shall not have notified the Company by 5:00 p.m. (New York City time) on the tenth (10th) Trading Day after its receipt of the Subsequent Placement Notice of its willingness to cause the Purchaser to provide (or to cause its sole designee to provide), subject to completion of mutually acceptable documentation, financing to the Company on substantially the terms set forth in the Subsequent Placement Notice. If the Purchaser shall fail to notify the Company of its intention to enter into such negotiations within such time period, the Company may effect the Subsequent Placement substantially upon the terms and to the Persons (or Affiliates of such Persons) set forth in the Subsequent Placement Notice; provided, that the Company shall provide the Purchaser with a second Subsequent Placement Notice, and the Purchaser shall again have the right of first refusal set forth above in this paragraph (a), if the Subsequent Placement subject to the initial Subsequent Placement Notice shall not have been consummated for any reason on the terms set forth in such Subsequent Placement Notice within thirty (30) Trading Days after the date of the initial Subsequent Placement Notice with the Person (or an Affiliate of such Person) identified in the Subsequent Placement Notice. (b) Except for (x) Underlying Shares, (y) other "Registrable Securities" (as such term is defined in the Registration Rights Agreement) to be registered, and securities of the Company permitted pursuant to Schedule 6(b) of the Registration's Rights Agreement to be registered in the Underlying Securities Registration in accordance with the Registration Rights Agreement, and (z) Common Stock to be registered for resale in connection with financings permitted pursuant to paragraph (a)(i) and (iii) of Section 3.11(a), the Company shall not, without the prior written consent of the Purchaser (i) issue or sell any of its or any of its Affiliates' equity or equity-equivalent securities pursuant to Regulation S promulgated under the Securities Act, or (ii) register for resale any securities of the Company for a period of not less than 90 Trading Days after the date that the Underlying Securities Registration Statement is declared effective by the Commission. Any days that a Purchaser is unable to sell Underlying Securities under the Underlying Securities Registration Statement shall be added to such 90 Trading Day period for the purposes of (i) and (ii) above. 3.12 Certain Securities Laws Disclosures; Publicity. The Company shall: (i) issue a press release acceptable to the Purchaser disclosing the transactions contemplated hereby on the Closing Date, (ii) file with the Commission a Report on Form 8-K disclosing the transactions contemplated hereby within ten (10) Business Days after the Closing Date, and (iii) timely file with the Commission a Form D promulgated under the Securities Act as required under Regulation D promulgated under the Securities Act and provide a copy thereof to the Purchaser promptly after the filing thereof. The Company shall, no less than two (2) Business Days prior to the filing of any disclosure required by clauses (ii) and (iii) above, provide a copy thereof to Encore Capital Management, L.L.C. ("Encore"). No such filing or disclosure may be made that mentions the Purchaser or Encore by name without the prior consent of Encore. 3.13 Use of Proceeds. The Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes and not for the satisfaction of any portion of Company debt or to redeem any Company equity or equity-equivalent securities. Pending application of the proceeds of this placement in the manner permitted hereby, the Company will invest such proceeds in interest bearing accounts and/or short-term, investment grade interest bearing securities. 3.14 Transfer of Intellectual Property Rights. Except in connection with the sale of all or substantially all of the assets of the Company, the Company shall not transfer, sell or otherwise dispose of any Intellectual Property Rights, or allow any of the Intellectual Property Rights to become subject to any Liens, or fail to renew such Intellectual Property Rights (if renewable and it would otherwise lapse if not renewed), without the prior written consent of the Purchaser. 3.15 Reimbursement. If the Purchaser, other than by reason of its gross negligence or willful misconduct, becomes involved in any capacity in any action, proceeding or investigation brought by or against any Person, including stockholders of the Company, in connection with or as a result of the consummation of the transactions contemplated by Transaction Documents, the Company will reimburse the Purchaser for its reasonable legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith, as such expenses are incurred. In addition, other than with respect to any matter in which the Purchaser is a named party, the Company will pay the Purchaser the charges, as reasonably determined by the Purchaser, for the time of any officers or employees of the Purchaser devoted to appearing and preparing to appear as witnesses, assisting in preparation for hearings, trials or pretrial matters, or otherwise with respect to inquiries, hearings, trials, and other proceedings relating to the subject matter of this Agreement. The reimbursement obligations of the Company under this paragraph shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any Affiliates of the Purchaser who are actually named in such action, proceeding or investigation, and partners, directors, agents, employees and controlling persons (if any), as the case may be, of the Purchaser and any such Affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Company, the Purchaser and any such Affiliate and any such Person. The Company also agrees that neither the Purchaser nor any such Affiliates, partners, directors, agents, employees or controlling persons shall have any liability to the Company or any person asserting claims on behalf of or in right of the Company in connection with or as a result of the consummation of the Transaction Documents except to the extent that any losses, claims, damages, liabilities or expenses incurred by the Company result from the gross negligence or willful misconduct of the Purchaser or entity in connection with the transactions contemplated by this Agreement. ARTICLE IV MISCELLANEOUS 4.1 Fees and Expenses. At the Closing the Company shall (i) pay $20,000 to the Escrow Agent in connection with the preparation and negotiation of the Transaction Documents, and (ii) pay to $10,000 to Encore for its due diligence expenses and disbursements in connection with the transactions contemplated hereby. Other than the amounts contemplated in the immediately preceding sentence, and except as otherwise set forth in the Registration Rights Agreement, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all stamp and other taxes and duties levied in connection with the issuance of the Securities. 4.2 Entire Agreement; Amendments. This Agreement, together with the Exhibits and Schedules hereto, the Registration Rights Agreement, the Certificate of Designation, the Transfer Agent Instructions, the Warrant and the Escrow Agreement contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. 4.3 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 8:00 p.m. (New York City time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in the Purchase Agreement later than 8:00 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City time) on such date, (iii) the Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Company: I-Link Incorporated 13751 S. Wadsworth Park Drive, Suite 200 Draper, Utah 84020 Facsimile No.: (801)_______ Attn: Chief Financial Officer With copies to: Hardy & Allen 60 East South Temple Suite 2200 Salt Lake City, Utah 84111 Facsimile No.: (801) 264-6664 Attn: David Hardy If to the Purchaser: JNC Opportunity Fund Ltd. c/o Olympia Capital (Cayman) Ltd. Williams House, 20 Reid Street Hamilton HM11, Bermuda Facsimile No.: (441) 295-2305 Attn: Director With copies to: Encore Capital Management, L.L.C. 12007 Sunrise Valley Drive, Suite 460 Reston, VA 20191 Facsimile No.: (703) 476-7711 Attn: Managing Member With copies to: Robinson Silverman Pearce Aronsohn & Berman LLP 1290 Avenue of the Americas New York, NY 10104 Facsimile No.: (212) 541-4630 Attn: Eric L. Cohen or such other address as may be designated in writing hereafter, in the same manner, by such Person. 4.4 Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by both the Company and the Purchaser; or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. 4.5 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. 4.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser. Except as set forth in Section 3.1(a), the Purchaser may not assign this Agreement or any of the rights or obligations hereunder (other than to an Affiliate of the Purchaser) without the consent of the Company, except that the Purchaser may assign its rights hereunder and under the Transaction Documents without the consent of the Company as long as such assignee demonstrates to the reasonable satisfaction of the Company its satisfaction of the representations and warranties set forth in Section 2.2. This provision shall not limit the Purchaser's right to transfer securities or transfer or assign rights hereunder or under the Registration Rights Agreement. 4.7 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and, other with respect to Encore who is an intended beneficiary of, and entitled to enforce, Sections 3.12, 4.1 and 4.11, is not for the benefit of, nor may any provision hereof be enforced by, any other Person. 4.8 Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York without regard to the principles of conflicts of law thereof. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of the any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. 4.9 Survival. The representations, warranties, agreements and covenants contained herein shall survive the Closing and the delivery and conversion or exercise (as the case may be) of the Shares and the Warrant. 4.10 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. 4.11 Publicity. The Company and the Purchaser shall consult with each other in issuing any press releases or otherwise making public statements or filings and other communications with the Commission or any regulatory agency or stock market or trading facility with respect to the transactions contemplated hereby and neither party shall issue any such press release or otherwise make any such public statement, filings or other communications without the prior written consent of the other, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such disclosure is required by law, in which such case the disclosing party shall provide the other party with prior notice of such public statement, filing or other communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name of the Purchaser or Encore, or include the name of the Purchaser or Encore in any filing with the Commission, or any regulatory agency, trading facility or stock market without the prior written consent of Encore, except to the extent such disclosure (but not any disclosure as to the controlling Persons thereof) is required by law, in which case the Company shall provide the Purchaser and Encore with prior notice of such disclosure. 4.12 Severability. In case any one or more of the provisions of this Agreement shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affecting or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision which shall be a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement. 4.13 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, the Purchaser will be entitled to specific performance of the obligations of the Company under the Transaction Documents. Each of the Company and the Purchaser agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of its obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Convertible Preferred Stock Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. I-LINK INCORPORATED By:_____________________________________ Name: John W. Edwards Title: President JNC OPPORTUNITY FUND LTD. By:_____________________________________ Name: Title: EX-10 8 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is made and entered into as of June 30, 1998, between I-Link Incorporated, a Florida corporation (the "Company"), and JNC Opportunity Fund Ltd., a Cayman Islands corporation (the "Purchaser "). This Agreement is made pursuant to the Convertible Preferred Stock Purchase Agreement, dated as of the date hereof between the Company and the Purchaser (the "Purchase Agreement"). The Company and the Purchaser hereby agree as follows: 1. Definitions Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement shall have the meanings given such terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings: "Advice" shall have meaning set forth in Section 3(o). "Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings correlative to the foregoing. "Business Day" means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the state of New York generally are authorized or required by law or other government actions to close. "Closing Date" shall have the meaning set forth in the Purchase Agreement. "Commission" means the Securities and Exchange Commission. "Common Stock" means the Company's common stock, par value $.007 per share. "Effectiveness Date" means the 90th day following the Closing Date. "Effectiveness Period" shall have the meaning set forth in Section 2(a). "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Filing Date" means the 30th day following the Closing Date. "Holder" or "Holders" means the holder or holders, as the case may be, from time to time of Registrable Securities. "Indemnified Party" shall have the meaning set forth in Section 5(c). "Indemnifying Party" shall have the meaning set forth in Section 5(c). "Losses" shall have the meaning set forth in Section 5(a). "Person" means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. "Preferred Stock" means the Company's shares of 5% Series A Convertible Preferred Stock, $[ ] par value, to be issued to the Purchaser pursuant to the Purchase Agreement. "Proceeding" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened. "Prospectus" means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. "Registrable Securities" means the shares of Common Stock issuable (i) upon conversion in full of the Preferred Stock, (ii) as payment of dividends in respect of the Preferred Stock, assuming all such dividends are paid in shares of Common Stock and that the shares of Preferred Stock remain outstanding for three years, and (iii) upon exercise of the Warrants; provided, however that in order to account for the fact that the number of shares of Common Stock issuable upon conversion of the shares of Preferred Stock (together with the payment of dividends thereon) is determined in part upon the market price of the Common Stock prior to the time of conversion, Registrable Securities contemplated by clauses (i) and (ii) above shall include (but not be limited to) a number of shares of Common Stock equal to no less than 200% of the number of shares of Common Stock into which the shares of Preferred Stock (together with the payment of dividends thereon) are convertible, assuming such conversion occurred on the Closing Date or the Filing Date, whichever yields a lower Conversion Price (as defined in the Purchase Agreement). The Company shall be required to file additional Registration Statements to the extent the sum of (i) the number of the shares of Common Stock into which the shares of Preferred Stock are convertible (together with the payment of dividends thereon), and (ii) the number of shares of Common Stock issuable upon exercise in full of the Warrants, exceeds the number of shares of Common Stock initially registered in accordance with the immediately prior sentence. The Company shall have ten (10) days to file such additional Registration Statements after notice of the requirement thereof, which the Holders may give at such time when the number of shares of Common Stock as are issuable upon conversion of shares of Preferred Stock (together with the payment of dividends thereon) and upon exercise of the Warrants, exceeds 85% of the number of shares of Common Stock to be registered in a Registration Statement hereunder. "Registration Statement" means the registration statement and any additional registration statements contemplated by Section 2(a), including (in each case) the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. "Rule 144" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Rule 158" means Rule 158 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Rule 415" means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Securities Act" means the Securities Act of 1933, as amended. "Special Counsel" means one special counsel to the Holders, for which the Holders will be reimbursed by the Company pursuant to Section 4. "Underwritten Registration or Underwritten Offering" means a registration in connection with which securities of the Company are sold to an underwriter for reoffering to the public pursuant to an effective registration statement. "Warrants" means collectively (i) the common stock purchase warrant issued to the Purchaser pursuant to the Purchase Agreement, and (ii) the common stock purchase warrants issued to Wharton Capital Partners, Ltd. and Alpine Capital Partners, Inc. in connection with consulting services provided to the Company. 2. Shelf Registration (a) On or prior to the Filing Date, the Company shall prepare and file with the Commission a "Shelf" Registration Statement covering all Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415. The Registration Statement shall be on Form S-3 (if the Company is not then eligible to register for resale the Registrable Securities on Form S-3 such registration shall be on another appropriate form in accordance herewith). The Registration Statement shall state, to the extent permitted by Rule 416 under the Securities Act, that it also covers such indeterminate number of shares of Common Stock as may be required to effect conversion of the shares of Preferred Stock (and payment of dividends thereon) or exercise of the Warrants, in each case to prevent dilution resulting from stock splits, stock dividends or similar events, or by reason of changes in the Conversion Price in accordance with the terms of the Certificate of Designation (as defined in the Purchase Agreement) or by reason of changes in the Exercise Price (as defined in the Warrants) in accordance with the terms of the Warrants. The Company shall use its best efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event prior to the Effectiveness Date, and shall use its best efforts to keep such Registration Statement continuously effective under the Securities Act until the date which is three years after the date that such Registration Statement is declared effective by the Commission or such earlier date when all Registrable Securities covered by such Registration Statement have been sold or may be sold without volume restrictions pursuant to Rule 144(k) as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Company's transfer agent (the "Effectiveness Period"), provided, however, that the Company shall not be deemed to have used its best efforts to keep the Registration Statement effective during the Effectiveness Period if it voluntarily takes any action that would result in the Holders not being able to sell the Registrable Securities covered by such Registration Statement during the Effectiveness Period, unless such action is required under applicable law or the Company has filed a post-effective amendment to the Registration Statement and the Commission has not declared it effective. (b) If the Holders of a majority of the Registrable Securities so elect, an offering of Registrable Securities pursuant to the Registration Statement may be effected in the form of an Underwritten Offering. In such event, and, if the managing underwriters advise the Company and such Holders in writing that in their opinion the amount of Registrable Securities proposed to be sold in such Underwritten Offering exceeds the amount of Registrable Securities which can be sold in such Underwritten Offering, there shall be included in such Underwritten Offering the amount of such Registrable Securities which in the opinion of such managing underwriters can be sold, and such amount shall be allocated pro rata among the Holders proposing to sell Registrable Securities in such Underwritten Offering. (c) If any of the Registrable Securities are to be sold in an Underwritten Offering, the investment banker in interest that will administer the offering will be selected by the Holders of a majority of the Registrable Securities included in such offering upon consultation with the Company. No Holder may participate in any Underwritten Offering hereunder unless such Holder (i) agrees to sell its Registrable Securities on the basis provided in any underwriting agreements approved by the Persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such arrangements. 3. Registration Procedures In connection with the Company's registration obligations hereunder, the Company shall: (a) Prepare and file with the Commission on or prior to the Filing Date, a Registration Statement on Form S-3 (or if the Company is not then eligible to register for resale the Registrable Securities on Form S-3 such registration shall be on another appropriate form in accordance herewith, or, in connection with an Underwritten Offering hereunder, such other form agreed to by the Company and by the Holders of Registrable Securities) which shall contain the "Plan of Distribution" attached hereto as Annex A (except if otherwise directed by the Holders), and cause the Registration Statement to become effective and remain effective as provided herein; provided, however, that not less than five (5) Business Days prior to the filing of the Registration Statement or any related Prospectus or any amendment or supplement thereto (including any document that would be incorporated or deemed to be incorporated therein by reference), the Company shall, (i) furnish to the Holders, their Special Counsel and any managing underwriters, copies of all such documents proposed to be filed, which documents (other than those incorporated or deemed to be incorporated by reference) will be subject to the review of such Holders, their Special Counsel and such managing underwriters, and (ii) cause its officers and directors, counsel and independent certified public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel to such Holders and such underwriters, to conduct a reasonable investigation within the meaning of the Securities Act. The Company shall not file the Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Holders of a majority of the Registrable Securities, their Special Counsel, or any managing underwriters, shall reasonably object on a timely basis. (b) (i) Prepare and file with the Commission such amendments, including post-effective amendments, to the Registration Statement as may be necessary to keep the Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to the Registration Statement or any amendment thereto and as promptly as reasonably possible provide the Holders true and complete copies of all correspondence from and to the Commission relating to the Registration Statement; and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by the Registration Statement during the applicable period in accordance with the intended methods of disposition by the Holders thereof set forth in the Registration Statement as so amended or in such Prospectus as so supplemented. (c) Notify the Holders of Registrable Securities to be sold, their Special Counsel and any managing underwriters as promptly as reasonably possible (and, in the case of (i)(A) below, not less than five (5) days prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one (1) Business Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to the Registration Statement is proposed to be filed; (B) when the Commission notifies the Company whether there will be a "review" of such Registration Statement and whenever the Commission comments in writing on such Registration Statement (the Company shall provide true and complete copies thereof and all written responses thereto to each of the Holders); and (C) with respect to the Registration Statement or any post-effective amendment, when the same has become effective; (ii) of any request by the Commission or any other Federal or state governmental authority for amendments or supplements to the Registration Statement or Prospectus or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) if at any time any of the representations and warranties of the Company contained in any agreement (including any underwriting agreement) contemplated hereby ceases to be true and correct in all material respects; (v) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (vi) of the occurrence of any event that makes any statement made in the Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to the Registration Statement, Prospectus or other documents so that, in the case of the Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (d) Use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of the Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment. (e) If requested by any managing underwriter or the Holders of a majority in interest of the Registrable Securities to be sold in connection with an Underwritten Offering, (i) promptly incorporate in a Prospectus supplement or post-effective amendment to the Registration Statement such information as such managing underwriters and such Holders reasonably agree should be included therein, and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such Prospectus supplement or post-effective amendment; provided, however, that the Company shall not be required to take any action pursuant to this Section 3(e) that would, in the opinion of counsel for the Company, violate applicable law or be materially detrimental to the business prospects of the Company. (f) Furnish to each Holder, their Special Counsel and any managing underwriters, without charge, at least one conformed copy of each Regis- tration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission. (g) Promptly deliver to each Holder, their Special Counsel, and any underwriters, without charge, as many copies of the Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Persons may reasonably request; and the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders and any underwriters in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto. (h) Prior to any public offering of Registrable Securities, use its best efforts to register or qualify or cooperate with the selling Holders, any underwriters and their Special Counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder or underwriter requests in writing, to keep each such registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by a Registration Statement; provided, however, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or subject the Company to any material tax in any such jurisdiction where it is not then so subject. (i) Cooperate with the Holders and any managing underwriters to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by applicable law, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such managing underwriters or Holders may request at least two Business Days prior to any sale of Registrable Securities. (j) Upon the occurrence of any event contemplated by Section 3(c)(vi), as promptly as reasonably possible, prepare a supplement or amendment, including a post-effective amendment, to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither the Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (k) Use its best efforts to cause all Registrable Securities relating to such Registration Statement to be listed on the Nasdaq SmallCap Market ("NASDAQ") and any other securities exchange, quotation system, market or over-the-counter bulletin board, if any, on which similar securities issued by the Company are then listed as and when required pursuant to the Purchase Agreement. (l) Enter into such agreements (including an underwriting agreement in form, scope and substance as is customary in Underwritten Offerings) and take all such other actions in connection therewith (including those reasonably requested by any managing underwriters and the Holders of a majority of the Registrable Securities being sold) in order to expedite or facilitate the disposition of such Registrable Securities, and whether or not an underwriting agreement is entered into, (i) make such representations and warranties to such Holders and such underwriters as are customarily made by issuers to underwriters in underwritten public offerings, and confirm the same if and when requested; (ii) in the case of an Underwritten Offering obtain and deliver copies thereof to each Holder and the managing underwriters, if any, of opinions of counsel to the Company and updates thereof addressed to each Holder and each such underwriter, in form, scope and substance reasonably satisfactory to any such managing underwriters and Special Counsel to the selling Holders covering the matters customarily covered in opinions requested in Underwritten Offerings and such other matters as may be reasonably requested by such Special Counsel and underwriters; (iii) immediately prior to the effectiveness of the Registration Statement, and, in the case of an Underwritten Offering, at the time of delivery of any Registrable Securities sold pursuant thereto, use its best reasonable efforts to obtain and deliver copies to the Holders and the managing underwriters, if any, of "cold comfort" letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any sub- sidiary of the Company or of any business acquired by the Company for which financial statements and financial data is, or is required to be, included in the Registration Statement), addressed to the Company in form and substance as are customary in connection with Underwritten Offerings; (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures no less favorable to the selling Holders and the underwriters, if any, than those set forth in Section 5 (or such other provisions and procedures acceptable to the managing underwriters, if any, and holders of a majority of Registrable Securities participating in such Underwritten Offering); and (v) deliver such documents and certificates as may be reasonably requested by the Holders of a majority of the Registrable Securities being sold, their Special Counsel and any managing underwriters to evidence the continued validity of the representations and warranties made pursuant to clause 3(l)(i) above and to evidence compliance with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company. (m) Make available for inspection by the selling Holders, any representative of such Holders, any underwriter participating in any disposition of Registrable Securities, and any attorney or accountant retained by such selling Holders or underwriters, at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and cause the officers, directors, agents and employees of the Company and its subsidiaries to supply all information in each case reasonably requested by any such Holder, representative, underwriter, attorney or accountant in connection with the Registration Statement; provided, however, that any information that is determined in good faith by the Company in writing to be of a confidential nature at the time of delivery of such information shall be kept confidential by such Persons, unless (i) disclosure of such information is required by court or administrative order or is necessary to respond to inquiries of regulatory authorities; (ii) disclosure of such information, in the opinion of counsel to such Person, is required by law; (iii) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard by such Person; or (iv) such information becomes available to such Person from a source other than the Company and such source is not known by such Person to be bound by a confidentiality agreement with the Company. (n) Comply with all applicable rules and regulations of the Commission. (o) The Company may require each selling Holder to furnish to the Company such information regarding the distribution of such Registrable Securities and the beneficial ownership of Common Stock held by such Holder as is required by law to be disclosed in the Registration Statement, and the Company may exclude from such registration the Registrable Securities of any such Holder who unreasonably fails to furnish such information within a reasonable time after receiving such request. If the Registration Statement refers to any Holder by name or otherwise as the holder of any securities of the Company, then such Holder shall have the right to require (if such reference to such Holder by name or otherwise is not required by the Securities Act or any similar Federal statute then in force) the deletion of the reference to such Holder in any amendment or supplement to the Registration Statement filed or prepared subsequent to the time that such reference ceases to be required. Each Holder covenants and agrees that (i) it will not sell any Registrable Securities under the Registration Statement until it has received copies of the Prospectus as then amended or supplemented as contemplated in Section 3(g) and notice from the Company that such Registration Statement and any post-effective amendments thereto have become effective as contemplated by Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to the Registration Statement. Each Holder agrees by its acquisition of such Registrable Securities that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue disposition of such Registrable Securities under the Registration Statement until such Holder's receipt of the copies of the supplemented Prospectus and/or amended Registration Statement contemplated by Section 3(j), or until it is advised in writing (the "Advice") by the Company that the use of the applicable Pro- spectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement. 4. Registration Expenses (a) All fees and expenses incident to the performance of or compliance with this Agreement by the Company, except as and to the extent specified in Section 4(b), shall be borne by the Company whether or not pursuant to an Underwritten Offering and whether or not the Registration Statement is filed or becomes effective and whether or not any Registrable Securities are sold pursuant to the Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with the NASDAQ and any subsequent market on which the Common Stock is then listed for trading, and (B) in compliance with state securities or Blue Sky laws (including, without limitation, fees and disbursements of counsel for the Holders in connection with Blue Sky qualifications or exemptions of the Registrable Securities and determination of the eligibility of the Regis- trable Securities for investment under the laws of such jurisdictions as the managing underwriters, if any, or the Holders of a majority of Registrable Securities may designate)), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities and of printing prospectuses if the printing of prospectuses is requested by the managing underwriters, if any, or by the holders of a majority of the Registrable Securities included in the Registration Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company and Special Counsel for the Holders, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. (b) If the Holders require an Underwritten Offering pursuant to the terms hereof, the Company shall be responsible for all costs, fees and expenses in connection therewith, except for the fees and disbursements of the Underwriters (including any underwriting commissions and discounts) and their legal counsel and accountants. By way of illustration which is not intended to diminish from the provisions of Section 4(a), the Holders shall not be responsible for, and the Company shall be required to pay the fees or disbursements incurred by the Company (including by its legal counsel and accountants) in connection with, the preparation and filing of a Registration Statement and related Prospectus for such offering, the maintenance of such Registration Statement in accordance with the terms hereof, the listing of the Registrable Securities in accordance with the requirements hereof, and printing expenses incurred to comply with the requirements hereof. 5. Indemnification (a) Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, agents (including any underwriters retained by such Holder in connection with the offer and sale of Registrable Securities), brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of Common Stock), investment advisors and employees of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, agents and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, costs of preparation and attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, except to the extent, but only to the extent, that such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, which information was reasonably relied on by the Company for use therein or to the extent that such information relates to such Holder or such Holder's proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto. The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding of which the Company is aware in connection with the transactions contemplated by this Agreement. (b) Indemnification by Holders. Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses (as determined by a court of competent jurisdiction in a final judgment not subject to appeal or review) arising solely out of or based solely upon any untrue statement of a material fact contained in the Registration Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement thereto, or arising solely out of or based solely upon any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company specifically for inclusion in the Registration Statement or such Prospectus and that such information was reasonably relied upon by the Company for use in the Registration Statement, such Prospectus or such form of prospectus or to the extent that such information relates to such Holder or such Holder's proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement, such Prospectus or such form of Prospectus, or in any amendment or supplement thereto. In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an "Indemnified Party"), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the "Indemnifying Party") in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party. An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indem- nified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; or (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding. All fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten (10) Business Days of written notice thereof to the Indemnifying Party (regardless of whether it is ultimately determined that an Indemnified Party is not entitled to indemnification hereunder; provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such Indemnified Party is not entitled to indemnification hereunder). (d) Contribution. If a claim for indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party (by reason of public policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in Section 5(c), any reasonable attorneys' or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the proceeds actually received by such Holder from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties. 6. Miscellaneous (a) Remedies. In the event of a breach by the Company or by a Holder, of any of their obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of dam- ages, will be entitled to specific performance of its rights under this Agreement. The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. (b) No Inconsistent Agreements. Neither the Company nor any of its subsidiaries has, as of the date hereof, nor shall the Company or any of its subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Except as and to the extent specified in Schedule 6(b) hereto, neither the Company nor any of its subsidiaries has previously entered into any agreement granting any registration rights with respect to any of its securities to any Person. Without limiting the generality of the foregoing, without the written consent of the Holders of a majority of the then outstanding Registrable Securities, the Company shall not grant to any Person the right to request the Company to register any securities of the Company under the Securities Act unless the rights so granted are subject in all respects to the prior rights in full of the Holders set forth herein, and are not otherwise in conflict or inconsistent with the provisions of this Agreement. (c) No Piggyback on Registrations. Except as and to the extent specified in Schedule 6(b) hereto, neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of the Company in the Registration Statement other than the Registrable Securities, and the Company shall not after the date hereof enter into any agreement providing any such right to any of its security holders. (d) Piggy-Back Registrations. If at any time when there is not an effective Registration Statement covering all of the Registrable Securities and the Underlying Shares, the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its 13 equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, then the Company shall send to each holder of Registrable Securities written notice of such determination and, if within twenty (20) days after receipt of such notice, any such holder shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such holder requests to be registered; provided, however, that the Company shall not be required to register any Registrable Securities pursuant to this Section 7(d) that are eligible for sale pursuant to Rule 144(k) of the Commission. (e) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of at least two-thirds of the then outstanding Registrable Securities; provided, however, that, for the purposes of this sentence, Registrable Securities that are owned, directly or indirectly, by the Company, or an Affiliate of the Company are not deemed outstanding. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders and that does not directly or indirectly affect the rights of other Holders may be given by Holders of at least a majority of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence. (f) Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 8:00 p.m. (New York City time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in the Purchase Agreement later than 8:00 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City time) on such date, (iii) the Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Company: I-Link Incorporated 13751 S. Wadsworth Park Drive, Suite 200 Draper, Utah 84020 Facsimile No.: (801)_______ Attn: Chief Financial Officer With copies to: Hardy & Allen 60 East South Temple Suite 2200 Salt Lake City, Utah 84111 Facsimile No.: (801) 264-6664 Attn: David Allen 14 If to the Purchaser:JNC Opportunity Fund Ltd. c/o Olympia Capital (Cayman) Ltd. Williams House, 20 Reid Street Hamilton HM11, Bermuda Facsimile No.: (441) 295-2305 Attn: Director With copies to: Encore Capital Management, L.L.C. 12007 Sunrise Valley Drive, Suite 460 Reston, VA 20191 Facsimile No.: (703) 476-7711 Attn: Managing Member With copies to: Robinson Silverman Pearce Aronsohn & Berman LLP 1290 Avenue of the Americas New York, NY 10104 Facsimile No.: (212) 541-4630 Attn: Eric L. Cohen If to any other Person who is then the registered Holder: To the address of such Holder as it appears in the stock transfer books of the Company or such other address as may be designated in writing hereafter, in the same manner, by such Person. (g) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign its rights or obligations hereunder without the prior written consent of each Holder. Each Holder may assign their respective rights hereunder in the manner and to the Persons as permitted under the Purchase Agreement. (h) Assignment of Registration Rights. The rights of each Holder hereunder, including the right to have the Company register for resale Registrable Securities in accordance with the terms of this Agreement, shall be automatically assignable by each Holder to any Affiliate of such Holder, any other Holder or Affiliate of any other Holder if: (i) the Holder agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment, (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred or assigned, (iii) following such transfer or assignment the further disposition of such securities by the transferee or assignees is restricted under the Securities Act and applicable state securities laws, (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this Section, the transferee or assignee agrees in writing with the Company to be bound by all of the provisions of this Agreement, and (v) such transfer shall have been made in accordance with the applicable requirements of the Purchase Agreement. The rights to assignment shall apply to the Holders (and to subsequent) successors and assigns. (i) Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof. (j) Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York without regard to the principles of conflicts of law thereof. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of the any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. (k) Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. (l) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (m) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (n) Shares Held by The Company and its Affiliates. Whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or its Affiliates (other than any Holder or transferees or successors or assigns thereof if such Holder is deemed to be an Affiliate solely by reason of its holdings of such Registrable Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGE TO FOLLOW] IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above. I-LINK INCORPORATED By:_____________________________________ Name: John W. Edwards Title: President JNC OPPORTUNITY FUND LTD. By:_____________________________________ Name: Title: Annex A Plan of Distribution The Selling Stockholders, their pledgees, donees, transferees or other successors-in-interest, may, from time to time, sell all or a portion of the shares of Common Stock being registered hereunder (the "Shares") in privately negotiated transactions or otherwise, at fixed prices that may be changed, at market prices prevailing at the time of sale, at prices related to such market prices or at negotiated prices. The Shares may be sold by the Selling Stockholders by one or more of the following methods, without limitation: (a) block trades in which the broker or dealer so engaged will attempt to sell the Shares as agent but may position and resell a portion of the block as principal to facilitate the transaction, (b) purchases by a broker or dealer as principal and resale by such broker or dealer for its account pursuant to this Prospectus, (c) an exchange distribution in accordance with the rules of the applicable exchange, (d) ordinary brokerage transactions and transactions in which the broker solicits purchasers, (e) privately negotiated transactions, (f) short sales, (g) a combination of any such methods of sale and (h) any other method permitted pursuant to applicable law. From time to time the Selling Stockholders may engage in short sales, short sales against the box, puts and calls and other transactions in securities of the Company or derivatives thereof, and may sell and deliver the Shares in connection therewith or in settlement of securities loans. If the Selling Stockholders engage in such transactions, the applicable conversion price may be affected. From time to time the Selling Stockholders may pledge their Shares pursuant to the margin provisions of its customer agreements with its brokers. Upon a default by the Selling Stockholders, the broker may offer and sell the pledged Shares from time to time. In effecting sales, brokers and dealers engaged by the Selling Stockholders may arrange for other brokers or dealers to participate in such sales. Brokers or dealers may receive commissions or discounts from the Selling Stockholders (or, if any such broker-dealer acts as agent for the purchaser of such shares, from such purchaser) in amounts to be negotiated which are not expected to exceed those customary in the types of transactions involved. Broker-dealers may agree with the Selling Stockholders to sell a specified number of such Shares at a stipulated price per share, and, to the extent such broker-dealer is unable to do so acting as agent for a Selling Stockholder, to purchase as principal any unsold Shares at the price required to fulfill the broker-dealer commitment to the Selling Stockholders. Broker- dealers who acquire Shares as principal may thereafter resell such Shares from time to time in transactions (which may involve block transactions and sales to and through other broker-dealers, including transactions of the nature described above) in the over-the-counter market or otherwise at prices and on terms then prevailing at the time of sale, at prices then related to the then-current market price or in negotiated transactions and, in connection with such resales, may pay to or receive from the purchasers of such Shares commissions as described above. The Selling Stockholders may also sell the Shares in accordance with Rule 144 under the Securities Act, rather than pursuant to this Prospectus. The Selling Stockholders and any broker-dealers or agents that participate with the Selling Stockholders in sales of the Shares may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the Shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. The Company is required to pay all fees and expenses incident to the registration of the Shares, including fees and disbursements of counsel to the Selling Stockholders. The Company has agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act. EX-10 9 NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. I-LINK INCORPORATED WARRANT Dated: June 30, 1998 I-Link Incorporated, a Florida corporation (the "Company"), hereby certifies that, for value received, JNC Opportunity Fund Ltd., or its registered assigns ("Holder"), is entitled, subject to the terms set forth below, to purchase from the Company up to a total of 250,000 shares of Common Stock, $.007 par value per share (the "Common Stock"), of the Company (each such share, a "Warrant Share" and all such shares, the "Warrant Shares") at an exercise price equal to $[ ] per share (as adjusted from time to time as provided in Section 9, the "Exercise Price"), at any time and from time to time from and after the date hereof and through and including June 30, 2003 (the "Expiration Date"), and subject to the following terms and conditions: 1. Registration of Warrant. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the "Warrant Register"), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, and the Company shall not be affected by notice to the contrary. 1 120% of the average of the Per Share Market Values for the five (5) Trading Days immediately preceding the Original Issue Date. 2. Registration of Transfers and Exchanges. (a) The Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Transfer Agent or to the Company at the office specified in or pursuant to Section 3(b). Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a "New Warrant"), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance of such transferee of all of the rights and obligations of a holder of a Warrant. (b) This Warrant is exchangeable, upon the surrender hereof by the Holder to the office of the Company specified in or pursuant to Section 3(b) for one or more New Warrants, evidencing in the aggregate the right to purchase the number of Warrant Shares which may then be purchased hereunder. Any such New Warrant will be dated the date of such exchange. 3. Duration and Exercise of Warrants. (a) This Warrant shall be exercisable by the registered Holder on any business day before 5:30 P.M., Eastern time, at any time and from time to time on or after the date hereof to and including the Expiration Date. At 5:30 P.M., Eastern time on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value. Prior to the Expiration Date, the Company may not call or otherwise redeem this Warrant without the prior written consent of the Holder. (b) Subject to Sections 2(b), 6 and 10, upon surrender of this Warrant, with the Form of Election to Purchase attached hereto duly completed and signed, to the Company at its address for notice set forth in Section 12 and upon payment of the Exercise Price multiplied by the number of Warrant Shares that the Holder intends to purchase hereunder, in lawful money of the United States of America, in cash or by certified or official bank check or checks, all as specified by the Holder in the Form of Election to Purchase, the Company shall promptly (but in no event later than 3 business days after the Date of Exercise) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate for the Warrant Shares issuable upon such exercise, free of restrictive legends other than as required by applicable law. Any person so designated by the Holder to receive Warrant Shares shall be deemed to have become holder of record of such Warrant Shares as of the Date of Exercise of this Warrant. A "Date of Exercise" means the date on which the Company shall have received (i) this Warrant (or any New Warrant, as applicable), with the Form of Election to Purchase attached hereto (or attached to such New Warrant) appropriately completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares so indicated by the holder hereof to be purchased. (c) This Warrant shall be exercisable, either in its entirety or, from time to time, for a portion of the number of Warrant Shares. If less than all of the Warrant Shares which may be purchased under this Warrant are exercised at any time, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares for which no exercise has been evidenced by this Warrant. 4. Piggyback Registration Rights. During the term of this Warrant, the Company may not file any registration statement with the Securities and Exchange Commission (other than registration statements of the Company filed on Form S-8 or Form S-4, each as promulgated under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to which the Company is registering securities pursuant to a Company employee benefit plan or pursuant to a merger, acquisition or similar transaction including supplements thereto, but not additionally filed registration statements in respect of such securities) at any time when there is not an effective registration statement covering the resale of the Warrant Shares and naming the Holder as a selling stockholder thereunder, unless the Company provides the Holder with not less than 20 days notice of its intention to file such registration statement and provides the Holder the option to include any or all of the applicable Warrant Shares therein. The piggyback registration rights granted to the Holder pursuant to this Section shall continue until all of the Holder's Warrant Shares have been sold in accordance with an effective registration statement or upon the Expiration Date. The Company will pay all registration expenses in connection therewith. 5. Demand Registration Rights. At any time during the term of this Warrant when the Warrant Shares are not registered pursuant to an effective registration statement, the Holder may make a written request for the registration under the Securities Act (a "Demand Registration"), of all of the Warrant Shares (the "Registrable Securities"), and the Company shall use its best efforts to effect such Demand Registration as promptly as possible, but in any case within 90 days thereafter. Any request for a Demand Registration shall specify the aggregate number of Registrable Securities proposed to be sold and shall also specify the intended method of disposition thereof. The right to cause a registration of the Registrable Securities under this Section 5 shall be limited to one such registration. In any registration initiated as a Demand Registration, the Company will pay all of its registration expenses in connection therewith. A Demand Registration shall not be counted as a Demand Registration hereunder until the registration statement filed pursuant to the Demand Registration has been declared effective by the Securities and Exchange Commission and maintained continuously effective for a period of at least 360 days or such shorter period when all Registrable Securities included therein have been sold in accordance with such registration statement, provided, however that any days on which such registration statement is not effective or on which the Holder is not permitted by the Company or any governmental authority to sell Warrant Shares under such registration statement shall not count towards such 360 day period. 6. Payment of Taxes. The Company will pay all documentary stamp taxes attributable to the issuance of Warrant Shares upon the exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder, and the Company shall not be required to issue or cause to be issued or deliver or cause to be delivered the certificates for Warrant Shares unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof. 7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and indemnity, if requested, satisfactory to it. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable charges as the Company may prescribe. 8. Reservation of Warrant Shares. The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holder (taking into account the adjustments and restrictions of Section 9). The Company covenants that all Warrant Shares that shall be so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. 9. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 9. Upon each such adjustment of the Exercise Price pursuant to this Section 9, the Holder shall thereafter prior to the Expiration Date be entitled to purchase, at the Exercise Price resulting from such adjustment, the number of Warrant Shares obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. (a) If the Company, at any time while this Warrant is outstanding, (i) shall pay a stock dividend (except scheduled dividends paid on outstanding preferred stock as of the date hereof which contain a stated divided rate) or otherwise make a distribution or distributions on shares of its Common Stock (as defined below) or on any other class of capital stock and not the Common Stock) payable in shares of Common Stock, (ii) subdivide outstanding shares of Common Stock into a larger number of shares, or (iii) combine outstanding shares of Common Stock into a smaller number of shares, the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision or combination, and shall apply to successive subdivisions and combinations. (b) In case of any reclassification of the Common Stock, any consolidation or merger of the Company with or into another person, the sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, then the Holder shall have the right thereafter to exercise this Warrant only into the shares of stock and other securities and property receivable upon or deemed to be held by holders of Common Stock following such reclassification, consolidation, merger, sale, transfer or share exchange, and the Holder shall be entitled upon such event to receive such amount of securities or property equal to the amount of Warrant Shares such Holder would have been entitled to had such Holder exercised this Warrant immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange. The terms of any such consolidation, merger, sale, transfer or share exchange shall include such terms so as to continue to give to the Holder the right to receive the securities or property set forth in this Section 9(b) upon any exercise following any such reclassification, consolidation, merger, sale, transfer or share exchange. (c) If the Company, at any time while this Warrant is outstanding, shall distribute to all holders of Common Stock (and not to holders of this Warrant) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security (excluding those referred to in Sections 9(a), (b) and (d)), then in each such case the Exercise Price shall be determined by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Exercise Price determined as of the record date mentioned above, and of which the numerator shall be such Exercise Price on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Company's independent certified public accountants that regularly examines the financial statements of the Company (an "Appraiser"). (d) If, at any time while this Warrant is outstanding, the Company shall issue or cause to be issued rights or warrants to acquire or otherwise sell or distribute shares of Common Stock to all holders of Common Stock for a consideration per share less than the Exercise Price then in effect, then, forthwith upon such issue or sale, the Exercise Price shall be reduced to the price (calculated to the nearest cent) determined by multiplying the Exercise Price in effect immediately prior thereto by a fraction, the numerator of which shall be the sum of (i) the number of shares of Common Stock outstanding immediately prior to such issuance, and (ii) the number of shares of Common Stock which the aggregate consideration received (or to be received, assuming exercise or conversion in full of such rights, warrants and convertible securities) for the issuance of such additional shares of Common Stock would purchase at the Exercise Price, and the denominator of which shall be the sum of the number of shares of Common Stock outstanding immediately after the issuance of such additional shares. Such adjustment shall be made successively whenever such an issuance is made. (e) For the purposes of this Section 9, the following clauses shall also be applicable: (i) Record Date. In case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock or in securities convertible or exchangeable into shares of Common Stock, or (B) to subscribe for or purchase Common Stock or securities convertible or exchangeable into shares of Common Stock, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (ii) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock. (f) All calculations under this Section 9 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. (g) Whenever the Exercise Price is adjusted pursuant to Section 9(c) above, the Holder, after receipt of the determination by the Appraiser, shall have the right to select an additional appraiser (which shall be a nationally recognized accounting firm), in which case the adjustment shall be equal to the average of the adjustments recommended by each of the Appraiser and such appraiser. The Holder shall promptly mail or cause to be mailed to the Company, a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. Such adjustment shall become effective immediately after the record date mentioned above. (h) If: (i) the Company shall declare a dividend (or any other distribution) on its Common Stock; or (ii) the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or (iii) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or (iv) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or (v) the Company shall authorize the voluntary dissolution, liquidation or winding up of the affairs of the Company, then the Company shall cause to be mailed to each Holder at their last addresses as they shall appear upon the Warrant Register, at least 30 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up; provided, however, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. 10. Payment of Exercise Price. The Holder may pay the Exercise Price in one of the following manners: (a) Cash Exercise. The Holder shall deliver immediately available funds; or (b) Cashless Exercise. The Holder shall surrender this Warrant to the Company together with a notice of cashless exercise, in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows: X = Y (A-B)/A where: X = the number of Warrant Shares to be issued to the Holder. Y = the number of Warrant Shares with respect to which this Warrant is being exercised. A = the average of the closing sale prices of the Common Stock for the five (5) trading days immediately prior to (but not including) the Date of Exercise. B = the Exercise Price. For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have been commenced, on the issue date. 11. Fractional Shares. The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. The number of full Warrant Shares which shall be issuable upon the exercise of this Warrant shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of this Warrant so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 11, be issuable on the exercise of this Warrant, the Company shall pay an amount in cash equal to the Exercise Price multiplied by such fraction. 12. Notices. Any and all notices or other communications or deliveries hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 4:30 p.m. (Eastern time) on a business day, (ii) the business day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section later than 4:30 p.m. (Eastern time) on any date and earlier than 11:59 p.m. (Eastern time) on such date, (iii) the business day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The addresses for such communications shall be: (i) if to the Company, to 13751 S. Wadsworth Park Drive, Suite 200, Draper, Utah 84020, Attention: Chief Financial Officer, or to facsimile no. (801) [], or (ii) if to the Holder, to the Holder at the address or facsimile number appearing on the Warrant Register or such other address or facsimile number as the Holder may provide to the Company in accordance with this Section 12. 13. Warrant Agent. (a) The Company shall serve as warrant agent under this Warrant. Upon thirty (30) days' notice to the Holder, the Company may appoint a new warrant agent. (b) Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder's last address as shown on the Warrant Register. 14. Miscellaneous. (a) This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Warrant may be amended only in writing signed by the Company and the Holder. (b) Subject to Section 14(a), above, nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Holder any legal or equitable right, remedy or cause under this Warrant. This Warrant shall inure to the sole and exclusive benefit of the Company and the Holder. (c) This Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York without regard to the principles of conflicts of law thereof. (d) The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof. (e) In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above. I-LINK INCORPORATED By: Name: John W. Edwards Title: President FORM OF ELECTION TO PURCHASE (To be executed by the Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant) To I-Link Incorporated: In accordance with the Warrant enclosed with this Form of Election to Purchase, the undersigned hereby irrevocably elects to purchase _____________ shares of Common Stock ("Common Stock"), $.007 par value per share, of I-Link Incorporated and , if such Holder is not utilizing the cashless exercise provisions set forth in this Warrant, encloses herewith $________ in cash, certified or official bank check or checks, which sum represents the aggregate Exercise Price (as defined in the Warrant) for the number of shares of Common Stock to which this Form of Election to Purchase relates, together with any applicable taxes payable by the undersigned pursuant to the Warrant. The undersigned requests that certificates for the shares of Common Stock issuable upon this exercise be issued in the name of PLEASE INSERT SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER ______________________________________________________________________________ (Please print name and address) If the number of shares of Common Stock issuable upon this exercise shall not be all of the shares of Common Stock which the undersigned is entitled to purchase in accordance with the enclosed Warrant, the undersigned requests that a New Warrant (as defined in the Warrant) evidencing the right to purchase the shares of Common Stock not issuable pursuant to the exercise evidenced hereby be issued in the name of and delivered to: ______________________________________________________________________________ (Please print name and address) ______________________________________________________________________________ ______________________________________________________________________________ Dated:_____________,_____ Name of Holder: (Print)__________________________________ (By:)____________________________________ (Name:) (Title:) (Signature must conform in all respects to name of holder as specified on the face of the Warrant) FORM OF ASSIGNMENT [To be completed and signed only upon transfer of Warrant] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ________________________________ the right represented by the within Warrant to purchase ____________ shares of Common Stock of I-Link Incorporated to which the within Warrant relates and appoints ________________ attorney to transfer said right on the books of I-Link Incorporated with full power of substitution in the premises. Dated: _______________, ____ _______________________________________ (Signature must conform in all respects to name of holder as specified on the face of the Warrant) _______________________________________ Address of Transferee _______________________________________ _______________________________________ In the presence of: __________________________ EX-10 10 EXCHANGE AGREEMENT This EXCHANGE AGREEMENT, dated as of July 28, 1998, between I-Link Incorporated, a Florida corporation (the "Company"), and JNC Opportunity Fund Ltd., a Cayman Islands corporation (the "Purchaser"). WHEREAS, the Company and the Purchaser entered into a Convertible Preferred Stock Purchase Agreement, dated as of June 30, 1998 (the "Purchase Agreement"), pursuant to which the Company issued to the Purchaser 1,000 shares of its 5% Series E Convertible Preferred Stock, par value $10 per share and stated value of $10,000 per share (the "Series E Stock"), which are convertible into shares of the Company's common stock, par value $.007 per share (the "Common Stock"), which shares of Series E Stock have the rights, preferences and privileges set forth in the Certificate of Designation of the Company filed with the Florida Secretary of State on July 7, 1998; and WHEREAS, the Company and the Purchaser have agreed to exchange the Series E Stock for (x) an equal number of shares of the Company's to be created 5% Series F Convertible Preferred Stock, par value $10 per share and stated value of $10,000 per share (the "Series F Stock"), which are convertible into Common Stock and which have the rights, preferences and privileges set forth in the Certificate of Designation of the Company, attached hereto as Exhibit A, to be filed with the Florida Secretary of State promptly following the execution of this Exchange Agreement (the "Series F Designation"), and (y) a certain Common Stock purchase warrant described below (the "Exchange"). NOW THEREFORE, in consideration of the mutual covenants contained in this Exchange Agreement, and for other good and valuable consideration the receipt and adequacy are hereby acknowledged, the Company and Purchaser, intending to be legally bound, agree as follows: Capitalized terms used but not defined herein that are defined in the Purchase Agreement shall have the respective meaning ascribed to them in the Purchase Agreement. 1. Exchange. Upon receipt of evidence satisfactory to the Purchaser of the acceptance for filing of the Series F Designation by the Florida Secretary of State, (A) the Company will deliver to the Purchaser (1) stock certificates representing 1,000 shares of the Series F Stock, registered in the name of the Purchaser (the "Shares"), (2) a Common Stock purchase warrant, in the form of Exhibit D to the Purchase Agreement, registered in the name of the Purchaser, pursuant to which the Purchaser shall have the right at any time and from time to time thereafter through the fifth anniversary of the date of the issuance thereof to acquire 100,000 shares of Common Stock at an exercise price per share (subject to adjustment as provided therein) of $4.00 (the "Additional Warrant"), (3) the legal opinion of David E. Hardy & Associates, outside counsel to the Company, and (4) $10,000 to Robinson Silverman Pearce Aronsohn & Berman LLP in connection with the preparation and negotiation of the documents relating to the Exchange and (B) the Purchaser shall deliver to the Company the stock certificates evidencing its ownership of the Series E Stock. 2. Purchase Agreement and Registration Rights Agreement. The Purchase Agreement and the Registration Rights Agreement shall be deemed amended to the extent required to provide for the Exchange. The term "Preferred Stock" in the Registration Rights Agreement shall hereafter mean the Series F Stock. The term "Shares" in the Purchase Agreement shall hereafter have the meaning ascribed to it in the Exchange Agreement and the term "Underlying Shares" in the Purchase Agreement shall hereafter mean the shares of Common Stock issuable upon conversion of the Shares, as payment of dividends thereon and upon exercise of the Warrant All references to the term "Warrant" in the Registration Rights Agreement and the Purchase Agreement shall include the Additional Warrant. Other than as expressly amended hereby, the Purchase Agreement and the Registration Rights Agreement are not amended and remain in full force and effect. 3. Representation and Warranties of the Company.The Company hereby reaffirms the representations and warranties in Section 2.1 of the Purchase Agreement and further represents and warrants as follows: (a) The execution, delivery and performance by the Company of this Exchange Agreement and the consummation of the transactions contemplated hereby (i) are within the power of Company and (ii) have been duly authorized by all necessary actions on the part of Company. Upon issuance, the Shares and the Common Stock issuable upon conversion thereof and upon payment of dividends thereon (if such dividends are paid in the form of Common Stock) will be validly issued, fully paid and non- assessable. (b) This Exchange Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of Company, enforceable against Company in accordance with its terms. (c) The Company restates the representations and warranties in Section 2.1(e) of the Purchase Agreement with respect to the Exchange. (d) No consent, approval, order or authorization of, or registration, declaration or filing with, any governmental authority or other person is required in connection with the execution and delivery of this Exchange Agreement and the performance and consummation of the transactions contemplated thereby, other than the acceptance of the Series F Designation with the Florida Secretary of State and any filings that may be required by the Commission and/or NASDAQ. (e) The Company has paid no commission or other remuneration directly or indirectly to any person for soliciting the Exchange. (f) The Exchange is not subject to the registration requirements of the Securities Act. 4. Representation and Warranties of the Purchaser.The Purchaser hereby reaffirms the representations and warranties in Section 2.2 of the Purchase Agreement and further represents and warrants as follows: (a) The execution, delivery and performance by the Purchaser of this Exchange Agreement and the consummation of the transactions contemplated hereby (i) are within the power of the Purchaser and (ii) have been duly authorized by all necessary actions on the part of the Purchaser. (b) This Exchange Agreement has been duly executed and delivered by the Purchaser and constitutes a legal, valid and binding obligation of such Purchaser, enforceable against the Purchaser in accordance with its terms. 5. Governing Law. This Exchange Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York without regard to the principles of conflicts of laws thereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Exchange Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. I-LINK INCORPORATED By:_____________________________________ Name: Title: JNC OPPORTUNITY FUND LTD. By:_____________________________________ Name: Title: EX-10 11 NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. I-LINK INCORPORATED WARRANT Dated: July 28, 1998 I-Link Incorporated, a Florida corporation (the "Company"), hereby certifies that, for value received, JNC Opportunity Fund Ltd., or its registered assigns ("Holder"), is entitled, subject to the terms set forth below, to purchase from the Company up to a total of 100,000 shares of Common Stock, $.007 par value per share (the "Common Stock"), of the Company (each such share, a "Warrant Share" and all such shares, the "Warrant Shares") at an exercise price equal to $4.00 per share (as adjusted from time to time as provided in Section 9, the "Exercise Price"), at any time and from time to time from and after the date hereof and through and including July 28, 2003 (the "Expiration Date"), and subject to the following terms and conditions: 1. Registration of Warrant. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the "Warrant Register"), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, and the Company shall not be affected by notice to the contrary. 2. Registration of Transfers and Exchanges. (a) The Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Transfer Agent or to the Company at the office specified in or pursuant to Section 3(b). Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a "New Warrant"), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance of such transferee of all of the rights and obligations of a holder of a Warrant. (b) This Warrant is exchangeable, upon the surrender hereof by the Holder to the office of the Company specified in or pursuant to Section 3(b) for one or more New Warrants, evidencing in the aggregate the right to purchase the number of Warrant Shares which may then be purchased hereunder. Any such New Warrant will be dated the date of such exchange. 3. Duration and Exercise of Warrants. (a) This Warrant shall be exercisable by the registered Holder on any business day before 5:30 P.M., Eastern time, at any time and from time to time on or after the date hereof to and including the Expiration Date. At 5:30 P.M., Eastern time on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value. Prior to the Expiration Date, the Company may not call or otherwise redeem this Warrant without the prior written consent of the Holder. (b) Subject to Sections 2(b), 6 and 10, upon surrender of this Warrant, with the Form of Election to Purchase attached hereto duly completed and signed, to the Company at its address for notice set forth in Section 12 and upon payment of the Exercise Price multiplied by the number of Warrant Shares that the Holder intends to purchase hereunder, in lawful money of the United States of America, in cash or by certified or official bank check or checks, all as specified by the Holder in the Form of Election to Purchase, the Company shall promptly (but in no event later than 3 business days after the Date of Exercise) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate for the Warrant Shares issuable upon such exercise, free of restrictive legends other than as required by applicable law. Any person so designated by the Holder to receive Warrant Shares shall be deemed to have become holder of record of such Warrant Shares as of the Date of Exercise of this Warrant. A "Date of Exercise" means the date on which the Company shall have received (i) this Warrant (or any New Warrant, as applicable), with the Form of Election to Purchase attached hereto (or attached to such New Warrant) appropriately completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares so indicated by the holder hereof to be purchased. (c) This Warrant shall be exercisable, either in its entirety or, from time to time, for a portion of the number of Warrant Shares. If less than all of the Warrant Shares which may be purchased under this Warrant are exercised at any time, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares for which no exercise has been evidenced by this Warrant. 4. Piggyback Registration Rights. During the term of this Warrant, the Company may not file any registration statement with the Securities and Exchange Commission (other than registration statements of the Company filed on Form S-8 or Form S-4, each as promulgated under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to which the Company is registering securities pursuant to a Company employee benefit plan or pursuant to a merger, acquisition or similar transaction including supplements thereto, but not additionally filed registration statements in respect of such securities) at any time when there is not an effective registration statement covering the resale of the Warrant Shares and naming the Holder as a selling stockholder thereunder, unless the Company provides the Holder with not less than 20 days notice of its intention to file such registration statement and provides the Holder the option to include any or all of the applicable Warrant Shares therein. The piggyback registration rights granted to the Holder pursuant to this Section shall continue until all of the Holder's Warrant Shares have been sold in accordance with an effective registration statement or upon the Expiration Date. The Company will pay all registration expenses in connection therewith. 5. Demand Registration Rights. At any time during the term of this Warrant when the Warrant Shares are not registered pursuant to an effective registration statement, the Holder may make a written request for the registration under the Securities Act (a "Demand Registration"), of all of the Warrant Shares (the "Registrable Securities"), and the Company shall use its best efforts to effect such Demand Registration as promptly as possible, but in any case within 90 days thereafter. Any request for a Demand Registration shall specify the aggregate number of Registrable Securities proposed to be sold and shall also specify the intended method of disposition thereof. The right to cause a registration of the Registrable Securities under this Section 5 shall be limited to one such registration. In any registration initiated as a Demand Registration, the Company will pay all of its registration expenses in connection therewith. A Demand Registration shall not be counted as a Demand Registration hereunder until the registration statement filed pursuant to the Demand Registration has been declared effective by the Securities and Exchange Commission and maintained continuously effective for a period of at least 360 days or such shorter period when all Registrable Securities included therein have been sold in accordance with such registration statement, provided, however that any days on which such registration statement is not effective or on which the Holder is not permitted by the Company or any governmental authority to sell Warrant Shares under such registration statement shall not count towards such 360 day period. 6. Payment of Taxes. The Company will pay all documentary stamp taxes attributable to the issuance of Warrant Shares upon the exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder, and the Company shall not be required to issue or cause to be issued or deliver or cause to be delivered the certificates for Warrant Shares unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof. 7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and indemnity, if requested, satisfactory to it. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable charges as the Company may prescribe. 8. Reservation of Warrant Shares. The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holder (taking into account the adjustments and restrictions of Section 9). The Company covenants that all Warrant Shares that shall be so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. 9. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 9. Upon each such adjustment of the Exercise Price pursuant to this Section 9, the Holder shall thereafter prior to the Expiration Date be entitled to purchase, at the Exercise Price resulting from such adjustment, the number of Warrant Shares obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. (a) If the Company, at any time while this Warrant is outstanding, (i) shall pay a stock dividend (except scheduled dividends paid on outstanding preferred stock as of the date hereof which contain a stated divided rate) or otherwise make a distribution or distributions on shares of its Common Stock (as defined below) or on any other class of capital stock and not the Common Stock) payable in shares of Common Stock, (ii) subdivide outstanding shares of Common Stock into a larger number of shares, or (iii) combine outstanding shares of Common Stock into a smaller number of shares, the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision or combination, and shall apply to successive subdivisions and combinations. (b) In case of any reclassification of the Common Stock, any consolidation or merger of the Company with or into another person, the sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, then the Holder shall have the right thereafter to exercise this Warrant only into the shares of stock and other securities and property receivable upon or deemed to be held by holders of Common Stock following such reclassification, consolidation, merger, sale, transfer or share exchange, and the Holder shall be entitled upon such event to receive such amount of securities or property equal to the amount of Warrant Shares such Holder would have been entitled to had such Holder exercised this Warrant immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange. The terms of any such consolidation, merger, sale, transfer or share exchange shall include such terms so as to continue to give to the Holder the right to receive the securities or property set forth in this Section 9(b) upon any exercise following any such reclassification, consolidation, merger, sale, transfer or share exchange. (c) If the Company, at any time while this Warrant is outstanding, shall distribute to all holders of Common Stock (and not to holders of this Warrant) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security (excluding those referred to in Sections 9(a), (b) and (d)), then in each such case the Exercise Price shall be determined by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Exercise Price determined as of the record date mentioned above, and of which the numerator shall be such Exercise Price on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Company's independent certified public accountants that regularly examines the financial statements of the Company (an "Appraiser"). (d) If, at any time while this Warrant is outstanding, the Company shall issue or cause to be issued rights or warrants to acquire or otherwise sell or distribute shares of Common Stock to all holders of Common Stock for a consideration per share less than the Exercise Price then in effect, then, forthwith upon such issue or sale, the Exercise Price shall be reduced to the price (calculated to the nearest cent) determined by multiplying the Exercise Price in effect immediately prior thereto by a fraction, the numerator of which shall be the sum of (i) the number of shares of Common Stock outstanding immediately prior to such issuance, and (ii) the number of shares of Common Stock which the aggregate consideration received (or to be received, assuming exercise or conversion in full of such rights, warrants and convertible securities) for the issuance of such additional shares of Common Stock would purchase at the Exercise Price, and the denominator of which shall be the sum of the number of shares of Common Stock outstanding immediately after the issuance of such additional shares. Such adjustment shall be made successively whenever such an issuance is made. (e) For the purposes of this Section 9, the following clauses shall also be applicable: (i) Record Date. In case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock or in securities convertible or exchangeable into shares of Common Stock, or (B) to subscribe for or purchase Common Stock or securities convertible or exchangeable into shares of Common Stock, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (ii) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock. (f) All calculations under this Section 9 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. (g) Whenever the Exercise Price is adjusted pursuant to Section 9(c) above, the Holder, after receipt of the determination by the Appraiser, shall have the right to select an additional appraiser (which shall be a nationally recognized accounting firm), in which case the adjustment shall be equal to the average of the adjustments recommended by each of the Appraiser and such appraiser. The Holder shall promptly mail or cause to be mailed to the Company, a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. Such adjustment shall become effective immediately after the record date mentioned above. (h) If: (i) the Company shall declare a dividend (or any other distribution) on its Common Stock; or (ii) the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or (iii) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or (iv) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or (v) the Company shall authorize the voluntary dissolution, liquidation or winding up of the affairs of the Company, then the Company shall cause to be mailed to each Holder at their last addresses as they shall appear upon the Warrant Register, at least 30 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up; provided, however, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. 10. Payment of Exercise Price. The Holder may pay the Exercise Price in one of the following manners: (a) Cash Exercise. The Holder shall deliver immediately available funds; or (b) Cashless Exercise. The Holder shall surrender this Warrant to the Company together with a notice of cashless exercise, in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows: X = Y (A-B)/A where: X = the number of Warrant Shares to be issued to the Holder. Y = the number of Warrant Shares with respect to which this Warrant is being exercised. A = the average of the closing sale prices of the Common Stock for the five (5) trading days immediately prior to (but not including) the Date of Exercise. B = the Exercise Price. For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have been commenced, on the issue date. 11. Fractional Shares. The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. The number of full Warrant Shares which shall be issuable upon the exercise of this Warrant shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of this Warrant so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 11, be issuable on the exercise of this Warrant, the Company shall pay an amount in cash equal to the Exercise Price multiplied by such fraction. 12. Notices. Any and all notices or other communications or deliveries hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 4:30 p.m. (Eastern time) on a business day, (ii) the business day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section later than 4:30 p.m. (Eastern time) on any date and earlier than 11:59 p.m. (Eastern time) on such date, (iii) the business day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The addresses for such communications shall be: (i) if to the Company, to 13751 S. Wadsworth Park Drive, Suite 200, Draper, Utah 84020, Attention: Chief Financial Officer, or to facsimile no. (801) [ ], or (ii) if to the Holder, to the Holder at the address or facsimile number appearing on the Warrant Register or such other address or facsimile number as the Holder may provide to the Company in accordance with this Section 12. 13. Warrant Agent. (a) The Company shall serve as warrant agent under this Warrant. Upon thirty (30) days' notice to the Holder, the Company may appoint a new warrant agent. (b) Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder's last address as shown on the Warrant Register. 14. Miscellaneous. (a) This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Warrant may be amended only in writing signed by the Company and the Holder. (b) Subject to Section 14(a), above, nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Holder any legal or equitable right, remedy or cause under this Warrant. This Warrant shall inure to the sole and exclusive benefit of the Company and the Holder. (c) This Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York without regard to the principles of conflicts of law thereof. (d) The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof. (e) In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above. I-LINK INCORPORATED By:___________________________________ Name: John W. Edwards Title: President FORM OF ELECTION TO PURCHASE (To be executed by the Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant) To I-Link Incorporated: In accordance with the Warrant enclosed with this Form of Election to Purchase, the undersigned hereby irrevocably elects to purchase _____________ shares of Common Stock ("Common Stock"), $.007 par value per share, of I-Link Incorporated and , if such Holder is not utilizing the cashless exercise provisions set forth in this Warrant, encloses herewith $________ in cash, certified or official bank check or checks, which sum represents the aggregate Exercise Price (as defined in the Warrant) for the number of shares of Common Stock to which this Form of Election to Purchase relates, together with any applicable taxes payable by the undersigned pursuant to the Warrant. The undersigned requests that certificates for the shares of Common Stock issuable upon this exercise be issued in the name of PLEASE INSERT SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER _____________________________________________________________________________ (Please print name and address) If the number of shares of Common Stock issuable upon this exercise shall not be all of the shares of Common Stock which the undersigned is entitled to purchase in accordance with the enclosed Warrant, the undersigned requests that a New Warrant (as defined in the Warrant) evidencing the right to purchase the shares of Common Stock not issuable pursuant to the exercise evidenced hereby be issued in the name of and delivered to: ___________________________________________________________________________ (Please print name and address) ___________________________________________________________________________ ___________________________________________________________________________ Dated:_________,_________ Name of Holder: (Print)__________________________________ (By:)____________________________________ (Name:) (Title:) (Signature must conform in all respects to name of holder as specified on the face of the Warrant) FORM OF ASSIGNMENT [To be completed and signed only upon transfer of Warrant] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ________________________________ the right represented by the within Warrant to purchase ____________ shares of Common Stock of I-Link Incorporated to which the within Warrant relates and appoints ________________ attorney to transfer said right on the books of I-Link Incorporated with full power of substitution in the premises. Dated: _______________, ____ _______________________________________ (Signature must conform in all respects to name of holder as specified on the face of the Warrant) _______________________________________ Address of Transferee _______________________________________ _______________________________________ In the presence of: __________________________ EX-27 12
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS DATED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS 6-MOS DEC-31-1998 JUN-30-1998 930176 0 4966391 883000 0 6839288 6523227 1667626 23815227 20962659 0 0 832150 125425 1894993 23815227 11801763 11801763 0 22296242 0 0 7640577 (18071592) 0 (18071592) (108006) 0 0 (18179598) (1.15) (1.15)
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