-----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, IW3kmDL38WbhcADO3pHe5oLfxmTS5yE3nMTmk0vw03iBBUN4rQ+6+4N3cicKeBX5 xx1ZSWFggY5csJ8eTu+cEA== 0000893838-00-000149.txt : 20000522 0000893838-00-000149.hdr.sgml : 20000522 ACCESSION NUMBER: 0000893838-00-000149 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000519 FILER: COMPANY DATA: COMPANY CONFORMED NAME: I LINK INC CENTRAL INDEX KEY: 0000849145 STANDARD INDUSTRIAL CLASSIFICATION: TELEGRAPH & OTHER MESSAGE COMMUNICATIONS [4822] IRS NUMBER: 592291344 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-17973 FILM NUMBER: 639976 BUSINESS ADDRESS: STREET 1: 13751 S WADSWORTH PK DR SUITE 200 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 10-Q 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 March 31, 2000 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 _____ -------------- As of May 15, 2000, the registrant had outstanding 26,779,023 shares of $0.007 par value common stock. PART I - FINANCIAL INFORMATION I-LINK INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
ASSETS March 31, 2000 December 31, (Unaudited) 1999 ------------------ ----------------- Current assets: Cash and cash equivalents $ 5,757,030 $ 2,950,730 Accounts receivable, less allowance for doubtful accounts of $1,070,516 and $1,789,000 as of March 31, 2000 and December 31, 1999, respectively 4,650,159 4,344,406 Certificates of deposit - restricted 53,980 53,500 Other current assets 212,350 308,691 ------------------ ----------------- Total current assets 10,673,519 7,657,327 Furniture, fixtures, equipment and software, net 7,775,908 7,019,361 Other assets: Intangible assets, net 5,832,383 6,551,453 Certificates of deposit - restricted 76,136 76,136 Other assets 453,920 353,922 ------------------ ----------------- $24,811,866 $ 21,658,199 LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable $ 3,535,810 $ 4,131,675 Accrued liabilities 5,222,496 2,629,046 Current portion of long-term debt 751,660 751,660 Notes payable to related parties 1,300,000 - Current portion of obligations under capital leases 1,366,507 1,380,957 Net liabilities of discontinued operations 82,629 82,629 ------------------ ----------------- Total current liabilities 12,259,102 8,975,967 Notes payable to related parties 7,768,000 7,768,000 Accrued interest on long-term notes payable 1,586,363 1,345,801 Obligations under capital leases 506,404 544,724 ------------------ ----------------- 22,119,869 18,634,492 ------------------ ----------------- Commitments and contingencies (Note 8) Redeemable preferred stock - Class M 11,734,820 11,734,820 Redeemable preferred stock - Class F - 2,338,784 Redeemable common stock to be issued (Note 6) 1,397,973 - ------------------ ----------------- 13,132,793 14,073,604 ------------------ ----------------- Stockholders' deficit: Preferred stock, $10 par value, authorized 10,000,000 shares, issued and outstanding 34,223 and 49,992 at March 31, 2000 and December 31, 1999, respectively, liquidation preference of $16,655,917 at March 31, 2000. 342,230 499,920 Common stock, $.007 par value, authorized 150,000,000 shares, issued and outstanding 26,662,252 and 24,150,829 at March 31, 2000 and December 31, 1999, respectively 186,636 169,056 Additional paid-in capital 103,378,458 98,734,475 Deferred compensation (362,315) (499,377) Accumulated deficit (113,985,805) (109,953,971) ------------------ ----------------- Total stockholders' deficit (10,440,796) (11,049,897) ------------------ ----------------- $24,811,866 $ 21,658,199 ================================================================================== ================== ==== =================
The accompanying notes are an integral part of these consolidated financial statements 1 I-LINK INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS for the Three Months Ended March 31, 2000 and 1999 (Unaudited)
2000 1999 ------------------ ----------------- Revenues: Telecommunication services $ 5,287,208 $ 6,182,698 Marketing services 464,354 759,872 Technology licensing and development 4,506,500 294,416 Other 701,103 - ------------------ ----------------- Total revenues 10,959,165 7,236,986 ------------------ ----------------- Operating costs and expenses: Telecommunication network expense 6,113,062 4,323,430 Marketing services 349,034 1,216,309 Selling, general and administrative 3,919,088 2,837,123 Provision for doubtful accounts 325,716 905,706 Depreciation and amortization 1,488,889 1,343,420 Write-down of capitalized software costs - 1,847,288 Research and development 832,912 573,035 ------------------ ----------------- Total operating costs and expenses 13,028,701 13,046,311 ------------------ ----------------- Operating loss (2,069,536) (5,809,325) ------------------ ----------------- Other income (expense): Interest expense (443,842) (1,125,889) Interest and other income 37,827 23,579 Settlement expense (Note 6) (1,359,950) - ------------------ ----------------- Total other income (expense) (1,765,965) (1,102,310) ------------------ ----------------- Loss from continuing operations (3,835,501) (6,911,635) Loss from discontinued operations (less applicable income tax provision of $0 for the three months ended March 31, 2000 and 1999) - (350,000) ------------------ ----------------- Net loss $(3,835,501) $(7,261,635) ================== ================= Calculation of net loss per common share: Loss from continuing operations $(3,835,501) $(6,911,635) Cumulative preferred stock dividends not paid in current period (407,393) (453,036) Dividends paid on Class F redeemable preferred stock (18,214) (39,874) ------------------ ----------------- Loss from continuing operations applicable to common stock $(4,261,108) $(7,404,545) ================== ================= Basic and diluted weighted average shares outstanding 24,901,536 19,266,499 ================== ================= Net loss per common share - basic and diluted: Loss from continuing operations $(0.17) $(0.38) Loss from discontinued operations 0.00 $(0.02) ------------------ ----------------- Net loss per common share $(0.17) $(0.40) ================== =================
The accompanying notes are an integral part of these consolidated financial statements 2 I-LINK INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT (Unaudited)
Preferred Stock Common Stock ----------------- ----------------- Additional Paid-in Deferred Accumulated Shares Amount Shares Amount Capital Compensation Deficit ------ ------ ------ ------ ------- ------------ ----------- Balance at December 31, 1999 49,992 $499,920 24,150,829 $169,056 $ 98,734,475 $(499,377) $(109,953,971) Conversion of preferred stock into common stock (16,017) (160,170) 1,884,544 13,192 146,980 Reclassification of Class F redeemable preferred stock from mezzanine due to conversion to common stock 248 2,480 2,336,305 Common stock dividend paid to holders of class F redeemable preferred stock 87,477 612 195,721 (196,333) Reclassification of redeemable common stock to be issued to mezzanine (660,481) (4,622) (1,393,352) Exercise of stock options and warrants 1,199,883 8,398 3,303,427 Stock options issued for services 54,902 (54,902) Amortization of deferred compensation on stock options issued for services 191,964 Net loss (3,835,501) ---------- --------- ------------ ----------- ------------- ----------- -------------- Balance at March 31, 2000 34,223 $342,230 26,662,252 $186,636 $103,378,458 $(362,315) $(113,985,805) ========== ========= ============ =========== ============= =========== ==============
The accompanying notes are an integral part of the accompanying financial statements 3 I-LINK INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Three Months Ended March 31, ----------------------------------------- 2000 1999 ------------------- ------------------ Cash flows from operating activities: Net loss $(3,835,501) $(7,261,635) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,488,889 1,343,420 Provision for doubtful accounts 325,716 905,706 Amortization of discount on notes payable - 659,180 Write-down of capitalized software costs - 1,847,288 Amortization of deferred compensation on stock options issued for services 191,964 314,417 Increase (decrease) from changes in operating assets and liabilities: Accounts receivable (631,469) (1,407,032) Other assets (4,137) (166,572) Accounts payable, accrued liabilities and interest 486,969 597,703 Discontinued operations - noncash charges and working capital changes 72,639 320,652 ------------------- ------------------ Net cash used in operating activities (1,904,930) (2,846,873) ------------------- ------------------ Cash flows from investing activities: Purchases of furniture, fixtures and equipment (1,526,367) (406,523) Proceeds received from maturity of certificate of deposit - restricted - 76,666 Investing activities of discontinued operations - 30,000 ------------------- ------------------ Net cash used in investing activities (1,526,367) (299,857) ------------------- ------------------ Cash flows from financing activities: Proceeds from note payable to related party 1,300,000 4,200,000 Proceeds from advance under strategic marketing agreement 1,751,183 - Payment of long-term debt - (254,344) Payment of related party debt - (287,500) Payment of capital lease obligations (52,772) (114,577) Proceeds from exercise of common stock warrants and options 3,311,825 5,000 ------------------- ------------------ Net cash provided by financing activities 6,310,236 3,548,579 ------------------- ------------------ Increase in cash and cash equivalents 2,878,939 401,849 Cash and cash equivalents at beginning of period 2,996,004 1,368,927 ------------------- ------------------ Cash and cash equivalents at end of period $ 5,874,943 $ 1,770,776 =================== ================== Cash and cash equivalents at end of period: Continuing operations $ 5,757,030 $ 1,712,200 Discontinued operations 117,913 58,576 ------------------- ------------------ Total cash and cash equivalents at end of period $ 5,874,943 $ 1,770,776 =================== ================== Supplemental schedule of non-cash investing and financing activities: Reclassification of common stock to be issued to mezzanine $1,397,973 - Reclassification of Class F redeemable preferred stock from mezzanine $2,338,785 $1,310,851 Warrants issued in connection with a standby letter of credit - $735,720 Equipment acquired under capital lease obligations - $1,654,653 Stock options issued for services $54,902 $237,351 Sale of assets of discontinued operations for note receivable - $35,000
The accompanying notes are an integral part of the accompanying financial statements 4 I-LINK INCORPORATED AND SUBSIDIAIRES 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 is an integrated voice and data communications company focused on simplifying the delivery of "Unified Communication." Unified Communication is the integration of traditional telecommunications with new data IP (Internet Protocol) communications systems with the effect of simplifying communications, increasing communication capabilities and lowering overall communication costs. Unified Communication platforms integrate telecommunication, mobile communication, paging, voice-over-IP (VoIP), fax and Internet technologies. Through its wholly owned subsidiaries I-Link Communications, Inc., and I-Link Systems, Inc., the Company provides enhanced telecommunications services on a wholesale and retail basis. Through its wholly-owned subsidiaries MiBridge, Inc., and ViaNet Technologies Ltd., the Company undertakes the research and development of new telecommunications services, products, and technologies, and the licensing of certain of these products and technologies to other telecommunications companies. 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 has sold or 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. During 1998, the Company received $310,000 from the sale of assets from the medical service subsidiaries. In January 1999, the Company sold additional assets for $15,000 and a note receivable of $35,000. In April 2000, the Company completed the sale of certain non-operating assets located in China, which had experienced unexpected delays in disposal. As of March 31, 2000, there were no revenue generating activities remaining from the medical services operations. On-going administrative costs primarily consist of fees associated with collecting outstanding accounts receivable. These anticipated costs have been accrued for as part of management's best estimate of the expected ultimate loss on disposal. 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 liabilities of 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 periods ended March 31, 2000 and 1999, (b) the financial position at March 31, 2000, and (c) cash flows for the three-month periods ended March 31, 2000 and 1999. 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, 1999. The results of operations for the three-month period ended March 31, 2000 are not necessarily indicative of those to be expected for the entire year. The Company incurred a net loss from continuing operations of $3,835,501 for the three-month period ended March 31, 2000, and as of March 31, 2000 had an accumulated deficit of $113,985,805 and negative working capital of $1,585,583. The Company anticipates that revenues generated from its continuing operations will not be sufficient during 2000 to fund ongoing operations, the continued expansion of its private telecommunications network facilities, development and manufacturing of its Indavo product and anticipated growth in subscriber base. In order to provide for capital needs, the Company entered into two agreements subsequent to March 31, 2000, namely a line of credit agreement with Winter Harbor and a strategic alliance with Red Cube Group (See Note 10). While the Company believes that the aforementioned sources of funds combined with ongoing revenues and other available sources of financing will be sufficient to fund its operations in 2000, the Company anticipates that additional funds will be necessary after such time to fund its operations and finance the planned expansion of the Company's business communications services, product development and manufacturing, and to discharge the financial obligations of the 5 I-LINK INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ----------- Note 1 - Description of Business, Principles of Consolidation and Liquidity, continued Company. The availability of such funds 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 funds will be available, or if available that they will be on terms and conditions favorable to the Company. Furthermore, the Company may need to raise funds prior to 2001 if, for example, the Company accelerates the expansion of its network, pursues acquisitions or experiences operating losses that exceed our current expectation. Note 2 - Summary of Significant Accounting Policies Net loss 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 three-month periods ending March 31, 2000 and 1999, basic and diluted loss per share are the same. 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:
March 31, 2000 December 31, (Unaudited) 1999 ------------------ ---------------- Assets: Current assets: Cash and cash equivalents $ 117,913 $ 45,274 Accounts receivable 289,725 391,590 Inventory 555,291 555,291 Other 33,233 33,233 ------------------ ---------------- Total current assets 996,162 1,025,388 Furniture, fixtures and equipment, net 37,850 37,850 Other non-current assets 854 854 ------------------ ---------------- Total assets 1,034,866 1,064,092 ------------------ ---------------- Liabilities: Current liabilities: Accounts payable and accrued liabilities 875,833 905,060 Notes payable 241,662 141,661 ------------------ ---------------- Total current liabilities 1,117,495 1,046,721 ------------------ ---------------- Note Payable - 100,000 ------------------ ---------------- Net liabilities of discontinued operations $ (82,629) $ (82,629) ================== ================
The net liabilities of the discontinued operations as of March 31, 2000 and December 31, 1999 are shown as a current liability in the Consolidated Balance Sheets as it is anticipated that the disposal of the medical services remaining assets will be completed by the third quarter of 2000. Revenues of the discontinued operations were $0 and $130,623 for the three-month periods ending March 31, 2000 and 1999, respectively. 6 I-LINK INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ----------- Note 4 - Capital Financing In March 2000, the Company entered into a new lease facility providing for equipment purchases of up to $5,000,000. The equipment will be used in expanding the Company's IP network. The lease agreement requires monthly payments over the three-year term. As of March 31, 2000, the Company had not purchased any equipment under the lease facility. Note 5 - Income Taxes The Company recognized no income tax benefit from the losses generated in 2000 and 1999 because of the uncertainty of the realization of the related deferred tax asset. Note 6 - Stockholder's Equity and Redeemable Common Stock to be Issued On March 10, 2000 the Company and JNC Opportunity Fund, Ltd. ("JNC") entered into a settlement and release agreement relating to certain litigation with respect to shares of Series F Preferred stock then held by JNC. The shares of Series F Preferred stock then held by JNC were convertible into 1,104,972 shares of common stock under the original agreement with JNC prior to the commencement of the litigation. On March 10, 2000, the Company issued 531,968 shares of common stock to JNC pursuant to the settlement agreement in cancellation of the Series F shares then held by JNC. The balance of the shares required to be issued pursuant to the settlement agreement will need to be registered for resale under the Securities Act of 1933, as amended, and will require shareholder approval at a special meeting of the shareholders scheduled to be held on May 23, 2000. Due to the delay in issuance of the shares required to be issued pursuant to the settlement agreement until shareholder approval is received and the related common shares are registered, the Company agreed to issue "Additional Shares" of common stock in an amount equal to 790,000 times .0825 times a fraction the numerator of which is the number of days from February 1, 2000 to the date such Additional Shares are actually issued, and the denominator of which is 360. In addition to the "Additional Shares", the Company is subject to other late fees to be paid in common shares (the "Late Shares") in the event the additional shares are not issued by May 24, 2000. Further, if the Company fails to deliver any of the above shares by May 24, 2000, the Company must issue additional Late Shares ("Additional Late Shares"). In the event that the common shares are not issued by May 24, 2000 (or June 28, 2000 in the event the Company has received a registration comment letter related to the registration of such shares prior to May 24, 2000), upon written notice from JNC, the Company would be required to pay JNC (in lieu of delivering the shares) the amount determined by multiplying the higher of the average closing share price of the common stock for the ten trading day period ending on the deadline (May 24 or June 28, 2000 as applicable) or the notice date by the number of undelivered shares. The issuance of 87,477 shares representing dividends associated with the Series F stock have been recorded in the Company's financial statements as dividends paid and 129,519 shares have been recorded as a settlement payable (included in accrued liabilities) and settlement expense. As of March 31, 2000, the Company has also recorded interest expense and interest payable (included in accrued liabilities) of $114,062 representing the common stock issuable as Additional Shares, Late Shares and Additional Late Shares (10,863). The settlement and interest payables and expense were determined by the respective shares issuable as of March 31, 2000, multiplied by the market price of the Company's common stock on March 31, 2000. Because of the possibility that the Company may have to redeem the common stock yet to be issued as discussed above, the common stock to be issued is presented as a separate line item above stockholder's deficit. Note 7 - Stock-based Compensation Plans During the three months ended March 31, 2000 the Company issued approximately 4,700,000 options to purchase common shares to employees of the Company at prices ranging from $2.75 to $8.75. Of the options granted, 2,550,000 were to executives of the Company, of which 2,050,000 are subject to shareholder approval at the next annual meeting. During the same three months, approximately 840,000 options to purchase common shares were exercised. 7 I-LINK INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ----------- Note 8 - Purchase Commitments The Company has commitments to purchase long-distance telecommunications capacity on lines from a national provider in order to originate and/or terminate long-distance telephone calls in certain geographic areas outside of the Company's dedicated telecommunications network. The Company's minimum monthly commitment is approximately $550,000. The agreement is effective through May 2000. Failure to achieve the minimum will require shortfall payments by the Company equal to 50% of the remaining monthly minimum usage amounts. In January 1999, the Company entered into an agreement with a national carrier to lease local access spans. The three-year agreement includes minimum usage commitments of $1,512,000 during the first year and $2,160,000 in the second and third years. If the Company were to terminate the agreement early, it would be required to pay 25 percent of any remaining second and third year minimum monthly usage requirements. In December 1999, the Company entered into an agreement with a national carrier to provide long-distance capacity in order to originate and/or terminate long-distance telephone calls in certain geographic areas outside of the Company's dedicated telecommunications network. The eighteen-month agreement includes minimum monthly usage commitments of $250,000 beginning in the sixth month of the agreement. Either party may terminate the agreement with 90 days notice. Note 9- Segment of Business Reporting Segment of business reporting is based upon the "management" approach as defined in SFAS 131. The management approach designates the internal organization that is used by management for making operating decisions and assessing performance as the source of the Company's reportable segments. Based on the management approach, the Company's three reportable segments are as follows: o Telecommunications services - includes long-distance toll services and enhanced calling features such as V-Link. The telecommunications services products are marketed primarily to residential and small business customers. o Marketing services - includes training and promotional materials to independent sales representatives (IRs) in the network marketing sales channel. Additionally, revenues are generated from registration fees paid by IRs to attend regional and national sales conferences. This segment ceased operation in February 2000. o Technology licensing and development - provides research and development to enhance the Company's product and technology offerings. Products developed by this segment include V-Link, Indavo, and other proprietary technology. The Company licenses certain developed technology to third party users, such as Lucent, Brooktrout and others. There are no intersegment revenues. The Company's business is conducted principally in the U.S.; foreign operations are not material. The table below presents information about revenues from external customers and net loss for the three-month periods ended March 31, 2000 and 1999. There has been no material change in segment assets from the amounts reported in the Company's annual report on Form 10-K for the year ended December 31, 1999. 8 I-LINK INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ----------- Note 9- Segment of Business Reporting, continued
For the Three For the Three Months Ended Months Ended March 31, 2000 March 31, 1999 --------------------- --------------------- Revenues from external customers: Telecommunications services $5,287,000 $ 6,183,000 Marketing services 464,000 760,000 Technology licensing and developing 4,907,000 294,000 --------------------- --------------------- Total revenues from external customers for reportable segments $10,658,000 $ 7,237,000 ===================== ===================== Segment income ( loss): Telecommunications services $(2,229,000) $ 316,000 Marketing services (96,000) (469,000) Technology licensing and developing 3,662,000 (422,000) --------------------- --------------------- Total segment loss for reportable segments 1,337,000 (575,000) Unallocated non-cash amounts in consolidated net loss: Amortization of discount on notes payable - (659,000) Settlement expense (1,360,000) Write-down of capitalized software costs - (1,847,000) Amortization of deferred compensation on stock options issued for services (192,000) (314,000) Amortization of intangible assets (719,000) (723,000) Other corporate expenses (2,902,000) (2,794,000) Loss from discontinued operations - (350,000) --------------------- --------------------- $(3,836,000) $ (7,262,000) ===================== =====================
Telecommunication services revenues during the first quarter of 2000 of $1,993,000 were from one customer. Note 10 - Subsequent Events Strategic Alliance with Red Cube Group On May 9, 2000, the Company and Red Cube Group, a leading international provider of Internet Protocol (IP) Telephony and enhanced Web-based communications services based in Zurich Switzerland, announced an alliance to offer global, enhanced IP communications to the customers of each of the two companies. Under the terms of the agreement, Red Cube Group will license I-Link's IP Telephony technology, standardize on I-Link's software-based platform Softswitch Plus(TM) network and deploy it throughout its existing networks in Europe and other parts of the world. In addition, the two companies will interconnect their IP Telephony networks, creating a single, unified network, giving customers from both companies global access to enhanced IP services. Red Cube Group, upon signing of the agreement, paid the Company $10,000,000 that consisted of a $7,500,000 licensing fee and $2,500,000 for consulting services. The Company and Red Cube Group are obligated to use their best commercially reasonable efforts to complete certain milestones defined in the agreement and to negotiate in good faith a revenue sharing agreement by June 23, 2000. In the event the Companies cannot reach agreement on the revenue sharing agreement, the 9 I-LINK INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ----------- Note 10 - Subsequent Events, continued agreement with Red Cube may unwind and the Company would be liable to repay any monies received from Red Cube Group up to that date. Red Cube Group is further obligated to pay to the Company an additional $10,000,000 for prepaid services prior to July 30, 2000 if the Company has substantially completed implementation of I-Link network gateways in Europe as defined in the agreement. Line of credit with Winter Harbor On April 13, 2000, Winter Harbor, LLC, agreed to provide I-Link with a line of credit of up to an aggregate amount of $15,000,000 (with interest at 12.5% per annum). By its terms, this commitment was to expire on the earlier of April 12, 2001 or the date I-Link received net cash proceeds of not less than $15,000,000 pursuant to one or more additional financings or technology sales, as well as licensing or consulting agreements outside the normal and historical course of business. The $15,000,000 aggregate commitment was reduced by $2,600,000 (plus accrued interest at 8% per annum) of which $1,300,000 was advanced to I-Link in the first quarter of 2000 and $1,300,000 in the second quarter prior to April 13, 2000 by Winter Harbor and interest accruing on any other advances under such commitment. In addition, any net cash proceeds received by I-Link in the future from additional financings or technology sales as well as licensing or consulting agreements outside the normal and historical course of business reduce the aggregate commitment. Amounts outstanding under the loan were due and payable no later than April 12, 2001. As part of this agreement, I-Link agreed to use its best effort to consummate as soon as possible one or more additional financings, technology sales or licensing or consulting agreements and to repay amounts outstanding under the loan with any net cash proceeds received by it from any such transaction. On May 12, 2000, the Company repaid borrowings under the line of $2,600,000 plus interest (from proceeds received from the Red Cube agreement) and terminated the line of credit, thus avoiding any future issuance of warrants that would have been issuable had the Company kept the line of credit open after May 15, 2000. 10 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 Management's Discussion and Analysis set forth in the Company's Form 10-K for the year ended December 31, 1999. Forward Looking Information This report contains certain forward-looking statements and information relating to the Company that are 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," "may," "will," "believe," "estimate," "expect," "plan," 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 below. 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. Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurance that its expectations will be achieved. Among many factors that could cause actual results to differ materially from the forward looking statements herein include, without limitation, the following: the Company's ability to finance and manage expected rapid growth; the impact of competitive services and pricing; 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 network; the Company's success in further expanding its dedicated IP telecommunications network; the existence of demand for and acceptance of the Company's technology, products and services; as well as other risks referenced from time to time in the Company's filings with the SEC. The Company undertakes no obligation and does not intend to update, revise or otherwise publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Operations In January 1997, I-Link Incorporated (the "Company") acquired I-Link Communications ("ILC"); in August 1997, the Company acquired MiBridge, Inc.; and in the first quarter of 1998 the Company formed ViaNet Technologies, Ltd. ("ViaNet"). In March 1998, 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 three-month periods ending March 31, 2000 and 1999 have been reported as discontinued operations. I-Link Incorporated (the "Company") is an integrated voice and data communications company focused on simplifying the delivery of "Unified Communication." Unified Communication is the integration of traditional telecommunications with new data IP (Internet Protocol) communications systems with the effect of simplifying communications, increasing communication capabilities and lowering overall communication costs. Unified Communication platforms integrate telecommunication, mobile communication, paging, voice-over-IP (VoIP) and Internet technologies. Through its wholly owned subsidiaries I-Link Communications, Inc., and I-Link Systems, Inc., the Company provides enhanced telecommunications services on a wholesale and retail basis. Through its wholly-owned subsidiaries MiBridge, Inc., and ViaNet Technologies Ltd., the Company undertakes the research and development of new telecommunications services, products, and technologies, and the licensing of certain of these products and technologies to other telecommunications companies. I-Link is a leader in the delivery of unified communications as a result of six core technology offerings: I-Link's Intranet, Softswitch Plus(TM), GateLink(TM), V-Link(TM), Indavo(TM), and I-Link TalkFree. 11 Prior to February 15, 2000 and as of December 31, 1999, the Company's telecommunication and marketing service revenues were primarily dependent upon the sales efforts of independent representatives (IRs) functioning within a Network Marketing channel of distribution which targets residential and small businesses in the United States. These revenue sources depended directly upon the efforts of IRs. IRs personally solicited potential individual and business customers via one to one sales presentations wherein customers sign order forms for I-Link telecommunication products and services (telecommunication service revenues). Growth in revenue for both telecommunications and marketing services required an increase in the productivity of IRs and/or growth in the total number of IRs. On February 15, 2000, the Company signed a strategic marketing and channel agreement with Big Planet, a wholly owned subsidiary of Nu Skin Enterprises, Inc. Under terms of the agreement, I-Link's independent network marketing sales force (the IR's) transitioned to Big Planet, and Big Planet was granted the exclusive worldwide rights to market and sell I-Link's products and services through the Network Marketing (sometimes referred to as "Multi-Level") sales channel to residential and small business users. Other I-Link sales channels into the residential, small business, and other markets are unaffected by the agreement with Big Planet. The result of the agreement with Big Planet is that the Network Marketing channel became part of I-Link's wholesale distribution channel. On May 9, 2000, the Company and Red Cube Group, a leading international provider of Internet Protocol (IP) Telephony and enhanced Web-based communications services, announced an alliance to offer global, enhanced IP communications to the customers of each of the two companies. Under the terms of the agreement, Red Cube Group will license I-Link's IP Telephony technology, standardize on I-Link's software-based Softswitch Plus(TM) network platform and deploy it throughout its existing networks in Europe and other parts of the world. In addition, the two companies will interconnect their IP Telephony networks, creating a single, unified network, giving customers from both companies global access to enhanced IP services. As part of a longer-term agreement, the two companies will also administer ongoing revenue sharing. (See more detailed discussion of this agreement in the "Current Position/Future Requirements" section below). During the first quarter of 2000, the Company began limited commercial deployment of its Indavo (Integrated Data and Voice) communications services gateway product (development name "C4" (Customer Communications Control Center)). The initial device called Indavo V6 provides small office, home office and small business, including branch office and remote office customers, the capacity of up to six simultaneous voice and fax lines using any data service over network facilities that are already available to their homes or offices today. Indavo also provides access to I-Link's other enhanced services, including voice mail, fax, paging, e-mail, conference calling and follow-me-anywhere One-Number service. Indavo installations include both stand-alone and customer phone system integrated service configurations. Indavo devices and services are being marketed and deployed through both wholesale and retail channels utilizing both general Internet access and fully managed access facilities. Liquidity and Capital Resources Cash and cash equivalents as of March 31, 2000 were $5,757,030, short-term certificates of deposits were $53,980 and the working capital deficit was $1,585,583. Cash used by operating activities during the three-month period ended March 31, 2000 was $1,904,930 as compared to $2,846,873 during the same period ended March 31, 1999. The decrease in cash used in 2000 was primarily due: (1) a decrease in cash used of $579,251 associated with timing of collections and payments related to accounts receivable, other assets, accounts payable and accrued expenses, and (2) a decrease of $362,692 in the Company's net loss after allowance for non-cash expenses. Net cash used by investing activities in the three-month period ended March 31, 2000 was $1,526,367 as compared to net cash used of $299,857 in the same period ended March 31, 1999. Cash used by investing activities in 2000 was attributable to the purchase of furniture, fixtures and equipment. In the first three months of 1999, cash used by investing activities was attributable to the purchase of furniture, fixtures and equipment of $406,523, offset by $30,000 received from the sale of certain assets from discontinued operations and the maturity of certificates of deposits in the amount of $76,666. Financing activities provided net cash of $6,310,236 in the first three months of 2000 as compared to cash provided of $3,548,579 in the same period of 1999. Cash provided in 2000 included proceeds of $1,300,000 from note payable to related party, $3,311,823 in net proceeds from exercises of common stock warrants and options and a $1,751,183 advance received 12 under the strategic marketing and channel agreement with Big Planet (to be repaid in second quarter of 2000). Repayments of $52,770 on capital lease obligations from continuing operations offset these proceeds. During the same three months in 1999, cash provided by financing activities included $4,200,000 in proceeds from issuance of short-term debt and warrants and $5,000 in net proceeds from exercises of common stock warrants and options which sources were offset by repayments of $656,421 on long-term debt, notes payable and capital lease obligations from continuing operations. The Company incurred a net loss from continuing operations of $3,835,501 for the first three months of 2000, and as of March 31, 2000 had an accumulated deficit of $113,985,805. Revenue generated from continuing operations will not be sufficient during the remainder of 2000 to fund the Company's operations or continued expansion of its private telecommunications network facilities and anticipated growth in subscriber base. The Company has entered into additional financing arrangements as described below in order to obtain the additional funds required for its continuing operations in 2000. Current Position/Future Requirements During the first quarter of 2000 revenue from continuing operations increased $2,862,112 (35.3%) from the fourth quarter of 1999 as shown below:
Three Months Ended Increase % Increase 12/31/99 3/31/00 (Decrease) (Decrease) Telecommunications services $7,044,799 $5,287,208 $(1,757,591) (24.9%) Marketing services 447,869 464,354 16,485 3.7% Technology licensing and development 604,385 4,506,500 3,902,115 645.6% Other - 701,103 701,103 n/a Net operating revenue $8,097,053 $10,959,165 $2,862,112 35.3% ================ ============== ==============
- -------------------------------------------------------------------------------- The decrease in telecommunications services was a direct result of an agreement with Big Planet effective February 15, 2000. Prior to February 15, 2000, the Company's telecommunication services revenues were primarily dependent upon the sales efforts of independent representatives (IRs) functioning within a Network Marketing channel of distribution which targeted residential users and small businesses in the United States. These revenue sources were recorded at retail. Under terms of the agreement, I-Link's independent network marketing sales force (the IR's) transitioned to Big Planet. A substantial decrease in telecommunication services revenues for the quarter ended March 31, 2000 was the financial impact as the Company migrated from retail sales to sell its services to the same subscribers through Big Planet at wholesale prices. The reduction in telecommunications service revenues is partially offset by a reduction in commissions paid to IRs related to telecommunication services revenues. Marketing services revenue was comparable during the periods presented. However, due to the Company's transitioning of this network marketing channel to Big Planet in February 2000, marketing service revenues ceased in February 2000. Technology licensing and development revenue increased in the first quarter of 2000. During the first quarter, the Company's increase in these revenues was primarily related with two licensing agreements that resulted in revenues of nearly $4,000,000. The Company did not have agreements of this magnitude in the past, nor does the Company anticipate contracts of this magnitude in the near future. Revenue from this source will vary from quarter to quarter based on timing of technology licensing and development projects. Other revenues in the first quarter of 2000 represent revenues from two new sources, namely: (1) royalties of $400,000 receivable from the sale of Indavo units through a distributor of the Company; and (2) revenues of $301,103 relating to services performed for Big Planet as part of the transitioning of the network marketing channel. 13 The Company anticipates improved cash flow in the remainder of 2000 primarily from the following sources: o Up to $20,000,000 in licensing fees, consulting services and prepaid services associated with an agreement between Red Cube Group and the Company in May 2000 (see discussion below). o Anticipated increase in monthly recurring subscription revenues from marketing of Indavo product. o Anticipated revenues from its Gatelink product offering commencing in the second quarter of 2000. o The affiliation with Big Planet effective February 15, 2000 is anticipated to have a positive overall financial impact in the long-term to the Company by increasing revenues, reducing expenses and increasing profit margins through customer growth. The Company anticipates that in preparation for continued market penetration and deployment of I-Link products, cash requirements for operations and the continued development and marketing of I-Link services will be at increasingly higher levels than experienced in the first quarter of 2000. Since December 31, 1999, the Company entered into four agreements as follow: o On May 9, 2000, the Company and Red Cube Group, a leading international provider of Internet Protocol (IP) Telephony and enhanced Web-based communications services, announced an alliance to offer global, enhanced IP communications to the customers of each of the two companies. Red Cube Group, upon signing of the agreement, paid the Company $10,000,000 that consisted of a $7,500,000 licensing fee and $2,500,000 for consulting services. The Company and Red Cube Group are obligated to use their best commercially reasonable efforts to complete certain milestones defined in the agreement and to negotiate in good faith a revenue sharing agreement by June 23, 2000. In the event the Companies cannot reach agreement on the revenue sharing agreement, the agreement with Red Cube may unwind and the Company would be liable to repay any monies received from Red Cube Group up to that date. Red Cube Group is further obligated to pay to the Company an additional $10,000,000 for prepaid services prior to July 30, 2000 if the Company has substantially completed implementation of I-Link network gateways in Europe as defined in the agreement. o On April 13, 2000, Winter Harbor, LLC, agreed to provide I-Link with a line of credit of up to an aggregate amount of $15,000,000. This commitment expired on the earlier of April 12, 2001 or the date I-Link has received net cash proceeds of not less than $15,000,000 pursuant to one or more additional financings or technology sales, as well as licensing or consulting agreements outside the normal and historical course of business. On May 12, 2000 the Company repaid borrowings under the line of $2,600,000 plus interest (from proceeds received from the Red Cube Agreement) and terminated the line of credit, thus avoiding any future issuance of warrants that would have been issuable had the Company kept the line of credit open after May 15, 2000. o On February 25, 2000, the Company obtained a leasing arrangement for certain network equipment up to $5,000,000 dollars. o The due date of the Company's existing obligation to Winter Harbor in the amount of $7,768,000 and accrued interest of $1,345,801 as of December 31, 1999, which was due April 15, 2000, was extended to April 15, 2001. While the Company believes that the aforementioned sources of funds will be sufficient to fund its operations in 2000, the Company anticipates that additional funds will be necessary after such time to fund its operations and finance the planned expansion of the Company's business communications services, product development and manufacturing, and to discharge the financial obligations of the Company. The availability of such funds will depend on prevailing market conditions, interest rates, and the financial position and results of operations of the Company. There can be no assurance that such funds will be available or if available that they will be on terms and conditions favorable to the Company. Furthermore, the Company may need to raise funds prior to 2001 if, for example, the Company accelerates the expansion of its network and services, pursue acquisitions or experience operating losses that exceed our current expectations. 14 Three-Month Period Ended March 31, 2000 Compared to Three-Month Period Ended March 31, 1999 In March 1998, 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 three-month periods ending March 31, 2000 and 1999 have been reported as discontinued operations. Revenues Telecommunications services revenue decreased $895,490 to $5,287,208 in the first quarter of 2000 as compared to $6,182,698 in the first quarter of 1999. The decrease is a direct result of agreement with Big Planet effective February 15, 2000. Prior to February 15, 2000, the Company's telecommunication services revenues were primarily dependent upon the sales efforts of independent representatives (IRs) functioning within a Network Marketing channel of distribution. These revenue sources were recorded at retail. Under terms of the agreement, I-Link's independent network marketing sales force (the IR's) transitioned to Big Planet. A substantial decrease in telecommunication services revenues for the quarter ended March 31, 2000 was the financial impact as the Company sells its services to the same subscribers but through Big Planet at wholesale prices Marketing services revenue, which includes revenues recognized from independent representatives for promotional and presentation materials, national conference fees and various product sales decreased $295,518 to $464,354 in the first quarter of 2000 as compared to $759,872 in the first quarter of 1999. The decrease was primarily a result of transition of this network-marketing channel to Big Planet in February 2000, which with such transition, marketing service revenues ceased. Technology licensing and development revenue increased $4,212,084 to $4,506,500 in the first quarter of 2000 as compared to $294,416 in the first quarter of 1999. These revenues are from the licensing and development of technology through MiBridge, Inc. and are due to increased acceptance of its products in the market place. During the first quarter, the Company's increase in these revenues was primarily related with two licensing agreements that resulted in revenues of nearly $4,000,000. The Company did not have agreements of this magnitude in the past, nor does it anticipate such contracts in the near future. Revenue from this source will vary from quarter to quarter based on timing of technology licensing and development projects. Other revenues in the first quarter of 2000 represent revenues from two new sources, namely: (1) royalties of $400,000 receivable from the sale of Indavo units through a distributor of the Company; and (2) revenues of $301,103 relating to services performed for Big Planet as part of the transitioning of the network marketing channel. Operating costs and expenses Telecommunications expenses increased $1,789,632 in the first quarter of 2000 to $6,113,062 as compared to $4,323,430 for the same quarter of 1999. These expenses include the costs related to the continuing development and deployment of the Company's communication network and expenses related to the generation of telecommunication service revenue. While telecommunication network expense is directly related to telecommunication services revenues, the relationship is not comparable with the same quarter in 1999 due to the transition to wholesale rather than retail revenues as a result of the agreement with Big Planet discussed above in telecommunication services revenue above. Marketing service costs decreased $867,275 to $349,034 in the first quarter of 2000 as compared to $1,216,309 for the same quarter of 1999. The expenses relate directly to the Company's marketing service revenue. Marketing service expenses included commissions and the costs of providing promotional and presentation materials, national and regional conventions and ongoing administrative support. The decrease in expense is directly related to the transition of this network marketing channel to Big Planet in February 2000, which resulted in the cessation of marketing service revenues and accordingly the related expenses. 15 Selling, general and administrative expense increased $1,081,965 to $3,919,088 in the first quarter of 2000 as compared to $2,837,123 in the first quarter of 1999. The increase was primarily due to general increases in overhead and personnel expenses associated with growing the Company's business. The provision for doubtful accounts decreased $579,990 to $325,716 in the first quarter of 2000 as compared to $905,706 in the same quarter of 1999. The decrease is directly related to the transitioning of the network channel subscribers to Big Planet in February 2000. With the transition, Big Planet assumed the risk of collections from individual subscribers. Accordingly, the Company continues to assess its risks of collections of accounts receivable, the effect of which resulted in reduced provision for the three months ended March 31, 2000 as compared to the same period of 1999. Depreciation and amortization increased $145,469 to $1,488,889 in the first quarter of 2000 as compared to $1,343,420 in the first quarter of 1999. The increase is due to increased depreciation on continuing acquisitions of furniture, fixtures and equipment as well as an increase in amortization on assets acquired through leases capitalized for accounting purposes. Research and development increased $259,877 to $832,912 in the first quarter of 2000 as compared to $573,035 in 1999. The Company expects that expenditures for research and development will continue at a comparable amount during the remainder of 2000. In the first quarter of 1999, the Company recorded a write-down of capitalized software costs of $1,847,288. In early 1998 the Company contracted with an outside consulting company to develop a billing and operations information system. As of March 31, 1999 the Company had capitalized $2,284,574 in costs associated with this in-process system development. The Company continually evaluated the functionality and progress of the in-process system development. In May 1999, the Company'smanagement and its Board of Directors concluded that the new system would not significantly enhance the Company's existing billing and information systems or meet its ultimate needs and accordingly did not justify paying additional contracted expenses of approximately $1,000,000. Negotiations to discontinue work under the contract were concluded in May 1999 with the consulting company forgoing any future payments on the project while retaining amounts paid to date of $1,847,288. Accordingly the Company has recorded a write-down on the in-process system development of $1,847,288. Interest expense decreased $682,047 to $443,842 in the first quarter of 2000 as compared to $1,125,889 in the same quarter of 1999. The net decrease is primarily due amortization of debt discount and debt issuance costs (non-cash) of $659,180 in the first quarter of 1999 for which there was no comparable expense in the first quarter of 2000. The debt discount and debt issuance costs in 1999 are related to warrants granted in connection with certain financing arrangements entered into in 1999. The Company also incurred a decrease of $22,867 in actual interest on notes payable in the first three months of 2000 as compared to the same period in 1999. Interest and other income increased $14,248 to $37,827 in the first quarter of 2000 as compared to $23,579 in the same quarter of 1999. The increase was primarily due to an increase in average balance of cash on hand during 2000. A settlement expense of $1,359,950 was recorded in the first three months of 2000. This expense is the result of an obligation to issue 129,519 shares of common stock in exchange for certain trading restrictions imposed on JNC Opportunity Fund Ltd. ("JNC") in relation to the common stock to be issued to JNC pursuant to a settlement and release agreement entered into in February 2000. The settlement and release agreement settled certain litigation between the Company and JNC over non-converted Series F preferred stock held by JNC. There was no comparable expense in 1999. The amount of this expense is subject to change in the future in relation to the changes in the market price of the Company's common stock until such time as the common stock is issued or the liability is paid in cash in the event the Company is unable to issue the common stock. The Company recorded a loss of $350,000 from discontinued operation in the first three months of 1999. No such loss was recorded during the same period in 2000. 16 PART II - OTHER INFORMATION Item 1 - Legal Proceedings On March 10, 2000 the Company and JNC entered into a settlement and release agreement relating to certain litigation with respect to shares of Series F Preferred stock then held by JNC. The shares of Series F Preferred stock then held by JNC were convertible into 1,104,972 shares of common stock under the original agreement with JNC prior to the commencement of the litigation. On March 10, 2000, the Company issued 531,968 shares of common stock to JNC pursuant to the settlement agreement in cancellation of the Series F shares then held by JNC. The balance of the shares required to be issued pursuant to the settlement agreement will need to be registered for resale under the Securities Act of 1933, as amended, and will require shareholder approval at a special meeting of the shareholders scheduled to be held on May 23, 2000. Due to the delay in issuance of the shares required to be issued pursuant to the settlement agreement until shareholder approval is received and the related common shares are registered, the Company agreed to issue "Additional Shares" of common stock in an amount equal to 790,000 times .0825 times a fraction the numerator of which is the number of days from February 1, 2000 to the date such Additional Shares are actually issued, and the denominator of which is 360. In addition to the "Additional Shares", the Company is subject to other late fees to be paid in common shares (the "Late Shares") in the event the additional shares are not issued by May 24, 2000. Further, if the Company fails to deliver any of the above shares by May 24, 2000, the Company must issue additional Late Shares ("Additional Late Shares"). In the event that the common shares are not issued by May 24, 2000 (or June 28, 2000 in the event the Company has received a registration comment letter related to the registration of such shares prior to May 24, 2000), upon written notice from JNC, the Company would be required to pay JNC (in lieu of delivering the shares) the amount determined by multiplying the higher of the average closing share price of the common stock for the ten trading day period ending on the deadline (May 24 or June 28, 2000 as applicable) or the notice date by the number of undelivered shares. The issuance of 87,477 shares representing dividends associated with the Series F stock have been recorded in the Company's financial statements as dividends paid and 129,519 shares have been recorded as a settlement payable (included in accrued liabilities) and settlement expense. As of March 31, 2000, the Company has also recorded interest expense and interest payable (included in accrued liabilities) of $114,062 representing the common stock issuable as Additional Shares, Late Shares and Additional Late Shares (10,863). The settlement and interest payables and expense were determined by the respective shares issuable as of March 31, 2000, multiplied by the market price of the Company's common stock on March 31, 2000. The Company is 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 4 - Submission of Matters to a Vote of Security Holders The Company held a special meeting of stockholders on February 11, 2000, at which one proposal was considered and not passed by the stockholders: The proposal voted upon was " to approve the issuance of a number of shares of common stock equal to or greater than 20% of the number of share of common stock outstanding immediately before the initial issuance of the Series F preferred stock as shall be appropriate upon conversion of the remaining outstanding shares of Series F preferred held by JNC Opportunity Fund Ltd." The result of the voting was: In favor 3,248,635 Against 18,309,359 Abstain 25,135 17 Item 5 - Other Information On May 9, 2000, the Company and Red Cube Group, a leading international provider of Internet Protocol (IP) Telephony and enhanced Web-based communications services based in Zurich Switzerland, announced an alliance to offer global, enhanced IP communications to the customers of each of the two companies. Under the terms of the agreement, Red Cube Group will license I-Link's IP Telephony technology, standardize on I-Link's software-based platform Softswitch Plus(TM) network and deploy it throughout its existing networks in Europe and other parts of the world. In addition, the two companies will interconnect their IP Telephony networks, creating a single, unified network, giving customers from both companies global access to enhanced IP services. Red Cube Group, upon signing of the agreement, paid the Company $10,000,000 that consisted of a $7,500,000 licensing fee and $2,500,000 for consulting services. The Company and Red Cube Group are obligated to use their best commercially reasonable efforts to complete certain milestones defined in the agreement and to negotiate in good faith a revenue sharing agreement by June 23, 2000. In the event the Companies cannot reach agreement on the revenue sharing agreement, the agreement with Red Cube may unwind and the Company would be liable to repay any monies received from Red Cube Group up to that date. Red Cube Group is further obligated to pay to the Company an additional $10,000,000 for prepaid services prior to July 30, 2000 if the Company has substantially completed implementation of I-Link network gateways in Europe as defined in the agreement. Item 6(a) - Exhibits Exhibit Number Item 10.1 Employment agreement with Dror Nahumi dated January 3, 2000 10.2 Employment agreement with David E. Hardy dated January 3, 2000 10.3 Employment agreement with John M. Ames dated January 3, 2000 10.4 Employment agreement with Alex Radulovic dated January 3, 2000 10.5 Form of Wholesale Service Provider and Distribution Agreement between the Company and Big Planet, Inc. dated February 1, 2000. 27 Financial data schedule. Item 6(b) - Reports on Form 8-K None 18 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: May 18, 2000 By: /s/ John W. Edwards ------------------------- John W. Edwards Chief Executive Officer By: /s/ John M. Ames ------------------------- John M. Ames, CPA Chief Operating Officer and Acting Chief Financial Officer 19 EX-10 2 EXHIBIT 10.1 Exhibit 10.1 ------------ I-LINK INCORPORATED EMPLOYMENT AGREEMENT Dror Nahumi, President THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into by and between I-LINK INCORPORATED, a Florida corporation with its principal place of business at 13751 South Wadsworth Park Drive, Suite 200, Salt Lake City, Utah 84020 (the "Company"), and DROR NAHUMI ("Employee"), effective this 3rd day of January, 2000; RECITALS WHEREAS, the Company is in the business of developing, marketing and providing telephony and communications technology, products and services; and WHEREAS, Employee has acknowledged skills and experience in the managing all aspects of telephony and communications technology companies; and WHEREAS, the Company desires to retain the benefit of Employee's knowledge, skills, and experience and assure itself of the ongoing right to Employee's services from and after the date hereof, and is willing to do so on the terms and conditions set forth in this Agreement; and WHEREAS, Employee is willing and able to render services to the Company, from and after the date hereof, on the terms and conditions set forth in this Agreement; and A G R E E M E N T S NOW, THEREFORE, in consideration of the premises and the mutual agreements, provisions, and covenants contained in this Agreement, the Company and Employee hereby agree as follows: 1. Employment. ---------- (a) Title and Duties of Employee. Subject to all of the terms and conditions herein provided, the Company hereby employs Employee in the position of President, and Employee hereby accepts such employment with the Company. Employee's duties shall consist of those generally associated with his title, as well as those duties assigned to him from time-to-time by the Company, consistent with Employee's position and qualifications and the best interests of the Company. Specifically, Employee shall be employed to manage the operations of the Company and its wholly-owned subsidiaries. Employee shall at all times be subject to and shall observe and carry out such reasonable rules, regulations, policies, directions, and restrictions as may be established from time-to-time by the Company. Employee agrees that the Company shall be entitled, at its option and cost, to obtain "key man" life insurance on Employee, and that Employee will submit to such reasonable physical examinations as may be required to obtain such insurance. (b) Performance. Throughout the Employment Term, Employee shall devote his full business time, attention, knowledge, and skills, faithfully diligently, and to the best of his ability, to the active performance of his duties and responsibilities hereunder, and do such traveling as may reasonably be required in connection with the performance of such duties and responsibilities. 2. Term of Employment. Unless terminated as provided in Section 5 hereof, the term of this Agreement shall be for a period of three (3) years, commencing on the date hereof and continuing through and including the day immediately preceding the second anniversary of the date hereof (the "Initial Period"), and thereafter shall automatically continue on a year-to-year basis (including the Initial Period, the "Employment Term") unless either party shall deliver written notice to the other party not more than sixty (60), nor less than thirty (30), days preceding the expiration of the Initial Period or any one-year extension thereof of its intention not to extend the term of this Agreement. 3. Compensation and Benefits. ------------------------- (a) Salary. For services rendered by Employee to the Company and upon the conditions that Employee fully and faithfully performs all of his duties and obligations owed during the Employment Term under this Agreement, the Company shall pay Employee an annual base salary equal to $200,000, payable in equal semi-monthly installments, less income tax withholdings and other normal employee deductions. This base salary set forth herein shall be reviewed annually by the Company at the end of each fiscal year of the Company (hereafter "Fiscal Year") (with the next such review to occur after the Fiscal Year ending December 31, 2000, with respect to base salary for the Fiscal Year ending December 31, 2001), or at such other times as deemed appropriate by the Company, and may at the sole discretion of the Company, be adjusted by an amount which it deems appropriate, provided that said base salary shall not be less than $200,000. Employee shall be entitled to receive bonuses during the term of this Agreement to the extent bonuses are declared by the Company's board of directors. (b) Bonus Compensation. Employee shall be eligible to receive such bonus compensation, if any, as and when determined by the Company's board of directors commensurate with Employee's position as a senior executive. (c) Stock Options. ------------- (i) Time-Vested Options. The Company grants to Employee non-qualified options to purchase 1,000,000 shares of its common stock at an exercise price of $2.750 per common share, which is equal to the closing price 2 of the Company's publicly traded shares as of the effective date of this Agreement (the "Time Options"). To the extent any number of the Time Options are required to be subject to the vote of the Company's shareholders under applicable law, rule or regulation, such number of Time Options are granted subject to ratification by the Company's shareholders at its next annual shareholders' meeting. The Time Options shall vest in twelve equal quarterly increments over a three-year period, with the first quarterly vesting to occur on the effective date of this Agreement for that partial quarter ended March 31, 2000, the second quarterly vesting to occur on April 1, 2000, and similarly on the first day of each subsequent calendar quarter with the final quarterly vesting to occur October 1, 2002. A change of control of the Company shall not accelerate vesting of the Time Options, except in the event of a change of control pursuant to which the Company's stock is exchanged for the stock of another entity and the Time Options are not rolled-over or otherwise exchanged for similar options of such entity (with like terms and conditions). In such event all of Employee's then unvested Time Options shall vest and be exercisable immediately prior to the consummation of such transaction. It is the intent of the parties that the Time Options continue to vest on a quarterly basis according to their terms notwithstanding a change of control, without being subject to loss or forfeiture by virtue of a change of control. The Time Option grant shall be evidenced by a written Option Agreement, the terms of which shall be consistent with the terms of this Agreement. The Company's Board of Directors, at their sole discretion, shall determine what number of additional stock options, if any, shall be granted to Employee, and upon what terms. (ii) Performance-Vested Options. The Company grants to Employee non-qualified options to purchase 750,000 shares of its common stock at an exercise price of $2.750 per common share, which is equal to the closing price of the Company's publicly traded shares as of the effective date of this Agreement (the "Performance Options"). To the extent any number of the Performance Options are required to be subject to the vote of the Company's shareholders under applicable law, rule or regulation, such number of Performance Options are granted subject to ratification by the Company's shareholders at its next annual shareholders' meeting. 125,000 of the Performance Options shall vest upon the Company's daily closing stock price attaining or exceeding each of the following levels for more than 20 consecutive trading days: $10, $12, $14, $16, $18, $20. A change of control of the Company shall not accelerate vesting of the Performance Options, except in the event of a change of control pursuant to which the Company's stock is exchanged for the stock of another entity and the Performance Options are not rolled-over or otherwise exchanged for similar options of such entity (with like terms and conditions). In such event all of Employee's then unvested Performance Options shall vest and be exercisable immediately prior to the consummation of such transaction. It is the intent of the parties that the Performance Options 3 continue to vest on a quarterly basis according to their terms notwithstanding a change of control, without being subject to loss or forfeiture by virtue of a change of control. The Performance Option grant shall be evidenced by a written Option Agreement, the terms of which shall be consistent with the terms of this Agreement. The Company's Board of Directors, at their sole discretion, shall determine what number of additional stock options, if any, shall be granted to Employee, and upon what terms. (d) Benefits. During the Employment Term, Employee shall Be eligible to participate in and receive coverage and benefits under all group insurance, pension, profit-sharing, bonus, stock option, stock ownership, and other employee benefit plans, programs, and arrangements of the Company which are now or hereafter adopted by the Company for the benefit of its employees (or the employees of any subsidiary or affiliate of the Company), subject to and on a basis consistent with the terms, conditions, and overall administration of such plans, programs, and arrangements. (e) Expense Reimbursement. The Company shall reimburse Employee for the business expenses reasonably incurred by Employee within the scope of his employment, pursuant to standard employee expense reimbursement policy and procedure as established by the Company. 4. Compensation Upon Termination or During Disability. -------------------------------------------------- (a) Compensation Upon Termination. If Employee's employment hereunder is terminated under Section 5 hereof, the Company shall have no further liability under this Agreement except (i) to pay Employee within ten days of the Date of Termination any accrued salary or other compensation due under this Agreement on the Date of Termination (or in the event of Employee's subsequent death, to his estate or devisee, legatee, or other designee, as applicable), and (ii) provide Employee, or his estate, or devisee, legatee, or other designee, with any benefits payable (including any death benefit, if applicable) under all employee benefit plans, programs, or arrangements of the Company in which Employee is a participant on the Date of Termination. (b) Compensation Upon Disability. During any period that Employee fails to perform his duties hereunder as a result of incapacity due to a "disabled condition," as such term is defined in Section 5(c) hereof (the "disability period"), Employee shall continue to receive his full base salary at the rate then in effect for the disability period until Employee's employment hereunder is terminated pursuant to Section 5(c) hereof; provided, however, that such salary payments so made to Employee during the first 120 days of the disability period shall be reduced by the sum of the amounts, if any, actually received by Employee prior to or during this period, as the result of such incapacity, under any disability benefit plan of the Company in which Employee participates. 4 5. Termination. ----------- (a) With and Without Cause. This Agreement may be terminated at any time by either the Company or the Employee for cause. As used herein, the term "cause" shall mean and be limited to with respect to Employee (i) any felony conviction of Employee; (ii) Employee's willful misconduct or failure to reasonably perform in connection with the performance of Employee's duties, responsibilities, agreements, and covenants hereunder, or Employee's refusal to comply with the reasonable rules, regulations, policies, directions, and restrictions as may be established from time-to-time by the Company, which misconduct, non-performance, or refusal to so comply shall continue after written notice from the Company, such notice to specify the respects in which Employee is in violation; (iii) Employee's breach of the provisions of Sections 6 and 8 hereof; (iv) any illegal use by Employee of narcotics or other controlled substances; or (v) Employee's inability to perform his duties and responsibilities hereunder due to the issuance of an injunction or restraining order, which is not rescinded within 45 days of issuance; and with respect to the Company, any material breach of the terms of this Agreement which shall continue after written notice from the Employee, such notice to specify the respects in which the Company is in breach. This Agreement may be terminated at any time without cause by Employee. (b) Death. This Agreement shall terminate automatically upon the death of Employee. (c) Disability. In the event Employee becomes mentally or physically disabled during the Employment Term, Employee's employment hereunder shall terminate as of the date such disability is "established." As used in this Subsection, the term "disabled" means suffering from any mental or physical condition, other than that resulting from the use of alcohol or illegal use of narcotics or other controlled substances, which renders Employee unable to substantially perform all of his duties and services under this Agreement in a satisfactory manner substantially similar to his previous performance (a "disabled condition") for a period of one hundred twenty (120) consecutive days or for more than one hundred twenty (120) days in any 12-month period. For purposes of this Subsection, the date that Employee's disability is "established" shall be, in the case of a disabled condition which exists for a period of 120 consecutive days, the 121st day on which such disabled condition exists, and, in the case of a disabled condition existing for more than 120 days in any 12-month period, the 121st day on which such disabled condition exists. (d) Impaired Health. Employee may terminate his employment hereunder if his health should become impaired to an extent that makes his continued performance of his duties and obligations hereunder hazardous to his physical or mental health or his life ("impaired health"), provided that Employee shall have furnished the Company with a written statement from a qualified doctor to such effect and, provided further, that, at the Company's request, Employee shall submit to an examination by a doctor selected by the Company and such doctor shall have concurred in the conclusion of Employee's doctor. 5 (e) Reassignment, Relocation. This Agreement may be terminated by Employee in the event of any of the following (i) without Employee's express written consent, the assignment to Employee of any duties or the significant reduction of Employee's duties, authority, or responsibilities, which is inconsistent with Employee's duties, authority, or responsibilities in effect immediately prior to such assignment, or the removal of Employee from such duties, authority, or responsibilities; or (ii) without Employee's express written consent, the relocation of Employee to a facility or a location more than forty-five (45) miles from Employee's then-present location. (f) Notice of Termination. Any termination of Employee's employment hereunder by the Company or by Employee (other than termination pursuant to Section 5(b) (death)) shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee's employment hereunder under the Section and Subsection so indicated. (g) Date of Termination. "Date of Termination" shall mean the following: if Employee's employment hereunder is terminated by (i) Sections 5(a) (cause), 5(c) (disability), or 5(d) (impaired health), the date specified in the Notice of Termination; (ii) 5(b) (death), the date of Employee's death; and (iii) Section 5(e) (Reassignment, Relocation) 30 days after delivery of the Notice of Termination; and (iv) for any other reason, the date on which the Notice of Termination is given. 6. Confidential Information. ------------------------ (a) Disclosure and Use. Employee shall not disclose or use at any time, either during or subsequent to the Employment Term, any trade secrets or other confidential information, whether or not patentable or otherwise protectable, of the Company or any other direct or indirect parent or subsidiary of the Company (collectively referred to herein as the "Company"), including but not limited to, information and lists relating to customers, suppliers, compensation of employees or independent sales representatives, products and product pricing, technical or non-technical data, programs, devices, methods, techniques, drawings, processes, or financial data, of which Employee is or becomes informed or aware during the Employment Term, whether or not developed by Employee, except (i) as may be required for Employee to perform Employee's employment duties with the Company, (ii) to the extent such information becomes generally available to the public through no wrongful act of Employee, (iii) information which must be disclosed as a result of a subpoena or other legal process, after the Company has had the opportunity to request a suitable protective order for such information, or (iv) unless Employee shall first secure the Company's prior written authorization. This covenant shall survive the termination of Employee's employment hereunder, and shall remain in effect and be enforceable against Employee for so long as any such Company secret or confidential information retains economic value, whether actual or potential, from not being generally known to other persons who can obtain economic value 6 from its disclosure or use. Employee shall execute such reasonable further agreements and/or confirmations of Employee's obligations to the Company concerning non-disclosure of Company trade secrets and confidential information as the Company may reasonably require from time-to-time. (b) Return of Materials. Upon termination of Employee's employment hereunder, Employee shall promptly deliver to the Company all customers lists, specifications, drawings, listings, documentation, manuals, letters, notes, notebooks, reports, computer programs, computer files, and copies thereof, and all other materials of a secret or confidential nature relating to the Company's business, which are in the possession or under the control of Employee. 7. Inventions and Discoveries. -------------------------- (a) Disclosure of Employment Invention. Employee agrees for himself and his heirs, executors, and administrators that Employee will, without further consideration, disclose immediately to a person designated by the Company as its agent to receive such disclosures each and every discovery, invention, part thereof or improvement thereon, or works of authorship, as defined below ("Employment Invention") which Employee may conceive, develop, reduce to practice, or create, either solely or jointly with others, which is: (i) conceived, developed, reduced to practice or created (a) within the scope of Employee's employment, or (b) on the Company's time, or (c) with the aid, assistance, or use of any of the Company's property, equipment, facilities, supplies, resources, or intellectual property; or (ii) the result of any work, services, or duties performed by Employee for the Company; or (iii) related to the current or demonstrably anticipated business, research, or development of the Company. (b) Assignment of Employee Invention. Employee hereby irrevocably assigns to the Company all of Employee's entire rights, title, interest, and Intellectual Property in and to the Employment Inventions referred to in Section 7(a), and will upon request and without further consideration do everything reasonably necessary or required to vest in the Company Employee's entire right, title, interest, and Intellectual Property in and to such Employment Inventions including executing all instruments and documents and performing all acts reasonably necessary or required for making, filing, or presenting any applicable for the benefit of the Company for Letters Patent or Copyrights in the United States or throughout the world for such Employment Inventions and executing assignments of such patents or applications thereof for the Company. (c) Definitions. As used herein, "Intellectual Property" means any and all patents, trade secrets, know-how, technology, confidential information, ideas, copyrights, 7 trademarks, and service marks and any and all rights, applications, and registrations relating to them. "Works of authorship" mean any original work of authorship within the purview of the copyright laws of the United States, and both parties agree that all works of authorship created by Employee under Section 7(a) shall be works for hire within the meaning and purview of such copyright laws. (d) Exclusions. The foregoing provisions of Sections 7(a) and 8(b) do not apply to any invention not included in Section 7(a) as an Employment Invention and created by Employee entirely on his own time and with his own resources. (e) Recordkeeping. Employee agrees to keep and maintain, or assist in keeping and maintaining, such records (such as laboratory notebooks properly and periodically witnessed and understood) as will show the conception, reduction to practice and operation of all Employment Inventions, as well as such other records as the Company may request, which records shall be and remain the property of and available to, the Company. 8. Restrictive Covenant. -------------------- (a) Restriction on Competition During Employment Term. So long as Employee is employed by the Company, Employee shall not, without the prior written authorization of the Company, render services of a business, professional or commercial nature (whether for compensation or otherwise) to any person or entity engaged in any business which competes with the Company (a "Competitive Business") during the Employment Term, or engage in any activity whether alone, as a partner, or as an officer, director, employee, consultant independent contractor, or stockholder in any Competitive Business. Notwithstanding the foregoing, this section shall not prevent Employee from purchasing an equity interest in any Competitive Business as a strictly passive investment and which does not comprise more than Five Percent (5%) of such Competitive Business's then-outstanding stock. (b) Restriction on Competition Following Termination. During the one-year period following the applicable Date of Termination (the "Non-Compete Period"), Employee shall not: (i) engage in business as, or own an interest in, any individual proprietorship, partnership, corporation, limited liability company, joint venture, trust, or any other form of business entity, whether as an individual proprietor, partner, shareholder, joint venturer, officer, director, consultant, finder, broker, employee, trustee, or in any other manner whatsoever if such entity, within any state, province, country or other jurisdiction in which the Company markets and sells and/or licenses its technologies, products and services, markets products and/or services performing substantially the same functions as the Company's technologies, products and/or services, or any other technologies, products and/or services that are being developed, designed, manufactured, or sold by the Company as of the commencement of the Non-Compete Period; or 8 (ii) attempt in any manner to solicit from any customer business of the type performed by the Company or to persuade any customer of the Company to cease doing business or to reduce the amount of business which any such customer has customarily done or contemplates doing with the Company, whether or not the relationship between the Company and such customer was originally established in whole or in part through Employee's efforts; or (iii) solicit or induce any employee of the Company to terminate their employment with the Company. As used in this Section 8, the verb "employ" shall include its variations, for example, retain, engage, or conduct business with; the term the "Company" shall include subsidiaries, a parent, or affiliates, if any, of the Company; and the term "customer" shall mean anyone who is a customer of the Company as of the date immediately prior to or at any time during the Non-Compete Period. The term "solicit" shall not be deemed to include general solicitations not specifically directed toward customers of the Company. Notwithstanding the foregoing, nothing in this Section 8 shall limit Employee's ability during the Non-Compete Period to seek employment by a Competitive Business if Employee refrains from providing services of any kind to said Competitive Business until the expiration of the Non-Compete Period, at all times subject to the duty of confidentiality set forth in Section 6 above. (c) Acknowledgment. The parties acknowledge that the time, scope, geographic area, and other provisions of this Agreement have been specifically negotiated by the parties and agree that all such provisions are reasonable under the circumstances and are given as an integral and essential part of Employee's employment hereunder. In the event that any covenant contained in this Agreement shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it shall be interpreted to extend only over a maximum period of time for which it may be enforceable and/or over the maximum geographical area as to which it may be enforceable and/or to the maximum intent in all other respects as to which it may be enforceable, all as determined by such court in such action. 9. Severability. If any provision of this Agreement is held invalid or unenforceable, either in its entirety or by virtue of its scope or application to given circumstances, such provision shall thereupon be deemed modified only to the extent necessary to render same valid, or not applicable to given circumstances, or excised from this Agreement, as the situation may require, and this Agreement shall be construed and enforced as if such provision had been included herein as so modified in scope or application, or had not been included herein, as the case may be. Should this Agreement, or any one or more of its provisions hereof, be held to be invalid, illegal, or unenforceable within any governmental jurisdiction or subdivision thereof, the Agreement or any such provision or provisions shall not as a consequence thereof be deemed to be invalid, illegal, or unenforceable in any other governmental jurisdiction or subdivision thereof. 9 10. Enforcement. Except for the injunctive relief provided for immediately below, any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators sitting in a location selected by the party bringing the claim, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrators' award in any court having jurisdiction. Notwithstanding the foregoing, Employee hereby acknowledges that the Company would suffer irreparable injury if the provisions of Sections 6 through 8 above, which shall survive the termination of the Agreement, were breached and that the Company's remedies at law would be inadequate in the event of such breach. Accordingly, Employee hereby agrees that any such breach or threatened breach may, in addition to any and all other available remedies, be preliminarily enjoined by the Company. 11. Legal Fees and Expenses. In the event of litigation under this Agreement, each of the Company and Employee shall pay its own attorneys' fees and expenses. 12. Non-Assignability. In light of the unique personal services to be performed by Employee hereunder, it is acknowledged and agreed that any purported or attempted assignment or transfer by either party of this Agreement or any of Employee's duties, responsibilities, or obligations hereunder shall be void, and if purported or attempted by Employer other than pursuant to Section 14(e) below, shall be considered a termination without cause by Employer under Paragraph 5(e). 13. Notices. Any notice, request, demand, or other communication required or permitted under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or when mailed by certified mail, return-receipt requested, addressed as follows: To the Company: I-Link Incorporated 13751 So. Wadsworth Park Drive Draper, UT 84020 Attn: John W. Edwards, CEO With copy to: David E. Hardy, Esq. Hardy & Allen 818 East South Temple Salt Lake City, UT 84102 To Employee: Dror Nahumi 1 Main Street, Suite 510 Eatontown, New Jersey 07724 or to such other address or addresses as may be specified from time-to-time by notice; provided, however, that any notice of change of address shall not be effective until its receipt by the party to be charged therewith. 10 14. General. ------- (a) Amendments. neither this Agreement nor any of the terms or conditions hereof may be waived, amended, or modified except by means of a written instrument duly executed by the party to be charged therewith. (b) Captions and Headings. The captions and paragraph headings used in this Agreement are for convenience of reference only, and shall not affect the construction or interpretation of this Agreement or any of the provisions hereof. (c) Successors and Assigns. This Agreement and Employee's duties and rights hereunder shall not be assignable by Employee. This Agreement and the Company's duties and rights hereunder shall not be assignable except in the event of a merger, acquisition, sale of substantially all of the assets of the Company, or other bona fide business reorganization to which the Company is a party. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, personal representatives, successors, and permitted assigns. (d) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original hereof, but all of which together shall constitute one and the same instrument. (e) Entire Agreement. Except as otherwise set forth or referred to in this Agreement, this Agreement constitutes the sole and entire agreement and understanding between the parties hereto as to the subject matter hereof, and supersedes all prior discussions, agreements, and understandings of every kind and nature between them as to such subject matter. (f) Reliance by Third Parties. This Agreement is intended for the sole and exclusive benefit of the parties hereto and their respective heirs, executors, administrators, personal representatives, successors, and permitted assigns, and no other person or entity shall have any right to rely on this Agreement or to claim or derive any benefit therefrom absent the express written consent of the party to be charged with such reliance or benefit. (g) Governing Law. This Agreement shall be construed in accordance with governed by the laws of the State of Utah. (h) Inclusive of Subsidiaries. All references to the Company herein shall include reference to each of the Company's wholly-owned subsidiaries. 11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the date first set forth above. I-LINK INCORPORATED By: -------------------------------- John W. Edwards, CEO ----------------------------------- DROR NAHUMI 12 EX-10 3 EXHIBIT 10.2 Exhibit 10.2 ------------ I-LINK INCORPORATED EMPLOYMENT AGREEMENT David E. Hardy, Senior Vice President General Counsel THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into by and between I-LINK INCORPORATED, a Florida corporation with its principal place of business located at 13751 South Wadsworth Park Drive, Suite 200, Salt Lake City, Utah 84120 (the "Company"), and DAVID E. HARDY ("Employee"), effective this 3rdth day of January, 2000; RECITALS WHEREAS, the Company, itself and through its subsidiaries, is in the business of developing, marketing and providing telephony and communications products and services; and WHEREAS, Employee has acknowledged skills and experience in managing corporate legal affairs; and WHEREAS, the Company desires to obtain the benefit of Employee's knowledge, skills, and experience and assure itself of the ongoing right to Employee's services from and after the date hereof, and is willing to do so on the terms and conditions set forth in this Agreement; and WHEREAS, Employee is willing and able to render services to the Company, from and after the date hereof, on the terms and conditions set forth in this Agreement; A G R E E M E N T S NOW, THEREFORE, in consideration of the premises and the mutual agreements, provisions, and covenants contained in this Agreement, the Company and Employee hereby agree as follows: 1. Employment. ---------- (a) Title and Duties of Employee. Subject to all of the terms and conditions herein provided, the Company hereby employs Employee in the position of Senior Vice President and General Counsel, and Employee hereby accepts such employment with the Company. Employee's duties shall consist of those generally associated with his title, as well as those duties assigned to him from time-to-time by the Company, consistent with Employee's position and qualifications and the best interests of the Company. Employee shall at all times be subject to and shall observe and carry out such reasonable rules, regulations, policies, directions, and restrictions as may be established from time-to-time by the Company. (b) Performance. Throughout the Employment Term, Employee shall devote his business time, attention, knowledge, and skills, faithfully diligently, and to the best of his ability, to the active performance of his duties and responsibilities hereunder, and do such traveling as may reasonably be required in connection with the performance of such duties and responsibilities. Employee shall be entitled to maintain his offices separate from those of the Company (at the Company's expense), and to engage in limited legal representation of clients provided it does not conflict or interfere with the performance of his duties hereunder. 2. Term of Employment. Unless terminated as provided in Section 5 hereof, the term of this Agreement shall be for a period of three (3) years, commencing on the date hereof and continuing through and including the day immediately preceding the second anniversary of the date hereof (the "Initial Period"), and thereafter shall automatically continue on a year-to-year basis (including the Initial Period, the "Employment Term") unless either party shall deliver written notice to the other party not more than sixty (60), nor less than thirty (30), days preceding the expiration of the Initial Period or any one-year extension thereof of its intention not to extend the term of this Agreement. 3. Compensation and Benefits. ------------------------- (a) Salary. For services rendered by Employee to the Company and upon the conditions that Employee fully and faithfully performs all of his duties and obligations owed during the Employment Term under this Agreement, the Company shall pay Employee an annual base salary equal to $200,000, payable in equal semi-monthly installments, less income tax withholdings and other normal employee deductions. This base salary set forth herein shall be reviewed annually by the Company at the end of each fiscal year of the Company (hereafter "Fiscal Year") (with the first such review to occur after the Fiscal Year ending December 31, 2000, with respect to base salary for the Fiscal Year ending December 31, 2001), or at such other times as deemed appropriate by the Company, and may at the sole discretion of the Company, be adjusted by an amount which it deems appropriate, provided that said base salary shall not be less than $200,000. (b) Bonus Compensation. Employee shall be eligible to receive such bonus compensation, if any, as and when determined by the Company's board of directors commensurate with Employee's position as a Senior Vice President. (c) Stock Options. The Company grants to Employee non-qualified options to purchase 100,000 shares of its common stock at an exercise price of $2.750 per common share, which is equal to the closing price of the Company's publicly traded shares as of the effective date of this Agreement (the "Options"). The Options shall vest in twelve equal quarterly increments over a three-year period, with the first quarterly vesting to occur on the effective date of this Agreement for that partial quarter ended March 31, 2000, the second quarterly vesting to occur on April 1, 2000, and similarly on the first day of each subsequent 2 calendar quarter with the final quarterly vesting to occur October 1, 2002. A change of control of the Company shall not accelerate vesting of the Options, except in the event of a change of control pursuant to which the Company's stock is exchanged for the stock of another entity and the Options are not rolled-over or otherwise exchanged for similar options of such entity (with like terms and conditions). In such event all of Employee's then unvested Options shall vest and be exercisable immediately prior to the consummation of such transaction. It is the intent of the parties that the Options continue to vest on a quarterly basis according to their terms notwithstanding a change of control, without being subject to loss or forfeiture by virtue of a change of control. The Option grant shall be evidenced by a written Option Agreement, the terms of which shall be consistent with the terms of this Agreement. The Company's Board of Directors, at their sole discretion, shall determine what number of additional stock options, if any, shall be granted to Employee, and upon what terms. (d) Benefits. During the Employment Term, Employee shall be eligible to participate in and receive coverage and benefits under all group insurance, executive life insurance, pension, profit-sharing, bonus, stock option, stock ownership, and other employee benefit plans, programs, and arrangements of the Company which are now or hereafter adopted by the Company for the benefit of its employees, subject to and on a basis consistent with the terms, conditions, and overall administration of such plans, programs, and arrangements. (e) Expense Reimbursement. The Company shall reimburse Employee for the business expenses reasonably incurred by Employee within the scope of his employment, pursuant to standard employee expense reimbursement policy and procedure as established by the Company. (f) Severance. In the event this Agreement is terminated by the Company prior to the expiration of the full term of this Agreement for any reason other than for cause pursuant to Section 5(b) below, Employee shall be entitled to receive upon such termination a lump sum equal to Employee's salary payable over twelve (12) months, together with the immediate accelerated vesting of all the Options. 4. Compensation Upon Termination or During Disability. -------------------------------------------------- (a) Compensation Upon Termination. If Employee's employment hereunder is terminated under Section 5 hereof, Employee shall be entitled to exercise, pursuant to the terms and conditions of the Option Agreement, the Options that shall have vested as of the date of such termination, and the Company shall have no further liability under this Agreement except (i) to pay Employee within ten days of the Date of Termination any accrued salary or other compensation due under this Agreement on the Date of Termination (or in the event of Employee's subsequent death, to his estate or devisee, legatee, or other designee, as applicable), and (ii) provide Employee, or his estate, or devisee, legatee, or other designee, with any benefits payable (including any death benefit, if applicable) under all employee benefit plans, programs, or arrangements of the Company in which Employee is a participant on the Date of Termination. 3 (b) Compensation Upon Disability. During any period that Employee fails to perform his duties hereunder as a result of incapacity due to a "disabled condition," as such term is defined in Section 5(c) hereof (the "disability period"), Employee shall continue to receive his full base salary at the rate then in effect for the disability period until Employee's employment hereunder is terminated pursuant to Section 5(c) hereof; provided, however, that such salary payments so made to Employee during the first 180 days of the disability period shall be reduced by the sum of the amounts, if any, actually received by Employee prior to or during this period, as the result of such incapacity, under any disability benefit plan of the Company in which Employee participates. 5. Termination. ----------- (a) By Employee. This Agreement may be terminated by Employee at any time upon sixty (60) days written notice to the Company. In the event of such termination by Employee, Employee shall be entitled to exercise, pursuant to the terms of this Agreement and the Option Agreement, the Options that shall have vested as of the date of such termination, and the Company shall have no further obligation to Employee beyond the timely payment of all salary and bonus (if any) accrued through the date of such termination. (b) Cause. This Agreement may be terminated at any time at the option of the Company for cause. As used herein, the term "cause" shall mean and be limited to: (i) any felony conviction of Employee; (ii) Employee's willful misconduct or failure to reasonably perform in connection with the performance of Employee's duties, responsibilities, agreements, and covenants hereunder, or Employee's refusal to comply with the reasonable rules, regulations, policies, directions, and restrictions as may be established from time-to-time by the Company, which misconduct, non-performance, or refusal to so comply shall continue after written notice from the Company, such notice to specify the respects in which Employee is in violation; (iii) Employee's breach of the provisions of Sections 6 and 8 hereof; (iv) any illegal use by Employee of narcotics or other controlled substances; or (v) Employee's inability to perform his duties and responsibilities hereunder due to the issuance of an injunction or restraining order, which is not rescinded within 45 days of issuance. (c) Death. This Agreement shall terminate automatically upon the death of Employee. (d) Disability. In the event Employee becomes mentally or physically disabled during the Employment Term, Employee's employment hereunder shall terminate as of the date such disability is "established." As used in this Subsection, the term "disabled" means suffering from any mental or physical condition, other than that resulting from the use of alcohol or illegal use of narcotics or other controlled substances, which renders Employee unable to substantially perform all of his duties and services under this Agreement in a satisfactory manner substantially similar to his previous performance (a "disabled condition") for a period of one hundred twenty (120) consecutive days or for more than one hundred 4 twenty (120) days in any 12-month period. For purposes of this Subsection, the date that Employee's disability is "established" shall be, in the case of a disabled condition which exists for a period of 120 consecutive days, the 121st day on which such disabled condition exists, and, in the case of a disabled condition existing for more than 120 days in any 12-month period, the 121st day on which such disabled condition exists. (e) Impaired Health. Employee may terminate his employment hereunder if his health should become impaired to an extent that makes his continued performance of his duties and obligations hereunder hazardous to his physical or mental health or his life ("impaired health"), provided that Employee shall have furnished the Company with a written statement from a qualified doctor to such effect and, provided further, that, at the Company's request, Employee shall submit to an examination by a doctor selected by the Company and such doctor shall have concurred in the conclusion of Employee's doctor. (f) Reassignment, Relocation. This Agreement shall, at the option of the Employee, be deemed to have been terminated by the Company in the event of any of the following (i) without Employee's express written consent, the assignment to Employee of any duties or the significant reduction of Employee's duties, title, authority, or responsibilities, which is inconsistent with Employee's duties, title, authority, or responsibilities in effect immediately prior to such assignment, or the removal of Employee from such duties, title, authority, or responsibilities; or (ii) without Employee's express written consent, the relocation of Employee to a facility or a location more than forty-five (45) miles from Employee's then-present location. (g) Notice of Termination. Any termination of Employee's employment hereunder by the Company or by Employee (other than termination pursuant to Section 5(b) (death)) shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee's employment hereunder under the Section and Subsection so indicated. (h) Date of Termination. "Date of Termination" shall mean the following: if Employee's employment hereunder is terminated by (i) Sections 5(a) (Employee), 5(b) (cause), 5(d) (disability), or 5(e) (impaired health), the date specified in the Notice of Termination; (ii) 5(c) (death), the date of Employee's death; and (iii) Section 5(f) (Reassignment, Relocation) 30 days after delivery of the Notice of Termination; and (iv) for any other reason, the date on which the Notice of Termination is given. 6. Confidential Information. ------------------------ (a) Disclosure and Use. Employee shall not disclose or use at any time, either during or subsequent to the Employment Term, any trade secrets or other confidential information, whether or not patentable, of the Company or any other direct or indirect parent or subsidiary of the Company (collectively referred to herein as the "Company"), including but 5 not limited to, information and lists relating to customers, suppliers, or independent sales representatives, compensation of employees or independent sales representatives, products and product pricing, technical or non-technical data, programs, devices, methods, techniques, drawings, processes, or financial data, of which Employee is or becomes informed or aware during the Employment Term, whether or not developed by Employee, except (i) as may be required for Employee to perform Employee's employment duties with the Company, (ii) to the extent such information has been disclosed to Employee by a third party who is not subject to restriction on the dissemination of such information or becomes generally available to the public through no wrongful act of Employee, (iii) information which must be disclosed as a result of a subpoena or other legal process, after the Company has had the opportunity to request a suitable protective order for such information, or (iv) unless Employee shall first secure the Company's prior written authorization. This covenant shall survive the termination of Employee's employment hereunder, and shall remain in effect and be enforceable against Employee for so long as any such Company secret or confidential information retains economic value, whether actual or potential, from not being generally known to other persons who can obtain economic value from its disclosure or use. Employee shall execute such reasonable further agreements and/or confirmations of Employee's obligations to the Company concerning non-disclosure of Company trade secrets and confidential information as the Company may reasonably require from time-to-time. (b) Return of Materials. Upon termination of Employee's employment hereunder, Employee shall promptly deliver to the Company all customers lists, specifications, drawings, listings, documentation, manuals, letters, notes, notebooks, reports, and copies thereof, and all other materials of a secret or confidential nature relating to the Company's business, which are in the possession or under the control of Employee. 7. Inventions and Discoveries. -------------------------- (a) Disclosure of Employment Invention. Employee agrees for himself and his heirs, executors, and administrators that Employee will, without further consideration, disclose immediately to a person designated by the Company as its agent to receive such disclosures each and every discovery, invention, part thereof or improvement thereon, or works of authorship, as defined below ("Employment Invention") which Employee may conceive, develop, reduce to practice, or create, either solely or jointly with others, which is: (i) conceived, developed, reduced to practice or created (a) within the scope of Employee's employment, or (b) on the Company's time, or (c) with the aid, assistance, or use of any of the Company's property, equipment, facilities, supplies, resources, or intellectual property; or (ii) the result of any work, services, or duties performed by Employee for the Company; or 6 (iii) related to the current or demonstrably anticipated business, research, or development of the Company. (b) Assignment of Employee Invention. Employee hereby irrevocably assigns to the Company all of Employee's entire rights, title, interest, and Intellectual Property in and to the Employment Inventions referred to in Section 7(a), and will upon request and without further consideration do everything reasonably necessary or required to vest in the Company Employee's entire right, title, interest, and Intellectual Property in and to such Employment Inventions including executing all instruments and documents and performing all acts reasonably necessary or required for making, filing, or presenting any applicable for the benefit of the Company for Letters Patent or Copyrights in the United States or throughout the world for such Employment Inventions and executing assignments of such patents or applications thereof for the Company. (c) Definitions. As used herein, "Intellectual Property" means any and all patents, trade secrets, know-how, technology, confidential information, ideas, copyrights, trademarks, and service marks and any and all rights, applications, and registrations relating to them. "Works of authorship" mean any original work of authorship within the purview of the copyright laws of the United States, and both parties agree that all works of authorship created by Employee under Section 7(a) shall be works for hire within the meaning and purview of such copyright laws. (d) Exclusions. The foregoing provisions of Sections 7(a) and 8(b) do not apply to any invention not included in Section 7(a) as an Employment Invention and created by Employee entirely on his own time and with his own resources. (e) Recordkeeping. Employee agrees to keep and maintain, or assist in keeping and maintaining, such records (such as laboratory notebooks properly and periodically witnessed and understood) as will show the conception, reduction to practice and operation of all Employment Inventions, as well as such other records as the Company may request, which records shall be and remain the property of and available to, the Company. 8. Restrictive Covenant. -------------------- (a) Restriction on Competition During Employment Term. So long as Employee is employed by the Company, Employee shall not, without the prior written authorization of the Company, directly or indirectly render services of a business, professional or commercial nature (whether for compensation or otherwise) to any person or entity engaged in any business which competes either directly or indirectly with the Company (a "Competitive Business") during the Employment Term, or engage in any activity whether along, as a partner, or as an officer, director, employee, consultant independent contractor, or stockholder in any Competitive Business. Notwithstanding the foregoing, this section shall not prevent Employee from purchasing an equity interest in any Competitive Business as a strictly passive investment and which does not comprise more than Five Percent (5%) of such Competitive Business's then-outstanding stock. 7 (b) Restriction on Competition Following Termination. During the twelve-month period following the applicable Date of Termination (the "Non-Compete Period"), Employee shall not: (i) engage in business as, or own an interest in, directly or indirectly, any individual proprietorship, partnership, corporation, joint venture, trust, or any other form of business entity that is a Competitive Business, whether as an individual proprietor, partner, shareholder, joint venturer, officer, director, consultant, finder, broker, employee, trustee, or in any other manner whatsoever if such entity, within any state, province, country or other jurisdiction in which the Company markets and sells its products and services, develops and/or markets products and/or services that either directly or indirectly compete with the Company's products and/or services in existence or that Employee has actual knowledge are being actively developed by the Company at the commencement of the Non-Compete Period; or (ii) attempt in any manner to solicit from any customer business of the type performed by the Company or to persuade any customer of the Company to cease doing business or to reduce the amount of business which any such customer has customarily done or contemplates doing with the Company, whether or not the relationship between the Company and such customer was originally established in whole or in part through Employee's efforts; or employ or attempt to employ or assist anyone else to employ an person who is at such time, or at any time during the preceding six months was, an employee or independent sales representative of or consultant to the Company, provided that this clause shall not restrict Employee from employing a third-party vendor who supplies generic services to the industry. As used in this Section 8, the verb "employ" shall include its variations, for example, retain, engage, or conduct business with; the term the "Company" shall include subsidiaries, a parent, or affiliates, if any, of the Company; and the term "customer" shall mean anyone who is a customer of the Company as of the date immediately prior to or at any time during the Non-Compete Period. Notwithstanding the foregoing, nothing in this Section 8 shall limit Employee's ability during the Non-Compete Period to seek employment by a Competitive Business if Employee refrains from providing services of any kind to said Competitive Business until the expiration of the Non-Compete Period. So long as Employee fulfills the performance obligations contained in Section 1(b), nothing in this Agreement shall limit or prevent Employee, during the Employment Term and thereafter during the Non-Compete Period, from engaging in business as, or own an interest in, directly or indirectly, any individual proprietorship, partnership, corporation, joint venture, trust, or any other form of business entity, whether as an individual proprietor, partner shareholder, joint venturer, officer, director, consultant, finder, broker, employee, trustee, or in any other manner whatsoever if such entity does not market products and/or services performing substantially the same functions as the Company's products and/or services in existence or that Employee 8 has actual knowledge are being actively developed by the Company both during the Employment Term and at the commencement of the Non-Compete Period. (c) Acknowledgment. The parties acknowledge that the time, scope, geographic area, and other provisions of this Agreement have been specifically negotiated by the parties and agree that all such provisions are reasonable under the circumstances and are given as an integral and essential part of Employee's employment hereunder. In the event that any covenant contained in this Agreement shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it shall be interpreted to extend only over a maximum period of time for which it may be enforceable and/or over the maximum geographical area as to which it may be enforceable and/or to the maximum intent in all other respects as to which it may be enforceable, all as determined by such court in such action. 9. Severability. If any provision of this Agreement is held invalid or unenforceable, either in its entirety or by virtue of its scope or application to given circumstances, such provision shall thereupon be deemed modified only to the extent necessary to render same valid, or not applicable to given circumstances, or excised from this Agreement, as the situation may require, and this Agreement shall be construed and enforced as if such provision had been included herein as so modified in scope or application, or had not been included herein, as the case may be. Should this Agreement, or any one or more of its provisions hereof, be held to be invalid, illegal, or unenforceable within any governmental jurisdiction or subdivision thereof, the Agreement or any such provision or provisions shall not as a consequence thereof be deemed to be invalid, illegal, or unenforceable in any other governmental jurisdiction or subdivision thereof. 10. Enforcement. The Company will be entitled to institute proceedings and avail itself of all remedies at law or in equity to recover damages occasioned by a breach or threatened breach by the other party of any of the provisions herein and shall have the right to pursue one or more of such proceedings and remedies simultaneously or from time-to-time. Employee hereby acknowledges that the Company would suffer irreparable injury if the provisions of Sections 6 through 8 above, which shall survive the termination of the Agreement, were breached and that the Company's remedies at law would be inadequate in the event of such breach. Accordingly, Employee hereby agrees that any such breach or threatened breach may, in addition to any and all other available remedies, be preliminarily enjoined by the Company. 11. Legal Fees and Expenses. In the event of litigation under this Agreement, each of the Company and Employee shall pay its own attorneys' fees and expenses. 12. Non-Assignability. In light of the unique personal services to be performed by Employee hereunder, it is acknowledged and agreed that any purported or attempted assignment or transfer by either party of this Agreement or any of Employee's duties, responsibilities, or obligations hereunder shall be void, and if purported or attempted by the 9 Company, shall be considered a termination without cause by the Company under Paragraph 5(c). 13. Notices. Any notice, request, demand, or other communication required or permitted under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or when mailed by certified mail, return-receipt requested, addressed as follows: To the Company: I-Link Incorporated 13751 So. Wadsworth Park Drive Suite 200 Draper, UT 84020 Attn: John Edwards, CEO To Employee: David E. Hardy 7314 Pine Ridge Drive Park City, UT 84098 or to such other address or addresses as may be specified from time-to-time by notice; provided, however, that any notice of change of address shall not be effective until its receipt by the party to be charged therewith. 14. General. ------- (a) Amendments. neither this Agreement nor any of the terms or conditions hereof may be waived, amended, or modified except by means of a written instrument duly executed by the party to be charged therewith. (b) Captions and Headings. The captions and paragraph headings used in this Agreement are for convenience of reference only, and shall not affect the construction or interpretation of this Agreement or any of the provisions hereof. (c) Successors and Assigns. This Agreement and Employee's duties and rights hereunder shall not be assignable by Employee. This Agreement and the Company's duties and rights hereunder shall be assignable in the event of a merger, acquisition or other bona fide business reorganization to which the Company is a party. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, personal representatives, successors, and permitted assigns. (d) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original hereof, but all of which together shall constitute one and the same instrument. 10 (e) Entire Agreement. Except as otherwise set forth or referred to in this Agreement, this Agreement constitutes the sole and entire agreement and understanding between the parties hereto as to the subject matter hereof, and supersedes all prior discussions, agreements, and understandings of every kind and nature between them as to such subject matter. (f) Reliance by Third Parties. This Agreement is intended for the sole and exclusive benefit of the parties hereto and their respective heirs, executors, administrators, personal representatives, successors, and permitted assigns, and no other person or entity shall have any right to rely on this Agreement or to claim or derive any benefit therefrom absent the express written consent of the party to be charged with such reliance or benefit. (g) Governing Law. This Agreement shall be construed in accordance with governed by the laws of the State of Utah. 11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the date first set forth above. I-LINK INCORPORATED By: ----------------------------------- John W. Edwards, CEO -------------------------------------- DAVID E. HARDY 12 EX-10 4 EXHIBIT 10.3 Exhibit 10.3 ------------ I-LINK INCORPORATED EMPLOYMENT AGREEMENT John M. Ames, Senior Vice President Chief Operating Officer and Acting Chief Financial Officer THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into by and between I-LINK INCORPORATED, a Florida corporation with its principal place of business located at 13751 South Wadsworth Park Drive, Suite 200, Salt Lake City, Utah 84120 (the "Company"), and JOHN M. AMES ("Employee"), effective this 3rdth day of January, 2000; RECITALS WHEREAS, the Company, itself and through its subsidiaries, is in the business of developing, marketing and providing telephony and communications products and services; and WHEREAS, Employee has acknowledged skills and experience in managing corporate operations and corporate finances; and WHEREAS, the Company desires to obtain the benefit of Employee's knowledge, skills, and experience and assure itself of the ongoing right to Employee's services from and after the date hereof, and is willing to do so on the terms and conditions set forth in this Agreement; and WHEREAS, Employee is willing and able to render services to the Company, from and after the date hereof, on the terms and conditions set forth in this Agreement; A G R E E M E N T S NOW, THEREFORE, in consideration of the premises and the mutual agreements, provisions, and covenants contained in this Agreement, the Company and Employee hereby agree as follows: 1. Employment. ---------- (a) Title and Duties of Employee. Subject to all of the terms and conditions herein provided, the Company hereby employs Employee in the position of Senior Vice President, Chief Operating Officer, and Acting Chief Financial Officer, and Employee hereby accepts such employment with the Company. Employee's duties shall consist of those generally associated with his title, as well as those duties assigned to him from time-to-time by the Company, consistent with Employee's position and qualifications and the best interests of the Company. Employee shall at all times be subject to and shall observe and carry out such reasonable rules, regulations, policies, directions, and restrictions as may be established from time-to-time by the Company. (b) Performance. Throughout the Employment Term, Employee shall devote his full business time, attention, knowledge, and skills, faithfully diligently, and to the best of his ability, to the active performance of his duties and responsibilities hereunder, and do such traveling as may reasonably be required in connection with the performance of such duties and responsibilities. 2. Term of Employment. Unless terminated as provided in Section 5 hereof, the term of this Agreement shall be for a period of three (3) years, commencing on the date hereof and continuing through and including the day immediately preceding the second anniversary of the date hereof (the "Initial Period"), and thereafter shall automatically continue on a year-to-year basis (including the Initial Period, the "Employment Term") unless either party shall deliver written notice to the other party not more than sixty (60), nor less than thirty (30), days preceding the expiration of the Initial Period or any one-year extension thereof of its intention not to extend the term of this Agreement. 3. Compensation and Benefits. ------------------------- (a) Salary. For services rendered by Employee to the Company and upon the conditions that Employee fully and faithfully performs all of his duties and obligations owed during the Employment Term under this Agreement, the Company shall pay Employee an annual base salary equal to $165,000, payable in equal semi-monthly installments, less income tax withholdings and other normal employee deductions. This base salary set forth herein shall be reviewed annually by the Company at the end of each fiscal year of the Company (hereafter "Fiscal Year") (with the first such review to occur after the Fiscal Year ending December 31, 2000, with respect to base salary for the Fiscal Year ending December 31, 2001), or at such other times as deemed appropriate by the Company, and may at the sole discretion of the Company, be adjusted by an amount which it deems appropriate, provided that said base salary shall not be less than $165,000. (b) Bonus Compensation. Employee shall be eligible to receive such bonus compensation, if any, as and when determined by the Company's board of directors commensurate with Employee's position as a Senior Vice President. (c) Stock Options. The Company grants to Employee non-qualified options to purchase 300,000 shares of its common stock at an exercise price of $2.750 per common 2 share, which is equal to the closing price of the Company's publicly traded shares as of the effective date of this Agreement (the "Options"). To the extent any number of the Options are required to be subject to the vote of the Company's shareholders under applicable law, rule or regulation, such number of Options are granted subject to ratification by the Company's shareholders at its next annual shareholders' meeting. The Options shall vest in twelve equal quarterly increments over a three-year period, with the first quarterly vesting to occur on the effective date of this Agreement for that partial quarter ended March 31, 2000, the second quarterly vesting to occur on April 1, 2000, and similarly on the first day of each subsequent calendar quarter with the final quarterly vesting to occur October 1, 2002. A change of control of the Company shall not accelerate vesting of the Options, except in the event of a change of control pursuant to which the Company's stock is exchanged for the stock of another entity and the Options are not rolled-over or otherwise exchanged for similar options of such entity (with like terms and conditions). In such event all of Employee's then unvested Options shall vest and be exercisable immediately prior to the consummation of such transaction. It is the intent of the parties that the Options continue to vest on a quarterly basis according to their terms notwithstanding a change of control, without being subject to loss or forfeiture by virtue of a change of control. The Option grant shall be evidenced by a written Option Agreement, the terms of which shall be consistent with the terms of this Agreement. The Company's Board of Directors, at their sole discretion, shall determine what number of additional stock options, if any, shall be granted to Employee, and upon what terms. (d) Benefits. During the Employment Term, Employee shall be eligible to participate in and receive coverage and benefits under all group insurance, executive life insurance, pension, profit-sharing, bonus, stock option, stock ownership, and other employee benefit plans, programs, and arrangements of the Company which are now or hereafter adopted by the Company for the benefit of its employees, subject to and on a basis consistent with the terms, conditions, and overall administration of such plans, programs, and arrangements. (e) Expense Reimbursement. The Company shall reimburse Employee for the business expenses reasonably incurred by Employee within the scope of his employment, pursuant to standard employee expense reimbursement policy and procedure as established by the Company. (f) Severance. In the event this Agreement is terminated by the Company prior to the expiration of the full term of this Agreement for any reason other than for cause pursuant to Section 5(b) below, Employee shall be entitled to receive upon such termination a lump sum equal to Employee's salary payable over twelve (12) months, together with the immediate accelerated vesting of all the Options. 4. Compensation Upon Termination or During Disability. -------------------------------------------------- (a) Compensation Upon Termination. If Employee's employment hereunder is terminated under Section 5 hereof, Employee shall be entitled to exercise, pursuant to the 3 terms and conditions of the Option Agreement, the Options that shall have vested as of the date of such termination, and the Company shall have no further liability under this Agreement except (i) to pay Employee within ten days of the Date of Termination any accrued salary or other compensation due under this Agreement on the Date of Termination (or in the event of Employee's subsequent death, to his estate or devisee, legatee, or other designee, as applicable), and (ii) provide Employee, or his estate, or devisee, legatee, or other designee, with any benefits payable (including any death benefit, if applicable) under all employee benefit plans, programs, or arrangements of the Company in which Employee is a participant on the Date of Termination. (b) Compensation Upon Disability. During any period that Employee fails to perform his duties hereunder as a result of incapacity due to a "disabled condition," as such term is defined in Section 5(c) hereof (the "disability period"), Employee shall continue to receive his full base salary at the rate then in effect for the disability period until Employee's employment hereunder is terminated pursuant to Section 5(c) hereof; provided, however, that such salary payments so made to Employee during the first 180 days of the disability period shall be reduced by the sum of the amounts, if any, actually received by Employee prior to or during this period, as the result of such incapacity, under any disability benefit plan of the Company in which Employee participates. 5. Termination. ----------- (a) By Employee. This Agreement may be terminated by Employee at any time upon sixty (60) days written notice to the Company. In the event of such termination by Employee, Employee shall be entitled to exercise, pursuant to the terms of this Agreement and the Option Agreement, the Options that shall have vested as of the date of such termination, and the Company shall have no further obligation to Employee beyond the timely payment of all salary and bonus (if any) accrued through the date of such termination. (b) Cause. This Agreement may be terminated at any time at the option of the Company for cause. As used herein, the term "cause" shall mean and be limited to: (i) any felony conviction of Employee; (ii) Employee's willful misconduct or failure to reasonably perform in connection with the performance of Employee's duties, responsibilities, agreements, and covenants hereunder, or Employee's refusal to comply with the reasonable rules, regulations, policies, directions, and restrictions as may be established from time-to-time by the Company, which misconduct, non-performance, or refusal to so comply shall continue after written notice from the Company, such notice to specify the respects in which Employee is in violation; (iii) Employee's breach of the provisions of Sections 6 and 8 hereof; (iv) any illegal use by Employee of narcotics or other controlled substances; or (v) Employee's inability to perform his duties and responsibilities hereunder due to the issuance of an injunction or restraining order, which is not rescinded within 45 days of issuance. 4 (c) Death. This Agreement shall terminate automatically upon the death of Employee. (d) Disability. In the event Employee becomes mentally or physically disabled during the Employment Term, Employee's employment hereunder shall terminate as of the date such disability is "established." As used in this Subsection, the term "disabled" means suffering from any mental or physical condition, other than that resulting from the use of alcohol or illegal use of narcotics or other controlled substances, which renders Employee unable to substantially perform all of his duties and services under this Agreement in a satisfactory manner substantially similar to his previous performance (a "disabled condition") for a period of one hundred twenty (120) consecutive days or for more than one hundred twenty (120) days in any 12-month period. For purposes of this Subsection, the date that Employee's disability is "established" shall be, in the case of a disabled condition which exists for a period of 120 consecutive days, the 121st day on which such disabled condition exists, and, in the case of a disabled condition existing for more than 120 days in any 12-month period, the 121st day on which such disabled condition exists. (e) Impaired Health. Employee may terminate his employment hereunder if his health should become impaired to an extent that makes his continued performance of his duties and obligations hereunder hazardous to his physical or mental health or his life ("impaired health"), provided that Employee shall have furnished the Company with a written statement from a qualified doctor to such effect and, provided further, that, at the Company's request, Employee shall submit to an examination by a doctor selected by the Company and such doctor shall have concurred in the conclusion of Employee's doctor. (f) Reassignment, Relocation. This Agreement shall, at the option of the Employee, be deemed to have been terminated by the Company in the event of any of the following (i) without Employee's express written consent, the assignment to Employee of any duties or the significant reduction of Employee's duties, title, authority, or responsibilities, which is inconsistent with Employee's duties, title, authority, or responsibilities in effect immediately prior to such assignment, or the removal of Employee from such duties, title, authority, or responsibilities; excepting, however, from the provisions of this Subsection (f)(i) Employee's current title, authority and responsibilities as Acting Chief Financial Officer, which the Company may at its discretion reassign away from Employee without such being deemed a termination; or (ii) without Employee's express written consent, the relocation of Employee to a facility or a location more than forty-five (45) miles from Employee's then-present location. (g) Notice of Termination. Any termination of Employee's employment hereunder by the Company or by Employee (other than termination pursuant to Section 5(b) (death)) shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee's employment hereunder under the Section and Subsection so indicated. 5 (h) Date of Termination. "Date of Termination" shall mean the following: if Employee's employment hereunder is terminated by (i) Sections 5(a) (Employee), 5(b) (cause), 5(d) (disability), or 5(e) (impaired health), the date specified in the Notice of Termination; (ii) 5(c) (death), the date of Employee's death; and (iii) Section 5(f) (Reassignment, Relocation) 30 days after delivery of the Notice of Termination; and (iv) for any other reason, the date on which the Notice of Termination is given. 6. Confidential Information. ------------------------ (a) Disclosure and Use. Employee shall not disclose or use at any time, either during or subsequent to the Employment Term, any trade secrets or other confidential information, whether or not patentable, of the Company or any other direct or indirect parent or subsidiary of the Company (collectively referred to herein as the "Company"), including but not limited to, information and lists relating to customers, suppliers, or independent sales representatives, compensation of employees or independent sales representatives, products and product pricing, technical or non-technical data, programs, devices, methods, techniques, drawings, processes, or financial data, of which Employee is or becomes informed or aware during the Employment Term, whether or not developed by Employee, except (i) as may be required for Employee to perform Employee's employment duties with the Company, (ii) to the extent such information has been disclosed to Employee by a third party who is not subject to restriction on the dissemination of such information or becomes generally available to the public through no wrongful act of Employee, (iii) information which must be disclosed as a result of a subpoena or other legal process, after the Company has had the opportunity to request a suitable protective order for such information, or (iv) unless Employee shall first secure the Company's prior written authorization. This covenant shall survive the termination of Employee's employment hereunder, and shall remain in effect and be enforceable against Employee for so long as any such Company secret or confidential information retains economic value, whether actual or potential, from not being generally known to other persons who can obtain economic value from its disclosure or use. Employee shall execute such reasonable further agreements and/or confirmations of Employee's obligations to the Company concerning non-disclosure of Company trade secrets and confidential information as the Company may reasonably require from time-to-time. (b) Return of Materials. Upon termination of Employee's employment hereunder, Employee shall promptly deliver to the Company all customers lists, specifications, drawings, listings, documentation, manuals, letters, notes, notebooks, reports, and copies thereof, and all other materials of a secret or confidential nature relating to the Company's business, which are in the possession or under the control of Employee. 7. Inventions and Discoveries. -------------------------- 6 (a) Disclosure of Employment Invention. Employee agrees for himself and his heirs, executors, and administrators that Employee will, without further consideration, disclose immediately to a person designated by the Company as its agent to receive such disclosures each and every discovery, invention, part thereof or improvement thereon, or works of authorship, as defined below ("Employment Invention") which Employee may conceive, develop, reduce to practice, or create, either solely or jointly with others, which is: (i) conceived, developed, reduced to practice or created (a) within the scope of Employee's employment, or (b) on the Company's time, or (c) with the aid, assistance, or use of any of the Company's property, equipment, facilities, supplies, resources, or intellectual property; or (ii) the result of any work, services, or duties performed by Employee for the Company; or (iii) related to the current or demonstrably anticipated business, research, or development of the Company. (b) Assignment of Employee Invention. Employee hereby irrevocably assigns to the Company all of Employee's entire rights, title, interest, and Intellectual Property in and to the Employment Inventions referred to in Section 7(a), and will upon request and without further consideration do everything reasonably necessary or required to vest in the Company Employee's entire right, title, interest, and Intellectual Property in and to such Employment Inventions including executing all instruments and documents and performing all acts reasonably necessary or required for making, filing, or presenting any applicable for the benefit of the Company for Letters Patent or Copyrights in the United States or throughout the world for such Employment Inventions and executing assignments of such patents or applications thereof for the Company. (c) Definitions. As used herein, "Intellectual Property" means any and all patents, trade secrets, know-how, technology, confidential information, ideas, copyrights, trademarks, and service marks and any and all rights, applications, and registrations relating to them. "Works of authorship" mean any original work of authorship within the purview of the copyright laws of the United States, and both parties agree that all works of authorship created by Employee under Section 7(a) shall be works for hire within the meaning and purview of such copyright laws. (d) Exclusions. The foregoing provisions of Sections 7(a) and 8(b) do not apply to any invention not included in Section 7(a) as an Employment Invention and created by Employee entirely on his own time and with his own resources. (e) Recordkeeping. Employee agrees to keep and maintain, or assist in keeping and maintaining, such records (such as laboratory notebooks properly and periodically witnessed and understood) as will show the conception, reduction to practice and operation of 7 all Employment Inventions, as well as such other records as the Company may request, which records shall be and remain the property of and available to, the Company. 8. Restrictive Covenant. -------------------- (a) Restriction on Competition During Employment Term. So long as Employee is employed by the Company, Employee shall not, without the prior written authorization of the Company, directly or indirectly render services of a business, professional or commercial nature (whether for compensation or otherwise) to any person or entity engaged in any business which competes either directly or indirectly with the Company (a "Competitive Business") during the Employment Term, or engage in any activity whether along, as a partner, or as an officer, director, employee, consultant independent contractor, or stockholder in any Competitive Business. Notwithstanding the foregoing, this section shall not prevent Employee from purchasing an equity interest in any Competitive Business as a strictly passive investment and which does not comprise more than Five Percent (5%) of such Competitive Business's then-outstanding stock. (b) Restriction on Competition Following Termination. During the twelve-month period following the applicable Date of Termination (the "Non-Compete Period"), Employee shall not: (i) engage in business as, or own an interest in, directly or indirectly, any individual proprietorship, partnership, corporation, joint venture, trust, or any other form of business entity that is a Competitive Business, whether as an individual proprietor, partner, shareholder, joint venturer, officer, director, consultant, finder, broker, employee, trustee, or in any other manner whatsoever if such entity, within any state, province, country or other jurisdiction in which the Company markets and sells its products and services, develops and/or markets products and/or services that either directly or indirectly compete with the Company's products and/or services in existence or that Employee has actual knowledge are being actively developed by the Company at the commencement of the Non-Compete Period; or (ii) attempt in any manner to solicit from any customer business of the type performed by the Company or to persuade any customer of the Company to cease doing business or to reduce the amount of business which any such customer has customarily done or contemplates doing with the Company, whether or not the relationship between the Company and such customer was originally established in whole or in part through Employee's efforts; or employ or attempt to employ or assist anyone else to employ an person who is at such time, or at any time during the preceding six months was, an employee or independent sales representative of or consultant to the Company, provided that this clause shall not restrict Employee from employing a third-party vendor who supplies generic services to the industry. 8 As used in this Section 8, the verb "employ" shall include its variations, for example, retain, engage, or conduct business with; the term the "Company" shall include subsidiaries, a parent, or affiliates, if any, of the Company; and the term "customer" shall mean anyone who is a customer of the Company as of the date immediately prior to or at any time during the Non-Compete Period. Notwithstanding the foregoing, nothing in this Section 8 shall limit Employee's ability during the Non-Compete Period to seek employment by a Competitive Business if Employee refrains from providing services of any kind to said Competitive Business until the expiration of the Non-Compete Period. So long as Employee fulfills the performance obligations contained in Section 1(b), nothing in this Agreement shall limit or prevent Employee, during the Employment Term and thereafter during the Non-Compete Period, from engaging in business as, or own an interest in, directly or indirectly, any individual proprietorship, partnership, corporation, joint venture, trust, or any other form of business entity, whether as an individual proprietor, partner shareholder, joint venturer, officer, director, consultant, finder, broker, employee, trustee, or in any other manner whatsoever if such entity does not market products and/or services performing substantially the same functions as the Company's products and/or services in existence or that Employee has actual knowledge are being actively developed by the Company both during the Employment Term and at the commencement of the Non-Compete Period. (c) Acknowledgment. The parties acknowledge that the time, scope, geographic area, and other provisions of this Agreement have been specifically negotiated by the parties and agree that all such provisions are reasonable under the circumstances and are given as an integral and essential part of Employee's employment hereunder. In the event that any covenant contained in this Agreement shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it shall be interpreted to extend only over a maximum period of time for which it may be enforceable and/or over the maximum geographical area as to which it may be enforceable and/or to the maximum intent in all other respects as to which it may be enforceable, all as determined by such court in such action. 9. Severability. If any provision of this Agreement is held invalid or unenforceable, either in its entirety or by virtue of its scope or application to given circumstances, such provision shall thereupon be deemed modified only to the extent necessary to render same valid, or not applicable to given circumstances, or excised from this Agreement, as the situation may require, and this Agreement shall be construed and enforced as if such provision had been included herein as so modified in scope or application, or had not been included herein, as the case may be. Should this Agreement, or any one or more of its provisions hereof, be held to be invalid, illegal, or unenforceable within any governmental jurisdiction or subdivision thereof, the Agreement or any such provision or provisions shall not as a consequence thereof be deemed to be invalid, illegal, or unenforceable in any other governmental jurisdiction or subdivision thereof. 9 10. Enforcement. The Company will be entitled to institute proceedings and avail itself of all remedies at law or in equity to recover damages occasioned by a breach or threatened breach by the other party of any of the provisions herein and shall have the right to pursue one or more of such proceedings and remedies simultaneously or from time-to-time. Employee hereby acknowledges that the Company would suffer irreparable injury if the provisions of Sections 6 through 8 above, which shall survive the termination of the Agreement, were breached and that the Company's remedies at law would be inadequate in the event of such breach. Accordingly, Employee hereby agrees that any such breach or threatened breach may, in addition to any and all other available remedies, be preliminarily enjoined by the Company. 11. Legal Fees and Expenses. In the event of litigation under this Agreement, each of the Company and Employee shall pay its own attorneys' fees and expenses. 12. Non-Assignability. In light of the unique personal services to be performed by Employee hereunder, it is acknowledged and agreed that any purported or attempted assignment or transfer by either party of this Agreement or any of Employee's duties, responsibilities, or obligations hereunder shall be void, and if purported or attempted by the Company, shall be considered a termination without cause by the Company under Paragraph 5(c). 13. Notices. Any notice, request, demand, or other communication required or permitted under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or when mailed by certified mail, return-receipt requested, addressed as follows: To the Company: I-Link Incorporated 13751 So. Wadsworth Park Drive Suite 200 Draper, UT 84020 Attn: John Edwards, CEO To Employee: John M. Ames 1413 E. Vestry Circle Draper, UT 84092 or to such other address or addresses as may be specified from time-to-time by notice; provided, however, that any notice of change of address shall not be effective until its receipt by the party to be charged therewith. 10 14. General. ------- (a) Amendments. neither this Agreement nor any of the terms or conditions hereof may be waived, amended, or modified except by means of a written instrument duly executed by the party to be charged therewith. (b) Captions and Headings. The captions and paragraph headings used in this Agreement are for convenience of reference only, and shall not affect the construction or interpretation of this Agreement or any of the provisions hereof. (c) Successors and Assigns. This Agreement and Employee's duties and rights hereunder shall not be assignable by Employee. This Agreement and the Company's duties and rights hereunder shall be assignable in the event of a merger, acquisition or other bona fide business reorganization to which the Company is a party. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, personal representatives, successors, and permitted assigns. (d) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original hereof, but all of which together shall constitute one and the same instrument. (e) Entire Agreement. Except as otherwise set forth or referred to in this Agreement, this Agreement constitutes the sole and entire agreement and understanding between the parties hereto as to the subject matter hereof, and supersedes all prior discussions, agreements, and understandings of every kind and nature between them as to such subject matter. (f) Reliance by Third Parties. This Agreement is intended for the sole and exclusive benefit of the parties hereto and their respective heirs, executors, administrators, personal representatives, successors, and permitted assigns, and no other person or entity shall have any right to rely on this Agreement or to claim or derive any benefit therefrom absent the express written consent of the party to be charged with such reliance or benefit. (g) Governing Law. This Agreement shall be construed in accordance with governed by the laws of the State of Utah. 11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the date first set forth above. I-LINK INCORPORATED By: ----------------------------------- John W. Edwards, CEO -------------------------------------- JOHN M. AMES 12 EX-10 5 EXHIBIT 10.4 Exhibit 10.4 ------------ I-LINK INCORPORATED EMPLOYMENT AGREEMENT Alex Radulovic Vice President, Technology THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into by and between I-LINK INCORPORATED, a Florida corporation with its principal place of business located at 13751 South Wadsworth Park Drive, Suite 200, Salt Lake City, Utah 84120 (the "Company"), and ALEX RADULOVIC ("Employee"), effective this 3rdth day of January, 2000; RECITALS WHEREAS, the Company, itself and through its subsidiaries, is in the business of developing, marketing and providing telephony and communications products and services; and WHEREAS, Employee has acknowledged skills and experience research and technology; and WHEREAS, the Company desires to obtain the benefit of Employee's knowledge, skills, and experience and assure itself of the ongoing right to Employee's services from and after the date hereof, and is willing to do so on the terms and conditions set forth in this Agreement; and WHEREAS, Employee is willing and able to render services to the Company, from and after the date hereof, on the terms and conditions set forth in this Agreement; A G R E E M E N T S NOW, THEREFORE, in consideration of the premises and the mutual agreements, provisions, and covenants contained in this Agreement, the Company and Employee hereby agree as follows: 1. Employment. ---------- (a) Title and Duties of Employee. Subject to all of the terms and conditions herein provided, the Company hereby employs Employee in the position of Vice President, Technology, and Employee hereby accepts such employment with the Company. Employee's duties shall consist of those generally associated with his title, as well as those duties assigned to him from time-to-time by the Company, consistent with Employee's position and qualifications and the best interests of the Company. Employee shall at all times be subject to and shall observe and carry out such reasonable rules, regulations, policies, directions, and restrictions as may be established from time-to-time by the Company. (b) Performance. Throughout the Employment Term, Employee shall devote his full business time, attention, knowledge, and skills, faithfully diligently, and to the best of his ability, to the active performance of his duties and responsibilities hereunder, and do such traveling as may reasonably be required in connection with the performance of such duties and responsibilities. 2. Term of Employment. Unless terminated as provided in Section 5 hereof, the term of this Agreement shall be for a period of three (3) years, commencing on the date hereof and continuing through and including the day immediately preceding the second anniversary of the date hereof (the "Initial Period"), and thereafter shall automatically continue on a year-to-year basis (including the Initial Period, the "Employment Term") unless either party shall deliver written notice to the other party not more than sixty (60), nor less than thirty (30), days preceding the expiration of the Initial Period or any one-year extension thereof of its intention not to extend the term of this Agreement. 3. Compensation and Benefits. ------------------------- (a) Salary. For services rendered by Employee to the Company and upon the conditions that Employee fully and faithfully performs all of his duties and obligations owed during the Employment Term under this Agreement, the Company shall pay Employee an annual base salary equal to $200,000, payable in equal semi-monthly installments, less income tax withholdings and other normal employee deductions. This base salary set forth herein shall be reviewed annually by the Company at the end of each fiscal year of the Company (hereafter "Fiscal Year") (with the first such review to occur after the Fiscal Year ending December 31, 2000, with respect to base salary for the Fiscal Year ending December 31, 2001), or at such other times as deemed appropriate by the Company, and may at the sole discretion of the Company, be adjusted by an amount which it deems appropriate, provided that said base salary shall not be less than $200,000. (b) Bonus Compensation. Employee shall be eligible to receive such bonus compensation, if any, as and when determined by the Company's board of directors commensurate with Employee's position as a Vice President. (c) Stock Options. The Company grants to Employee non-qualified options to purchase 400,000 shares of its common stock at an exercise price of $2.750 per common share, which is equal to the closing price of the Company's publicly traded shares as of the effective date of this Agreement (the "Options"). To the extent any number of the Options are required to be subject to the vote of the Company's shareholders under applicable law, rule or regulation, such number of Options are granted subject to ratification by the Company's shareholders at its next annual shareholders' meeting. The Options shall vest in twelve equal quarterly increments over a three-year period, with the first quarterly vesting to occur on the 2 effective date of this Agreement for that partial quarter ended March 31, 2000, the second quarterly vesting to occur on April 1, 2000, and similarly on the first day of each subsequent calendar quarter with the final quarterly vesting to occur October 1, 2002. A change of control of the Company shall not accelerate vesting of the Options, except in the event of a change of control pursuant to which the Company's stock is exchanged for the stock of another entity and the Options are not rolled-over or otherwise exchanged for similar options of such entity (with like terms and conditions). In such event all of Employee's then unvested Options shall vest and be exercisable immediately prior to the consummation of such transaction. It is the intent of the parties that the Options continue to vest on a quarterly basis according to their terms notwithstanding a change of control, without being subject to loss or forfeiture by virtue of a change of control. The Option grant shall be evidenced by a written Option Agreement, the terms of which shall be consistent with the terms of this Agreement. The Company's Board of Directors, at their sole discretion, shall determine what number of additional stock options, if any, shall be granted to Employee, and upon what terms. (d) Benefits. During the Employment Term, Employee shall be eligible to participate in and receive coverage and benefits under all group insurance, executive life insurance, pension, profit-sharing, bonus, stock option, stock ownership, and other employee benefit plans, programs, and arrangements of the Company which are now or hereafter adopted by the Company for the benefit of its employees, subject to and on a basis consistent with the terms, conditions, and overall administration of such plans, programs, and arrangements. (e) Expense Reimbursement. The Company shall reimburse Employee for the business expenses reasonably incurred by Employee within the scope of his employment, pursuant to standard employee expense reimbursement policy and procedure as established by the Company. (f) Severance. In the event this Agreement is terminated by the Company prior to the expiration of the full term of this Agreement for any reason other than for cause pursuant to Section 5(b) below, Employee shall be entitled to receive upon such termination a lump sum equal to Employee's salary payable over twelve (12) months, together with the immediate accelerated vesting of all the Options. 4. Compensation Upon Termination or During Disability. -------------------------------------------------- (a) Compensation Upon Termination. If Employee's employment hereunder is terminated under Section 5 hereof, Employee shall be entitled to exercise, pursuant to the terms and conditions of the Option Agreement, the Options that shall have vested as of the date of such termination, and the Company shall have no further liability under this Agreement except (i) to pay Employee within ten days of the Date of Termination any accrued salary or other compensation due under this Agreement on the Date of Termination (or in the event of Employee's subsequent death, to his estate or devisee, legatee, or other designee, as applicable), and (ii) provide Employee, or his estate, or devisee, legatee, or other designee, with any benefits payable (including any death benefit, if applicable) under all employee 3 benefit plans, programs, or arrangements of the Company in which Employee is a participant on the Date of Termination. (b) Compensation Upon Disability. During any period that Employee fails to perform his duties hereunder as a result of incapacity due to a "disabled condition," as such term is defined in Section 5(c) hereof (the "disability period"), Employee shall continue to receive his full base salary at the rate then in effect for the disability period until Employee's employment hereunder is terminated pursuant to Section 5(c) hereof; provided, however, that such salary payments so made to Employee during the first 180 days of the disability period shall be reduced by the sum of the amounts, if any, actually received by Employee prior to or during this period, as the result of such incapacity, under any disability benefit plan of the Company in which Employee participates. 5. Termination. ----------- (a) By Employee. This Agreement may be terminated by Employee at any time upon sixty (60) days written notice to the Company. In the event of such termination by Employee, Employee shall be entitled to exercise, pursuant to the terms of this Agreement and the Option Agreement, the Options that shall have vested as of the date of such termination, and the Company shall have no further obligation to Employee beyond the timely payment of all salary and bonus (if any) accrued through the date of such termination. (b) Cause. This Agreement may be terminated at any time at the option of the Company for cause. As used herein, the term "cause" shall mean and be limited to: (i) any felony conviction of Employee; (ii) Employee's willful misconduct or failure to reasonably perform in connection with the performance of Employee's duties, responsibilities, agreements, and covenants hereunder, or Employee's refusal to comply with the reasonable rules, regulations, policies, directions, and restrictions as may be established from time-to-time by the Company, which misconduct, non-performance, or refusal to so comply shall continue after written notice from the Company, such notice to specify the respects in which Employee is in violation; (iii) Employee's breach of the provisions of Sections 6 and 8 hereof; (iv) any illegal use by Employee of narcotics or other controlled substances; or (v) Employee's inability to perform his duties and responsibilities hereunder due to the issuance of an injunction or restraining order, which is not rescinded within 45 days of issuance. (c) Death. This Agreement shall terminate automatically upon the death of Employee. (d) Disability. In the event Employee becomes mentally or physically disabled during the Employment Term, Employee's employment hereunder shall terminate as of the date such disability is "established." As used in this Subsection, the term "disabled" means suffering from any mental or physical condition, other than that resulting from the use of alcohol or illegal use of narcotics or other controlled substances, which renders Employee unable to substantially perform all of his duties and services under this Agreement in a 4 satisfactory manner substantially similar to his previous performance (a "disabled condition") for a period of one hundred twenty (120) consecutive days or for more than one hundred twenty (120) days in any 12-month period. For purposes of this Subsection, the date that Employee's disability is "established" shall be, in the case of a disabled condition which exists for a period of 120 consecutive days, the 121st day on which such disabled condition exists, and, in the case of a disabled condition existing for more than 120 days in any 12-month period, the 121st day on which such disabled condition exists. (e) Impaired Health. Employee may terminate his employment hereunder if his health should become impaired to an extent that makes his continued performance of his duties and obligations hereunder hazardous to his physical or mental health or his life ("impaired health"), provided that Employee shall have furnished the Company with a written statement from a qualified doctor to such effect and, provided further, that, at the Company's request, Employee shall submit to an examination by a doctor selected by the Company and such doctor shall have concurred in the conclusion of Employee's doctor. (f) Reassignment, Relocation. This Agreement shall, at the option of the Employee, be deemed to have been terminated by the Company in the event of any of the following (i) without Employee's express written consent, the assignment to Employee of any duties or the significant reduction of Employee's duties, title, authority, or responsibilities, which is inconsistent with Employee's duties, title, authority, or responsibilities in effect immediately prior to such assignment, or the removal of Employee from such duties, title, authority, or responsibilities; or (ii) without Employee's express written consent, the relocation of Employee to a facility or a location more than forty-five (45) miles from Employee's then-present location. (g) Notice of Termination. Any termination of Employee's employment hereunder by the Company or by Employee (other than termination pursuant to Section 5(b) (death)) shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee's employment hereunder under the Section and Subsection so indicated. (h) Date of Termination. "Date of Termination" shall mean the following: if Employee's employment hereunder is terminated by (i) Sections 5(a) (Employee), 5(b) (cause), 5(d) (disability), or 5(e) (impaired health), the date specified in the Notice of Termination; (ii) 5(c) (death), the date of Employee's death; and (iii) Section 5(f) (Reassignment, Relocation) 30 days after delivery of the Notice of Termination; and (iv) for any other reason, the date on which the Notice of Termination is given. 6. Confidential Information. ------------------------ (a) Disclosure and Use. Employee shall not disclose or use at any time, either during or subsequent to the Employment Term, any trade secrets or other confidential 5 information, whether or not patentable, of the Company or any other direct or indirect parent or subsidiary of the Company (collectively referred to herein as the "Company"), including but not limited to, information and lists relating to customers, suppliers, or independent sales representatives, compensation of employees or independent sales representatives, products and product pricing, technical or non-technical data, programs, devices, methods, techniques, drawings, processes, or financial data, of which Employee is or becomes informed or aware during the Employment Term, whether or not developed by Employee, except (i) as may be required for Employee to perform Employee's employment duties with the Company, (ii) to the extent such information has been disclosed to Employee by a third party who is not subject to restriction on the dissemination of such information or becomes generally available to the public through no wrongful act of Employee, (iii) information which must be disclosed as a result of a subpoena or other legal process, after the Company has had the opportunity to request a suitable protective order for such information, or (iv) unless Employee shall first secure the Company's prior written authorization. This covenant shall survive the termination of Employee's employment hereunder, and shall remain in effect and be enforceable against Employee for so long as any such Company secret or confidential information retains economic value, whether actual or potential, from not being generally known to other persons who can obtain economic value from its disclosure or use. Employee shall execute such reasonable further agreements and/or confirmations of Employee's obligations to the Company concerning non-disclosure of Company trade secrets and confidential information as the Company may reasonably require from time-to-time. (b) Return of Materials. Upon termination of Employee's employment hereunder, Employee shall promptly deliver to the Company all customers lists, specifications, drawings, listings, documentation, manuals, letters, notes, notebooks, reports, and copies thereof, and all other materials of a secret or confidential nature relating to the Company's business, which are in the possession or under the control of Employee. 7. Inventions and Discoveries. -------------------------- (a) Disclosure of Employment Invention. Employee agrees for himself and his heirs, executors, and administrators that Employee will, without further consideration, disclose immediately to a person designated by the Company as its agent to receive such disclosures each and every discovery, invention, part thereof or improvement thereon, or works of authorship, as defined below ("Employment Invention") which Employee may conceive, develop, reduce to practice, or create, either solely or jointly with others, which is: (i) conceived, developed, reduced to practice or created (a) within the scope of Employee's employment, or (b) on the Company's time, or (c) with the aid, assistance, or use of any of the Company's property, equipment, facilities, supplies, resources, or intellectual property; or (ii) the result of any work, services, or duties performed by Employee for the Company; or 6 (iii) related to the current or demonstrably anticipated business, research, or development of the Company. (b) Assignment of Employee Invention. Employee hereby irrevocably assigns to the Company all of Employee's entire rights, title, interest, and Intellectual Property in and to the Employment Inventions referred to in Section 7(a), and will upon request and without further consideration do everything reasonably necessary or required to vest in the Company Employee's entire right, title, interest, and Intellectual Property in and to such Employment Inventions including executing all instruments and documents and performing all acts reasonably necessary or required for making, filing, or presenting any applicable for the benefit of the Company for Letters Patent or Copyrights in the United States or throughout the world for such Employment Inventions and executing assignments of such patents or applications thereof for the Company. (c) Definitions. As used herein, "Intellectual Property" means any and all patents, trade secrets, know-how, technology, confidential information, ideas, copyrights, trademarks, and service marks and any and all rights, applications, and registrations relating to them. "Works of authorship" mean any original work of authorship within the purview of the copyright laws of the United States, and both parties agree that all works of authorship created by Employee under Section 7(a) shall be works for hire within the meaning and purview of such copyright laws. (d) Exclusions. The foregoing provisions of Sections 7(a) and 8(b) do not apply to any invention not included in Section 7(a) as an Employment Invention and created by Employee entirely on his own time and with his own resources. (e) Recordkeeping. Employee agrees to keep and maintain, or assist in keeping and maintaining, such records (such as laboratory notebooks properly and periodically witnessed and understood) as will show the conception, reduction to practice and operation of all Employment Inventions, as well as such other records as the Company may request, which records shall be and remain the property of and available to, the Company. 8. Restrictive Covenant. -------------------- (a) Restriction on Competition During Employment Term. So long as Employee is employed by the Company, Employee shall not, without the prior written authorization of the Company, directly or indirectly render services of a business, professional or commercial nature (whether for compensation or otherwise) to any person or entity engaged in any business which competes either directly or indirectly with the Company (a "Competitive Business") during the Employment Term, or engage in any activity whether along, as a partner, or as an officer, director, employee, consultant independent contractor, or stockholder in any Competitive Business. Notwithstanding the foregoing, this section shall not prevent Employee from purchasing an equity interest in any Competitive Business as a strictly passive 7 investment and which does not comprise more than Five Percent (5%) of such Competitive Business's then-outstanding stock. (b) Restriction on Competition Following Termination. During the twelve-month period following the applicable Date of Termination (the "Non-Compete Period"), Employee shall not: (i) engage in business as, or own an interest in, directly or indirectly, any individual proprietorship, partnership, corporation, joint venture, trust, or any other form of business entity that is a Competitive Business, whether as an individual proprietor, partner, shareholder, joint venturer, officer, director, consultant, finder, broker, employee, trustee, or in any other manner whatsoever if such entity, within any state, province, country or other jurisdiction in which the Company markets and sells its products and services, develops and/or markets products and/or services that either directly or indirectly compete with the Company's products and/or services in existence or that Employee has actual knowledge are being actively developed by the Company at the commencement of the Non-Compete Period; or (ii) attempt in any manner to solicit from any customer business of the type performed by the Company or to persuade any customer of the Company to cease doing business or to reduce the amount of business which any such customer has customarily done or contemplates doing with the Company, whether or not the relationship between the Company and such customer was originally established in whole or in part through Employee's efforts; or employ or attempt to employ or assist anyone else to employ an person who is at such time, or at any time during the preceding six months was, an employee or independent sales representative of or consultant to the Company, provided that this clause shall not restrict Employee from employing a third-party vendor who supplies generic services to the industry. As used in this Section 8, the verb "employ" shall include its variations, for example, retain, engage, or conduct business with; the term the "Company" shall include subsidiaries, a parent, or affiliates, if any, of the Company; and the term "customer" shall mean anyone who is a customer of the Company as of the date immediately prior to or at any time during the Non-Compete Period. Notwithstanding the foregoing, nothing in this Section 8 shall limit Employee's ability during the Non-Compete Period to seek employment by a Competitive Business if Employee refrains from providing services of any kind to said Competitive Business until the expiration of the Non-Compete Period. So long as Employee fulfills the performance obligations contained in Section 1(b), nothing in this Agreement shall limit or prevent Employee, during the Employment Term and thereafter during the Non-Compete Period, from engaging in business as, or own an interest in, directly or indirectly, any individual proprietorship, partnership, corporation, joint venture, trust, or any other form of business entity, whether as an individual proprietor, partner shareholder, joint venturer, officer, director, consultant, finder, broker, employee, trustee, or in any other manner whatsoever if such entity does not market products and/or services performing substantially 8 the same functions as the Company's products and/or services in existence or that Employee has actual knowledge are being actively developed by the Company both during the Employment Term and at the commencement of the Non-Compete Period. (c) Acknowledgment. The parties acknowledge that the time, scope, geographic area, and other provisions of this Agreement have been specifically negotiated by the parties and agree that all such provisions are reasonable under the circumstances and are given as an integral and essential part of Employee's employment hereunder. In the event that any covenant contained in this Agreement shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it shall be interpreted to extend only over a maximum period of time for which it may be enforceable and/or over the maximum geographical area as to which it may be enforceable and/or to the maximum intent in all other respects as to which it may be enforceable, all as determined by such court in such action. 9. Severability. If any provision of this Agreement is held invalid or unenforceable, either in its entirety or by virtue of its scope or application to given circumstances, such provision shall thereupon be deemed modified only to the extent necessary to render same valid, or not applicable to given circumstances, or excised from this Agreement, as the situation may require, and this Agreement shall be construed and enforced as if such provision had been included herein as so modified in scope or application, or had not been included herein, as the case may be. Should this Agreement, or any one or more of its provisions hereof, be held to be invalid, illegal, or unenforceable within any governmental jurisdiction or subdivision thereof, the Agreement or any such provision or provisions shall not as a consequence thereof be deemed to be invalid, illegal, or unenforceable in any other governmental jurisdiction or subdivision thereof. 10. Enforcement. The Company will be entitled to institute proceedings and avail itself of all remedies at law or in equity to recover damages occasioned by a breach or threatened breach by the other party of any of the provisions herein and shall have the right to pursue one or more of such proceedings and remedies simultaneously or from time-to-time. Employee hereby acknowledges that the Company would suffer irreparable injury if the provisions of Sections 6 through 8 above, which shall survive the termination of the Agreement, were breached and that the Company's remedies at law would be inadequate in the event of such breach. Accordingly, Employee hereby agrees that any such breach or threatened breach may, in addition to any and all other available remedies, be preliminarily enjoined by the Company. 11. Legal Fees and Expenses. In the event of litigation under this Agreement, each of the Company and Employee shall pay its own attorneys' fees and expenses. 12. Non-Assignability. In light of the unique personal services to be performed by Employee hereunder, it is acknowledged and agreed that any purported or attempted assignment or transfer by either party of this Agreement or any of Employee's duties, 9 responsibilities, or obligations hereunder shall be void, and if purported or attempted by the Company, shall be considered a termination without cause by the Company under Paragraph 5(c). 13. Notices. Any notice, request, demand, or other communication required or permitted under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or when mailed by certified mail, return-receipt requested, addressed as follows: To the Company: I-Link Incorporated 13751 So. Wadsworth Park Drive Suite 200 Draper, UT 84020 Attn: John Edwards, CEO To Employee: Alex Radulovic -------------------------- -------------------------- or to such other address or addresses as may be specified from time-to-time by notice; provided, however, that any notice of change of address shall not be effective until its receipt by the party to be charged therewith. 14. General. ------- (a) Amendments. neither this Agreement nor any of the terms or conditions hereof may be waived, amended, or modified except by means of a written instrument duly executed by the party to be charged therewith. (b) Captions and Headings. The captions and paragraph headings used in this Agreement are for convenience of reference only, and shall not affect the construction or interpretation of this Agreement or any of the provisions hereof. (c) Successors and Assigns. This Agreement and Employee's duties and rights hereunder shall not be assignable by Employee. This Agreement and the Company's duties and rights hereunder shall be assignable in the event of a merger, acquisition or other bona fide business reorganization to which the Company is a party. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, personal representatives, successors, and permitted assigns. (d) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original hereof, but all of which together shall constitute one and the same instrument. 10 (e) Entire Agreement. Except as otherwise set forth or referred to in this Agreement, this Agreement constitutes the sole and entire agreement and understanding between the parties hereto as to the subject matter hereof, and supersedes all prior discussions, agreements, and understandings of every kind and nature between them as to such subject matter. (f) Reliance by Third Parties. This Agreement is intended for the sole and exclusive benefit of the parties hereto and their respective heirs, executors, administrators, personal representatives, successors, and permitted assigns, and no other person or entity shall have any right to rely on this Agreement or to claim or derive any benefit therefrom absent the express written consent of the party to be charged with such reliance or benefit. (g) Governing Law. This Agreement shall be construed in accordance with governed by the laws of the State of Utah. 11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the date first set forth above. I-LINK INCORPORATED By: --------------------------------- John W. Edwards, CEO ------------------------------------ ALEX RADULOVIC 12 EX-10 6 EXHIBIT 10.5 Exhibit 10.5 ------------ WHOLESALE SERVICE PROVIDER AND DISTRIBUTION AGREEMENT This Wholesale Service Provider and Distribution Agreement ("Agreement") is entered into effective as of the 1st day of February, 2000 (the "Execution Date"), by and among Big Planet, Inc., a Delaware corporation ("Big Planet"), I-Link, Incorporated, a Florida corporation ("I-Link"), and I-Link Worldwide, LLC, a Delaware limited liability company and wholly owned by I-Link ("I-Link LLC"). I-Link, I-Link LLC and Big Planet together shall be collectively referred to as the "Parties." RECITALS A. Big Planet is a technology-based company that provides Internet service and sells other products and services, including technology and communication products. Big Planet markets its products and services to consumers through a sales force of independent contractors in the Network Marketing Channel, as hereinafter defined. B. I-Link provides enhanced communication products and services and has constructed an expanding Internet Protocol ("IP")-based telecommunications network within the continental United States. I-Link's products and services are marketed in part by I-Link LLC to residential and small office/home office ("SOHO") consumers through a network marketing sales force of I-Link LLC Representatives. I-Link also sells its products and services through other marketing and sales channels. C. I-Link desires to enter into an agreement with Big Planet pursuant to which (i) I-Link will provide products and services to Big Planet for resale to residential and SOHO consumers in each of the fifty states in the United States and Puerto Rico (hereafter collectively referred to as the "United States") through the Network Marketing Channel, (ii) Big Planet will integrate the I-Link LLC Representatives into its sales force, (iii) Big Planet will acquire and provide products and services directly to I-Link's existing customers acquired through I-Link LLC, and (iv) Big Planet will acquire the exclusive world-wide rights to such products and services subject to the conditions and terms of this Agreement. Big Planet is willing to act as a distributor of I-Link's Products and Services and integrate the I-Link LLC Representatives into its sales force, and I-Link is willing to provide services and products to Big Planet on the terms and conditions set forth herein. AGREEMENT NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, intending to be legally bound, the Parties agree as follows: Article 1 Definitions Unless the context otherwise requires, the following terms, when used in this Agreement, shall have the respective meanings specified below: "Accounts Receivable" mean all I-Link accounts receivablegenerated from sales by the I-Link LLC Representatives, both billed and unbilled, as of the Effective Time, to be assigned to Big Planet at the Effective Time as contemplated by Section 6.3(a). "Action" means any claim, action, suit, complaint, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority. "Affiliate" means, with respect to any specified person, any other person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified person. "Big Planet Customers" means any person acquiring any products or services from or through Big Planet or Big Planet Representatives including all of the Big Planet Enhanced Service Customers. "Big Planet Enhanced Service Customer" means any and all customers of Big Planet, including the Existing Customers, who after the Effective Time subscribe to or purchase one or more I-Link Products and Services from Big Planet, which are evidenced by written agreements, letters of authorization, electronic order, or any other agreement or other arrangements, as evidenced by such customer's payment for services or any billings made to such customer. "Big Planet Representatives" means the independent representatives and distributors of Big Planet and its Affiliates, including any I-Link LLC Representatives following the Effective Time. "Billing Software" shall have the meaning set forth in Section 8.3. "Double-Leg Call" means any call not a Single Leg Call that originates and terminates within the United States. "Effective Time" has the meaning set forth in Section 2.2. "Encumbrances" means any security interest, pledge, mortgage, lien, charge, adverse claim, preferential arrangement or restriction of any kind. "Enhanced Service Devices" means (i) the tangible products of I-Link more fully described on Schedule 4.1 and (ii) Future Products and Services that are tangible products and that Big Planet elects to market pursuant to the provisions of this Agreement, that provide connectivity to the I-Link Network or otherwise provide enhancement to traditional 2 telecommunication services, including in each of (i) and (ii) above, any and all upgrades, modifications, enhancements and replacements thereof. "Enhanced Services" means (i) all of the products and services of I-Link more fully described on Schedule 4.1, which represent all of the services of any type currently marketed by I-Link LLC and provided by I-Link to the residential and SOHO marketplace, and (ii) any Future Products and Services that are not Enhanced Service Devices that Big Planet elects to market pursuant to the provisions of this Agreement, including in each of (i) and (ii) above, any and all upgrades, modifications, enhancements or replacements thereof. "Exclusive Products and Services" means the products and services for which Big Planet has been granted and retains the worldwide exclusive rights in the Network Marketing Channel pursuant to this Agreement. "Existing Customers" means all of I-Link's customers who are subscribed for I-Link's Products and Services through I-Link LLC at the Effective Time to whom I-Link provides Enhanced Services or any Enhanced Service Devices pursuant to written agreements, letters of authorization or any other agreement or arrangement as evidenced by such Existing Customer's payment for services to I-Link or any billings made to such customer. "Future Products and Services" shall mean any I-Link Products and Services which I-Link commences to market and distribute after the Effective Time, but excluding any and all upgrades, modifications, enhancements and replacements to Enhanced Services and Enhanced Service Devices. "Governmental Authority" means any domestic or foreign national, federal, state, municipal or local or other government, governmental, regulatory or administrative authority, agency or commission, or any court, tribunal, or judicial or arbitration body having proper jurisdiction. "Governmental Order" means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority. "I-Link Costs" means those costs identified on Schedule 1(b) that are used in determining the pricing of Double-Leg Calls and Single-Leg Calls under this Agreement. "I-Link Products and Services" means any products or services of any type that may be offered, sold or distributed by I-Link to the residential and SOHO marketplace at anytime during the term of this Agreement, excluding products and services the rights to which are not wholly-owned by I-Link for which I-Link does not have the right to grant distribution rights. "I-Link LLC Representatives" means I-Link LLC's sales force of independent contractors that have executed I-Link LLC Representative Agreements with I-Link LLC that are currently in-force. 3 "I-Link LLC Representative Agreement" means the standard forms of written agreement between I-Link LLC and an I-Link LLC Representative. "I-Link Network" means I-Link's telecommunications network in the United States, including but not limited to network equipment, high-speed fiber optic backbone and routing technology, whether I-Link owned or leased, used to provide Enhanced Services or other services, and within such other territories as such network may be established in the future. "I-Link Sales Compensation Plan" means the compensation plan that details the bonuses and commissions that I-Link LLC Representatives may earn by selling I-Link Products and Services. "Law" means any domestic or foreign national, federal, state, municipal or local or other statute, law, ordinance, regulation, code, rule, order or other requirement or rule of law. "Legacy Customers" means those customers purchasing Presubscribed Services from I-Link. "Network Marketing Channel" means (i) the multi-level marketing channel through which products and services are marketed directly to residential and SOHO end-user consumers through a sales force of independent contractors who receive rewards or commissions based upon a standardized compensation plan which contemplates a genealogical sales force of multiple levels, with such commissions paid for (A) sales of products and services by such contractor, and (B) sales of products and services by other independent contractors in such contractor's genealogical downline, and (ii) direct selling organizations that promote a home-based business opportunity focused on selling products to the residential and SOHO marketplace (by way of example: Avon, Mary Kay Cosmetics, Tupperware, etc.). "Order and Provisioning System" shall have the meaning set forth in Section 5.1 "person" means any individual, partnership, firm, corporation, joint venture, association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed a person under Section 13(d) of the Securities Exchange Act of 1934. "Presubscribed Services" means the ordinary presubscribed long distance telephone services provided by I-Link over the I-Link Network and through other carriers as of the Execution Date. "Single-Leg Calls" means any call that originates on a customer premise device and terminates on the I-Link Network, or any call that originates on the I-Link Network and terminates on a customer premise device. "Stand Alone Product" means a product or service that does not include the features or functionality of any of the Exclusive Products and Services. 4 "Subsidiary" means, with respect to any entity, any and all corporations, partnerships, limited liability companies, joint ventures, associations and other entities controlled by such entity directly or indirectly through one or more intermediaries. "Technical Support" shall mean the technical support that I-Link is obligated to provide to Big Planet pursuant to Article 10 hereof. "United States" shall mean the fifty states and Puerto Rico. Article 2 The Transaction 2.1 The Transaction. At the Effective Time, and upon the terms and subject to the conditions of this Agreement, I-Link shall commence providing Enhanced Services and Enhanced Service Devices, to the extent such are market-ready as provided on Schedule 4.1, to Big Planet as more fully described in Article 4 and shall assign to Big Planet the I-Link LLC Representatives, the Existing Customers, and the Accounts Receivable as more fully described in Article 6. 2.2 Closing and Effective Time. Subject to the satisfaction of the closing conditions set forth in Sections 2.4 and 2.5 below, I-Link shall commence the provision of Enhanced Services to Big Planet and the Big Planet Customers under this Agreement and shall assign and transfer the I-Link LLC Representatives, the Existing Customers, and the Accounts Receivable to Big Planet effective as of 12:01 a.m., Mountain Standard Time, on February 15, 2000, or such other time and date as the Parties may mutually agree upon in writing (the "Effective Time"). The Effective Time shall not be later than the first day of the month following the date that the closing conditions set forth in Sections 2.4 and 2.5 have been satisfied. In the event that the Effective Time does not take place on or before February15, 2000 then a Party not in default under this Agreement may terminate this Agreement as set forth in Section 9.6. The closing shall occur at I-Link's offices at Draper, Utah. It is understood by the parties that actual marketing activities by the Big Planet Representatives with respect to the Enhanced Services, and by the I-Link LLC Representatives with respect to Big Planet products and services, shall not commence at the Effective Time, but as soon as practicable thereafter as reasonably determined by Big Planet. 2.3 Closing Obligations. At the Effective Time: ------------------- (a) Deliveries by I-Link. I-Link and I-Link LLC shall deliver to Big Planet: (i) A duly executed assignment assigning all of their rights under the I-Link LLC Representative Agreements to Big Planet in the form attached hereto as Schedule 2.3(a)(i), 5 (ii) An Officer's Certificate duly executed by authorized officers of I-Link and I-Link LLC certifying to Big Planet that: (A) each of the representations and warranties of I-Link and I-Link LLC set forth in this Agreement was true, complete and accurate in all material respects as of the Execution Date and is true complete, and accurate in all material respects as of the Effective Time as if made at the Effective Time; and (B) I-Link and I-Link LLC have performed or complied with all of their obligations under the Agreement which were to be complied with or performed prior to the Effective Time; (iii) An opinion of counsel in form satisfactory to Big Planet covering the matters set forth in Section 2.3(a)(iii). (iv) A complete and accurate list of all of the Existing Customers of I-Link being transferred to Big Planet in I-Link's existing electronic format. (v) A complete and accurate list of all of the I-Link LLC Representatives being assigned to Big Planet in I-Link's existing electronic format, together with copies of all agreements related thereto; (vi) A duly executed assignment of the Accounts Receivable in a form reasonably satisfactory to Big Planet, together with a complete and accurate list of all Accounts Receivable and a complete and accurate aging schedule; and a duly executed UCC-1 Financing Statement filed with the State of Utah Department of Commerce, Division of Corporations and Commercial Code and such other filing locations as may be reasonably requested by Big Planet; (vii) Copies of any and all legally required approvals, consents or waivers of any Governmental Authority, and any and all letters of authorization and state and federal filings, including any customer notifications or other filing or notifications necessary to lawfully perform the transfer of Existing Customers to Big Planet; (viii) Any and all other material information reasonably necessary for Big Planet to perform its obligations hereunder or which would have a material adverse impact on Big Planet's ability to perform its obligations hereunder. (b) Deliveries by Big Planet. Big Planet shall deliver to I-Link: (i) funds in the form of a wire transfer representing payment for the Accounts Receivable; 6 (ii) duly countersigned original copies of the assignment attached as Schedule 2.3(a)(i) and the assignment of Accounts Receivable; and (iii) A certificate duly executed by an officer of Big Planet certifying that (A) Each of the representations and warranties of Big Planet set forth in this Agreement was true, complete and accurate in all material respects as of the Execution Date and shall be true, complete, and accurate in all material respects as of the Effective Time as if made at the Effective Time; and (B) Big Planet has performed and complied with all of its obligations under the Agreement in all material respects which were to be performed or complied with prior to the Effective Time. 2.4 Conditions to Obligations of Big Planet. The obligations of Big Planet to consummate the transactions that are the subject of this Agreement (the "Transactions") shall be subject to the fulfillment, at or prior to the Effective Time, of each of the following conditions: (a) Performance of Obligations. I-Link and I-Link LLC shall have performed or complied in all material respects with all agreements and covenants required to be performed by it under this Agreement at or prior to the Effective Time, including, without limitation, the delivery of all documents required by Section 2.3. (b) Accuracy of Representations. All of I-Link's and I-Link LLC's representations and warranties in this Agreement must have been true, complete, and accurate in all material respects as of the Execution Date, and must be true, complete, and accurate in all material respects as of the Effective Time as if made at the Effective Time. (c) Governmental and Third Party Consents. All legally required consents or approvals from any third parties or Governmental Authorities shall have been obtained in form reasonably satisfactory to Big Planet, including, without limitation, any necessary approvals or waivers from the Federal Communications Commission and any state regulatory bodies allowing for the transfer of the Existing Customers to Big Planet by notice without obtaining the consent of each individual Existing Customer. (d) No Actions. There must not have been commenced or threatened by giving written notice to I-Link or Big Planet any material Action (i) involving any challenge to, or seeking damages or other relief in connection with, any of the transactions contemplated by this Agreement, or (ii) that may have the effect of preventing, delaying, making illegal, or otherwise interfering with any of the transactions contemplated hereby or adversely affecting the right of Big Planet to market and distribute the Enhanced Services and Enhanced Service Devices. 7 (e) No Material Changes. Since the Execution Date, there shall not have occurred any material adverse change in the business, properties, assets, or I-Link Products and Services , of I-Link, I-Link LLC and each of their respective Subsidiaries and Affiliates. (f) No Prohibition. Neither the consummation nor the performance of any of the transactions contemplated by this Agreement will, directly or indirectly (with or without notice of lapse of time), materially contravene, or conflict with, or result in a material violation of, or cause Big Planet or any Affiliate of Big Planet to suffer any material adverse consequences under, (a) any Law or Governmental Order, (b) any Law that has been published, introduced or otherwise proposed before any Governmental Authority, or (c) any agreement Big Planet is a party to. (f) Completion of Due Diligence. Big Planet shall have completed their due diligence investigation of I-Link and I-Link LLC and their Subsidiaries and Affiliates, their related products, services and support and operating systems, and their distribution force, and the information gathered in such investigation shall be satisfactory to Big Planet in its sole judgment and discretion. 2.5 Conditions to Obligations of I-Link and I-Link LLC. The obligations of I-Link and I-Link LLC to consummate the Transactions that is the subject of this Agreement shall be subject to the fulfillment, at or prior to the Effective Time, of each of the following conditions: (a) Performance of Obligations. Big Planet shall have performed or complied in all material respects with all agreements and covenants required to be performed by or complied with by it under this Agreement at or prior to the Effective Time, including, without limitation, the delivery of all documents required by Section 2.3. (b) Accuracy of Representations. All of Big Planet's representations and warranties in this Agreement must have been true, complete and accurate in all material respects as of the Execution Date, and must be accurate in all material respects as of the Effective Time as if made at the Effective Time. (c) Governmental Consents. All legally required consents or approvals from any Governmental Authorities shall have been obtained in form reasonably satisfactory to I-Link, including, without limitation, any necessary approvals or waivers from the Federal Communications Commission and any state regulatory authority. (d) No Actions. There must not have been commenced or threatened by giving written notice to I-Link any material Action (i) involving any challenge to, or seeking damages or other relief in connection with, any of the transactions contemplated by this Agreement, or (ii) that may have the effect of preventing, delaying, making illegal, or otherwise interfering with any of the transactions contemplated hereby or adversely affecting the ability of Big Planet to perform its obligations under this Agreement. 8 (e) No Material Changes. Since the Execution Date, there shall not have occurred any material adverse change in the business, properties, or assets of Big Planet. (f) No Prohibition. Neither the consummation nor the performance of any of the transactions contemplated by this Agreement will, directly or indirectly (with or without notice of lapse of time), materially contravene, or conflict with, or result in a material violation of, or cause I-Link or I-Link LLC to suffer any material adverse consequences under, (a) any Laws or Governmental Order, or (b) any Law that has been published, introduced or otherwise proposed before any Governmental Authority, or (c) any agreement I-Link or its Subsidiaries is a party to. (g) Completion of Due Diligence. I-Link shall have completed their due diligence investigation of Big Planet, its related support and operating systems, and its distribution force, and the information gathered in such investigation shall be satisfactory to I-Link in its sole judgment and discretion. Article 3 Pre-Closing Covenants The Parties agree as follows with respect to the period between the Execution Date of this Agreement and the Effective Time or the earlier termination of this Agreement pursuant to Section 9.6. 3.1 General. Each of the Parties will use its reasonable best efforts to take all action and to do all things necessary, proper, or advisable in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver of, the closing conditions set forth in Article 2). 3.2 Notices, Consents and Regulatory Approvals. Each of I-Link and I-Link LLC will use its reasonable best efforts to obtain any third-party consents that are required in order to consummate the transactions contemplated herein. Not more than ten (10) days after the Execution Date, I-Link, at its own expense and with prior approval of Big Planet, will give any notices to, make any filings with, and use its reasonable best efforts to obtain any authorizations, consents, and approvals of Governmental Authorities in connection with the transactions referred to in this Agreement. Without limiting the generality of the foregoing, each of the Parties agrees to cooperate, in good faith, with the other Parties in obtaining consents and approvals from Governmental Authorities, including, without limitation, approvals from state and federal telecommunications regulatory agencies. 3.3 Operation of Business. I-Link and I-Link LLC will not engage in any practice, take any action, or enter into any transaction out of the ordinary course of business with respect to the I-Link LLC Representatives and the distribution of I-Link Products and Services through such I-Link LLC Representatives without the prior written approval of Big Planet. Without limiting the generality of the foregoing, I-Link and I-Link LLC will not, without the prior written approval of Big Planet: (i) amend or modify the I-Link Sales Compensation Plan, the I-Link LLC 9 Representative Agreements, related policy and procedures, or any customer agreements or terms; (ii) terminate, cause or facilitate the termination or dissatisfaction of any I-Link LLC Representatives, Existing Customers or Legacy Customers; (iii) take any action or engage in any practice which would discontinue or otherwise impair the technical specifications and/or capabilities of any of the I-Link Products or Services; (iv) take any action to alter the pricing for any of the I-Link Products and Services or I-Link Network; or (v) introduce new retail residential and/or SOHO products or pricing or carry on any discussion with I-Link LLC Representatives concerning any such new products or pricing. 3.4 Preservation of Business. Each of the Parties shall use its reasonable best efforts to maintain its existing customers and sales representatives intact and to maintain the relations and good will with such customers and representatives. I-Link and I-Link LLC agree to perform provisioning, billing, and customer service at service levels consistent with the service levels required under this Agreement. Neither Party will misrepresent or disparage the technical specifications and/or capabilities of the other Party's products and services, the other Party, or the contractual relationship between the Parties. 3.5 Full Access. The Parties will permit representatives of the other Party to have full access to all premises, properties, assets, personnel, books, records, contracts, and documents of or pertaining to its business or operations that are relevant to the transaction contemplated hereby in order to complete their due diligence. 3.6 Notice of Developments. Each Party will give prompt written notice to the other Parties of any material adverse development causing a breach of any of its own representations and warranties in this Agreement or covenants in Article 3 of this Agreement . No disclosure by any Party pursuant to this Section 3.6, however, shall be deemed to amend or supplement any schedule to the Agreement or to prevent or cure any misrepresentation, breach of warranty, or breach of covenant. 3.7 Exclusivity. I-Link and I-Link LLC will not (i) solicit, initiate, or encourage the submission of any proposal or offer from any person relating to the acquisition of the distribution rights to the I-Link Products and Services in the Network Marketing Channel or any acquisition of the I-Link LLC Representatives or the Existing or Legacy Customers in any form or manner, or (ii) participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any effort or attempt by any person to do or seek any of the foregoing. I-Link will notify Big Planet immediately in writing if any person makes any proposal, offer, inquiry, or contact with respect to any of the foregoing. Article 4 Wholesale Services and Distribution Agreement 4.1 Wholesale Enhanced Services/Devices within the United States. Subject to the terms and conditions of this Agreement, commencing at the Effective Time I-Link shall provide to Big Planet on a wholesale basis in the United States the Enhanced Services described on 10 Schedule 4.1 attached hereto, at the rates and for the fees set forth in this Agreement. Big Planet shall with assistance from I-Link provide I-Link on a quarterly basis in the form set forth in Schedule 4.1 written two-year rolling forecasts of Big Planet Customers and I-Link Network usage requirements by each NPA-NXX. I-Link shall provide the amount and type of then existing Enhanced Services and Enhanced Service Devices as may be ordered by Big Planet or its Big Planet Customers and agrees to maintain sufficient capacity in its I-Link Network to handle the level and type of actual usage as required by the Big Planet Customers; provided that such requirements do not exceed Big Planet's forecasts. It is expressly understood and agreed that Big Planet shall have no requirement, and shall not be committed expressly or implicitly, to purchase any minimum amount of Enhanced Services or Enhanced Service Devices or any amount set forth in a forecast during any period this Agreement is in effect. I-Link shall provide all I-Link Products and Services in compliance with all applicable Law. 4.2 Service Level Commitment. The Enhanced Services to be provided by I-Link and the I-Link Network shall meet the service level requirements set forth in Section 4.14 and as set forth in the Service Level Agreement attached hereto as Schedule 4.14. 4.3 Grant of Exclusive Distribution Rights. -------------------------------------- (a) Exclusivity. Subject to the provisions of Section 4.4 and 4.17 below, and to any Pre-Existing Agreement (as defined below), I-Link grants to Big Planet the world-wide exclusive right to market, distribute and sell to residential and SOHO users through the Network Marketing Channel (i) all of the Enhanced Services and Enhanced Service Devices described on Schedule 4.1, and any future upgrades, modifications, enhancements or replacements thereto, which Enhanced Services represent all of the services of any type currently marketed by I-Link LLC, and (ii) any Future Products and Services subject to the terms of Section 4.5 below. I-Link and I-Link LLC expressly agree that so long as the exclusive rights granted under this Section 4.3 have not terminated pursuant to Section 4.4 below and except as otherwise provided in Section 4.5 and Section 4.17, and excluding retail sales directly to individuals pursuant to I-Link's general solicitations via general advertising efforts, they shall not (i) sell or market, or grant any right to any other person to sell or market Enhanced Services or Enhanced Service Devices on a retail basis to any person, or their independent representatives, that market or distribute any type of products or services in the Network Marketing Channel, (ii) grant the right to market, or sell any of the Exclusive Product and Services, or sell on a wholesale basis, to any person, or their independent representatives, that markets or distributes products or services of any type through the Network Marketing Channel . The provisions of this Section 4.3 shall not apply to the sale by I-Link to and the resale and distribution of Enhanced Services and Enhanced Service Devices by any person with whom I-Link has entered into a written agreement for the sale and distribution of Enhanced Services and Enhanced Service Devices (other than the I-Link LLC Representative Agreements) with an effective date prior to the date of this Agreement (a "Pre-Existing Agreement"). A list of the Pre-Existing Agreements is set forth on Schedule 4.3. I-Link agrees that it shall cause terms prohibiting sales of Enhanced Services and Enhanced Services Devices into the Network Marketing Channel to be 11 included in any renewal of any Pre-Existing Agreement, and, to the extent permitted by Law, at any time the other contracting party to any Pre-Existing Agreement requests of I-Link any modification to or assignment of the Pre-Existing Agreement to be made. I-Link represents and warrants that the terms of the Pre-Existing Agreements do not exceed one year, and that I-Link will immediately move to amend all Pre-Existing Agreements and all future agency, wholesale and or reseller agreements to include a specific exclusion for participation in the Network Marketing Channel. I-Link further agrees that it shall use reasonable efforts to investigate any claim of breach of this Section 4.3 regarding Pre-Existing Agreements regardless of whether the allegation of breach is from Big Planet or any other person. (b) Refusal of Service. If any party or affiliate, subsidiary, successor and/or assign thereto to an I-Link Pre-Existing Agreement markets, distributes, solicits, causes to be solicited, or facilitates any solicitation of any person to purchase I-Link Products or Services in contravention of the Network Marketing Channel exclusivity granted to Big Planet herein, or as more particularly described in Section 4.3 (c) (1) and (3) (exclusive of I-Link's retail sales directly to individuals in the Network Marketing Channel pursuant to general solicitations via general advertising efforts, which shall not be deemed in contravention of Big Planet's exclusivity), then (i) I-Link shall, to the fullest extent possible under such Pre-Existing Agreement, refuse to provide its products and services pursuant to the terms of that specific Pre-Existing Agreement, which refusal shall be at the earliest date permitted by the Pre-Existing Agreement, and (ii) I-Link shall indemnify and defend Big Planet from any and all claims arising from said refusal. (c) Right to Private Label. Notwithstanding the existence of the Pre-Existing Agreements, if any of the following events occur during the term of this Agreement, then Big Planet shall have the right to privately label the I-Link Products and Services and market them under a Big Planet label: (1) I-Link, its agents, Subsidiaries, Affiliates, successors and or assigns provides I-Link Products and Services under the Pre-Existing Agreements in contravention of Big Planet's exclusivity within the Network Marketing Channel as provided in this Section 4.3 (exclusive of retail sales directly to individuals in the Network Marketing Channel pursuant to I-Link's general solicitations via general advertising efforts); (2) I-Link, its agents, Subsidiaries, Affiliates, successors and or assigns sell directly to retail customers within the residential and SOHO market I-Link Products and Services at a retail sales price less than Big Planet's retail pricing; (3) I-Link, its agents, Subsidiaries, Affiliates, successors and or assigns has renewed an existing agreement, including Pre-Existing Agreements, or executed a new agreement, and said renewal or new agreement provides for the sale of I-Link Products and Services at a retail 12 price less than Big Planet's retail pricing; or (4) Big Planet loses its right of exclusivity to market, distribute and sell to residential and SOHO users through the Network Marketing Channel. (d) Private Label Enhancement. Pursuant to Section 4.3 (c), at a reasonable cost to Big Planet I-Link shall make available to Big Planet for any privately labeled Big Planet product and/or service an enhancement as mutually agreed upon by the Parties that distinguishes said product and/or service from those being marketed directly by I-Link or pursuant to its Pre-Existing Agreements or other agency agreements. (e) Use of I-Link Mark with Private Label. In connection with any right of Big Planet to private label the I-Link Products and Services under Section 4.3(c), Big Planet shall display an I-Link mark such as "I-Link Enhanced," "Powered by I-Link," or such other identifying mark as shall be designated by I-Link in all promotion and advertising materials, and on all Enhanced Service Devices, pursuant to the requirements of Section 4.13 below. (f) In the event (1), (2), or (3) as set forth in Section 4.3(c) above occur after that date which is 120 days after the Effective Time, and as a result thereof Big Planet's ability to achieve the minimum number of new Big Planet Enhanced Service Customers required to maintain exclusivity pursuant to Section 4.4(a) below is materially impeded, then the minimum number of new Big Planet Enhanced Service Customers required to maintain exclusivity under Section 4.4(a) shall be reduced by half. 4.4 Termination of Exclusive Distribution Rights. -------------------------------------------- (a) Enhanced Services. [Sentence Redacted] In such event, I-Link may terminate the exclusive right to market, distribute and sell the Enhanced Services and Enhanced Service Devices by providing Big Planet with 30 days advance written notice of its election to terminate exclusivity. If the number of Big Planet Enhanced Service Customers within the United States meets or exceed the targeted number of customers at the last six-month period set forth on Schedule 4.4(a), then Big Planet shall maintain exclusivity for the remaining term of this Agreement. For purposes of determining the number of Big Planet Enhanced Service Customers utilizing Enhanced Services, a Big Planet Enhanced Service Customer that is paying a separate monthly recurring charge for two or more Enhanced Services shall be counted as one Big Planet Enhance Service Customer. However, if the same Big Planet Enhanced Service Customer also purchases an Enhanced Service Device, then he or she shall be counted as two Big Planet Enhanced Service Customers for purposes of determining the number of customers under this Section 4.4(a). 13 (b) Exceptions to Right to Terminate Exclusivity. Notwithstanding the provisions of Section 4.4(a) above, in the event that during the designated six-month periods (i) I-Link fails to provide the Enhanced Services at the service levels required hereunder, (ii) the I-Link Network or the Ordering and Provisioning System fails to perform in accordance with the service levels required hereunder (iii) the Billing System fails to operate at the service levels required or bills are not processed in accordance with the service levels required hereunder, or (iv) I-Link materially breaches any other material term, covenant, representation or warranty set forth in this Agreement, and such failure or breach is the primary cause of Big Planet's failure to achieve the targeted number of Big Planet Enhanced Service Customers for the designated six-month period, then I-Link shall not have the right to terminate exclusivity. (c) Non-exclusive Distribution Rights. If Big Planet's right to exclusivity is terminated pursuant to Section 4(a) above, then Big Planet shall (i) retain the nonexclusive right to market then existing I-Link Products and Services in the United States, (ii) its rights under this Agreement to any other market it has entered, and (iii) retain its rights to future markets as provided in Section 4.17. (d) No Liability. Big Planet shall have no liability of any kind or nature to I-Link for any failure of Big Planet to meet any forecasts for any Enhanced Services or any Enhanced Service Devices. The sole consequence of any such failure shall be the termination of exclusivity as provided in this Section 4.4 and the right of first option to exclusivity for Future Products and Services to the extent provided in this Section 4.4. 4.5 Right of First Option for Future Products. With respect to any given country, territory or jurisdiction, so long as Big Planet shall retain its exclusive rights within such country, territory or jurisdiction as provided in Sections 4.3 and 4.4 above, and Section 4.17 below, I-Link hereby grants Big Planet a right of first option to exclusively market in the Network Marketing Channel within any such country, territory or jurisdiction any Future Product or Service that it releases to market. I-Link shall provide written notice of any Future Product or Service [Number Redacted] days prior to making such Future Product or Service available to the market. Such notice shall contain a detailed description of the Future Product or Service and the anticipated timeline for introducing such Future Product or Service. I-Link shall make available to Big Planet such Future Product or Service for testing by Big Planet at such time as such Future Product or Service is functional and marketable. Within [Number Redacted] days from the date of receipt of such functional and marketable Future Product or Service, Big Planet shall provide I-Link with a written response indicating whether it is interested in marketing and distributing such Future Product or Service. If Big Planet indicates that it is not interested in marketing such Future Product or Service, then I-Link may contract with other parties to market and distribute such Future Product or Service within the Network Marketing Channel provided such Future Product or Service is a Stand-Alone Product. If Big Planet indicates that it is interested in marketing such Future Product or Service, then Big Planet and I-Link shall negotiate in good faith the terms and pricing on which such Future Products and Services will be sold or provided to Big Planet for distribution through the Network Marketing Channel under this Agreement. The parties agree that, where reasonable, I-Link may require Big Planet to pay additional costs 14 not associated with the existing Enhanced Services and may reserve the right to terminate the distribution rights with respect to a Future Product or Service that I-Link in good faith reasonably believes is not suitable for the Network Marketing Channel because of the complexity of the product if Big Planet fails to meet agreed upon criteria and conditions in the distribution of such product or service. In the event Big Planet and I-Link are unable to reach agreement within [Number Redacted] days from the date the parties commence good faith negotiations, I-Link shall have the right to contract with another party to distribute the Future Product or Service in the Network Marketing Channel if (a) such Future Product or Service is a Stand-Alone Product, and (b) the terms and conditions are not more favorable than the terms last offered by Big Planet. Big Planet shall retain the non-exclusive right to distribute such product in the Network Marketing Channel. With respect to any product or service that may be offered or sold by or through I-Link or over the I-Link Network, the rights to which are not wholly-owned by I-Link or for which I-Link does not have the right to grant distribution rights, I-Link agrees to use its best efforts to obtain from the owner of such rights the right to grant Big Planet distribution rights consistent with this Agreement, so long as in doing so I-Link is not required to expend any monies or agree to any terms or conditions that would in I-Link's reasonable determination have a material adverse effect on I-Link's business. Notwithstanding the foregoing, I-Link shall keep Big Planet informed of such negotiations so that Big Planet may, in its sole discretion, cooperate with I-Link as needed to facilitate the acquisition of said rights. 4.6 Pricing. ------- (a) Initial Pricing. The pricing for the Enhanced Services listed on Schedule 4.1, and all upgrades, modifications, enhancements and replacements thereof, shall consist of (i) a per minute charge and billing increment for each Single-Leg Call and each Double Leg Call to be accrued and billed in [Number Redacted] increments, and [Number Redacted] increments for international calls, (ii) a monthly recurring charge for each Big Planet Customer who subscribes for one of the base packages of Enhanced Services as described on Schedule 4.1, and (iii) a monthly recurring charge for any additional Enhanced Service added to the base package for a Big Planet Customer. The initial pricing for the Enhanced Services and the Enhanced Service Devices are set forth in Schedule 4.1, which initial pricing shall be modified from time to time as set forth in this Section 4.6. (b) Pass Through Charges. Unless otherwise provided for in the applicable service or product description contained in any attachment hereto, I-Link will pass through to Big Planet, and Big Planet will be responsible for the pass through charges identified on Schedule 4.6(b). Unless required by a Government Authority, except for the fees set forth in Section 4.1 and the pass through charges identified on Schedule 4.6(b), no additional fees, charges or expenses may be passed through or charged to Big Planet. I-Link shall provide as soon as possible, but in no event less than five (5) days prior, written notice to Big Planet of any changes to the pass through charges. 15 (c) Adjustment to Per Minute Charge. Subject to the provisions of Section 4.6(d), during the term of this Agreement the per minute price to Big Planet of Single-Leg Calls and Double-Leg Calls shall be adjusted on a six-month basis to equal [Costs and Percentages Redacted]. Big Planet's and I-Link's representatives agree to meet within 30 days after the end of each six-month period (the initial six-month period shall be deemed to end October 31, 2000) to review I-Link's Costs. The pricing of any product or service for which I-Link costs have changed since the last review shall be adjusted to equal [Costs and Percentages Redacted] effective as of the first day of the next month. (d) Cap. Notwithstanding the agreement to adjust pricing levels as set forth in Section 4.6(c) and I-Link's Costs for such service, I-Link agrees that I-Link's pricing for Double-Leg Calls shall not exceed [Charges Redacted] per minute and that I-Link's pricing for Single-Leg Calls shall not exceed [Charges Redacted] per minute during the term of this Agreement, unless I-Link's Costs are increased due to regulatory changes or government mandates, or limited circumstances beyond I-Link's control such as the critical failure of an underlying I-Link Network carrier requiring off-Network re-routing of I-Link traffic or similar catastrophic events; provided, however, that such limited circumstances shall not include business issues such as increases in operating costs, increases in supply costs, or the general increase of prices of underlying carriers in the industry. In the event of a catastrophic limited circumstance, I-Link shall immediately give Big Planet written notice so that Big Planet may inform its Big Planet Customers and Big Planet Representatives. Once the event has been remedied the I-link Costs shall revert back to the then existing cap. Notwithstanding the foregoing, the cap on pricing for Future Products and Services shall be negotiated with the right of first option set forth in Section 4.5. All enhanced service calls originating in a NECA areas described in Schedule 4.6(d), or originating or terminating outside the continental United States (Alaska, Hawaii, Puerto Rico or any international country) are subject to surcharges and/or rates as outlined in Schedule 4.6(d) and are subject to change upon [Recacted] days written notice to Big Planet, which charges are not subject to the cap described. (e) Recurring Charges. The monthly recurring charge related to the existing Enhanced Service packages and existing Enhanced Services described in the current Schedules to this Agreement shall not be increased without the consent of Big Planet; (f) Resale Rights. I-Link and Big Planet agree that throughout the duration of this Agreement Big Planet shall have the right to purchase or market the Enhanced Services and Enhanced Service Devices listed on Schedule 4.1, plus any Future Products and Services provided for hereunder, for resale to its Big Planet Customers, and in its sole discretion, Big Planet may set any retail price that it desires. During the period Big Planet uses the Billing System, Big Planet agrees to notify I-Link 60 days prior to the expected price change of their request for change in sufficient detail to allow I-Link to make such changes as required. Any changes Big Planet requests which require more than an update to the rate tables (i.e. product design, development, code modifications, testing) shall be mutually agreed to in terms of feasibility and timing of implementation of such changes along with any charges I-Link may assess in order to facilitate Big Planet's requested 16 changes. Big Planet assumes liability for any escheat liability under state or federal law, if any, and shall indemnify I-Link from and against any such liability. 4.7 Most Favored Customer. For the term of this Agreement, I-Link agrees to treat Big Planet as its most favored customer, distributor, agent or reseller in the residential and SOHO market. If during the term of this Agreement I-Link shall enter into arrangements with any other distributor, reseller, agent or customer in any form of engagement where I-Link Products or Services are sold to a residential or SOHO end-user with similar usage volume as Big Planet and with a similar geographic concentration, and the agreement provides said distributor, reseller, agent or customer with more favorable terms, then I-Link shall provide written notice to Big Planet of the terms of such agreement or arrangement and Big Planet shall have the right to elect to have this Agreement deemed amended to provide the same pricing and other terms to Big Planet by providing written notice to I-Link and the Agreement shall be deemed to be amended effective as of the date of such notice. 4.8 Audit. Big Planet shall have the right to inspect and audit the books and records of I-Link upon reasonable notice solely to confirm the accuracy of the reports and information provided to Big Planet concerning customer usage and other billing information and to confirm the I-Link Costs of the Double-Leg Calls and Single-Leg Calls in determining the pricing established under this Article 4, to confirm any other costs or expenses being charged or passed through to Big Planet and to confirm its rights under Section 4.7 with respect to agreements or arrangements with other distributors, dealers, resellers and customers. 4.9 Information/Data to be Provided. I-Link shall provide or make available to Big Planet the information/data specified in Schedule 4.9 at the times and in the manner and form specified therein. In addition, I-Link shall provide Big Planet with access to all contracts with respect to I-Link's Network capacity and pricing for such capacity, unless prohibited by the terms of an existing contract, including but not limited to all pricing matrix, discount matrix and related documentation necessary for Big Planet to determine I-Link's compliance with Section 4.7 hereof. I-Link agrees to use its reasonable best efforts to obtain the consent of the other party to any existing contract which by its terms would otherwise prevent Big Planet from accessing such contract to allow such access. I-Link shall provide such other existing and available information as Big Planet may reasonably request and shall work with Big Planet to establish mutually workable timelines and delivery methods for delivering such other information. 4.10 Marketing. During the period of exclusivity and in such territories where Big Planet maintains the exclusive right to distribute Enhanced Services and Enhanced Service Devices, Big Planet shall use good faith efforts to market the Exclusive Products and Services and shall promote such products in all introductory information packs provided to potential or new Big Planet Representatives. Subject to Section 4.3, all marketing programs and materials prepared by Big Planet shall include the appropriate trademarks and service marks of I-Link including the phrase "I-Link Enhanced." Big Planet shall monitor and control the marketing efforts of the Big Planet Representatives at a level consistent with the efforts of Big Planet to monitor and control the marketing of other Big Planet products and services prior to the Effective 17 Time. Big Planet shall have the right to market the Enhanced Services and Enhanced Service Devices through one or more of its Affiliates and their independent representatives. 4.11 Network Outages. The Parties agree that if any event occurs including any default in payment of any supplier agreement or otherwise which is reasonably likely to cause or result in a service outage, then I-Link shall give Big Planet immediate notice of such event together with summary of the event that will result in such service outage. Big Planet shall have the right to step in and at I-Link's expense cure any default or take necessary action to prevent such service outage, including but not limited to the procurement of similar services from other suppliers necessary to obtain Enhanced Services over the I-Link Network, contacting and working with vendors and suppliers of I-Link, and shall provide I-Link the reasonable opportunity to participate if possible, and such other actions as may be necessary. In such event, I-Link shall promptly reimburse Big Planet for any payments made on behalf of I-Link and any costs or expenses incurred by Big Planet. Big Planet shall have the right to offset such amounts against any future billings for Enhance Services and Enhanced Service Devices provided pursuant to this Agreement. 4.12 Board Seat. So long as this Agreement shall remain in force, I-Link agrees that it will nominate a person designated by Big Planet to sit on the Board of Directors of I-Link unless Big Planet declines or requests not to have a Board member. I-Link shall have the right to approve the person designated to be nominated, which approval shall not be unreasonably withheld. In the event I-Link reasonably withholds its approval, it shall notify Big Planet of its objections and Big Planet shall have the right to designate a different person. I-Link shall take all reasonable action to have the person designated by Big Planet elected to serve on the Board. In the event the designated person is not elected for reasons beyond the control of I-Link, or if Big Planet declines or request not to have a Board member, then Big Planet shall have the right to have a representative attend each meeting of the Board of Directors or committee thereof, and I-Link shall provide copies of all notices, information and other material it provides to its Board members to Big Planet's representative. Upon the termination of this Agreement, I-Link shall have the right to request and obtain the immediate resignation of Big Planet's board designee. 4.13 Trademarks. I-Link hereby grants to Big Planet and its Affiliates a royalty-free, non-exclusive, non-transferable. non-sublicenseable license to use the trade names and trademarks enumerated in Schecule 4.13 ("Marks") in Big Planet's advertising and promotion of the I-Link Products and Services. Subject to Section 4.3 above, Big Planet shall use the Marks in all of Big Planet's advertising and promotion relating to the I-Link Products and Services. Big Planet acknowledges I-Link's ownership and exclusive rights in the Marks, and Big Planet's use of the Marks shall accrue to the benefit of I-Link. Big Planet shall not attempt to register the Marks or adopt, use or attempt to register any confusingly similar mark. Big Planet shall not use any trademark, word, symbol, letter or design in combination with the Marks in a manner that would create a combination mark. Big Planet shall provide, at its own expense, samples of usage of the Marks for I-Link to inspect prior to usage. I-Link may reject any sample if I-Link believes in good faith that the use will damage the recognition value or reputation for quality associated with the Marks. Big Planet shall either modify nonconforming uses within thirty (30) days of notice or immediately cease any further use of the Marks. 18 4.14 Product and Service Warranty. I-Link warrants and covenants that the Enhanced Services shall have [Percentage Redacted]service availability and shall continue to perform functionally for the term of this Agreement, as described in the documentation provided in accordance with this Agreement, including the service level agreement attached as Schedule 4.14, and with I-Link's marketing literature, and I-Link's specifications; and that the I-Link Products and Services and user documentation furnished by I-Link are compatible; and that the I-Link Products and Services and the Ordering and Provisioning System and the Billing Service system shall be free of defects in design, workmanship and materials which prevent them from being used for their intended purpose. I-Link further represents and warrants that it will not discontinue any of the Enhanced Services or Enhanced Service Devices unless it shall give Big Planet at least ninety (90) days prior written notice of such discontinuation and provides a replacement product on the same terms and pricing. Big Planet shall make no representations and warranties regarding the I-Link Products and Services beyond the representations and warranties set forth in this Agreement or the schedules or exhibits hereto or additional warranties provided by I-Link at the time Big Planet orders or facilitates the order of said product or service. 4.15 Carrier Commitment and Capacity Requirements. The Parties acknowledge that Big Planet has an agreement in place with a telecommunications carrier ("Carrier Agreement"). I-Link agrees to use good faith efforts to assist Big Planet in identifying and implementing actions that would facilitate Big Planet meeting its volume commitment under the Carrier Agreement, so long as such actions do not cause any material adverse financial impact to I-Link. So long as this Agreement shall remain in force Big Planet shall not take any actions to cause any Legacy Customer to be moved from I-Link's Carrier Information Code (CIC) without the prior written consent of I-Link. Notwithstanding the foregoing, nothing shall prohibit a Legacy Customers, on an individual basis, from being moved from I-Link's CIC in the event (i) the Legacy Customer purchases or subscribes to another I-Link Enhanced Service that includes as a feature long-distance calling, (ii) Big Planet through general solicitation or its Big Planet Representatives sells a non-competing product (as defined in 4.16 below) to a Legacy Customer that requires the Legacy Customer to be moved from I-Link's CIC; or (iii) a Legacy Customer makes a request in compliance with applicable Law that he or she be moved from the I-Link CIC. 4.16 Non-Compete. Big Planet agrees that during the period it has exclusivity for Enhanced Services and Enhanced Service Devices under Section 4.3 above, it shall not market or distribute in any territory where it has exclusivity and in which the I-Link Product and Services are available any products of other suppliers that are substantially similar to the Exclusive Products and Services. Big Planet products listed on Schedule 4.16 shall be deemed non-competing products, including any and all upgrades, modifications, enhancements and replacements thereof. 4.17 Wholesale Services Outside the United States. (a) [Sentence Redacted] I-Link agrees to keep Big Planet generally informed with respect to developments in the expansion and build-out of the I-Link Network, including licensing arrangements with third parties. I-Link also agrees that if Big Planet elects to build out network capabilities either individually or jointly with a third party for purposes of providing Enhance 19 Services and Enhanced Service Devices in the Network Marketing Channel, I-Link will cooperate with Big Planet in such build-out and will negotiate in good faith the license of any necessary technology; provided, however, that I-Link shall not be required to so cooperate or negotiate if in its reasonable discretion I-Link deems that working with any such third party would materially adversely affect I-Link's business. (b) At such time that I-Link first undertakes to establish a telecommunications network in a country other than the United States, I-Link shall give Big Planet written notice. The written notice shall identify the territory, jurisdiction or country in which such network has been or is being established, the I-Link Products and Services that will be available in such market, and the estimated date that such products and services will be available for distribution. The notice shall be delivered at least six months prior to activating such service or introducing such product. Within 60 days of receipt of such notice, the Parties shall commence negotiations in good faith to establish the pricing to Big Planet of such I-Link Products and Services and the forecasts of the number of Big Planet Customers that Big Planet will need to achieve in order to maintain exclusivity in such market in the Network Marketing Channel. The pricing to Big Planet shall be no less favorable than that offered to other similarly situated customers of I-Link consistent with the provisions of Section 4.7 of this Agreement. The Parties hereby agree that in negotiating the pricing for the Enhanced Services and Enhanced Services in territories outside of the United States, that the following shall be considered: the retail price of the I-Link Products and Services to the end-user must be competitive as to pricing and service levels within the market for comparable telecommunication products and services; Big Planet's desire that the wholesale pricing of the I-Link Products and Services to Big Planet should provide a sufficient margin to allow Big Planet to pay commissions to Big Planet Representatives on 100% of the sales price to end users; variations in I-Link's cost structure and network build out in a specific country as compared to the United States; and a pricing structure that would allow both I-Link and Big Planet to achieve reasonable profit margins. If the Parties are able to reach an agreement as to the pricing and required customer levels to maintain exclusivity, the Parties shall execute an addendum to this Agreement to set forth such terms. The provisions of this Section 4.17 shall remain intact notwithstanding the loss of exclusivity by Big Planet in the United States pursuant to Section 4.4 above. (c) If the parties are unable to reach an agreement with respect to pricing and the number of customers required to maintain exclusivity prior to the later of (i) six months after Big Planet receives the written notice specified in Section 4.17 above, and (ii) the date that the I-Link commences providing the I-Link Products and Services in such market, then Big Planet shall have a non-exclusive right to market the I-Link Products and Services in the Network Marketing Channel in such market, and I-Link shall be able to contract with one or more other persons to distribute I-Link Products and Services in the Network Marketing Channel in such territory, jurisdiction or country on a non-exclusive basis, provided that the terms and conditions thereof shall not be more favorable than the terms last offered by Big Planet or pursuant to which such I-Link Products and Services are sold to Big Planet on a non-exclusive basis in such market. 4.18 Insurance. I-Link and Big Planet shall maintain insurance coverage with a carrier rated A or better by the Best Key Rating Guide and list the other as an additional insured on the 20 policy. Policies shall include statutory workers' compensation, employer's liability, comprehensive automobile liability with a combined single limit of $1,000,000 for each occurrence for bodily injury and property damage liability, and comprehensive commercial general liability in an amount not less than $1,000,000.00 per occurrence and $2,000,000.00 in the aggregate. The Parties shall immediately notify each other upon receipt of notice of cancellation of any policy. Article 5 Ordering, Customer Services and Billing 5.1 Ordering Services. At no additional charge to Big Planet, I-Link shall provide and maintain the ordering and provisioning software system necessary to allow Big Planet Representatives and Big Planet Customers to sign up and order I-Link Products and Services (the "Order and Provisioning System"). The Parties agree that the Ordering and Provisioning System shall be a web-based order processing system located on I-Link's premises that is acceptable to Big Planet and branded as "Big Planet." Big Planet shall provide at its expense the web server(s) and data connections necessary to support the Order and Provisioning System. The specifications and performance service level requirements for the Order and Provisioning System and the required interface to Big Planet's systems and web page product as described below are set forth in the Service Level Agreement attached as Schedule 5.1. The Order and Provisioning System shall be web accessible from Big Planet's Dynamic Web Page product as a hotlink to I-Link's ordering/provisioning website. I-Link and Big Planet shall jointly develop and build an interface for the Order and Provisioning System and each Party shall be responsible for its own costs in the development, build-out and maintenance of such interface. Any additional modifications to the Order and Provisioning System beyond the existing functionality of the System (as specified in Schedule 5.1) that may be requested by Big Planet will be evaluated by I-Link, and the cost of any such modification will be estimated and provided to Big Planet. Big Planet will bear the cost of developing and implementing any such modifications or enhancements. The Order and Provisioning System of I-Link and Big Planet will be linked by a specific uniform resource locator that is approved by Big Planet prior to use and that is exclusively dedicated to the Order and Provisioning System ("Order URL"). All Big Planet Customers shall remain exclusively within this Order URL while transacting business on the Order and Provisioning System and at no time shall any banners or links be inserted into or maintained as part of the Order and Provisioning System that directs a Big Planet Customer or Big Planet Representative elsewhere. The Parties agree that web entered orders from Big Planet Customers will go directly to I-Link's Order and Provisioning System. In the event that Big Planet elects to accept telephone and paper orders, those orders shall be entered into an order entry system directly by Big Planet and Big Planet shall be responsible for placing such orders into the Order and Provisioning System. In the event Big Planet offers Presubscribed Services utilizing the I-Link Network, Big Planet shall bear the cost associated with any required third-party verification procedures and provisioning. 5.2 Customer Service, Billing and Collections. Big Planet acknowledges and agrees that from and after the Effective Time that it shall be responsible for providing at its cost all billing, collections, and other customer service to its Big Planet Enhanced Service Customers 21 with respect to the I-Link Products and Services provided by I-Link hereunder. This Section 5.2 shall in no way relieve I-Link from providing any customer service and technical support obligations that it is required to perform for Big Planet under the terms of this Agreement including those set forth in Article 10. Notwithstanding the foregoing, Big Planet may contract with I-Link to provide billing services and other services and personnel for the first twelve months following the Effective Time as more fully described in Article 8. 5.3 Warranty for Tangible Products. With respect to warranties on Future Products and Services that are tangible products manufactured by I-Link, I-Link shall remain responsible at its cost for performing any and all warranty work and providing replacement products for defective tangible products during the warranty period in accordance with the warranty provisions to be negotiated in accordance with Section 4.5. With respect to tangible I-Link Products and Services manufactured by third parties, I-Link shall pass through to Big Planet and the end users of its tangible I-Link Products and Services all warranties provided to I-Link by the manufacturers of such tangible Products. I-Link shall use its good faith and reasonable best efforts to negotiate favorable warranty terms with its third party manufacturers that are consistent with industry standards. This Section 5.3 shall not relieve I-Link from providing any customer service and technical support obligations that it is required to perform for Big Planet under the terms of this Agreement including those set forth in Article 10. Article 6 Assignment of Sales Force and Related Business 6.1 Transfer of I-Link LLC Representatives. (a) Transfer. At the Effective Time, I-Link and I-Link LLC shall assign and transfer to Big Planet their entire right, title and legal and equitable interests in the I-Link LLC Representative Agreements and all associated documentation, including all rights to the names and other personal information related thereto. A list of the I-Link LLC Representative Agreements are attached hereto as Schedule 6.1(a). By this irrevocable assignment, I-Link and I-Link LLC renounce and waive any and all rights they may have in the I-Link LLC Representative Agreements and the I-Link LLC Representatives, or to receive any compensation whatsoever by reason of any use of the I-Link LLC Representatives or any element thereof by Big Planet. I-Link and I-Link LLC agree that they will not use or release the names of such I-Link LLC Representatives or other personal information related thereto to any other person or otherwise use such information. (b) Information. I-Link and I-Link LLC further agree that, on reasonable request and without further consideration, they shall provide any and all existing information, hard copies of the agreements, data and business information, financial data, representative lists, and similar information of I-Link and I-Link LLC to Big Planet regarding the I-Link LLC Representatives and I-Link LLC Representative Agreements, 22 and generally do everything reasonably necessary to aid Big Planet with this assignment and transfer. (c) Transition. At the Effective Time, Big Planet shall assume control of the I-Link LLC Representatives and they shall be treated as Big Planet Representatives. I-Link and I-Link LLC shall be liable for any and all claims of I-Link LLC Representatives relating to any matter occurring or accruing prior to the Effective Time. During the first twelve months following the Effective Time, Big Planet agrees that all I-Link LLC Representatives shall be transitioned to the Big Planet Sales Compensation Plan in accordance with the terms and timetable set forth in Schedule 6.1(c). Except as set forth in this Section 6.1(c), Big Planet shall have no obligation to make any changes to its Big Planet Sales Compensation Plan or offer any other exceptions or inducements to retain the I-Link LLC Representatives. In no event shall either Party have any liability to the other with respect to any loss or decline in the number of I-Link LCC Representatives marketing I-Link Products and Services, as a result of any I-Link LLC Representative electing not to transition to Big Planet as a result of the Assignment of this Agreement, or Big Planet's actions in integrating such I-Link LLC Representatives. (d) Commissions. I-Link shall be solely responsible for paying all commissions that relate to sales and usage of I-Link Products and Services prior to the Effective Time or any other fees or commissions that result from actions that occur prior to the Effective Time or that are anything other than the standard commissions on sales of product and services as described in the I-Link Sales Compensation Plan. Big Planet shall be responsible for paying all commissions on sales of I-Link Products and Services marketed and distributed by Big Planet following the Effective Time. 6.2 Transition of Customer Base. --------------------------- (a) Assignment of Customers. At the Effective Time, I-Link shall assign and transfer to Big Planet all its right, title and interest in the Existing Customers, which are more particularly described on attached Schedule 6.2(a). I-Link shall update Schedule 6.2(a) as of the Effective Time. By this irrevocable assignment, I-Link renounces and waives any and all rights it may have in the Existing Customers, except as otherwise provided herein. As of the Effective Time, Big Planet shall receive any and all gross revenues from the Existing Customers. I-Link further agrees that, on reasonable request and without further consideration, I-Link shall provide any and all existing information, hard copies of any contracts, data and business information, financial data, and similar existing information of I-Link to Big Planet regarding the Existing Customers, and generally do everything reasonably necessary to aid Big Planet with this assignment and transfer. In the event of the termination of this Agreement for any reason during the first year following the Effective Time, I-Link shall have the right, at its sole cost and expense, to reacquire all right, title and interest in the Existing Customers with respect to I-Link Products and Services, but not the product and services of Big Planet. Any such reacquisition must be done in accordance with all applicable laws. I-Link shall have the right to contact and notify the Existing Customers of such reversion, and Big Planet shall 23 provide I-Link with reasonable assistance in effecting such reversion. In the event of any such election, I-Link shall be required to pay and reimburse Big Planet on a monthly basis for all commissions payable by Big Planet to its Big Planet Representatives with respect to such customers until Big Planet is no longer obligated to pay commission on sales to the Existing Customers. Big Planet shall have no obligation to modify its Big Planet Sales Compensation Plan to eliminate the commission payable on sales to the Existing Customers. Big Planet shall invoice I-Link on a monthly basis for the amount of such commissions and I-Link shall pay the invoice within thirty days. I-Link acknowledges and agrees that upon termination of this Agreement under any other circumstance all right, title and interest in the Existing Customers shall remain with Big Planet. I-Link and I-Link LLC shall cooperate with Big Planet to migrate Existing Customers to another provider if so directed by Big Planet subject to any applicable regulatory requirements. I-Link further acknowledges that it is providing Big Planet with information concerning its Legacy Customers so as to enable Big Planet to market its other products and services to those customers. 6.3 Assignment of Accounts Receivables. ---------------------------------- (a) Assignment. At the Effective Time, I-Link agrees to assign and transfer to Big Planet all its right, title and interest in the Accounts Receivable. At the Effective Time, I-Link shall provide Big Planet with a complete accounts receivable aging schedule of the billed Accounts Receivable and applicable bad debt reserves as of January 31, 2000 (the "Cutoff Date"). Upon receipt of such schedule, Big Planet shall have ten days to review such schedule and shall be given access to I-Link's books and records if it desires to confirm the accuracy of such schedule. Within twenty (20) days of the Effective Time, I-Link shall process a final I-Link billing with respect to the sale and usage of, and payments received from, the I-Link Products and Services from the Cutoff Date to the Effective Time, and shall provide a report of this final I-Link billing statement to Big Planet. (b) Payment. In consideration for the assignment of such Accounts Receivable, Big Planet hereby agrees to pay to I-Link by wire transfer (i) at the Effective Time an amount equal to the sum of (a) [Percentage Redacted] of the Accounts Receivable as reflected on the Cutoff Date that have been outstanding for less than [Number Redacted] days as of the Effective Time, plus (b) [Percentage Redacted] of the Accounts Receivables as reflected on the Cutoff Date that have been outstanding between thirty and sixty days as of the Effective Time. Big Planet shall make no payment with respect to any Accounts Receivables that are outstanding for more [Number Redacted] days, and (ii) within five (5) days of Big Planet's receipt of the report of final I-Link billing statement an amount equal to [Percentage Redacted] of the Accounts Receivable billed after the Cutoff Date for services and products sold and used up to the Effective Time, less any payments received after the Cutoff Date and up to the Effective Time. (c) Collection. From and after the Effective Time, Big Planet shall assume responsibility for collecting the Accounts Receivables and shall be entitled to receive any 24 and all proceeds from the Accounts Receivables. I-Link further agrees that, on reasonable request and without further consideration, I-Link shall provide any and all existing information, hard copies of any contracts, data and business information, financial data, and similar information of I-Link to Big Planet regarding the Accounts Receivables, and generally do everything reasonably necessary to aid Big Planet with this assignment and transfer. If I-Link receives any payments of the Accounts Receivable after the Effective Time, it shall promptly forward to Big Planet all such payments with sufficient information for Big Planet to identify the Account Receivable associated with such payment. (d) Initial True-Up. Within 20 days of the end of each of the first two calendar months following the month following the Effective Time (April 20 and May 20), Big Planet shall provide I-Link with a schedule indicating which of the Accounts Receivables have been collected and the total sum collected with respect to such Accounts Receivables (less any finance charges or other fees or charges that were not included on the balances of the Accounts Receivables used to determine the initial payment) as of the end of such calendar month (the "Collected Amount"). If the Collected Amount exceeds the amount of the Initial Payment plus any additional monthly payments paid pursuant to this Section 6.3(d) (the "Total Payments"), then Big Planet shall within 15 days thereafter pay to I-Link a sum equal to the difference between (a) the Collected Amount and (b) the sum of the Total Payments. (e) Final True-Up. Within 20 days of the end of the fourth calendar month following the Effective Time (June 20), Big Planet shall provide I-Link with a final schedule indicating which of the Accounts Receivable have been collected and the Collected Amount through the end of the fourth calendar month. If the Collected Amount is less than the Initial Payment, I-Link shall within 15 days pay to Big Planet a sum equal to the difference between (a) [Amounts Redacted], and (b) [Amounts Redacted]. If the Collected Amount exceeds the amount of the Total Payments, then Big Planet shall within 15 days thereafter pay to I-Link a sum equal to the difference between (a) the Collected Amount and (b) the sum of the Total Payment. Big Planet shall be entitled to keep all sums collected on the Accounts Receivables after the end of the fourth calendar month from the Effective Time without any further payment to I-Link; provided, however, I-Link shall have the right to require Big Planet to assign back to I-Link all Accounts Receivable that have not been collected as of the end of the fourth calendar month for no additional consideration. 6.4 Legacy Customers. ---------------- (a) No Transfer. None of the Legacy Customers shall be transferred to Big Planet at the Effective Time. All of these Legacy Customers shall remain customers of I-Link and Big Planet shall provide customer services to these Legacy Customers at a level consistent with services provided to Big Planet Enhanced Service Customers. At anytime following the Effective Time, Big Planet shall have the right to request I-Link to transfer 25 the Legacy Customers to Big Planet, subject to the provisions of Section 4.15. In the event of such a request, I-Link shall cooperate in effecting such transfer including obtaining any regulatory approvals. Each Party shall be responsible for its own costs in connection with any transfers of such Legacy Customers. (b) Representations and Warranties. I-Link represents and warrants that as of October 1999, approximately [Percentage Redacted] of its total Presubscribed Services traffic is carried on the Sprint network. I-Link further represents and warrants that it has notified I-Link LLC Representatives that the commission value to I-Link LLC Representatives on Legacy Customer contracts under the Sprint Plus One plan will be less than or equal to [Percentage Redacted] of retail sales price. (c) Commission Distribution . I- Link agrees that it shall pay Big Planet (by way of direct payment or offset, at I-Link's discretion) [Percentage Redacted] of the gross per minute revenue generated from the sale of all non-I-Link Network Presubscribed Services traffic, and [Percentage Redacted] of the monthly recurring charge from the Cascade product (identified on Schedule 4.1). I-Link also agrees to pay Big Planet [Percentage Redacted] of the gross per minute revenue generated from the balance of the Legacy business originating or terminating on the I-Link Network, and [Percentage Redacted] of the monthly recurring charge generated from the balance of the Pre-subscribed Services customers. A list of Legacy Customers is set forth in Schedule 6.4 (which schedule shall be provided within 48 hours of the Execution Date). The obligations shall continue until all Legacy Customers have ceased receiving services under such plans. I-Link shall provide Big Planet with complete and timely information sufficient to direct the appropriate payments to the appropriate former I-Link LLC Representative. 6.5 Customer Service Space. For a period of six months commencing at the Effective Time and ending on the six-month anniversary of the Effective Time, I-Link shall provide Big Planet with work space on its premises that is adequate for Big Planet to provide customer support functions for the Big Planet Enhanced Service Customers as long as space requirements do not exceed I-Link's current space requirements on existing leases. Big Planet agrees to provide telephones, headsets, workstations, installation and associated software licenses required for normal customer care . Big Planet will prepare a customer care headcount forecast and agrees to hire and manage such customer care representatives during the 6 month transition period. Big Planet shall Pay I-Link a monthly amount for this customer care related space allocation based on the square footage leased equal to [Amount Redacted] per square foot, plus a corresponding pro rata share of the utilities associated with such space. Big Planet's employees, agents and subcontractors working on I-Link premises during the training/transition periods shall fully comply with I-Link's security, access and safety requirements for the protection of I-Link's facilities and employees while on I-Link's premises. 6.6 Customer Support Personnel. I-Link shall provide all necessary instruction and training to enable Big Planet to supply Customer Support for the I-Link Products and Services, including but not limited to all Customer Support training manuals and materials. Such training 26 is described on attached Schedule 6.6 and shall be provided at cost plus [Percentage Redacted] to Big Planet, and Big Planet shall reimburse I-Link for all out-of-pocket expenses such as costs for reasonable travel, manuals and materials. In addition, Big Planet may contract with I-Link to use personnel of I-Link to provide its customer support functions. Such personnel costs shall be calculated as that percentage of I-Link's total fully-burdened (customary employee benefits and taxes) customer support personnel costs that equals the percentage of I-Link's total customers/users that Big Planet Customers represent, plus [Percentage Redacted]; or, in the event Big Planet opts to specify to I-Link a definitive number of I-Link personnel who would be dedicated to handling Big Planet customer support functions, such full-burdened personnel costs shall be calculated as the actual cost for such dedicated personnel, plus [Percentage Redacted. 6.7 Notices of Investigation (a) I-Link and I-Link LLC agree that during the term of this Agreement it will notify Big Planet within three business days of I-Link or I-Link LLC (i) becoming aware of any investigation of I-Link's sales or marketing activities prior to the Effective Time by any Governmental Authority; or (ii) becoming subject to any Governmental Order, or being approached as to a settlement relating to its conduct of business with respect to the I-Link LLC Representatives. (b) I-Link and I-Link LLC agree that during the term of this Agreement it will notify Big Planet within three business days of either of them becoming aware of any notice by any Governmental Authority that its products and/or services do not comply with any Law. (c) Big Planet agrees that during the term of this Agreement it will notify I-Link within three business days of Big Planet (i) becoming aware of any investigation of Big Planet's sales or marketing activities of Enhanced Services following the Effective Time by any Governmental Authority; or (ii) becoming subject to any Governmental Order, or being approached as to a settlement relating to its conduct of business with respect to the Big Planet Representatives in connection with the Enhanced Services, that in either case could reasonably be expected to have a material adverse affect on its ability to perform its obligations hereunder and relating to the I-Link Products and Services. (d) Big Planet agrees that during the term of this Agreement it will notify I-Link within three business days of Big Planet becoming aware of any notice by any Governmental Authority that its sales or marketing activities do not comply with any Law to the extent it could be reasonably expected that such alleged violation would have a material adverse affect on its ability to perform its obligations hereunder and relating to the I-Link Products and Services. 6.8 Transition Costs. Unless otherwise provided herein, each of the Parties shall be responsible for their costs incurred prior to the Effective Time, including but not limited to training of employees, hiring, marketing materials, and costs of communications to Existing and Legacy Customers. 27 6.9 Non-Solicitation. Each of I-Link and I-Link LLC agree that neither they nor any of their Subsidiaries or Affiliates, nor any of their respective directors, officers, or employees shall directly, or indirectly by causing, assisting or encouraging another party to do so, for their own account or the account of any other person with which they shall become associated in any capacity, or in which they shall have any ownership interest, (a) solicit or cause to be solicited or facilitate any solicitation of any I-Link LLC Representative or any existing or future Big Planet Representative to become a distributor, representative or customer of I-Link, I-Link LLC or any other party, (b) except as otherwise provided in this Agreement, solicit or cause to be solicited or facilitate any solicitation of any Existing Customer, Legacy Customer or any current or future Big Planet Customer to become a customer of I-Link, I-Link LLC or any other party, or (c) provide any information concerning such I-Link LLC Representatives, Big Planet Representatives, or Big Planet Customers, including but not limited to the terms of any agreements between I-Link and such customers, to any other person; provided, however, that the foregoing (i) shall apply only so long as such I-Link LLC Representative or Big Planet Representative shall remain an independent representative of Big Planet, and only so long as such Existing Customer, Legacy Customer, or Big Planet Customer shall remain a customer of Big Planet, and (ii) shall not prohibit I-Link or its Subsidiaries, Affiliates, agents, representatives or distributors from performing general solicitations not targeting Big Planet employees, representatives or customers via general advertisements and contracting with or selling to any person who may respond to such general advertising. All information concerning Big Planet Customers and Big Planet Representatives shall be considered confidential. Big Planet agrees that neither it nor any of its Subsidiaries or Affiliates, nor any of their respective directors, officers, or employees shall directly, or indirectly by causing, assisting or encouraging another party to do so, for their own account or the account of any other person with which they shall become associated in any capacity, or in which they shall have any ownership interest, solicit or cause to be solicited or facilitate any solicitation of any I-Link or I-Link LLC employee (except I-Link customer support/service personnel) to become an employee of Big Planet or any of its Subsidiaries or Affiliates; provided, however, the foregoing shall not prohibit Big Planet or its Subsidiaries or Affiliates from performing general solicitations not targeting I-Link employees via general advertisements and hiring any employee who may respond to such general advertising, or from hiring any employee who may utilize the services of an employment agency that has not been retained or a search instigated by Big Planet. The obligations of the Parties under this Section shall survive for a period of two (2) years after termination of this Agreement. Article 7 Payment 7.1 Payment Unless otherwise expressly provided in this Agreement, I-Link shall invoice Big Planet for those I-Link Products and Services provided pursuant to this Agreement, and all other amounts payable under this Agreement in accordance with the prices established pursuant to this Agreement. Except as provided herein, Big Planet shall pay I-Link by wire transfer the amount due and payable within thirty (30) days from the invoice date (the "Due Date"). Payment of the invoice shall not constitute final acceptance of the products and/or 28 services. All properly invoiced amounts not paid within thirty (30) days of the Due Date shall be subject to an interest charge at the rate of one percent (1.0%) of the late payment per month. (a) Big Planet shall notify I-Link in writing within sixty (60) days of the Due Date of any contested or disputed amount concerning charges as they appear on the I-Link invoice. Written notification must include a description of any credit that Big Planet reasonably believes itself entitled, and I-Link and Big Planet shall promptly address and attempt to resolve the claim within thirty (30) days of the date of Big Planet's written notice. If I-Link and Big Planet are unable to resolve any such claim, the matter may be submitted to arbitration pursuant to the terms described in Section 8.4 (d). (b) Regardless of whether the Parties resolve the dispute between themselves or by arbitration, the following shall apply to the disputed funds. In the event the disputed invoice is resolved in favor of I-Link, then I-Link shall retain the monies paid pursuant to the disputed invoice. If, during the resolution of the matter it is determined that Big Planet owes I-Link additional funds, then Big Planet shall pay I-Link said amount plus interest from the Due Date at the rate of one percent (1.0%) per month on the amount due and payable within ten (10) days of resolution. In the event that the dispute is resolved in favor of Big Planet, then I-Link shall either refund or credit to Big Planet said amount plus interest from the Due Date at the rate of one percent (1.0%) per month on the amount due and payable. If, at the election I-Link, said amount plus interest is to be credited against a future invoice, then it shall be credited by I-Link as described in Section 7.2. If, at the election I-Link, said amount plus interest is to be refunded, then I-Link shall pay Big Planet said amount plus interest from the Due Date at the rate of one percent (1.0%) per month on the amount due and payable within ten (10) days of resolution. 7.2 Credits. Any credits due Big Planet as determined in section 7.1 shall be applied by I-Link against its next invoice with the appropriate information shown thereon or attached. Any credits due Big Planet that are not applied against I-Link's next invoice shall be paid to Big Planet by I-Link within thirty (30) days after written request from Big Planet. If Big Planet has not received such credits within thirty (30) days of the date of the request, then Big Planet may deduct such credits from any other amounts owed to I-Link. In the event (i) there occurs a failure or problem in the software/hardware system (as opposed to the Network) underlying Enhanced Services that results in an outage of Enhanced Services service to a Big Planet Customer in excess of 10.8 hours in any given billing period (exclusive of Network outages occasioned by underlying carriers or providers of Network components to I-Link) (an "Enhanced Services Outage"), (ii) as a result of such Enhanced Services Outage Big Planet is required by its own currently existing terms and conditions to its customers to offer a credit to such customer , and (iii) Big Planet shall give I-Link prior notice of such credit, then I-Link shall be responsible for the portion of such credit as shall equal the percentage I-Link's wholesale price to Big Planet is of Big Planet's retail price to the customer. Any such credit responsibility shall be deducted from any monthly service fees invoiced to Big Planet during which the Enhanced Services Outage occurred, unless disputed by I-Link, in which case the dispute shall be handled pursuant to the provisions of Section 7.1 above. 29 7.3 Legacy Payments. I-Link shall deduct amounts payable to Big Planet for commissions on the business from Legacy Customers as described in Section 6.4(c) from amounts billed to Big Planet for other business as described in the pass through charges in Section 4.5(b). In the event I-Link fails to make any payments for such commissions or deduct such amounts, Big Planet shall have the right to offset such amounts against amounts owing to I-Link. If I-Link deducts an amount for amounts billed to Big Planet for other business, it shall clearly identify the amount of the deduction. Article 8 Billing Service 8.1 Billing and Accounts Receivable Services. For a period of 12 months following the Effective Time, unless otherwise agreed upon by the Parties, I-Link shall provide billing services ("Billings Service") for Big Planet Enhanced Service Customers according to the standards, terms and conditions, and service levels set forth on Schedule 8.1. Said customer billings shall be branded as Big Planet and shall include appropriate I-Link carrier designation (provided that the Parties acknowledge printing change requirement of up to eight weeks for bill image development and setup). As compensation for providing these Billing Services, Big Planet shall reimburse I-Link [Amount Redacted] per customer bill. Any decrease or increase in actual costs after the Effective Time shall be passed on to Big Planet. Big Planet shall be responsible for any additional one-time or recurring costs for inserts, format changes and modifications, including but not limited to logo imaging, bill stock runs and other related bill customization. In addition to out-of-pocket costs, Big Planet shall reimburse I-Link for personnel costs. Upon transfer of the billing function to Big Planet, I-Link agrees to use its best efforts to assist Big Planet in the transfer of the data and information related to the Billing Service to either Big Planet or a third party as may be necessary for the orderly, non-disrupted business continuation of each party. In the event Big Planet shall desire I-Link to assist in collection efforts and activities, Big Planet shall reimburse I-Link for its costs in performing such services. These costs shall include, but not be limited to, personnel costs, external collection agency fees (one-time and recurring), fulfillment costs for collection letters, postage, customer cancellation notification, and collection data base maintenance costs. Personnel costs shall be calculated as that percentage of I-Link's total, fully-burdened (customary employee benefits and taxes) personnel costs (for each of the separate billing and collection functions) that equals the percentage of I-Link's total customers/users that Big Planet Customers represent, plus 10%. For an initial period of six months I-Link shall provide Big Planet accounts receivable accounting and processing services, including but not limited to processing of payments, adjustments, invoices, late and/or finance charges, reactivation fees, aging, bad debt analysis, and other related activities necessary for customer account balance management. I-Link shall provide Big Planet a monthly reconciliation of account balances. For these services Big Planet shall pay to I-Link the sum of [Amount Redacted] per month. At the end of the initial six-month period, the parties shall be free to negotiate any continuance of the accounts receivable services. Big Planet acknowledges that I-Link does not offer any warranties or guarantees as to the performance of its accounts receivable system, and that Big Planet's sole remedy under this Agreement in the event of any problems experienced with the accounts receivable services shall be the recovery of actual 30 monetary damages limited to the aggregate amount paid by Big Planet in the monthly accounts receivable services fee. In the event of errors or imbalances, I-Link shall use its best efforts to rectify such issues in a timely manner. Any modifications or enhancements to the accounts receivable system beyond the existing functionality of the system that may be requested by Big Planet will be evaluated by I-Link, and the cost of any such modification will be estimated and provided to Big Planet. Big Planet will bear the cost of developing and implementing any such modifications or enhancements. 8.2 Tax Compliance. -------------- (a) All charges are exclusive of federal, state, local, and foreign sales, use, excise, utility, gross receipts, value added taxes (VAT), other similar tax-like charges and tax-related surcharges as provided in I-Link's F.C.C. and state tariffs, and other similar tax-like charges levied by any duly constituted authority. (b) Big Planet shall provide I-Link with all duly authorized exemption certificates in all jurisdictions in which they sell I-Link Products and Services. Upon receipt of these certificates, I-Link agrees to exempt Big Planet from such taxes if and as provided by applicable law, effective on the date the exemption certificate is received by I-Link. Big Planet agrees to indemnify I-Link from and against any liability arising from any taxing jurisdictions. (c) Taxes based on I-Link's net income shall be the sole responsibility of I-Link; provided that, if Big Planet is required by the laws of any foreign tax jurisdiction to withhold income or profits taxes from any payment, Big Planet shall, within 90 days of the date of such withholding, provide to I-Link official tax certificates documenting remittance of such taxes to the relevant tax authorities. Such tax certificates shall be in a form sufficient under the U.S. Internal Revenue Code to document the qualification of such income or profits tax for the foreign tax credit allowable against I-Link's U.S. corporation income tax, and shall be accompanied by an English translation. Upon receipt of such certificates, I-Link will issue Big Planet a billing credit for the amounts represented thereby. (d) Big Planet will assume responsibility for city, state, federal and regulatory tax payments that are required as a result of sales of the Enhanced Services and Enhanced Service Devices to Big Planet Enhanced Services Customers (the "Taxes") . Big Planet shall review I-Link's system and assumptions for billing such taxes to end-users by Big Planet and shall agree to indemnify and hold harmless I-Link in regard to the Taxes. I-Link shall agree to maintain taxing systems as required to be current with the tables provided by Vertex. I-Link will process tax bills to end-users in conjunction with the billing activities described in this Agreement. Big Planet shall be responsible for all required tax compliance/reporting and remittance of the Taxes owed to various taxing jurisdictions, including notification of tax changes to end-users, as well as the expense to I-Link of any additional software licensing from Vertex required to achieve such compliance. During the period I-Link maintains ownership of the Legacy Customers, Big 31 Planet shall pay I-Link the sum of [Amount Redacted] per month to reimburse I-Link for tax compliance with respect to the Legacy Customers. 8.3 License of Billing Software. At such time as Big Planet shall take over the billing function, upon ninety (90) days written notice, Big Planet shall have the right to obtain from I-Link a non-exclusive, non-transferrable, perpetual license to use I-Link's current billing software solely for use with products and services sold through the Big Planet Representative sales force. As consideration for such license, Big Planet shall pay to I-Link a one-time, fully paid-up license fee of [Amount Redacted] ninety (90) days from the date of the written notice to license the current billing software. Payment of the license fee shall grant Big Planet a perpetual license to use the software until discontinued by Big Planet. I-Link shall also deliver to Big Planet with the software detailed documentation, including but not limited to, a user's manual, systems manual, operating manual, programming manual, modification manual and source code. Such license shall be evidenced by a license agreement mutually agreeable to the Parties containing terms standard to the industry. Big Planet shall pay to I-Link an annual maintenance and upgrade fee equal to [Amount Redacted] payable each anniversary thereafter so long as the software license agreement shall remain in force. 8.4 Escrow of Source Code (a) Deposit. Within fifteen (15) days from the Effective Time, I-Link shall deposit a copy of the current version of the source code and relevant documentation ("Source Code") for the Billing Software and Order System in escrow with an escrow agent reasonably acceptable to both parties ("Escrow Agent"). Escrow Agent shall be required by a separate agreement to contact I-Link at least annually to notify I-Link of its continuing obligation to update the escrow as required herein. This Escrow shall cease to exist (i) in the event Big Planet ceases to use the Billing Software or Order System, or (ii) upon the termination of this Agreement for any reason other than termination by Big Planet for cause under Section 9.2(a). (b) Warranty of I-Link to Big Planet. I-Link warrants to Big Planet that (i) the material deposited with the Escrow Agent shall constitute the source code and all existing documentation for the Billing Software and the Order System; (ii) the Source Code delivered to the Escrow Agent will be in a form suitable for reproduction by computer and/or photocopy equipment, and consists of a full source language statement of the program or programs comprising the Billing Software and the Order System and program maintenance documentation, including existing flow charts, schematics, and annotations which comprise available pre-coding detailed design specifications, and all other material necessary to allow a reasonably skilled third-party programmer or analyst to maintain or enhance the Billing Software and Order System without the help of any other person or reference to any other material; and (iii) I-Link will promptly supplement the Source Code delivered hereunder with all revisions, corrections, enhancements, or other changes so that the Source Code constitutes a human-readable program for the current release of the Billing Software and System. 32 (c) Notice of Default. ----------------- (i) I-Link shall be deemed to be in material default of its responsibilities to Big Planet if (A) I-Link is unable, at any time during the term of this Agreement, to correct any material malfunction, defect or nonconformity in the Billing Software and Order System that prevents such system from functioning substantially in accordance with the applicable specifications, documentation, performance criteria and other warranties and descriptions provided in this Agreement, within thirty (30) days after Big Planet's written notification to I-Link specifying in reasonable detail in what respects the Billing Software and Order System fails to conform; or (B) I-Link is adjudged insolvent, makes a general assignment for the benefit of creditors, files a voluntary petition of bankruptcy, suffers or permits the appointment of a receiver for its business or assets, becomes subject to any proceeding under any bankruptcy or insolvency law, whether domestic or foreign, or has wound up or liquidated its business voluntarily or otherwise and Big Planet has compelling reasons to believe that such event(s) will cause I-Link to fail to meet its warranty and maintenance obligations in the foreseeable future. Big Planet shall give written notice (the "Notice of Default") to the Escrow Agent of any default by I-Link. The Notice of Default shall, at the minimum (1) be labeled "Notice of Default"; (2) identify this Agreement and the escrow agreement; (3) specify the nature of the default; (4) identify the Source Code with specificity; and (5) demand the delivery of the Source Code to the Big Planet. (ii) Upon receipt of the Notice of Default, the Escrow Agent shall send a copy thereof to I-Link by certified or registered mail, postage prepaid, return receipt requested. If I-Link desires to dispute the Notice of Default, I-Link shall, within ten (10) days after the receipt of the copy of the Notice of Default from the Escrow Agent, deliver to the Escrow Agent a sworn statement (the "Affidavit") saying that no default has occurred, whereupon the provisions of Section 8.4(d) hereof will become applicable. If the Escrow Agent receives the Affidavit within said ten (10) days, the Escrow Agent shall send a copy thereof to Big Planet by certified or registered mail, return receipt requested. If the Escrow Agent does not receive the Affidavit within said ten (10) days and Big Planet has not terminated this Agreement, the Escrow Agent shall be authorized and directed to deliver the Source Code to Big Planet. (d) Disputes -------- (i) In the event that I-Link files the Affidavit with the Escrow Agent in the manner and within the time period set forth above, or if Big Planet shall fail to agree that this Agreement has been terminated, the Escrow Agent shall not release the Source Code to either Party except in accordance with (A) a final decision of the arbitration panel as hereinafter provided; or (B) receipt of an agreement with 33 authorized and notarized signatures of both I-Link and Big Planet, authorizing the release of the Source Code to one of the Parties hereto. (ii) Disputes arising under this Section shall be referred immediately to, and settled by, binding arbitration as set forth in this Section 8.4 (d)(ii). The arbitration panel shall consist of three persons. Each of the Parties hereto shall appoint one arbitrator and the two arbitrators thereby appointed shall select a third arbitrator. The arbitration shall be conducted in Salt Lake City, Utah, in accordance with the rules of the American Arbitration Association. The Escrow Agent shall give prompt effect to any court having jurisdiction thereof, enforcement or a stay of any award rendered by the arbitrators. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Utah. (e) Escrow Agreement. The Parties shall execute an escrow agreement that incorporates the terms of this Section and provide for other commercially reasonable provisions. Article 9 Term 9.1 Term. The provisioning of services under this Agreement shall become effective at the Effective Time and continue for three (3) years from the Effective Time or until such earlier date upon which this Agreement may be terminated in accordance with the provisions of this Article 9. This Agreement shall automatically renew for continuous one-year periods (an "Extension") unless I-Link or Big Planet gives the other Party six (6) months prior written notice of its intent to terminate this Agreement. Except as provided in Section 6.2(a) above, Big Planet shall have no obligation to transfer back to I-Link or I-Link LLC any of the I-Link LLC Representatives or the Existing Customers or Legacy Customers following the expiration or termination of this Agreement. Upon expiration of the initial three year term or termination of any Extension, Big Planet shall have the non-exclusive right to market, distribute and sell the Enhanced Services and Enhanced Service Devices, provided, however, that after expiration of the initial three year term I-Link may adjust its pricing for the any Enhanced Service or Enhanced Service Device to reflect changes to its cost structure subject to the provisions of Section 4.7. 9.2 Termination for Cause. --------------------- (a) Big Planet may terminate this Agreement by giving I-Link written notice of such termination upon the occurrence of any of the following events: (i) failure of I-Link to maintain I-Link's system integrity and/or overall network quality sufficient to provide the I-Link Product and Services hereunder; (ii) failure to materially comply with the Service Level Agreements and requirements set forth herein or to provide within the timelines set forth herein the information or data required to be delivered to Big Planet hereunder in accordance with Section 4.9; (iii) any violation of the non-solicitation 34 provisions of this Agreement; (iv) any other material breach or default in any of the material terms or conditions of this Agreement if I-Link has failed to cure such breach or default within thirty (30) days of receipt of written notice of such breach from Big Planet, (v) I-Link makes any assignment for the benefit of creditors, is adjudged insolvent, (v) any proceedings are instituted by or against I-Link in bankruptcy or under any insolvency laws or for reorganization, receivership or dissolution, or (vi) any assignment or attempted assignment of the Agreement in violation of Section 15.6 of this Agreement; or (vii) as a result of a Law or Governmental Order I-Link becomes unable to provide or sell the Enhanced Services and Enhanced Service Devices in one or more of the 48 states in the continental United States for a period in excess of 30 days. (b) I-Link may terminate by giving Big Planet written notice of such termination upon the occurrence of any of the following events: (i) any breach or default of any payment obligations under Section 7.1 if Big Planet fails to cure such default within ten (10) days of the date such payment is due; (ii) any other material breach or default in any of the material terms or conditions of this Agreement if Big Planet has failed to cure such breach or default within thirty (30) days of receipt of written notice of such breach from Big Planet, (iii) Big Planet makes any assignment for the benefit of creditors, is adjudged insolvent, (iv) any proceedings are instituted by Big Planet in bankruptcy or under any insolvency laws or for reorganization, receivership or dissolution, (v) any assignment or attempted assignment of the Agreement in violation of Section 15.6 of this Agreement, or (vi) Big Planet becomes unable by reason of injunction or order by any states or jurisdictions to market and sell the Enhanced Services in geographic areas representing more than 33% of the United States population for a period in excess of 30 days. 9.3 Big Planet's Right to Terminate Exclusivity. If Big Planet, in its good faith judgment, determines that pricing and/or service levels for I-Link Products and Services are no longer competitive, then Big Planet may elect to be a non-exclusive distributor of any or all I-Link Products and Services, provided, however, that Big Planet has given I-Link six months written notice of such election and that the date to become a non-exclusive distributor is after the first anniversary date of this Agreement. 9.4 Termination Assistance. I-Link agrees to make available to Big Planet all services necessary for an orderly transition of Big Planet Enhanced Service Customers at the time of termination of the contract, unless the Existing and Legacy Customers revert to I-Link under the provisions of Section 6.2(a) above, in which case Big Planet shall make such services and assistance available to I-Link. Such services include, but are not limited to: (i) providing all relevant and existing files in their existing format; (ii) providing all relevant and existing intermediate materials in existing format; (iii) providing all supplies and other property of Big Planet, and any other reasonable data or documentation existing and necessary for an orderly transfer; providing all existing information regarding changes to I-Link's Products and Services, including but not limited to, pricing, service product quality, and service delivery process. Big Planet agrees to reimburse I-Link for any reasonable out-of -pocket expenditures incurred by I- 35 Link in connection with the assistance provided hereunder if the Agreement is terminated by Big Planet other than for cause. 9.5 Transfer of 800 Numbers. Upon termination all 800 numbers and local toll free numbers in use by Big PlanetEnhanced Services Customers shall be assigned to Big Planet and transferred in a manner complying with applicable Law so that the Big PlanetEnhanced Services Customers may continue to use such 800 numbers and local toll free numbers following the termination of this Agreement. I-Link agrees to cooperate and to take such actions as are necessary to facilitate such assignment and transfer without any interruption of service. Big Planet agrees to reimburse I-Link for any reasonable out-of-pocket expenditures incurred by I-Link in connection with the foregoing if the Agreement is terminated by Big Planet other than for cause. 9.6 Termination Prior to Effective Time. ----------------------------------- This Agreement may be terminated prior to the Effective Time (a) by either Big Planet or I-Link if a material breach of any provision of this Agreement has been committed by the other Party and such breach has not been waived; (b) by Big Planet if any of the conditions in Section 2.4 has not been satisfied as of February 15, 2000, or such earlier date as the satisfaction of such condition is or becomes impossible (other than through the failure of Big Planet to comply with its obligations hereunder) and such condition has not been waived by Big Planet; (c) by I-Link if any of the conditions in Section 2.5 have not been satisfied as of February 15, 2000, or such earlier date as the satisfaction of such condition is or becomes impossible (other than through the failure of I-Link or I-Link LLC to comply with their obligations under this Agreement) and such condition has not been waived by I-Link; (d) by mutual consent of I-Link and Big Planet; or (e) by either Big Planet or I-Link if the Effective Time has not occurred prior to February 15, 2000 (other than through a failure of any Party seeking to terminate this Agreement to fully comply with its obligations under this Agreement), or such later date as the Parties may mutually agree. Article 10 Technical Support and Customer Support 10.1 Technical Support for Big Planet. I-Link will maintain a 24-hour a day, 7 day a week, including holidays, on-call technical staff for the purpose of handling emergency technical situations. I-Link will provide to Big Planet, within ten (10) days of execution of this 36 Agreement, a current `escalation procedure' for handling technical emergencies reasonably acceptable to Big Planet. 10.2 Customer Support. I-Link shall maintain second-line customer service call center operations for all Big Planet Enhanced Service Customers consisting of support to Big Planet's customer service operation. I-Link shall cooperate with Big Planet to resolve any customer related problems consistent with the terms of the relevant service level agreements; provided, however, that I-Link shall not be authorized to establish, modify, or resolve any customer related problems directly with a Big Planet Enhanced Service Customer unless, and only to the extent, authorized by Big Planet. Should a Big Planet Enhanced Service Customer inadvertently contact I-Link directly, I-Link will politely direct them to Big Planet for support. I-Link shall within five (5) business days of the Execution Date designate a corporate operations manager to represent I-Link in all of I-Link's contacts or dealings with Big Planet. 10.3 Training for Big Planet. I-Link will provide to select members of Big Planet management, at no cost, `sales' and `customer care' training, including but not limited to all customer care and sales manuals and materials reasonably necessary to enable such Big Planet management to train its staff to competently sell and support I-Link Products and Services; provided however, that I-Link shall be reimbursed for any directly related out-of-pocket expenses. Article 11 Representations and Warranties of I-Link and I-Link LLC As a material inducement to Big Planet to enter into this Agreement and with the acknowledgement and understanding that Big Planet is relying on the accuracy of these representations and warranties in determining the feasibility of entering into this Agreement, I-Link and I-Link LLC hereby jointly and severally represent and warrant as follows: 11.1 Organization, Authority and Qualification. I-Link is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida, and has all necessary corporate power and authority to enter into this Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. I-Link LLC is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all necessary power and authority to enter into this Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. Each of I-Link and I-Link LLC is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary. The execution and delivery by I-Link and I-Link LLC of this Agreement, the performance by I-Link and I-Link LLC of their obligations hereunder, and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate or limited liability company action. This Agreement has been duly executed by an authorized officer of each of I-Link and I-Link LLC, and constitutes a legal, valid and binding obligation of such party, enforceable against such party in accordance with its terms; 37 11.2 No Conflict. The execution, delivery and performance of this Agreement by I-Link and I-Link LLC do not and will not (i) violate, conflict with or result in the breach of any provision of the charter or bylaws (or similar organizational documents) of I-Link or I-Link LLC, (ii) conflict with or violate any law, regulation, statute, ordinance or other requirement of law of any foreign national, federal, state, municipal or local government, any governmental or court order of any jurisdiction applicable to I-Link, I-Link LLC, any of their respective Subsidiaries, or the assets properties or business of I-Link, I-Link LLC and each of their Subsidiaries, or (iii) conflict with, result in any breach of, constitute a default, or require any consent or approval (or an event which with the giving of notice or lapse of time or both would become a default) under any note, bond, mortgage, deed of trust, indenture, contract, agreement lease, sublease, license, sublicense, permit, franchise or other instrument or agreement, lease, sublease, license, sublicense, permit, or other instrument or arrangement to which I-Link, I-Link LLC, or any of their Subsidiaries are a party relevant to, or which would have an adverse effect on I-Link's ability to perform, its obligations hereunder. 11.3 No Litigation. Except as identified on Schedule 11.3, there are no Actions by or against either I-Link, I-Link LLC, or any Subsidiary or Affiliate of either I-Link or I-Link LLC (or, to the knowledge of I-Link or I-Link LLC, any Affiliate thereof and relating to the business or distribution channel of I-Link or I-Link LLC or any entity controlled, directly or indirectly, by them) or the I-Link Products or Services, or in any way affecting the business or distribution channel of I-Link or I-Link LLC or the I-Link Products or Services, pending before or threatened to be brought by or before any Governmental Authority other than collection of customer accounts carried out in the ordinary course of business. 11.4 Payment of Bonuses. As of the Execution Date, all commissions and bonuses payable to the I-Link LLC Representatives, Steven Campbell and Campbell Communications LLC pursuant to the I-Link Sales Compensation Plan or any other agreement for sales and revenue generated through January 10, 2000, have been paid and there are no other monies or obligations of any kind due and owing the I-Link LLC Representatives, Steven D. Campbell or Campbell Communications LLC, except for commissions due and payable for sales and revenue generated from January 11, 2000, through the Effective Time, which shall be paid by I-Link in accordance with the provisions of Article 6 hereof. 11.5 Coverage Area. The Enhanced Services enumerated in Schedule 4.1 is available in each of the fifty states of the United States and Puerto Rico. 11.6 Contracts. --------- (a) Schedule of Contracts. Schedule 11.6(a) contains a true, complete and correct list of each of the following contracts, agreements and commitments (including, without limitation, oral and informal arrangements to the extent necessary to conduct of the business) to which I-Link, I-Link LLC or any Subsidiary or Affiliate is a party: 38 (i) Each form of contract with any I-Link LLC Representative and copies of all policies and procedures, sales compensation plans and any other agreement or document setting forth or establishing the rights and obligations of I-Link LLC, I-Link and the I-Link LLC Representatives or in any way provides any benefits to any I-Link LLC Representative. (ii) Each form of contract, agreement or commitment with any Existing or Legacy Customer of I-Link, I-Link LLC or any Subsidiary or Affiliate that is being assigned or shifted to Big Planet following the Effective Time pursuant to the terms of this Agreement. (iii) Each contract related to the I-Link Costs. (b) No Other Contracts. Except as set forth in Schedule 11.6(a), there is no contract, agreement or other commitment granting any I-Link LLC Representative or any Existing or Legacy Customer any rights or benefits, or under which I-Link, I-Link LLC or any of their Subsidiaries or Affiliates may have any obligation or liability to any I-Link LLC Representative or Existing or Legacy Customer. (c) Assignability. Except as otherwise provided in Schedule 11.6(a), each of the I-Link LLC Representative Agreements and each customer agreement may be assigned to Big Planet without the consent of the I-Link LLC Representative or Existing or Legacy Customer and in connection with such assignment, no I-Link LLC Representative or Existing or Legacy Customer shall be entitled to any additional compensation, fee or other payment or have any cause of action against I-Link, I-Link LLC or Big Planet. (d) Amendment of I-Link Sales Compensation Plan. The I-Link Sales Compensation Plan may be amended at anytime by I-Link LLC, or their assignee, Big Planet, without the consent of any I-Link LLC Representative, and upon any such amendment no I-Link LLC Representative shall have any rights under the I-Link Sales Compensation Plan as it existed prior to such amendment, other than for the payment of commissions on sales generated through the date of such amendment. Each I-Link LLC Representative shall be bound by the terms of any such amendment and shall not have, or be entitled to, any rights, claims, and causes of action as a result of such amendment. Neither I-Link, I-Link LLC nor any of their Subsidiaries or Affiliates has made any representations to any I-Link LLC Representative or any Existing Customer or Legacy Customer concerning any promise or commitment (i) not to amend or change the I-Link Sales Compensation Plan, the policies and procedures, the customer contracts, or the I-Link Representative Agreements, (ii) to make any payment or make exceptions with respect to any amendment, or (iii) to keep intact any portion or term of the foregoing. (e) Campbell Agreement. On or before the Effective Time, any and all rights of Steven D. Campbell and/or Campbell Communications LLC to market any I-Link 39 Products and Services has been terminated and any such agreement, if any, is of no further force or effect. (f) Independent Contractors. All I-Link LLC Representatives have represented and agreed that they are independent contractors in the written agreements they have with I-Link LLC, and I-Link LLC has consistently treated them as such. 11.7 Product and Services. -------------------- (a) Description of Products. Schedule 11.7(a) contains a correct and accurate summary of information provided by I-Link of certain I-Link Products and Services that are currently being provided to I-Link customers including: (i) a partial historical review and projected forecast of total and percentage revenue derived from those certain product and services; (ii) the average breakage costs for full minute rounding and Single Leg Calls and Double Legs Calls; and (iii) other key information that Big Planet has relied upon in formulating proforma financial statements for the I-Link Products and Services. (b) Functionality of I-Link Products and Services. All of the I-Link Products and Services described in Schedule 11.7(b) are ready for market and will perform functionally as described in the documentation attached to Schedule 11.7(b) and any and all marketing literature. The user documentation furnished by I-Link is compatible with the I-Link Products and Services. (c) Customer Complaints. I-Link has made available for review by Big Planet any and all complaints from Existing or Legacy Customers or I-Link LLC Representatives concerning I-Link, I-Link LLC, the I-Link Products and Services, or the I-Link LLC Representatives. (d) Pre-Existing Agreements. As of the Effective Time, none of the Pre-Existing Agreements provide for billing increments less than [Number Redacted] seconds, or pricing for single-leg calls, and I-Link has not granted any specific affirmative right under the Pre-Existing Agreements to market to or through the Network Marketing Channel. 11.8 Customer Support. Schedule 11.8 sets forth and complete and accurate summary concerning the customer support and service functions provided by I-Link, I-Link LLC or their Subsidiaries or Affiliates including: (i) a breakdown of the different types of support and service functions (i.e., billing/collection, customer billing support) and the number of full-time equivalent employees engaged in such service function and the average salary for such employees; and (ii) a description of any outside vendors or consultants providing any such services and the average cost per month thereof, including any and all agreements for services in connection with billing and compliance with regulatory and tax requirements. 11.9 Receivables. The Accounts Receivable, net of the [Percentage Redacted] allowance for disputes and bad debt represent or will represent valid obligations arising from 40 sales actually made or services actually performed in the ordinary course of business. All of the Accounts Receivable are owned entirely by I-Link free and clear from any Encumbrance. All of the Accounts Receivable will be as of the Effective Time current and collectible net of the respective reserves shown on the balance sheet or accounting records of I-Link. 11.10 Compliance with Laws. Except as disclosed on Schedule 11.10, I-Link and its Subsidiaries and Affiliates have conducted and continue to conduct their business in compliance with all Laws and Governmental Orders, and neither I-Link nor any of its Subsidiaries or Affiliates is in material violation of any Law or Governmental Order, and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been filed or commenced against any of them alleging any failure so to comply. Except as disclosed in Schedule 11.10, I-Link has obtained and currently possesses all material licenses, permits, certificates, authorities and approvals necessary to operate its business as currently conducted including, without limitation, all required domestic and international telecommunications and electronic commerce licenses, permits, certificates, approvals and authorities. 11.11 Assets/Intellectual Property. (a) Title to Properties. I-Link owns, leases or has the legal right to use all of the properties and assets forming a part of or used or held for use in connection with, necessary for, or otherwise material to the conduct of the business conducted or operated by I-Link or to be provided hereunder, and with respect to any contract rights, is a party to and enjoys the rights to the benefits of all such contracts, agreements and other arrangements belonging to or used, held for use or intended to be used by I-Link or necessary for, or otherwise material to the conduct of the business or the I-Link Services and Products to be provided hereunder. (b) Intellectual Property. All copyrights, trademarks, service marks, trade names, patents, trade secrets and other intellectual and proprietary rights necessary to conduct I-Link's business as presently operated and the I-Link Products and Services to be provided hereunder, including, without limitation, all intellectual and other proprietary rights to its products, services and ordering and billing systems, is owned by I-Link, properly licensed by I-Link pursuant to a valid license or in the public domain, and no such license will expire during the term of this Agreement or is of such a nature that it can be readily obtained from another source. Neither I-Link, I-Link LLC nor any of their Subsidiaries or Affiliates is infringing upon the intellectual and proprietary rights of any other party, and, except as identified on Schedule 11.11(b), there is no claim or action by any person, pending or threatened, alleging any such infringement. The core technology used to provide the I-Link Products and Services offered by I-Link is proprietary to I-Link, and no other person has the right to use such technology. (c) No Encumberances. All of the property and assets, including the intellectual property, necessary to conduct I-Link's business is owned or validly licensed by I-Link free and clear of any Encumbrances except as otherwise set forth on Schedule 11.11 (c). 41 11.12 Network Capacity. I-Link's Network facilities currently have sufficient capacity to handle the traffic currently generated by the Existing and Legacy Customers plus all other existing traffic from other existing customers. I-Link's e-mail and Internet access is sufficient to meet the existing requirements of the Existing and Legacy Customers and currently meets the communication and Web requirements of the I-Link LLC Representative sales force. 11.13 Year 2000. All I-Link Products and Services provided by I-Link, including without limitation, any and all enhancements, upgrades, customizations, modifications, maintenance and alike, deliverable by I-Link hereunder, containing or calling on a calendar function including, without limitation, any function indexed to the CPU clock, and any function providing specific dates or days, or calculating spans of dates or days shall record, store, process, provide and, where appropriate, insert true and accurate dates and calculations for dates and spans including and following January 1, 2000. 11.14 Full Disclosure. Neither I-Link nor I-Link LLC is aware of any facts which pertain specifically to them, any Subsidiary or any Affiliate, their business, the Enhanced Services and Enhanced Service Devices, the I-Link LLC Representatives or any other matter affecting them which could reasonably be expected to have a material adverse affect on (i) the ability of Big Planet to provide the products or services or to maintain the Existing or Legacy Customers or I-Link LLC Representatives, (ii) the I-Link LLC Representatives, (iii) the Existing Customers being transferred to Big Planet or the Legacy Customers, (iv) the business of I-Link and I-Link LLC or its ability to provide the services and products hereunder at the service levels contemplated hereunder. No representation or warranty of I-Link or I-Link LLC set forth in this Agreement, nor any written statement or certificate furnished or to be furnished to Big Planet contains or will contain any untrue statement of fact, or omit or will omit to state a material fact necessary to make the statements contained herein or therein, taken as whole and light of the circumstances under which they were made, not misleading. 11.15 Existing Customers. I-Link has the full and complete and sole authority to assign and transfer such Existing Customers and Legacy Customers together with any and all accounts receivable associated therewith and any revenue stream free and clear of any Encumbrance. 11.16 I-Link LLC Representatives. As of the Execution Date and to the best of I-Link's knowledge based upon a full review of its records and files, the number of I-Link LLC Representatives currently receiving commission checks was approximately [Amount Redacted]. Except for the general state of unrest and uncertainty among the I-Link LLC Representatives occasioned by I-Link's discussions with Big Planet as publicly announced, I-Link is not aware of any material adverse change in the number of active I-Link LLC Representatives since that date set forth above, nor is it aware of any facts or circumstances that would result in a material adverse change in the number of such active I-Link LLC Representatives aside from the general unrest and uncertainty referenced above. 11.17 Subsidiaries. Schedule 11.17 sets forth a true, complete and accurate list of each Subsidiary and Affiliate of I-Link and I-Link LLC. 42 11.18 Financial Statements. Since the date of the most recent financial statements of I-Link filed with the Securities Exchange Commission, there have been no material adverse change in the financial condition or results of operations of I-Link. Article 12 Representations and Warranties of Big Planet As a material inducement to I-Link to enter into this Agreement and with the acknowledgement and understanding that I-Link is relying on the accuracy of these representations and warranties in determining the feasibility of entering into this Agreement, Big Planet hereby represents and warrants as follows: 12.1 Organization, Authority and Qualification. Big Planet is a corporation duly organized, validly existing and in good standing under the laws of the Delaware, and has all necessary corporate power and authority to enter into this Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. Big Planet is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary. The execution and delivery by Big Planet of this Agreement, the performance by Big Planet of its obligations hereunder, and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action. This Agreement has been duly executed by an authorized officer of Big Planet, and constitutes a legal, valid and binding obligation of Big Planet, enforceable against such party in accordance with its terms{;}[.] 12.2 No Conflict. The execution, delivery and performance of this Agreement by Big Planet do not and will not (i) violate, conflict with or result in the breach of any provision of the charter or bylaws (or similar organizational documents) of Big Planet, (ii) conflict with or violate any law, regulation, statute, ordinance or other requirement of law of any foreign national, federal, state, municipal or local government, or any governmental or court order of any jurisdiction applicable to Big Planet, its Affiliates or its assets properties or business, including without limitation to the business to be performed under this Agreement and the business to be transferred to Big Planet hereunder in such a manner which would have a material adverse affect on its business or assets, or (iii) conflict with, result in any breach of, constitute a default, or require any consent or approval (or an event which with the giving of notice or lapse of time or both would become a default) under any note, bond, mortgage, deed of trust, indenture, contract, agreement lease, sublease, license, sublicense, permit, franchise or other instrument or agreement, lease, sublease, license, sublicense, permit, or other instrument or arrangement to which Big Planet or any of its Affiliates is a party that would materially affect Big Planet's ability to perform under this Agreement. 12.3 No Litigation. Except as identified on Schedule 12.3, there are no Actions by or against either Big Planet or Affiliate of it which poses a material adverse threat to the business or distribution channel of Big Planet pending before or threatened to brought by or before any Governmental Authority. 43 12.4 Compliance with Laws. Except as disclosed on Schedule 12.4, Big Planet and its Subsidiaries and Affiliates have conducted and continue to conduct their business in compliance with all Laws and Governmental Orders, and neither Big Planet nor any of its Subsidiaries or Affiliates is in material violation of any Law or Governmental Order, and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been filed or commenced against any of them alleging any failure so to comply. Except as disclosed in Schedule 12.4, Big Planet has obtained and currently possesses all material licenses, permits, certificates, authorities and approvals necessary to operate its business as currently conducted including, without limitation, all required domestic and international telecommunications and electronic commerce licenses, permits, certificates, approvals and authorities. 12.5 Assets/Intellectual Property. (a) Title to Properties. Big Planet owns, leases or has the legal right to use all of the properties and assets that are material to the conduct of the business conducted or operated by Big Planet or to be provided hereunder, and with respect to any contract rights, is a party to and enjoys the rights to the benefits of all such contracts, agreements and other arrangements material to the conduct of its business. (b) Intellectual Property. All copyrights, trademarks, service marks, trade names, patents, trade secrets and other intellectual and proprietary rights material to Big Planet's business as presently conducted is owned by Big Planet, properly licensed by Big Planet or in the public domain. Neither Big Planet nor Affiliates is infringing upon the copyrights of any third party which could reasonably be expected to have a material adverse affect on the business of Big Planet. As of the Execution Date and the Effective Time Big Planet has not received any notice or claim from any third party alleging that any of its property infringes any copyrights of such third party. 12.6 Full Disclosure. Big Planet is not aware of any facts which pertain specifically to it, any Subsidiary or any Affiliate, their business or any other matter affecting them which could reasonably be expected to have a material adverse affect on (i) the ability of Big Planet to market the Products and Services or to maintain the Existing or Legacy Customers or I-Link LLC Representatives, (ii) either the Big Planet Representatives or the I-Link LLC Representatives after the Effective Time, (iii) the Existing Customers being transferred to Big Planet or the Legacy Customers, (iv) the business of Big Planet or its ability to perform its obligations under the Agreement. No representation or warranty of Big Planet set forth in this Agreement, nor any written statement or certificate furnished or to be furnished to I-Link or I-Link LLC contains or will contain any untrue statement of fact, or omit or will omit to state a material fact necessary to make the statements contained herein or therein, taken as whole and light of the circumstances under which they were made, not misleading. 12.7 [Deleted] 44 12.8 Big Planet Independent Representatives. As of the Execution Date and to the best of Big Planet's knowledge based upon a full review of its records and files, the total number of Big Planet Representatives currently receiving commission checks is approximately [Number Redacted]. Of that total number all are located in the United States with the remaining number located outside of the United States . Big Planet is not aware of any material adverse change in the number of active Big Planet Representatives since that date set forth above, nor is it aware of any facts or circumstances that would result in a material adverse change in the number of such active Big Planet Representatives. 12.9 Subsidiaries. Big Planet has no Subsidiaries. ------------ 12.10 Year 2000. Big Planet's network relating to the sale of I-Link's Products and Services containing or calling on a calendar function including, without limitation, any function indexed to the CPU clock, and any function providing specific dates or days, or calculating spans of dates or days shall record, store, process, provide and, where appropriate, insert true and accurate dates and calculations for dates and spans including and following January 1, 2000. Article 13 Indemnification 13.1 Big Planet General Indemnity. Subject to Section 15.9, Big Planet shall defend, indemnify and hold I-Link, I-Link LLC and each of their Subsidiaries and Affiliates, and each of their respective directors, employees, stockholders and agents and affiliates harmless from and against any and all liabilities, losses, damages, claims, costs expenses, interest, awards and judgments (including, but not limited to, costs and attorneys' fees but excluding any amounts recovered by an indemnified party from any third-party insurer for such liability), arising out of , resulting from or relating to: (a) Any breach of any representation or warranty made by Big Planet under this Agreement; (b) Any breach of any covenant, agreement or other provision set forth in this Agreement by Big Planet or any schedule or agreement entered into pursuant to this Agreement; and (c) Any claims or actions for commissions to the I-Link LLC Representatives arising from sales of I-Link Products and Services by Big Planet after the Effective Time and any other liability or claims of any I-Link LLC Representative arising under the I-Link Sales Compensation Plan, following its amendment to become part of the Big Planet Compensation Plan, with respect obligations of Big Planet to be performed following the Effective Time including, without limitation, any commissions payable by Big Planet thereunder that relate to sales occurring after the Effective Time, provided, however, that (i) this right of indemnification does not relieve I-Link of its obligations to pay Big Planet 45 commissions on the Legacy customers as more fully described in Section 6.4; and (ii) the right to indemnification shall not apply to any claims that relate to events, actions or omissions occurring prior to the Effective Time. (d) any claims or actions by I-Link LLC Representatives or any Existing Customers or Legacy Customers that relate to conduct, actions or omissions by Big Planet, its Subsidiaries or Affiliates, or any of their respective officers, directors, employees, stockholders, agents, representatives or contractors after the Effective Time; provided, however, such indemnification shall not apply to any claims or actions resulting from the transactions contemplated hereby or any change in the I-Link Compensation Plan, policy and procedures or I-Link LLC Representative Agreements, customer agreements in connection with the transition of such customers and I-Link LLC Representatives to Big Planet. (e) Any and all third party or Governmental Authority Actions related to actions of the I-Link LLC Representatives occurring after the Effective Time including, without limitation any violation of any applicable Laws, unless any such action arises out of the I-Link LLC Representatives' relationship with I-Link and I-Link LLC prior to the Effective Time or the acts or omissions of such I-Link LLC Representatives occurring prior to the Effective Time; or (f) Any failure of Big Planet or any of its respective Subsidiaries or Affiliates, to fully comply with all regulatory requirements in connection with the performance of its obligations under this Agreement. 13.2 I-Link and I-Link LLC General Indemnity. Subject to Section 15.9, I-Link and I-Link LLC shall jointly and severally defend, indemnify and hold Big Planet and each of its Subsidiaries and Affiliates, and each of their respective directors, employees, stockholders, agents and affiliates harmless from and against any and all liabilities, losses, damages, claims, costs, expenses, interest, awards and judgments (including, but not limited to, costs and attorneys' fees but excluding any amounts recovered by an indemnified party from any third-party insurer for such liability), arising out of, resulting from or relating to: (a) Any breach of any representation or warranty made by I-Link or I-Link LLC under this Agreement; (b) Any breach of any covenant, agreement or other provision set forth in this Agreement by I-Link or I-Link LLC or any schedule or agreement entered into pursuant to this Agreement, including but not limited to any and all service level agreements (and including any deemed breach pursuant to Section 15.1); (c) Any claims or actions for commissions to the I-Link LLC Representatives arising from sales of I-Link Products and Services prior to the Effective Time and any other liability or claims of any I-Link LLC Representative arising under the I-Link Sales 46 Compensation Plan, including, without limitation, any commissions paid by Big Planet that relate to sales occurring prior to the Effective Time; (d) Any claims or actions by I-Link LLC Representatives based on, related to, or arising from the transactions contemplated by this Agreement including any claims or actions or any liability resulting, related to or arising from the changes to the existing I-Link LLC Sales Compensation Plan, the existing I-Link LLC Representative Agreements, or the existing policies and procedures made by Big Planet or I-Link or I-Link LLC in connection with or following the transaction or the assignment by I-Link LLC of the I-Link LLC Representative Agreements to Big Planet; (e) Any claims or actions by I-Link LLC Representatives or any Existing Customers or Legacy Customers that relate to conduct, actions or omissions by I-Link, I-Link LLC, their Subsidiaries or Affiliates, or any of their respective officers, directors, employees, stockholders, agents, representatives or contractors prior to the Effective Time; (f) Any and all actions of the I-Link LLC Representatives occurring prior to the Effective Time including, without limitation any violation of any applicable Laws; (g) Any failure of I-Link or I-Link LLC, or any of their respective Subsidiaries or Affiliates, to fully comply with all regulatory requirements in connection with the I-Link Products and Services to be provided hereunder; or (h) Any infringement or alleged or claimed infringement by the products, services or and other intellectual property provided hereunder, including any software, of any patent, copyright, trademark, trade secrets or other proprietary right of any third party; or (i) Any claim, action, damages, expenses or other liabilities, including attorney's fees, arising out of I-Link's, I-Link LLC's, or any of their respective Subsidiary's or Affiliate's, or any of their respective officer's, director's, employees', stockholder's, agent's, representative's or contractor's, acts, omissions or misrepresentations, prior to the Effective Time, regardless of the form of that action. 13.3 I-Link Patent and other Proprietary Rights Indemnity. I-Link warrants that the I-Link Products and Services and/or Marks furnished by I-Link will not infringe upon or violate any patent, copyright, trademark, trade secret, or any other proprietary right of any third party. In the event of any claim by a third party against Big Planet asserting or involving a patent, copyright, trademark, trade secret, or other proprietary rights violation which concerns any products or services and/or Marks provided to Big Planet hereunder, I-Link and I-Link will defend, at its expense, and will indemnify and hold the Big Planet indemnified parties harmless with respect to such action in accordance with this Article 13. In the event an injunction or order shall be obtained against Big Planet's use of any products or services and/or Marks by reason of the allegations, or, if in Big Planet's opinion, the products or services and/or Marks are 47 likely to become the subject of a claim of infringement or violation of patent, copyright, trademark, trade secret, or other proprietary right of a third party, I-Link will, without in any way limiting the foregoing, and at its expense: (a) Procure for Big Planet the right to continue using the products or services and/or Marks, or (b) Replace or modify the products or services and/or Marks so that it becomes non-infringing but only if the modification or replacement does not adversely affect the specifications for the products or services and/or Marks or its use by Big Planet. In the event the foregoing options are not available then I-Link shall be liable for its inability to provide such I-Link Products and Services as breach of this Agreement. In no event shall Big Planet be liable to I-Link for any charges after the date that Big Planet no longer uses the products or services and/or Marks because of actual or claimed infringement. 13.4 I-Link Equipment Indemnity. I-Link shall indemnify and hold harmless Big Planet, its agents, contractors and employees from and against any and all claims, liability, damage, loss, or expense (including reasonable attorney's fees) including injury or death to persons, or damages to property, both real and personal, which may arise out of: (a) the presence of I-Link's equipment, at any location; (b) the installation, operation maintenance or removal of I-Link's equipment from any location; and (c) the negligence or willful misconduct of I-Link, its agents, employees or contractors. I-Link shall pay all damages, costs, fees and other charges incurred by Big Planet in any such third-party action which are attributable to the aforementioned issues. Furthermore, I-Link shall have the exclusive right to defend, countersue or settle any of the foregoing actions and to collect all damages, costs, fees and other charges awarded from such action. Big Planet shall provide to I-Link, at I-Link's expense all information and assistance reasonably requested by I-Link to settle, defend or being a countersuit in conjunction with the foregoing third party actions. Big Planet shall immediately inform I-Link of any such third party action upon learning of such action. 13.5 Big Planet Equipment Indemnity. Big Planet shall indemnify and hold harmless I-Link, its agents, contractors and employees from and against any and all claims, liability, damage, loss, or expense (including reasonable attorney's fees) including injury or death to persons, or damages to property, both real and personal, which may arise out of: (a) the presence of Big Planet's equipment, at any location; (b) the installation, operation maintenance or removal of Big Planet's equipment from any location; and (c) the negligence or willful misconduct of Big Planet, its agents, employees or contractors. Big Planet shall pay all damages, costs, fees and other charges incurred by I-Link in any such third-party action which are attributable to the aforementioned issues. Furthermore, Big Planet shall have the exclusive right to defend, countersue or settle any of the foregoing actions and to collect all damages, costs, fees and other charges awarded from such action. I-Link shall provide to Big Planet, at Big Planet's expense all information and assistance reasonably requested by Big Planet to settle, defend or being a countersuit in conjunction with the foregoing third party actions. I-Link shall immediately inform Big Planet of any such third party action upon learning of such action. 13.6 Notice; Conflict; Assumption of Defense. --------------------------------------- (a) Notice of Claims. A party entitled to indemnification hereunder (the "Indemnified Party") shall promptly notify in writing the party obligated to provide such 48 indemnification (the "Indemnifying Party") of any matter which an Indemnified Party has determined has given or could give rise to a right of indemnification under this Agreement; provided that any failure by the Indemnified Party to give such notice shall not relieve the Indemnifying Party from the obligation to indemnify the Indemnified Party except to the extent actually prejudiced thereby. (b) Third Party Claims. The obligations of an Indemnifying Party with respect to claims for indemnification arising from claims or actions by third parties (the "Third Party Claims") shall be governed by and subject the following additional terms and conditions: if an Indemnified Party shall receive notice of any Third Party Claim, the Indemnified Party shall give the Indemnifying Party notice of such Third Party Claim within 30 calendar days of the receipt of such notice by the Indemnified Party; provided, however, failure to provide such notice shall not release the Indemnifying Party from any of its obligations under this Article 13 except to the extent the Indemnifying Party is materially prejudiced by such failure. If the Indemnifying Party acknowledges in writing its obligation to indemnify the Indemnified Party hereunder against any liability that may arise under such Third Party Claim, the Indemnifying Party shall be entitled to assume and control the defense thereof at their expense and with counsel selected by the Indemnifying Party (which counsel shall be reasonably satisfactory to the Indemnified Party) provided that the Indemnifying Party gives written notice of its intention to do so within five calendar days after receipt of the notice from the Indemnified Party. After written notice from the Indemnifying Party to the Indemnified Party of its election to assume the defense thereof, the Indemnifying Party will not be liable to the Indemnified Party hereunder for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation and such other expenses as have been approved in advance; provided, however, that (i) if counsel for the Indemnified Party determines in good faith that there is a conflict that requires separate representation for the Indemnifying Party and the Indemnified Party, or (ii) the Indemnifying Party fails to assume or proceed in a timely and reasonable manner with the defense of such action or fails to employ counsel reasonably satisfactory to the Indemnified Party in any such action, then in either such event the Indemnified Party shall be entitled to select its own counsel and, if necessary, local counsel of its own choice to represent the Indemnified Party. If the Indemnified Party makes such election, then the Indemnifying Party shall not, or no longer, be entitled to assume the defense thereof on behalf of such Indemnified Party and such Indemnified Party shall be entitled to indemnification under this Article 13 (including, without limitation, reasonable fees and expenses of such counsel) to the extent provided in this Indemnity provision. Such counsel shall, to the fullest extent consistent with its professional responsibilities, cooperate with the Indemnifying Party and any counsel designated by the Indemnifying Party. Nothing contained herein shall preclude the Indemnified Party, at its own expense, from retaining its own counsel to represent the Indemnified Party in any action with respect to which indemnity may be sought from the Indemnifying Party hereunder and for which the Indemnified Party is not entitled to engage its own counsel at the expense of the Indemnifying Party as provided for hereunder. If the Indemnifying Party has assumed the defense and is proceeding with the defense in a timely manner, then the Indemnifying 49 Party shall not be liable under this Agreement for any settlement made by an Indemnified Party without Indemnifying Party's prior written consent, which shall not be unreasonably withheld, and the Indemnifying Party agrees to indemnify and hold harmless the Indemnified Party from and against any loss or liability by reason of the settlement of any claim or action with the consent of the Indemnifying Party. The Indemnifying Party shall not settle any such claim or action without prior written consent of the Indemnified Party, which shall not be unreasonably withheld. 13.7 Payment of Claims; Enforcement. The Indemnifying Party shall promptly pay to the Indemnified Party any amounts such party claims for indemnity under such notice unless the Indemnified Party disputes the claim for indemnification in which case it shall provide written notice to the other party within 30 days of its objection to the claim for indemnification. In the event the parties are not able to reach an agreement with respect to any disputed claim for indemnity within 30 days or the Indemnifying Party fails to pay an undisputed indemnity claim within 30 days, the Indemnified Party may thereafter bring an Action to enforce the indemnity obligations hereunder. The rights of the parties under this Article 13 are in addition to any other legal remedies they may have including, without limitation, any claims for a breach of contract or fraud. Article 14 Confidentiality 14.1 Confidential Information. A Party's "Confidential Information" is defined as any confidential or proprietary information of a Party that is disclosed to the other Party in a writing marked confidential or, if disclosed orally, is identified as confidential at the time of disclosure and is subsequently reduced to a writing marked "Confidential" and delivered to the other Party within 30 days of disclosure. Big Planet's "Confidential Information" shall also mean Big Planet Representative lists and/or lists of Big Planet Customers (including their name, address and telephone number), business plans, financial data, product development plans, marketing plans, strategies, subscriber lists, sales compensation plans, manufacturing techniques and methods, research data and similar information of Big Planet that are valuable, special, unique and proprietary assets of Big Planet. 14.2 Duty of Confidentiality. Each Party shall hold the other Party's Confidential Information in confidence and shall not disclose such Confidential Information to third parties nor use the other Party's Confidential Information for any purpose other than the purposes of this Agreement. Such restrictions shall not apply to Confidential Information that: (a) is already known by the recipient, (b) becomes, through no act or fault of the recipient, publicly known, (c) is received by recipient from a third party without a restriction on disclosure or use, (d) is independently developed by recipient without reference to the Confidential Information, (e) is furnished to any third party by the discloser without similar restriction on such third party; or (f) is approved for release by the written authorization of the discloser. The foregoing exception shall not apply to any information concerning the Existing Customers, the Legacy Customers, the I-Link LLC Representatives and any Big Planet Representatives or Big Planet Customers. 50 14.3 Information Generated by this Agreement. Except as otherwise herein stipulated, it is hereby agreed to by the Parties that the information generated by virtue of this Agreement is and will remain Confidential Information and is therefore proprietary to the Parties. The Parties further agree that they shall keep the Confidential Information secure and shall not use the Confidential Information for any other purpose other than to fulfill its obligations as herein set forth. 14.4 Disclosures Required by Law. Notwithstanding anything in this Agreement to the contrary, in the event that a Party is required by Law or a valid Governmental Order issued in connection with any Action to disclose any Confidential Information, such Party shall promptly notify the other Party of such Governmental Order or other Law so that the other Party may seek a protective order or other remedy or waive compliance with this Agreement, or both. Each Party agrees to cooperate, and shall cause its representatives to cooperate, with the other Party on a reasonable basis in a Party's efforts to obtain a protective order or other remedy. It is further agreed that, if in the absence of a protective order or receipt of a waiver hereunder, a Party or its representative is nonetheless, in the reasonable opinion of its counsel, compelled to disclose the Confidential Information to any tribunal or else stand liable for contempt or suffer any censure or penalty, such Party may disclose such information without liability hereunder so long as the Party discloses such Confidential Information only to the extent legally compelled to disclose such information based on advise from its counsel. 14.5 Injunctive Relief. The Parties agree that unauthorized disclosure or use of Confidential Information will cause substantial and irreparable injury to the other party, that money damages will not adequately compensate for such injury and that said party, therefore, is entitled to among other remedies, immediate injunctive and other equitable relief for any breach of this Agreement. Article 15 Miscellaneous 15.1 Affiliates and Subsidiaries. Each Party shall take such actions as are necessary to cause its Subsidiaries and Affiliates to comply with the obligations, restrictions and conditions set forth in this Agreement. Any action taken by a Subsidiary or Affiliate of a Party that would be a breach of this Agreement if it were an action of such Party shall be deemed a breach of this Agreement by such Party and they shall be liable for such breach as if they were the breaching Party. 15.2 Exhibits and Schedules. Any reference to a Schedule or Exhibit shall refer to a Schedule or Exhibit to this Agreement unless the context clearly provides otherwise. All Schedules and Exhibits are incorporated by reference into this Agreement and shall be binding upon the Parties except as otherwise expressly provided in this Agreement or the Schedule or Exhibit. No Schedule or Exhibit may be amended without the written consent of the other Parties. 51 15.3 Notice. Any such notice or demand, required or permitted by law, or by provision in this Agreement, shall be made in writing, and shall be served either by personal delivery, by certified mail, by overnight delivery, or by electronic or facsimile communication with a confirming copy sent by mail, return receipt requested. When served by certified mail, service shall be deemed to have been made when three business days after deposit in the regular receptacle of the United States Postal Service and addressed to the Parties at the addresses set forth above. When serviced by personal delivery or overnight delivery, service shall be deemed to have been made on the date of such delivery. When served by electronic communication, the notice shall be effective on the date sent. Any Party may, upon written notice to the other, change its address for such mailing. The addresses and telephone numbers for purposes of this paragraph are as follows: Big Planet, Inc. I-Link, Inc. and I-Link Worldwide LLC 75 West Center Street 13751 So. Wadsworth Park Drive, Suite 200 Provo, UT 84601 Draper, UT 84020 Attention: Jack Peterson Attn: Chief Financial Officer With a copy to the attention of the With a copy to the attention of the General Counsel at the same address General Counsel at the same address 15.4 Counterparts. This Agreement may be executed in several counterparts each of which so executed shall be deemed to be an original, and in each case such counterpart shall constitute but one and the same instrument. This Agreement may also be executed in several facsimile counterparts each of which so executed shall be deemed to be an original, and in each case such facsimile counterpart shall constitute but one and the same instrument; however, at the request of Big Planet, the Parties agree to execute an original hard copy of the same date after the facsimile counterparts have been executed. 15.5 Publicity. None of the Parties shall publicize the existence of this Agreement, including any sales promotions, advertising, and use of each other's name, logos or trademarks, without the prior written consent of the other Parties. Neither party shall issue any press release pertaining to the subject matter of this Agreement without obtaining the prior written approval of the other party, which approval shall not be unreasonably withheld; provided, however, that any of the Parties, in its sole discretion, may withhold its consent with respect to any forward looking statement as to its business or operation. The Parties agree that no party to this Agreement or any person acting for or on its behalf, including their attorneys, shall directly or indirectly disclose to any person the terms and conditions of this Agreement, both during the term of this Agreement or after its termination, without the prior written consent of the other Parties, unless and to the extent such disclosure is required under Law. This provision shall survive the termination of this Agreement. 15.6 Assignment. None of the Parties may, without the other Parties' prior written consent, which shall not be unreasonably withheld, assign or transfer this Agreement, or any of its rights or obligations under this Agreement to any person ("Assignee") except to an Affiliate wholly-owned by, or that wholly owns, or that is under common control with, such Party, or as 52 part of the sale of all or substantially all of the assets of the; provided, however, that the Assignee agrees to fully perform and be bound by the provisions of this Agreement. In addition, Big Planet shall have the right to sublicense its rights hereunder to an Affiliate or a Subsidiary or Nu Skin Enterprises, Inc. provided that such sublicensee agrees in writing to be bound by the terms of this Agreement. 15.7 Entire Agreement; Modifications. This Agreement constitutes the entire agreement and understanding of the Parties with respect to the subject matter hereof, and supercedes all prior written or oral negotiations, commitments, arrangements, agreements or understandings with respect to such matters. This Agreement can not be modified or amended except in a writing signed by all the Parties. 15.8 Waiver. No failure or delay on the part of any Party in exercising any right under this Agreement shall operate as a waiver of such right, or shall any single or partial exercise of any such right preclude any other or future exercise of such right or the exercise of any such right. No waiver of any right or obligation hereunder shall be enforceable against any Party unless made in a writing, specifying such waiver, and executed by such Party. 15.9 Severability. If any provision in this Agreement is found to be unenforceable in a court of competent jurisdiction, the remaining provisions shall nevertheless remain in full force and effect. 15.10 Governing Laws; Waiver of Jury Trial. This Agreement shall be governed by the laws of the State of Utah, regardless of the laws that might otherwise be applicable under principles of conflicts of law, as to all matters, including, without limitation, matters of validity, construction, effect, and performance. Any action brought to enforce this Agreement must be brought in either Utah County or Salt Lake County, Utah. The Parties consent to the personal jurisdiction of said courts within the State of Utah and waive any objection to improper venue. Each of the Parties hereby waives any right to a trial by jury. 15.11 Plural Terms. Feminine or neuter pronouns shall be substituted for those of masculine form or vice versa and the plural shall be substituted for the single number or vice versa in any place or places in which the context may require such substitution. 15.12 Incorporation of Recitals. The Recitals set forth above are incorporated herein by this reference. 15.13 Authorship. This Agreement has been reviewed by attorneys representing the respective Parties and therefore shall not be construed in favor of or against any Party hereto based on the sole or primary authorship of this Agreement being the work of one Party hereto. 15.14 No Further Relationships. This Agreement shall not constitute, give effect to or otherwise imply a joint venture, pooling arrangement, partnership or formal or informal business organization of any kind. Accordingly, no Party shall be liable for any debts, accounts, 53 obligations or other liabilities or torts of the other Party, or its agents or employees, except as this Agreement may otherwise expressly provide. 15.15 Survival. The applicable provisions of Articles 6.9, 9.1, 11, 12, 13, 14, and 15 shall survive the cancellation, termination or expiration of this Agreement. Any other provisions, or parts thereof, which, by their nature, should survive cancellation, termination, or expiration shall also survive. 15.16 Force Majeure. If performance of this Agreement, or any technical obligation hereunder (other than the obligation to pay and/or representations and warranties and obligations to use best efforts to effect the closing of the transactions), is delayed, interrupted or prevented by reason of an act of God, fire, flood, war, public disaster, strikes or labor difficulties, government enactment, regulation or order, or any other act or condition beyond the control of the affected Party (provided that the Party shall use its best efforts to remedy the same), the Party so affected, upon giving prompt notice to the other Party, will be excused from such performance to the extent of such delay, interruption or prevention for a period equal to the duration of the contingency that occasioned the delay, interruption or prevention. 15.17 Headings. Headings are for reference purposes only and in no way define, limit, construe or describe the scope or extent of such section or in any way affect this Agreement. 15.18 Compliance with Laws. At their sole expense, each of the Parties shall comply with all applicable laws and regulations regarding its activities related to this Agreement. 15.19 Limitation on Liability. Neither Big Planet its Affiliates or Subsidiaries nor I-Link, I-Link LL or their Affiliates or Subsidiaries shall be liable to the other for any consequential, punitive or special loss or damages of any kind, such as but not limited to lost business revenue, lost profits or lost sales, however caused, whether based on contract, tort (including negligence) or any other theory. 15.20 Parties Benefitted. Nothing in this Agreement whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any persons other than the parties hereto and their respective successors and assigns, nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third persons to any party to this Agreement, nor shall any provisions give any third persons any right of subrogation or action over or against any party to this Agreement. 54 IN WITNESS WHEREOF, the Parties to this Agreement have caused it to be executed on the date first above written. Big Planet, Inc. I-Link, Incorporated By: By: ---------------------------- --------------------------------- Printed Name: Printed Name: Title: Title: I-Link Worldwide LLC By: --------------------------------- Printed Name: Title: 55 EX-27 7 EXHIBIT 27.1
5 THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS AS OF MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-2000 MAR-31-2000 5,757,300 0 5,720,675 1,070,516 0 10,673,519 13,490,274 5,714,366 24,811,866 12,259,102 0 0 342,230 186,636 10,969,662 24,811,866 0 10,959,165 0 13,028,701 0 0 443,842 (3,835,501) 0 (3,835,501) 0 0 0 (3,835,501) (0.17) (0.17)
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