Heritage Global Inc. (Form: 10-K, Received: 03/17/2016 16:13:17)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13

OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2015

Commission File No. 0-17973

HERITAGE GLOBAL INC.

(Exact Name of Registrant as Specified in Its Charter)

Florida	59-2291344
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

12625 High Bluff Drive, Suite 305, San Diego, CA	92130
(Address of Principal Executive Offices)	(Zip Code)

(858) 847-0656

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

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 Exchange Act of 1934 during the preceding 12 months (or for such shorter 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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).

Large Accelerated Filer o

Accelerated Filer o

Non-Accelerated Filer o

Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

The aggregate market value of Common Stock held by non-affiliates based upon the closing price of $0.30 per share on June 30, 2015, as reported by the OTCQB, was approximately $7.1 million.

As of March 11, 2016, there were 28,467,648 shares of Common Stock, $0.01 par value, outstanding.

TABLE OF CONTENTS

		PAGE
PART I
Item 1.	Business.		3
Item 1A.	Risk Factors.		6
Item 1B.	Unresolved Staff Comments.		9
Item 2.	Properties.		9
Item 3.	Legal Proceedings.		9
Item 4.	Mine Safety Disclosures.		9

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.		10
Item 6.	Selected Financial Data.		11
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.		11
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.		18
Item 8.	Financial Statements and Supplementary Data.		18
Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.		18
Item 9A.	Controls and Procedures.		19
Item 9B.	Other Information.		19

PART III
Item 10.	Directors, Executive Officers and Corporate Governance.		20
Item 11.	Executive Compensation.		24
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.		30
Item 13.	Certain Relationships and Related Transactions, and Director Independence.		32
Item 14.	Principal Accountant Fees and Services.		33

PART IV
Item 15.	Exhibits and Financial Statement Schedules.		35

Forward-Looking Information

This Annual Report on Form 10-K (the “Report”) contains certain “forward-looking statements” that are based on management’s exercise of business judgment as well as assumptions made by, and information currently available to, management. When used in this document, the words “may,” "will,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” and words of similar import, are intended to identify any forward-looking statements. You should not place undue reliance on these forward-looking statements. These statements reflect our current view of future events and are subject to certain risks and uncertainties, including those noted under Item 1A “Risk Factors” below. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results could differ materially from those anticipated in these forward-looking statements. We undertake no obligation, and do 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 any unanticipated events. Although we believe that our expectations are based on reasonable assumptions, we can give no assurance that our expectations will materialize.

PART I

Item 1. Business.

Overview, History and Recent Developments

Heritage Global Inc. (“HGI,” “we” or the “Company”) was incorporated in Florida in 1983 under the name “MedCross, Inc.” The Company’s name was changed to “I-Link Incorporated” in 1997, to “Acceris Communications Inc.” in 2003, to “C2 Global Technologies Inc.” in 2005, to “Counsel RB Capital Inc.” in 2011, and to Heritage Global Inc. effective August 22, 2013. The most recent name change more closely identifies the Company with its core auction business, Heritage Global Partners, Inc. (“HGP”).

On March 20, 2014, the Company’s former majority shareholder, Street Capital Group Inc. (formerly Counsel Corporation, herein referred to as “Street Capital”), declared a dividend of all of its shares of the Company. This dividend was paid on April 30, 2014 to Street Capital’s common shareholders of record as of April 1, 2014.

On June 2, 2014, and effective May 31, 2014, the Company acquired all of the issued and outstanding capital stock in National Loan Exchange, Inc. (“NLEX”), a broker of charged-off receivables in the United States and Canada. NLEX operates as a wholly owned division of the Company. The acquisition of NLEX is consistent with HGI’s strategy to expand the services provided by its asset liquidation business. In connection with the acquisition, HGI entered into employment agreements with the previous owner and key employees of NLEX. The purchase price consisted of $2.0 million cash and an earn-out provision (“contingent consideration”) with a cap of $5.0 million, based on the Net Profits (as defined by the NLEX stock purchase agreement) of NLEX during the four years following the acquisition. At December 31, 2015 the present value of the contingent consideration is estimated to be $3.5 million. See Note 3 to the consolidated financial statements for further information.

On March 11, 2016, the Company entered into a purchase and sale agreement with International Auto Processing Inc. (“IAP”) to sell the Company’s real estate inventory. The purchase price of the real estate inventory is $4.1 million. Concurrently, the Company entered into a five year lease agreement with an affiliate of IAP to lease the building during the escrow period, which will terminate at the close of escrow. The purchase agreement gives IAP the right to terminate its obligation to consummate the sale for any reason, but in the event the sale is not consummated, the lease agreement will continue on through the end of the lease term. The purchase and sale agreement is attached hereto as Exhibit 10.24, which exhibit is incorporated by reference herein.

The organization chart on the following page outlines the basic corporate structure of the Company as of December 31, 2015.

(1)	Registrant.

(2)	Full service global auction, appraisal and asset advisory company.

(3)	Asset liquidation company which acquires and monetizes distressed and surplus assets.

(4)	Mergers and acquisitions (M&A) advisory firm specializing in financially distressed companies and properties.

(5)	Broker of charged-off receivables.

(6)	Owns and licenses telecommunications patents.

Asset liquidation

The Company is a value-driven, innovative leader in corporate and financial asset liquidation transactions, valuations and advisory services. The Company specializes both in acting as an adviser, as well as acquiring or brokering turnkey manufacturing facilities, surplus industrial machinery and equipment, industrial inventories, accounts receivable portfolios, intellectual property, and entire business enterprises.

The asset liquidation business began operations in 2009 with the establishment of Heritage Global LLC (“HG LLC”). In addition to acquiring turnkey manufacturing facilities and used industrial machinery and equipment, HG LLC arranges traditional asset disposition sales, including liquidation and auction sales. In 2011, HG LLC acquired 100% of the business of EP USA, LLC (d/b/a Equity Partners) (“Equity Partners”), thereby expanding the Company’s operations. Equity Partners is a boutique M&A advisory firm and provider of financial solutions for distressed businesses and properties.

In 2012 the Company increased its in-house asset liquidation expertise via its acquisition of 100% of the outstanding equity of Heritage Global Partners, Inc. (“HGP”), a global full-service auction, appraisal and asset advisory firm, and in 2012, the Company launched Heritage Global Partners Europe (“HGP Europe”). Through its wholly-owned subsidiary Heritage Global Partners UK Limited, the Company opened three European-based offices, one each in the United Kingdom, Germany and Spain.

In May 2014, the Company again expanded its asset liquidation operations with the acquisition of National Loan Exchange (‘NLEX”). NLEX is the largest volume broker of charged-off receivables in the United States and Canada, and its offerings include national, state and regional portfolios on behalf of many of the world’s top financial institutions. The NLEX acquisition is consistent with HGI’s strategy to expand and diversify the services provided by its asset liquidation business.

As a result of the events and acquisitions outlined above, management believes that HGI’s expanded global platform will allow the Company to achieve its long term industry leadership goals.

Intellectual property licensing

The Company holds several patents, including two that relate to Voice over Internet Protocol (“VoIP”). U.S. Patent No. 6,438,124 was developed by the Company, and encompasses the technology that allows two parties to converse phone-to-phone, regardless of

the distance, by transmitting voice/sound via the Internet . U.S. Patent No. 6,243,373 (the “VoIP Patent”) was purchased from a third party (the “Vendor”). These patents, together with related international patents and patent applications, form the Company’s international VoIP Patent Portfolio (the “Portfolio”) th at covers the basic process and technology that enable VoIP communication as used in the market today. As part of the consideration for the acquisition of the VoIP Patent, the Vendor is entitled to receive 35% of the net earnings from the Portfolio. At th is time, although the Company expects to continue to incur costs relating to maintaining ownership of these patents, it is not expected that either these costs or related revenue will be material.

Employees

As of December 31, 2015, HGI had 52 employees: 29 are employed by HGP, 15 by NLEX, and eight by Equity Partners. In addition, five employees of Street Capital provided management and administrative services to HGI during the first eight months of 2015 under the terms of a management services agreement (the “Services Agreement”) that is described in Item 13 of this Report and Note 14 to the consolidated financial statements. The Services Agreement was terminated effective August 31, 2015. Refer to Note 14 to the consolidated financial statements for more information.

Industry and Competition

The asset liquidation business consists primarily of the auction, appraisal and asset advisory services provided by HGP, mergers and acquisitions advisory services provided by Equity Partners, and the accounts receivable brokerage services provided by NLEX. It also includes the purchase and sale, including at auction, of industrial machinery and equipment, real estate, inventories, accounts receivable and distressed debt. The market for these services and assets is highly fragmented. To acquire auction or appraisal contracts, or assets for resale, HGI competes with other liquidators, auction companies, dealers and brokers. It also competes with them for potential purchasers, as well as with equipment manufacturers, distributors, dealers and equipment rental companies. Some competitors have significantly greater financial and marketing resources and name recognition.

HGI’s business strategy includes the option of partnering with one or more additional purchasers, pursuant to a partnership, joint venture or limited liability company agreement (collectively, “Joint Ventures”). These Joint Ventures give the Company access to more opportunities, helping to mitigate some of the competition from the market’s larger participants and contribute to the Company’s objective to be the leading resource for clients requiring capital asset solutions.

Government Regulation

We are subject to federal, state and local consumer protection laws, including laws protecting the privacy of customer non-public information and regulations prohibiting unfair and deceptive trade practices. Many jurisdictions also regulate "auctions" and "auctioneers" and may regulate online auction services. These consumer protection laws and regulations could result in substantial compliance costs and could interfere with the conduct of our business.

Legislation in the United States, including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act of 2010, has increased public companies’ regulatory and compliance costs as well as the scope and cost of work provided by independent registered public accountants and legal advisors. The mandatory adoption of XBRL reporting in 2011 has also increased the Company’s costs paid to third party service providers. As regulatory and compliance guidelines continue to evolve, we expect to continue to incur costs, which may or may not be material, in order to comply with legislative requirements or rules, pronouncements and guidelines by regulatory bodies.

Available Information

HGI is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which requires that HGI file periodic reports, and other information with the SEC. The SEC maintains a website at http://www.sec.gov that contains periodic reports, proxy and information statements, and other information regarding issuers, including HGI, which file electronically with the SEC. In addition, HGI’s Exchange Act filings may be viewed at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The Company makes available free of charge through its web site, http://www.heritageglobalinc.com (follow Investor Relations tab to link to “SEC Filings”) its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material has been electronically filed with, or furnished to, the SEC. The information on the Company’s corporate website is not a part of this Annual Report on Form 10-K.

Item 1A. Risk Factors.

You should carefully consider and evaluate these risk factors, as any of them could materially and adversely affect our business, financial condition and results of operations, which, in turn, can adversely affect the price of our securities.

We face significant competition in our asset liquidation business.

Our asset liquidation business depends on our ability to successfully obtain a continuous supply of auction or appraisal contracts, or distressed and surplus assets for profitable resale to third parties. In this regard, we compete with numerous other organizations, some of which are much larger and better-capitalized, with greater resources available for both asset acquisition and associated marketing to potential customers. Additionally, some competitors have a longer history of activity in the asset liquidation business, and may have advantages with respect to accessing both deals and capital.

Our asset liquidation business is subject to inventory risk and credit risk.

Under our business model, when not acting solely as an auctioneer, we assume the general and physical inventory and credit risks associated with purchasing assets for subsequent resale. Although we do enter into transactions for which a subsequent purchaser has already been identified, in most cases we purchase assets and assume the risk that they may sell for less than our forecasted price. As well, we may miscalculate demand or resale value, and subsequently sell the assets for less than their original purchase price. Either situation could have a material adverse effect upon our use of working capital and our results of operations.

Our operating results are subject to significant fluctuation.

Our revenue and operating results are subject to fluctuation from quarter to quarter and from year to year due to the nature of the asset liquidation business, which involves discrete deals of varying size that are very difficult to predict. The timing of revenue recognition related to significant transactions can materially affect quarterly and annual operating results. Despite the accompanying variability of direct asset liquidation costs, quarterly fixed costs that are largely composed of salaries and benefits could exceed our gross profit. There can therefore be no assurance that we can achieve or sustain profitability on a quarterly or annual basis.

We are subject to the risks associated with managing growth.

Since the establishment of our asset liquidation business in 2009, we have experienced significant growth. This has occurred through the acquisitions of Equity Partners in 2011, HGP in 2012 and NLEX in 2014, as well as through the expansion of our operations to Europe during 2012. This growth requires an increased investment in personnel, systems and facilities. In the absence of continued revenue growth, the Company’s operating margins could decline from current levels. Additional acquisitions will be accompanied by such risks as exposure to unknown liabilities of acquired businesses, unexpected acquisition expenses, greater than anticipated investments in personnel, systems and facilities, the expense of integrating new and existing operations, diversion of senior management resources, and dilution to existing shareholders. Failure to anticipate and manage these risks could have a material adverse effect upon our business and results of operations.

A portion of our asset liquidation business is conducted through Joint Ventures.

Conducting business through Joint Ventures, as described above under “Industry and Competition,” allows us to participate in significantly larger deals than those we could fund independently. If we ceased entering into Joint Ventures, or our Joint Venture partners decide not to partner with us, the pool of potential transactions would be reduced. Further, upon entering into Joint Ventures, we become exposed to the uncertainties of the activities of our partners. This could negatively impact our ability to obtain a continuous supply of assets for resale, and could have a material adverse effect upon our use of working capital and our results of operations.

We are subject to foreign currency exchange rate risk.

During 2012, we expanded our operations to the United Kingdom (“UK”), Spain, and Germany. Our UK operations are conducted in pounds sterling (£) and our Spain and Germany operations are conducted in euros (€), rather than in U.S. dollars. To date we have been required to use funds generated by our US operations to meet a portion of European obligations as they come due. We thereby incur exchange rate risk. We conduct some of our asset liquidation transactions in currencies other than the U.S. dollar, which exposes us to foreign exchange risk. Although this risk has not had a material impact on our business and operations to date, failure to anticipate and continue to manage this risk could have a material adverse effect.

The auction portion of our asset liquidation business may be subject to a variety of additional costly government regulations.

Many states and other jurisdictions have regulations governing the conduct of traditional “auctions” and the liability of traditional “auctioneers” in conducting auctions, which may also apply to online auction services. In addition, certain states have laws or regulations that expressly apply to online auction services. We expect to continue to incur costs in complying with these laws and could be subject to fines or other penalties for any failure to comply with these laws. We may be required to make changes in our business to comply with these laws, which could increase our costs, reduce our revenue, and cause us to prohibit the listing of certain items, or otherwise adversely affect our financial condition or operating results.

Certain categories of merchandise that we sell are subject to government restrictions.

We sell merchandise, such as scientific instruments, that is subject to export control and economic sanctions laws, among other laws, imposed by the United States and other governments. Such restrictions include the U.S. Export Administration regulations, the International Traffic in Arms regulations, and economic sanctions and embargo laws administered by the Office of the Foreign Assets Control regulations. These restrictions prohibit us from, among other things, selling property to (1) persons or entities that appear on lists of restricted or prohibited parties maintained by the United States or other governments or (2) countries, regimes, or nationals that are the target of applicable economic sanctions or other embargoes.

We may incur significant costs or be required to modify our business to comply with these requirements. If we are alleged to have violated any of these laws or regulations we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines, and suspension or prohibition from doing business with U.S. federal government agencies. In addition, we could suffer serious harm to our reputation if allegations of impropriety are made against us, whether or not true.

We are subject to the U.S. Foreign Corrupt Practices Act (“FCPA”).

We are subject to the FCPA, which generally prohibits U.S. companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or retaining business. Our 2012 expansion into Europe has increased the risk of non-compliance with the FCPA. Failure to comply with the FCPA could subject the Company to, among other things, penalties and legal expenses that could harm our reputation and have a material adverse effect on our business, financial condition and results of operations.

Our asset liquidation business is subject to environmental risk.

Our asset liquidation business at times includes the purchase and resale of buildings and land. Although our purchase process includes due diligence to determine that there are no material adverse environmental issues, it is possible that such issues could be discovered subsequent to a completed purchase. Any remediation and related costs could have a material adverse effect upon our business and results of operations.

We are dependent upon key personnel.

Our operations are substantially dependent on the knowledge, skills and performance of several of our executive officers, particularly our Chief Executive Officer and Chief Operating Officer/President, President of NLEX, and Senior Managing Director of Equity Partners. The loss of any of these officers could damage key relationships and result in the loss of essential information and expertise. As our operations expand, we will be required to hire additional employees, and may face competition for them. Therefore, either the loss of the services of the above existing officers, or the inability to attract and retain appropriately skilled new employees, could have a material adverse effect upon our business and results of operations.

We may require additional financing in the future, which may not be available, or may not be available on favorable terms.

We may need additional funds to finance the operations of our asset liquidation business, to make additional investments, or to acquire complementary businesses or assets. We may be unable to generate these funds from our operations. If funds are not available, or not available on acceptable terms, we could experience a material adverse effect upon our business.

Provisions in our Articles of Incorporation, as amended, could prevent or delay stockholders' attempts to replace or remove current management.

Our Articles of Incorporation, as amended, provide for staggered terms for the members of our Board. The Board is divided into three staggered classes, and each director serves a term of three years. At an annual stockholders’ meeting, only those directors comprising one of the three classes will have completed their term and stand for re-election or replacement. These provisions may

tend to preserve our current management and the Board in a hostile tender offer, and may have an adverse impact on stockholders who may want to participate in such a tender offer, or who may want to replace some or all of the members of the Board.

Our Board of Directors may issue additional shares of preferred stock without stockholder approval.

Our Articles of Incorporation, as amended, authorize the issuance of up to 10,000,000 shares of preferred stock, $10.00 par value per share. The Board is authorized to determine the rights and preferences of any additional series or class of preferred stock. The Board may, without stockholder approval, issue shares of preferred stock with dividend, liquidation, conversion, voting or other rights that are senior to our shares of common stock or that could adversely affect the voting power or other rights of the existing holders of outstanding shares of preferred stock or common stock. The issuance of additional shares of preferred stock may also hamper or discourage an acquisition or change in control of HGI.

We may conduct future offerings of our common stock and preferred stock and pay debt obligations with our common and preferred stock that may diminish our investors’ pro rata ownership and depress our stock price.

We reserve the right to make future offers and sales, either public or private, of our securities including shares of our preferred stock, common stock or securities convertible into common stock at prices differing from the price of the common stock previously issued. In the event that any such future sales of securities are affected or we use our common or preferred stock to pay principal or interest on our debt obligations, an investor’s pro rata ownership interest may be reduced to the extent of any such issuances and, to the extent that any such sales are effected at consideration which is less than that paid by the investor, the investor may experience dilution and a diminution in the market price of the common stock.

There is a limited public trading market for our common stock; the market price of our common stock has been volatile and could experience substantial fluctuations.

Our common stock is currently traded in the OTC market in the United States and has a limited public trading market in the United States. Our common stock is traded on the Canadian Securities Exchange, and the market there is similarly limited. Without an active trading market, there can be no assurance regarding the liquidity or resale value of the common stock. In addition, the market price of our common stock has been, and may continue to be, volatile. Such price fluctuations may be affected by general market price movements or by reasons unrelated to our operating performance or prospects such as, among other things, announcements concerning us or our competitors, technological innovations, government regulations, and litigation concerning proprietary rights or other matters.

We may not be able to utilize income tax loss carryforwards.

Restrictions in our ability to utilize income tax loss carry forwards have occurred in the past due to the application of certain changes in ownership tax rules in the United States. There is no certainty that the application of these rules may not recur. In addition, further restrictions of, reductions in, or expiration of net operating loss and net capital loss carry forwards may occur through future merger, acquisition and/or disposition transactions or through failure to continue a significant level of business activities. Any such additional limitations could require us to pay income taxes in the future and record an income tax expense to the extent of such liability. We could be liable for income taxes on an overall basis while having unutilized tax loss carry forwards since these losses may be applicable to one jurisdiction and/or particular line of business while earnings may be applicable to a different jurisdiction and/or line of business. Additionally, income tax loss carry forwards may expire before we have the ability to utilize such losses in a particular jurisdiction and there is no certainty that current income tax rates will remain in effect at the time when we have the opportunity to utilize reported tax loss carry forwards.

We have not declared any dividends on our common stock to date and have no expectation of doing so in the foreseeable future.

The payment of cash dividends on our common stock rests within the discretion of our Board of Directors and will depend, among other things, upon our earnings, unencumbered cash, capital requirements and our financial condition, as well as other relevant factors. To date, we have not paid dividends on our common stock nor do we anticipate that we will pay dividends in the foreseeable future. As of December 31, 2015, we do not have any preferred stock outstanding that has any preferential dividends.

We may fail to either adequately protect our proprietary technology and processes, or enforce our intellectual property rights.

The Company’s VoIP Patent Portfolio consists of United States Patents No. 6,243,373 and No. 6,438,124. The ultimate value of these patents has yet to be determined. If we fail to obtain or maintain adequate protections, or are unsuccessful in enforcing our patent rights, we may not be able to either realize additional value from our patents, or prevent third parties from benefiting from those patents without benefit to the Company. Any currently pending or future patent applications may not result in issued patents. In

addition, any issued patents may not have priority over any patent applications of others or may not contain claims sufficiently broad to protect us against third parties with sim ilar technologies, products or processes. In addition, the Company’s existing patents have finite lives (although they may be extended by filing continuations and/or divisional applications), most of which expire over the next three years. There is no guar antee that they will be fully exploited or commercialized before expiration.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties.

The Company, in connection with its asset liquidation business, leases or rents office space in several locations in the U.S. The principal locations are San Diego, CA and Foster City, CA, which are related to HGP’s operations, and Edwardsville, IL, which is related to NLEX’s operations. The Company also maintains offices in Scottsdale, AZ; Farmington Hills, MI; Marietta, GA and Easton, MD. The Foster City and Edwardsville offices are leased from related parties, as discussed in Note 14 to the consolidated financial statements.

Item 3. Legal Proceedings.

The Company is involved in various legal matters 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 effect on the Company. Refer to Note 15 to the consolidated financial statements for further detail.

Item 4. Mine Safety Disclosures.

None.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Shares of our common stock, $0.01 par value per share, are quoted under the symbol “HGBL” in the OTC market (“OTCQB”), and under the symbol “HGP” on the Canadian Securities Exchange (“CSE”).

The following table sets forth the high and low prices for our common stock, as quoted on the OTCQB, for the calendar quarters from January 1, 2014 through December 31, 2015, based on inter-dealer quotations, without retail mark-up, mark-down or commissions. These prices may not represent actual transactions, and are quoted in U.S. dollars:

Quarter Ended	High		Low
March 31, 2014	$	0.74	$	0.31
June 30, 2014		0.80		0.27
September 30, 2014		0.50		0.26
December 31, 2014		0.44		0.15

March 31, 2015	$	0.47	$	0.05
June 30, 2015		0.51		0.17
September 30, 2015		0.35		0.15
December 31, 2015		0.26		0.11

On March 11, 2016, the closing price for a share of the Company’s common stock as quoted on the OTCQB was $0.28.

The following table sets forth the high and low prices for our common stock, as quoted on the CSE, for the calendar quarters from January 1, 2014 through December 31, 2015, based on inter-dealer quotations, without retail mark-up, mark-down or commissions. These prices may not represent actual transactions, and are quoted in Canadian dollars:

Quarter Ended		High			Low
March 31, 2014	⁽¹⁾	N/A		⁽¹⁾	N/A
June 30, 2014		$	0.80		$	0.25
September 30, 2014			0.48			0.27
December 31, 2014			0.41			0.20

March 31, 2015		$	0.50		$	0.20
June 30, 2015			0.42			0.20
September 30, 2015			0.33			0.17
December 31, 2015			0.25			0.15

(1)

The Company was not listed on the CSE until the second quarter of 2014, following the disposition by Street Capital. Refer to Item 13 and Note 14 to the consolidated financial statements for further detail on the disposition.

On March 11, 2016, the closing price for a share of the Company’s common stock as quoted on the CSE was Canadian $0.22.

Holders

As of March 11, 2016, the Company had approximately 421 holders of common stock of record.

Dividends

To date, we have not paid dividends on our common stock nor do we anticipate that we will pay dividends in the foreseeable future. As of December 31, 2015, we do not have any preferred stock outstanding which has any preferential dividends.

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities.

On November 1, 2014 the Company granted restricted stock awards for 300,000 shares to two key employees (150,000 each) as part of their employment agreements. The shares were restricted only by the continued employment of the individuals.

Issuer Purchases of Equity Securities.

None.

Item 6. Selected Financial Data.

As a Smaller Reporting Company, we are electing scaled reporting obligations and therefore are not required to provide the information requested by this Item.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and Notes thereto, included in Item 15 of this Report. Our accounting policies have the potential to have a significant impact on our financial statements, either because of the significance of the financial statement item to which they relate, or because they require judgment and estimation due to the uncertainty involved in measuring, at a specific point in time, events that are continuous in nature.

Business Overview, Recent Developments and Outlook

Please see Item 1, above, of this Report for an overview of the Company’s business and recent developments. Please see Item 1A, above, for a discussion of the risk factors that may impact the Company’s current and future operations, and financial condition.

Liquidity and Capital Resources

Liquidity

At December 31, 2015 the Company had a working capital deficit of $5.1 million, as compared to a working capital deficit of $4.0 million at December 31, 2014, an increased deficit of $1.1 million. The Company’s current assets decreased to $4.3 million compared to $7.6 million at December 31, 2014, however the current liabilities also decreased to $9.4 million compared to $11.5 million at December 31, 2014. Within current assets, the most significant change was a decrease of $2.2 million in accounts receivable, the cash from which was used to pay down balances on the related party loan to Street Capital (the “Street Capital Loan”). The significant movements in current liabilities were: the line of credit with a balance of $0.5 million at December 31, 2014 was paid off and terminated during 2015, and the Street Capital Loan was reduced by $1.3 million during 2015.

The Company believes it can fund its operations and address the working capital deficit, through a combination of its on-going asset liquidation operations, sale of its real estate inventory, accessing new financing from related parties and flexibility on the timing of the repayment of its existing debt obligations with its related party creditor and third party creditor.

The Company’s current debt consists of the “Street Capital Loan”. At December 31, 2015, the third party debt had an outstanding balance of $2.5 million, however consistent with the prior year the outstanding balance was classified as non-current as the maturity date was extended to January 2017. The Street Capital Loan is with the Company’s former majority shareholder, Street Capital, and has fluctuated over time. At December 31, 2015 it had an outstanding balance of $1.7 million as compared to $3.0 million at December 31, 2014.

During 2015, the Company’s primary sources of cash were the operations of its asset liquidation business, cash receipts of $3.5 million related to its equity method investments (including receipt of proceeds of $2.0 million from the sale of the Company’s investment in Polaroid in 2014), and advances of $0.8 million under the Street Capital Loan. Cash disbursements, other than those related to debt repayment of $2.9 million ($0.5 million to third parties and $2.4 million under the Street Capital Loan), were primarily related to operating expenses. Additionally, the Company made its first payment of the contingent consideration owed to the former owner (and current president) of NLEX in the amount of $0.5 million during 2015.

The Company has historically classified both real estate inventory and asset liquidation related equity method investments as non-current, although they are expected to be converted to cash within a year. At December 31, 2015 and 2014, these assets totaled approximately $3.7 million and $7.5 million, respectively.

The Company expects that its asset liquidation business will continue to be the primary source of cash required for ongoing operations for the foreseeable future.

Ownership Structure and Capital Resources

At December 31, 2015 the Company had stockholders’ equity of $3.4 million, as compared to $13.5 million at December 31, 2014. The decrease in the stockholders’ equity was primarily the result of the Company’s $10.4 million net loss for the year-ended December 31, 2015.

In 2013, Street Capital, the Company’s former majority shareholder, announced that its Board of Directors had approved a plan to focus Street Capital’s operations on its core business, mortgage lending, and therefore to dispose of its other operating segments, including its interest in HGI. On March 20, 2014, Street Capital declared a dividend of all of its shares of the Company. This dividend was paid on April 30, 2014 to Street Capital’s common shareholders of record as of April 1, 2014. On May 1, 2014, HGI and Street Capital entered into a management services agreement (the “Services Agreement”) under which Street Capital continued to provide management and other services to HGI until the Services Agreement was terminated effective August 31, 2015. For more detail regarding the Services Agreement, see Note 14 to the consolidated financial statements.

The Company determines its future capital and operating requirements based upon its current and projected operating performance and the extent of its contractual commitments. The Company expects to be able to finance its future operations through a combination of its asset liquidation business and securing additional debt financing. The Company’s contractual requirements are limited to the outstanding loans and lease commitments with related and unrelated parties. Capital requirements are generally limited to the Company’s purchases of surplus and distressed assets. The Company believes that its current capital resources are sufficient for these requirements. In the event additional capital is needed, the Company believes it can obtain additional debt financing through either related party loans or through a new credit facility.

Cash Position and Cash Flows

Cash and cash equivalents at December 31, 2015 were $2.8 million compared to $3.6 million at December 31, 2014.

Cash used in operating activities. Cash used in operating activities was $0.8 million during 2015 as compared to $0.6 million cash provided during 2014, which represents an approximate $1.4 million change in operating cash flows between the two years. The $1.4 million change was primarily attributed to the following: the net loss adjusted for noncash items was $0.6 million greater in 2015 compared to 2014 as a result of some general under performance of our asset liquidation business (with the exception of NLEX) during 2015; we generated $0.3 million less of return on investment in equity method investments in 2015 compared to 2014, and we had a net unfavorable change of $0.5 million in the operating assets and liabilities in 2015 compared to 2014. The significant noncash items in 2015 included a $5.4 million impairment of goodwill and intangible assets charge and a $2.7 million real estate inventory write-down charge; whereas the most significant noncash item in 2014 was a $24.7 million income tax expense relating primarily to recording a valuation allowance against our deferred tax assets.

The significant changes in operating assets and liabilities during 2015 as compared to 2014 are primarily due to the nature of the Company’s operations. The Company earns revenue from discrete asset liquidation deals that vary considerably with respect to their magnitude and timing, and that can consist of fees, commissions, asset sale proceeds, or a combination of these. The operating assets and liabilities associated with these deals are therefore subject to the same variability and can be quite different at the end of any given period.

Cash provided by or used in investing activities. Cash provided by investing activities during 2015 was $2.7 million, as compared to $1.5 million cash used during 2014. The 2015 activity consisted primarily of the following cash receipts related to the Company’s equity method investments: $2.0 million of proceeds from the Company’s December 2014 exit from its investment in Polaroid (received in 2015), and $0.9 million of distributions from the Company’s other equity method investments. In 2014 the most significant items were the net $1.4 million cash paid to acquire NLEX and $0.6 million of investments in equity method investments.

Cash used in or provided by financing activities. Cash used in financing activities was $2.7 million during 2015, as compared to $1.3 million cash provided during 2014. The 2015 activity consisted of net $1.6 million of debt repaid to Street Capital, $0.5 million of debt repaid on our credit facility that we terminated in 2015, and $0.5 million of contingent consideration paid to the former owner (and current president) of NLEX. In 2014, the Company received $1.6 million (net of repayments) as loans from third parties, primarily used for the purchase of NLEX.

Management’s Discussion of Results of Operations

The following table summarizes our consolidated results of operations for 2015 and 2014 (in thousands).

	Year ended December 31,
	2015			2014
Revenues:
Services revenue	$	13,485		$	13,270
Asset sales		3,946			6,716
Total revenue		17,431			19,986
Operating costs and expenses:
Cost of services revenue		3,125			4,882
Cost of asset sales		3,412			5,398
Real estate inventory write-down		2,748			-
Selling, general and administrative		12,774			11,183
Depreciation and amortization		575			566
Impairment of goodwill and intangible assets		5,437			-
Total operating costs and expenses		28,071			22,029
Earnings of equity method investments		286			143
Operating loss		(10,354	)		(1,900	)
Other income		297			603
Interest expense		(349	)		(495	)
Loss before income tax expense		(10,406	)		(1,792	)
Income tax expense		15			24,722
Net loss	$	(10,421	)	$	(26,514	)

The Company’s asset liquidation revenue has several components: (1) traditional fee based asset disposition services, such as commissions from on-line and webcast auctions, liquidations and negotiated sales, and commissions from the NLEX charged-off receivables business, (2) the acquisition and subsequent disposition of distressed and surplus assets, including industrial machinery and equipment and real estate, and (3) fees earned for appraisal and management advisory services. The Company also earns income from its asset liquidation business through its earnings from equity method investments.

2015 Compared to 2014

Revenues and cost of revenues - Revenues were $17.4 million in 2015 compared to $20.0 million in 2014, costs of services revenue and asset sales were $6.5 million in 2015 compared to $10.3 million in 2014, and earnings of equity method investments were $0.3 million in 2015 compared to $0.1 million in 2014. The gross profits of these three items were therefore $11.2 million in 2015 compared to $9.9 million in 2014, an increase of approximately $1.3 million or approximately 14%. Because the Company conducts its asset liquidation operations both independently and through partnerships, and the ratio of the two is unlikely to remain constant in each period, the operations must be considered as a whole rather than on a line-by-line basis. The increased gross profit in the current year reflects the vagaries of the timing of asset liquidation transactions as well as the inclusion of a full year of NLEX gross profit as compared to only seven months of gross profit in 2014. NLEX generated $4.5 million of gross profit in 2015 as compared to $2.1 million of gross profit in 2014.

Real estate inventory write-down - The Company recorded a $2.7 million real estate inventory write-down charge during 2015. No charge was taken in the comparable 2014 period. The write-down represented a net realizable value adjustment to the carrying value of the Company’s real estate inventory and was triggered by the Company’s decision to list the property for sale at a much lower price than which it had previously been listed.

Selling, general and administrative expense – Selling, general and administrative expense, including expenses paid to related parties, was $12.8 million in 2015 as compared to $11.2 million in 2014, an increase of $1.6 million or 14%. Expenses increased overall primarily due to the inclusion of NLEX expenses of $2.8 million for the entire year in 2015, compared to only $1.4 million for the seven month period from acquisition in June 2014 through the end of the year. The Company’s personnel expense also contributed to the increase, as we increased the headcount in our asset liquidation businesses to promote operational growth.

Significant components of se lling, general and administrative expense were as shown below (dollars in thousands):

	Year ended December 31,
	2015		2014		% change
Compensation:
HGP	$	4,233	$	3,935		8	%
Equity Partners		1,617		1,702		-5	%
NLEX		2,155		1,205		79	%
Former President’s salary		138		138		0	%
Stock-based compensation		358		484		-26	%

Legal		219		268		-18	%
Consulting		553		507		9	%
Street Capital management fees		240		360		-33	%
Accounting and tax consulting		190		323		-41	%
Insurance		233		162		44	%
Occupancy		611		370		65	%
Travel and entertainment		875		717		22	%
Advertising and promotion		408		360		13	%
Other		944		652		45	%
Total selling, general and administrative expense	$	12,774	$	11,183

Depreciation and amortization expense – Depreciation and amortization expense was $0.6 million in both 2015 and 2014. The increased amortization from a full year of expense on the NLEX intangible assets acquired in the second quarter of 2014 was offset by a reduction to the amortization on the HGP customer network resulting from the reduction in carrying value subsequent to the impairment charge at the beginning of the fourth quarter of 2015. In both years the depreciation of property and equipment was not material.

Impairment of goodwill and intangible assets – The Company recorded an impairment charge of $5.4 million to reduce the carrying value of the goodwill and customer network, which resulted from the acquisition of HGP in 2012, to their respective fair values as of October 1, 2015 (the date at which the Company tested its goodwill and intangibles for impairment). There was no such similar charge in 2014. The sustained losses incurred by the Company, and the qualitative and quantitative review of the HGP reporting unit, led to the impairment charge in the fourth quarter of 2015. Refer to Note 8 to the consolidated financial statements for further detail.

Other income – The significant items within other income included the following: In 2014, the Company recorded $0.6 million as its gain on the sale of its investment in Polaroid. There were no similar transactions in 2015. In 2014, the Company recorded $0.3 million as its share of income from its other equity accounted investments. Income from these other equity accounted investments was not material in 2015. In 2015 the Company recorded other income of $0.2 million related to the mark-to-market revaluation of the NLEX contingent consideration. In 2014 the mark-to-market revaluation resulted in other expense of $0.2 million.

Off-Balance Sheet Arrangements – The Company had no off balance sheet arrangements during the years ended December 31, 2015 and 2014.

Future Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 specifies a comprehensive model to be used in accounting for revenue arising from contracts with customers, and supersedes most of the current revenue recognition guidance, including industry-specific guidance. It applies to all contracts with customers except those that are specifically within the scope of other FASB topics, and certain of its provisions also apply to transfers of nonfinancial assets, including in-substance nonfinancial assets that are not an output of an entity’s ordinary activities. The core principal of the model is that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the transferring entity expects to be entitled in exchange. To apply the revenue model, an entity will: 1) identify the contract(s) with a customer, 2) identify the performance obligations in the contract, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract, and 5)

recognize revenue when (or as) the entity satisfies a performance obligation. For public companies, ASU 2014-09 is effective for annua l reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. Early adoption is not permitted. Upon adoption, entities can choose to use either a full retrospective or modified approach, as outlined in AS U 2014-09. As compared with current Generally Accepted Accounting Principles (“GAAP”), ASU 2014-09 requires significantly more disclosures about revenue recognition. The Company has not yet assessed the potential impact of ASU 2014-09 on its consolidated f inancial statements.

In August 2014, the FASB issued Accounting Standards update 2014-15, Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 requires management to determine whether substantial doubt exists regarding the entity’s going concern presumption, which generally refers to an entity’s ability to meet its obligations as they become due, and provides guidance on determining when and how to disclose going-concern uncertainties in an entity’s financial statements. It requires management to perform both interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. The ASU contains guidance on 1) how to perform a going-concern assessment, and 2) when to provide going-concern disclosures. An entity must provide specified disclosures if conditions or events raise substantial doubt about its ability to continue as a going concern. ASU 2014-15 applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company has not yet adopted ASU 2014-15 nor assessed its potential impact on its disclosures.

In January 2015, the FASB issued Accounting Standards update 2015-01, Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items (“ASU 2015-01”). ASU 2015-01 eliminates the requirement for entities to consider whether an underlying event or transaction is extraordinary, and, if so, to separately present the item in the income statement net of tax, after income from continuing operations. Instead, items that are both unusual and infrequent should be separately presented as a component of income from continuing operations, or be disclosed in the notes to the financial statements. ASU 2015-01 will be effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 31, 2015. Early adoption is permitted provided that the new standard is applied from the beginning of the fiscal year of adoption. The Company has not historically reported extraordinary items in its consolidated financial statements, and is not aware of any pending transactions or events that might have required reporting as extraordinary items, and therefore does not expect the adoption of ASU 2015-01 to have a material impact on its consolidated financial statements.

In March 2015, the FASB issued Accounting Standards update 2015-02, Amendments to the Consolidation Analysis (“ASU 2015-02”). ASU 2015-02 eliminates entity specific consolidation guidance for limited partnerships, and revises other aspects of the consolidation analysis, but does not change the existing consolidation guidance for corporations that are not variable interest entities (“VIEs”). For public business entities, ASU 2015-02 will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted. The Company does not believe that ASU 2015-02 will have a material impact on its consolidated financial statements.

In April 2015, the FASB issued Accounting Standards update 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 changes the presentation of debt issuance costs in financial statements, by requiring them to be presented in the balance sheet as a direct deduction from the related debt liability, rather than as an asset. Amortization of the costs is reported as interest expense. There is no change to the current guidance on the recognition and measurement of debt issuance costs. For public business entities, ASU 2015-03 will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted. The Company does not believe that ASU 2015-03 will have a material impact on its consolidated financial statements.

In August 2015, the FASB issued Accounting Standards update 2015-15, Interest – Imputation of Interest , (“ASU 2015-15”). ASU 2015-15 amends subtopic 835-30 of the accounting standards codification (which was previously amended by ASU 2015-03), to allow for the capitalization of debt issuance costs related to line of credit agreements. Capitalized costs would be presented as an asset and subsequently amortized ratably over the term of the line of credit. The Company does not believe that ASU 2015-15 will have a material impact on its consolidated financial statements.

In September 2015, the FASB issued Accounting Standards update 2015-16, Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”). ASU 2015-16 changes the recognition of business combination adjustments by requiring acquirers to recognize adjustments to provisional amounts identified during the measurement period in the reporting period in which the adjustment amounts are determined. The acquirer is required to record the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts. These amounts are calculated as if the accounting was completed at acquisition date. The acquirer is also required to present separately on the face of the income statement, or disclose in the notes, the amount recorded in current-period earnings (by line item) that would have been recorded in previous reporting periods had the adjustments been recognized as of the acquisition date. ASU 2015-16 will be effective for fiscal years, and interim

periods within those fiscal years, beginning after December 15, 2015. The Company does not believe ASU 2015-16 will have a material impact on its consolidated financial statements.

In November 2015, the FASB issued Accounting Standards update 2015-17, Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”). ASU 2015-17 requires all deferred tax assets and liabilities to be classified as non-current on the balance sheet. This amendment simplifies the presentation of deferred income taxes. ASU 2015-17 will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The Company has not yet adopted ASU 2015-17, however its effects are not expected to have a material impact on the consolidated financial statements.

In February 2016, the FASB issued Accounting Standards update 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 requires a lessee to recognize a lease asset representing its right to use the underlying asset for the lease term, and a lease liability for the payments to be made to lessor, on its balance sheet for all operating leases greater than 12 months. ASU 2016-02 will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company has not yet adopted ASU 2016-02 nor assessed its potential impact on the financial statements.

Critical Accounting Policies

Use of estimates

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.

Significant estimates include the assessment of collectability of revenue recognized, and the valuation of accounts receivable, inventory, investments, goodwill and intangible assets, liabilities, contingent consideration, deferred income tax assets and liabilities, and stock-based compensation. These estimates have the potential to significantly impact our consolidated financial statements, either because of the significance of the financial statement item to which they relate, or because they require judgment and estimation due to the uncertainty involved in measuring, at a specific point in time, events that are continuous in nature.

Revenue recognition

Services revenue generally consists of commissions and fees from providing auction services, appraisals, brokering of sales transactions and providing merger and acquisition advisory services. Revenue is recognized when persuasive evidence of an arrangement exists, the selling price is fixed and determinable, goods or services have been provided, and collectability is reasonably assured. For asset sales revenue is recognized in the period in which the asset is sold, the buyer has assumed the risks and awards of ownership, the Company has no continuing substantive obligations and collectability is reasonably assured.

We evaluate revenue from asset liquidation transactions in accordance with the accounting guidance to determine whether to report such revenue on a gross or net basis. We have determined that we act as an agent for our fee based asset liquidation transactions and therefore we report the revenue from transactions in which we act as an agent on a net basis.

The Company also earns income through asset liquidation transactions that involve the Company acting jointly with one or more additional purchasers, pursuant to a partnership, joint venture or limited liability company (“LLC”) agreements (collectively, “Joint Ventures”). For these transactions, the Company does not record the revenue or expenses associated with these Joint Ventures. Instead, the Company’s proportionate share of the net income (loss) is reported as Earnings of equity method investments. In general, the Joint Ventures apply the same revenue recognition and other accounting policies as the Company.

Cost of services revenue and asset sales

Cost of services revenue generally includes the direct costs associated with generating commissions and fees from the Company’s auction and appraisal services, merger and acquisition advisory services, and brokering of charged-off receivable portfolios. The Company generally recognizes these expenses in the period in which the revenue they relate to is recorded. Cost of asset sales generally includes the cost of purchased inventory and the related direct costs of selling inventory. The Company recognizes these expenses in the period in which title to the inventory passes to the buyer and the buyer assumes the risk and reward of the inventory.

Accounts receivable

receivables from Joint Venture partners. The initial value of an account receivable corresponds to the fair value of the underlying goods or services. To date, a majority of the receivables have been classifie d as current and, due to their short-term nature, any decline in fair value would be due to issues involving collectability. At each financial statement date the collectability of each outstanding account receivable is evaluated, and an allowance is record ed if the book value exceeds the amount that is deemed collectable. See Note 9 to the consolidated financial statements for more detail regarding the Company’s accounts receivable.

Inventory

The Company’s inventory consists of assets acquired for resale. Machinery and equipment inventory is classified as current, and historically is sold within a one-year operating cycle. Real estate inventory is classified as non-current due to uncertainties relating to the timing of resale. All inventory is recorded at the lower of cost or net realizable value. There is a risk that assets acquired for resale may be subsequently sold for less than their cost, or may remain unsold. Historically, the assets’ selling prices have generally been in excess of their cost. However, during 2015, the Company recorded an inventory write down charge of $2.7 million related to its real estate inventory. See Note 4 to the consolidated financial statements for further detail.

Equity Method Investments

As noted above, the Company conducts a portion of its asset liquidation business through Joint Ventures. These are accounted for using the equity method of accounting whereby the Company’s proportionate share of the Joint Venture’s net income (loss) is reported in the consolidated statement of operations as Earnings of equity method investments. At the balance sheet date, the Company’s investments in these Joint Ventures are reported in the consolidated balance sheet as equity method investments. The Company monitors the value of each Joint Ventures’ underlying assets and liabilities, and records a write down of its investments should the Company conclude that there has been a decline in the value of the net assets. Given that the underlying transactions are identical, in all material aspects, to asset liquidation transactions that the Company undertakes independently, the net assets are similarly expected to be sold within a one-year operating cycle. However, these investments have historically been classified as non-current in the consolidated financial statements due to the uncertainties relating to the timing of resale of the underlying assets as a result of the Joint Venture relationship.

Intangible assets and goodwill

Intangible assets are recorded at fair value upon acquisition. Those with an estimated useful life are amortized, and those with an indefinite useful life are unamortized. Subsequent to acquisition, the Company monitors events and changes in circumstances that require an assessment of intangible asset recoverability. Indefinite-lived intangible assets are assessed at least annually to determine both if they remain indefinite-lived and if they are impaired. The Company assesses whether or not there have been any events or changes in circumstances that suggest the value of the asset may not be recoverable. Amortized intangible assets are not tested annually, but are assessed when events and changes in circumstances suggest the assets may be impaired. If an assessment determines that the carrying amount of any intangible asset is not recoverable, an impairment loss is recognized in the statement of operations, determined by comparing the carrying amount of the asset to its fair value. All of the Company’s identifiable intangible assets at December 31, 2015 have been acquired as part of the acquisitions of HGP in 2012 and NLEX in 2014, and are discussed in more detail in Note 8 to the consolidated financial statements. During 2015 the Company recorded an impairment charge of $2.7 million related to the customer network acquired as part of the acquisition of HGP. No impairment charges were recorded during 2014. See Note 3 and Note 8 to the consolidated financial statements for more detail regarding the Company’s identifiable intangible assets.

Goodwill, which results from the difference between the purchase price and the fair value of net identifiable tangible and intangible assets acquired in a business combination, is not amortized, but is tested at least annually for impairment. The Company performs its annual impairment test on October 1. Testing goodwill is a two-step process, in which the carrying amount of the reporting unit associated with the goodwill is first compared to the reporting unit’s estimated fair value. If the carrying amount of the reporting unit exceeds its estimated fair value, the fair values of the reporting unit’s assets and liabilities are analyzed to determine whether the goodwill of the reporting unit has been impaired. An impairment loss is recognized to the extent that the Company’s recorded goodwill exceeds its implied fair value as determined by this two-step process. Accounting Standards Update 2011-08, Testing Goodwill for Impairment , provides the option to perform a qualitative assessment prior to performing the two-step process, which may eliminate the need for further testing. Goodwill, in addition to being tested for impairment annually, is tested for impairment at interim periods if an event occurs or circumstances change such that it is more likely than not that the carrying amount of goodwill may be impaired.

In testing goodwill, the Company initially uses a qualitative approach and analyzes relevant factors to determine if events and circumstances have affected the value of the goodwill. If the result of this qualitative analysis indicates that the value has been impaired, the Company then applies a quantitative approach to calculate the difference between the goodwill’s recorded value and its fair value. An impairment loss is recognized to the extent that the recorded value exceeds its fair value. All of the Company’s goodwill relates to its acquisitions of Equity Partners in 2011, HGP in 2012 and NLEX in 2014, and is discussed in more detail in

Note 3 and Note 8 to th e consolidated financial statements. During 2015 the Company recorded an impairment charge of $2.7 million related to the goodwill from its acquisition of HGP. No impairment charges were recorded during 2014.

Future impairment of the Company’s intangible assets and goodwill could result from changes in assumptions, estimates or circumstances, some of which are beyond the Company’s control. The most significant items that could impact the Company’s business and result in an impairment charge are outlined above in Item 1A. Risk Factors .

Deferred income taxes

The Company recognizes deferred tax assets and liabilities for temporary differences between the tax bases of assets and liabilities and the amounts at which they are carried in the financial statements, based upon the enacted tax rates in effect for the year in which the differences are expected to reverse. The Company periodically assesses the value of its deferred tax assets, which have been generated by a history of net operating and net capital losses, and determines the necessity for a valuation allowance that will reduce deferred tax assets to the amount expected to be realized. The Company evaluates which portion of the deferred tax assets, if any, will more likely than not be realized by offsetting future taxable income, taking into consideration any limitations that may exist on its use of its net operating and net capital loss carryforwards. In 2014, as a result of incurring losses in prior years, the Company recorded a valuation allowance that reduced its deferred tax assets to $0. The Company continued to carry a full valuation allowance in 2015. For further discussion of the Company’s income taxes, see Note 13 to the consolidated financial statements.

Contingent consideration

At December 31, 2015 the Company’s contingent consideration consists of the estimated fair value of an earn-out provision that was part of the consideration for the acquisition of NLEX in 2014. The amount assigned to the contingent consideration at the acquisition date was determined using a discounted cash flow analysis. Its present value is assessed quarterly, and any adjustments, together with the accretion of the fair value discount, are reported as other income/expense on the Company’s consolidated statement of operations. See Note 3 to the consolidated financial statements for more discussion of the acquisition of NLEX and the related contingent consideration.

Liabilities and contingencies

The Company is involved from time to time in various legal matters arising out of its operations in the normal course of business. On a case by case basis, the Company evaluates the likelihood of possible outcomes for these contingent matters. Based on this evaluation, the Company determines whether a loss accrual is appropriate. If the likelihood of a negative outcome is probable, and the amount can be estimated, the Company accrues the estimated loss in the current period. Refer to Note 12 to the consolidated financial statements for further detail.

Stock-based compensation

The Company’s stock-based compensation is primarily in the form of options to purchase common shares. The fair value of stock options is calculated using the Black-Scholes option pricing model. The determination of the fair value of the Company’s stock options is based on a variety of factors including, but not limited to, the price of the Company’s common stock, the expected volatility of the stock price over the expected life of the award, and expected exercise behavior. The fair value of the awards is subsequently expensed over the vesting period. The provisions of the Company’s stock-based compensation plans do not require the Company to settle any options by transferring cash or other assets, and therefore the Company classifies the option awards as equity. See Note 16 to the consolidated financial statements for further discussion of the Company’s stock-based compensation.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

As a Smaller Reporting Company, we are electing scaled reporting obligations and therefore are not required to provide the information requested by this Item.

Item 8. Financial Statements and Supplementary Data.

See Consolidated Financial Statements beginning on page F-1.

Item 9. Changes In and Disagreemen ts with Accountants on Accounting and Financial Disclosure.

During Fiscal 2014 and Fiscal 2015 the Company had no disagreements with its auditors and no reportable events.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Annual Report, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer (the “Certifying Officers”), the Company conducted an evaluation of its disclosure controls and procedures. As defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the Certifying Officers, to allow timely decisions regarding required disclosure. Based on this evaluation, the Certifying Officers have concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2015.

Management’s Annual Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, in accordance with Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Under the supervision and with the participation of the Company’s management, including the Certifying Officers, we conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Based on its assessment using these criteria, the Company’s management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2015.

This Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report is not subject to attestation by the Company’s independent registered public accounting firm pursuant to the rules of the SEC that permit the Company to provide only management’s report in this Report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the fourth fiscal quarter of 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Under our Charter documents, the Board of Directors (the “Board”) is divided into three classes, with the total number of directors to be not less than five and not more than nine. Each director is to serve a term of three years or until his or her successor is duly elected and qualified. As of the date hereof, the Board consists of eight members: three Class I directors (Messrs. Dove, Perlis and Shimer), three Class II directors (Messrs. Toh, Heaton, and Silber) and two Class III directors (Messrs. Turock and Ryan). The following table sets forth the names, ages and positions with HGI of our current directors and executive officers. With the exception of Ross Dove and Kirk Dove, who are brothers, there are no family relationships between any present executive officers and directors.

Name	Age (1)	Title
Allan C. Silber	67	Chairman of the Board
Hal B. Heaton	65	Director (2), (3), (4)
Henry Y.L. Toh	58	Director (2), (3), (4)
Samuel L. Shimer	52	Director (2)
David L. Turock	58	Director (2)
J. Brendan Ryan	73	Director (2)
Morris Perlis	67	Director (2)
Ross Dove	63	Director, Chief Executive Officer
Kirk Dove	60	Chief Operating Officer and President
Scott A. West	46	Chief Financial Officer
James Sklar	50	Executive Vice President, General Counsel, and Corporate Secretary
Kenneth Mann	48	Senior Managing Director, Equity Partners HG LLC
David Ludwig	58	President, National Loan Exchange

(1)

As of December 31, 2015

(2)

Independent Director

(3)

Member of the Audit Committee

(4)

Member of the Compensation Committee

Set forth below are descriptions of the backgrounds of the executive officers and directors of the Company:

Allan C. Silber , Chairman of the Board. Mr. Silber was elected to the Board as a Class II director in September 2001. He was appointed as Chairman of the Board in November 2001, a position he held until October 2004, and was again appointed as Chairman of the Board in March 2005. In January 2011, Mr. Silber resigned the position of Chief Executive Officer and assumed the position of President. On May 5, 2015 in connection with the appointment of Ross Dove as Chief Executive Officer and Kirk Dove as Chief Operating Officer and President, Mr. Silber resigned the position of President. Mr. Silber is the Chairman of Street Capital, which he founded in 1979. Mr. Silber sits on a number of public, private and not for profit Boards. Mr. Silber attended McMaster University and received a bachelor’s degree from the University of Toronto.

Hal B. Heaton , Director. Dr. Heaton was appointed by the Board as a Class II director on June 14, 2000 to fill a Board vacancy. Dr. Heaton has expertise in capital markets, corporate finance, emerging markets and entrepreneurial finance, all of which have relevance to the Company as it pursues varied investment and business opportunities in both North America and foreign markets. From 1983 to the present he has been a professor of Finance at Brigham Young University and between 1988 and 1990 was a visiting professor of Finance at Harvard University. From 2001 to 2007, Dr. Heaton served on the board of Mity Enterprises Inc., and was a member of its Compensation Committee. Dr. Heaton holds a bachelor’s degree in Computer Science/Mathematics and a Master’s in Business Administration from Brigham Young University, as well as a master’s degree in Economics and a Ph.D. in Finance from Stanford University.

Henry Y.L. Toh , Director. The Board elected Mr. Toh as a Class II director and as Vice Chairman of the Board in April 1992. Mr. Toh has valuable experience as a director with a variety of technology-oriented companies, in addition to extensive hands-on experience as an executive officer of the Company. Mr. Toh became President of HGI in May 1993, Acting Chief Financial Officer in September 1995 and Chairman of the Board in May 1996, and served as such through September 1996. Mr. Toh was appointed as Chairman of the Audit Committee in March 2005. Mr. Toh currently serves as Vice Chairman/Executive Vice President and Director of NuGen Holdings Inc. (formerly InovaChem, Inc.), a research, development and production company specializing in Axio flux electric motor systems, since January 2008, and President and CEO of Amerique Investments International Corporation since 1992. He previously served as Executive Vice President and a director of NuGen Holdings Inc., from February 2008 to December 2009. Mr. Toh has served as a director of iDNA, Inc., a specialized finance and entertainment company, since 1999; a director of Teletouch Communications, Inc., a retail provider of internet, cellular and paging services, since 2002; a director of Isolagen, Inc., a

biotechnology company, from 2003 until 2009; and a director of American Surgical Holdings, Inc. from 2007 to April 2011. Mr. Toh is a graduate of Rice University.

Samuel L. Shimer , Director. Mr. Shimer was appointed by the Board as a Class I director on April 15, 2001 to fill a Board vacancy. Mr. Shimer has extensive expertise in mergers and acquisitions, including those transactions that occurred while he was an officer of the Company and Street Capital, where he was initially employed as a Senior Vice President, Mergers & Acquisitions and Business Development in July 1997. He was appointed Managing Director in February 2000 and he terminated his employment with the Company in February 2004 to join J. H. Whitney & Co., a private equity fund management company, where he remained as a Partner until December 2009. Mr. Shimer is currently Managing Director of SLC Capital Partners, LLC, a private equity fund management company that he co-founded in 2010. From 1991 to 1997, Mr. Shimer worked at two merchant banking funds affiliated with Lazard Frères & Co., Center Partners and Corporate Partners, ultimately serving as a Principal. Mr. Shimer earned a Bachelor of Science in Economics degree from The Wharton School of the University of Pennsylvania, and a Master of Business Administration degree from Harvard Business School.

David L. Turock , Director. Mr. Turock was appointed by the Board as a Class III director on January 16, 2008 to fill a Board vacancy. Mr. Turock is the inventor of the Company’s VoIP Patent, and an expert on numerous technologies and their applications. Mr. Turock began his career working with AT&T Bell Laboratories in 1982 and Bell Communications Research in 1988, and subsequently founded enhanced telephone service provider, Call Sciences. He later formed Interexchange, which designed and operated one of the world’s largest debit card systems. Most recently, from 2001 to 2007, Mr. Turock was Chief Technology Officer of Therap Services, a provider of informatics services to disabled patients. Mr. Turock received his Bachelor of Science in Experimental Psychology from Syracuse University, his Master of Science and Ph.D. degrees in Cognitive Psychology from Rutgers University, and his Master of Science in Engineering in Computer Science from the Moore School of the University of Pennsylvania.

J. Brendan Ryan , Director. Mr. Ryan was appointed by the Board as a Class III director on August 8, 2011 to fill a Board vacancy. Mr. Ryan has had a distinguished career in the advertising industry, most recently serving as the global CEO of Foote Cone & Belding Worldwide (now FCB), and as the Chairman and Chairman Emeritus from June 2005 to December 2010. He has served on the boards of several public companies and currently serves as a board member of several non-profit corporations. Mr. Ryan has extensive experience at the Board level with respect to the workings of public companies as well as an extensive network of contacts that could be of benefit to the Company. Mr. Ryan received his Bachelor degree in History from Fordham College and his Master of Business Administration in Marketing from the Wharton Graduate School of the University of Pennsylvania.

Morris Perlis , Director. Mr. Perlis was appointed by the Board as a Class I director on May 5, 2015. Mr. Perlis previously served as President of Street Capital from 1992 until 2001, a period of tremendous success that included guiding the Company’s health care strategy, resulting in superior growth of three investee companies. In addition to his past experience at Street Capital, Mr. Perlis bring a wealth of expertise gained in senior strategic and management roles with other leading organizations. He spent 13 years with American Express Inc., including five years as President of American Express Canada. During that time he obtained approval for, and directed the launch of, the AMEX Bank of Canada, for which he served as CEO. Among his other responsibilities with American Express, Mr. Perlis served as Executive Vice President, and was a key member of numerous senior level U.S. executive committees. Mr. Perlis also spent four years as President and CEO of Mad Catz Interactive, during which time he completely re-engineered the Company, leading it to become the largest third party manufacturer in its industry. Mr. Perlis is currently the President and CEO of Morris Perlis and Associates, and is active on a number of public, private and not for profit boards.

Ross Dove , Chief Executive Officer and Director. Mr. Ross Dove was appointed Chief Executive Officer of the Company on May 5, 2015 and has served as Co-Managing Partner of Heritage Global Partners, Inc. since its founding in October 2009. Together with his brother, Kirk Dove, Mr. Dove joined the Company when HGI acquired HGP in February 2012. Mr. Dove began his career in the auction business over thirty years ago, beginning with a small family-owned auction house and helping to expand it into a global firm, DoveBid, which was sold to a third party in 2008. The Messrs. Dove remained as global presidents of the business until September 2009, and then formed HGP in October 2009. During his career, Mr. Dove has been actively involved in auction industry advances such as theatre-style auctions, which was a first step in migrating auction events onto the Internet. Mr. Dove has been a member of the National Auctioneers Associations since 1985, and a founding member of the Industrial Auctioneers Association. He served as a director of Critical Path from January 2002 to January 2005 and has served on the boards of several venture funded companies.

Kirk Dove , Chief Operating Officer and President. Mr. Kirk Dove was appointed Chief Operating Officer and President of the Company on May 5, 2015 and has served as Co-Managing Partner of Heritage Global Partners, Inc. since its founding in October 2009. Together with his brother, Ross Dove, Mr. Dove joined the Company when HGI acquired HGP in February 2012. Mr. Dove began his career in the auction business over twenty-five years ago, including, along with his brother, the position of global president of DoveBid, which was sold to a third party in 2008. The Messrs. Dove remained as global presidents of the business until September 2009, and then formed HGP in October 2009. In addition to his experience with the auction business, Mr. Dove was employed at Merrill Lynch for several years as a Senior Account Executive. Mr. Dove holds a Bachelor of Sciences degree in Business from

Northern Illinois University. He is a Senior ASA Member of the American Society of Appraisers, and has been a member of the National Auctioneers Associations since 1985 .

Scott A. West , Chief Financial Officer. Mr. West became the Chief Financial Officer of HGP in March 2014 and was appointed the Chief Financial Officer of HGI in May 2015. Mr. West has over 25 years of multi-national executive financial accounting and business management experience serving various public and private equity funded companies, including a Fortune 500 company. He has expertise managing financial, technical, M&A and international accounting teams and has deep knowledge of SEC financial reporting, SOX compliance and international accounting matters. Mr. West is responsible for all of the Company’s financial and treasury functions including financial reporting, bank relationships, conducting internal and industry analysis to support the Company’s goals for growth, investor relations, and M&A activity. Mr. West has a bachelor’s degree in Accounting from Arizona State University.

James Sklar, Executive Vice President, General Counsel, and Corporate Secretary. Mr. Sklar became the Executive Vice President and General Counsel of HGP in June 2013 and was appointed the Executive Vice President, General Counsel and Corporate Secretary of HGI in May 2015. Mr. Sklar has over two decades of relevant legal expertise serving leading worldwide asset advisory and auction services firms. Throughout his career, he has played a key role in establishing relationships with global alliance partners and implementing international contracts as well as expanding the adoption of the auction sale process in North America, Europe, Asia and Latin America. Mr. Sklar is responsible for all of the Company’s legal matters including negotiating global transactional business alliance documents, managing relationships and contracts with worldwide clients and business partners, and providing legal representation for all of the Heritage Global companies. Mr. Sklar has a bachelor’s degree in Economics from the Wharton School of the University of Pennsylvania and a Juris Doctorate from Wayne State University Law School.

Kenneth Mann , Senior Managing Director, Equity Partners HG LLC. Mr. Mann has been employed by the Company since March 2011, when he joined the Company in connection with its acquisition of Equity Partners. Prior to the acquisition, Mr. Mann was a Partner at Equity Partners since 1995, and a Managing Partner since September 2002. During his career, Mr. Mann has had extensive experience handling investment banking services for distressed businesses operating in a wide variety of industries. Mr. Mann holds a Bachelor of Science Degree in Business Administration from Salisbury University. He began sponsoring events with the American Bankruptcy Institute in 1995, became a member in March 2003, and has served on its Asset Sales Committee since 2003.

David Ludwig , President, National Loan Exchange Inc. (“NLEX”). Mr. Ludwig joined the Company when HGI acquired NLEX in June 2014. Mr. Ludwig has worked in the financial industry for twenty-five years, and he developed NLEX from its start as a post-Resolution Trust Corporation (RTC) sales outlet to the nation's leading broker of charged-off credit card and consumer debt accounts. He is considered a leading pioneer in the debt sales industry, and has been a featured speaker at many industry conferences, as well as quoted in numerous publications including the New York Times, LA Times, Collections and Credit Risk, and Collector Magazine. Mr. Ludwig also serves as consultant and expert witness within the industry. Mr. Ludwig has a Bachelor of Science Degree in Economics from the University of Illinois .

Each officer of HGI has been appointed by the Board and holds his office at the discretion of the Board.

No director or officer of our company has, during the last ten years: (i) been subject to or involved in any legal proceedings described under Item 401(f) of Regulation S-K, including, without limitation, any criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, United States federal or state securities laws, or finding any violations with respect to such laws.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our officers and directors, and persons who own more than ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership of equity securities of HGI with the SEC. Officers, directors, and greater than ten percent stockholders are required by the SEC regulation to furnish us with copies of all Section 16(a) forms that they file.

Based solely upon a review of Forms 3 and Forms 4 furnished to us pursuant to Rule 16a-3 under the Exchange Act during our most recent fiscal year, and Forms 5 with respect to our most recent fiscal year, we believe that all such forms required to be filed pursuant to Section 16(a) were timely filed by the executive officers, directors and security holders required to file same during the fiscal year ended December 31, 2015.

Code of Ethics

HGI has adopted a code of ethics that applies to its employees, including its principal executive, financial and accounting officers or persons performing similar functions. The HGI Code of Conduct (the “Code”) can be found on the Company’s website at http://www.heritageglobalinc.com (follow Corporate Governance link to Governance Documents tab). The Company intends to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding any amendments to, or waivers from, a provision of the Code that applies to its principal executive, financial and accounting officers or persons performing similar functions by posting such information on its website at the website address set forth above.

Corporate Governance

Board Leadership and Risk Oversight

HGI is a small organization, with a market capitalization at December 31, 2015 of approximately $6.5 million. From 2001 until the first quarter of 2014, Street Capital was the Company’s majority shareholder. In the first quarter of 2014 Street Capital declared a dividend in kind, consisting of its 73.3% interest in HGI, which was paid to Street Capital shareholders in April 2014. The Company’s association with Street Capital continued into 2015, and Street Capital remained a related party, due to a management services agreement (the “Services Agreement”) between HGI and Street Capital. The Services Agreement is described in more detail in Item 13 of this Report and in Note 14 to the consolidated financial statements. The Services Agreement was terminated effective August 31, 2015, as described more fully in the Current Report on Form 8-K filed with the SEC on September 1, 2015. After the termination of the Services Agreement, Street Capital remained a related party as a result of the Company’s Chairman of the Board, Mr. Allan Silber, also holding a similar position for Street Capital.

HGI’s operations, even following the acquisitions of HGP in 2012 and NLEX in 2014, and HGP’s expansion into Europe in 2012, remain relatively modest, with only fifty-three employees, as detailed in Item 1 of this report. Given the current size and scale of the Company’s operations, the Company believes that the Board does not require a lead independent director in order to effectively oversee the strategic priorities of the Company. The Board meets quarterly to review and approve the Company’s operating results. It meets annually to review and approve the Company’s strategy and budget. Material matters such as acquisitions and dispositions, investments and business initiatives are approved by the full Board.

Board Meetings and Committees

The Board held four meetings during the fiscal year ended December 31, 2015. The Board has designated two standing committees: the Audit Committee and the Compensation Committee. HGI does not have a nominating or a corporate governance committee. However, corporate governance functions are included in the Audit Committee Charter, and Board nominations are considered by the full Board. There are no specific criteria for Director nominees, and the Company does not specifically consider diversity with respect to the selection of its Board nominees. Given the Company’s limited operations, the Company believes that it would have difficulty identifying and attracting a diverse selection of candidates. To date, it has been deemed most effective to nominate and appoint individuals who are either former employees with detailed knowledge of the business, such as Mr. Toh and Mr. Shimer, individuals with expertise that is unique to the Company’s operations, such as Mr. Turock, or individuals with expertise that will be of value as the Company expands its market presence, such as Dr. Heaton, Mr. Ryan and Mr. Perlis. There has been no material change in the procedures by which our shareholders may recommend nominees to our Board since such procedures were adopted and implemented.

Audit Committee

The Audit Committee is responsible for making recommendations to the Board concerning the selection and engagement of independent accountants and for reviewing the scope of the annual audit, audit fees, results of the audit and independent registered public accounting firm’s independence. The Audit Committee is also responsible for corporate governance, and reviews and discusses with management and the Board such matters as accounting policies, internal accounting controls and procedures for preparation of financial statements. Its membership is currently comprised of Mr. Toh (Chairman) and Dr. Heaton, both independent directors. The Audit Committee held four meetings during the fiscal year ended December 31, 2015. In 2000, the Board approved HGI’s Audit Committee Charter, which was subsequently revised and amended in 2001 and again in 2003 in order to incorporate certain updates in light of regulatory developments, including the Sarbanes-Oxley Act of 2002. A copy of the current Audit Committee Charter is available on the Company’s website www.heritageglobalinc.com .

Audit Committee Financial Expert

The Board has determined that Mr. Henry Y.L. Toh is an Audit Committee financial expert as defined by Item 407(d) of Regulation S-K and is “independent” as such term is defined under Nasdaq Marketplace Rules and applicable federal securities laws and regulations.

Item 11. Executi ve Compensation.

Compensation Discussion and Analysis

Summary

The following sections provide an explanation and analysis of our executive compensation program and the material elements of total compensation paid to each of our named executive officers. Included in the discussion is an overview and description of:

our compensation philosophy and program;

the objectives of our compensation program;

what our compensation program is designed to reward;

each element of compensation;

why we choose to pay each element;

how we determine the amount for each element; and

how each compensation element and our decision regarding that element fit into our overall compensation objectives and affect decisions regarding other elements, including the relationship between our compensation objectives and our overall risk management.

In reviewing our executive compensation program, we considered issues pertaining to policies and practices for allocating between long-term and currently paid compensation and those policies for allocating between cash and non-cash compensation. We also considered the determinations for granting awards, performance factors for our company and our named executive officers, and how specific elements of compensation are structured and taken into account in making compensation decisions. Questions related to the benchmarking of total compensation or any material element of compensation, the tax and accounting treatment of particular forms of compensation and the role of executive officers (if any) in the total compensation process also are addressed where appropriate. In addition to the named executive officers discussed below, the Company has only 47 salaried employees.

General Executive Compensation Philosophy

We compensate our executive management through a combination of base salaries, merit based performance bonuses, and long-term equity compensation. We adhere to the following compensation policies, which are designed to support the achievement of our business strategies:

Our executive compensation program should strengthen the relationship between compensation, both cash and equity-based, and performance by emphasizing variable, at-risk earnings that are dependent upon the successful achievement of specified corporate, business unit and individual performance goals.

A portion of each executive’s total compensation should be comprised of long-term, at-risk compensation to focus management on the long-term interests of shareholders.

An appropriately balanced mix of at-risk incentive cash and equity-based compensation aligns the interests of our executives with that of our shareholders. The equity-based component promotes a continuing focus on building profitability and shareowner value.

Total compensation should enhance our ability to attract, retain, motivate and develop knowledgeable and experienced executives upon whom, in large part, our successful operation and management depends.

Total compensation should encourage our executives to ensure that the risks involved in any business decision align that executive’s potential personal return with maximal return to shareholders.

A core principle of our executive compensation program is the belief that compensation paid to executive officers should be closely aligned with our near- and long-term success, while simultaneously giving us the flexibility to recruit and retain the most qualified key executives. Our compensation program is structured so that it is related to our stock performance and other factors, direct and indirect, all of which may influence long-term shareholder value and our success.

We utilize each element of executive compensation to ensure proper balance between our short- and long-term success as well as between our financial performance and shareholder return. In this regard, we believe that the executive compensation program for our named executive officers is consistent with our financial performance and the performance of each named executive officer. We do not utilize the services of compensation consultants in determining or recommending executive or director compensation.

Our Named Executive Officers

This analysis focuses on the compensation paid to our “named executive officers,” a defined term generally encompassing:

all persons that served as our principal executive officer (“PEO”) at any time during the fiscal year

all persons that served as our principal financial officer (“PFO”) at any time during the fiscal year

the Company’s three most highly compensated executive officers, other than the PEO and PFO, serving in such positions at the end of the fiscal year.

During 2015, our named executive officers were:

Allan C. Silber - our Chairman of the Board and former Chief Executive Officer and President. Mr. Silber is the Chairman of Street Capital, our former majority shareholder, which he founded in 1979. In January 2011, Mr. Silber resigned the position of Chief Executive Officer and assumed the position of President. Mr. Silber resigned as the Company’s President effective May 5, 2015, as more fully described on the Company’s Form 8-K filed with the SEC on May 7, 2015 .

Stephen A. Weintraub – our former Executive Vice President, Corporate Secretary and Chief Financial Officer who resigned from these positions effective May 5, 2015, as more fully described on the Company’s Form 8-K filed with the SEC on May 7, 2015. Mr. Weintraub is the Corporate Secretary of Street Capital. The Company paid no compensation directly to Mr. Weintraub, as his services were included in the management services agreements between the Company and Street Capital, as discussed in Item 13 of this Report.

Ross Dove – Chief Executive Officer. Mr. Dove (and his brother) co-founded HGP, which was acquired by the Company in February 2012. Effective May 5, 2015, Mr. Dove became Chief Executive Officer of the Company, as more fully described on the Company’s Form 8-K filed with the SEC on May 7, 2015.

Kirk Dove – Chief Operating Officer and President. Mr. Dove (and his brother) co-founded HGP, which was acquired by the Company in February 2012. Effective May 5, 2015, Mr. Dove became Chief Operating Officer and President of the Company, as more fully described on the Company’s Form 8-K filed with the SEC on May 7, 2015.

Scott A. West – Chief Financial Officer. Effective May 5, 2015, Mr. West became Chief Financial Officer of the Company, as more fully described on the Company’s Form 8-K filed with the SEC on May 7, 2015.

Kenneth Mann – Senior Managing Director, Equity Partners. Mr. Mann has held this position prior to and since the Company’s acquisition of Equity Partners in June 2011.

David Ludwig – President, National Loan Exchange. Mr. Ludwig has held this position prior to and since the Company’s acquisition of National Loan Exchange in June 2014.

Elements of Compensation

Base Salaries

Unless specified otherwise in their employment agreements, the base salaries of the Company’s named executive officers are evaluated annually. In evaluating appropriate pay levels and salary increases for such officers, the Compensation Committee uses a subjective analysis, considering achievement of the Company’s strategic goals, level of responsibility, individual performance, and internal equity and external pay practices. In addition, the Committee considers the scope of the executives’ responsibilities, taking into account competitive market compensation for similar positions where available, as well as seniority of the individual, our ability to replace the individual and other primarily judgmental factors deemed relevant by our Board and Compensation Committee. The Compensation Committee does not use any specific benchmark in the determination of base salaries.

Base salaries are reviewed annually by our Compensation Committee and our Board, and adjusted from time to time pursuant to such review or at other appropriate times, in order to align salaries with market levels after taking into account individual responsibilities, performance and experience.

During 2015 and 2014, all of the Company’s named executive officers, with the exception of Mr. Weintraub, were paid employees. As noted above, the Company’s former Chief Executive Officer, Mr. Allan Silber, is also the Chairman of Street Capital. Mr. Silber’s annual salary of $137,500, and a discretionary bonus of up to 100% of his base salary, have been fixed at these amounts since 2005, but neither his salary nor bonus eligibility will continue starting in 2016 due to Mr. Silber no longer being our Chief Executive Officer or President.

Mr. Mann earns a base salary of $425,000 and is eligible for a performance bonus as described below.

The Messrs. Dove each earn base salaries of $350,000 and are eligible for discretionary bonuses of up to 50% of their base salaries.

Mr. West earns a base salary of $200,000 and is eligible for a discretionary bonus.

Mr. Ludwig earns a base salary of $400,000 and is subject to the earn-out consideration from the acquisitions of NLEX in 2014, as further described in Note 3 to the consolidated financial statements.

Bonuses

Bonus awards are designed to focus management attention on key operational goals for the current fiscal year. Our executives may earn a bonus based upon achievement of their specific operational goals and achievement by the Company or business unit of its financial targets. Cash bonus awards are distributed based upon the Company and the individual meeting performance criteria objectives. The final determination for all bonus payments is made by our Compensation Committee based on a subjective analysis of the foregoing elements.

We set bonuses based on a subjective analysis of certain performance measures in order to maximize and align the interests of our officers with those of our shareholders. Although performance goals are generally standard for determining bonus awards, we have and will consider additional performance rating goals when evaluating the bonus compensation structure of our executive management. In addition, in instances where the employee has responsibility over a specific area, performance goals may be directly tied to the overall performance of that particular area.

Mr. Silber was entitled to a bonus of up to 100% of his annual salary while he was our President. No bonus was awarded for 2015 or 2014.

Mr. Mann is eligible for a performance bonus calculated as follows: after Equity Partners achieves net operating income of $175,000, the Equity Partners team receives 75% of the next $250,000, with the allocation among the Equity Partners team to be determined by Mr. Mann and the Company’s Chief Executive Officer, Mr. Ross Dove. After this, 50% of net operating income earned by Equity Partners (i.e., net operating income in excess of $425,000) is allocated to the Equity Partners team for allocation as described above. In 2015 Mr. Mann earned a bonus of $53,705. In 2014 he earned a bonus of $317,607.

The Messrs. Dove are eligible to receive an annual bonus of up to 50% of their annual salaries. They did not receive a bonus in either 2015 or 2014.

Mr. West is eligible to receive a discretionary bonus as determined by executive management and approved by the Compensation Committee.

As the bonuses described above, with the exception of Mr. Mann’s bonus, can only be awarded at the discretion of the Compensation Committee, they do not encourage inappropriate risk-taking on the part of the named executive officers, nor represent a risk to the Company. As Mr. Mann’s bonus is closely tied to the Company’s performance, it also does not encourage inappropriate risk-taking on his part.

Equity Incentive Grants

In keeping with our philosophy of providing a total compensation package that favors at-risk components of pay, long-term incentives can comprise a significant component of our executives’ total compensation package. These incentives are designed to motivate and reward executives for maximizing shareowner value and encourage the long-term employment of key employees. Our objective is to provide executives with above-average, long-term incentive award opportunities.

We view stock options as our primary long-term compensation vehicle for our executive officers. Stock options generally are granted at slightly above the prevailing market price on the date of grant and will have value only if our stock price increases. Grants of stock options generally are based upon our performance, the level of the executive’s position, and an evaluation of the executive’s past and expected future performance. We do not time or plan the release of material, non-public information for the purpose of affecting the value of executive compensation.

We believe that stock options will continue to be used as the predominant form of stock-based compensation. No options were granted to any of our named executive officers during 2015 or 2014, other than Mr. West was granted an option to purchase 50,000 shares of common stock with a strike price of $0.70 per share in 2014 when he joined the Company.

Other Benefits

The only additional benefits provided to the named executive officers during 2015 and 2014 were the payment of an automobile allowance of $14,029 to Mr. Ross Dove. Mr. Kirk Dove also received a payment of $56,000 during 2015 which represented an automobile allowance for the period from 2012 to 2015. There were no pension or change in control benefits in either 2015 or 2014.

Upon termination of employment by the Company without cause, the Messrs. Dove and Mr. Mann are each entitled to twelve months base salary and a pro rata share of the bonus payable in the fiscal year of termination. Any bonus payable is based on the termination date (provided that, as of the termination date, the performance criteria established with respect to the bonus for the fiscal year have been met), subject to certain conditions.

Tax Considerations

Section 162(m) of the Internal Revenue Code places limits on the deductibility of compensation in excess of $1.0 million paid to executive officers of publicly held companies. The Compensation Committee does not believe that Section 162(m) has had or will have any impact on the compensation policies followed by the Company.

Executive Compensation Process

Compensation Committee

Our Compensation Committee oversees and approves all compensation and awards made to the Chief Executive Officer, Chief Operating Officer/President, Chief Financial Officer and General Counsel. The Compensation Committee reviews the performance and compensation of the executive officers, without their participation, and establishes their compensation accordingly, with consultation from others when appropriate.

Executive and Director Compensation – Tabular Disclosure

Summary Compensation Table

The following table sets forth the aggregate compensation for services rendered during the fiscal years ended December 31, 2015 and 2014 by our named executive officers. As discussed below and in Item 13, certain employees of Street Capital had provided services to HGI, and compensation for those services was provided and paid for under the terms and provisions of management services agreements entered into between Street Capital and HGI.

Name and Principal Position ¹	Year	Salary			Bonus		Option Awards ³			All Other Compensation			Total
Allan C. Silber	2015	$	137,500		$	—	$	—		$	—		$	137,500
Chairman of the Board and former President (6)	2014		137,500			—		—			—			137,500

Ross Dove	2015		350,000			—		—			14,029	⁽²⁾		364,029
Chief Executive Officer	2014		300,000			—		—			14,029	⁽²⁾		314,029

Kirk Dove	2015		350,000			—		—			56,000	⁽²⁾		406,000
Chief Operating Officer/President	2014		300,000			—		—			—			300,000

Scott A. West	2015		200,000			—		—						200,000
Chief Financial Officer	2014		150,000			—		11,030	⁽³⁾					161,030

Kenneth Mann	2015		425,000			53,705		—			—			478,705
Senior Managing Director, Equity Partners	2014		425,000			317,607		—			—			742,607

David Ludwig	2015		400,000					—			513,161	⁽⁴⁾		913,161
President. National Loan Exchange	2014		233,333	⁽⁵⁾				—			—			233,333

(1)	No disclosure is provided with respect to the Company’s former Chief Financial Officer, Mr. Weintraub, as his services were covered under the terms of the Management Services Agreement referenced above, and no compensation was paid directly to Mr. Weintraub by the Company.

(2)	This amount represents an automobile allowance. Of the $56,000 paid to Mr. Kirk Dove in 2015 $41,971 represents an automobile allowance for 2012, 2013 and 2014.

(3)	See “Grants of Plan-Based Awards,” below, for details regarding the assumptions made in the valuation of these option awards.

(4)	This amount represents the contingent consideration payment to David Ludwig in connection with the acquisition of NLEX in 2014. See Note 3 to the consolidated financial statements for further details.

(5)	This amount is prorated from the date of the NLEX acquisition, June 2, 2014 through December 31, 2014.

(6)	Mr. Silber resigned from the position of President on May 5, 2015.

Grants of Plan-Based Awards

No grants were made to the named executive officers of the Company noted above during 2015. In 2014 when he joined the Company Mr. West was granted an option to purchase 50,000 shares of common stock with a strike price of $0.70 per share.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth the detail of outstanding equity awards at December 31, 2015.

Name	Number of Securities Underlying Unexercised Options: Exercisable			Number of Securities Underlying Unexercised Options: Unexercisable			Option Exercise Price($/Sh)		Option Expiration Date
Allan C. Silber		250,000	⁽¹⁾		-		$	1.97	June 29, 2018
Kenneth Mann		200,000	⁽²⁾		—		$	1.83	June 23, 2018
Kenneth Mann		75,000	⁽³⁾		75,000	⁽³⁾	$	1.00	March 11, 2020
Ross Dove		234,375	⁽⁴⁾		78,125	⁽⁴⁾	$	2.00	February 28, 2019
Kirk Dove		234,375	⁽⁴⁾		78,125	⁽⁴⁾	$	2.00	February 28, 2019
Scott A. West		12,500	⁽⁵⁾		37,500	⁽⁵⁾	$	0.70	May 7, 2021

(1)	These options are fully vested.

(2)	These options were part of the consideration paid to acquire Equity Partners on June 23, 2011 and vested immediately.

(3)	The options vest 25% annually beginning on the first anniversary of the March 11, 2013 grant date.

(4)	The options vest 25% annually beginning on the first anniversary of the February 29, 2012 grant date.

(5)	The options vest 25% annually beginning on the first anniversary of the May 7, 2014 grant date.

There were no adjustments or changes in the terms of any of the Company’s equity awards in 2015 or 2014.

Compensation of Directors

The following table sets forth the aggregate compensation for services rendered during the fiscal year ended December 31, 2015 by each person serving as a director.

Name		Fees Earned or Paid in Cash		Option Awards ⁽¹⁾		Total
Henry Y.L. Toh		$	40,500	$	2,945	$	43,445
Hal B. Heaton			35,000		2,945		37,945
Samuel L. Shimer			24,000		2,945		26,945
David L. Turock			24,000		2,945		26,945
J. Brendan Ryan			24,000		2,945		26,945
Morris Perlis			14,111		—		14,111
Allan C. Silber	⁽²⁾		—		—		—
Ross Dove	⁽²⁾		—		—		—

(1)

The value included in this column represents the grant date fair value of the option award computed in accordance with FASB ASC Topic 718. The number of shares underlying stock options granted during 2015 for each of the directors listed in the table was as follows: Mr. Toh — 10,000; Dr. Heaton — 10,000; Mr. Shimer — 10,000; Mr. Turock — 10,000; Mr. Ryan — 10,000.

(2)	Mr. Silber and Mr. Dove were not compensated as directors during 2015, but rather were compensated for their employment as officers of the Company during 2015.

Each director who is not employed by HGI receives a $20,000 per year cash retainer, $1,000 per meeting attended in person or by telephone, and an annual grant of stock options to purchase 10,000 shares of common stock, which is award ed on March 31 or the next business day. In addition, the Chairman of the Audit Committee receives a cash retainer of $10,000 per year, Audit Committee members who are not the chair receive a cash retainer of $5,000 per year, and other committee chairperso ns receive an annual cash retainer of $2,000 per year. The directors are also eligible to receive options under our stock option plans at the discretion of the Board. No discretionary stock options were awarded during 2015 or 2014.

Stock Option Plans

At December 31, 2015, the Company had three stock-based employee compensation plans, which are described in Note 16 of the consolidated financial statements included in Item 15 of this Report.

Item 12. Security Ownership of Certain Beneficial Ow ners and Man agement and Related Stockholder Matters.

The following table sets forth information regarding the ownership of our common stock as of March 11, 2016 by: (i) each director; (ii) each of the Named Executive Officers in the Summary Compensation Table; (iii) all executive officers and directors of the Company as a group; and (iv) all those known by us to be beneficial owners of more than five percent of our common stock. As of March 11, 2016, there are 28,467,648 shares of common stock and 569 shares of Series N Preferred stock issued and outstanding. Each share of Series N Preferred Stock is entitled to 40 votes.

Name and Address of Beneficial Owner (1)	Number of Shares Beneficially Owned (2)			Percentage of Common Stock Beneficially Owned
Allan C. Silber		1,735,183	(3)		5.8	%
Zachary Capital L.P.		1,613,454	(4)		5.4	%
Ross Dove		1,431,800	(5)		4.8	%
Kirk Dove		1,240,000	(5)		4.1	%
Morris Perlis		537,000	(6)		1.8	%
Kenneth Mann		444,467	(7)		1.5	%
David Ludwig		292,500	(8)		1.0	%
Scott A. West		170,000	(9)	*%
Samuel L. Shimer		143,803	(10)	*%
J. Brendan Ryan		125,000	(11)	*%
Hal B. Heaton		86,750	(10)	*%
Henry Y.L. Toh		85,000	(10)	*%
David L. Turock		55,000	(10)	*%
All Executive Officers and Directors as a Group (12 people)		6,346,503			21.2	%

*	Indicates less than one percent.

(1)

Unless otherwise noted, all listed shares of common stock are owned of record by each person or entity named as beneficial owner and that person or entity has sole voting and dispositive power with respect to the shares of common stock owned by each of them. All addresses are c/o Heritage Global Inc. unless otherwise indicated.

(2)

As to each person or entity named as beneficial owners, that person’s or entity’s percentage of ownership is determined based on the assumption that any options or convertible securities held by such person or entity which are exercisable or convertible within 60 days have been exercised or converted, as the case may be.

(3)	Includes 250,000 shares of common stock issuable pursuant to options.

(4)	Unrelated third party with beneficial ownership greater than 5.0%, based solely upon a Schedule 13G filed on July 21, 2015 with the SEC. Zachary Capital L.P.’s address is 12 Castle Street, Helier, Jersey, JE2 3RT.

(5)	Includes 312,500 shares of common stock issuable pursuant to options, and 427,500 shares of common stock held of record by a trust that is jointly controlled by the Messrs. Dove.

(6)	Includes 250,000 shares of common stock issuable pursuant to options.

(7)	Includes 312,500 shares of common stock issuable pursuant to options. Mr. Mann’s address is c/o Equity Partners HG LLC, 16 N. Washington St, Easton, MD 21601.

(8)	Represents shares of common stock. Mr. Ludwig’s address is c/o National Loan Exchange Inc., 10 Sunset Hills Professional Center, Floor 1, Edwardsville, IL 62025.

(9)	Includes 25,000 shares of common stock issuable pursuant to options.

(1 0)

Includes 45,000 shares of common stock issuable pursuant to options

(11)	Includes 25,000 shares of common stock issuable pursuant to options.

There are no arrangements, known to the Company, including any pledge by any person of securities of the registrant or any of its parents, the operation of which may at a subsequent date result in a change of control of the registrant.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth, as of December 31, 2015, information with respect to equity compensation plans (including individual compensation arrangements) under which the Company’s securities are authorized for issuance.

Plan Category (1)	Number of Securities to be issued upon exercise of outstanding options		Weighted-average exercise price of outstanding options		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)		(b)		(c)
Equity compensation plans approved by security holders:
2003 Stock Option and Appreciation Rights Plan		1,170,000	$	1.65	—

Equity compensation plans not approved by security holders:
2010 Non-Qualified Stock Option Plan		150,000	$	0.60		1,100,000
Equity Partners Plan		230,000	$	1.83	—
Options issued upon acquisition of HGP		625,000	$	2.00	—
Total		2,175,000	$	1.70		1,100,000

(1)	For a description of the material terms of these plans, see Note 16 to the Company’s consolidated financial statements included in Item 15 of this Report.

Item 13. Certain Relationships and Relate d Transactions, and Director Independe nce.

Transactions with Management and Others

See Item 7 hereof for discussion of the Company’s changes in the ownership and control by Street Capital, its former majority owner and parent. See Item 11 hereof for descriptions of the terms of employment, consulting and other agreements between the Company and certain officers and directors.

Transactions with Street Capital

Collateralized Loan Agreement

The Company’s related party debt (the “Street Capital Loan”), which is due on demand, was originally entered into in 2003 and accrued interest at 10% per annum compounded quarterly from the date funds were advanced. The Street Capital Loan is secured by the assets of the Company.

In the second quarter of 2014, following Street Capital’s distribution of its ownership interest in HGI to Street Capital shareholders as a dividend in kind, the unpaid balance of the Street Capital Loan began accruing interest at a rate per annum equal to the lesser of the Wall St. Journal (“WSJ”) prime rate + 2.0%, or the maximum rate allowable by law. As of December 31 2015 and 2014, the interest rate on the loan was 5.50% and 5.25%, respectively. Please see Note 14 to the consolidated financial statements for further discussion of transactions with Street Capital .

During 2015, the largest amount outstanding under the Street Capital Loan was $3.0 million, which occurred during the first quarter of 2015. During 2015, the Company made payments on the loan, net of proceeds received, of $1.6 million. As of March 11, 2016, the outstanding balance of the loan was $1.7 million.

Street Capital Services Provided to Company

Beginning in 2004, HGI and Street Capital entered into successive annual management services agreements (collectively, the “Agreement”). Under the terms of the Agreement, HGI agreed to pay Street Capital for ongoing services provided to HGI by Street Capital personnel. These services included preparation of the Company’s financial statements and regulatory filings, taxation matters, stock-based compensation administration, Board administration, patent portfolio administration and litigation matters. The Street Capital employees providing the services were: 1) its Executive Vice President, Secretary and Chief Financial Officer, 2) its Tax Manager, 3) an Accounting Manager, and 4) its Accounts Payable Clerk. These employees had the same or similar positions with HGI, but none of them received compensation from HGI. Rather, Street Capital allocated to HGI a percentage, based on time incurred, of the employees’ base compensation paid by Street Capital. Beginning in 2011, additional amounts were charged to HGI for Street Capital services specifically relating to the ongoing operations of HGI’s asset liquidation business. The amounts due under the Agreement were payable within 30 days following the respective year end, subject to applicable restrictions. Any unpaid amounts bore interest at 10% per annum commencing on the day after such year end.

In 2013, Street Capital announced its plan to dispose of its interest in HGI, and on March 20, 2014, Street Capital declared a dividend in kind, consisting of Street Capital’s distribution of its majority interest in HGI to Street Capital shareholders. The dividend was paid on April 30, 2014 to shareholders of record as of April 1, 2014.

Following this disposition, the Company and Street Capital entered into a replacement management services agreement (the “Services Agreement”). Under the terms of the Services Agreement, Street Capital remained as external manager and continued to provide the same services, at similar rates, until the Services Agreement was terminated effective August 31, 2015, as described more fully in the Current Report on Form 8-K filed with the SEC on September 1, 2015. Please see Note 14 to the consolidated financial statements for details of the amounts expensed during 2015 and 2014 relating to services provided by Street Capital under the agreements.

Transactions with Other Related Parties

As part of the operations of HGP, the Company leases office space in Foster City, CA that is owned by an entity that is jointly controlled by HGI’s Chief Executive Officer and Chief Operating Officer/President. The total amount paid in both 2015 and 2014 was $0.2 million. As part of the operations of NLEX, the Company leases office space in Edwardsville, IL that is owned by senior officers of NLEX. The total amount paid in both 2015 and 2014 was $0.1 million.

Director Independence

Our securities are quoted on the OTC market and the Canadian Securities Exchange. Our Board applies “independence” requirements and standards under the Nasdaq Marketplace Rules. Pursuant to the requirements, the Board periodically undertakes a review of director independence. During this review, the Board considers transactions and relationships between each director or any member of his or her immediate family and HGI and its subsidiaries and affiliates. The purpose of this review is to determine whether any such relationships or transactions exist that are inconsistent with a determination that the director is independent. As a result of this review in 2015, the Board affirmatively determined that during 2015 Messrs. Toh, Heaton, Ryan, Shimer, Turock and Perlis were deemed “independent” as defined under the Nasdaq Marketplace Rules. The Board further determined that each of the foregoing directors met the independence and other requirements, including the Audit Committee membership independence requirements, needed to serve on the Board committees for which they serve.

Item 14. Principal Accountant Fees and Services.

In September 2014 the Company’s Audit Committee engaged Squar, Milner, Peterson, Miranda & Williamson, LLP (“Squar Milner”) as the Company’s independent registered public accounting firm for the fiscal year ended December 31, 2014. Previously, the Company’s independent registered public accounting firm was Deloitte LLP (“Deloitte”). All fees paid to independent registered public accounting firms were pre-approved by the Audit Committee.

Fees paid to Deloitte, our independent registered public accounting firm for the period January 1 – September 23, 2014, are set forth below (in thousands):

	Year Ended December 31,
	2014
Audit fees	$	38
Audit-related fees		74
Tax fees		—
All other fees		—
Total	$	112

Fees paid or expected to be paid to Squar Milner, our independent registered public accounting firm for the period September 27 – December 31, 2014 and for all of 2015 are set forth below (in thousands):

	Year Ended December 31,
	2015		2014
Audit fees	$	127	$	99
Audit-related fees		—		—
Tax fees		—		—
All other fees		—		—
Total	$	127	$	99

Audit Fees

Audit fees are for professional services for the audit of our annual financial statements, the reviews of the financial statements included in our Quarterly Reports on Form 10-Q, and services in connection with our statutory and regulatory filings.

Audit-Related Fees

Audit related fees are for assurance and related services that are reasonably related to the audit and reviews of our financial statements, exclusive of the fees disclosed as Audit Fees above. These fees include benefit plan audits and accounting consultations. In 2014, the audit-related fees paid to Deloitte related to HGI’s requirement to file statutory reports in Canada, prior to Street Capital’s distribution of its ownership in HGI as a dividend in kind. No such fees were paid in 2015.

Tax Fees

Tax fees are for services related to tax compliance, consulting and planning services and include preparation of tax returns,

review of restrictions on net operating loss carryforwards and other general tax services. For 2014 and 2015, these services were provided by an independent accounting firm other than Deloitte or Squar Milner.

All Other Fees

We did not incur fees for any services, other than the fees disclosed above relating to audit, audit-related and tax services, rendered during the years ended December 31, 2014 and 2015.

Audit and Non-Audit Service Pre-Approval Policy

In accordance with the requirements of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder, the Audit Committee has adopted an informal approval policy to pre-approve services performed by the independent registered public accounting firm. All proposals for services to be provided by the independent registered public accounting firm, which must include a detailed description of the services to be rendered and the amount of corresponding fees, are submitted to the Chairman of the Audit Committee and the Chief Financial Officer. The Chief Financial Officer authorizes services that have been pre-approved by the Audit Committee. If there is any question as to whether a proposed service fits within a pre-approved service, the Audit Committee chair is consulted for a determination. The Chief Financial Officer submits requests or applications to provide services that have not been pre-approved by the Audit Committee, which must include an affirmation by the Chief Financial Officer and the independent registered public accounting firm that the request or application is consistent with the SEC’s rules on auditor independence, to the Audit Committee (or its Chairman or any of its other members pursuant to delegated authority) for approval. All fees related to audit services during 2015 were pre-approved by the Audit Committee.

Audit Services. Audit services include the annual financial statement audit (including quarterly reviews) and other procedures required to be performed by the independent registered public accounting firm to be able to form an opinion on our financial statements. The Audit Committee pre-approves specified annual audit services engagement terms and fees and other specified audit fees. All other audit services must be specifically pre-approved by the Audit Committee. The Audit Committee monitors the audit services engagement and may approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope or other items.

Audit-Related Services. Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of our financial statements which historically have been provided to us by the independent registered public accounting firm and are consistent with the SEC’s rules on auditor independence. The Audit Committee pre-approves specified audit-related services within pre-approved fee levels. All other audit-related services must be pre-approved by the Audit Committee.

Tax Services. The Audit Committee pre-approves specified tax services that the Audit Committee believes would not impair the independence of the independent registered public accounting firm and that are consistent with SEC rules and guidance. All other tax services must be specifically approved by the Audit Committee.

All Other Services. Other services are services provided by the independent registered public accounting firm that do not fall within the established audit, audit-related and tax services categories. The Audit Committee pre-approves specified other services that do not fall within any of the specified prohibited categories of services.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)

The following financial statements and those financial statement schedules required by Item 8 hereof are filed as part of this Report:

Financial Statements:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2015 and 2014

Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2015 and 2014

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2015 and 2014

Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014

Notes to Consolidated Financial Statements

Financial Statement Schedules:

These schedules are omitted because they are not required, or are not applicable, or the required information is shown in the consolidated financial statements or notes thereto.

(b)

The following exhibits are filed as part of this Report:

Exhibit Number		Title of Exhibit

3.1(i)		Amended and Restated Articles of Incorporation. (1)

3.2(ii)		Bylaws as amended (2)

3.2(iii)		Articles of Amendment to the Amended and Restated Articles of Incorporation (8)

3.2(iv)		Articles of Amendment to the Amended and Restated Articles of Incorporation

10.1*		2003 Stock Option and Appreciation Rights Plan. (3)

10.2*		2010 Non-Qualified Stock Option Plan (9)

10.3*		Form of Option Grant for Options Granted Under 2003 Stock Option and Appreciation Rights Plan.

10.4		Loan and Security Agreement between Israel Discount Bank of New York (as Agent) and Counsel RB Capital LLC, dated as of June 2, 2009. (7)

10.5		Sixth Amendment to Loan Agreement between C2 Global Technologies Inc. and Street Capital dated January 26, 2004, dated as of May 5, 2009. (7)

10.6*		Form of Option Grant for Options Granted Under 2010 Non-Qualified Stock Option Plan. (10)

10.7		Asset Purchase Agreement among EP USA, LLC (as Company), Equity Partners, Inc. of Maryland, The Rexford Company, LLC and Cross Concepts, LLC (as Sellers) and Equity Partners CRB LLC (as Buyer), dated June 23, 2011. (11)

10.8		Share Purchase Agreement by and among Heritage Global Partners, Inc. as the Company; Kirk Dove and Ross Dove as Sellers; and Counsel RB Capital Inc. as Buyer Dated as of February 29, 2012 (12)

10.9		Stock option grant notice to Ross Dove effective February 29, 2012

10.10		Stock option grant notice to Kirk Dove effective February 29, 2012

10.11		Mutual Separation and Transition Agreement with Adam Reich, effective as of June 30, 2013 (13)

10.12		Mutual Separation and Transition Agreement with Jonathan Reich, effective as of June 30, 2013 (13)

10.13*		Management Services Agreement between Heritage Global Inc. and Street Capital, effective as of May 1, 2014 (14)

10.14		Stock Purchase Agreement between Heritage Global Inc., National Loan Exchange, Inc., and David Ludwig, signed on June 2, 2014 and effective as of May 31, 2014 (15)

Exhibit Number		Title of Exhibit
10.15		Promissory Note by and between Heritage Global Inc. and Harvey Frisch, effective as of June 19, 2014.

10.16		Renewed Note to the Promissory Note by and between Heritage Global Inc. and Harvey Frisch dated June 19, 2014, effective as of December 31, 2014.

10.17		Second Renewed Note to the Promissory Note by and between Heritage Global Inc. and Harvey Frisch dated June 19, 2014, effective as of January 15, 2016.

10.18		Employment Agreement between Kenneth Mann and Equity Partners CRB LLC effective as of March 10, 2011. (11)

10.19		Employment Agreement between Ross Dove and Heritage Global Partners, Inc. effective as of February 29, 2012.

10.20		Employment Agreement between Kirk Dove and Heritage Global Partners, Inc. effective as of February 29, 2012.

10.21		Employment Agreement between James Sklar and Heritage Global Partners, Inc. effective as of June 23, 2013.

10.22		Employment Agreement between Scott A. West and Heritage Global Partners, Inc. effective as of March 6, 2014.

10.23		Employment Agreement between David Ludwig and National Loan Exchange, Inc. effective as of May 31, 2014.

10.24		Purchase and Sale Agreement between 737 Gerrard Road, LLC and International Auto Processing Inc., effective as of March 11, 2016.

14		C2 Global Technologies Inc. Code of Conduct. (4)

21		List of subsidiaries. (filed herewith)

31.1		Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

31.2		Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

32.1		Certification pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (filed herewith)

32.2		Certification pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (filed herewith)

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation Linkbase

101.DEF		XBRL Taxonomy Extension Definition Linkbase

101.LAB		XBRL Taxonomy Extension Label Linkbase

101.PRE		XBRL Taxonomy Extension Presentation Linkbase

*	Indicates a management contract or compensatory plan required to be filed as an exhibit.

(1)	Incorporated by reference to our Quarterly Report on Form 10-QSB for the quarter ended June 30, 1996, file number 0-17973.

(2)	Incorporated by reference to our Quarterly Report on Form 10-Q for the period ended September 30, 1998, file number 0-17973.

(3)	Incorporated by reference to our Definitive Proxy Statement for the November 26, 2003 annual stockholder meeting.

(4)	Incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2003.

(5)	Incorporated by reference to our Current Report on Form 8-K filed on January 6, 2005.

(6)	Incorporated by reference to our Annual Report on Form 10-K for the period ended December 31, 2008.

(7)	Incorporated by reference to our Quarterly Report on Form 10-Q for the period ended June 30, 2009.

(8)	Incorporated by reference to our Definitive Schedule 14C Information Statement filed on December 23, 2010.

(9)	Incorporated by reference to our Current Report on Form 8-K filed on January 24, 2011.

(10)	Incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2010.

(11)	Incorporated by reference to our Quarterly Report on Form 10-Q for the period ended June 30, 2011.

(12)	Incorporated by reference to our Current Report on Form 8-K filed on March 6, 2012.

(13)	Incorporated by reference to our Current Report on Form 8-K filed on July 31, 2013.

(14)	Incorporated by reference to our Current Report on Form 8-K filed on May 1, 2014.

(15)	Incorporated by reference to our Current Report on Form 8-K filed on June 6, 2014.

The following Schedules are included in our Financial Statements:

None.

SIGNA TURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

	HERITAGE GLOBAL INC.
	(Registrant)

Dated: March 17, 2016	By:	/s/ Ross Dove
	Ross Dove, Chief Executive Officer
	(Principal Executive Officer)

	By:	/s/ Scott A. West
	Scott A. West, Chief Financial Officer
	(Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ Ross Dove	Chief Executive Officer and Director (Principal Executive Officer)	March 17, 2016
Ross Dove

/s/ Hal B. Heaton	Director	March 17, 2016
Hal B. Heaton

/s/ Morris Perlis	Director	March 17, 2016
Morris Perlis

/s/ J. Brendan Ryan	Director	March 17, 2016
J. Brendan Ryan

/s/ Samuel L. Shimer	Director	March 17, 2016
Samuel L. Shimer

/s/ Allan C. Silber	Chairman of the Board of Directors	March 17, 2016
Allan C. Silber

/s/ Henry Y. L. Toh	Director	March 17, 2016
Henry Y.L. Toh

/s/ David L. Turock	Director	March 17, 2016
David L. Turock

INDEX OF FINANCIAL STATEMENTS

Title of Document

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2015 and 2014	F-3
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2015 and 2014	F-4
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2015 and 2014	F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014	F-6
Notes to Consolidated Financial Statements	F-7

F-1

Report of Independent Regis tered Public Accounting Firm

To the Board of Directors and Stockholders of

Heritage Global Inc.

We have audited the accompanying consolidated balance sheets of Heritage Global Inc. and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we do not express an opinion thereon. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Heritage Global Inc. and subsidiaries as of December 31, 2015 and 2014 and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

/s/ SQUAR MILNER LLP

(formerly Squar, Milner, Peterson, Miranda & Williamson, LLP)

San Diego, California

March 17, 2016

F-2

HERITAGE GLOBAL INC.

CONSOLIDATED BALANCE SHEETS

(In thousands of US dollars, except share amounts)

	December 31,
	2015			2014
ASSETS
Current assets:
Cash and cash equivalents	$	2,777		$	3,633
Accounts receivable, net		639			2,857
Deposits		4			173
Inventory – equipment		395			139
Other current assets		449			587
Total current assets		4,264			7,389
Inventory – real estate		3,715			6,508
Equity method investments		17			1,134
Property and equipment, net		110			150
Intangible assets, net		4,382			7,657
Goodwill		6,158			8,846
Other assets		156			186
Total assets	$	18,802		$	31,870

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	6,673		$	7,225
Current portion of third party debt		-			525
Related party debt		1,721			2,985
Current portion of contingent consideration		865			803
Other current liabilities		97			-
Total current liabilities		9,356			11,538
Non-current portion of third party debt		2,500			2,500
Non-current portion of contingent consideration		2,592			3,395
Deferred tax liabilities		960			960
Total liabilities		15,408			18,393

Commitments and contingencies (Note 12)

Stockholders’ equity:
Preferred stock, $10.00 par value, authorized 10,000,000 shares; issued and outstanding 569 Class N shares at December 31, 2015 and 575 Class N shares at December 31, 2014		6			6
Common stock, $0.01 par value, authorized 300,000,000 shares; issued and outstanding 28,467,648 shares at December 31, 2015 and 28,167,408 shares at December 31, 2014		285			282
Additional paid-in capital		284,046			283,691
Accumulated deficit		(280,889	)		(270,468	)
Accumulated other comprehensive loss		(54	)		(34	)
Total stockholders’ equity		3,394			13,477
Total liabilities and stockholders’ equity	$	18,802		$	31,870

The accompanying notes are an integral part of these consolidated financial statements.

F-3

HERITAGE GLOBAL INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands of US dollars, except per share amounts)

	Year Ended December 31,
	2015			2014
Revenues:
Services revenue	$	13,485		$	13,270
Asset sales		3,946			6,716
Total revenues		17,431			19,986

Operating costs and expenses:
Cost of services revenue		3,125			4,882
Cost of asset sales		3,412			5,398
Real estate inventory write-down		2,748			-
Selling, general and administrative		12,774			11,183
Depreciation and amortization		575			566
Impairment of goodwill and intangible assets		5,437			-
Total operating costs and expenses		28,071			22,029
Earnings of equity method investments		286			143
Operating loss		(10,354	)		(1,900	)
Gain on sale of equity method investment		-			551
Other income		297			52
Interest expense		(349	)		(495	)
Loss before income tax expense		(10,406	)		(1,792	)
Income tax expense		15			24,722
Net loss		(10,421	)		(26,514	)
Other comprehensive (loss) income:
Foreign currency translation adjustment		(20	)		10
Comprehensive loss	$	(10,441	)	$	(26,504	)

Weighted average common shares outstanding – basic and diluted		28,336,876			28,167,378

Net loss per share – basic and diluted	$	(0.37	)	$	(0.94	)

The accompanying notes are an integral part of these consolidated financial statements.

F-4

HERITAGE GLOBAL INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands of US dollars, except share amounts)

	Preferred stock					Common stock				Additional paid-in			Accumulated			Accumulated other comprehensive
	Shares			Amount		Shares		Amount		capital			deficit			income (loss)			Total
Balance at December 31, 2013		579		$	6		28,167,248	$	282	$	283,207		$	(243,954	)	$	(44	)	$	39,497
Conversion of Series N preferred shares		(4	)		—		160		—		—			—			—			—
Stock-based compensation expense		—			—		—		—		484			—			—			484
Net loss		—			—		—		—		—			(26,514	)		—			(26,514	)
Foreign currency translation adjustments		—			—		—		—		—			—			10			10
Balance at December 31, 2014		575			6		28,167,408		282		283,691			(270,468	)		(34	)		13,477
Conversion of Series N preferred shares		(6	)		—		240		—		—			—			—			—
Issuance of common stock from restricted stock awards							300,000		3		(3	)								—
Stock-based compensation expense		—			—		—		—		358			—			—			358
Net loss		—			—		—		—		—			(10,421	)		—			(10,421	)
Foreign currency translation adjustments		—			—		—		—		—			—			(20	)		(20	)
Balance at December 31, 2015		569		$	6		28,467,648	$	285	$	284,046		$	(280,889	)	$	(54	)	$	3,394

The accompanying notes are an integral part of these consolidated financial statements.

F-5

HERITAGE GLOBAL INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of US dollars)

	Year Ended December 31,
	2015			2014
Cash flows used in operating activities:
Net loss	$	(10,421	)	$	(26,514	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Accrued management fees and other charges added to principal of related party debt		290			553
Accrued interest added to principal of related party debt		90			190
Mark-to-market of contingent consideration		(228	)		210
Stock-based compensation expense		358			484
Real estate inventory write-down		2,748			—
Earnings of equity method investments		(291	)		(404	)
Gain on sale of equity method investment		—			(551	)
Depreciation and amortization		575			566
Impairment of goodwill and intangible assets		5,437			—
Return on investment in equity method investments		680			970
Changes in operating assets and liabilities:
Accounts receivable		216			619
Inventory - equipment		(211	)		9
Other assets		299			(246	)
Deferred income taxes		—			24,667
Accounts payable and accrued liabilities		(378	)		68
Net cash (used in) provided by operating activities		(836	)		621

Cash flows provided by (used in) investing activities:
Cash paid for business acquisition, net of cash acquired of $639		—			(1,361	)
Cash distributions from equity method investments		850			590
Proceeds from sale of equity method investments		1,992			—
Investment in equity method investments		(143	)		(583	)
Purchase of property and equipment		(9	)		(127	)
Net cash provided by (used in) investing activities		2,690			(1,481	)

Cash flows (used in) provided by financing activities:
Proceeds from debt payable to third parties		—			3,453
Repayment of debt payable to third parties		(525	)		(1,866	)
Proceeds from debt payable to related party		775			2,198
Repayment of debt payable to related party		(2,419	)		(2,505	)
Payment of contingent consideration		(513	)		—
Net cash (used in) provided by financing activities		(2,682	)		1,280
Net (decrease) increase in cash and cash equivalents		(828	)		420
Effect of exchange rate changes on cash and cash equivalents		(28	)		—
Cash and cash equivalents at beginning of year		3,633			3,213
Cash and cash equivalents at end of year	$	2,777		$	3,633


Supplemental cash flow information:
Cash paid for income taxes	$	75	$	55
Cash paid for interest	$	178	$	168

The accompanying notes are an integral part of these consolidated financial statements.

F-6

HERITAGE GLOBAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Description of Business and Principles of Consolidation

These consolidated financial statements include the accounts of Heritage Global Inc. together with its subsidiaries, including Heritage Global Partners, Inc. (“HGP”), Equity Partners HG LLC (“Equity Partners”), National Loan Exchange Inc. (“NLEX”), Heritage Global LLC (“HG LLC”), C2 Communications Technologies Inc., and C2 Investments Inc. These entities, collectively, are referred to as “HGI,” the “Company,” “we” or “our” in these consolidated financial statements. These consolidated financial statements were prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”), as outlined in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and include the assets, liabilities, revenues, and expenses of all subsidiaries over which HGI exercises control. All significant intercompany accounts and transactions have been eliminated upon consolidation.

The Company’s sole operating segment is its asset liquidation business, which began operations in 2009 with the establishment of Heritage Global LLC (“HG LLC”). The business was subsequently expanded by the acquisitions of Equity Partners, HGP and NLEX in 2011, 2012 and 2014, respectively. As a result, HGI is positioned to provide an array of value-added capital and financial asset solutions: auction and appraisal services, traditional asset disposition sales, and financial solutions for distressed businesses and properties.

Note 2 – Summary of Significant Accounting Policies

Use of estimates

Significant estimates include the assessment of collectability of revenue recognized and the valuation of accounts receivable, inventory, investments, goodwill and intangible assets, liabilities, contingent consideration, deferred income tax assets and liabilities, and stock-based compensation. These estimates have the potential to significantly impact our consolidated financial statements, either because of the significance of the financial statement item to which they relate, or because they require judgment and estimation due to the uncertainty involved in measuring, at a specific point in time, events that are continuous in nature.

Foreign Currency

The functional currency of foreign operations is deemed to be the local country’s currency. Assets and liabilities of operations outside of the United States are generally translated into U.S dollars, and the effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income (loss).

Reclassifications

Certain prior year balances within the consolidated financial statements have been reclassified to conform to current year presentation.

F-7

Nature of Business

The Company earns revenue both from commission or fee-based services, and from the sale of distressed or surplus assets. With respect to the former, revenue is recognized as the services are provided. With respect to the latter, the majority of the asset sale transactions are conducted directly by the Company and the revenue is recognized in the period in which the asset is sold. Fee based revenue is reported as Services revenue, and the associated direct costs are reported as Cost of services revenue. At the balance sheet date, any unsold assets which the Company owns are reported as Inventory, any outstanding accounts receivable are included in the Company’s Accounts receivable, and any associated liabilities are included in the Company’s Accrued liabilities. Equipment inventory is expected to be sold within a year and is therefore classified as a current asset; however, real estate inventory is classified as non-current due to the uncertainty in the timing of its sale.

The remaining asset sale transactions involve the Company acting jointly with one or more additional purchasers, pursuant to a partnership, joint venture or limited liability company (“LLC”) agreement (collectively, “Joint Ventures”). These transactions are accounted for as equity method investments, and, accordingly, the Company’s proportionate share of the net income (loss) is reported as Earnings of equity method investments. At each balance sheet date, the Company’s investments in these Joint Ventures are reported in the consolidated balance sheet as Equity method investments. Although the Company generally expects to exit each of its investments in Joint Ventures in less than one year, they are classified on the balance sheet as non-current assets due to the uncertainties relating to the timing of resale of the underlying assets as a result of the Joint Venture relationship. The Company monitors the value of the Joint Ventures’ underlying assets and liabilities, and records a write down of its investments if the Company concludes that there has been a decline in the value of the net assets. As the activity of the Joint Ventures involves asset purchase/resale transactions, which is similar in nature to the Company’s other asset liquidation activities, the earnings (losses) of the Joint Ventures are included in the operating income/loss in the accompanying consolidated statements of operations.

Liquidity

We have incurred significant operating losses for the past several years and have partially relied on debt financing to fund our operations. As of December 31, 2015, we had an accumulated deficit of $280.9 million. Until we achieve profitability, we may need to continue to partially rely on debt financing to fund our operations. Management expects that a combination of our asset liquidation operations, the sale of our real estate inventory, and debt financing will generate cash flow sufficient to fund our operations in 2016 and beyond.

Cash and cash equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company maintains its cash and cash equivalents with financial institutions in the United States and Spain. These accounts may from time to time exceed federally insured limits. The Company has not experienced any losses on such accounts.

Accounts receivable

The Company’s accounts receivable primarily relate to the operations of its asset liquidation business. They generally consist of three major categories: fees, commissions and retainers relating to appraisals and auctions, receivables from asset sales, and receivables from Joint Venture partners. The initial value of an account receivable corresponds to the fair value of the underlying goods or services. To date, a majority of the receivables have been classified as current and, due to their short-term nature, any decline in fair value would be due to issues involving collectability. At each financial statement date the collectability of each outstanding account receivable is evaluated, and an allowance is recorded if the book value exceeds the amount that is deemed collectable. See Note 9 for more detail regarding the Company’s accounts receivable.

Inventory

The Company’s inventory consists of assets acquired for resale, which are normally expected to be sold within a one-year operating cycle. The inventory is recorded at the lower of cost or net realizable value. During the year ended December 31, 2015, the Company recorded an inventory write-down charge of $2.7 million to reduce the carrying value of its real estate inventory to its net realizable value. Refer to Note 4 for further details.

Fair value of financial instruments

The fair value of financial instruments is the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. At December 31, 2015 and 2014, the carrying values of the Company’s cash, accounts receivable, deposits, other assets, accounts payable and accrued liabilities approximate fair value given the short term nature of these instruments. The Company’s debt obligations approximate fair value as a result of the interest rate on the debt obligation approximating prevailing market rates.

F-8

There are three levels within the fair value hierarchy: Level 1 – quoted prices in active markets for identical assets or liabilities; Level 2 – significant other observable inputs; and Level 3 – significant unobservable inputs. The Company employs fair value accounting for only the contingent consideration recorded as part of the acquisition of NLEX. The fair value of the Company’s contingent consideration was determined using a discounted cash flow analysis, which is based on significant inputs that are not observable in the market and therefore fall within Level 3. Please see Note 3 and Note 11 for more discussion of this contingent consideration.

Business combinations

Acquisitions are accounted for under FASB Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”), which requires that assets acquired and liabilities assumed that are deemed to be a business are recorded based on their respective acquisition date fair values. ASC 805 further requires that separately identifiable intangible assets be recorded at their acquisition date fair values and that the excess of consideration paid over the fair value of assets acquired and liabilities assumed (including identifiable intangible assets) should be recorded as goodwill. See Note 3 for discussion of the acquisition of NLEX in 2014.

Intangible assets

Intangible assets are recorded at fair value upon acquisition. Those with an estimated useful life are amortized, and those with an indefinite useful life are unamortized. Subsequent to acquisition, the Company monitors events and changes in circumstances that require an assessment of intangible asset recoverability. Indefinite-lived intangible assets are assessed at least annually to determine both if they remain indefinite-lived and if they are impaired. The Company assesses whether or not there have been any events or changes in circumstances that suggest the value of the asset may not be recoverable. Amortized intangible assets are not tested annually, but are assessed when events and changes in circumstances suggest the assets may be impaired. If an assessment determines that the carrying amount of any intangible asset is not recoverable, an impairment loss is recognized in the statement of operations, determined by comparing the carrying amount of the asset to its fair value. All of the Company’s identifiable intangible assets at December 31, 2015 have been acquired as part of the acquisitions of HGP in 2012 and NLEX in 2014, and are discussed in more detail in Note 8. During 2015 the Company recorded an impairment charge of $2.7 million related to the customer network acquired as part of the acquisition of HGP. No impairment charges were recorded during 2014. See Note 3 and Note 8 for more detail regarding the Company’s identifiable intangible assets.

Goodwill

Goodwill, which results from the difference between the purchase price and the fair value of net identifiable tangible and intangible assets acquired in a business combination, is not amortized but, in accordance with GAAP, is tested at least annually for impairment. The Company performs its annual impairment test as of October 1. Testing goodwill is a two-step process, in which the carrying amount of the reporting unit associated with the goodwill is first compared to the reporting unit’s estimated fair value. If the carrying amount of the reporting unit exceeds its estimated fair value, the fair values of the reporting unit’s assets and liabilities are analyzed to determine whether the goodwill of the reporting unit has been impaired. An impairment loss is recognized to the extent that the Company’s recorded goodwill exceeds its implied fair value as determined by this two-step process. FASB Accounting Standards Update 2011-08, Testing Goodwill for Impairment , provides the option to perform a qualitative assessment prior to performing the two-step process, which may eliminate the need for further testing. Goodwill, in addition to being tested for impairment annually, is tested for impairment at interim periods if an event occurs or circumstances change such that it is more likely than not that the carrying amount of goodwill may be impaired.

In 2015 the Company changed the date of its annual impairment test from December 31 to October 1. The change allows the Company to perform the required testing on a more timely basis for its fiscal year-end close process. The Company does not believe that the change in the date has a material impact on the result of the 2015 annual impairment test.

Deferred income taxes

F-9

the differences are expected to reverse. The Company establishes a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized. In 2014, as a result of incurring losses in previous years, the Company recorded a valuation allowance against all of its net deferred tax assets. The Company continues to carry the full valuation allowance as of December 31, 2015.

Contingent consideration

At December 31, 2015 the Company’s contingent consideration consists of the estimated fair value of an earn-out provision that was part of the consideration for the acquisition of NLEX in 2014. The estimated fair value assigned to the contingent consideration at the acquisition date was determined using a discounted cash flow analysis. Its fair value is assessed quarterly, and any adjustments, together with the accretion of the present value discount, are reported as other income/expense on the Company’s consolidated statement of operations. See Note 3 to the consolidated financial statements for more discussion of the acquisition of NLEX and the related contingent consideration.

Liabilities and contingencies

The Company is involved from time to time in various legal matters arising out of its operations in the normal course of business. On a case by case basis, the Company evaluates the likelihood of possible outcomes for this litigation. Based on this evaluation, the Company determines whether a loss accrual is appropriate. If the likelihood of a negative outcome is probable, and the amount can be estimated, the Company accounts for the estimated loss in the current period.

Revenue recognition

The Company also earns asset liquidation income through asset liquidation transactions that involve the Company acting jointly with one or more additional purchasers, pursuant to a partnership, joint venture or limited liability company (“LLC”) agreement (collectively, “Joint Ventures”). For these transactions, the Company does not record asset liquidation revenue or expense. Instead, the Company’s proportionate share of the net income (loss) is reported as Earnings of equity method investments. In general, the Joint Ventures apply the same revenue recognition and other accounting policies as the Company.

Cost of services revenue and asset sales

Cost of services revenue generally includes the direct costs associated with generating commissions and fees from the Company’s auction and appraisal services, merger and acquisition advisory services, and brokering of charged-off receivable portfolios. The Company recognizes these expenses in the period in which the revenue they relate to is recorded. Cost of asset sales generally includes the cost of purchased inventory and the related direct costs of selling inventory. The Company recognizes these expenses in the period in which title to the inventory passes to the buyer, and the buyer assumes the risk and reward of the inventory.

Stock-based compensation

The Company’s stock-based compensation is primarily in the form of options to purchase common shares. The grant date fair value of stock options is calculated using the Black-Scholes option pricing model. The determination of the fair value of the Company’s stock options is based on a variety of factors including, but not limited to, the price of the Company’s common stock, the expected volatility of the stock price over the expected life of the award, and expected exercise behavior. The grant date fair value of the awards is subsequently expensed over the vesting period. The provisions of the Company’s stock-based compensation plans do not require the Company to settle any options by transferring cash or other assets, and therefore the Company classifies the option awards as equity. See Note 16 for further discussion of the Company’s stock-based compensation.

F-10

Future accounting pronouncements

In May 2014, the FASB issued Accounting Standards update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 specifies a comprehensive model to be used in accounting for revenue arising from contracts with customers, and supersedes most of the current revenue recognition guidance, including industry-specific guidance. It applies to all contracts with customers except those that are specifically within the scope of other FASB topics, and certain of its provisions also apply to transfers of nonfinancial assets, including in-substance nonfinancial assets that are not an output of an entity’s ordinary activities. The core principal of the model is that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the transferring entity expects to be entitled in exchange. To apply the revenue model, an entity will: 1) identify the contract(s) with a customer, 2) identify the performance obligations in the contract, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract, and 5) recognize revenue when (or as) the entity satisfies a performance obligation. For public companies, ASU 2014-09 is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. Early adoption is not permitted. Upon adoption, entities can choose to use either a full retrospective or modified approach, as outlined in ASU 2014-09. As compared with current GAAP, ASU 2014-09 requires significantly more disclosures about revenue recognition. The Company has not yet assessed the potential impact of ASU 2014-09 on its consolidated financial statements.

In March 2015, the FASB issued Accounting Standards update 2015-02, Amendments to the Consolidation Analysis (“ASU 2015-02”). ASU 2015-02 eliminates entity specific consolidation guidance for limited partnerships, and revises other aspects of the consolidation analysis, but does not change the existing consolidation guidance for corporations that are not variable interest entities (“VIEs”). For public business entities, ASU 2015-02 will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted. The Company does not expect ASU 2015-02 to have a material impact on its consolidated financial statements.

In April 2015, the FASB issued Accounting Standards update 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 changes the presentation of debt issuance costs in financial statements, by requiring them to be presented in the balance sheet as a direct deduction from the related debt liability, rather than as an asset. Amortization of the costs is reported as interest expense. There is no change to the current guidance on the recognition and measurement of debt issuance costs. For public business entities, ASU 2015-03 will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted. The Company does not expect ASU 2015-03 to have a material impact on its consolidated financial statements.

F-11

and subsequently amortized ratably over the term of the line of credit. The Company does not expect ASU 2015-15 to have a material impact on its consolidated financial statements .

Note 3 – Acquisition of National Loan Exchange, Inc.

The consideration for the acquisition consisted of $2.0 million cash and an earn-out provision (“contingent consideration”). Under the terms of the NLEX purchase agreement, the Company will pay, to the former owner of NLEX, 50% of the Net Profits (as defined in the NLEX stock purchase agreement) of NLEX for each of the four years following the closing. The payments are due on or about July 30 of each year, beginning in 2015. In July 2015 the Company made its first payment to the former owner of NLEX in the amount of $0.5 million. The contingent consideration is capped at an aggregate of $5.0 million, and at December 31, 2015, subject to the application of a 9% discount rate, was estimated to have a present value of approximately $3.5 million. Key assumptions in determining this present value include projected earnings through May 2018 and a weighted average cost of capital of 31.6%. At December 31, 2015, the Company has recorded a current liability of $0.9 million for the estimated second earn-out payment due in 2016, and estimated that the non-current portion of the contingent consideration is $2.6 million.

In connection with the contingent consideration, the Company recognized a total of $0.2 million of other income which represents the mark-to-market of the present value during the year ended December 31, 2015.

F-12

The following table summarizes the conside ration paid for NLEX and the amounts of the assets acquired and liabilities assumed, with the excess purchase price recognized as goodwill (in thousands).

Consideration
Cash paid on closing	$	2,000
Contingent consideration		3,989
Total purchase price	$	5,989

Acquisition related costs (included in selling, general, and administrative expenses in HGI’s consolidated statement of operations and comprehensive loss for the year ended December 31, 2014)	$	198

Recognized amounts of identifiable assets acquired and liabilities assumed
Cash	$	639
Other current assets		17
Fixed assets		14
Identifiable intangible assets		3,390
Accounts payable and accrued liabilities		(656	)
Deferred tax liability		(960	)
Total identifiable net assets assumed		2,444
Goodwill		3,545
	$	5,989

The intangible assets and goodwill are discussed in more detail in Note 8.

The goodwill of $3.5 million arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company and NLEX. None of the goodwill recognized is expected to be deductible for income tax purposes.

The amounts of NLEX revenue and net income for the period June 1, 2014 through December 31, 2014, and January 1, 2015 through December 31, 2015 included in HGI’s consolidated statement of operations for the years then ended, are shown below. Also shown are HGI’s pro-forma consolidated revenue and net loss as if the acquisition of NLEX had occurred on January 1, 2014 (in thousands):

	Revenue		Net income (loss)

NLEX revenue and net income included for the year ended December 31, 2015	$	4,503	$	1,640

NLEX revenue and net income included for the period June 1, 2014 through December 31, 2014	$	2,076	$	526

Supplemental pro-forma consolidated revenue and net loss (unaudited):
HGI revenue and net income for the year ended December 31, 2014	$	15,609	$	(26,506	)

Note 4 – Real Estate Inventory Write-down

In October 2015, the Company executed a listing agreement with a real estate broker to list its real estate inventory for sale at a list price of $4.9 million. The carrying value of the inventory had been $6.5 million. The Company determined that the net realizable value for the inventory, based on the most probable selling price net of costs to complete the sale, was $3.7 million. As such, the Company recorded an inventory write-down charge during 2015 of $2.7 million, reducing the carrying cost of the inventory to $3.7 million.

F-13

Note 5 – Equity Method Investments

The table below details the Company’s share of revenues and operating income earned from the Joint Ventures in which it was invested during the years ended December 31, 2015 and 2014 (in thousands):

	2015		2014
Revenues	$	1,007	$	2,177
Operating income	$	286	$	143

The table below details the summarized components of assets and liabilities, as at December 31, 2015 and 2014, attributable to HGI from the Joint Ventures in which it was invested at those dates (in thousands):

	2015		2014
Current assets	$	194	$	1,055
Noncurrent assets	$	—	$	40
Current liabilities	$	291	$	117

The table below details the classification of the Earnings of equity method investments within the consolidated statements of operations and comprehensive loss for the years ended December 31, 2015 and 2014 (in thousands):

	2015		2014
Earnings of equity method investments included within operating loss	$	286	$	143
Earnings of equity method investments included within other income		5		261
Total earnings of equity method investments	$	291	$	404

Polaroid

In 2009, the Company invested approximately $2.6 million to indirectly acquire an approximate 5% interest in Polaroid Corporation and invested a further $0.3 million in 2010. The Company accounted for its investment in Polaroid using the equity method. Upon exiting the investment in December 2014, the Company recognized a gain on sale of $0.6 million. As of December 31, 2014 a total of $2.0 million is included in accounts receivable in connection with the sale of this investment which was collected in the first quarter of 2015.

Note 6 – Earnings per Share

The Company is required, in periods in which it has net income, to calculate basic earnings per share (“basic EPS”) using the two-class method. The two-class method is required because the Company’s Class N preferred shares, each of which is convertible to 40 common shares, have the right to receive dividends or dividend equivalents should the Company declare dividends on its common stock. Under the two-class method, earnings for the period are allocated on a pro-rata basis to the common and preferred stockholders. The weighted-average number of common and preferred shares outstanding during the period is then used to calculate basic EPS for each class of shares.

In periods in which the Company has a net loss, basic loss per share is calculated by dividing the loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. The two-class method is not used in periods in which the Company has a net loss because the preferred stock does not participate in losses.

The Company’s restricted share awards have been included in the weighted-average number of common shares outstanding since the date the shares were issued in 2014.

Stock options and other potential common shares are included in the calculation of diluted earnings per share (“diluted EPS”), since they are assumed to be exercised or converted, except when their effect would be anti-dilutive. For the years ended December 31, 2015 and 2014, the Company recorded a net loss and therefore in both years excluded the outstanding options from its calculation of diluted EPS, since they would be anti-dilutive.

F-14

Note 7 – Property and Equipment

Property and equipment are recorded at historical cost. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives on a straight-line basis. Leasehold improvements are amortized over the useful life of the asset or the lease term, whichever is shorter. Estimated service lives are five years for furniture, fixtures and office equipment and three years for software and technology assets. Expenditures for repairs and maintenance not considered to substantially lengthen the life of the asset or increase capacity or efficiency are charged to expense as incurred.

The following summarizes the components of the Company’s property and equipment (in thousands):

	December 31, 2015			December 31, 2014
Furniture, fixtures and office equipment	$	193		$	202
Software and technology assets		147			199
		340			401
Accumulated depreciation		(230	)		(251	)
Property and equipment, net	$	110		$	150

Depreciation expense related to property and equipment was $49,000 and $23,000 for 2015 and 2014, respectively.

Note 8 – Intangible Assets and Goodwill

Intangible assets

The details of all identifiable intangible assets as of December 31, 2015 and 2014, are shown below (in thousands except for lives):

Amortized Intangible Assets	Original Life (years)	Remaining Life (years)	Acquisition Cost		Accumulated Amortization			Impairment			Carrying Value December 31, 2015
Customer Network (HGP)	12	8.2	$	4,180	$	(1,253	)	$	(2,749	)	$	178
Trade Name (HGP)	14	10.2		1,460		(401	)		—			1,059
Customer Relationships (NLEX)	7.6	6.1		834		(174	)		—			660
Non-Compete Agreement (NLEX)	2	0.4		71		(56	)		—			15
Website (NLEX)	5	3.4		48		(15	)		—			33
Total				6,593		(1,899	)		(2,749	)		1,945

Unamortized Intangible Assets
Trade Name (NLEX)	N/A	N/A		2,437		—			—			2,437
Total			$	9,030	$	(1,899	)	$	(2,749	)	$	4,382


Amortized Intangible Assets	Original Life (years)	Remaining Life (years)	Acquisition Cost		Accumulated Amortization			Impairment			Carrying Value December 31 2014
Customer Network (HGP)	12	9.2	$	4,180	$	(987	)	$	—		$	3,193
Trade Name (HGP)	14	11.2		1,460		(295	)		—			1,165
Customer Relationships (NLEX)	7.6	7.1		834		(64	)		—			770
Non-Compete Agreement (NLEX)	2	1.4		71		(21	)		—			50
Website (NLEX)	5	4.4		48		(6	)		—			42
Total				6,593		(1,373	)		—			5,220

Unamortized Intangible Assets
Trade Name (NLEX)	N/A	N/A		2,437		—			—			2,437
Total			$	9,030	$	(1,373	)	$	—		$	7,657

F-15

Amortization expense during each of 2015 and 2014 was $0.5 million. No significant residual value is estimated for these intangible assets.

The Company performed its annual impairment test in the fourth quarter of 2015. The Company first performed a qualitative assessment of its intangible assets to determine if the two-step impairment test was required. The results of the qualitative analysis assessment of the HGP customer network and tradename indicated that, due to the sustained losses of HGP, the Company would be required to perform the two-step impairment test. The Company tested the recoverability of each asset using an undiscounted cash flow analysis. Based on the results of the test, the Company concluded that the carrying cost of the HGP tradename was recoverable, and therefore no further testing was warranted, however the carrying cost of the HGP customer network was not recoverable, and therefore the Company proceeded to step two of the impairment test. Under step two of the impairment test, the Company used a discounted cash flow analysis to determine the fair value of the customer network, which was then compared against the asset’s carrying cost to determine if an impairment charge is warranted. This step of the assessment indicated that the fair value of the customer network was less than its carrying value, and as a result, the Company recorded a non-cash impairment charge of $2.7 million in the fourth quarter of 2015, reducing the carrying amount of the HGP customer network to $0.2 million.

The estimated amortization expense during the next five fiscal years and thereafter is shown below:

Year	Amount
2016	$	260
2017		245
2018		245
2019		240
2020		236
Thereafter		719
Total	$	1,945

Goodwill

As part of its acquisitions, the Company recognized goodwill of $0.6 million related to Equity Partners in 2011, $4.7 million related to HGP in 2012, and $3.5 million related to NLEX in 2014.

A summary of the goodwill for 2015 and 2014 is shown below (in thousands):

Acquisition	December 31, 2014		Acquired		Disposed		Impairment			December 31, 2015
Equity Partners	$	573	$	—	$	—	$	—		$	573
HGP		4,728		—		—		(2,688	)		2,040
NLEX		3,545		—		—		—			3,545
Total goodwill	$	8,846	$	—	$	—	$	(2,688	)	$	6,158


Acquisition	December 31, 2013		Acquired		Disposed		Impairment			December 31, 2014
Equity Partners	$	573	$	—	$	—	$	—		$	573
HGP		4,728		—		—		—			4,728
NLEX		—		3,545		—		—			3,545
Total goodwill	$	5,301	$	3,545	$	—	$	—		$	8,846

The Company performed its annual impairment test in the fourth quarter of 2015. The Company first performed a qualitative assessment of its reporting units to determine if the two-step impairment test was required. The results of the qualitative assessment of the HGP reporting unit indicated that due to its sustained losses the Company would be required to perform the two-step impairment test. The Company performed the first step of the impairment test by comparing the fair value of the reporting unit to its carrying

F-16

value. The Company determined the fair value of the reporting unit using a combination of valuation techniques, including multiples from comparable companies and discounted cash flows, due to the lack of quoted market prices for the reporting unit. The carrying value of the reporting unit exceeded its fair value, and the Company proceeded to step two of the impairment test. Under step two of the impairment test the Company performed a hypothetical purchase price allocation as if the reporting unit was being acquired in a business combination, and estimated the fair value of the identifiable assets and liabilities of the reporting unit. This determination required the Company to make estimates and assumptions regarding the fair value of its recorded assets and liabilities. This step of the assessment indicated that the implied fair value of the Company’s goodwill for HGP was $2.0 million. As a result, the Company recorded a non-cash impairment charge of $2.7 million in the fourth quarter of 2015, reducing the carrying amount of its HGP goodwill to $2.0 million.

Note 9 – Accounts Receivable and Accounts Payable

Accounts receivable

As described in Note 2, the Company’s accounts receivable are primarily related to the operations of its asset liquidation business. With respect to auction proceeds and asset dispositions, including NLEX’s accounts receivable brokerage transactions, the assets are not released to the buyer until payment has been received. The Company, therefore, is not exposed to significant collectability risk relating to these receivables. Given this experience, together with the ongoing business relationships between the Company and its joint venture partners, the Company has not historically required a formal credit quality assessment in connection with these activities. The Company has not experienced any significant collectability issues with its accounts receivable. As the Company’s asset liquidation business expands, more comprehensive credit assessments may be required.

The Company’s allowance for doubtful accounts was $44,000 and $31,000 as of December 31, 2015 and 2014, respectively.

Accounts payable and accrued liabilities

Accounts payable and accrued liabilities consisted of the following at December 31 (in thousands):

	2015		2014
Due to auction clients	$	3,457	$	2,353
Sales and other taxes		1,421		1,156
Remuneration and benefits		645		957
Accounting, auditing and tax consulting		128		140
Customer deposits		108		503
Due to Joint Venture partners		69		1,020
Asset liquidation expenses		246		540
Interest expense		76		94
Other		523		462
Total accounts payable and accrued liabilities	$	6,673	$	7,225

Note 10 – Debt

Outstanding debt at December 31, 2015 and 2014 is summarized as follows (in thousands):

	December 31, 2015		December 31, 2014
Current:
Third party debt	$	—	$	525
Related party debt		1,721		2,985
		1,721		3,510
Non-current:
Third party debt		2,500		2,500
Total debt	$	4,221	$	6,010

The Company entered into a loan with an unrelated third party during the second quarter of 2014 for a principal amount of $2.5 million. The loan bears interest at 6% and had an original maturity date of January 15, 2015. In December 2014, the maturity date was

F-17

extende d to January 15, 2016 at the same interest rate and in early 2016 the maturity date was further extended to January 15, 2017 at the same interest rate.

The Company’s Related Party Debt (the “Street Capital Loan”), which is due on demand, was originally entered into in 2003 and accrued interest at 10% per annum compounded quarterly from the date funds were advanced. The Street Capital Loan is secured by the assets of the Company.

In the second quarter of 2014, following Street Capital’s distribution of its ownership interest in HGI to Street Capital shareholders as a dividend in kind, the unpaid balance of the Street Capital Loan began accruing interest at a rate per annum equal to the lesser of the Wall St. Journal (“WSJ”) prime rate + 2.0%, or the maximum rate allowable by law. As of December 31, 2015 and 2014, the interest rate on the loan was 5.50% and 5.25%, respectively. Please see Note 14 for further discussion of transactions with Street Capital.

The third party debt at December 31, 2014 included $0.5 million outstanding under a credit facility provided by a U.S. bank. The credit facility was repaid in full and terminated in March 2015.

Note 11 – Fair Value Measurements

In accordance with the authoritative guidance for financial assets and liabilities measured at fair value on a recurring basis, the Company prioritizes the inputs used to measure fair value from market-based assumptions to entity specific assumptions:

Level 1 – Inputs based on quoted market prices for identical assets or liabilities in active markets at the measurement date.

Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Inputs which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instruments valuation.

As of December 31, 2015 and 2014, the Company had no Level 1 or Level 2 assets or liabilities measured at fair value. As of December 31, 2015 and 2014, the Company’s contingent consideration from the acquisition of NLEX in 2014 of $3.5 million and $4.2 million respectively, was the only liability measured at fair value on a recurring basis, and was classified as Level 3 within the fair value hierarchy. The fair value of the Company’s contingent consideration was determined using a discounted cash flow analysis, which is based on significant inputs that are not observable in the market.

The following tables present the Company’s hierarchy for its assets measured at fair value on a recurring basis as of December 31, 2015 and 2014 (in thousands):

	Fair Value as of December 31, 2015
	Level 1		Level 2		Level 3		Total
Liabilities
Contingent consideration	$	—	$	—	$	3,457	$	3,457


	Fair Value as of December 31, 2014
	Level 1		Level 2		Level 3		Total
Liabilities
Contingent consideration	$	-	$	-	$	4,198	$	4,198

When valuing its Level 3 liabilities, the Company gives consideration to operating results, financial condition, economic and/or market events, and other pertinent information that would impact its estimate of the expected contingent consideration payment. The valuation of the liability is primarily based on management’s estimate of the Net Profits of NLEX (as defined in the NLEX stock purchase agreement). Given the short term nature of the contingent consideration periods, changes in the discount rate are not expected to have a material impact on the fair value of the liability.

The following table summarizes the changes in the fair value of the liability during 2014 and 2015 (in thousands):

F-18


Balance at December 31, 2013	$	—
Acquisition contingent consideration		4,198
Balance at December 31, 2014		4,198
Payment of contingent consideration		(513	)
Mark-to-market of contingent consideration		(228	)
Balance at December 31, 2015	$	3,457

The Company’s assets measured at fair value on a non-recurring basis as of December 31, 2015 consisted of its goodwill and intangible assets subject to the impairment charges recorded during the fourth quarter of 2015. No such assets were measured at fair value on a non-recurring basis as of December 31, 2014. Refer to Note 8 for further detail on the fair value techniques used by the Company in assessing the fair value of the goodwill and intangible assets.

Note 12 – Commitments and Contingencies

At December 31, 2015, HGI’s lease commitments related to its offices in California, Illinois, Maryland, Georgia and Arizona, an automobile lease, and a copier lease. The California leases expire in July 2016 and January 2020; the Illinois lease expires in June 2018, and the Georgia and Arizona leases expire in August 2016. The automobile lease expires in June 2017, and the copier lease expires in October 2018. The annual lease obligations are as shown below (in thousands):

2016	$	372
2017		226
2018		166
2019		127
2020		6
Total	$	897

In the normal course of its business, HGI may be subject to contingent liabilities with respect to assets sold either directly or through Joint Ventures. At December 31, 2015 HGI does not expect any potential contingent liabilities, individually or in the aggregate, to have a material adverse effect on its assets or results of operations.

Note 13 – Income Taxes

In 2014 the Company recorded a valuation allowance against its deferred tax assets, reducing the carrying value of those assets to zero, as a result of incurring losses in 2012, 2013 and 2014. At December 31, 2015, the Company continued to carry a full valuation allowance against its deferred tax assets. The following table summarizes the change in the valuation allowance during 2014 and 2015 (in thousands):

Balance at December 31, 2013	$	4,740
Change during 2014		24,102
Balance at December 31, 2014		28,842
Change during 2015		3,080
Balance at December 31, 2015	$	31,922

At December 31, 2015 the Company has aggregate tax net operating loss carry forwards of approximately $74.0 million ($58.9 million of unrestricted net operating tax losses and approximately $15.1 million of restricted net operating tax losses) and unused minimum tax credit carry forwards of $0.5 million. Substantially all of the net operating loss carryforwards and unused minimum tax credit carry forwards expire between 2024 and 2034.

F-19

The reported tax expense varies from the amount that would be provided by applying the statutory U.S. Federal income tax rate to the loss before income tax expense for the following reasons in each of the years ending December 31 (in thousands):

	2015			2014
Expected federal statutory tax benefit	$	(4,130	)	$	(694	)
Increase (reduction) in taxes resulting from:
State income taxes recoverable		17			56
Non-deductible expenses (permanent differences)		1,162			537
Change in valuation allowance		3,080			24,102
Rate changes		—			55
Other		(114	)		666
Income tax expense	$	15		$	24,722

The Company’s utilization of restricted net operating tax loss carry forwards against future income for tax purposes is restricted pursuant to the “change in ownership” rules in Section 382 of the Internal Revenue Code. These rules, in general, provide that an ownership change occurs when the percentage shareholdings of 5% direct or indirect stockholders of a loss corporation have, in aggregate, increased by more than 50 percentage points during the immediately preceding three years.

Restrictions in net operating loss carry forwards occurred in 2001 as a result of the acquisition of the Company by Street Capital. Further restrictions may have occurred as a result of subsequent changes in the share ownership and capital structure of the Company and Street Capital and disposition of business interests by the Company. Pursuant to Section 382 of the Internal Revenue Code, the annual usage of the Company’s net operating loss carry forwards was limited to approximately $2.5 million per annum until 2008 and $1.7 million per annum thereafter. There is no certainty that the application of these “change in ownership” rules may not recur, resulting in further restrictions on the Company’s income tax loss carry forwards existing at a particular time. In addition, further restrictions, reductions in, or expiration of net operating loss and net capital loss carry forwards may occur through future merger, acquisition and/or disposition transactions or failure to continue a significant level of business activities. Any such additional limitations could require the Company to pay income taxes on its future earnings and record an income tax expense to the extent of such liability, despite the existence of such tax loss carry forwards.

All loss taxation years remain open for audit pending the application of the respective tax losses against income in a subsequent taxation year. In general, the statute of limitations expires three years from the date that a company files a tax return applying prior year tax loss carry forwards against income for tax purposes in the later year. The 2011 through 2013 taxation years remain open for audit.

The Company is subject to state income tax in multiple jurisdictions. In most states, the Company does not have tax loss carry forwards available to shield income attributable to a particular state from being subject to tax in that particular state.

The components of the deferred tax assets and liabilities as of December 31, 2015 and 2014 are as follows in (thousands):

	2015			2014
Net operating loss carry forwards	$	30,073		$	29,437
Stock based compensation		1,019			870
Write-down of real estate inventory		1,550			456
Trade names		(1,388	)		(1,418	)
Customer relationships		(351	)		(1,597	)
Minimum tax credit carry forwards		—			186
Mark to market of contingent consideration		91			—
Other		(32	)		(52	)
Gross deferred tax assets		30,962			27,882
Less: valuation allowance		(31,922	)		(28,842	)
Deferred tax assets (liabilities), net of valuation allowance	$	(960	)	$	(960	)

As a result of the acquisition of NLEX in 2014, and the recognition of an indefinite-lived intangible asset in the amount of $2.4 million related to the NLEX trade name, the Company is required to record a non-current deferred tax liability in the amount of $1.0 million.

F-20

Uncertain Tax Positions

The accounting for uncertainty in income taxes requires a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. Upon adoption of this principle, effective in 2007, the Company derecognized certain tax positions that, upon examination, more likely than not would not have been sustained as a recognized tax benefit. As a result of derecognizing uncertain tax positions, the Company has recorded a cumulative reduction in its deferred tax assets of approximately $12.0 million associated with prior years’ tax benefits, which are not expected to be available primarily due to change of control usage restrictions, and a reduction in the rate of the tax benefit associated with all of its tax attributes.

Due to the Company’s historic policy of applying a valuation allowance against its deferred tax assets, the effect of the above was an offsetting reduction in the Company’s valuation allowance. Accordingly, the above reduction had no net impact on the Company’s financial position, operations or cash flow. As of December 31, 2015, the unrecognized tax benefit has been determined to be $12.1 million, which is unchanged from the balance as of December 31, 2014.

In the unlikely event that these tax benefits are recognized in the future, the amount recognized at that time should result in a reduction in the Company’s effective tax rate.

The Company’s policy is to recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. Because the Company has tax loss carry forwards in excess of the unrecognized tax benefits, the Company did not accrue for interest and penalties related to unrecognized tax benefits either upon the initial derecognition of uncertain tax positions or in the current period.

It is possible that the total amount of the Company’s unrecognized tax benefits will significantly increase or decrease within the next 12 months. These changes may be the result of future audits, the application of “change in ownership” rules leading to further restrictions in tax losses arising from changes in the capital structure of the Company, reductions in available tax loss carry forwards through future merger, acquisition and/or disposition transactions, failure to continue a significant level of business activities, or other circumstances not known to management at this time. At this time, an estimate of the range of reasonably possible outcomes cannot be made.

Note 14 – Related Party Transactions

Debt with Street Capital

Until the second quarter of 2014, as discussed below, Street Capital was the Company’s majority shareholder. Street Capital remained a related party following the distribution of its investment in HGI to Street Capital shareholders as a result of the Services Agreement and the relationship of the chairman of the board discussed below. The Services Agreement terminated on August 31, 2015, however subsequent to its termination Street Capital remained a related party because the Company’s chairman of the board, who is also a significant shareholder of the Company, is also the chairman of the board of Street Capital. At December 31, 2015 and 2014, the Company reported amounts owed to Street Capital of $1.7 million and $3.0 million, respectively, as related party debt (see Note 10). Total interest of $0.4 million has been accrued to the principal balance of the debt through December 31, 2015, and remains unpaid.

Street Capital Services Provided to Company

F-21

Following this disposition, the Company and Street Capital entered into a replacement management services agreement (the “Serv ices Agreement”). Under the terms of the Services Agreement, Street Capital remained as external manager and continued to provide the same services, at similar rates, until the Services Agreement was terminated effective August 31, 2015, as described more fully in the Current Report on Form 8-K filed with the SEC on September 1, 2015 .

The amounts charged by Street Capital, which are included in selling, general and administrative expenses and have been added to the Street Capital Loan balance, are detailed below (in thousands):

	Year ended December 31,
	2015		2014
Management fees	$	240	$	360
Other charges		50		193
Total	$	290	$	553

Transactions with Other Related Parties

The Company leases office space in Foster City, CA as part of the operations of HGP. The premises are owned by an entity that is jointly controlled by the HGI Chief Executive Officer and Chief Operating Officer/President. It also leases office space in Edwardsville, IL, as part of the operations of NLEX, which is owned by senior officers of NLEX. The lease amounts paid by the Company to the related parties, which are included in selling, general and administrative expenses during the year ended December 31, 2015 and 2014, are detailed below (in thousands):

	Year ended December 31,
Leased premises location	2015		2014
Foster City, CA	$	228	$	228
Edwardsville, IL		97		57
Total	$	325	$	285

Note 15 – Legal Proceedings

The Company is involved in various other legal matters 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 effect on the Company.

Note 16 – Stock-Based Compensation

Stock- Based Compensation Plans

At December 31, 2015, the Company had three stock-based compensation plans which are described below.

F-22

2003 Stock Option and Appreciation Rights Plan

In 2003, the stockholders of the Company approved the 2003 Stock Option and Appreciation Rights Plan (the “2003 Plan”) which provided for the issuance of incentive stock options, non-qualified stock options and Stock Appreciation Rights (“SARs”) up to an aggregate of 2,000,000 shares of common stock (subject to adjustment in the event of stock dividends, stock splits, and other similar events). The plan had a ten-year term, and therefore after 2013 no options have been issued. The price at which shares of common stock covered by the option can be purchased was determined by the Company’s Board or a committee thereof; however, in the case of incentive stock options the exercise price was never less than the fair market value of the Company’s common stock on the date the option was granted.

2003 Plan	2015			2014
Options outstanding, beginning of year		1,210,000			1,275,000
Options forfeited		—			(17,500	)
Options expired		(40,000	)		(47,500	)
Options outstanding, end of year		1,170,000			1,210,000

The outstanding options vest over four years at exercise prices ranging from $0.08 to $2.00 per share. No SARs were issued under the 2003 Plan.

2010 Non-Qualified Stock Option Plan

In 2010, the Company’s Board approved the 2010 Non-Qualified Stock Option Plan (the “2010 Plan”) to induce certain key employees of the Company or any of its subsidiaries who are in a position to contribute materially to the Company’s prosperity to remain with the Company, to offer such persons incentives and rewards in recognition of their contributions to the Company’s progress, and to encourage such persons to continue to promote the best interests of the Company. The Company reserved 1,250,000 shares of common stock (subject to adjustment under certain circumstances) for issuance or transfer upon exercise of options granted under the 2010 Plan. Options may be issued under the 2010 Plan to any key employees or consultants selected by the Company’s Board (or an appropriately qualified committee). Options may not be granted with an exercise price less than the fair market value of the common stock of the Company as of the day of the grant. Options granted pursuant to the plan are subject to limitations on transfer and execution and may be issued subject to vesting conditions. Options may also be forfeited in certain circumstances. During 2015, options to purchase 50,000 shares were granted to the Company’s independent directors as part of their annual compensation. During 2014, options to purchase 50,000 shares were granted to the Company’s independent directors as part of their annual compensation, and options to purchase 50,000 shares were granted to an officer of the Company as part of his joining the Company.

2010 Plan	2015		2014
Options outstanding, beginning of year		100,000		—
Options granted		50,000		100,000
Options forfeited		—		—
Options outstanding, end of year		150,000		100,000

The outstanding options vest over four years at exercise prices ranging from $0.42 to $0.70 per share.

Equity Partners Stock Option Plan

In 2011, the Company’s Board approved the Equity Partners Stock Option Plan (the “Equity Partners Plan”) to allow the Company to issue options to purchase common stock as a portion of the purchase price of Equity Partners. The Company reserved 230,000 shares of common stock for issuance upon exercise of options granted under the Equity Partners Plan. During 2011, options to purchase 230,000 shares with an exercise price of $1.83, vesting immediately, were granted under the Equity Partners Plan.

Equity Partners Plan	2015		2014
Options outstanding, beginning of year		230,000		230,000
Options granted		—		—
Options forfeited		—		—
Options outstanding, end of year		230,000		230,000

Other Options Issued

In 2012, the Company’s Board approved the issuance of options as part of the acquisition of HGP, and reserved 625,000 shares of common stock for issuance upon option exercise. The options have an exercise price of $2.00, and vest over four years, beginning

F-23

on the first anniversary of the grant date. Unlike other options issued by the Company under its stock option plans, the options issued as part of the HGP acquisition survive termination of employment. None of the option holders have terminated their empl oyment with the Company.

Other Options	2015		2014
Options outstanding, beginning of year		625,000		625,000
Options granted		—		—
Options forfeited		—		—
Options outstanding, end of year		625,000		625,000

Stock-Based Compensation Expense

Total compensation cost related to stock options in 2015 and 2014 was $0.3 million and $0.5 million, respectively. These amounts were recorded in selling, general and administrative expense in both years. During both 2015 and 2014 no options were exercised and therefore no tax benefit was recognized.

In connection with the stock option grants during 2015 and 2014, the fair value of each option grant was estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions:

	2015		2014
Risk-free interest rate	0.99%		0. 69% - 0.88%
Expected life (years)		4.75		4.75
Expected volatility		94%		100%
Expected dividend yield	Zero		Zero
Expected forfeitures	Zero		Zero

The risk-free interest rates are those for U.S. Treasury constant maturities for terms matching the expected term of the option. The expected life of the options is calculated according to the simplified method for estimating the expected term of the options, based on the vesting period and contractual term of each option grant. Expected volatility is based on the Company’s historical volatility. The Company has never paid a dividend on its common stock and therefore the expected dividend yield is zero.

The following summarizes the changes in common stock options for 2015 and 2014:

	2015					2014
	Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price
Outstanding at beginning of year		2,165,000		$	1.71		2,130,000		$	1.75
Granted		50,000		$	0.42		100,000		$	0.70
Exercised		—		N/A			—		N/A
Expired		(40,000	)	$	0.90		(47,500	)	$	1.18
Forfeited		—		N/A			(17,500	)	$	2.00
Outstanding at end of year		2,175,000		$	1.70		2,165,000		$	1.71

Options exercisable at year end		1,743,750		$	1.78		1,330,000		$	1.75

Weighted-average fair value of options granted during the year				$	0.29				$	0.36

As of December 31, 2014, the Company had 835,000 unvested options with a weighted average grant date fair value of $1.48 per share. As of December 31, 2015, the Company had 431,250 unvested options with a weighted average grant date fair value of $1.13 per share.

As of December 31, 2015, the total unrecognized stock-based compensation expense related to unvested stock options was $0.1 million, which is expected to be recognized over a weighted-average period of 1.8 years.

F-24

The total fair value of options vesting during each of the years ending December 31, 2015 and 2014 was $0.8 million. The unvested options have no associated performance conditions. In general, the Company’s employee turnover is low, and the Company ex pects that the majority of the unvested options will vest according to the standard four-year timetable.

The following table summarizes information about all stock options outstanding at December 31, 2015:

Exercise price	Options Outstanding		Weighted Average Remaining Life (years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Remaining Life (years)		Weighted Average Exercise Price
$ 0.08 to $ 0.15		80,000		0.8	$	0.12		80,000		0.8	$	0.12
$ 0.42 to $ 1.00		390,000		4.6	$	0.84		165,000		3.9	$	0.93
$ 1.83 to $ 2.00		1,705,000		2.8	$	1.97		1,498,750		2.8	$	1.96
		2,175,000		3.1	$	1.70		1,743,750		2.8	$	1.78

At December 31, 2015 and 2014, the aggregate intrinsic value of exercisable options was $9,000 and $16,000, respectively. There were no options exercised during 2015.

Restricted Stock

Restricted stock awards represent a right to receive shares of common stock at a future date determined in accordance with the participant’s award agreement. There is no exercise price and no monetary payment required for receipt of restricted stock awards or the shares issued in settlement of the award. Instead, consideration is furnished in the form of the participant’s services to the Company. Compensation cost for these awards is based on the fair value on the date of grant and recognized as compensation expense on a straight-line basis over the requisite service period.

The Company granted restricted stock awards for 300,000 shares to two key employees (150,000 each), in connection with their employment agreements in 2014.

The following summarizes the changes in restricted stock awards for the year ended December 31, 2015:

	Restricted Stock Awards			Weighted Average Grant Date Fair Value
Awards at December 31, 2014		300,000		$	0.38
Granted		—		$	—
Vested		(150,000	)	$	0.38
Unvested at December 31, 2015		150,000		$	0.38

Vested at December 31, 2015		150,000		$	0.38

The Company recognized stock-based compensation expense related to restricted stock awards of $0.1 million for the year ended December 31, 2015. As of December 31, 2015 there is approximately $36,000 of unrecognized stock-based compensation expense related to unvested restricted stock awards, which is expected to be recognized over a weighted average period of 1.3 years.

Note 17 – Subsequent Events

The Company has evaluated events subsequent to December 31, 2015 for potential recognition or disclosure in its consolidated financial statements.

In January 2016, the Company extended the maturity date of its third party debt for one year at the same interest rate.

In January 2016, the Company entered into a related party loan with a trust controlled by certain executive officers of the Company. The Company received proceeds of $0.4 million. The loan bears interest at 10% per annum and is payable within 90 days of the loan date.

F-25

entered into a five year lease agreement with an affiliate of IAP to lease the building during the escrow period, which will terminate at the close of escrow. The purchase agreement gives IAP the right to terminate its obligation to consummate the sale for any reason, but in the event the sale is not consummated, the lease agreement will continue on through the end of the lease term.

There have been no other material subsequent events requiring disclosure in this Report.

F-26

Exhibit 3.2(iv)

ARTICLES OF AMENDMENT TO

THE AMENDED AND RESTATED ARTICLES OF INCORPORATION

COUNSEL RB CAPITAL INC.

Pursuant to the Amended and Restated Articles of Incorporation of Counsel RB Capital Inc. (the “Corporation”) as amended (the “Articles of Incorporation”) and the provisions of Section 607.1003 of the Florida Business Corporation Act (the “Act”), the Board of Directors recommended and the shareholders of the Corporation have approved the following amendment to the Articles of Incorporation:

1. Article I of the Articles of Incorporation is hereby amended and restated in its entirety as follows:

“Article I. The name of the corporation is “Heritage Global Inc.”

IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment of the Articles of Incorporation to be executed by its authorized officer this 21 ^st day of August, 2013.

COUNSEL RB CAPITAL INC.
By:	/s/ Stephen A. Weintraub
	Stephen A. Weintraub
	Chief Financial Officer and
	Corporate Secretary

ARTICLES OF AMENDMENT TO

THE AMENDED AND RESTATED ARTICLES OF INCORPORATION

C2 GLOBAL TECHNOLOGIES INC.

Pursuant to the Amended and Restated Articles of Incorporation of C2 Global Technologies Inc. (the “Corporation”) as amended (the “Articles of Incorporation”) and the provision of Section 607.1003 of the Florida Business Corporation Act (the “Act”), the Board of Directors recommended and the shareholders of the Corporation have approved the following amendment to the Articles of Incorporation:

1. Article I of the Articles of Incorporation is hereby amended and restated in its entirety as follows:

“Article I. The name of the corporation is Counsel RB Capital Inc.”

2. As permitted by Section 607.0704 of the Act, shareholder approval was obtained by written consent of shareholders holding a majority of the outstanding stock of the Corporation and without a meeting. A copy of such written consent is attached hereto and is being filed with this amendment

IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment of the Articles of Incorporation to be executed by its authorized officer this 19 ^th day of January, 2011.

C2 GLOBAL TECHNOLOGIES INC.
By:	/s/ Stephen A. Weintraub
	Stephen A. Weintraub
	Chief Financial Officer and
	Corporate Secretary

Attachment

WRITTEN CONSENT OF

SHAREHOLDERS OF

C2 GLOBAL TECHNOLOGIES INC.

See attached.

C2 GLOBAL TECHNOLOGIES INC.

CONSENT ACTION

OF MAJORITY SHAREHOLDERS

The undersigned holders of a majority of the shares of common stock of C2 Global Technologies Inc., a Florida corporation (the “Company”), by signing below, effective as of December 20, 2010, hereby consent to and evidence their approval of the Company taking the following corporate actions without a meeting of shareholders and without submitting such actions to a vote of the Company’s shareholders at such a meeting, as permitted under Section 607.0704 of the Florida Business Corporation Act:

Changing the name of the Company to “Counsel RB Capital Inc.”;

Filing Articles of Amendment amending the Amended and Restated Articles of Incorporation of the Company to effect the foregoing name change; and

Taking any other corporate actions reasonably necessary to effect any of the foregoing.

[signatures appear on following page]

IN WITNESS WHEREOF, the undersigned have given their consent to the foregoing effective on the date first written above.

COUNSEL COMMUNICATIONS LLC
By:	/s/ S. Weintraub
	Name: S. Weintraub
	Its: Secretary
	Date: December 10, 2010

COUNSEL LLC
By:	/s/ S. Weintraub
	Name: S. Weintraub
	Its: Secretary
	Date: December 10, 2010

ARTICLES OF AMENDMENT TO

THE ARTICLES OF INCORPORATION

ACCERIS COMMUNICATIONS INC.

Pursuant to the Amended and Restated Articles of Incorporation of Acceris Communications Inc. f/k/a I-Link Incorporated (the “Corporation”) as amended (the “Articles of Incorporation”) and the provisions of Section 607.1003 of the Florida Business Corporation Act. the Board of Directors of the Corporation recommended and the shareholders of the Corporation have approved the following amendment to the Articles of Incorporation;

The Article I of the Articles of Incorporation of the Corporation is hereby amended and restated in its entirety and shall read as follows:

“Article I. The name of the corporation is C2 Global Technologies Inc.”

IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment of the Articles of Incorporation to be executed by its authorized officer this 5 ^th day of August, 2005.

ACCERIS COMMIUNICATIONS INC.

By:	/s/ Gary M. Clifford
	Name: Gary M. Clifford
	Title: Chief Financial Officer

ARTICLES OF AMENDMENT TO THE AMENDED

AND RESTATED ARTICLES OF INCORPORATION

ACCERIS COMMUNICATIONS INC.

Pursuant to the Amended and Restated Articles of Incorporation of the Acceris Communications Inc. f/k/a I-Link Incorporated (the “Corporation”), as amended (the “Articles of Incorporation”) and the provisions of Section 607.1003 of the Florida Business Corporation Act, the Board of Directors of the Corporation recommended and the shareholders of the Corporation have resolved to amend the Articles of Incorporation, as follows:

A.	Article VI of the Articles of Incorporation shall be deleted in the entirety and the following shall be substituted therefor:

“Article VL Reserved.”

B.	Paragraph A(1) of Article III of the Articles of Incorporation shall be amended by deleting paragraph A(1) as it is now in its entirety and substituting the following for it:

“A(1). Three Hundred Million (300,000,000) shares of common stock, having a par value of $.01 per share (the “Common Stock”).”

The date of adoption was December 30, 2003.

IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to the Amended and Restated Articles of Incorporation to be executed by its Chief Financial Officer this 2 ^nd day of January, 2004.

ACCERIS COMMUNICATIONS INC.
By:	/s/ Gary M. Clifford
	Gary M. Clifford
	Chief Financial Officer

ARTICLES OF AMENDMENT TO THE AMENDED

AND RESTATED ARTICLES OF INCORPORATION

I-LINK INCORPORATED

Pursuant to the Amended and Restated Articles of Incorporation of the I-Link Incorporated (the “Corporation”), as amended (the “Articles of Incorporation”) and the provisions of Section 607.1003 of the Florida Business Corporation Act, the Board of Directors of the Corporation recommended and the shareholders of the Corporation have resolved to amend the Articles of Incorporation, as follows:

A.	Article I of the Articles of Incorporation shall be deleted in the entirety and the following shall be substituted therefor:

“Article I. The name of the corporation is Acceris Communications Inc.”

B.	Article III of the Articles of Incorporation shall be amended by deleting paragraph A as it is now in its entirety and substituting the following for it:

“A(1). Three Hundred Million (300,000,000) shares of common stock, having a par value of $.007 per share (the “Common Stock”).

“A(2). Effective 12:01 a.m. on November 28, 2003 (the “Effective Date”), each one (1) share of Common Stock of the Company’s issued and outstanding shall, by virtue of this amendment of the Company’s Articles of Incorporation, be combined into one-twentieth (1/20th) of one (1) share of fully paid and non-assessable Common Stock of the Company, subject to treatment of fractional share interests described below. Following the effectiveness of these Articles of Amendment, the Company will evidence the reverse stock split effected by this paragraph (A(2)) pursuant to the procedures of the Company.

(i) No fractional shares of Common Stock of the Company shall be issued. No Stockholder of the Company shall transfer any fractional shares of Common Stock of the Company. The Company shall not recognize on its stock record books any purported transfer of any fractional shares of Common Stock of the Company.

(ii) A holder of Common Stock, who immediately prior to the Effective Date, owns a number of shares of Common Stock of the Company which is not evenly divisible by the reverse split ratio shall, with respect to the fractional interest, be issued a number of shares of new Common Stock of the Company, rounded to the nearest whole number.”

The amendments set forth in the foregoing Sections A and B were duly approved and adopted by the majority of all votes entitled to be cast by the shareholders of the Corporation at a meeting held on November 26, 2003, pursuant to the provisions of the Florida Business Corporation Act, The number of votes cast was sufficient for approval.

* * * * *

IN WITNESS WHEREOF, I-Link Incorporated has caused these Articles of Amendment to the Amended and Restated Articles of Incorporation to be executed by its President and attested to by its Secretary this 26 ^th day of November, 2003.

I-LINK INCORPORATED
By:	/s/ Kelly Murumets
	Kelly Murumets
	President

ATTEST:

/s/ Stephen A. Weintraub

Stephen A. Weintraub, Secretary

ARTICLES OF AMENDMENT TO THE

AMENDED AND RESTATED

ARTICLES OF INCORPORATION OF

I-LINK INCORPORATED

Pursuant to the Amended and Restated Articles of Incorporation of the Corporation, as amended (the “ Articles of Incorporation ”) and the provisions of Section 607.1003 of the Florida Business Corporation Act, the shareholders of the Corporation have resolved to amend Article III(a) of the Articles of Incorporation as set forth in Section B herein.

The name of the corporation is I-Link Incorporated.

Article III of the Articles of Incorporation shall be amended by the substitution of the following paragraph (a) for paragraph (a) of Article III:

“(a) Three Hundred Million (300,000,000) shares of common stock, having a par value of $.007 per share (the “ Common Stock ”); and”

The amendment set forth in the foregoing Section B was duly approved and adopted by the majority of all votes entitled to be cast by the Shareholders of the Corporation at a meeting held on September 20, 2001, pursuant to the provisions of the Florida Business Corporation Act. The number of votes cast were sufficient for approval.

I-LINK INCORPORATED

/s/ Helen Seltzer

Helen Seltzer, President

Attested to:

/s/ Jeff Hollingworth

Jeff Hollingworth, Secretary

ARTICLES OF AMENDMENT TO THE AMENDED

AND RESTATED ARTICLES OF INCORPORATION OF

I-LINK INCORPORATED

Pursuant to the Amended and Restated Articles of Incorporation of the Corporation, as amended (the “Articles of Incorporation”) and the provisions of Section 607.1003 of the Florida Business Corporation Act, the Shareholders of the Corporation have resolved to amend Article III(a) of the Articles of Incorporation, as set forth in Section B. herein.

Pursuant to Article III(b) of the Articles of Incorporation, and the provisions of Section 607.0602 of the Florida Business Corporation Act, the board of directors of the Corporation (the “Board of Directors”) has resolved to amend Article III of the Articles of Incorporation, as set forth in Section C. herein.

A. The name of the corporation is I-Link Incorporated.

B. Article III of the Articles of Incorporation shall be amended by the substitution of the following paragraph (a) for paragraph (a) of Article III:

“(a) One Hundred Fifty Million (150,000,000) shares of common stock, having a par value of $.007 per share (the “Common Stock”); and”

C. Article III is hereby amended by adding Section III(k), which shall read in its entirety as follows:

“(k) Of the ten million (10,000,000) shares of Preferred Stock authorized hereunder, twenty thousand (20,000) shares of Preferred Stock shall be designated as Series N Convertible Preferred Stock (the “Series N Preferred Stock”), shall have a par value of $10.00 per share, and shall have the following rights and preferences:

1. Dividends . If and when dividends are declared by the Board of Directors on the shares of Common Stock, the holders of Series N Preferred Stock shall be entitled to receive the same dividend as declared on the shares of Common Stock based on the number of shares of Common Stock which would have been held by the holder of each issued and outstanding share of Series N Preferred Stock, if that share of Series N Preferred Stock had been converted in accordance with Section III(k)(4) below to shares of Common Stock immediately prior to the record date for the dividend.

2. Liquidation, Dissolution or Winding Up .

(b) If upon any such Liquidation the remaining assets of the Corporation available for distribution to its shareholders shall be insufficient to pay the holders of shares of Series N Preferred Stock and the holders of shares of the Class C Preferred Stock, the Series F Preferred Stock and the Series M Preferred Stock the full amount to which they shall be entitled, then the entire assets of the Corporation shall be distributed among the holders of shares of Series N Preferred Stock and the holders of shares of the Series F Preferred Stock ratably in proportion to the full amount to which such holders are entitled, prior to any distribution to holders of Class C Preferred Stock or Series M Preferred Stock.

3. Voting Rights . Each share of Series N Preferred Stock shall entitle the holder thereof to that number of votes which is equal to the number of shares of Common Stock into which such share of Series N Preferred Stock would be convertible if that share of Series N Preferred Stock had been converted in accordance with Section III(k)(4) below to shares of Common Stock immediately prior to the record date for the vote.

4. Conversion Into Common Stock . The holders of the Series N Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

(a) Right to Convert . Each share of Series N Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time after January 15, 1999, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing (i) the Conversion Value (as defined below) of such share by (ii) the Conversion Price (as defined below). In the event of a Liquidation of the Corporation, the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for the payment of any amounts distributable on Liquidation to the holders of Series N Preferred Stock.

(b) Conversion Value . The “Conversion Value” of each share of Series N Preferred Stock shall be $1,000.00.

(i) The Conversion Price (the “Conversion Price”) shall be determined in the manner set forth in subsection (III)(k)(4)(c)(ii) below and without regard to the provisions of subsection (III)(k)(4)(c)(iii) below; provided, however, that when, as and if a plurality of eligible voting shares outstanding approve the use of the provision set forth in Section (III)(k)(4)(c)(iii) in lieu of that provision set forth in subsection (III)(k)(4)(c)(ii) for purposes of determining the Conversion Price hereunder at a duly convened shareholders meeting, then from and after the date of such vote, the Conversion Price shall be computed as set forth in subsection (III)(k)(4)(c)(iii) and without regard to the provisions set forth in subsection (III)(k)(4)(c)(ii).

(ii) The Conversion Price at which shares of Common Stock shall be deliverable upon conversion of Series N Preferred Stock without the payment of additional consideration by the holder thereof shall initially be $2.78. The Conversion Price, and the rate at which shares of Series N Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided in this Section III(k)(4).

(iii) The Conversion Price at which shares of Common Stock shall be deliverable upon conversion of Series N Preferred Stock without the payment of additional consideration by the holder thereof shall initially be $2.78. The Conversion Price shall reset (“Reset”) to the lowest of, but in no event lower than $1.25, (i) 110% of the average trading price for any 20 day period subsequent to the date any Series N Preferred Stock is first issued (the “Original Issue Date”), (ii) the price at which common stock or common stock equivalent is issued (whether by conversion, exercise or otherwise, but excluding options granted to employees or issued to consultants of the Company or warrants which, in each such case, are outstanding as of the Original Issue Date), (iii) the exercise price or conversion rate of any new options, warrants, preferred stock or other convertible security (excluding options granted to employees, directors or consultants pursuant to stock option plans adopted by the Board of Directors and approved by the Compensation Committee of the Board of Directors after the Original Issue Date), and (iv) if at any time the “Conversion Price” set forth in Section III(j)(5)(c) for which the Series F Convertible Preferred Stock is converted into the Corporation’s Common Stock is less than the applicable Conversion Price for the Series N Preferred Stock then in effect, then and in any such event, the Conversion Price for the Series N Preferred Stock shall be reduced to equal the Conversion Price of the Series F Convertible Preferred Stock. The Conversion Price, and the rate at which shares of Series N Preferred Stock may be converted into shares of Common Stock, shall be subject to further adjustment as provided in this Section III(k)(4).

(d) Fractional Shares . No fractional shares of Common Stock shall be issued upon conversion of the Series N Preferred Stock pursuant to this Section III(k)(4). In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the then effective Conversion Price.

(e) Mechanics of Conversion .

(i) In order for a holder of Series N Preferred Stock to convert shares of Series N Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Series N Preferred Stock at the office of the transfer agent for the Series N Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of Series N Preferred Stock represented by such certificate or certificates. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or its attorney duly authorized in writing. The date of receipt of such certificates and notice by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) shall be the conversion date (“Conversion Date”). The Corporation shall, as soon as practicable after the Conversion Date, issue and deliver at such office to such holder of Series N Preferred Stock a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled, together with cash in lieu of any fraction of a share. As of the Conversion Date, the person entitled to receive certificates of Common Stock shall be regarded for all corporate purposes as the holder of the number of shares of Common Stock to which it is entitled upon the conversion.

(ii) The Corporation shall at all times when the Series N Preferred Stock shall be outstanding, reserve and keep available out of its auth orized but unissued stock, for the purpose of effecting the conversion of the Series N Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series N Preferred Stock.

(iii) All shares of Series N Preferred Stock which shall have been surrendered for conversion as herein provided in this Section III(k)(4) shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate on the Conversion Date, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor. Any shares of Series N Preferred Stock so converted shall be retired and canceled and shall not be reissued, and the Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized Series N Preferred Stock accordingly.

(f) [reserved]

(g) Adjustment for Stock Splits and Combinations . If the Corporation shall at any time or from time to time after the date of first issuance of any shares of Series N Preferred Stock (the “Original Issue Date”) effect a subdivision of the outstanding Common Stock, the Conversion Price then in effect immediately before that subdivision shall be proportionately decreased and the number of shares of Common Stock issuable upon conversion of a share of the Series N Preferred Stock shall be proportionately increased. If the Corporation shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock, the Conversion Price then in effect immediately before the combination shall be proportionately increased and the number of shares of Common Stock issuable upon conversion of a share of the Series N Preferred Stock shall be proportionately decreased. Any adjustment under this paragraph shall become effective at the close of business on the date the subdivision or combination becomes effective.

(h) Adjustment for Certain Dividends and Distributions . In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Conversion Price for the Series N Preferred Stock then in effect shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Price for the Series N Preferred Stock then in effect by a fraction:

(i) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

(ii) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided , however , if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price for the Series N Preferred Stock shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price for the Series N Preferred Stock shall be adjusted pursuant to this paragraph as of the time of actual payment of such dividends or distributions.

(i) Adjustments for Other Dividends and Distributions . In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation other than shares of Common Stock, then and in each such event provision shall be made so that the holders of the Series N Preferred Stock shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities of the Corporation that they would have received had their Series N Preferred Stock been converted on the date of such event and had thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period giving application to all adjustments called for during such period, under this paragraph with respect to the rights of the holders of the Series N Preferred Stock.

(j) Adjustment for Reclassification, Exchange, or Substitution . If the Common Stock issuable upon the conversion of the Series N Preferred Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares or stock dividend provided for above, or a reorganization, merger, consolidation, or sale of assets provided for below), then and in each such event each holder of the Series N Preferred Stock shall have the right thereafter to convert each such share of Common Stock issuable upon the conversion of the Series N Preferred Stock into the kind and amount of shares of stock and other securities and property receivable upon such reorganization, reclassification, or other change, by holders of the number of shares of Common Stock into which such shares of Series N Preferred Stock might have been converted immediately prior to such reorganization, reclassification, or change, all subject to further adjustment as provided herein.

(k) Adjustment for Merger or Reorganization . In case of any consolidation or merger of the Corporation with or into another corporation, each share of Series N Preferred Stock shall thereafter be convertible into the kind and amount of shares of stock or other securities or property to which a holder of the number of shares of Common Stock of the Corporation deliverable upon conversion of such Series N Preferred Stock would have been entitled upon such consolidation or merger; and, in such case, appropriate adjustment (as determined in good faith by the Board of Di rectors) shall be made in the application of the provisions in this Section III(k)(4) set forth with respect to the rights and interest thereafter of the holders of the Series N Preferred Stock, to the end that the provisions set forth in this Section III( k)(4) (including provisions with respect to changes in and other adjustments of the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the conve rsion of the Series N Preferred Stock.

(l) No Impairment . The Corporation will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section III(k)(4) and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Series N Preferred Stock against impairment.

(m) Certificate as to Adjustments . Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section III(k)(4), the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series N Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series N Preferred Stock, furnish or cause to be furnished to such holder a similar certificate setting forth (i) such adjustments and readjustments; (ii) the Conversion Price then in effect; and (iii) the number of shares of Common Stock and the amount, if any, of other property which then would be received upon the conversion of Series N Preferred Stock.

(n) Notice of Record Date . In the event:

(i) that the Corporation declares a dividend (or any other distribution) on its Common Stock payable in Common Stock or other securities of the Corporation;

(ii) that the Corporation subdivides or combines its outstanding shares of Common Stock;

(iii) of any reclassification of the Common Stock of the Corporation (other than a subdivision or combination of its outstanding shares of Common Stock or a stock dividend or stock distribution thereon), or of any consolidation or merger of the Corporation into or with another corporation; or

(iv) of the Liquidation of the Corporation;

then the Corporation shall cause to be filed at its principal office or at the office of the transfer agent of the Series N Preferred Stock, and shall cause to be mailed to the holders of the Series N Preferred Stock at their last addresses as shown on the records of the Corporation or such transfer agent, at least ten days prior to the record date specified in (A) below or twenty days before the date specified in (B) below, a notice stating:

(A) the record date of such dividend, distribution, subdivision or combination, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, subdivision or combination are to be determined, or

(B) the date on which such reclassification, consolidation, merger, or Liquidation is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, or Liquidation.”

D. The amendment set forth in the foregoing Section B was duly approved and adopted by the majority of all votes entitled to be cast by the Shareholders of the Corporation at a meeting held on April 14, 1999, pursuant to the provisions of the Florida Business Corporation Act. The number of votes cast were sufficient for approval.

E. The amendment set forth in the foregoing Section C was duly adopted by the Board of Directors without the requirement of shareholder action by unanimous written consent as of June 16, 1999, pursuant to the provisions of the Florida Business Corporation Act.

* * * * *

IN WITNESS WHEREOF, I-Link Incorpora ted has caused these Articles of Amendment to the Amended and Restated Articles of Incorporation to be executed by its President and attested to by its Secretary this 17 day of June, 1999.

I-LINK INCORPORATED

By:

/s/ John E. Edwards

John E. Edwards, President

ATTEST:

/s/ David E. Hardy

David E. Hardy, Secretary

ARTICLES OF AMENDMENT TO THE AMENDED

AND RESTATED ARTICLES OF INCORPORATION

I-LINK INCORPORATED

Pursuant to Article III of the Amended and Restated Articles of Incorporation of the Corporation (the “Articles of Incorporation”), and the provisions of Section 607.0602 of the Florida Business Corporation Act, the board of directors of the Corporation (the “Board of Directors”) has resolved to amend Article III of the Articles of Incorporation.

1. The name of the corporation is I-Link Incorporated.

2. Article III is hereby amended by adding Section III(j), which shall read in its entirety as follows:

“(j) Of the 10,000,000 shares of Preferred Stock authorized hereunder, 1,000 shares of Preferred Stock shall be designated as 5% Series F Convertible Preferred Stock (the “Series F Preferred Stock”).

Section 1. Designation, Amount and Par Value . The series of preferred stock shall be designated as 5% Series F Convertible Preferred Stock (the “ Preferred Stock ”) and the number of shares so designated shall be 1,000 (which shall not be subject to increase without the consent of the holders of the Preferred Stock (each, a “ Holder ” and collectively, the “ Holders ”)); Each share of Preferred Stock shall have a par value of $10 and a stated value of $10,000 (the “ Stated Value ”).

Section 2. Dividends .

(a) Holders shall be entitled to receive, when and as declared by the Board of Directors out of funds legally available therefor, and the Company shall pay, cumulative dividends at the rate per share (as a percentage of the Stated Value per share) equal to 5% per annum, payable on a quarterly basis on March 31, June 30, September 30 and December 31 of each year during the term hereof (each a “ Dividend Payment Date ”), commencing on September 30,1998, in cash or shares of Common Stock (as defined in Section 8) at, subject to the terms and conditions set forth herein, the option of the Company. Dividends on the Preferred Stock shall be calculated on the basis of a 360-day year, shall accrue daily commencing on the Original Issue Date (as defined in Section 8), and shall be deemed to accrue from such date whether or not earned or declared and whether or not there are profits, surplus or other funds of the Company legally available for the payment of dividends. Any dividends not paid on any Dividend Payment Date shall continue to accrue and shall be due and payable upon conversion of the Preferred Stock. A party that holds shares of Preferred Stock on a Dividend Payment Date will be entitled to receive such dividend payment and any other accrued and unpaid dividends which accrued prior to such Dividend Payment Date, without regard to any sale or disposition of such Preferred Stock subsequent to the applicable record date. All overdue accrued and unpaid dividends and other amounts due herewith shall entail a late fee at the rate of 15% per annum (to accrue daily, from the date such dividend is due hereunder through and including the date of payment). Except as otherwise provided herein, if at any time the Company pays less than the total amount of dividends then accrued on account of the Preferred Stock, such payment shall be distributed ratably among the Holders based upon the number of shares held by each Holder. Payment of dividends on the Preferred Stock is further subject to the provisions of Section 5(c)(i). The Company shall provide the Holders notice of its intention to pay dividends in cash or shares of Common Stock not less than 10 Trading Days prior to any Dividend Payment Date for so long as shares of Preferred Stock are outstanding. If dividends are paid in shares of Common Stock, the number of shares of Common Stock issuable on account of such dividend shall equal the cash amount of such dividend on such Dividend Payment Date divided by the Conversion Price (as defined below) on such date.

(b) Subject to Section 5(a)(iii)(B) and notwithstanding anything to the contrary contained herein, the Company may not issue shares of Common Stock in payment of dividends on the Preferred Stock (and must deliver cash in respect thereof) if:

(i) the number of shares of Common Stock at the time authorized, unissued and unreserved for all purposes is insufficient to pay such dividends in shares of Common Stock;

(ii) such shares of Common Stock are not registered for resale pursuant to an effective registration statement that names the recipient of such dividend as a selling stockholder thereunder and may not be sold without volume restrictions pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended (the “ Securities Act ”), as determined by counsel to the Company pursuant to a written opinion letter, addressed to the Company’s transfer agent in the form and substance acceptable to the Holders and such transfer agent;

(iii) the Common Stock is not then listed or quoted on the Nasdaq SmallCap Market (“ NASDAQ ”) or on the New York Stock Exchange, American Stock Exchange or the Nasdaq N ational Market (each, a “ Subsequent Market ”);

(iv) the Company has failed to timely satisfy its conversion obligations hereunder; or

(v) the issuance of such shares of Common Stock would result in the recipient thereof beneficially owning, as determined in accordance with Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), more than 4.999% of the then issued and outstanding shares of Common Stock.

(c) So long as any Preferred Stock shall remain outstanding, neither the Company nor any subsidiary thereof shall redeem, purchase or otherwise acquire directly or indirectly any Junior Securities (as defined in Section 8), nor shall the Company directly or indirectly pay or declare any dividend or make any distribution (other than a dividend or distribution described in Section 5) upon, nor shall any distribution be made in respect of, any Junior Securities (as defined in Section 8), nor shall any monies be set aside for or applied to the purchase or redemption (through a sinking fund or otherwise) of any Junior Securities or shares pari passu with the Preferred Stock, except for repurchases effected by the Company on the open market, pursuant to a direct stock purchase plan.

Section 3. Voting Rights . Except as otherwise provided herein and as otherwise required by law, the Preferred Stock shall have no voting rights. However, so long as any shares of Preferred Stock are outstanding, the Company shall not and shall cause its subsidiaries not to, without the affirmative vote of the Holders of all of the shares of the Preferred Stock then outstanding, (a) alter or change adversely the powers, preferences or rights given to the Preferred Stock, (b) alter or amend this Certificate of Designation, (c) authorize or create any class of stock ranking as to dividends or distribution of assets upon a Liquidation (as defined in Section 4) senior to or otherwise pari passu with or senior to the Preferred Stock, (d) amend its Certificate of Incorporation, bylaws or other charter documents so as to affect adversely any rights of any Holders, (e) increase the authorized number of shares of Preferred Stock, or (f) enter into any agreement with respect to the foregoing.

Section 4. Liquidation . Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a “ Liquidation ”), the Holders shall be entitled to receive out of the assets of the Company, whether such assets are capital or surplus, for each share of Preferred Stock an amount equal to the Stated Value plus all due but unpaid dividends per share, whether declared or not, before any distribution or payment shall be made to the holders of any Junior Securities, and if the assets of the Company shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders shall be distributed among the Holders ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. A sale, conveyance or disposition of all or substantially all of the assets of the Company or the effectuation by the Company of a transaction or series of related transactions in which more than 33% of the voting power of the Company is disposed of, or a consolidation or merger of the Company with or into any other company or companies shall not be treated as a Liquidation, but instead shall be subject to the provisions of Section 5. The Company shall mail written notice of any such Liquidation, not less than 45 days prior to the payment date stated therein, to each record Holder.

Section 5. Conversion .

(a)(i) Conversions at Option of Holder . Each share of Preferred Stock shall be convertible into shares of Common Stock (subject to the limitations set forth in Section 5(a)(iii) hereof) at the Conversion Ratio (as defined in Section 8) at the option of the Holder, at any time and from time to time, from and after the Original Issue Date. Holders shall effect conversions by surrendering the certificate or certificates representing the shares of Preferred Stock to be converted to the Company, together with the form of conversion notice attached hereto as Exhibit A (a “ Conversion Notice ”). Each Conversion Notice shall specify the number of shares of Preferred Stock to be converted and the date on which such conversion is to be effected, which date may not be prior to the date the Holder delivers such Conversion Notice by facsimile (the “ Conversion Date ”). If no Conversion Date is specified in a Conversion Notice, the Conversion Date shall be the date that the Conversion Notice is deemed delivered hereunder. If the Holder is converting less than all shares of Preferred Stock represented by the certificate or certificates tendered by the Holder with the Conversion Notice, or if a conversion hereunder cannot be effected in full for any reason, the Company shall promptly deliver to such Holder (in the manner and within the time set forth in Section 5(b)) a certificate for such number of shares as have not been converted.

(ii) Automatic Conversion . Subject to the provisions in this paragraph and Section 5(a)(iii)(B), all outstanding shares of Preferred Stock for which conversion notices have not previously been received or for which redemption has not been made or required hereunder shall be automatically converted on the third anniversary of the Original Issue Date at the Conversion Price on such date. The conversion contemplated by this paragraph shall not occur at such time as (a) (1) an Underlying Securities Registration Statement (as defined in Section 8) is not then effective or (2) the Holder is not permitted to resell Underlying Shares pursuant to Rule 144(k) promulgated under the Securities Act, without volume restrictions, as evidenced by an opinion letter of counsel acceptable to the Holder and the transfer agent for the Common Stock; (b) there are not sufficient shares of Common Stock authorized and reserved for issuance upon such conversion; or (c) the Company shall have defaulted on its covenants and obligations hereunder or under the

-2-

Purchase Agreement or Registration Rights Agreement. Notwithstanding the foregoing, the three-year period for conversion under this Section shall be extended (on a day-for-day basis) for any Trading Days that the Purchaser is unable to resell Underlying Shares unde r an Underlying Securities Registration Statement due to (a) the Common Stock not being listed for trading on the NASDAQ or any Subsequent Market, (b) the failure of an Underlying Securities Registration Statement to be declared effective by the Securities and Exchange Commission (the “Commission”) by the Filing Date (as defined in the Registration Rights Agreement), or (c) if an Underlying Securities Registration Statement shall have been declared effective by the Commission, (x) the failure of such Underl ying Securities Registration Statement to remain effective during the Effectiveness Period (as defined in the Registration Rights Agreement) as to all Underlying Shares, or (y) the suspension of the Holder’s ability to resell Underlying Shares thereunder.

(iii) Certain Conversion Restrictions .

(A) The Holder agrees not to convert shares of Preferred Stock to the extent such conversion would result in the Holder beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules thereunder) in excess of 4.999% of the then issued and outstanding shares of Common Stock, including shares issuable upon conversion of the shares of Preferred Stock held by such Holder after application of this Section. To the extent that the limitation contained in this Section applies, the determination of whether shares of Preferred Stock are convertible (in relation to other securities owned by a Holder) and of which shares of Preferred Stock are convertible shall be in the sole discretion of the Holder, and the submission of shares of Preferred Stock for conversion shall be deemed to be the Holder’s determination of whether such shares of Preferred Stock are convertible (in relation to other securities owned by the Holder) and of which portion of such shares of Preferred Stock are convertible, in each case subject to such aggregate percentage limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. Nothing contained herein shall be deemed to restrict the right of the Holder to convert shares of Preferred Stock at such time as such conversion will not violate the provisions of this Section. The provisions of this Section will not apply to any conversion pursuant to Section 4(a)(ii) hereof, and may be waived by a Holder (but only as to itself and not to any other Holder) upon not less than 75 days prior notice to the Company (in which case, the Holder shall make such filings with the Commission, including under Rule 13D or 13G, as are required by applicable law), and the provisions of this Section shall continue to apply until such 75th day (or later, if stated in the notice of waiver). Other Holders shall be unaffected by any such waiver.

(B) If on any Conversion Date (A) the Common Stock is listed for trading on the NASDAQ or the Nasdaq National Market, (B) the Conversion Price then in effect is such that the aggregate number of shares of Common Stock that would then be issuable upon (i) conversion in full of all then outstanding shares of Preferred Stock, as payment of dividends thereon in shares of Common Stock, and (ii) exercise of the Additional Warrant (as defined in the Exchange Agreement), if the exercise price of the Additional Warrant is less than the closing sales price of the Common Stock on the Original Issue Date, together with any shares of the Common Stock previously issued upon conversion of shares of Preferred Stock, as payment of dividends thereon and exercise of the Additional Warrant, if the exercise price of the Additional Warrant is less than the closing sales price of the Common Stock on the Original Issue Date, would equal or exceed 20% of the number of shares of the Common Stock outstanding on the Original Issue Date (such number of shares as would not equal or exceed such 20% limit, the “ Issuable Maximum ”), and (C) the Company shall not have previously obtained the vote of shareholders (the “ Shareholder Approval ”), if any, as may be required by the applicable rules and regulations of The Nasdaq Stock Market (or any success entity) applicable to approve the issuance of shares of Common Stock in excess of the Issuable Maximum in a private placement whereby shares of Common Stock are deemed to have been issued at a price that is less than the greater of book or fair market value of the Common Stock, then the Company shall issue to the Holder so requesting a conversion a number of shares of Common Stock equal to the Issuable Maximum and, with respect to the remainder of the aggregate Stated Value of the shares of Preferred Stock then held by such Holder for which a conversion in accordance with the Conversion Price would result in an issuance of Common Stock in excess of the Issuable Maximum (the “ Excess Stated Value ”), the converting Holder shall have the option to require the Company to either (1) use its best efforts to obtain the Shareholder Approval applicable to such issuance as soon as is possible, but in any event not later than the 60th day after such request, or (2)(i) issue and deliver to such Holder a number of shares of Common Stock as equals (x) the Excess Stated Value, plus accrued dividends on all shares of Preferred Stock being converted, divided by (y) the closing sale price of the Common Stock on the Original Issue Date, and (ii) cash in an amount equal to the product of (x) the Per Share Market Value on the Conversion Date and (y) the number of shares of Common Stock in excess of such Holder’s pro rata portion of the Issuable Maximum that would have otherwise been issuable to the Holder in respect of such conversion but for the provisions of this Section (such amount of cash being hereinafter referred to as the “ Discount Equivalent ”), or (3) pay cash to the converting Holder in an amount equal to the Mandatory Redemption Amount (as defined in Section 8) for the Excess Stated Value. If the Company fails to pay the Discount Equivalent or the Mandatory Redemption Amount, as the case may be, in full pursuant to this Section within seven (7) days after the date payable, the Company will pay interest thereon at a rate of 18% per annum to the converting Holder, accruing daily from the Conversion Date until such amount, plus all such interest thereon, is paid in full.

-3-

Preferred Stock (subject to the limitations set forth in Section 5(a)(iii) hereof), (ii) one or more certificates representing the number of shares of Preferred Stock not converted, (iii) a bank check in the amount of accrued and unpaid divid ends (if the Company has elected to pay accrued dividends in cash), and (iv) if the Company has elected and is permitted hereunder to pay accrued dividends in shares of Common Stock, certificates, which shall be free of restrictive legends and trading rest rictions (other than those required by Section 3.1 (b) of the Purchase Agreement), representing such shares of Common Stock; provided , however , that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upo n conversion of any shares of Preferred Stock until certificates evidencing such shares of Preferred Stock are either delivered for conversion to the Company or any transfer agent for the Preferred Stock or Common Stock, or the Holder of such Preferred Sto ck notifies the Company that such certificates have been lost, stolen or destroyed and provides a bond (or other adequate security) reasonably satisfactory to the Company to indemnify the Company from any loss incurred by it in connection therewith. The Co mpany shall, upon request of the Holder, if available, use its best efforts to deliver any certificate or certificates required to be delivered by the Company under this Section electronically through the Depository Trust Corporation or another established clearing corporation performing similar functions. If in the case of any Conversion Notice such certificate or certificates, including for purposes hereof, any shares of Common Stock to be issued on the Conversion Date on account of accrued but unpaid div idends hereunder, are not delivered to or as directed by the applicable Holder by the third (3 ^rd ) Trading Day after the Conversion Date, the Holder shall be entitled by written notice to the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Company shall immediately return the certificates representing the shares of Preferred Stock tendered for conversion.

(ii) If the Company fails to deliver to the Holder such certificate or certificates pursuant to Section 5(b)(i), including for purposes hereof, any shares of Common Stock to be issued on the Conversion Date on account of accrued but unpaid dividends hereunder, by the third (3 ^rd ) Trading Day after the Conversion Date, the Company shall pay to such Holder, in cash, as liquidated damages and not as a penalty, $5,000 for each day after such third (3 ^rd ) Trading Day until such certificates are delivered. Nothing herein shall limit a Holder’s right to pursue actual damages for the Company’s failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holders from seeking to enforce damages pursuant to any other Section hereof or under applicable law. Further, if the Company shall not have delivered any cash due in respect of conversions of Preferred Stock or as payment of dividends thereon by the third (3 ^rd ) Trading Day after the Conversion Date, the Holder may, by notice to the Company, require the Company to issue Underlying Shares pursuant to Section 5(c), except that for such purpose the Conversion Price applicable thereto shall be the lesser of the Conversion Price on the Conversion Date and the Conversion Price on the date of such Holder demand. Any such Underlying Shares will be subject to the provision of this Section.

(iii) In addition to any other rights available to the Holder, if the Company fails to deliver to the Holder such certificate or certificates pursuant to Section 5(b)(i), including for purposes hereof, any shares of Common Stock to be issued on the Conversion Date on account of accrued but unpaid dividends hereunder, by the third (3 ^rd ) Trading Day after the Conversion Date, and if after such third (3 ^rd ) Trading Day the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Holder of the Underlying Shares which the Holder anticipated receiving upon such conversion (a “ Buy-In ”),then the Company shall pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the aggregate stated value of the shares of Preferred Stock for which such conversion was not timely honored. For example, if the Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of $10,000 aggregate stated value of the shares of Preferred Stock, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In.

(c)(i) The conversion price for each share of Preferred Stock (the “ Conversion Price ”) in effect on any Conversion Date shall be the lesser of (a) $4.00 (the “ Initial Conversion Price ”) and (b) 87% (the “ Discount Rate ”) multiplied by the average of the three (3) lowest Per Share Market Values during the twenty two (22) Trading Day period immediately preceding the applicable Conversion Date, provided , that such twenty two (22) Trading Day period shall be extended for the number of Trading Days, if any, during such period in which (A) trading in the Common Stock was suspended from the NASDAQ or a Subsequent Market, or (B) after the date declared effective by the Commission, the Underlying Securities Registration Statement is not effective, or (C) after the date declared effective by the Commission, the Prospectus included in the Underlying Securities Registration Statement may not be used by the Holder for the resale of Underlying Shares, provided , however , that the Conversion Price shall not be less than the Floor (as defined in Section 8). The Floor (x) shall be decreased by 2% as of any Event Date (as defined below) and on each monthly anniversary thereof in accordance with this Section, (y) shall simultaneously be adjusted by the same ratio as the adjustments to the Conversion Price as a result of the provisions of Section 5(c)(ii)-(v), and (z) shall not apply in the event that the Common Stock is no longer listed on the NASDAQ or on a Subsequent Market. If: (a) an Underlying Securities Registration Statement is not filed on or prior to the Filing Date (if the Company files such Underlying Securities Registration Statement without affording the Holder the opportunity to review and comment on the same as required by Section 3(a) of the Registration Rights Agreement, the Company shall

-4-

not be deemed to have satisfied this clause (a)), or (b) the Company fails to file with the Commission a request for accel eration in accordance with Rule 12dl-2 promulgated under the Securities Exchange Act of 1934, as amended, within five (5) days of the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that an Underlying Securi ties Registration Statement will not be “reviewed,” or not subject to further review, or (c) the Underlying Securities Registration Statement is not declared effective by the Commission on or prior to the Effectiveness Date (as defined in the Registration Rights Agreement), or (d) such Underlying Securities Registration Statement is filed with and declared effective by the Commission but thereafter ceases to be effective as to all Registrable Securities (as defined in the Registration Rights Agreement) at a ny time prior to the expiration of the “Effectiveness Period” (as defined in the Registration Rights Agreement), without being succeeded within ten (10) days by a subsequent Underlying Securities Registration Statement filed with and declared effective by the Commission, or (e) trading in the Common Stock shall be suspended from the NASDAQ or a Subsequent Market for more than three (3) Business Days (which need not be consecutive days), (f) the conversion rights of the Holders are suspended for any reason o r (g) an amendment to the Underlying Securities Registration Statement is not filed by the Company with the Commission within ten (10) days of the Commission’s notifying the Company that such amendment is required in order for the Underlying Securities Reg istration Statement to be declared effective (any such failure or breach being referred to as an “ Event, ” and for purposes of clauses (a), (c), (f) the date on which such Event occurs, or for purposes of clause (b) the date on which such five (5) day perio d is exceeded, or for purposes of clauses (d) and (g) the date which such 10 day-period is exceeded, or for purposes of clause (e) the date on which such three (3) Business Day-period is exceeded, being referred to as “ Event Date ”), then each of the Initia l Conversion Price and the Discount Rate shall be decreased by 2% on the Event Date and each monthly anniversary thereof until the earlier to occur of the second month anniversary after the Event Date and such time as the applicable Event is cured (i.e., t he Discount Rate would decrease to 85% as of the Event Date and 83% as of the one month anniversary of such Event Date). Commencing on the second month anniversary after the Event Date, the Holder shall have the option to either (x) require further cumulat ive 2% discounts to continue or (y) require the Company to pay to the Holder 2% of the aggregate Stated Values of the shares of Preferred Stock then held by such Holder, in cash, as liquidated damages and not as a penalty, on the first day of each monthly anniversary of the Event Date, until such time as the applicable Event is cured. Any decrease in the Initial Conversion Price and the Discount Rate pursuant to this Section shall remain in effect notwithstanding the fact that the Event causing such decreas e has been subsequently cured and further monthly decreases have ceased. The provisions of this Section are not exclusive and shall in no way limit the Company’s obligations under the Registration Rights Agreement.

(ii) If the Company, at any time while any shares of Preferred Stock are outstanding, shall (a) pay a stock dividend or otherwise make a distribution or distributions on shares of its Junior Securities or pari passu securities payable in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of Common Stock any shares of capital stock of the Company, the Initial Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section 5(c)(ii) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

(iii) If the Company, at any time while any shares of Preferred Stock are outstanding, shall issue rights, warrants or options to all holders of Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Per Share Market Value at the record date mentioned below, then the Initial Conversion Price shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to the issuance of such rights, warrants or options, plus the number of shares of Common Stock which the aggregate offering price of the total number of shares so offered would purchase at such Per Share Market Value, and the denominator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to such issuance plus the number of shares of Common Stock offered for subscription or purchase. Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights or warrants. However, upon the expiration of any right, warrant or option to purchase shares of Common Stock the issuance of which resulted in an adjustment in the Conversion Price pursuant to this Section 5(c)(iii), if any such right, warrant or option shall expire and shall not have been exercised, the Conversion Price shall immediately upon such expiration shall be recomputed and effective immediately upon such expiration shall be increased to the price which it would have been (but reflecting any other adjustments in the Conversion Price made pursuant to the provisions of this Section 5 upon the issuance of other rights or warrants) had the adjustment of the Conversion Price made upon the issuance of such rights, warrants, or options been made on the basis of offering for subscription or purchase only that number of shares of Common Stock actually purchased upon the exercise of such rights, warrants or options actually exercised.

-5-

outstanding immediately prior to the issuance of shares of Common Stock or such Common Stock Equivalents plus the number of shares of Common Stock which the offering price for such shares of Common Stock or Common Stock Equivalents would purchase at the Conversion Price, and the denominator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to such issuance plus the number of shares of Common Stock so issued or issuable, provided, that for purposes hereof, all shares of Common Stock that are issuable upon exercise or exchange of Common Stock Equivalents shall be deemed outstanding immediately after the issuance of such Common Stock Equivalents. Such adjustment shall be made whenever such shares of Common Stock or Common Stock Equivalents are issued.

(v) If the Company, at any time while shares of Preferred Stock are outstanding, shall distribute to all holders of Common Stock (and not to Holders) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security (excluding those referred to in Sections 5(c)(ii)-(iv) above), then in each such case the Initial Conversion Price at which each share of Preferred Stock shall thereafter be convertible shall be determined by multiplying the Initial Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Per Share Market Value of Common Stock determined as of the record date mentioned above, and of which the numerator shall be such Per Share Market Value of the Common Stock on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors in good faith; provided , however , that in the event of a distribution exceeding ten percent (10%) of the net assets of the Company, if the Holders of a majority in interest of the Preferred Stock dispute such valuation, such fair market value shall be determined by a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Company) (an “ Appraiser ”) selected in good faith by the Holders of a majority in interest of the shares of Preferred Stock then outstanding; and provided , further , that the Company, after receipt of the determination by such Appraiser shall have the right to select an additional Appraiser, in good faith, in which case the fair market value shall be equal to the average of the determinations by each such Appraiser. In either case the adjustments shall be described in a statement provided to the Holders of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

(vi) All calculations under this Section 5 shall be made to the nearest cent or the nearest l/100th of a share, as the case may be.

(vii) Whenever the Conversion Price is adjusted pursuant to Section 5(c)(i),(ii),(iii),(iv), or (v) the Company shall promptly mail to each Holder, a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

(viii) In case of any reclassification of the Common Stock, or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property (other than compulsory share exchanges which constitute Change of Control Transactions), the Holders of the Preferred Stock then outstanding shall have the right thereafter to convert such shares only into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such reclassification or share exchange, and the Holders of the Preferred Stock shall be entitled upon such event to receive such amount of securities, cash or property as a holder of the number of shares of the Common Stock of the Company into which such shares of Preferred Stock could have been converted immediately prior to such reclassification or share exchange would have been entitled. This provision shall similarly apply to successive reclassifications or share exchanges.

(ix) If (a) the Company shall declare a dividend (or any other distribution) on its Common Stock, (b) the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock, (c) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (d) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share of exchange whereby the Common Stock is converted into other securities, cash or property, or (e) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of Preferred Stock, and shall cause to be mailed to the Holders at their last addresses as they shall appear upon the stock books of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such

-6-

reclassification, consolidation, merger, sale, transfer or share exchange; provided , however , that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. Holders are entitled to convert shares of Preferred Stock during the 20-day period commencing the date of such notice to the effective date of the event triggering such notice.

(x) If the Company (i) makes a public announcement that it intends to enter into a Change of Control Transaction (as defined in Section 8) or (ii) any person, group or entity (including the Company, but excluding a Holder or any affiliate of a Holder) publicly announces a bona fide tender offer, exchange offer or other transaction to purchase 33% or more of the Common Stock (such announcement being referred to herein as a “ Major Announcement ” and the date on which a Major Announcement is made, the “ Announcement Date ”), then, in the event that a Holder seeks to convert shares of Preferred Stock on or following the Announcement Date, the Conversion Price shall, effective upon the Announcement Date and continuing through the earlier to occur of the consummation of the proposed transaction or tender offer, exchange offer or other transaction and the Abandonment Date (as defined below), be equal to the lower of (x) the average Per Share Market Value on the five Trading Days immediately preceding (but not including) the Announcement Date and (y) the Conversion Price that would otherwise have been in effect on the Conversion Date for such Preferred Stock but for the application of this section. “ Abandonment Date ” means with respect to any proposed transaction or tender offer, exchange offer or other transaction for which a public announcement as contemplated by this paragraph has been made, the date upon which the Company (in the case of clause (i) above) or the person, group or entity (in the case of clause (ii) above) publicly announces the termination or abandonment of the proposed transaction or tender offer, exchange offer or another transaction which caused this paragraph to become operative.

(d) The Company covenants that it will at all times reserve and keep available out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of Preferred Stock and payment of dividends on Preferred Stock, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holders, not less than such number of shares of Common Stock as shall (subject to any additional requirements of the Company as to reservation of such shares set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5(a) and Section 5(c)) upon the conversion of all outstanding shares of Preferred Stock and payment of dividends hereunder. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable and freely tradeable, subject to the legend requirements of Section 3.1 (b) of the Purchase Agreement.

(e) Upon a conversion hereunder the Company shall not be required to issue stock certificates representing fractions of shares of Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the Per Share Market Value at such time. If the Company elects not, or is unable, to make such a cash payment, the Holder of a share of Preferred Stock shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.

(f) The issuance of certificates for shares of Common Stock on conversion of Preferred Stock shall be made without charge to the Holders thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of such shares of Preferred Stock so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

(g) Shares of Preferred Stock converted into Common Stock shall be canceled. The Company may not reissue any shares of Preferred Stock.

(h) Any and all notices or other communications or deliveries to be provided by the Holders of the Preferred Stock hereunder, including, without limitation, any Conversion Notice, shall be in writing and delivered personally, by facsimile or sent by a nationally recognized overnight courier service, addressed to the attention of the Chief Financial Officer of the Company at the facsimile telephone number or address of the principal place of business of the Company as set forth in the Purchase Agreement. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile or sent by a nationally recognized overnight courier service, addressed to each Holder at the facsimile telephone number or address of such Holder appearing on the books of the Company, or if no such facsimile telephone number or address appears, at the principal place of business of the Holder. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 8:00 p.m. (Eastern Standard Time), (ii) the date after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section later than 8:00 p.m. (Eastern Standard Time) on any date and earlier than 11:59 p.m. (Eastern Standard Time) on such date, (iii) upon receipt, if sent by a nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.

-7-

Section 6. Optional Redemption .

(a) The Company shall have the right, exercisable at any time upon 20 Trading Days’ notice (an “ Optional Redemption Notice ”) to the Holders of the Preferred Stock given at any time after the Original Issue Date to redeem all or any portion of the shares of Preferred Stock which have not previously been converted or redeemed, at a price equal to the Optional Redemption Price (as defined below), provided , that the Company shall not be entitled to deliver an Optional Redemption Notice to the Holders if: (i) the number of shares of Common Stock at the time authorized, unissued and unreserved for all purposes is insufficient to satisfy the Company’s conversion obligations of all shares of Preferred Stock then outstanding, or (ii) the Underlying Shares then outstanding are not registered for resale pursuant to an effective Underlying Securities Registration Statement and may not be sold without volume restrictions pursuant to Rule 144 promulgated under the Securities Act, as determined by counsel to the Company pursuant to a written opinion letter, addressed to the Company’s transfer agent in the form and substance acceptable to the Holders and such transfer agent, or (iii) the Common Stock is not then listed for trading on the NASDAQ or a Subsequent Market. The entire Optional Redemption Price shall be paid in cash. Holders may convert (and the Company shall honor such conversions in accordance with the terms hereof) any shares of Preferred Stock, including shares subject to an Optional Redemption Notice, during the period from the date thereof through the 20th Trading Day after the receipt of an Optional Redemption Notice.

(b) If any portion of the Optional Redemption Price shall not be paid by the Company by the 20th Trading Day after the delivery of an Optional Redemption Notice, interest shall accrue thereon at the rate of 15% per annum until the Optional Redemption Price plus all such interest is paid in full. In addition, if any portion of the Optional Redemption Price remains unpaid after the date due, the Holder of the Preferred Stock subject to such redemption may elect, by written notice to the Company given at any time thereafter, to either (i) demand conversion of all or any portion of the shares of Preferred Stock for which such Optional Redemption Price, plus interest thereof, has not been paid in full (the “ Unpaid Redemption Shares ”), in which event the Per Share Market Value for such shares shall be the lower of the Per Share Market Value calculated on the date the Optional Redemption Price was originally due and the Per Share Market Value as of the Holder’s written demand for conversion, or (ii) invalidate ab initio such redemption, notwithstanding anything herein contained to the contrary. If the Holder elects option (i) above, the Company shall within three (3) Trading Days of its receipt of such election deliver to the Holder the shares of Common Stock issuable upon conversion of the Unpaid Redemption Shares subject to such Holder conversion demand and otherwise perform its obligations hereunder with respect thereto; or, if the Holder elects option (ii) above, the Company shall promptly, and in any event not later than three (3) Trading Days from receipt of Holder’s notice of such election, return to the Holder all of the Unpaid Redemption Shares.

(c) The “ Optional Redemption Price ” shall equal the sum of (i) the product of (A) the number of shares of Preferred Stock to be redeemed and (B) the product of (1) the average Per Share Market Value for the five (5) Trading Days immediately preceding (x) the date of the Optional Redemption Notice or (y) the date of payment in full by the Company of the Optional Redemption Price, whichever is greater, and (2) the Conversion Ratio calculated on the date of the Optional Redemption Notice, and (ii) all other amounts, costs, expenses and liquidated damages due in respect of such shares of Preferred Stock.

Section 7. Redemption Upon Triggering Events .

(a) Upon the occurrence of a Triggering Event, each Holder shall (in addition to all other rights it may have hereunder or under applicable law), has the right, exercisable at the sole option of such Holder, to require the Company to redeem all or a portion of the Preferred Stock then held by such Holder for a redemption price, in cash, equal to the sum of (i) the Mandatory Redemption Amount plus (ii) the product of (A) the number of Underlying Shares issued in respect of conversions or as payment of dividends hereunder and then held by the Holder and (B) the Per Share Market Value on the date such redemption is demanded or the date the redemption price hereunder is paid in full, whichever is greater. If the Company fails to pay the redemption price hereunder in full pursuant to this Section within seven (7) days after the date of a demand therefor, the Company will pay interest thereon at a rate of 15% per annum, accruing daily from such seventh day until the redemption price, plus all such interest thereon, is paid in full. For purposes of this Section, a share of Preferred Stock is outstanding until such date as the Holder shall have received Underlying Shares upon a conversion (or attempted conversion) thereof.

A “Triggering Event” means any one or more of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

(i) the failure of an Underlying Securities Registration Statement to be declared effective by the Commission on or prior to the 180th day after the Original Issue Date;

(ii) if, during the Effectiveness Period, the effectiveness of the Underlying Securities Registration Statement lapses for any reason, or the Holder shall not be permitted to resell Registrable Securities under the Underlying Securities Registration Statement;

-8-

(iii) the failure of the Common Stock to be listed for trading on the NASDAQ or on a Subsequent Market or the suspension of the Common Stock from trading on the NASDAQ or on a Subsequent Market, in either case, for more than three (3) days (which need not be consecutive days);

(iv) the Company shall fail for any reason to deliver certificates representing Underlying Shares issuable upon a conversion hereunder that comply with the provisions hereof prior to the 10th day after the Conversion Date or the Company shall provide notice to any Holder, including by way of public announcement, at any time, of its intention not to comply with requests for conversion of any Preferred Stock in accordance with the terms hereof;

(v) the Company shall be a party to any Change of Control Transaction, shall agree to sell (in one or a series of related transactions) all or substantially all of its assets (whether or not such sale would constitute a Change of Control Transaction) or shall redeem more than a de minimis number of shares of Common Stock or other Junior Securities (other than redemptions of Underlying Shares);

(vi) an Event shall not have been cured to the satisfaction of the Holders prior to the expiration of thirty (30) days from the Event Date relating thereto;

(vii) the Company shall fail for any reason to deliver the certificate or certificates required pursuant to Section 5(b)(iii) or the cash pursuant to a Buy-In within seven (7) days after notice is deemed delivered hereunder; or

(viii) the Company shall fail to have available a sufficient number of authorized and unreserved shares of Common Stock to issue to such Holder upon a conversion hereunder.

Section 8. Definitions . For the purposes hereof, the following terms shall have the following meanings:

“ Change of Control Transaction ” means the occurrence of any of (i) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(l) promulgated under the Exchange Act) of in excess of 33% of the voting securities of the Company, (ii) a replacement of more than one-half of the members of the Company’s board of directors which is not approved by those individuals who are members of the board of directors on the date hereof in one or a series of related transactions, (iii) the merger of the Company with or into another entity, consolidation or sale of all or substantially all of the assets of the Company in one or a series of related transactions, unless following such transaction, the holders of the Company’s securities continue to hold at least 33% of such securities following such transaction or (iv) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in (i), (ii) or (iii).

“ Common Stock ” means the Company’s common stock, par value $.007 per share, and stock of any other class into which such shares may hereafter have been reclassified or changed.

“ Conversion Ratio ” means, at any time, a fraction, the numerator of which is Stated Value plus accrued but unpaid dividends (including any accrued but unpaid late fees thereon) but only to the extent not paid in shares of Common Stock in accordance with the terms hereof, and the denominator of which is the Conversion Price at such time.

“ Exchange Agreement ” means the Exchange Agreement, dated as of July 28, 1998, between the Company and the original Holder of the Preferred Stock.

“ Floor ” shall initially mean $2.50 (the “ Initial Floor ”), provided , that, if at any time after the Original Issue Date, the average Per Share Market Value for any five (5) consecutive Trading Days (such five Trading Day average, the “ Reset Price ”) is lower than the Initial Floor, the Floor shall be reset to the Reset Price. After such initial reset, if any, subsequent resets of the Floor may occur and shall be based upon the then most recent Reset Price. Notwithstanding the foregoing, subject to the adjustments contemplated in Sections 5(c)(i)-(v), the Floor shall not be less than $1.25.

“ Junior Securities ” means the Common Stock and all other equity securities of the Company which are junior in rights and liquidation preference to the Preferred Stock.

“ Mandatory Redemption Amount ” for each share of Preferred Stock means the sum of (i) the greater of (A) 130% of the Stated Value and all accrued dividends with respect to such share, and (B) the product of (a) the Per Share Market Value on the Trading Day immediately preceding (x) the date of the Triggering Event or the Conversion Date, as the case may be, or (y) the date of payment in full by the Company of the applicable redemption price, whichever is greater, and (b) the Conversion Ratio calculated on the date of the Triggering Event, or the Conversion Date, as the case may be, and (ii) all other amounts, costs, expenses and liquidated damages due in respect of such shares of Preferred Stock.

-9-

“ Original Issue Date ” shall mean the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers of any particular shares of Preferred Stock and regardless of the number of certificates which may be issued to evidence such Preferred Stock.

“ Per Share Market Value ” means on any particular date (a) the closing bid price per share of the Common Stock on such date on the NASDAQ or on such Subsequent Market on which the Common Stock is then listed or quoted, or if there is no such price on such date, then the closing bid price on the NASDAQ or on such Subsequent Market on which the Common Stock is then listed or quoted on the date nearest preceding such date, or (b) if the Common Stock is not then listed or quoted on the NASDAQ or on a Subsequent Market, the closing bid price for a share of Common Stock in the over-the-counter market, as reported by the National Quotation Bureau Incorporated or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (c) if the Common Stock is not then reported by the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices), then the average of the “Pink Sheet” quotes for the relevant conversion period, as determined in good faith by the Holder, or (d) if the Common Stock is not then publicly traded the fair market value of a share of Common Stock as determined by an Appraiser selected in good faith by the Holders of a majority of the shares of the Preferred Stock.

“ Person ” means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency.

“ Purchase Agreement ” means the Convertible Preferred Stock Purchase Agreement, dated as of June 30, 1998, between the Company and the original Holder of the Preferred Stock.

“ Registration Rights Agreement ” means the Registration Rights Agreement, dated as of June 30, 1998, between the Company and the original Holder of the Preferred Stock.

“ Trading Day ” means (a) a day on which the Common Stock is traded on the NASDAQ or on such Subsequent Market on which the Common Stock is then listed or quoted, as the case may be, or (b) if the Common Stock is not listed on the NASDAQ or on a Subsequent Market, a day on which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided , however , that in the event that the Common Stock is not listed or quoted as set forth in (a), (b) and (c) hereof, then Trading Day shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close.

“ Underlying Securities Registration Statement ” means a registration statement that meets the requirement of the Registration Rights Agreement and registers the resale of all Underlying Shares by the recipient thereof, who shall be named as a “selling stockholder” thereunder.

“ Underlying Shares ” means, collectively, the shares of Common Stock into which the Shares are convertible and the shares of Common Stock issuable upon payment of dividends thereon in accordance with the terms hereof.

-10-

EXHIBIT A

NOTICE OF CONVERSION

(To be Executed by the Registered Holder

in order to Convert shares of Preferred Stock)

The undersigned hereby elects to convert the number of shares of 5% Series F Convertible Preferred Stock indicated below, into shares of Common Stock, par value $.007 per share (the “ Common Stock ”), of I-Link Incorporated (the “ Company ”) according to the conditions hereof, as of the date written below. If shares are to be issued in the name of a person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the Holder for any conversion, except for such transfer taxes, if any.

Conversion calculations:
	Date to Effect Conversion


	Number of shares of Preferred Stock to be Converted


	Number of shares of Common Stock to be Issued


	Applicable Conversion Price


	Signature


	Name


	Address

3. The foregoing amendment was duly adopted by the Board of Directors without the requirement of shareholder action by meeting held on July 21, 1998, pursuant to the provisions of the Florida Business Corporation Act.

I-LINK INCORPORATED

By:

/s/ John W. Edwards

John W. Edwards, President/Director

ATTEST:

/s/ David E. Hardy

David E. Hardy, Secretary

-11-

ARTICLES OF AMENDMENT TO THE AMENDED

AND RESTATED ARTICLES OF INCORPORATION

I-LINK INCORPORATED

1. The name of the corporation is I-Link Incorporated.

2. Article III is hereby amended by adding Section III(i), which shall read in its entirety as follows:

“(i) Of the 10,000,000 shares of Preferred Stock authorized hereunder, 1,000 shares of Preferred Stock shall be designated as 5 % Series E Convertible Preferred Stock (the “Series E Preferred Stock”). The number of shares so designated as Series E Preferred Stock shall not be subject to increase without the consent of the holders of the Series E Preferred Stock (each, a “ Holder ” and collectively, the “ Holders ”). Each share of Series E Preferred Stock shall have a par value of $10.00 and a stated value of $10,000.00 (the “Stated Value”).

1. Dividends .

(a) Holders shall be entitled to receive, when and as declared by the Board of Directors out of funds legally available therefor, and the Company shall pay, cumulative dividends at the rate per share (as a percentage of the Stated Value per share) equal to 5% per annum, payable on a quarterly basis on March 31, June 30, September 30 and December 31 of each year during the term hereof (each a “ Dividend Payment Date ”), commencing on September 30, 1998, in cash or shares of Common Stock (as defined in Section 7) at, subject to the terms and conditions set forth herein, the option of the Company. Dividends on the Preferred Stock shall be calculated on the basis of a 360-day year, shall accrue daily commencing on the Original Issue Date (as defined in Section 7), and shall be deemed to accrue from such date whether or not earned or declared and whether or not there are profits, surplus or other funds of the Company legally available for the payment of dividends. Any dividends not paid on any Dividend Payment Date shall continue to accrue and shall be due and payable upon conversion of the Preferred Stock. A party that holds shares of Preferred Stock on a Dividend Payment Date will be entitled to receive such dividend payment and any other accrued and unpaid dividends which accrued prior to such Dividend Payment Date, without regard to any sale or disposition of such Preferred Stock subsequent to the applicable record date. All overdue accrued and unpaid dividends and other amounts due herewith shall entail a late fee at the rate of 15% per annum (to accrue daily, from the date such dividend is due hereunder through and including the date of payment). Except as otherwise provided herein, if at any time the Company pays less than the total amount of dividends then accrued on account of the Preferred Stock, such payment shall be distributed ratably among the Holders based upon the number of shares held by each Holder. Payment of dividends on the Preferred Stock is further subject to the provisions of Section 4(c)(i). The Company shall provide the Holders notice of its intention to pay dividends in cash or shares of Common Stock not less than 10 Trading Days prior to any Dividend Payment Date for so long as shares of Preferred Stock are outstanding. If dividends are paid in shares of Common Stock, the number of shares of Common Stock issuable on account of such dividend shall equal the cash amount of such dividend on such Dividend Payment Date divided by the Conversion Price (as defined below) on such date.

(b) Notwithstanding anything to the contrary contained herein, the Company may not issue shares of Common Stock in payment of dividends on the Preferred Stock (and must deliver cash in respect thereof) if:

(i) the number of shares of Common Stock at the time authorized, unissued and unreserved for all purposes is insufficient to pay such dividends in shares of Common Stock;

(iii) the Common Stock is not then listed or quoted on the Nasdaq SmallCap Market (“ Nasdaq ”) or on the New York Stock Exchange, American Stock Exchange or the Nasdaq National Market (each, a “ Subsequent Market ”);

(iv) the Company has failed to timely satisfy its conversion obligations hereunder; or

(c) So long as any Preferred Stock shall remain outstanding, neither the Company nor any subsidiary thereof shall redeem, purchase or otherwise acquire directly or indirectly any Junior Securities (as defined in Section 7), nor shall the Company directly or indirectly pay or declare any dividend or make any distribution (other than a dividend or distribution described in Section 4) upon, nor shall any distribution be made in respect of, any Junior Securities (as defined in Section 7), nor shall any monies be set aside for or applied to the purchase or redemption (through a sinking fund or otherwise) of any Junior Securities or shares pari passu with the Preferred Stock, except for repurchases effected by the Company on the open market, pursuant to a direct stock purchase plan.

2. Voting Rights . Except as otherwise provided herein and as otherwise required by law, the Preferred Stock shall have no voting rights. However, so long as any shares of Preferred Stock are outstanding, the Company shall not and shall cause its subsidiaries not to, without the affirmative vote of the Holders of all of the shares of the Preferred Stock then outstanding, alter or change adversely the powers, preferences or rights given to the Preferred Stock, (b) alter or amend this Certificate of Designation, (c) authorize or create any class of stock ranking as to dividends or distribution of assets upon a Liquidation (as defined in Section 3) senior to or otherwise pari passu with or senior to the Preferred Stock, (d) amend its Certificate of Incorporation, bylaws or other charter documents so as to affect adversely any rights of any Holders, (e) increase the authorized number of shares of Preferred Stock, or (f) enter into any agreement with respect to the foregoing.

3. Liquidation . Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a “ Liquidation ”), the Holders shall be entitled to receive out of the assets of the Company, whether such assets are capital or surplus, for each share of Preferred Stock an amount equal to the Stated Value plus all due but unpaid dividends per share, whether declared or not, before any distribution or payment shall be made to the holders of any Junior Securities, and if the assets of the Company shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders shall be distributed among the Holders ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. A sale, conveyance or disposition of all or substantially all of the assets of the Company or the effectuation by the Company of a transaction or series of related transactions in which more than 33% of the voting power of the Company is disposed of, or a consolidation or merger of the Company with or into any other company or companies shall not be treated as a Liquidation, but instead shall be subject to the provisions of Section 4. The Company shall mail written notice of any such Liquidation, not less than 45 days prior to the payment date stated therein, to each record Holder.

4. Conversion .

(a) (i) Conversions at Option of Holder . Each share of Preferred Stock shall be convertible into shares of Common Stock (subject to the limitations set forth in Section 4(a)(iii) hereof) at the Conversion Ratio (as defined in Section 7) at the option of the Holder, at any time and from time to time, from and after the Original Issue Date. Holders shall effect conversions by surrendering the certificate or certificates representing the shares of Preferred Stock to be converted to the Company, together with the form of conversion notice attached hereto as Exhibit A (a “ Conversion Notice ”). Each Conversion Notice shall specify the number of shares of Preferred Stock to be converted and the date on which such conversion is to be effected, which date may not be prior to the date the Holder delivers such Conversion Notice by facsimile (the “ Conversion Date ”). If no Conversion Date is specified in a Conversion Notice, the Conversion Date shall be the date that the Conversion Notice is deemed delivered hereunder. If the Holder is converting less than all shares of Preferred Stock represented by the certificate or certificates tendered by the Holder with the Conversion Notice, or if a conversion hereunder cannot be effected in full for any reason, the Company shall promptly deliver to such Holder (in the manner and within the time set forth in Section 4(b)) a certificate for such number of shares as have not been converted.

(ii) Automatic Conversion . Subject to the provisions in this paragraph, all outstanding shares of Preferred Stock for which conversion notices have not previously been received or for which redemption has not been made or required hereunder shall be automatically converted on the third anniversary of the Original Issue Date at the Conversion Price on such date. The conversion contemplated by this paragraph shall not occur so long as (a) (1) an Underlying Securities Registration Statement (as defined in Section 7) is not then effective or (2) the Holder is not permitted to resell Underlying Shares pursuant to Rule 144(k) promulgated under the Securities Act, without volume restrictions, as evidenced by an opinion letter of counsel acceptable to the Holder and the transfer agent for the Common Stock; (b) there are not sufficient shares of Common Stock authorized and reserved for issuance upon such conversion; or (c) the Company shall have defaulted on its covenants and obligations hereunder or under the Purchase Agreement or Registration Rights Agreement. Notwithstanding the foregoing, the three-year period for conversion under this Section shall be extended (on a day-for-day basis) for any Trading Days that the Purchaser is unable to resell Underlying Shares under an Underlying Securities Registration Statement due to (a) the Common Stock not being listed for trading on the Nasdaq or any

Subsequent Market, (b) the failure of an Underlying Securities Registration Statement to be declared effective by the Securities and Exchange Commission (the “Commission”) by the Filing Date (as defined in the Registration Rights Agreement), or (c) if an Underlying Securities Registration Statement shall have been declared effective by the Commission, (x) the failure of such Underlying Securities Registration Statement to remain effective during the “Effectiveness Period” (as defined in the Registration Rights Agreement) as to all Underlying Shares, or (y) the suspension of the Holder’s ability to resell Underlying Shares thereunder.

(iii) Certain Conversion Restrictions .

(B) If on any Conversion Date (A) the Common Stock is listed for trading on the Nasdaq or the Nasdaq National Market, (B) the Conversion Price then in effect is such that the aggregate number of shares of Common Stock that would then be issuable upon conversion in full of all then outstanding shares of Preferred Stock and as payment of dividends thereon in shares of Common Stock, together with any shares of the Common Stock previously issued upon conversion of shares of Preferred Stock and as payment of dividends thereon, would equal or exceed 20% of the number of shares of the Common Stock outstanding on the Original Issue Date (such number of shares as would not equal or exceed such 20% limit, the Issuable Maximum ”), and (C) the Company shall not have previously obtained the vote of shareholders (the “ Shareholder Approval ”), if any, as may be required by the applicable rules and regulations of The Nasdaq Stock Market (or any success entity) applicable to approve the issuance of shares of Common Stock in excess of the Issuable Maximum in a private placement whereby shares of Common Stock are deemed to have been issued at a price that is less than the greater of book or fair market value of the Common Stock, then the Company shall issue to the Holder so requesting a conversion a number of shares of Common Stock equal to the Issuable Maximum and, with respect to the remainder of the aggregate Stated Value of the shares of Preferred Stock then held by such Holder for which a conversion in accordance with the Conversion Price would result in an issuance of Common Stock in excess of the Issuable Maximum (the “ Excess Stated Value ”), the converting Holder shall have the option to require the Company to either (1) use its best efforts to obtain the Shareholder Approval applicable to such issuance as soon as is possible, but in any event not later than the 60th day after such request, or (2)(i) issue and deliver to such Holder a number of shares of Common Stock as equals (x) the Excess Stated Value, plus accrued dividends on all shares of Preferred Stock being converted, divided by (y) the Initial Conversion Price, and (ii) deliver to the Holder cash in an amount equal to the product of (x) the Per Share Market Value on the Conversion Date and (y) the number of shares of Common Stock in excess of such Holder’s pro rata portion of the Issuable Maximum that would have otherwise been issuable to the Holder in respect of such conversion but for the provisions of this Section (such amount of cash being hereinafter referred to as the “ Discount Equivalent ”), or (3) pay cash to the converting Holder in an amount equal to the Mandatory Redemption Amount (as defined in Section 7) for the Excess Stated Value. If the Company fails to pay the Discount Equivalent or the Mandatory Redemption Amount, as the case may be, in full pursuant to this Section within seven (7) days after the date payable, the Company will pay interest thereon at a rate of 18% per annum to the converting Holder, accruing daily from the Conversion Date until such amount, plus all such interest thereon, is paid in full.

(b) (i) Not later than three (3) Trading Days after any Conversion Date, the Company will deliver to the Holder (i) a certificate or certificates which shall be free of restrictive legends and trading restrictions (other than those required by Section 3.1(b) of the Purchase Agreement) representing the number of shares of Common Stock being acquired upon the conversion of shares of Preferred Stock (subject to the limitations set forth in Section 4(a)(iii) hereof), (ii) one or more certificates representing the number of shares of Preferred Stock not converted, (iii) a bank check in the amount of accrued and unpaid dividends (if the Company has elected to pay accrued dividends in cash), and (iv) if the Company has elected and is permitted hereunder to pay accrued dividends in shares of Common Stock, certificates, which shall be free of restrictive legends and trading restrictions (other than those required by Section 3.1 (b) of the Purchase Agreement), representing such shares of Common Stock; provided , however , that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon conversion of any shares of Preferred Stock until

certificates evidencing such shares of Preferred Stock are either delivered for conversion to the Company or any transfer ag ent for the Preferred Stock or Common Stock, or the Holder of such Preferred Stock notifies the Company that such certificates have been lost, stolen or destroyed and provides a bond (or other adequate security) reasonably satisfactory to the Company to in demnify the Company from any loss incurred by it in connection therewith. The Company shall, upon request of the Holder, if available, use its best efforts to deliver any certificate or certificates required to be delivered by the Company under this Sectio n electronically through the Depository Trust Corporation or another established clearing corporation performing similar functions. If in the case of any Conversion Notice such certificate or certificates, including for purposes hereof, any shares of Commo n Stock to be issued on the Conversion Date on account of accrued but unpaid dividends hereunder, are not delivered to or as directed by the applicable Holder by the third (3 ^rd ) Trading Day after the Conversion Date, the Holder shall be entitled by written notice to the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Company shall immediately return the certificates representing the shares of Preferred Stock tendered for conversion.

(ii) If the Company fails to deliver to the Holder such certificate or certificates pursuant to Section 4(b)(i), including for purposes hereof, any shares of Common Stock to be issued on the Conversion Date on account of accrued but unpaid dividends hereunder, by the third (3 ^rd ) Trading Day after the Conversion Date, the Company shall pay to such Holder, in cash, as liquidated damages and not as a penalty, $5,000 for each day after such third (3 ^rd ) Trading Day until such certificates are delivered. Nothing herein shall limit a Holder’s right to pursue actual damages for the Company’s failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holders from seeking to enforce damages pursuant to any other Section hereof or under applicable law. Further, if the Company shall not have delivered any cash due in respect of conversions of Preferred Stock or as payment of dividends thereon by the third (3 ^rd ) Trading Day after the Conversion Date, the Holder may, by notice to the Company, require the Company to issue Underlying Shares pursuant to Section 4(c), except that for such purpose the Conversion Price applicable thereto shall be the lesser of the Conversion Price on the Conversion Date and the Conversion Price on the date of such Holder demand. Any such Underlying Shares will be subject to the provision of this Section.

(iii) In addition to any other rights available to the Holder, if the Company fails to deliver to the Holder such certificate or certificates pursuant to Section 4(b)(i), including for purposes hereof, any shares of Common Stock to be issued on the Conversion Date on account of accrued but unpaid dividends hereunder, by the third (3 ^rd ) Trading Day after the Conversion Date, and if after such third (3 ^rd ) Trading Day the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Holder of the Underlying Shares which the Holder anticipated receiving upon such conversion (a “ Buy-In ”), then the Company shall pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the aggregate stated value of the shares of Preferred Stock for which such conversion was not timely honored. For example, if the Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of $10,000 aggregate stated value of the shares of Preferred Stock, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In.

(c) (i) The conversion price for each share of Preferred Stock (the “ Conversion Price ”) in effect on any Conversion Date shall be the lesser of (a) the Initial Conversion Price (as defined in Section 7) and (b) 90% (the “ Discount Rate ”) multiplied by the average of the three (3) lowest Per Share Market Values during the twenty two (22) Trading Day period immediately preceding the applicable Conversion Date, provided , however , that such twenty two (22) Trading Day period shall be extended for the number of Trading Days, if any, during such period in which (A) trading in the Common Stock was suspended from the Nasdaq or a Subsequent Market, or (B) after the date declared effective by the Commission, the Underlying Securities Registration Statement is not effective, or (C) after the date declared effective by the Commission, the Prospectus included in the Underlying Securities Registration Statement may not be used by the Holder for the resale of Underlying Shares. If: (a) an Underlying Securities Registration Statement is not filed on or prior to the Filing Date (if the Company files such Underlying Securities Registration Statement without affording the Holder the opportunity to review and comment on the same as required by Section 3(a) of the Registration Rights Agreement, the Company shall not be deemed to have satisfied this clause (a)), or (b) the Company fails to file with the Commission a request for acceleration in accordance with Rule 12d1-2 promulgated under the Securities Exchange Act of 1934, as amended, within five (5) days of the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that an Underlying Securities Registration Statement will not be “reviewed,” or not subject to further review, or (c) the Underlying Securities Registration Statement is not declared effective by the Commission on or prior to the Effectiveness Date (as defined in the Registration Rights Agreement), or (d) such Underlying Securities Registration Statement is filed with and declared effective by the Commission but thereafter ceases to be effective as to all Registrable Securities (as defined in the Registration Rights Agreement) at any time prior to the expiration of the Effectiveness Period, without being succeeded within ten (10) days by a subsequent Underlying Securities Registration Statement filed with and declared effective by the Commission, or (e) trading in the Common Stock shall be suspended from the Nasdaq or a Subsequent Market for more than three (3) Business Days (which need not be consecutive days), (f) the conversion rights of the

Holders are suspended for any reason or (g) an amendment to the Underlying Securities Registration Statement is not filed by the Company with the Commissio n within ten (10) days of the Commission’s notifying the Company that such amendment is required in order for the Underlying Securities Registration Statement to be declared effective (any such failure or breach being referred to as an “ Event ,” and for pur poses of clauses (a), (c), (f) the date on which such Event occurs, or for purposes of clause (b) the date on which such five (5) day period is exceeded, or for purposes of clauses (d) and (g) the date which such 10 day-period is exceeded, or for purposes of clause (e) the date on which such three (3) Business Day-period is exceeded, being referred to as “ Event Date ”), then each of the Initial Conversion Price and the Discount Rate shall be decreased by 2% on the Event Date and each monthly anniversary ther eof until the earlier to occur of the second month anniversary after the Event Date and such time as the applicable Event is cured (i.e., the Discount Rate would decrease to 88% as of the Event Date and 86% as of the one month anniversary of such Event Dat e). Commencing on the second month anniversary after the Event Date, the Holder shall have the option to either (x) require further cumulative 2% discounts to continue or (y) require the Company to pay to the Holder 2% of the aggregate Stated Values of the shares of Preferred Stock then held by such Holder, in cash, as liquidated damages and not as a penalty, on the first day of each monthly anniversary of the Event Date, until such time as the applicable Event is cured. Any decrease in the Initial Conversi on Price and the Discount Rate pursuant to this Section shall remain in effect notwithstanding the fact that the Event causing such decrease has been subsequently cured and further monthly decreases have ceased. The provisions of this Section are not exclu sive and shall in no way limit the Company’s obligations under the Registration Rights Agreement.

(ii) If the Company, at any time while any shares of Preferred Stock are outstanding, shall (a) pay a stock dividend or otherwise make a distribution or distributions on shares of its Junior Securities or pari passu securities payable in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of Common Stock any shares of capital stock of the Company, the Initial Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section 4(c)(ii) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

(iii) If the Company, at any time while any shares of Preferred Stock are outstanding, shall issue rights, warrants or options to all holders of Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Per Share Market Value at the record date mentioned below, then the Initial Conversion Price shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to the issuance of such rights, warrants or options, plus the number of shares of Common Stock which the aggregate offering price of the total number of shares so offered would purchase at such Per Share Market Value, and the denominator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to such issuance plus the number of shares of Common Stock offered for subscription or purchase. Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights or warrants. However, upon the expiration of any right, warrant or option to purchase shares of Common Stock the issuance of which resulted in an adjustment in the Conversion Price pursuant to this Section 4(c)(iii), if any such right, warrant or option shall expire and shall not have been exercised, the Conversion Price shall immediately upon such expiration shall be recomputed and effective immediately upon such expiration shall be increased to the price which it would have been (but reflecting any other adjustments in the Conversion Price made pursuant to the provisions of this Section 4 upon the issuance of other rights or warrants) had the adjustment of the Conversion Price made upon the issuance of such rights, warrants, or options been made on the basis of offering for subscription or purchase only that number of shares of Common Stock actually purchased upon the exercise of such rights, warrants or options actually exercised.

(iv) If the Company or any subsidiary thereof, as applicable with respect to Common Stock Equivalents (as defined below), at any time while any shares of Preferred Stock are outstanding, shall issue shares of Common Stock or rights, warrants, options or other securities or debt that is convertible into or exchangeable for shares of Common Stock (“ Common Stock Equivalents ”) entitling any Person to acquire shares of Common Stock at a price per share less than the Conversion Price, then the Conversion Price shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to the issuance of shares of Common Stock or such Common Stock Equivalents plus the number of shares of Common Stock which the offering price for such shares of Common Stock or Common Stock Equivalents would purchase at the Conversion Price, and the denominator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to such issuance plus the number of shares of Common Stock so issued or issuable, provided, that for purposes hereof, all shares of Common Stock that are issuable upon exercise or exchange of Common Stock Equivalents shall be deemed outstanding immediately after the issuance of such Common Stock Equivalents. Such adjustment shall be made whenever such shares of Common Stock or Common Stock Equivalents are issued.

(excluding those referred to in Sections 4(c)(ii)-(iv) above), then in each such case the Initial Conversion Price at which each share of Preferred Stock sha ll thereafter be convertible shall be determined by multiplying the Initial Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Per Share Market Value of Common Stock determined as of the record date mentioned above, and of which the numerator shall be such Per Share Market Value of the Common Stock on such record date less the then fair market value at such record da te of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors in good faith; provided , however , that in the event of a distribution exceeding ten perc ent (10%) of the net assets of the Company, if the Holders of a majority in interest of the Preferred Stock dispute such valuation, such fair market value shall be determined by a nationally recognized or major regional investment banking firm or firm of i ndependent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Company) (an “ Appraiser” ) selected in good faith by the Holders of a majority in interest of the shares of Preferr ed Stock then outstanding; and provided , further , that the Company, after receipt of the determination by such Appraiser shall have the right to select an additional Appraiser, in good faith, in which case the fair market value shall be equal to the averag e of the determinations by each such Appraiser. In either case the adjustments shall be described in a statement provided to the Holders of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one shar e of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

(vi) All calculations under this Section 4 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.

(vii) Whenever the Conversion Price is adjusted pursuant to Section 4(c)(i),(ii),(iii),(iv), or (v) the Company shall promptly mail to each Holder, a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

(x) If the Company (i) makes a public announcement that it intends to enter into a Change of Control Transaction (as defined in Section 7) or (ii) any person, group or entity (including the Company, but excluding a Holder or any affiliate of a Holder) publicly announces a bona fide tender offer, exchange offer or other transaction to purchase 33% or more of the Common Stock (such announcement being referred to herein as a “ Major Announcement ” and the date on which a Major Announcement is made, the “ Announcement Date ”), then, in the event that a Holder seeks to convert shares of Preferred Stock on or following the Announcement

Date, the Conversion Price shall, effective upon the Announcement Date and continuing through the earlier to occur of the consummation of the proposed transaction or tender offer, exchange offer or other transaction and the Ab andonment Date (as defined below), be equal to the lower of (x) the average Per Share Market Value on the five Trading Days immediately preceding (but not including) the Announcement Date and (y) the Conversion Price that would otherwise have been in effec t on the Conversion Date for such Preferred Stock but for the application of this section. “ Abandonment Date ” means with respect to any proposed transaction or tender offer, exchange offer or other transaction for which a public announcement as contemplate d by this paragraph has been made, the date upon which the Company (in the case of clause (i) above) or the person, group or entity (in the case of clause (ii) above) publicly announces the termination or abandonment of the proposed transaction or tender o ffer, exchange offer or another transaction which caused this paragraph to become operative.

(xi) The Company covenants that it will at all times reserve and keep available out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of Preferred Stock and payment of dividends on Preferred Stock, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holders, not less than such number of shares of Common Stock as shall (subject to any additional requirements of the Company as to reservation of such shares set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 4(a) and Section 4(c)) upon the conversion of all outstanding shares of Preferred Stock and payment of dividends hereunder. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable and freely tradeable, subject to the legend requirements of Section 3.1 (b) of the Purchase Agreement.

(xii) Upon a conversion hereunder the Company shall not be required to issue stock certificates representing fractions of shares of Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the Per Share Market Value at such time. If the Company elects not, or is unable, to make such a cash payment, the Holder of a share of Preferred Stock shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.

(xiii) The issuance of certificates for shares of Common Stock on conversion of Preferred Stock shall be made without charge to the Holders thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of such shares of Preferred Stock so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

(xiv) Shares of Preferred Stock converted into Common Stock shall be canceled. The Company may not reissue any shares of Preferred Stock.

(xv) Any and all notices or other communications or deliveries to be provided by the Holders of the Preferred Stock hereunder, including, without limitation, any Conversion Notice, shall be in writing and delivered personally, by facsimile or sent by a nationally recognized overnight courier service, addressed to the attention of the Chief Financial Officer of the Company at the facsimile telephone number or address of the principal place of business of the Company as set forth in the Purchase Agreement. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile or sent by a nationally recognized overnight courier service, addressed to each Holder at the facsimile telephone number or address of such Holder appearing on the books of the Company, or if no such facsimile telephone number or address appears, at the principal place of business of the Holder. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 8:00 p.m. (Eastern Standard Time), (ii) the date after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section later than 8:00 p.m. (Eastern Standard Time) on any date and earlier than 11:59 p.m. (Eastern Standard Time) on such date, (iii) upon receipt, if sent by a nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.

5. Optional Redemption .

for resale pursuant to an effective Underlying Securities Registration Statement and may not be sold without volume restrictions pursuant to Rule 144 promulgated under the Securities Act, as determined by counsel to the Company pu rsuant to a written opinion letter, addressed to the Company’s transfer agent in the form and substance acceptable to the Holders and such transfer agent, or ( the Common Stock is not then listed for trading on the Nasdaq or a Subsequent Market. The entire Optional Redemption Price shall be paid in cash. Holders may convert (and the Company shall honor such conversions in accordance with the terms hereof) any shares of Preferred Stock, including shares subject to an Optional Redemption Notice, during the pe riod from the date thereof through the 20th Trading Day after the receipt of an Optional Redemption Notice.

6. Redemption Upon Triggering Events .

(b)A “Triggering Event” means any one or more of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgement, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

(i) the failure of an Underlying Securities Registration Statement to be declared effective by the Commission on or prior to the 180th day after the Original Issue Date;

(iii) the failure of the Common Stock to be listed for trading on the Nasdaq or on a Subsequent Market or the suspension of the Common Stock from trading on the Nasdaq or on a Subsequent Market, in either case, for more than three (3) days (which need not be consecutive days);

(v) the Company shall be a party to any Change of Control Transaction, shall agree to sell (in one or a series of related transactions) all or substantially all of its assets (whether or not such sale would constitute a Change of Control Transac tion) or shall redeem more than a de minimis number of shares of Common Stock or other Junior Securities (other than redemptions of Underlying Shares);

(vi) an Event shall not have been cured to the satisfaction of the Holders prior to the expiration of thirty (30) days from the Event Date relating thereto;

(vii) the Company shall fail for any reason to deliver the certificate or certificates required pursuant to Section 4(b)(iii) or the cash pursuant to a Buy-In within seven (7) days after notice is deemed delivered hereunder; or

(viii) the Company shall fail to have available a sufficient number of authorized and unreserved shares of Common Stock to issue to such Holder upon a conversion hereunder.

7. Definitions . For the purposes hereof, the following terms shall have the following meanings:

“ Change of Control Transaction ” means the occurrence of any of (i) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of in excess of 33 % of the voting securities of the Company, (ii) a replacement of more than one-half of the members of the Company’s board of directors which is not approved by those individuals who are members of the board of directors on the date hereof in one or a series of related transactions, (iii) the merger of the Company with or into another entity, consolidation or sale of all or substantially all of the assets of the Company in one or a series of related transactions, unless following such transaction, the holders of the Company’s securities continue to hold at least 33% of such securities following such transaction or (iv) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in (i), (ii) or (iii).

“ Common Stock ” means the Company’s common stock, par value $.007 per share, and stock of any other class into which such shares may hereafter have been reclassified or changed.

“ Initial Conversion Price ” means (x) for the first 180 days following the Original Issue Date, 110% of the average of the Per Share Market Values for the five (5) Trading Days immediately preceding the Original Issue Date, and (v) from and after the 181st day following the Original Issue Date (the “Record Date”), the average of the Per Share Market Values for the five (5) Trading Days immediately preceding the Record Date.

“ Junior Securities ” means the Common Stock and all other equity securities of the Company which are junior in rights and liquidation preference to the Preferred Stock.

“ Per Share Market Value ” means on any particular date (a) the closing bid price per share of the Common Stock on such date on the Nasdaq or on such Subsequent Market on which the Common Stock is then listed or quoted, or if there is no such price on such date, then the closing bid price on the Nasdaq or on such Subsequent Market on which the Common Stock is then listed or quoted on the date nearest preceding such date, or (b) if the Common Stock is not then listed or quoted on the Nasdaq or on a Subsequent Market, the closing bid price for a share of Common Stock in the over-the-counter market, as reported by the National Quotation Bureau Incorporated or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (c) if the Common Stock is not then reported ‘by the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices), then the average of the “Pink Sheet” quotes for the relevant

conversion period, as determined in good faith by the Holder, or (d) if the Common Stock is not then publicly traded the fair market value of a share of Common Stock as determined by an Appraiser selected in good faith by the Holders of a majority of the shares of the Preferred Stock.

“ Person ” means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency.

“ Purchase Agreement ” means the Convertible . Preferred Stock Purchase Agreement, dated as of the Original Issue Date, among the Company and the original Holder of the Preferred Stock.

“ Registration Rights Agreement ” means the Registration Rights Agreement, dated as of the Original Issue Date, by and among the Company and the original Holder of the Preferred Stock.

“ Trading Day ” means (a) a day on which the Common Stock is traded on the Nasdaq or on such Subsequent Market on which the Common Stock is then listed or quoted, as the case may be, or (b) if the Common Stock is not listed on the Nasdaq or on a Subsequent Market, a day on which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided , however , that in the event that the Common Stock is not listed or quoted as set forth in (a), (b) and (c) hereof, then Trading Day shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close.

3. The foregoing amendment was duly adopted by the Board of Directors without the requirement of shareholder action by meeting held on July 6, 1998, pursuant to the provisions of the Florida Business Corporation Act.

IN WITNESS WHEREOF, I-Link Incorporated bas caused these Articles of Amendment to the Amended and Restated Articles of Incorporation to be executed by its President and attested to by its Secretary this 6th day of July, 1998.

I-LINK INCORPORATED

By:	/s/ John W. Edwards
	John W. Edwards, President /Director

ATTEST:

/s/ David E. Hardy
David E. Hardy, Secretary

ARTICLES OF CORRECTION TO THE

ARTICLES OF AMENDMENT TO THE

AMENDED AND RESTATED ARTICLES OF INCORPORATION OF

I-LINK INCORPORATED

(formerly Medcross, Inc.)

Pursuant to Section 607.0124 of the Florida Business Corporation Act, I-Link Incorporated (formerly Medcross, Inc.) (the “Company”) hereby corrects the Articles of Amendment to the Amended and Restated Articles of Incorporation filed on October 9, 1997, to correct an incorrect statement contained in said Articles of Amendment.

A. The incorrect statement was contained in Article C(a) of the Articles of Amendment, and incorrectly stated that “Article III of the Articles of Incorporation shall be amended by the substitution of the following paragraph (a) for paragraph (a) of Article III:

“(a) Fifty million (50,000,000) shares of common stock, having a par value of $.007 per share (the “Common Stock”).

B. This statement is incorrect in that the shareholders approved an increase in the authorized Common Stock of the Company to seventy-five million (75,000,000) shares at the Company’s annual shareholders’ meeting held on October 7, 1997.

C. The corrected Article C(a) of the Articles of Amendment should read:

“C. Article III of the Articles of Incorporation shall be amended by the substitution of the following paragraph (a) for paragraph (a) of Article III:

(a) Seventy-five million (75,000,000) shares of common stock, having a par value of $.007 per share (the “Common Stock”).”

IN WITNESS WHEREOF, I-Link Incorporated has caused these Articles of Correction to be executed by its Secretary this 21st day of October, 1997.

I-LINK INCORPORATED

By:	/s/ David E. Hardy
	David E. Hardy, Secretary

ARTICLES OF AMENDMENT

TO THE

AMENDED AND RESTATED

ARTICLES OF INCORPORATION OF

MEDCROSS, INC.

Pursuant to the Amended and Restated Articles of Incorporation of Medcross, Inc. (the “ Corporation ”), and the provisions of the Florida Business Corporation Act, the Shareholders of the Corporation have resolved to amend the Articles of Incorporation as set forth herein.

A. The name of the corporation is MEDCROSS, INC.

B. Article I of the Articles of Incorporation shall be deleted and the following substituted therefor:

“Article I. The name of the corporation is I-LINK INCORPORATED.”

C. Article III of the Articles of Incorporation shall be amended by the substitution of the following paragraph (a) for paragraph (a) of Article III:

“(a) Fifty million (50,000,000) shares of common stock, having a par value of $.007 per share (the “Common Stock”); and”

D. Article III of the Articles of Incorporation shall be amended by the substitution of the following paragraph (b) for paragraph (b) of Article III:

“(b) Ten million (10,000,000) shares of preferred stock, having a par value of $10.00 per share (the “Preferred Stock”). The Preferred Stock may be issued in one or more series. The Board of Directors shall have the authority to divide the Preferred Stock into one or more series and subject to the provisions and limitations set forth herein, to determine the relative rights and preferences of the shares of any series so established with regard to the rate or manner of payment of dividends, whether such shares may be redeemed and, if so, the redemption price and the terms and conditions of redemption, sinking fund provisions, if any, for the redemption or purchase of such shares, the terms and conditions, if any, on which such shares may be converted, and voting rights, if any. Provided, however, except as to any rights and preferences as determined by the Board of Directors as set forth above, all shares of such Preferred Stock regardless of series shall be identical.”

E. The foregoing Articles of Amendment were duly approved and adopted by the majority of all votes entitled to be cast by the Shareholders of the Corporation at a meeting held on October 7, 1997, pursuant to the provision of the Florida Business Corporation Act. The number of votes cast were sufficient for approva1.

IN WITNESS WHEREOF, Medcross, Inc. has caused these Articles of Amendment to the Articles of Incorporation to be executed by its President and attested to by its Secretary this 8th day of October, 1997.


MEDCROSS, INC

By:	/s/ John W. Edwards
	John W. Edwards, President

ATTEST:

/s/ David E. Hardy
David E. Hardy, Secretary

ARTICLES OF AMENDMENT TO THE AMENDED

AND RESTATED ARTICLES OF INCORPORATION

MEDCROSS, INC.

1. The name of the corporation is Medcross, Inc.

2. Article III is hereby amended by adding Section 111(g), which shall read in its entirety as follows:

“(g) Of the 500,000 shares of Preferred Stock authorized hereunder, 29,000 shares of Preferred Stock shall be designated as Series M Participating Convertible Preferred Stock (the “Series M Preferred Stock”), shall have a par value of $10.00 per share, and shall have the following rights and preferences:

1. Dividends .

(a) Priority of Dividends . No dividends shall be declared or set aside for the Corporation’s Common Stock, 12% Cumulative Convertible Preferred Stock, Class A Preferred Stock, Class B Preferred Stock, Class C Preferred Stock, Series D Preferred Stock or, except as permitted pursuant to Section 111(g) (3) (b), any other class of capital stock of the Corporation (such Common Stock, 12% Cumulative Convertible Preferred Stock, Class A Preferred Stock, Class B Preferred Stock, Class C Preferred Stock, Series D Preferred Stock or, except as permitted pursuant to Section 111(g) (3) (b), other class of capital stock of the Corporation being collectively referred to as “Junior Stock”), unless at the same time or prior thereto all accrued and unpaid dividends on the Series M Preferred Stock shall be declared, set aside and paid on all the then outstanding shares of Series M Preferred Stock. In the event that funds legally available for distribution on any Dividend Payment Date (as defined as Section 1(b)) are insufficient to fully pay the cash dividend due and payable on such Dividend Payment Date to all holders of outstanding Series M Preferred Stock, then all funds legally available for distribution shall be paid in cash to holders of Series M Preferred Stock pro rata in accordance with the number of shares of Series M Preferred Stock held by such holder. Any remaining dividend amount owed to holders of the Series M Preferred Stock shall be accrued in accordance with Section 1(b). After the payment of all accrued and unpaid dividends on the Series M Preferred Stock in accordance with this Section 1, the holders of the shares of Series M Preferred Stock shall be entitled to participate with the Common Stock in the issuance of any dividends on the Common Stock on a per share basis.

(b) Dividend Rate; Dividend Payment Dates . Each holder of the Series M Preferred Stock shall be entitled to receive when and as declared by the Board of Directors, out of funds legally available therefor, cumulative cash dividends, in preference and priority to dividends on any Junior Stock, that shall accrue on the Liquidation Price (as defined in Section 2 (a)) of each share of the Series M Preferred Stock at the rate of ten percent (10%) per annum, from and including the Original Issue Date of such share (as defined in Section 4 (f) (i) (B) ) to and including the date on which such share ceases to be outstanding. The accrued dividends will be adjusted for stock splits, stock dividends, combinations, recapitalizations, reclassifications and similar events (together referred to as “Recapitalization Events”) which affect the number of outstanding shares of the Series M Preferred Stock. Accrued dividends on the Series M Preferred Stock shall be payable out of funds legally available therefor on January 1, 1998 and thereafter quarterly on April 1, July 1, October 1, and January 1 of each year (each a “Dividend Payment Date”), to the holders of record of the Series M Preferred Stock as of the close of business on the applicable record date. Dividends shall be fully cumulative and shall accrue on a daily basis based on a 365-day or 366-day year, as the case may be, without regard to the occurrence of a Dividend Payment Date and whether or not such dividends have been declared and whether or not there are any unrestricted funds of the Corporation legally available for the payment of dividends. The amount of dividends “accrued” with respect to any share of Series M Preferred Stock as of the first Dividend Payment Date after the Original Issue Date, or as of any other date after the Original Issue Date that is not a Dividend Payment Date, shall be calculated on the basis of the actual number of days elapsed from and including the Original Issue Date, in the case of the first Dividend Payment Date and any date of determination prior to the first Dividend Payment, or from and including the last preceding Dividend Payment Date, in the case of any other date of determination, to and including such date of determination which is to be made, in each case based on a year of 365 or 366 days, as the case may be (the “Dividend Period”). Whenever the Board of Directors of the Corporation declares any dividend pursuant to this Section 1, notice of the applicable record date and related Dividend Payment Date shall be given in accordance with Section 4 (n).

(c) Compounding of Dividends; Addition to Conversion Value and to Liquidation Price . On each Dividend Payment Date, all dividends that have accrued on each share of Series M Preferred Stock during the immediately preceding Div idend Period shall, to the extent not paid on such Dividend Payment Date for any reason (whether or not such unpaid dividends have been earned or declared or there are any unrestricted funds of the Corporation legally available for the payment of dividends ), be added to the Conversion Value (as defined in Section 4 (b)) of such share effective as of such Dividend Payment Date and shall remain a part thereof. All dividends that have accrued on each share of Series M Preferred Stock during any Dividend Period shall, to the extent not paid in full on the first Dividend Payment Date after the end of such Dividend Period for any reason (whether or not such unpaid dividends have been earned or declared or there are any unrestricted funds of the Corporation legally available for the payment of dividends) , be added to the Liquidation Price of such share effective as of the first Dividend Payment Date after the last day of such Dividend Period and shall remain a part thereof to and including the date on which the Liq uidation Price or Redemption Price of such share is paid in full to the holder of such share pursuant to sections 2 or 6, respectively. No accrued dividends (or dividends accrued thereon) which have been added to the Liquidation Price or Conversion Value o f any Series M Preferred Stock may be subsequently declared or, except in accordance with Section 2 or 6, paid by the Corporation without the consent of the holders of a majority of the shares of Series M Preferred Stock.

(d) Pro Rata Declaration and Payment of Dividends . All dividends paid with respect to shares of the Series M Preferred Stock pursuant to this Section 1 shall be declared and paid pro rata to all the holders of the shares of Series M Preferred Stock outstanding as of the applicable record date.

2. Liquidation, Dissolution or Winding Up .

(a) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the sale of all or substantially all of its assets, or the merger or consolidation of the Corporation as a result of which the then shareholders of the Corporation do not continue to hold more than a 50% interest in the successor entity or a transaction or series of related transactions in which the Corporation’s shareholders transfer more than 50% of the voting power of the Corporation (each such event, a “Liquidation”), except as provided in Section 2 (b) below, the holder of each share of Series M Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its shareholders before payment to the holders of Common Stock by reason of their ownership thereof, an amount (the “Liquidation Price”), payable in cash (and, to the extent sufficient cash is not available for such payment, property at its fair market value), equal to (i) $2,750.00 per share, plus (ii) an amount equal to all dividends accrued on such share of Series M Preferred stock since the Original Issue Date thereof which, pursuant to Section 1(c), have been added to and remain part of the Liquidation Price as of such time of determination, whether or not such unpaid dividends have been earned or declared or there are any unrestricted funds of the Corporation legally available for the payment of dividends (the “Accrued Dividend Amount”), plus (iii) the difference in amount, if any, between the Accrued Dividend Amount and the amount necessary to effect a cumulative preferred return at the rate of ten percent (10%) per annum compounded annually since the Original Issue Date thereof.

(b) If upon any such Liquidation the remaining assets of the Corporation available for distribution to its shareholders shall be insufficient to pay the holders of shares of Series M Preferred Stock and the holders of shares of the Class B Preferred Stock, Class C Preferred Stock and Series D Preferred Stock the full amount to which they shall be entitled, then the entire assets of the Corporation shall be distributed among the holders of shares of Series M Preferred Stock and the holders of shares of the Class B Preferred Stock, the Class C Preferred Stock and the Series D Preferred Stock ratably in proportion to the full amount to which such holders are entitled.

(c) After the payment of all preferential amounts required to be paid to the holders of Series M Preferred Stock and the holders of Preferred Stock, other than the Series M Preferred Stock, upon the Liquidation of the Corporation, the holders of the shares of Series M Preferred Stock shall be entitled to participate with the Common Stock in the distribution of all remaining assets and funds of the corporation available for distribution to its shareholders.

3. Voting Rights

(a) Each holder of shares of Series M Preferred Stock shall be entitled to votes equal in the aggregate to the number of votes to which the number of whole shares of Common Stock into which the shares of Series M Preferred Stock held by such holder are convertible would be entitled (as adjusted from time to time pursuant to Section 4 hereof), at each meeting of the shareholders of the Corporation (and for purposes of written actions of shareholders in lieu of meetings) with respect to any and all matters presented to the shareholders of the Corporation for their action or consideration. Except as otherwise provided herein or required by law, holders of shares of Series M Preferred Stock shall vote with the holders of shares of Common Stock and any other class of stock entitled to vote and not as a separate class. Any class vote pursuant to this Section 3 or required by law shall be determined by the holders of a majority of the shares of Series M Preferred Stock as of the applicable record date.

-2-

(b) The Corporation shall not amend, alter or repeal the preferences, privileges, special rights or other powers of the Series M Preferred Stock so as to affect adversely the Series M Preferred Stock, without the written consent or affirmative vote of the holders of a majority of the then outstanding shares of Series M Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class. For this purpose, without limiting the generality of the foregoing, the authorization or issuance of any Preferred Stock having an equal right or a preference or priority over the Series M Preferred Stock as to the right to receive dividends or amounts distributable upon Liquidation of the Corporation shall be deemed to affect adversely the Series M Preferred Stock. In addition, the holders of the Series M Preferred Stock shall have the right to vote as a c lass on all, matters requiring their vote or approval under, and in the manner set forth in, the Florida Business Corporation Act.

(c) After the Original Issue Date, the Corporation shall not, and shall not permit any of its subsidiaries to, without the consent or affirmative vote of the holders a majority of the then outstanding shares of the Series M Preferred Stock given in writing or by vote at a meeting, consenting or voting (as the case may be) as a separate class:

(i) amend, modify or repeal the Articles of Incorporation or Bylaws of the Corporation or the Articles of Incorporation, Bylaws, operating Agreement or other organizational document of any subsidiary, or take any action with respect to the creation, authorization, designation or issuance of any class or series of equity securities of the Corporation or any subsidiary or any option, warrants or other rights to receive any class or series of equity securities of the Corporation or any subsidiary (other than pursuant to employee benefit or incentive plans in effect as of the date hereof or described in the Corporation’s definitive proxy statement for its 1997 annual shareholders meeting);

(ii) effect any merger, recapitalization or consolidation with or into another entity, or enter into any binding share exchange or similar transaction with any entity;

(iii) sell, transfer, lease or dispose of all or substantially all of its assets in one transaction or a series of related transactions, or liquidate, dissolve or wind-up its affairs;

(iv) sell, transfer, dispose of, lease, pledge or encumber (a “disposition”), or engage in a series of related dispositions, of any assets (including rights) having a value, in the aggregate for such transaction or series of transactions, in excess of $250,000;

(v) lease or otherwise acquire any assets having a value, in the aggregate, in excess of $250,000;

(vi) incur or prepay any indebtedness (or guarantee obligations of others or enter into any other guarantee or credit support arrangement) other than trade debt incurred in the ordinary course of business;

(vii) pay any dividend, or make other distributions or redemption payments with respect to any of its equity interests;

(viii) conduct or engage in any business other than the business in which it is presently engaged (and such other businesses as are reasonably ancillary thereto);

(ix) form and own, in whole or in part, one or more corporations, trusts, partnerships or other subsidiary entity;

(x) acquire, own or hold for investment any equity interests in another entity or any option, warrant, or other debt or equity interest convertible into or evidencing the right to acquire (whether or not for additional consideration) any equity interest in such entity;

(xi) enter into any transaction or agreement (or amend any agreement) with any affiliate of the Corporation or any of the Corporation’s shareholders;

(xii) adopt or amend its annual budget;

(xiii) hire, employ or discharge any of its executive officers, managers or key employees;

(xiv) engage or discharge its independent certified public accountants;

(xv) initiate or settle any litigation involving an amount in controversy in excess of $250,000;

-3-

(xvi) adopt or amend any employee benefit plan or program;

(xvii) enter into any commitment or series of related commitments involving a payment or payments of an aggregate amount in excess of $500,000;

(xviii) file for voluntary or involuntary protection under federal or state bankruptcy or insolvency laws or make any assignment for the benefit of creditors; or

(xix) take any action that would make it impossible for the Corporation or any of its subsidiaries to carry on its ordinary business or take any action that is in contravention of these Articles of Incorporation.

(d) In addition to and distinct from the matters described in Sections 3(b) and 3(c) above, holders of Series M Preferred Stock, voting as a separate class, shall have the right to elect two individuals to be members of the Corporation’s Board of Directors. Each director duly elected to the Board of Director of the Corporation in accordance with this Section 3(d) shall be subject to removal only at the request of the holders of a majority of the shares of Series M Preferred Stock.

4. Conversion at the Option of a Holder . The holders of the Series M Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

(a) Right to Convert . Each share of Series M Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time prior to the fifth anniversary of the Original Issue Date, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing (i) the Conversion Value (as defined below) of such share determined as of such time by (ii) the Conversion Price (as defined below) determined as of such time. In the event of a Liquidation of the Corporation, the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for the payment of any amounts distributable on Liquidation to the holders of Series M Preferred Stock.

(b) Conversion Value . The “Conversion Value” measured per share of the Series M Preferred Stock shall be the sum of (A) $2,750.00, plus (B) an amount equal to all dividends accrued on such share of Series M Preferred Stock since the Original Issue Date which, pursuant to Section 1(c), have been added to and remain part of the Conversion Value at such time, whether or not such unpaid dividends have been earned or declared or there are any unrestricted funds of the Corporation legally available for the payment of dividends, plus (C) an amount equal to all dividends accrued on such share of Series M Preferred Stock since the most recent Dividend Payment Date through and including such time, whether or not such unpaid dividends have been earned or declared or there are any unrestricted funds of the Corporation legally available for the payment of dividends.

(c) Conversion Price . The Conversion Price at which shares of Common Stock shall be deliverable upon conversion of Series M Preferred Stock without the payment of additional consideration by the holder thereof shall initially be $2.75 or, in the case of an automatic conversion pursuant to Section 5 below, the lower of $2.75 or 50% of the average closing bid price of the Common stock for the ten trading days immediately preceding the fifth anniversary of the original Issue Date (the “Conversion Price”). such initial Conversion Price, and the rate at which shares of Series M Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided in this Section 4.

(d) Fractional Shares . No fractional shares of Common Stock shall be issued upon conversion of the Series M Preferred Stock pursuant to this Section 4 or Section 5. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the then effective Conversion Price.

(e) Mechanics of Conversion .

(i) In order for a holder of Series M Preferred Stock to convert shares of Series M Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Series M Preferred Stock, at the office of the transfer agent for the Series M Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of Series M Preferred Stock represented by such certificate or certificates. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or its attorney duly authorized in writing. The date of receipt of such certificates and notice by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) shall be the conversion date (“Conversion Date”). The Corporation shall, as soon as practicable after the Conversion Date, issue and deliver at such office to such holder of Series M Preferred Stock a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled, together with cash in lieu of any fraction of a share. As of the Conversion Date, the person entitled to receive certificates of Common Stock

-4-

shall be regarded for all corporate purposes as the holder of the number of shares of Common Stock to which it is entitled up on the conversion.

(ii) The Corporation shall at all times when the Series M Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued stock, for the purpose of effecting the conversion of the Series M Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series M Preferred Stock.

(iii) All shares of Series M Preferred Stock which shall have been surrendered for conversion as herein provided in this Section 4 or which shall have been automatically converted pursuant to Section 5 shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate on the Conversion Date, in the case of conversions pursuant to this section 4, or the fifth anniversary of the Original Issue Date, in the case of automatic conversions pursuant to Section 5, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor. Any shares of Series M Preferred Stock so converted shall be retired and canceled and shall not be reissued, and the Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized Series M Preferred Stock accordingly.

(f) Adjustments to Conversion Price for Diluting Issues .

(i) Special Definitions . For purposes of this Section 4 (f), the following definitions shall apply:

(A) “Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities, excluding (I) options granted to employees or issued to consultants of the Corporation or warrants which, in each such case, are outstanding as of the Original Issue Date, (II) any warrants issued in connection with or as a direct result of the issuance of Series M Preferred Stock pursuant to the Securities Purchase Agreement dated as of September 30, 1997, by and between the Corporation and Winter Harbor, L.L.C. (the “Securities Purchase Agreement”), or (III) options granted to employees or consultants pursuant to stock option plans adopted by the Board of Directors and approved by the Compensation Committee of the Board of Directors after the Original Issue Date.

(B) “Original Issue Date” shall mean the date on which a share of Series M Preferred Stock was first issued.

(C) “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock.

(D) “Additional Shares of Common Stock” shall mean all shares of Common Stock issued (or, pursuant to section 4 (f) (iii) below, deemed to be issued) by the Corporation after the Original Issue Date, other than shares of Common Stock issued or issuable

(I) upon conversion of shares of Class B Preferred Stock, Class C Preferred Stock, Series D Preferred Stock or Series M Preferred Stock outstanding on the Original Issue Date;

(II) upon the exercise of Warrants issued under the Securities Purchase Agreement;

(III) as a dividend or distribution on Class B Preferred Stock, Class C Preferred Stock, Series D Preferred Stock or Series M Preferred Stock;

(IV) in connection with an acquisition or other transaction by the Corporation, in either case approved by the holders of at least a majority of the then outstanding shares of the Series M preferred Stock, unless the Corporation agrees to include such issuance in the definition of Additional Shares of Common Stock in connection with obtaining the approval of the holders of at least a majority of the then outstanding shares of the Series M Preferred Stock to such acquisition or other transaction;

(V) by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock excluded from the definition of Additional Shares of Common Stock by the foregoing clauses (I), (II), (III) and (IV) or this clause (V); or

(VI) upon the exercise of options excluded from the definition of “Option” in Section 4 (f) (i) (A).

(ii) Adjustment of Conversion Price. If the consideration per share (determined pursuant to Section 4 (f) (v)) for an Additional Share of Common Stock issued or deemed to be issued by the Corporation is less than the conversion Price in effect on the

-5-

date of, and immediately prior to, th e issuance of such Additional Shares of Common Stock, the Conversion Price shall be adjusted to such lower price per share at which such Additional Shares of Common Stock are being issued or deemed issued.

(iii) Issue of Securities Deemed Issue of Additional Shares of Common Stock. If the Corporation at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities or shall fix a record date for the determination of holders of. any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities arid the exercise of such Options therefor, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issuance or, in case such a record date shall have been fixed, as of the close of business on such record date, provided that Additional Shares of Common Stock shall not be deemed to have been issued unless the consideration per share (determined pursuant to Section 4 (f) (V) hereof) of such Additional Shares of Common Stock would be less than the Conversion Price in effect on the date of and immediately prior to such issuance, or such record date, as the case may be, and provided further that in any such case in which Additional Shares of Common Stock are deemed to be issued:

(A) No further adjustment in the Conversion Price shall be made upon the subsequent issuance of Convertible Securities or shares of Common Stock upon the exercise of such Options or conversion or exchange of such Convertible Securities;

(B) If such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase in the consideration payable to the Corporation, or decrease in the number of shares of Common Stock issuable, upon the exercise, conversion or exchange thereof, the Conversion Price computed upon the original issuance thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities;

(C) No readjustment pursuant to clause (B) above shall have the effect of increasing the Conversion Price to an amount which exceeds the Conversion Price on the original adjustment date; and

(D) In the event of any change in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any option or Convertible Security, including, but not limited to, a change resulting from the anti-dilution provisions thereof, the Conversion Price then in effect shall forthwith be readjusted to such Conversion Price as would have obtained had the adjustment which was made upon the issuance of such option or Convertible Security not exercised or converted prior to such change been made upon the basis of such change, but no further adjustment shall be made for the actual issuance of Common Stock upon the exercise or conversion of any such Option or Convertible Security.

(iv) Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock . In the event the Corporation shall at any time after the Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 4 (f) (iii), but excluding shares issued as a dividend or distrtbution as provided in Section 4(h) or upon a stock split or combination as provided in Section 4 (g)), without consideration or for a consideration per share (determined pursuant to Section 4 (f) (v) hereof) less than the Conversion Price in effect on the date of and immediately prior to such issuance, then and in such event, the Conversion Price shall be reduced, concurrently with such issuance, to such lower consideration per share at which such Additional Shares of Common Stock are being issued (or deemed issued).

(v) Determination of Consideration . For purposes of this Section 4(f), the consideration received by the Corporation for the issuance of any Additional Shares of Common Stock shall be computed as follows:

(A) Cash and Property . Such consideration shall:

(I) insofar as it consists of cash, be computed at the aggregate of cash received by the Corporation, excluding amounts paid or payable for accrued interest or accrued dividends;

(II) insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issuance, as determined in good faith by the Corporation’s Board of Directors; and

(III) in the event Additional Shares of Common Stock are issued together with other shares of securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (I) and (II) above, as determined in good faith by the Corporation’s Board of Directors.

-6-

(B) Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Section 4(f) (iii), relating to Option s and Convertible Securities, shall be determined by dividing:

(I) the total amount, if any, received or receivable by the Corporation as consideration for the issuance of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by

(II) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities.

(g) Adjustment for Stock Splits and Combinations . If the Corporation shall at any time or from time to time after the Original Issue Date for the Series M Preferred Stock effect a subdivision of the outstanding Common Stock, the Conversion Price then in effect immediately before that subdivision shall be proportionately decreased and the number of shares of Common Stock issuable upon conversion of a share of the Series M Preferred Stock shall be proportionately increased. If the Corporation shall at any time or from time to time after the Original Issue Date for the Series M Preferred Stock combine the outstanding shares of Common Stock, the Conversion Price then in effect immediately before the combination shall be proportionately increased and the number of shares of Common Stock issuable upon conversion of a share of the Series M Preferred Stock shall be proportionately decreased. Any adjustment under this paragraph shall become effective at the close of business on the date the subdivision or combination becomes effective.

(h) Adjustment for Certain Dividends and Distributions . In the event the Corporation at any time or from time to time after the Original Issue Date for the Series M Preferred Stock shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Conversion Price for the Series M Preferred Stock then in effect shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Price for the Series M Preferred Stock then in effect by a fraction:

(i) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

(ii) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided , however , if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price for the Series M Preferred Stock shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price for the Series M Preferred Stock shall be adjusted pursuant to this paragraph as of the time of actual payment of such dividends or distributions.

(i) Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issue Date for the Series M Preferred Stock shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation other than shares of Common Stock, then and in each such event provision shall be made so that the holders of the Series M Preferred Stock shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities of the Corporation that they would have received had their Series M Preferred Stock been converted on the date of such event and had thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period giving application to all adjustments called for during such period, under this paragraph with respect to the rights of the holders of the Series M Preferred Stock.

(j) Adjustment for Reclassification, Exchange, or Substitution. If the Common Stock issuable upon the conversion of the Series M Preferred Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares or stock dividend provided for above, or a reorganization, merger, consolidation, or sale of assets provided for below), then and in each such event each holder of the Series M Preferred Stock shall have the right thereafter to convert each such share of Common Stock issuable upon the conversion of the Series M Preferred Stock into the kind and amount of shares of stock and other securities and property receivable upon such

-7-

reorganization, reclassification, or other change, by holders of the number of shares of Common Stock into which such shares of Series M Preferred Stock might have been converted immediately prior to such reorganizat ion, reclassification, or change, all subject to further adjustment as provided herein.

(k) Adjustment for Merger or Reorganization. In case of any consolidation or merger of the Corporation with or into another corporation, each share of Series M Preferred Stock shall thereafter be convertible into the kind and amount of shares of stock or other securities or property to which a holder of the number of shares of Common Stock of the Corporation deliverable upon conversion of such Series M Preferred Stock would have been entitled upon such consolidation or merger; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors) shall be made in the application of the provisions in this Section 4 set forth with respect to the rights and interest thereafter of the holders of the Series M Preferred Stock, to the end that the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the conversion of the Series M Preferred Stock.

(l) No Impairment . The Corporation will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this section 4 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Series M Preferred Stock against impairment.

(m) Certificate as to Adjustments . Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 4, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of series M Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series M Preferred Stock, furnish or cause to be furnished to such holder a similar certificate setting forth (i) such adjustments and readjustments; (ii) the Conversion Price then in effect; and (iii) the number of shares of Common Stock and the amount, if any, of other property which then would be received upon the conversion of Series M Preferred Stock.

(n) Notice of Record Date . In the event:

(i) that the Corporation declares a dividend (or any other distribution) on its Common Stock payable in Common Stock or other securities of the Corporation;

(ii) that the Corporation subdivides or combines its outstanding shares of Common Stock;

(iv) of the Liquidation of the Corporation; then the Corporation shall cause to be filed at its principal office or at the office of the transfer agent of the Series M Preferred Stock, and shall cause to be mailed to the holders of the Series M Preferred Stock at their last addresses as shown on the records of the Corporation or such transfer agent, at least ten days prior to the record date specified in (A) below or twenty days before the date specified in (B) below, a notice stating:

5. Automatic Conversion.

(a) Immediately upon the fifth anniversary of the Original Issue Date, each share of the Series M Preferred Stock then outstanding shall be automatically converted into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing (i) the Conversion Value (as defined in Section 4) determined as of such time by (ii) the Conversion Price (as defined in Section 4) determined as of such time.

-8-

(b) On the date fixed for conversion, all rights with respect to the Series M Preferred Stock so converted will terminate. If so required by the Corporation, certificates surrend ered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by its attorney duly authorized in writing. As soon as practicable aft er the date of such mandatory conversion and the surrender of the certificate or certificates for Series M Preferred Stock, the Corporation shall cause to be issued and delivered to such holder, or on its written order, a certificate or certificates for th e number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof and cash as provided in Section 4(d) in respect of any fraction of a share of Common Stock otherwise issuable upon such conversion.

(c) All certificates evidencing shares of Series M Preferred Stock which are required to be surrendered for conversion in accordance with the provisions hereof shall, from and after the date such certificates are so required to be surrendered, be deemed to have been retired and canceled and the shares of Series M Preferred Stock represented thereby converted into Common Stock for all purposes as of the date of conversion set forth in Section 5(a) above, notwithstanding the failure of the holder or holders thereof to surrender such certificates.

6. Optional Redemption.

(a) At any time on or after a Change in Control (as such term is defined herein), each holder of Series M Preferred Stock may tender all (but not less than all) of its shares of Series M Preferred Stock to the Corporation, and thereupon the Corporation shall pay to such holder, in cash, an amount equal to the Fair Market Value of such shares,as determined in accordance with the procedure set forth herein payable with respect to such shares. The Corporation shall provide each holder of Series M Preferred Stock with a written notice of the occurrence of a Change in Control (addressed to the holder at its address as it appears on the stock transfer books of the Corporation), not earlier than sixty nor later than twenty days before the date of such occurrence. Any holder of shares of Series M Preferred Stock that elects to have such shares redeemed shall notify the Corporation of such election in writing. Such notice shall specify a date for optional redemption payments to be made, which shall be a date not earlier than the date of the occurrence of the Change in Control (the “Redemption Date”). If on the Redemption Date sufficient funds of the Corporation are not legally available to redeem all outstanding shares of Series M Preferred Stock so tendered for redemption, then funds to the extent legally available shall be used for such redemption pro rata according to the number of shares of Series M Preferred Stock so tendered (a “Partial Redemption”) as of the Redemption Date. The Corporation shall make additional Partial Redemptions beginning thirty days after the Redemption Date and each thirty days thereafter until all tendered shares of Series M Preferred Stock have been redeemed.

(b) For purposes of this Section 6, a “Change in Control” shall be deemed to have occurred at such time as (i) a “person” or “group” (within the meaning of Sections 13(d) and 14(d) (2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) becomes the “beneficial owner” (as defined in Rule l3d-3 under the Exchange Act) of more than 50% of the total voting power required to elect or designate for election a majority of the Corporation’s Board of Directors, or (ii) during any period of twenty-four consecutive months, individuals who at the beginning of such period constituted the Corporation’s Board of Directors (together with any new directors whose election by the Board of Directors or whose nomination for election by the stockholders of the Corporation was approved by a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved or who have been elected by the holders, as of the date hereof, of the Corporation’s Common Stock) cease for any reason to constitute a majority of the Board of Directors then in office.

(c) For purposes of the provisions of this Section 6, the Fair Market Value of the shares of the Series M Preferred Stock shall be determined in accordance with the procedures set forth in this Section 6(c).

(i) The Fair Market Value of the shares of the Series M Preferred Stock shall be equal to the price that would be payable with respect to the shares if all of the assets of the Corporation were sold to a third party in a transaction structured to maximize cash sale proceeds, treating the business of the Corporation as a going concern, and the Corporation then had been dissolved and liquidated and its remaining assets distributed to its shareholders in accordance with their equity interests in the Corporation (and without any discount for a minority position or illiquidity), after first deducting from the cash proceeds resulting from such sale and any other cash on hand held by the Corporation all liabilities of the Corporation (determined in accordance with generally accepted accounting principles, and giving effect to any brokerage fees that would be required to be paid in connection with any such sale). Within the thirty-day period following the delivery of the holder’s election to have its shares of Series M Preferred Stock redeemed, the Corporation and such holder shall negotiate in good faith in an effort to reach mutual agreement as to the Fair Market Value of the shares.

(ii) If the Corporation and such holder are unable to reach agreement as to the Fair Market Value of the shares within such thirty-day period, the Fair Market Value of the shares shall be determined by an appraisal process as set forth herein. Each of the Corporation and such holder shall designate, within fifteen days after the conclusion of the thirty-day negotiation period referred to above, an independent and experienced telecommunications industry appraiser (each individually an “Appraiser” and collectively

-9-

the “Appraisers”). The Appraisers shall be instructed to complete their appraisals of the Fair Market Value of the shares by no later than thirty days after their appointment. If the determination of the Appraiser with the higher determination is not greater than 110% of the determination of the other Appraiser, the Fair Market Value shall be equal to the average of the determinations of the two Appraisers; provided, however, if the higher determination is greater than 110% of the lower determination, then the two Appraisers shall jointly select a third Appraiser within ten days after the first date on which both of such two Appraisers have delivered their reports. Such third Appraiser shall deliver its report of its good faith determination of the Fair Market Value of the sha res within thirty days after such appointment, and in such case the Fair Market Value shall be equal to the average of the closest determinations; provided , however , that if the highest and lowest of such three determinations differ from the middle determi nation by an equal amount, the Fair Market Value shall be equal to such middle determination. The cost of all such appraisals shall be borne by the Corporation.

7. Preemptive Rights .

(a) Each holder of the Series M Preferred Stock shall be entitled to a preemptive right to purchase its pro rata share of all or any part of any New Securities (as defined below) which the Corporation may, from time to time, propose to sell and issue. Such holder’s pro rata share, for purposes of this preemptive right, is the ratio that the number of whole shares of Common Stock into which the shares of Series M Preferred Stock held by such holder are convertible plus the number of shares of any other class of Common Stock or Preferred Stock (on a fully diluted basis) then held by the holder bears to the total number of shares of Common Stock of the Corporation on a fully-diluted basis then outstanding.

(b) Except as set forth in the next succeeding sentence, “New Securities” shall mean any shares of capital stock of the Corporation, including Common Stock, whether now authorized or not, and rights, options or warrants to purchase said shares of capital stock, and securities of any type whatsoever that are, or may become, convertible into said shares of capital stock. Notwithstanding the foregoing, “New Securities” does not include (i) securities offered to the public generally pursuant to a registration statement filed with the Securities and Exchange Commission and declared effective under the Securities Act of 1933, as amended, (ii) securities issued in the acquisition of another corporation by the Corporation by merger, purchase of substantially all of the assets or other reorganization or in a transaction governed by Rule 145 under the Exchange Act, (iii) options exercisable for Common Stock issued to employees or consultants of the Corporation outstanding as of the Original Issue Date or options issued to employees pursuant to a stock option plan adopted by the Board of Directors and approved by the holders of Series M Preferred Stock after the Original Issue Date, (iv) shares of Common Stock issued on conversion of outstanding Class B Preferred Stock, Class C Preferred Stock, Series D Preferred Stock or Series M Preferred Stock; (v) shares of Common Stock issued upon exercise of warrants (A) outstanding as of the Original Issue Date or (B) issued in connection with the sale of Series M Preferred under the Securities Purchase Agreement, (vi) stock issued pursuant to any rights or agreements, including without limitation convertible securities, options and warrants, provided that the preemptive rights established by this Section 7 shall apply with respect to the initial sale or grant by the Corporation of interests in its capital stock pursuant to such rights or agreements, or (vii) stock issued in connection with any stock split, stock dividend or recapitalization by the Corporation.

(c) In the event the Corporation proposes to undertake an issuance of New Securities, it shall give the holders of the Series M Preferred Stock written notice of its intention, describing the type of New Securities, and the price and terms upon which the Corporation proposes to issue the same. Each holder of Series M Preferred Stock shall have thirty days from the date of receipt of any such notice to agree to purchase up to its respective pro rata share of such New Securities for the price and upon the terms specified in the notice by giving written notice to the Corporation and stating therein the quantity of New Securities to be purchased.

(d) If any holder fails to exercise such preemptive right within said thirty-day period, the Corporation shall have ninety days thereafter to sell or enter into an agreement (pursuant to which the sale of New Securities covered thereby shall be closed, if at all, within sixty days from the date of said agreement) to sell the New Securities not elected to be purchased by holders of the Series M Preferred Stock at the price and upon the terms no more favorable to the purchasers of such securities than specified in the Corporation’s notice. In the event the Corporation has not sold the New Securities or entered into an agreement to sell the New Securities within said ninety-day period (or sold and issued New Securities in accordance with the foregoing within sixty days from the date of said agreement), the Corporation shall not thereafter issue or sell any of such New Securities, without first offering such securities in the manner provided above.”

3. The foregoing amendment was duly adopted by the Board of Directors without the requirement of shareholder action by unanimous written consent on September 22, 1997, pursuant to the provisions of the Florida Business Corporation Act.

-10-

IN WITNESS WHEREOF, Medcross, Inc. has caused these Articles of Amendment to the Amended and Restated Articles of Incorporation to be executed by its President and attested to by its Secretary this 6th day of October, 199 7.

MEDCROSS, INC.

By:	/s/ John W. Edwards
	John W. Edwards, President

ATTEST:

/s/ David E. Hardy

David E. Hardy, Secretary

ARTICLES OF AMENDMENT

TO THE

AMENDED AND RESTATED

ARTICLES OF INCORPORATION

MEDCROSS, INC.

Pursuant to Article III(b) of the Amended and Restated Articles of Incorporation of Medcross, Inc. (the “ Company ”), and the provisions of the Florida Business Corporation Act, the Board of Directors of the Company has resolved to amend Article III of the Articles of Incorporation as set forth herein.

A. The name of the corporation is MEDCROSS, INC.

B. Article III of the Articles of Incorporation is hereby amended by adding a new Section 111(h), which shall read in its entirety as follows:

(h) Of the 500,000 shares of Preferred Stock authorized hereunder, 1,000 shares of Preferred Stock shall be designated as a new Series D Preferred Stock (the “Series D Preferred Stock” ), which shall have a par value of $10.00 per share, and which shall have the following rights and preferences:

Dividends . If and when dividends are declared by the Board of Directors on the shares of Common Stock, the holders of Series D Preferred Stock shall be entitled to receive the same dividend as declared on the shares of Common Stock based on the number of shares of Common Stock which would have been held by the holder of each issued and outstanding share of Series D Preferred Stock if that share of Series D Preferred Stock had been converted in accordance with Section III(h)(3) below to shares of Common Stock immediately prior to the record date for the dividend.

Voting Rights . Except as otherwise required by applicable law, the Series D Preferred Stock shall have no voting rights.

Conversion Into Common Stock .

(i)

Subject to the terms and conditions of this Section III (g)(3), each issued and outstanding share of Series D Preferred Stock may be converted, at the option of the holder at any time within the nine (9) month period beginning September 2, 1997 and ending on June 1, 1998 (the “ Conversion Period ”) into such number of shares of Common Stock (the “ Conversion Shares ”) as shall equal 6250 divided by the lower of (a) $9.25, or (b) the average closing bid price of the Common Stock for the five (5) consecutive trading days immediately preceding the Conversion Date as established in Sub-section (iii) below.

(ii)

Each issued and outstanding share of Series D Preferred Stock which has not been converted to Common Stock at the election of the holder thereof during the Conversion Period pursuant to Sub-section (1) above, shall be automatically converted to Common Stock effective on the last day of the Conversion Period on the same basis as calculated and established for that date in Sub-section (i) above.

(iii)

The holder may exercise this right of conversion only by delivering written notice to the Company that the holder elects to convert a stated number of shares of Series D Preferred Stock into shares of Common Stock (“ Conversion Date ”) and surrendering to the Company a certificate or certificates for the shares of the Series D Preferred Stock to be converted, at the principal office of the Company, at any time during its usual business hours on the Conversion Date.

(iv)

Promptly after the receipt of certificates representing Series D Preferred Stock and surrender of Series D Preferred Stock, the Company shall issue and deliver, or cause to be issued and delivered, to the holder a certificate or certificates for the number of whole shares of Common Stock issuable upon the conversion of such Series D Preferred Stock. No fractional shares shall be issued upon conversion of the Series D Preferred Stock into shares of Common Stock. To the extent permitted by law, the conversion shall be deemed to have been effected as of the close of business on the Conversion Date (or on the next preceding business day if the Conversion Date is not a business day) and at that time the rights of the holder of Series D Preferred Stock, as such holder, shall cease, and the holder of the Series D Preferred Stock shall become the holder of record of shares of Common Stock.

Liquidation Rights . In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, each share of Series D Preferred Stock shall have a liquidation preference of $6,250.00 per share. This liquidation preference shall be subordinate to the liquidation preferences attached to any issued and outstanding shares of Class A, Class B and Class C Preferred Stock, but shall rank senior to the shar es of Common Stock of the Company.

C. The foregoing Articles of Amendment were duly adopted by the Board of Directors without the requirement of shareholder action by meeting held on July 29, 1997, pursuant to the provisions of the Florida Business Corporation Act.

IN WITNESS WHEREOF, Medcross, Inc. has caused these Articles of Amendment to the Articles of Amendment to the Articles of Incorporation to be executed by its President and attested to by its Secretary this 2nd day of September, 1997.

MEDCROSS, INC

By:	/s/ John W. Edwards
	John W. Edwards, President

ATTEST:

/s/ David E. Hardy

David E. Hardy, Secretary

ARTICLES OF AMENDMENT

TO THE

AMENDED AND RESTATED

ARTICLES OF INCORPORATION

MEDCROSS, INC.

1. The name of the corporation is Medcross, Inc.

2. Article Ill is hereby amended by deleting Section III(f) and replacing it with the following Section III(f), which shall read in its entirety as follows:

“(f) Of the 500,000 shares of Preferred Stock authorized hereunder, 240,000 shares of Preferred Stock shall be designated as Class C Convertible Cumulative Redeemable Preferred Stock (the “Class C Preferred Stock”), shall have a par value of $10.00 per share, and shall have the following rights and preferences:

1 Dividends . The holders of the Class C Preferred Stock shall be entitled to cumulative preferential dividends, when, as and if declared by the Board of Directors on a quarterly basis on November 15, February 15, May 15 and August 15 each year in an amount equal to eight percent (8%) per annum of the liquidation preference per share of $60.00. In the event the Corporation has not filed a registration statement relating to the Conversion Shares (as hereinafter defined) under the Securities Act of 1933, as amended (the “Act”) within 12 months of the final closing of the private placement of the Class C Preferred Stock by the Corporation (the ‘Final Closing”) and such registration statement Is not declared effective under the Act within such 12-month period, the cumulative preferential dividend rate shall be increased to twelve percent (12%) per annum of the liquidation preference per share of $60.00. Dividends may be paid (to the extent permissible under the Florida Business Corporation Act) to the holders of the Class C Preferred Stock in cash or, at the option of the Company, In shares (the “Dividend Shares”) of common stock of the Corporation, par value $.007 per share (the “Common Stock”) (based upon the last sale price of a shirt of Common Stock for the five (5) trading days preceding the record date for a particular dividend) provided that such Dividend Shares are covered by a registration statement which has been declared effective under the Act.

2. Liquidation Rights . In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, each share of Class C Preferred Stock shall have a liquidation preference of $60.00 per share.

3. Voting Rights . Except as otherwise required by applicable law, the Class C Preferred Stock shall have no voting rights.

4. Redemption . The Corporation may, at its option (a) redeem shares of Class C Preferred Stock at any time prior to the fourth anniversary of the Final Closing on not less than thirty (30) nor more than sixty (60) day’s written notice to such holders at a redemption price equal to $60.00 per share Plus accrued and unpaid dividends provided that: (i) shares of Common Stock issuable upon conversion of shares of Class C Preferred Stock (the “conversion shares”) are covered by a registration statement which has been declared effective under the Act, or the Conversion Shares are otherwise exempt from registration under the Act in the opinion of counsel to the Company, and (ii) during the immediately preceding thirty (30) consecutive trading days ending within fifteen(15) days of the date of notice of redemption to the holders, the closing bid price of the Corporation’s Common Stock is not less than 58.00 per share

(b) redeem shares of Class C Preferred Stock at any time after the fourth anniversary of the Final Closing on not less than thirty(30) nor more than sixty(60) day’s written notice to such holders at a redemption price equal to $90.00 per share plus accrued and unpaid dividends provided that the conversion shares are covered by a registration statements which has been declared effective under the Act or the Conversion Shares are otherwise exempt from registration under the Act in the opinion of counsel to the Company.

5. Conversion Into Common Stock . (a) Subject to the terms and conditions of subsections (a) and (b) of this Section 5, and unless previously redeemed, issued and outdstanding shares of Class C Preferred Stock may be converted, at the option of the holder, at any time after three(3) months from the first closing of the private placement of the Class C Preferred Stock by the Corporation (the “First Closing”) into such number of shares of the Corporation’s Common Stock (the “Conversion Shares”) as shall equal $60.00 divided by the lower of (a) $2.50 or (b) the closing bid price for any five consecutive trading days during the period commencing on the Final Closing and ending eighteen months thereafter (but in no event less than $1.25) (the “Conversion Price”) subject to adjustment as set forth below.

(b) on the fifth anniversary of the Final Closing (the “Conversion Date”), and with no other action required by the Corporation or the holder of the Class C Preferred Stock, the shares of Class C Preferred Stock held by each holder thereof shall be Converted into such number of whole shares of Common Stock at a conversion Price equal to the lower of the then current Conversion Price or 50% of the average closing bid price of the Common Stock for the ten (10) trading days immediately preceding the fifth anniversary of the Final Closing.

(i)

In case the Corporation shall subdivide the number of outstanding shares of the Common Stock Into a greater number of shares or shall contract the number of outstanding shares of its Common Stock into a lesser number of shares, the Conversion Price then In effect shall be adjusted, effective at the close of business on the record date for the determination of stockholders entitled to receive the same, to the price (computed to the nearest, cent) determined by dividing (A) the product obtained by multiplying the Conversion Price in effect immediately prior to the close of business on such record date by the number of shares of Common Stock outstanding prior to such subdivision or contraction, by (B) the number of shares of Common Stock outstanding immediately after such subdivision or contraction;

(ii)

In the event that the Corporation shall issue or sell shares of its Common Stock (except for shares issuable upon exercise or conversion of securities outstanding or issuable by the Company as of the date hereof) at a price per share less than the then current Conversion Price (the “New Issue Price”), the Conversion Price shall be reduced to the greater of the New Issue Price or $1.25 per share; and

(iii)

In the event that the Corporation’s registration statement under the Act registering the Conversion Shares is not declared effective within twelve (12) months after the Final Closing, the Conversion Price shall be subject to an additional reduction of 10% for each 90-day delay In the effective date of such registration statement, provided however that in no event shall the Conversion Price be less than $1.25 per share.

(d) Promptly after the receipt of certificates representing Class C Preferred Stock and surrender of Class C Preferred Stock, the Corporation shall issue and deliver, or cause to be issued and delivered, to the holder a certificate or certificates for the number of whole shares of Common Stock Issuable upon the conversion of such Class C Preferred Stock. No fractional shares shall be issued upon conversion of the Class C Preferred Stock into shares of Common Stock. To the extent permitted by law, the conversion shall be deemed to have been effected as of the close of business on the Conversion Date (or on the next preceding business day if the Conversion Date is not a business day) and at that time the rights of the holder of Class C Preferred Stock, as such holder, shall cease, and the holder of the Class C Preferred Stock shall become the holder of record of shares of Common Stock.

(e) Notwithstanding anything herein to the contrary, on any liquidation of the Corporation, the right of conversion of the Class C Preferred Stock shall terminate at the close of business on the last full business day before the date fixed for payment of the amount distributable on the Class C Preferred Stock.

6. Registration Rights . The Corporation, within twelve (12) months of the Final Closing, shall file a registration statement registering the reoffer and resale of the Conversion Shares by the Holders thereof; provided, however, that in the event the Company files a registration statement prior to the expiration of twelve (12) months from the Final Closing, the Conversion Shares shall be included in such registration statement to the extent permitted by law. In the event that the registration statement is not declared effective within such 12-month period, the Conversion Price will be reduced as provided by Subsection 5(a) hereof, and dividends payable on the Class C Preferred Stock will be increased as provided by Subsection 1 hereof.

7. Lock-up . The Conversion Shares and Dividend Shares may not be publicly sold until alter the first anniversary of the Final Closing without the prior written consent of Commonwealth Associates,

8. Rank . Wi th respect to the payment of dividends and rights to redemption and upon liquidation, the shares of the Class C Preferred Stock shall be subordinate to any issued and outstanding shares of Class A Preferred Stock and Class B Preferred Stock of the Corporat ion and shall rank senior to the shares of Common Stock of the Corporation.

3. The foregoing amendment was duly adopted by the Board of Directors without the requirement of shareholder action by meeting held on July 31, 1996, pursuant to the provisions of the Florida Business Corporation Act.

IN WITNESS WHEREOF, Medcross, Inc. has caused this Certificate of Amendment to the Articles of Incorporation to be executed by its Vice President and attested to by its Secretary this 15 ^th day of August, 1996.

MEDCROSS, INC.

By:	/s/ Dorothy L. Michon
	Dorothy L. Michon, Vice President

ATTEST:

/s/ Stephanie Giallourakis

Stephanie Giallourakis, Secretary

ARTICLES OF AMENDMENT

TO THE

AMENDED AND RESTATED

ARTICLES OF INCORPORATION

MEDCROSS, INC.

Pursuant to Article III of the Amended and Restated Articles of Incorporation (the “Articles of Incorporation”) of Medcross, Inc. (the “Corporation”), and the provisions of Section 607.0602 of the Florida Business Corporation Act, the board of directors of the Corporation (the “Board of Directors”) previously designated 240,000 shares of Class C Preferred Stock on or about December 18, 1995, when the Corporation filed with the Secretary of State of the State of Florida, Articles of Amendment to the Amended and Restated Articles of Incorporation of Medcross, Inc. No Class C Preferred Stock shares were issued pursuant to such designation. At its meeting on April 17, 1996, the Board of Directors has resolved to further amend Article III of the Articles of Incorporation and specifically to modify the rights and preferences relating to the 240,000 shares of Class C Preferred Stock as set forth hereinbelow.

1. The name of the corporation is Medcross, Inc.

2. Article III is hereby amended by adding Section III(f), which shall read in its entirety as follows:

“(f) Of the 500,000 shares of Preferred Stock authorized hereunder, 240,000 shares of Preferred Stock shall be designated as Class C 12% Cumulative Convertible Preferred Stock (the “Class C Preferred Stock”), shall have a par value of $10.00 per share, and shall have the following rights and preferences:

1. Dividends . The holders of the Class C Preferred Stock (“Holders”) shall be entitled to cumulative preferential dividends, when, as and if declared by the Board of Directors in an amount equal to 12% per annum of the liquidation preference per share of $40.00. Dividends may be paid (to the extent permissible under the Florida Business Corporation Act) to the holders of the Class C Preferred Stock in cash and/or shares of Common Stock (or any combination thereof), at the option of the Corporation. To the extent that Dividends are paid in shares of Common Stock, the shares will be valued at last reported sale price, or, in case no such reported sale takes place on such day, the average of the last reported sale prices for the last three trading days, in either case as officially reported by the principal securities exchange on which the Common Stock is listed or admitted to trading or as reported in the Nasdaq National Market System, or, if the Common Stock is not listed or admitted to trading on any national securities exchange or quoted on the Nasdaq National Market System, the last reported sale price as furnished by the National Association of Securities Dealers, Inc. through Nasdaq or similar organization if Nasdaq is no longer reporting such information, or if the Common Stock is not quoted on Nasdaq, as determined in good faith by resolution of the Board of Directors of the Company, based on the best information available to it for the two days immediately preceding such issuance or sale and the day of such issuance or sale.

3. Voting Rights . Except as otherwise required by applicable law, the Class C Preferred Stock shall have no voting rights.

4. Redemption . The Corporation may not redeem any shares of Class C Preferred Stock; provided, however, that nothing herein shall prohibit the Corporation in its sole discretion from repurchasing the Class C Preferred Stock in negotiation transaction(s) with the Holders.

5. Conversion Into Common Stock . (a) Subject to the terms and conditions of this subsection, issued and outstanding shares of Class C Preferred Stock are convertible at the option of the holder thereof into shares of common stock, par value $.007 per share (the “Common Stock”) of the Corporation ninety days after issuance, provided, however, on May 31, 1997, (the “Conversion Date”), all of the outstanding Class C Preferred Stock shall automatically be converted, provided further that such Common Stock is the subject of an effective registration statement under the Securities Act of 1933, as amended (the “Act”), without further action of the Corporation or the Holders of the Class C Preferred Stock, into shares of Common Stock as set forth herein. The shares of Class C Preferred Stock held by each holder thereof shall be converted into seven (7) shares of Common Stock. However, on any liquidation of the Corporation, the right of conversion shall terminate at the close of business on the last full business day before the date fixed for payment of the amount distributable on the Class C Preferred Stock, provided that thirty days prior written notice of the same by the Company is sent to the Holders at their address of record.

(b) Promptly after the receipt of certificates representing Class C Preferred Stock and surrender of such Class C Preferred Stock, the Corporation shall issue and deliver, or cause to be issued and delivered, to the holder a certificate or certificates for the number of whole shares of Common Stock issuable upon the conversion of such Class C Preferred Stock. No fractional shares shall be issued upon conversion of the Class C Preferred Stock into shares of Common Stock. To the extent permitted by law, the c onversion shall be deemed to have been effected as of the close of business on the Conversion Date (or on the next preceding business day if the Conversion Date is not a business day) and at that time the rights of the holder of Class C Preferred Stock, as such holder, shall cease, and the holder of the Class C Preferred Stock shall become the holder of record of shares of Common Stock.

6. Rank . With respect to the payment of dividends and upon liquidation, the shares of the Class C Preferred Stock shall be subordinate to the issued and outstanding shares of Class A Preferred Stock and Class B Preferred Stock of the Corporation and shall rank senior to any other series of Preferred Stock and to the shares of Common Stock of the Corporation.

7. Registration Rights . The Corporation hereby covenants and agrees as follows:

(a) Definitions . As used herein, the following terms shall have the meanings set forth below:

i. The terms “register,” “registered” and “registration” shall refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Act, and the declaration or ordering of the effectiveness of such registration statement or document.

ii. The term “Registrable Securities” shall mean: (A) the Common Stock issuable upon conversion of the Class C Preferred Stock and (B) any Common Stock issued in payment of dividends on the Class C Preferred Stock.

(b) Registration Rights . The Corporation shall file a registration statement on one occasion covering the Registrable Securities as soon as practicable and use its best-efforts to have such registration statement declared effective on or before the Conversion Date. The registration statement filed pursuant to this section may, subject to the provisions of this section, include other securities of the Corporation and may include securities of the Corporation being sold for the account of the Corporation.

If the Holders intend to distribute the Registrable Securities covered by the registration statement by means of an underwriting, they shall so advise the Corporation in writing, and the Corporation shall include such information in the written notice referred to in this subsection. The right of any party hereto to registration pursuant to this section shall be conditioned upon such party’s participation in such underwriting and the inclusion of such party’s Registrable Securities in the underwriting to the extent requested (unless otherwise mutually agreed by a majority in interest of the Holders and such party) to the extent provided herein.

If the underwriter (or managing underwriter on behalf of all the underwriters) has not limited the number of Registrable Securities to be underwritten, the Corporation may include securities for its own account or for the account of other shareholders in such registration if the underwriters in their absolute discretion so agree and if the number of Registrable Securities which would otherwise have been included in such registration and underwriting will not thereby be limited.

(c) Obligations of the Corporation. Whenever required hereunder to effect the registration of any Registrable Securities, the Corporation shall, as expeditiously as reasonably possible:

(i) Prepare and file with the Securities and Exchange Commission (“SEC”) a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for at least nine (9) months.

(ii) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement.

(iii) Furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Act, and such other Corporate Materials as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them.

(iv) Use its best efforts to register and qualify the securities covered by such registration statement under the securities laws of such jurisdictions as shall be reasonably requested by the Holders for the dist ribution of the securities covered by the registration statement, provided that the Corporation shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such jurisdiction.

(v) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement with terms generally satisfactory to the managing underwriter of such offering.

(vi) Notify the Holders, promptly after the Corporation shall have received notice thereof, of the time when the registration statement becomes effective or any supplement to any prospectus forming a part of the registration statement has been filed.

(vii) Notify the Holders of any stop order suspending the effectiveness of the registration statement and use its reasonable best efforts to remove such stop order.

(d) Furnish Information . It shall be a condition precedent to the obligations of the Corporation to take any action pursuant hereto that the Holder, having chosen to have its Registrable Securities included for registration, shall furnish to the Corporation such information regarding the Holder, its Registrable Securities and the intended method of disposition of such securities as shall be required to effect the registration thereof. The Holder shall be required to represent to the Corporation that all such information which is given is complete and accurate in all material respects. The Holder shall deliver to the Corporation a statement in writing from the beneficial owners of such securities that such beneficial owners bona fide intend to sell, transfer or otherwise dispose of such securities.

(e) Expenses .

(i) Registration Expenses . All expenses incurred by the Corporation in complying with this section, including without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Corporation, “Blue Sky” fees and expenses, and the expense of any special audits incident to or required by any such registration shall be borne by the Corporation.

(ii) Selling Expenses . All underwriting discounts, underwriters’ expense allowance, and selling commissions applicable to the sale of Registrable Securities by the Holders and all fees and disbursements of any special counsel (other than the Corporation’s counsel) shall be borne by the Holders of the Registrable Securities so registered pro rata on the basis of the number of Registrable Securities so registered.

(f) Underwriting Requirements . All Holders proposing to distribute their Registrable Securities through an underwriting in which the Corporation has proposed or is proposing to participate, shall (together with the Corporation and any other Holders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for underwriting by the Corporation. Notwithstanding any other subsection of this section, at the request of the managing underwriter, the Holder shall delay the sale of Registrable Securities which such Holder has requested be registered hereunder for up to ninety (90) days following the effective date of the registration statement. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Corporation and the underwriter. Any Registrable Securities excluded or withdrawn from such underwriting shall not be withdrawn from such registration except at the election of the Holder.

(g) Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this section.

(h) Indemnification. In the event that any Registrable Securities are included in a registration statement pursuant hereto:

(i) To the extent permitted by law, the Corporation will indemnify and hold harmless each Holder, the officers, directors and partners of each Holder, any underwriter (as defined in the Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Act or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), against any losses, claims, damages or liabilities (joint or several) to which they may become subject under the Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively, a “Violation”): (A) any untrue statement or alleged untrue

statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (B) the omission or alleged omission to state th erein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (C) any violation or alleged violation by the Corporation of the Act, the Exchange Act, any applicable state securities law or any rule or r egulation promulgated under the Act, the Exchange Act or any applicable state securities law; and the Corporation will reimburse the Holder for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such l oss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this subsection shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Corporation (which consent shall not be unreasonably withheld), nor shall the Corporation be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation w hich occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by the Holder; and further provided, however, that the foregoing indemnity agreement is subject to the condition that, insofar as it relates to any untrue statement, alleged untrue statement, omission or alleged omission made in any preliminary prospectus but eliminated or remedied in the prospectus, such indemnity agreement shall not inure to the benefit of any underwrite r or broker, if a copy of the prospectus was not sent or given to such person with or prior to the confirmation of the sale of such securities to such person.

(ii) To the extent permitted by law, each selling Holder will indemnify and hold harmless the Corporation, its directors, its officers, any person who controls the Corporation within the meaning of the Act or the Exchange Act, any underwriter (within the meaning of the Act) for the Corporation and any person who controls such underwriter against any losses, claims, damages or liabilities (joint or several) to which the Corporation or any such director, officer, controlling person, or underwriter or controlling person may become subject, under the Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by the Holder expressly for use in connection with such registration; provided, however, that the indemnity agreement contained in this subsection shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld.

(iii) Promptly after receipt by an indemnified party of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party hereunder, notify the indemnifying party in writing of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly notified, to assume the defense thereof with counsel mutually satisfactory to the parties; provided , however , that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to notify an indemnifying party within a reasonable time of the commencement of any such action, to the extent prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party hereunder, but the omission so to notify the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this subsection.

(i) Reports Under Exchange Act. Following registration of the Corporation’s securities under the Exchange Act and with a view of making available to the Holders the benefits of Rule 144 under the Act and any other rule or regulation promulgated by the SEC that may at any time permit a Holder to sell securities of the Corporation to the public without registration, the Corporation agrees to:

(i) use its best efforts to make and keep public information available, as those terms are understood and defined in Rule 144, at all times; and

(ii) use its best efforts to file with the SEC in a timely manner all reports and other documents required of the Corporation under the Act and the Exchange Act.

(j) Termination of the Corporation’s Obligations.

(i) The Corporation shall have no obligations pursuant to Subsections 7(b) or 7(c) with respect to any request made by the Holder after April 29, 1999.

(ii) Notwithstanding any provision hereof to the contrary, the Corporation shall no t be required to effect any registration under the Act or under any state securities laws on behalf of any Holder or Holders if, in the opinion of counsel for the Corporation, the offering or transfer by such Holder or Holders in the manner proposed (inclu ding without limitation, the number of shares proposed to be offered or transferred and the method of offering or transfer) is exempt from the registration requirements of the Act and the securities or “Blue Sky” laws of applicable states.

(k) Holder’s Acceptance of Obligations . Acceptance of this Warrant by its Holder(s) shall be deemed to constitute the unqualified acceptance by the Holder of all of the terms and conditions set forth herein.”

3. The Corporation has not yet issued shares of Class C Preferred Stock.

4. The foregoing amendment was duly adopted by the Board of Directors, without the requirement of shareholder action, by meeting held on April 17, 1996, pursuant to the provisions of the Florida Business Corporation Act.

5. Shareholder action is not required to effectuate the action taken hereby.

IN WITNESS WHEREOF, Medcross, Inc. has caused this Certificate of Amendment to the Articles of Incorporation to be executed by its President and attested to by its Secretary this 26th day of April. 1996.

MEDCROSS, INC.

By:	/s/ Henry Y. L. Toh
	Henry Y. L. Toh, President

ATTEST:

/s/ Stephanie Giallourakis

Stephanie Giallourakis, Secretary

ARTICLES OF AMENDMENT

TO THE

AMENDED AND RESTATED

ARTICLES OF INCORPORATION

MEDCROSS, INC.

1. The name of the corporation is Medcross, Inc.

2. Article III is hereby amended by adding Section III (f), which shall read in its entirety as follows:

1. Dividends . The holders of the Class C Preferred Stock shall be entitled to cumulative preferential dividends, when, as and if declared by the Board of Directors in an amount equal to 12% per annum of the liquidation preference per share of $20.00. Dividends may be paid (to the extent permissible under the Florida Business Corporation Act) to the holders of the Class C Preferred Stock in cash or shares of Common Stock or Preferred Stock or obligations of the Corporation (or any combination thereof), at the option of the Corporation.

3. Voting Rights. Except as otherwise required by applicable law, the Class C Preferred Stock shall have no voting rights; provided , however , that each holder of Class C Preferred Stock shall be entitled to notice of all stockholders meetings at the same time and in the same manner as notice is given to all stockholders entitled to vote at such meetings.

4. Redemption . The Corporation may not redeem any shares of Class C Preferred Stock.

5. Conversion Into Common Stock . (a) Subject to the terms and conditions of this subsection, Issued and outstanding shares of Class C Preferred Stock shall convert to common stock of the Corporation, par value $.007 per share (the “Common Stock”), on the second anniversary of the filing of this Certificate of Designation with the Secretary of State of Florida (the Conversion Date), and with no other action required by the Corporation or the holder of the Class C Preferred Stock. The shares of Class C Preferred Stock held by each holder thereof shall be converted into such number of whole shares of Common Stock as is determined by multiplying the number of shares of Class C Preferred Stock by a fraction, the numerator of which is 20 and the denominator of which is the Conversion Price (as hereinafter defined). However, on any liquidation of the Corporation, the right of conversion shall terminate at the close of business on the last full business day before the date fixed for payment of the amount distributable on the Class C Preferred Stock.

(b) Promptly after the receipt of certificates representing Class C Preferred Stock and surrender of Class C Preferred Stock, the Corporation shall issue and deliver, or cause to be issued and delivered, to the holder a certificate or certificates for the number of whole shares of Common Stock Issuable upon the conversion of such Class C Preferred Stock. No fractional shares shall be issued upon conversion of the Class C Preferred Stock into shares of Common Stock. To the extent permitted by law, the conversion shall be deemed to have been effected as of the close of business on the Conversion Date (or on the next preceding business day if the Conversion Date is not a business day) and at that time the rights of the holder of Class C Preferred Stock, as such holder, shall cease, and the holder of the Class C Preferred Stock shall become the holder of record of shares of Common Stock.

(c) The conversion price per share of Class C Preferred Stock (the “Conversion Price’) shall be seventy percent (70%) of the average of the bid and asked prices per share of the Common Stock as quoted by Nasdaq (or the closing bid price if no transaction price is available, or, in the case of no closing transaction price and no closing bid price being available, the fair market value of the Common Stock as determined in good faith by the Corporation’s Board of Directors) for the twenty (20) consecutive trading days prior to the Conversion Date.

6. Rank . With respect to the pay ment of dividends and rights to redemption and upon liquidation, the shares of the Class C Preferred Stock shall be subordinate to the issued and outstanding shares of Class A Preferred Stock and Class B Preferred Stock of the Corporation and shall rank se nior to the shares of Common Stock of the Corporation.’

3. The foregoing amendment was duly adopted by the Board of Directors without the requirement of shareholder action by meeting held on December 8, 1995, pursuant to the provisions of the Florida Business Corporation Act.

IN WITNESS WHEREOF, Medcross, Inc. has caused this Certificate of Amendment to the Articles of Incorporation to be executed by its President and attested to by its, Secretary this 14 ^th day of December, 1995.

MEDCROSS, INC.

By:	/s/ Henry Y. L. Toh
	Henry Y. L. Toh, President
	Director

ATTEST:

/s/ Stephanie Giallourakis

Stephanie Giallourakis, Secretary

ARTICLES OF AMENDMENT TO THE

AMENDED AND RESTATED ARTICLES OF INCORPORATION OF

MEDCROSS, INC.

Pursuant to the provisions of Section 607.1006 of the Florida Business Corporation Act, Medcross, Inc. (the “Corporation”), does hereby adopt the following Articles of Amendment to its Amended and Restated Articles of Incorporation:

1. The Name of the Corporation is Medcross, Inc.

2. Article III. Section (b) of the Amended and Restated Articles of Incorporation is hereby amended to read in its entirety as follows:

“(b) 500,000 shares of preferred stock, having a par value of $10.00 per share (the “Preferred Stock”). The Preferred Stock may be issued in one or more series. The Board of Directors shall have the authority to divide the Preferred Stock into one or more series and, subject to the provisions and limitations set forth herein, to determine the relative rights and preferences of the shares of any series so established with regard to the rate or manner of payment of dividends, whether such shares may be redeemed and, if so, the redemption price and the terms and conditions of redemption, sinking fund provisions, if any, for the redemption or purchase of such shares, the terms and conditions, if any, on which such shares may be converted, and voting rights, if any. Provided, however, except as to any rights and preferences as determined by the Board of Directors as set forth above, all shares of such Preferred Stock regardless of series shall be identical.”

3. Article III. Section (d) of the Amended and Restated Articles of incorporation is hereby amended to read in its entirety as follows:

“(d) Of the 250,000 shares of Preferred Stock authorized hereunder, 200.000 shares of Preferred Stock shall be designated Class A Variable Rate Cumulative Convertible Preferred Stock (“Class A Preferred Stock”), shall have a par value of $10.00 per share, and shall have the following rights and preferences:

1. Dividends. The holders of the shares of Class A Preferred Stock shall be entitled to receive out of any assets at the time legally available therefor and when and as declared by the Board of Directors cumulative dividends at the rate of 5.55% per annum: provided, however, the dividend rate shall be adjusted monthly commencing on April 1, 1992, and continuing on the first day of each and every month thereafter while each share of Class A Preferred Stock is outstanding. The dividend rate for each such month shall be equal to the published rate paid by Texas Commerce Bank, National Association, Houston, Texas, on 30-day certificates of deposit in effect on the first day of each such month plus 2%. Dividends shall be payable in cash quarterly commencing on April I, 1992, and continuing on the first day of July, October, January and April of each year that any shares of Class A Preferred Stock are outstanding. Such dividends are prior and in preference to any declaration or payment of any distribution (as defined below) on the Common Stock of the Company. Such dividends shall accrue on each share of Class A Preferred stock from day to day from the date of initial issuance thereof whether or not there are funds legally available for payment of dividends, or such dividends are earned or declared, so that if such dividends with respect to any previous dividend period at the rate provided for herein have not been paid on, or declared and set apart for, all shares of Class A Preferred Stock at the time outstanding, the deficiency shall be fully paid on. or declared and set apart for, such shares before any distribution shall be paid on, or declared and set apart for, the Common Stock.

For purposes hereof, unless the context otherwise requires, the term “distribution” shall mean the transfer of cash or property without consideration, or issuance of indebtedness, whether by way of dividend or otherwise, payable other than in Common Stock, as a dividend on any class or series of capital stock of the Company on the repurchase or redemption of shares of capital stock of the Company (other than repurchases of Common Stock held by employees of the Company upon termination of their employment pursuant to agreements providing for such repurchase) for cash or property or as a payment by the Company in liquidation of all or a portion of its assets.

2. Voting Rights. Each share of Class A Preferred Stock shall entitle the holder thereof to that number of votes which is equal to the number of shares of Common Stock into which the Class A Preferred Stock is convertible pursuant to Subsection 4 at the time the vote is taken, on all matters submitted to a vote of the Company s shareholders. Except as otherwise provided herein or required by law, holders of shares of Class A Preferred Stock shall vote with the holders of shares of Common Stock and any other class of stock entitled to vote and not as a separate class.

3. [Intentionally omitted.]

4. Optional Conversion Into Common Stock.

(a) Subject to the terms and conditions of this Subsection 4, the holder of any share or shares of Class A Preferred stock has the right at any time after the issuance of the shares of Class A Preferred Stock at its option to convert all or a portion of the shares of Class A Preferred stock held by it into such number of whole shares of Common Stock as is determined by multiplying the number of shares of Class A Preferred stock by a fraction, the numerator of which is $10.00 and the denominator is the Conversion Price (as hereinafter defined). However, on any liquidation of the Company. the right of conversion shall terminate at the close of business on the last full business day before the date fixed for payment of the amount distributable on the Class A Preferred Stock. The holder may exercise this right of conversion only by giving written notice that the holder elects to convert a stated number of shares of the Class A Preferred Stock into shares of Common Stock on the date specified in the notice and surrendering to the Company a certificate or certificates for the Class A Preferred Stock to be converted, at its principal office, at any time during its usual business hours on or before the date set forth in the notice, together with a statement of the name or names (with addresses) in which the certificate or certificates for Common Stock should be issued.

(b) Promptly after the receipt of the written notice referred to above and surrender of the share or shares of Class A Preferred Stock to be converted, the Company shall issue and deliver, or cause to be issued and delivered, to the holder a certificate or certificates for the number of whole shares of Common Stock issuable upon the conversion of such share or shares. No fractional shares shall be issued upon conversion of the Class A Preferred Stock into shares of Common Stock. To the extent permitted by law, the conversion shall he deemed to have been effected as of the close of business on the date specified in the written notice, and at that time the rights of the holder of the share or shares, as such a holder, shall cease, and the holder of the Class A Preferred Stock shall become the holder of record of the shares of Common Stock.

(c) The conversion price per share of Common Stock as of any date (the “Conversion Price”) shall be $.058375 (the “Initial Conversion Price”). as adjusted from time to time in accordance with paragraph (d) of this Subsection 4.

(d) (l) In the event that the Company shall make any distribution of its assets upon or with respect to its Common Stock, as a liquidating or partial liquidating dividend, each holder of a share of Class A Preferred Stock shall, upon the exercise of his right to convert after the record date for such distribution or, in the absence of a record date, after the date of such distribution, receive, in addition to the shares subscribed for, the amount of such assets, (or, at the option of the Company, a sum equal to the value thereof at the time of distribution as determined by the Board of Directors in its sole discretion) which would have been distributed to such holder if he had exercised his right to convert immediately prior to the record date for such distribution or, in the absence of a record date, immediately prior to the date of such distribution.

(2) If at any time the Company shall subdivide its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision shall be proportionately reduced and conversely, in case the outstanding shares of Common Stock of the Company shall be combined into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased.

(3) If any capital reorganization or reclassification of the capital stock of the Company, or consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets to another corporation, shall be effected in such way that holder of shares of Common Stock shall be entitled to receive stock, securities, or a with respect to or in exchange for their shares of Common Stock, then, as a condition of such reorganization, reclassification, consolidation, merger, or sale, each holder of a share(s) of Class A Preferred Stock shall have the right thereafter for so long as such Share(s) is outstanding to convert such Share(s) into the kind and amount of stock, securities, or assets receivable upon such reorganization, reclassification, consolidations, merger, or sale by a holder of the number of shares of Common Stock into which such Share(s) of Class A Preferred Stock might have been convened immediately prior to such reorganization, reclassification, consolidations, merger, or sale, subject to adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for herein.

(4) Before taking any action which would cause an adjustment reducing the Conversion Price at any time in effect below the then par value of the shares of Common Stock issuable upon conversion of shares of Class A Preferred Stock, the Company shall take any corporate action which may be necessary in order that the Company may validly and legally issue fully paid and nonassessable share of such Common Stock at such Conversion Price as so adjusted

(5) Whenever the Conversion Price is adjusted, as herein provided, the Company shall send to each holder of a share of Class A Preferred Stock a certificate of a firm of independent public accountants (who may be the accountants regularly employed by the Company) selected by the Board of Directors setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

(6) In case:

(1) the Company shall declare a dividend (or any other distribution) on its Common Stock; or

(2) the Company shall authorize the granting to holders of shares of Common Stock of rights to subscribe for or purchase any shares of capital stock of any class or of any other rights; or

(3) of any capital reorganization or reclassification of the capital stock of the Company or of any consolidation or merger of the Company with another corporation, or of the sale of all or substantially all of its assets to another corporation which is to be effected in such a way that holders of the Common Stock shall be entitled to receive stock, securities, or other assets with respect to or in exchange for Common Stock; or

(4) of the voluntary or involuntary dissolution liquidation, or winding up of the Company;

then the Company shall promptly send to the holder of each share of Class A Preferred Stock, at least 30 days prior to the applicable record date hereinafter specified, a notice stating (1) the date on which a record is to be taken for the purpose of such dividend or distribution of rights, or, if a record date is not to be taken, the date as of which the holders of shares of Common Stock of record would be entitled to such dividend or distribution of rights, or (2) the date on which such capital reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding up is expected to become effective, and the date as of which it is expected that the holders of shares of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other assets deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding up.

5. Liquidation Preference. In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Company, the holders of shares of the Class A Preferred Stock then outstanding shall be entitled to be paid, out of the assets of the Company available for distribution to its stockholders, whether from capital, surplus, or earnings, before any payment shall be made in respect of the Class B Preferred Stock or Common Stock, an amount equal to Ten Dollars ($10.00) per share, plus all accrued and unpaid dividends thereon to the date fixed for distribution. After setting apart or paying in full the preferential amounts due the holders of the Class A Preferred Stock, the remaining assets of the Company available for distribution to stockholders, if any, shall be distributed exclusively to the holders of Class B Preferred Stock or Common Stock. If upon liquidation, dissolution, or winding up of the Company, the assets of the Company available for distribution to its shareholders shall be insufficient to pay the holders of the Class A Preferred Stock the full amounts to which they respectively shall be entitled, the holders of the Class A Preferred Stock shall share ratably in any distribution of assets according to the respective amounts which would be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to said shares were paid in full. Neither a consolidation nor merger of the Company into or with any other corporation or corporations, nor the merger of any other corporation into the Company, nor the sale or transfer by the Company of all or any part of its assets, nor a reorganization of the Company, nor the purchase or redemption of all or part of the outstanding shares of any class or classes of the capital stock of the Company, nor a reduction of the capital stock of the Company shall be deemed to be a liquidation, dissolution, or winding up of the Company within the meaning of any of the provisions of this Subsection 5.”

4. The aforesaid amendments were approved by the shareholders on January 24, 1994, and by the Board of Directors on February 24, 1993 (as to the amendment of Article III. Section (d)) and on November 8, 1993 (as to the amendment of Article III, Section (b)).

5. The designation of each voting group entitled to vote separately on the amendment is the holders of the Common Stock as one voting group and the holders of the Class A Preferred Stock and the Class B Preferred Stock as another voting group. The number of votes cast for the aforesaid amendments by each of the two voting groups was sufficient for approval by that voting group.

Executed on February 23, 1994

MEDCROSS, INC.

By:	/s/ Henry Y. L. Toh
	Henry Y. L. Toh, President

ATTEST:

[Illegible Copy]

Secretary

ARTICLES OF AMENDMENT TO THE

AMENDED AND RESTATED ARTICLES OF INCORPORATION OF

MEDCROSS, INC.

Pursuant to the provisions of Section 607.1006 of the Florida Business Corporation Act, Medcross, Inc., a Florida corporation (the “Corporation”), does hereby adopt the following Articles of Amendment to its Amended and Restated Articles of Incorporation:

1. The name of the Corporation is Medcross, Inc.

2. Article III, Section (a), of the Amended and Restated Articles of, Incorporation is hereby amended to read in its entirety as follows:

“(a) 20,000,000 shares of common stock, having a par value of $.007 per share (the “Common Stock”); and”

In connection with the adoption of the aforesaid amendment, the Corporation is effectuating a I-for-7 reverse stock split whereby each seven shares of Common Stock, par value $.001 per share (the “Old Common Stock”), outstanding immediately prior to the filing of these Articles of Amendment with the Department of State. State of Florida, as well as any shares issuable upon exercise of outstanding options and upon the conversion of outstanding convertible securities, will become equivalent to and be exchanged for one share of Common Stock, par value $.007 per share (the “New Common Stock”). Fractional shares of New Common Stock will not be issued as part of the aforesaid exchange of New Common Stock for Old Common Stock, but any shareholder who would be entitled to a fractional share in such exchange will be issued one whole share of New Common Stock in lieu thereof.

3. The aforesaid amendment was approved by the shareholders on September 11, 1992, and by the Board of Directors on October 13, 1992.

4. The designation of each voting group entitled to vote separately on the amendment is the holders of the Common Stock as one voting group and the Class A Preferred Stock and the Class B Preferred Stock as another voting group. The number of votes cast for the aforesaid amendment by each of the two voting groups was sufficient for approval by that voting group.

Executed on October 13, 1992	MEDCROSS, INC.

	By:	/s/ Robert M. Irvin
		Robert M. Irvin, President

ARTICLES OF AMENDMENT TO THE

AMENDED AND RESTATED ARTICLES OF INCORPORATION OF

MEDCROSS, INC.

Pursuant to Article III of the Articles of Incorporation of the Company, and the provisions of Section 607.0602 of the Florida Business Corporation Act, the Board of Directors of the Company has amended Article III of the Company’s Articles of Incorporation.

1. The name of the corporation is Medcross, Inc.

2. Article III, Subsection (e), is amended in its entirety to read as follows:

“(e) Of the 250,000 shares of Preferred Stock authorized hereunder, 22,500 shares of Preferred Stock shall be designated Class B Variable Rate Cumulative Convertible Preferred Stock (“Class B Preferred Stock”), shall have a par value of $10.00 per share, and shall have the following rights and preferences:

1. Dividends. The holders of the shares of Class B Preferred Stock shall be entitled to receive out of any assets at the time legally available therefor and when and as declared by the Board of Directors cumulative dividends at the rate of 5.55% per annum; provided, however, the dividend rate shall be adjusted monthly commencing on April I, 1992, and continuing on the first day of each and every month thereafter while each share of Class B Preferred Stock is outstanding. The dividend rate for each such month shall be equal to the published rate paid by Texas Commerce Bank, National Association, Houston, Texas, on 30-day certificates of deposit in effect on the first day of each such month plus 2%. Dividends shall be payable in cash quarterly commencing on April 1, 1992, and continuing on the first day of July, October, January, and April of each year that any shares of Class B Preferred Stock are outstanding. Such dividends are prior and in preference to any declaration or payment of any distribution (as defined below) on the Common Stock of the Company. Such dividends shall accrue on each share of Class B Preferred Stock from day to day from the date of initial issuance thereof whether or not there are funds legally available for payment of dividends, or such dividends are earned or declared, so that if such dividends with respect to any previous dividend period at the rate provided for herein have not been paid on, or declared and set apart for, all shares of Class B Preferred Stock at the time outstanding, the deficiency shall be fully paid on, or declared and set apart for, such shares before any distribution shall be paid on, or declared and set apart for, the Common Stock.

For purposes hereof, unless the context otherwise requires, the term “distribution” shall mean the transfer of cash or property without consideration, or issuance of indebtedness, whether by way of dividend or otherwise, payable other than in Common Stock, as a dividend on any class or series of capital stock of the Company on the repurchase or redemption of shares of capital stock of the Company (other than redemptions provided for in Subsection 3 hereof or repurchases of Common Stock held by employees of the Company upon termination of their employment pursuant to agreements providing for such repurchase) for cash or property or as a payment by the Company in liquidation of all or a portion of its assets.

2. Voting Rights. Except as otherwise provided by law, the shares of Class B Preferred Stock shall have no voting rights.

3. Redemption.

(a) The Company may, at any time after issuance of the Class B Preferred Stock, call for redemption at the Redemption Price (as defined below) any or all of the outstanding shares of Class B Preferred Stock in accordance with this Subsection 3. The Company shall mail notice of any redemption by certified mail, postage prepaid, to each holder of record of the shares of the Class B Preferred Stock to be redeemed, at his or her address registered with the Company, which notice shall be accompanied by payment in full of the Redemption Price. The date of the mailing of notice of redemption shall be the Redemption Date.

(b) If notice of redemption has been mailed and the Company has made payment of the Redemption Price, on the Redemption Date all rights of the holders of the shares, as shareholders of the Company by reason of the ownership of the shares, shall cease, and after the Redemption Date the shares shall not be outstanding. If less than all the shares represented by any certificate are redeemed, a new certificate, representing the unredeemed shares, shall be issued to the holder thereof without cost (except for the payment of any applicable transfer taxes) to the holder. If called for redemption, the right to convert Class B Preferred Stock to Common Stock pursuant to Subsection 4 shall terminate on the close of business on the day before the date fixed for actual payment of the Redemption Price unless the Company shall default in paying the Redemption Price.

( c) To facilitate the redemption of any shares of Class B Preferred Stock, the Board of Directors is authorized to cause the transfer books of the Company to be closed as to such shares as of the record date for determining the holders of Class B Preferred Stock entitled to notice of redemption.

(d) For purposes hereof, the term “Redemption Price” shall mean $10.00 per share of Class B Preferred Stock, plus the amount of any accrued and unpaid dividends on such share on the date payment of the Redemption Price is paid.

4. Optional Conversion Into Common Stock.

(a) Subject to the provisions of Subsection 3 hereof regarding redemption, and subject to the terms and conditions of this Subsection 4, the holder of any share or shares of Class B Preferred Stock has the right at any time after the issuance of the shares of Class B Preferred Stock at its option to convert all or a portion of the shares of Class B Preferred Stock held by it into such number of whole shares of Common Stock as is determined by multiplying the number of shares of Class B Preferred Stock by a fraction, the numerator of which is $10.00 and the denominator is the Conversion Price (as hereinafter defined). However, on any liquidation of the Company, the right of conversion shall terminate at the close of business on the last full business day before the date fixed for payment of the amount distributable on the Class B Preferred Stock. The holder may exercise this right of conversion only by giving written notice that the holder elects to convert a stated number of shares of the Class B Preferred Stock into shares of Common Stock on the date specified in the notice and surrendering to the Company a certificate or certificates for the Class B Preferred Stock to be converted, at its principal office, at any time during its usual business hours on or before the date set forth in the notice, together with a statement of the name or names (with addresses) in which the certificate or certificates for Common Stock should be issued.

(b) Promptly after the receipt of the written notice referred to above and surrender of the share or shares of Class B Preferred Stock to be converted, the Company shall issue and deliver, or cause to be issued and delivered, to the holder a certificate or certificates for the number of whole shares of Common Stock issuable upon the conversion of such share or shares. No fractional shares shall be issued upon conversion of the Class B Preferred Stock into shares of Common Stock. To the extent permitted by law, the conversion shall be deemed to have been effected as of the close of business on the date specified in the written notice, and at that time the rights of the holder of the share or shares, as such a holder, shall cease, and the holder of the Class B Preferred Stock shall become the holder of record of the shares of Common Stock.

(c) The conversion price per share of Common Stock as of any date (the “Conversion Price”) shall [ Illegible ] 58375 (the “initial Conversion Price”), as adjusted from time to time in [ Illegible ] with paragraph (d) of this Subsection 4.

(d) (1) In the event that the Company shall make any distribution of its assets upon or with respect to its Common Stock, as a liquidating or partial liquidating dividend, each holder of a share of’ Class B Preferred Stock shall, upon the exercise of his right to convert after the record date for such distribution or, in the absence of a record date, after the date of such distribution, receive, in addition to the shares subscribed for, the amount of such assets (or, at the option of the Company, a sum equal to the value thereof at the time of distribution as determined by the Board of Directors in its sole discretion) which would have been distributed to such holder if he had exercised his right to convert immediately prior to the record date for such distribution or, in the absence of a record date, immediately prior to the date of such distribution.

(3) If any capital reorganization or reclassification of the capital stock of the Company, or consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets to another corporation, shall be effected in such a way that holders of shares of Common Stock shall be entitled to receive stock, securities, or assets with respect to or in exchange for their shares of Common Stock, then, as a condition of such reorganization, reclassification, consolidation, merger, or sale, each holder of a share(s) of Class B Preferred Stock shall have the right thereafter for so long as such share(s) is outstanding to convert such share(s) into the kind and amount of stock, securities, or assets receivable upon such reorganization, reclassification, consolidations, merger, or sale by a holder of the number of shares of Common Stock into which such share(s) of Class B Preferred Stock might have been convened immediately prior to such reorganization, reclassification, consolidations, merger or sale, subject to adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for herein.

Stock, the Company shall take any corporate action which ma y be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of such Common Stock at such Conversion Price as so adjusted.

(5) Whenever the Conversion Price is adjusted, as herein provided, the Company shall send to each holder of a share of Class B Preferred Stock a certificate of a firm of independent public accountants (who may be the accountants regularly employed by the Company) selected by the Board of Directors setting [ Illegible ] the Conversion Price after such adjustment and [ Illegible ] forth a brief statement [ Illegible ] the facts requiring such adjustment.

(6) In case:

(1) the Company shall declare a dividend (or any other distribution) on its Common Stock; or

(2) the Company shall authorize the granting to holders of shares of Common Stock of rights to subscribe for or purchase any shares of capital stock of any class or of any other rights; or

(4) of the voluntary or involuntary dissolution, liquidation, or winding up of the Company;

then the Company shall promptly send to the holder of each share of Class B Preferred Stock, at least 30 days prior to the applicable record date hereinafter specified, a notice stating (1) the date on which a record is to be taken for the purpose of such dividend or distribution of rights, or, if a record date is not to be taken, the date as of which the holders of shares of Common Stock of record would be entitled to such dividend or distribution of rights, or (2) the date on which such capital reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding up is expected to become effective, and the date as of which it is expected that the holders of shares of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other assets deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding up.

5. Liquidation Preference. In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Company, the holders of shares of the Class B Preferred Stock then outstanding shall be entitled to be paid, out of the assets of the Company available for distribution to its stockholders, whether from capital, surplus, or earnings, before any payment shall be made in respect of the Common Stock, an amount equal to Ten Dollars ($10.00) per share, plus all accrued and unpaid dividends thereon to the date fixed for distribution. After setting apart or paying in full the preferential amounts due the holders of the Class B Preferred Stock, the remaining assets of the Company available for distribution to stockholders, if any, shall be distributed exclusively to the holders of Common Stock, each such issued and outstanding share of Common Stock entitling the holder thereof to receive an equal proportion of said remaining assets. If upon liquidation, dissolution, or winding up of the Company, the assets of the Company available for distribution to its shareholders shall be insufficient to pay the holders of the Class B Preferred Stock the full amounts to which they respectively shall be entitled, the holders of the Class B Preferred Stock shall share ratably in any distribution of assets according to the respective amounts which would be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to said shares were paid in full. Neither a consolidation nor merger of the Company into or with any other corporation or corporations, nor the merger of any other corporation into the Company, nor the sale or transfer by the Company of all or any part of its assets, nor a reorganization of the Company, nor the purchase or redemption of all or part of the outstanding shares of any class or classes of the capital stock of the Company, nor a reduction of the capital stock of the Company shall be deemed to be a liquidation, dissolution, or winding up of the Company within the meaning of any of the provisions of this Subsection 5.”

3. The foregoing amendment was duly adopted by the Board of Directors without the requirement of shareholder action on March 30, 1992, pursuant to Section 607.0602 of the Florida Business Corporation Act.

IN WITNESS WHEREOF, the undersigned director of the Company has executed these Articles of Amendment this 2nd day of April, 1992.


	[Illegible Copy]
	[Illegible Copy]	, Director

ARTICLES OF AMENDMENT TO THE

AMENDED AND RESTATED ARTICLES OF INCORPORATION OF

MEDCROSS, INC.

1. The name of the corporation is Medcross, Inc.

2. Article III is amended to add subsections “(d) and (e) as follows:

“(d) Of the 250,000 shares of Preferred Stock authorized hereunder, 200,000 shares of Preferred Stock shall be designated Class A Variable Rate Cumulative Convertible Preferred Stock (“Class A Preferred Stock”), shall have a par value of $10.00 per share, and shall have the following rights and preferences:

1. Dividends. The holders of the shares of Class A Preferred Stock shall be entitled to receive out of any assets at the lime legally available therefor and when and as declared by the Board of Directors cumulative dividends at the rate of 5.55% per annum: provided, however, the dividend rate shall be adjusted monthly commencing on April 1, 1992, and continuing on the first day of each and every month thereafter while each share of Class A Preferred Stock is outstanding. The dividend rate for each such month shall be equal to the published rate paid by Texas Commerce Bank, National Association, Houston, Texas, on 30-day certificates of deposit in effect on the first day of each such month plus 2%. Dividends shall be payable in cash quarterly commencing on April 1, 1992, and continuing on the first day of July, October, January, and April of each year that any shares of Class A Preferred Stock are outstanding. Such dividends are prior and in preference to any declaration or payment of any distribution (as defined below) on the Common Stock of the Company. Such dividends shall accrue on each share of Class A Preferred Stock from day to day from the date of initial issuance thereof whether or not there are funds legally available for payment of dividends, or such dividends are earned or declared. so that if such dividends with respect to any previous dividend period at the rate provided for herein have not been paid on, or declared and set apart for, all shares of Class A Preferred Stock at the time outstanding, the deficiency shall be fully paid on, or declared and set apart for, such shares before any distribution shall be paid on, or declared and set apart for, the Common Stock.

For purposes hereof, unless the context otherwise requires, the term “distribution” shall mean the transfer of cash or property without consideration, or issuance of indebtedness, whether by way of dividend or otherwise, payable other than in Common Stock, as a dividend on any class or series of capital stock of the Company on the repurchase or redemption of shares of capital stock of the Company (other than redemptions provided for in Subsection 3 hereof or repurchases of Common Stock held by employees of the Company upon termination of their employment pursuant to agreements providing for such repurchase) for cash or property or as a payment by the Company in liquidation of all or a portion of its assets.

2. Voting Rights. Each share of Class A Preferred Stock shall entitle the holder thereof to that number of votes which is equal to the number of shares of Common Stock into which the Class A Preferred Stock is convertible pursuant to Subsection 4 at the time the vote is taken, on all matters submitted to a vote of the Company’s shareholders. Except as otherwise provided herein or required by law, holders of shares of Class A Preferred Stock shall vote with the holders of shares of Common Stock and any other class of stock entitled to vote and not as a separate class.

3. Redemption.

(a) The Company may, at any time after issuance of the Class A Preferred Stock, call for redemption at the Redemption Price (as defined below) any or all of the outstanding shares of Class A Preferred Stock in accordance with this Subsection 3. The Company shall mail notice of any redemption by certified mail, postage prepaid, to each holder of record of the shares of the Class A Preferred Stock to be redeemed, at his or her address registered with the Company, which notice shall be accompanied by payment in full of the Redemption Price. The date of the mailing of notice of redemption shall be the Redemption Date.

(b) If notice of redemption has been mailed and the Company has made payment of the Redemption Price, on the Redemption Date all rights of the holders of the shares, as shareholders of the Company by reason of the ownership of the sha res, shall cease, and after the Redemption Date the shares shall not be outstanding. If less than all the shares represented by any certificate are redeemed, a new certificate, representing the unredeemed shares, shall be issued to the holder thereof witho ut cost (except for the payment of any applicable transfer taxes) to the holder. If called for redemption, the right to convert Class A Preferred Stock to Common Stock pursuant to Subsection 4 shall terminate on the close of business on the day before the date fixed for actual payment of the Redemption Price unless the Company shall default in paying the Redemption Price.

(c) To facilitate the redemption of any shares of Class A Preferred Stock, the Board of Directors is authorized to cause the transfer books of the Company to be closed as to such shares as of the record date for determining the holders of Class A Preferred Stock entitled to notice of redemption.

(d) For purposes hereof, the term “Redemption Price” shall mean $10.00 per share of Class A Preferred Stock, plus the amount of any accrued and unpaid dividends on such share on the date payment of the Redemption Price is paid.

4. Optional Conversion Into Common Stock.

(a) Subject to the provisions of Subsection 3 hereof regarding redemption, and subject to the terms and conditions of this Subsection 4, the holder of any share or shares of Class A Preferred Stock has the right at any time after the issuance of the shares of Class A Preferred Stock at its option to convert all or a portion of the shares of Class A Preferred Stock held by it into such number of whole shares of Common Stock as is determined by multiplying the number of shares of Class A Preferred Stock by a fraction, the numerator of which is $10.00 and the denominator is the Conversion Price (as hereinafter defined). However, on any liquidation of the Company, the right of conversion shall terminate at the close of business on the last full business day before the date fixed for payment of the amount distributable on the Class A Preferred Stock. The holder may exercise this right of conversion only by giving written notice that the holder elects to convert a stated number of shares of the Class A Preferred Stock into shares of Common Stock on the date specified in the notice and surrendering to the Company a certificate or certificates for the Class A Preferred Stock to be converted, at its principal office, at any time during its usual business hours on or before the date set forth in the notice, together with a statement of the name or names (with addresses) in which the certificate or certificates for Common Stock should be issued.

(b) Promptly after the receipt of the written notice referred to above and surrender of the share or shares of Class A Preferred Stock to be converted, the Company shall issue and deliver, or cause to be issued and delivered, to the holder a certificate or certificates for the number of whole shares of Common Stock issuable upon the conversion of such share or shares. No fractional shares shall be issued upon conversion of the Class A Preferred Stock into shares of Common Stock. To the extent permitted by law, the conversion shall be deemed to have been effected as of the close of business on the date specified in the written notice, and at that time the rights of the holder of the share or shares, as such a holder, shall cease, and the holder of the Class A Preferred Stock shall become the holder of record of the shares of Common Stock.

(c) The conversion price per share of Common Stock as of any date (the “Conversion Price”) shall be $.058375 (the “Initial Conversion Price”), as adjusted from time to time in accordance with paragraph (d) of this Subsection 4.

(d) (1) In the event that the Company shall make any distribution of its assets upon or with respect to its Common Stock, as a liquidating or partial liquidating dividend, each holder of a share of Class A Preferred Stock shall, upon the exercise of his right to convert after the record date for such distribution or, in the absence of a record date, after the date of such distribution, receive, in addition to the shares subscribed for, the amount of such assets (or, at the option of the Company, a sum equal to the value thereof at the time of distribution as determined by the Board of Directors in its sole discretion) which would have been distributed to such holder if he had exercised his right to convert immediately prior to the record date for such distribution or, in the absence of a record date, immediately prior to the date of such distribution.

such share(s) is outstanding to convert such share(s) into the kind and amount of stock, securities, or assets receivable upon such reorganization, reclassification, consolidations, merger, or sale b y a holder of the number of shares of Common Stock into which such share(s) of Class A Preferred Stock might have been converted immediately prior to such reorganization, reclassification, consolidations, merger, or sale, subject to adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for herein.

(4) Before taking any action which would cause an adjustment reducing the Conversion Price at any time in effect below the then par value of the shares of Common Stock issuable upon conversion of shares of Class A Preferred Stock, the Company shall take any corporate action which may be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of such Common Stock at such Conversion Price as so adjusted.

(6) In case:

(1) the Company shall declare a dividend (or any other distribution) on its Common Stock; or

(2) the Company shall authorize the granting to holders of shares of Common Stock of rights to subscribe for or purchase any shares of capital stock of any class or of any other rights; or

(4) of the voluntary or involuntary dissolution, liquidation, or winding up of the Company;

then the Company shall promptly send to the holder of each share of Class A Preferred Stock, at least 30 days prior to the applicable record date hereinafter specified, a notice stating (I) the date on which a record is to be taken for the purpose of such dividend or distribution of rights, or, if a record date is not to be taken, the date as of which the holders of shares of Common Stock of record would be entitled to such dividend or distribution of rights, or (2) the date on which such capital reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding up is expected to become effective, and the date as of which it is expected that the holders of shares of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other assets deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding up.

5. Liquidation Preference. In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Company, the holders of shares of the Class A Preferred Stock then outstanding shall be entitled to be paid, out of the assets of the Company available for distribution to its stockholders, whether from capital, surplus, or earnings, before any payment shall be made in respect of the Class B Preferred Stock or Common Stock, an amount equal to Ten Dollars ($10.00) per share, plus all accrued and unpaid dividends thereon to the date fixed for distribution. After setting apart or paying In full the preferential amounts due the holders of the Class A Preferred Stock, the remaining assets of the Company available for distribution to stockholders, if any, shall be distributed exclusively to the holders of Class B Preferred Stock or Common Stock. If upon liquidation, dissolution, or winding up of the Company, the assets of the Company available for distribution to its shareholders shall be insufficient to pay the holders of the Class A Preferred Stock the full amounts to which they respectively shall be entitled, the holders of the Class A Preferred Stock shall share ratably in any distribution of assets according to the respective amounts which would be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to said shares were paid in full. Neither a consolidation nor merger of the Company into or with any other corporation or corporations, nor the merger of any other corporation into the Company, nor the sale or transfer by the Company of all or any part of its assets, nor a reorganization of the Company, nor the purchase or redemption of all or part of the outstanding shares of any class or classes of the capital stock of the Company, nor a reduction of the capital stock of the Company shall be deemed to be a liquidation, dissolution, or winding up of the Company within the meaning of any of the provisions of this Subsection 5.

(e) Of the 250,000 shares of Preferred Stock authorized hereunder, 7.500 shares of Preferred Stock shall be designated Class B Variable Rate Cumulative Convertible Preferred Stock (“Class B Preferred Stock”), shall have a par value of $10.00 per share, and shall have the following rights and preferences:

1. Dividends. The holders of the shares of Class B Preferred Stock shall be entitled to receive out of any assets at the time legally available therefor and when and as declared by the Board of Directors cumula tive dividends at the rate of 5.55% per annum; provided, however, the dividend rate shall be adjusted monthly commencing on April 1, 1992, and continuing on the first day of each and every month thereafter while each share of Class B Preferred Stock is out standing. The dividend rate for each such month shall be equal to the published rate paid by Texas Commerce Bank, National Association, Houston, Texas, on 30-day certificates of deposit in effect on the first day of each such month plus 2%. Dividends shall be payable in cash quarterly commencing on April 1, 1992, and continuing on the first day of July, October, January, and April of each year that any shares of Class B Preferred Stock are outstanding. Such dividends are prior and in preference to any decla ration or payment of any distribution (as defined below) on the Common Stock of the Company. Such dividends shall accrue on each share of Class B Preferred Stock from day to day from the date of initial issuance thereof whether or not there are funds legal ly available for payment of dividends, or such dividends are earned or declared, so that if such dividends with respect to any previous dividend period at the rate provided for herein have not been paid on, or declared and set apart for, all shares of Clas s B Preferred Stock at the time outstanding, the deficiency shall be fully paid on, or declared and set apart for, such shares before any distribution shall be paid on, or declared and set apart for, the Common Stock.

For purposes hereof, unless the context otherwise requires, the term “distribution” shall mean the transfer of cash or property without consideration, or issuance of indebtedness, whether by way of dividend or otherwise, payable other than in Common Stock, as a dividend on any class or series of capital stock of the Company on the repurchase or redemption of shares of capital stock of the Company (other than redemptions provided for in Subsection 3 hereof or repurchases of Common Stock held by employees of the Company upon termination of their employment pursuant to agreements providing for such repurchase) for cash or property or as a payment by the Company in liquidation of all or a portion of its assets.

2. Voting Rights. Except as otherwise provided by law, the shares of Class B Preferred Stock shall have no voting rights.

3. Redemption.

(b) If notice of redemption has been mailed and the Company has made payment of the Redemption Price, on the Redemption Date all rights of the holders of the shares, as shareholders of (the Company by reason of the ownership of the shares, shall cease, and after the Redemption Date the shares shall not be outstanding. If less than all the shares represented by any certificate are redeemed, a new certificate, representing the unredeemed shares, shall be issued to the holder thereof without cost (except for the payment of any applicable transfer Taxes) to the holder. If called for redemption, (the right to convert Class B Preferred Stock to Common Stock pursuant to Subsection 4 shall terminate on the close of business on the day before (he date fixed for actual payment of the Redemption Price unless the Company shall default in paying the Redemption Price.

(c) To facilitate the redemption of any shares of Class B Preferred Stock, the Board of Directors is authorized to cause the transfer books of the Company to be closed as to such shares as of the record date for determining the holders of Class B Preferred Stock entitled to notice of redemption.

4. Optional Conversion Into Common Stock.

certificate or certificates for the Class B Preferred Stock to be converted, at its principal office, at any time during its usual business hours on or be fore the date set forth in the notice, together with a statement of the name or names (with addresses) in which the certificate or certificates for Common Stock should be issued.

(d) (1) In the event that the Company shall make any distribution of its assets upon or with respect to its Common Stock, as a liquidating or partial liquidating dividend, each holder of a share of Class B Preferred Stock shall, upon the exercise of his right to convert after the record date for such distribution or, in the absence of a record date, after the date of such distribution, receive, in addition to the shares subscribed for, the amount of such assets (or, at the option of the Company, a sum equal to the value thereof at the time of distribution as determined by the Board of Directors in its sole discretion) which would have been distributed to such holder if he had exercised his right to convert immediately prior to the record date for such distribution or, in the absence of a record date, immediately prior to the date of such distribution.

(3) If any capital reorganization or reclassification of the capital stock of the Company, or consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets to another corporation, shall be effected in such a way that holders of shares of Common Stock shall be entitled to receive stock, securities, or assets with respect to or in exchange for their shares of Common Stock, then, as a condition of such reorganization, reclassification, consolidation, merger, or sale, each holder of a share(s) of Class B Preferred Stock shall have the right thereafter for so long as such share(s) is outstanding to convert such share(s) into the kind and amount of stock, securities, or assets receivable upon such reorganization, reclassification, consolidations, merger, or sale by a holder of the number of shares of Common Stock into which such share(s) of Class B Preferred Stock might have been converted immediately prior to such reorganization, reclassification, consolidations, merger, or sale, subject to adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for herein.

(4) Before taking any action which would cause an adjustment reducing the Conversion Price at any time in effect below the then par value of the shares of Common Stock issuable upon conversion of shares of Class B Preferred Stock, the Company shall take any corporate action which may be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of such Common Stock at such Conversion Price as so adjusted.

(5) Whenever the Conversion Price is adjusted, as herein provided, the Company shall send to each holder of a share of Class B Preferred Stock a certificate of a firm of independent public accountants (who may be the accountants regularly employed by the Company) selected by the Board of Directors setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

(6) In case:

(1) the Company shall declare a dividend (or any other distribution) on its Common Stock; or

(2) the Company shall authorize the granting to holders of shares of Common Stock of rights to subscribe for or purchase any shares of capital stock of any class or of any other rights; or

(3) of any c apital reorganization or reclassification of the capital stock of the Company or of any consolidation or merger of the Company with another corporation, or of the sale of all or substantially all of its assets to another corporation which is to be effected in such a way that holders of the Common Stock shall be entitled to receive stock, securities, or other assets with respect to or in exchange for Common Stock; or

(4) of the voluntary or involuntary dissolution, liquidation, or winding up of the Company;

5. Liquidation Preference. In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Company, the holders of shares of the Class B Preferred Stock then outstanding shall be entitled to be paid, out of the assets of the Company available for distribution to its stockholders, whether from capital, surplus, or earnings, before any payment shall be made in respect of the Common Stock, an amount equal to Ten Dollars ($10.00) per share, plus all accrued and unpaid dividends thereon to the date fixed for distribution. After setting apart or paying in full the preferential amounts due the holders of the Class B Preferred Stock, the remaining assets of the Company available for distribution to stockholders, if any, shall be distributed exclusively to the holders of Common Stock, each such issued and outstanding share of Common Stock entitling the holder thereof to receive an equal proportion of said remaining assets. If upon liquidation, dissolution, or winding up of the Company, the assets of the Company available for distribution to its shareholders shall be insufficient to pay the holders of the Class B Preferred Stock the full amounts to which they respectively shall be entitled, the holders of the Class B Preferred Stock shall share ratably in any distribution of assets according to the respective amounts, which would be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to said shares were paid in full. Neither a consolidation nor merger of the Company into or with any other corporation or corporations. nor the merger of any other corporation into the Company, nor the sale or transfer by the Company of all or any part of its assets, nor a reorganization of the Company, nor the purchase or redemption of all or part of the outstanding shares of any class or classes of the capital stock of the Company, nor a reduction of the capital stock of the Company shall be deemed to be a liquidation, dissolution, or winding up of the Company within the meaning of any of the provisions of this Subsection 5.”

IN WITNESS WHEREOF, the undersigned director of the Company has executed these Articles of Amendment effective March 30, 1992.

/s/ Philip M. Shasteen

Philip M. Shasteen, Director

ARTICLES OF AMENDMENT TO THE

AMENDED AND RESTATED ARTICLES OF INCORPORATION OF

MEDCROSS, INC.

The Statement of Designations, Preferences, and Rights of 8% Cumulative Convertible Preferred Stock of Medcross, Inc., a Florida corporation (the “Company”), dated March 1, 1989, and filed as an amendment to the Articles of Incorporation on March 3, 1989 as amended by Articles of Amendment to the Articles of Incorporation dated May 12, 1989, and filed on May 15, 1989, are hereby repealed.

1. The name of the corporation is Medcross, Inc.

2. Article III was amended to add subsection (c) as follows:

“ (c) Of the 250,000 shares of Preferred Stock authorized hereunder, 7,500 shares of Preferred Stock shall be designated 12% Cumulative Convertible Preferred Stock, shall have a par value of $10 per share, and shall have the following rights and preferences:

1. Dividends. The holders of the shares of 12% Cumulative Convertible Preferred Stock shall be entitled to receive out of any assets at the time legally available therefor and when and as declared by the Board of Directors dividends at the rate of One Dollar and Twenty Cents ($1.20) per share per annum, and no more, payable in cash quarterly commencing on April 1, 1992, and continuing on the first day of July, October, January, and April of each year that any shares of 12% Cumulative Convertible Preferred Stock are outstanding. Such dividends are prior and in preference to any declaration or payment of any distribution (as defined below) on the Common Stock of the Company. Such dividends shall accrue on each share of 12% Cumulative Convertible Preferred Stock from day to day from the date of initial issuance thereof whether or not earned or declared, so that if such dividends with respect to any previous dividend period at the rate provided for herein have not been paid on, or declared and set apart for, all shares of 12% Cumulative Convertible Preferred Stock at the time outstanding, the deficiency shall be fully paid on, or declared and set apart for, such shares before any distribution shall be paid on, or declared and set apart for, the Common Stock.

For purposes hereof, unless the context otherwise requires, the term “distribution” shall mean the transfer of cash or property without consideration, whether by way of dividend or otherwise, payable other than in Common Stock, on the repurchase or redemption of shares of capital stock of the Company (other than redemptions provided for in Subsection 3 hereof or repurchases of Common Stock held by employees of the Company upon termination of their employment pursuant to agreements providing for such repurchase) for cash or property.

2. Voting Rights. Each share of 12% Cumulative Convertible Preferred Stock shall entitle the holder thereof to 40 votes on all matters submitted to a vote of the Company’s shareholders.

3. Redemption.

(a) The Company may, at any time after issuance of the 12% Cumulative Convertible Preferred Stock, call for redemption at the Redemption Price (as defined below) any or all of the outstanding shares of 12% Cumulative Convertible Preferred Stock in accordance with this Subsection 3. If the Company redeems less than all the outstanding shares of 12% Cumulative Convertible Preferred Stock, the Company shall redeem from each holder a number of shares of 12% Cumulative Convertible Preferred Stock that bears the same proportion to all the shares of 12% Cumulative Convertible Preferred Stock to be redeemed as the shares of 12 % Cumulative Convertible Preferred Stock held of record by the holder bears to all the shares of 12% Cumulative Convertible Preferred Stock at the time outstanding. However, if a fraction of a share would be redeemed from any holder, the Company may, in order to avoid the redemption of a fractional share, redeem the next higher whole number of shares from the holder or, at its option, add that fraction to the shares to be redeemed from any other holder or holders.

(b) The Company shall mail notice of any redemption by certified mail, postage prepaid, to each holder of record of the shares of the 12% Cumulative Convertible Preferred Stock to be redeemed, at his or her address registered with the Company, which notice shall be accompanied by payment in full of the Redemption Price. The date of the mailing of notice of redemption shall be the Redemption Date.

(c) If notice of redemption has been mailed and the Company has made payment of the Redemption Price, on the Redemption Date all rights of the holders of the shares, as shareholders of the Company by reason of the ownership of the shares, shall cease, and after the Redemption Date the shares shall not be outstanding. If less than all the shares represented by any certificate are redeemed, a new certificate, representing the unredeemed shares, shall be issued to the holder thereof without cost (except for the payment of any applicable transfer taxes) to the holder.

(d) To facilitate the redemption of any shares of 12% Cumulative Convertible Preferred Stock, the Board of Directors is authorized to cause the transfer books of the Company to be closed as to such shares as of the record date for determining the holders of 12% Cumulative Convertible Preferred Stock entitled to notice of redemption.

(e) For purposes hereof, the term “Redemption Price” shall mean $10.50 per share of 12% Cumulative Convertible Preferred Stock.

(f) In the event that the shares of 12% Cumulative Convertible Preferred Stock are redeemed, the Board of Directors reserves the right to further amend the Company’s Articles of Incorporation to amend and re-designate the rights and preferences applicable to the shares of Preferred Stock designated herein as 12% Cumulative Convertible Preferred Stock.

4. Optional Conversion Into Common Stock.

(a) Subject to the provisions of Subsection 3 hereof regarding redemption, and subject to the terms and conditions of this Subsection 4, the holder of any share or shares of 12% Cumulative Convertible Preferred Stock has the right at any time after the expiration of six months after the issuance of the shares of 12% Cumulative Convertible Preferred Stock at its option to convert all or a portion of the shares of 12% Cumulative Convertible Preferred Stock held by it into such number of whole shares of Common Stock as is determined by multiplying the number of shares of 12% Cumulative Convertible Preferred Stock converted by 40. However, on any liquidation of the Company, the right of conversion shall terminate at the close of business on the last full business day before the date fixed for payment of the amount distributable on the 12% Cumulative Convertible Preferred Stock. The holder may exercise this right of conversion only by giving written notice that the holder elects to convert a stated number of shares of the 12% Cumulative Convertible Preferred Stock into shares of Common Stock on the date specified in the notice and surrendering to the Company a certificate or certificates for the 12% Cumulative Convertible Preferred Stock to be converted, at its principal office, at any time during its usual business hours on or before the date set forth in the notice, together with a statement of the name or names (with addresses) in which the certificate or certificates for Common Stock should be issued.

(b) Promptly after the receipt of the written notice referred to above and surrender of the share or shares of 12% Cumulative Convertible Preferred Stock to be converted, the Company shall issue and deliver, or cause to be issued and delivered, to the holder a certificate or certificates for the number of whole shares of Common Stock issuable upon the conversion of such share or shares. No fractional shares shall be issued upon conversion of the 12% Cumulative Convertible Preferred Stock into shares of Common Stock. To the extent permitted by law, the conversion shall be deemed to have been effected as of the close of business on the date specified in the written notice, and at that time the rights of the holder of the share or shares, as such a holder, shall cease, and the holder of the 12% Cumulative Convertible Preferred Stock shall become the holder of record of the shares of Common Stock.

5. Liquidation Preference. In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Company, the holders of shares of the 12% Cumulative Convertible Preferred Stock then outstanding shall be entitled to be paid, out of the assets of the Company available for distribution to its stockholders, whether from capital, surplus, or earnings, before any payment shall be made in respect of the Common Stock, an amount equal to Ten Dollars ($10.00) per share, plus all accrued and unpaid dividends thereon to the date fixed for distribution. After setting apart or paying in full the preferential amounts due the holders of the 12% Cumulative Convertible Preferred Stock, the remaining assets of the Company available for distribution to stockholders, if any, shall be distributed exclusively to the holders of Common Stock, each such issued and outstanding share of Common Stock entitling the holder thereof to receive an equal proportion of said remaining assets. If upon liquidation, dissolution, or winding up of the Company, the assets of the Company available for distribution to its shareholders shall be insufficient to pay the holders of the 12% Cumulative Convertible Preferred Stock the full amounts to which they respectively shall be entitled, the holders of the 12% Cumulative Convertible Preferred Stock shall share ratably in any distribution of assets according to the respective amounts which would be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to said shares were paid in full. Neither a consolidation nor merger of the Company into or with any other corporation or corporations, nor the merger of any other corporation into the Company, nor the sale or transfer by the Company of all or any part of its assets, nor a reorganization of the Company, nor the purchase or redemption of all or

part of the outstanding shares of any class or classes of the capital stock of the Company, nor a reduction of the capital stock of t he Company shall be deemed to be a liquidation, dissolution, or winding up of the Company within the meaning of any of the provisions of this Subsection 5.”

3. The foregoing amendment was duly adopted by the Board of Directors without the requirement of shareholder action on November 5, 1991, pursuant to Section 607.0602 of the Florida Business Corporation Act.

SIGNATURE PAGE TO ARTICLES OF AMENDMENT

TO THE ARTICLES OF INCORPORATION OF

MEDCROSS, INC.

IN WITNESS WHEREOF, the undersigned director of the Company has executed these Articles of Amendment on November 5, 1991.

/s/ Philip M. Shasteen

Philip M. Shasteen, Director

ARTICLES OF AMENDMENT TO THE

AMENDED AND RESTATED ARTICLES OF INCORPORATION OF

MEDCROSS, INC.

1. The first sentence of paragraph (b) of Article III of the Amended and Restated Articles of Incorporation of MEDCROSS, INC. (the “Corporation”) is hereby amended to read in its entirety as follows:

“(b) 250,000 shares of preferred stock, having a par value of $10.00 per share (the “Preferred Stock”).”

2. Paragraph 2 of the Statement of Designations, Preferences, and Rights of 8% Cumulative Convertible Preferred Stock filed as an amendment to the Articles of Incorporation of the Corporation (the “Statement”) is hereby amended to read in its entirety as follows:

“2. Voting Rights. Each share of Preferred Stock shall entitle the holder thereof to 10 votes on all matters submitted to a vote of the Company’s shareholders.”

3. Subparagraph (g) of Paragraph 3 of the Statement is hereby amended to read in its entirety as follows:

“(g) For purposes hereof, the term “Redemption Price” shall mean $10.00 per share of Preferred Stock plus accrued and unpaid dividends to the Redemption Date.”

4. The first sentence of subparagraph (a) of Paragraph 4 of the Statement is hereby amended to read in its entirety as follows:

“(a) Subject to the provisions of Section 3 hereof regarding redemption, and subject to the terms and conditions of this Section 4, the holder of any share or shares of Preferred Stock ahs the right, at any time after the consummation of the Public Offering (as defined in Section 3(f)) at its option to convert all or a portion of the shares of Preferred Stock held by it into such number of whole shares of Common Stock as is determined by multiplying the number of shares of Preferred Stock converted by thirty.”

5. The foregoing Amendment was adopted by the Board of Directors of the Corporation on May 10, 1989, and by the holders of a majority of the issued and outstanding shares of common stock and preferred stock of the Corporation by written action on May 12, 1989.

IN WITNESS WHEREOF, the undersigned President and Secretary of the Corporation have executed these Articles of Amendment on the 12 ^t ^h day of May, 1989.

MEDCROSS, INC., a Florida corporation

By:		/s/ Robert M. Irvin
		Robert M. Irvin, President

[SEAL]

By:		/s/ Timothy R. Barnes
		Timothy R. Barnes, Secretary

STATE OF FLORIDA

COUNTY OF PINELLAS

The foregoing instrument was acknowledged before me this 17 ^th day of May, 1989, by ROBERT M. IRVIN and TIMOTHY R. BARNES, President and Secretary of the Corporation, respectively, on behalf of the Corporation.


My Commission Expires:		Notary Public

		Notary Public, State of Florida at Large My Commission Expires July 01, 1989 BONDED THRU AGENT’S NOTARY BROKERAGE

ARTICLES OF AMENDMENT TO THE

AMENDED AND RESTATED ARTICLES OF INCORPORATION OF

MEDCROSS, INC.

1. The following sentence is hereby added to the end of Article VI of the Amended and Restated Articles of Incorporation of MEDCROSS, INC. (the “Corporation”):

“Notwithstanding anything contained in these Articles of Incorporation to the contrary, the affirmative vote of the holders of at least 67% of the outstanding shares of the corporation then entitled to vote in the election of directors shall be required to amend, alter, or repeal, or to adopt any provision inconsistent with, this Article VI.”

2. The foregoing Amendment was adopted by the Board of Directors and by the holders of a majority of the issued and outstanding shares of the Corporation on March 14, 1989.

IN WITNESS WHEREOF, the undersigned President and Secretary of the corporation have executed these Articles of Amendment on the 14th day of March, 1989.

MEDCROSS, INC., a Florida corporation

By:		/s/ Robert M. Irvin
		Robert M. Irvin, President

[SEAL]

By:		/s/ Timothy R. Barnes
		Timothy R. Barnes, Secretary

STATE OF FLORIDA

COUNTY OF PINELLAS

The foregoing instrument was acknowledged before me this 14 day of March, 1989, by ROBERT M. IRVIN and TIMOTHY R. BARNES, President and Secretary of the Corporation, respectively, on behalf of the Corporation.


My Commission Expires:		Notary Public

Notary Public, State of Florida at Large My Commission Expires Feb. 1, 1992 Bonded thru Huckleberry & Associates

STATEMENT OF DESIGNATIONS, PREFERENCES, AND RIGHTS OF

8% CUMULATIVE CONVERTIBLE PREFERRED STOCK

MEDCROSS, INC.

Medcross, Inc., a Florida corporation (the “Company”), certifies that pursuant to the authority contained in Article III of its Amended and Restated Articles of Incorporation, and in accordance with the provisions of section 607.047, Florida Statutes, its Board of Directors has adopted a resolution creating a series of its Preferred Stock, $1.00 par value, designated as 8% Cumulative Convertible Preferred Stock. A copy of the resolution establishing and designating the series and fixing and determining the relative rights and preferences thereof is attached hereto as Exhibit “A” and made a part hereof. Such resolution was duly adopted by the Board of Directors on February 28 ^th , 1989.

IN WITNESS WHEREOF, said Medcross, Inc. has caused this Statement of Designations, Preferences, and Rights of 8% Cumulative Convertible Preferred Stock to be duly executed by its President and attested to by its Secretary and has caused its corporate seal to be affixed hereto, this 1 ^st day of March, 1989.

MEDCROSS, INC.

By:		/s/ Robert M. Irvin
		Robert M. Irvin, President

(Corporate Seal)

ATTEST:

/s/ Timothy R. Barnes

Timothy R. Barnes, Secretary

STATE OF FLORIDA

COUNTY OF PINELLAS

The foregoing instrument was acknowledged before me this 1 ^st day of March, 1989, by Robert M. Irvin and Timothy R. Barnes, President and Secretary of the corporation, respectively, on behalf of the corporation.


My Commission Expires:		Notary Public
[Illegible Copy]

EXHIBIT “A”

ANNUAL WRITTEN ACTION OF THE

BOARD OF DIRECTORS OF

MEDCROSS, INC.

The undersigned, being all of the members of the Board of Directors of MEDCROSS, INC. (the “Company”), hereby take the following written actions in lieu of holding an annual meeting, pursuant to the Florida General Corporations Act:

1. Amendment and Restatement of Articles of Incorporation.

WHEREAS, the Company desires to substantially amend and restate its Articles of Incorporation; now, therefore, be it

RESOLVED, that the Amended and Restated Articles of Incorporation of the Company, the form of which is attached hereto as Exhibit “A,” are hereby approved by the Board of Directors and are recommended to a vote of the shareholders of the Company.

RESOLVED, FURTHER, subsequent to receiving approval of the shareholders of the Company, that the president and Secretary of the Company are hereby authorized to execute and file with the Florida Department of State such Amended and Restated Articles of Incorporation.

2. Designation of Preferred Stock.

WHEREAS, Article III of the Company’s Amended and Restated Articles of Incorporation authorizes the issuance of Preferred Stock; and

WHEREAS, the Board of Directors of the Company have determined that it is in the best interests to designate the series of Preferred Stock and to set forth their respective rights and preferences; now therefore, be it

RESOLVED, that pursuant to the provisions of Article III of the Company’s Amended and Restated Articles of Incorporation, the Preferred Stock of the Company shall be issued in one series, designated 8% Cumulative Convertible Preferred Stock (“the Preferred Stock”), which shall have the following rights and preferences:

1. Dividends. The holders of the Common Stock are not entitled to receive a dividend during a calendar year unless the Board of Directors, within that calendar year, paid or set aside for payment to the holders of the Preferred Stock, out of the funds of the Company legally available therefor, a cumulative dividend at the rate of 8% per annum of the par value of the Preferred Stock outstanding as of the record date established for determining shareholders entitled to receive the dividend. In the case of the original issuance of the shares of Preferred Stock, dividends will begin to accrue and be cumulative from the date of issue. If the Board of Directors does not declare the full dividend on the preferred Stock in any given calendar year, the dividend or additional dividend that otherwise would have been payable with respect to that calendar year shall accrue, and the Company shall not pay any dividends on any other class of stock in a later calendar year unless it first declares and pays, or sets aside for payment, all dividends that have accrued with respect to the Preferred Stock. After the payment of the cumulative dividend described above, the holders of the Preferred Stock shall not participate in additional dividends.

2. Voting Rights. Each share of Preferred Stock shall entitle the holder thereof to one vote on all matters submitted to a vote of the Company’s shareholders.

3. Redemption.

(a) If on or before September 30, 1989, the Company has not consummated the Public Offering (as defined below), the company, at any time thereafter, may call for redemption at the Redemption Price (as defined below) any or all of the outstanding shares of Preferred Stock in accordance with this Section 3. If the Company redeems less than all the outstanding shares of Preferred Stock, the Company shall redeem from each holder a number of shares of Preferred Stock that bears the same proportion to all the shares of Preferred Stock to be redeemed as the shares of Preferred Stock held of record by the holder bears to all the shares of Preferred Stock at the time outstanding. However, if a fraction of a share would be redeemed from any holder, the Company may, in order to avoid the redemption of a fractional share, redeem the next higher whole number of shares from the holder or, at its option, add that fraction to the shares to be redeemed from any other holder or holders.

(b) In the event that the Public Offering is not consummated on or before September 30, 1989, the Company shall, on March 31, 1990, redeem any and all shares of Preferred Stock then outstanding at the Redemption Price.

(c) The Company shall mail notice of any redemption by certified mail, postage prepaid, to each holder of record of the shares of the Preferred Stock to be redeemed, at his or her address registered with the Company, which notice shall be accompanied by payment in full of the Redemption Price. The date of the mailing of notice of redemption shall be the Redemption Date.

(d) If notice of redemption has been mailed and the Company has made payment of the Redemption Price, the shares of Preferred Stock designated for redemption shall not be entitled to any dividends after the Redemption Date, and on the Redemption Date all rights of the holders of the shares, as shareholders of the Company by reason of the ownership of the shares, shall cease, and after the Redemption Date the shares shall not be outstanding. If less than all the shares represented by any certificate are redeemed, a new certificate, representing the unredeemed shares, shall be issued to the holder thereof without cost (except for the payment of any applicable transfer taxes) to the holder.

(e) To facilitate the redemption of any shares of Preferred Stock, the Board of Directors is authorized to cause the transfer books of the Company to be closed as to such shares as of the record date for determining the holders of Preferred Stock entitled to notice of redemption.

(f) For purposes hereof, the term “Public Offering” shall mean an initial public offering of a minimum of 400,000 and a maximum of 500,000 Units, each Unit consisting of five shares of Common Stock and one Common stock Purchase Warrant, underwritten on a “best efforts” basis by Corporate Securities Group, Inc., 20801 Biscayne Boulevard, North Miami Beach, Florida, 33180, pursuant to a registration statement relating to the Units declared effective by the United States Securities and Exchange Commission pursuant to the Securities Act of 1933.

(g) For purposes hereof, the term “Redemption Price” shall mean $1.00 per share of Preferred Stock plus accrued and unpaid dividends to the Redemption Date.

4. Optional Conversion Into Common Stock.

(a) Subject to the provisions of Section 3 hereof regarding redemption, and subject to the terms and conditions of this Section 4, the holder of any share or shares of Preferred Stock has the right at any time after the consummation of the Public Offering (as defined in Section 3(f)) at its option to convert all or a portion of the shares of Preferred Stock held by it into such number of whole shares of Common Stock as is determined by multiplying the number of shares of Preferred Stock converted by three. However, on any liquidation of the Company the right of conversion shall terminate at the close of business on the last full business day before the date fixed for payment of the amount distributable on the Preferred Stock. The holder may exercise this right of conversion only by giving written notice that the holder elects to convert a stated number of shares of the Preferred Stock into shares of Common Stock on the date specified in the notice and surrendering a certificate or certificates for the Preferred Stock to be converted to the Company, at its principal office, at any time during its usual business hours on or before the date set forth in the notice, together with a statement of the name or names (with addresses) in which the certificate or certificates for Common Stock should be issued.

(b) Promptly after the receipt of the written notice referred to above and surrender of the share or shares of Preferred Stock to be converted, the Company shall issue and deliver, or cause to be issued and delivered, to the holder a certificate or certificates for the number of whole shares of Common Stock issuable upon the conversion of such share or shares. No fractional shares shall be issued upon conversion of the Preferred Stock into shares of Common Stock. To the extent permitted by law, the conversion shall be deemed to have been effected as of the close of business on the date specified in the written notice, and at that time the rights of the holder of the share or shares, as such a holder, shall cease, and the holder of the Preferred Stock shall become the holder of record of the shares of Common Stock. Upon conversion, no payment or adjustment shall be made for dividends.

5. Liquidation Preference. Upon the liquidation, dissolution, or winding-up of the Company, the holders of the Preferred Stock shall be entitled to receive out of the assets of the Company all accrued and unpaid cash dividends on the Preferred Stock. Upon any liquidation, dissolution, or winding-up of the Company, after the holders of the Preferred Stock have been paid in full the amounts to which they are entitled, the remaining assets of the Company or the proceeds thereof shall be distributed ratably among the holders of the Common Stock and the holders of the Preferred Stock. If the assets distributable upon any liquidation, dissolution, or winding‑up of the Company are insufficient to permit the payment to the holders of the Preferred Stock of the full preferential amount attributable thereto, then all of the assets of the Company, or the proceeds thereof, shall be distributed ratably among the holders of the Preferred Stock, with each holder of Preferred Stock receiving that portion of the assets or proceeds that equals the ratio of the number of shares of Preferred Stock held by that holder to the total number of shares of Preferred Stock outstanding. Neither a consolidation

nor merger of the Company into or with any other corporation or corporations, nor the merger of any other corporation into the Company, nor the sale or transfer by the Company of all or any part of its assets, nor a reorganization of the Company, nor the purchase or redemption of all or part of the outstanding shares of any class or classes of the capital stock of the Company, nor a reduction of t he capital stock of the Company shall be deemed to be a liquidation, dissolution, or winding up of the Company within the meaning of any of the provisions of this section 5.

RESOLVED, FURTHER, that the President and the Secretary of the Company are hereby authorized to prepare and execute a Statement of Designations, Preferences, and Rights setting forth the designation, preferences, and rights of the 8% Cumulative Convertible Preferred Stock as required by Section 607.047, Florida Statutes, and to file said Statement with the Florida Department of State.

RESOLVED, FURTHER, that this Written Action shall become effective upon the filing of the Statement referenced in the preceding paragraph.

RESOLVED, FURTHER, that upon conversion or redemption of all of the issued and outstanding shares of Preferred Stock as provided herein, the Statement of Designations, Preferences, and Rights then on file with the Florida Department of State shall be deemed cancelled, and the Board of Directors shall again have the authority to divide the shares of Preferred Stock into one or more series and to determine the relative rights and preferences of the shares of any series so established pursuant to any issuance of Preferred Stock thereafter.

3. Rescission and Adoption of Bylaws.

RESOLVED, the current Bylaws of the Company are hereby rescinded and the form of Bylaws attached hereto as Exhibit “B” are hereby approved and ratified by the Board of Directors of the Company, to be effective as of the date of this Written Action.

4. Election of Officers.

RESOLVED, that the following persons are hereby nominated and elected to office of the Company, to hold such office until the next annual meeting of the Board of Directors or until their successors are duly chosen and elected:

Chairman of the Board:		R. Huston Babcock, M.D.
President:		Robert M. Irvin
Senior Vice President:		Timothy R. Barnes
Vice President – Sales and Marketing:		Katherine L. Drew
Medical Director:		R. Huston Babcock, M.D.
Secretary:		Timothy R. Barnes
Treasurer:		Timothy R. Barnes

5. Acquisition of Medcross Securities, Inc. Shares.

WHEREAS, the current shareholders of the Company are also shareholders of Medcross Securities, Inc. in the same proportions as they own shares of the Company, and such shareholders have agreed to transfer their shares of Medcross Securities, Inc. to the Company; and

WHEREAS, it is deemed to be in the best interests of the Company to acquire all of the shares of Medcross Securities, Inc. in a tax-free exchange of stock in accordance with Section 351 of the Internal Revenue Code of 1986, and operate Medcross Securities, Inc. as a wholly-owned subsidiary of the Company; now, therefore, it is

RESOLVED, that the Company is authorized to issue one share of the Company’s common stock for each 10 shares of Medcross Securities, Inc. common stock. Accordingly, the following shares of the Company’s common stock shall be issued to the shareholders of Medcross Securities Inc.:

R. Huston Babcock, M.D.		155.524
Guy M. Burns		22.238
Philip M. Shasteen		22.238
Total		200.000

6. Stock Split.

WHEREAS, it is deemed by the Board of Directors of the Company to be desirable and in the best interests of the Company and its shareholders that a stock split be declared so that, after the stock split, a total of 5,237,500 shares of common stock are issued and outstanding, taking into account the prior issuance of common stock in return for shares of common stock of Medcross Securities, Inc.

RESOLVED, that, contingent upon approval of the Amended and Restated Articles of Incorporation and effective upon the filing of said Amended and Restated Articles of Incorporation, the total issued and outstanding shares of common stock, par value $.00l, shall be reclassified and changed into 5,237,500 fully paid and nonassessable shares of common stock of the Company of the par value of $.00l each, and each holder of record of a certificate for one or more shares of common stock of the Company as of the close of business on the date this resolution becomes effective shall be entitled to receive as soon as practicable, and without surrender of such certificate, a certificate or certificates representing approximately 1,662.69841269 shares of common stock for each one share of common stock represented by the certificate of such holder, as adjusted to eliminate fractional shares. This reclassification of shares shall become effective upon the filing of the Amended and Restated Articles of Incorporation referenced above. Upon the effectiveness of such reclassification of shares, the shareholdings of the Company shall be as follows:

R. Huston Babcock, M.D.		4,072,784
Guy M. Burns		582,358
Philip M. Shasteen		582,358
Total		5,237,500

RESOLVED, FURTHER, that upon effectiveness of the above reclassification of shares, the officers of the Company are authorized to direct the Company’s accountants to transfer from earned surplus or capital surplus an amount which equals $.001 for each share of common stock to be issued and outstanding as a result of the reclassification.

7. Reservation of Shares.

RESOLVED, that 262,500 shares of the Company’s common stock is hereby reserved for issuance pursuant to stock options which may be granted by the Board of Directors in order to attract and retain employees.

RESOLVED, FURTHER, that 750,000 shares of the Company’s common stock is hereby reserved for issuance upon conversion of the Company’s preferred stock.

8. Ratification of Acts.

WHEREAS, upon review of the acts, contracts, agreements, and activities of the corporation since the corporation’s inception, the following resolutions are adopted:

RESOLVED, that all purchases, contracts, dividends, contributions, compensations, acts, decisions, proceedings, elections and appointments by the Directors and officers of the Company during the past year be and hereby are approved.

DATED as of the 28 ^th day of February, 1989.

/s/ R. Huston Babcock		/s/ Timothy R. Barnes
R. Huston Babcock, M.D.		Timothy R. Barnes

/s/ Guy M. Burns		/s/ Robert M. Irvin
Guy M. Burns		Robert M. Irvin

/s/ Philip M. Shasteen
Philip M. Shasteen

EXHIBIT “A”

AMENDED AND RESTATED

ARTICLES OF INCORPORATION

MEDCROSS, INC.

MEDCROSS, INC., a corporation organized and existing under the laws of the State of Florida, hereby certifies as follows:

1. The name of the corporation is MEDCROSS, INC. and the name under which the corporation was originally incorporated is Mobile Medical, Inc. The date of filing its original Articles of Incorporation with the Department of State was April 21, 1983.

2. These Amended and Restated Articles of Incorporation have been adopted by the shareholders and the Board of Directors pursuant to Sections 607.194(4) and 607.194(2), respectively, Florida Statutes.

ARTICLE I

NAME

The name of this corporation is MEDCROSS, INC.

ARTICLE II

PURPOSES

This corporation may engage in any activity or business permitted under the laws of the United States of America and of this State.

ARTICLE III

CAPITAL STOCK

The maximum number of shares of stock which this corporation is authorized to have at any time is:

(a) 20,000,000 shares of common stock, having a par value of $.00l per share (the “Common Stock”); and

(b) 250,000 shares of preferred stock, having a par value of $1.00 per share (the “Preferred Stock”). The Preferred Stock may be issued in one or more series. The Board of Directors shall have the authority to divide the Preferred Stock into one or more series and, subject to the provisions and limitations set forth herein, to determine the relative rights and preferences of the shares of any series so established with regard to the rate or manner of payment of dividends, whether such shares may be redeemed and, if so, the redemption price and the terms and conditions of redemption, sinking fund provisions, if any, for the redemption or purchase of such shares, the terms and conditions, if any, on which such shares may be converted, and voting rights, if any. Provided, however, except as to any rights and preferences as determined by the Board of Directors as set forth above, all shares of such Preferred Stock regardless of series shall be identical.

ARTICLE IV

VOTING RIGHTS

Each holder of Common Stock is entitled to one vote for each share of Common Stock that he holds on each matter submitted to a vote at a meeting of shareholders.

ARTICLE V

BOARD OF DIRECTORS

1. Number. The property, business, and affairs of the corporation shall be managed and controlled by the Board of Directors. The number of directors of the corporation shall not be less than five nor more than nine, the exact number of directors to be determined from time to time by resolution adopted by affirmative vote of a majority of the whole Board of Directors, and such exact number shall be five until otherwise determined by resolution adopted by affirmative vote of a majority of the whole Board of Directors; provided, however, that the number of directors shall not be reduced so as to shorten the term of a director at that time in office. As used in this Article V, the term “whole Board” means the total number of directors which the corporation would have if there were no vacancies.

2. Classes. The Board of Directors shall be divided into three classes, as nearly equal in number as the then total number of directors constituting the whole Board permits, with the term of office of one class expiring each year. Directors of the first class shall be elected to hold office for a term expiring at the next succeeding annual meeting, directors of the second class shall be elected to hold office for a term expiring at the second succeeding annual meeting, and directors of the third class shall be elected to hold office for a term expiring at the third succeeding annual meeting. Any vacancies in the Board of Directors for any reason, and any newly created directorships resulting from any increase in the number of directors, may be filled by the Board of Directors acting by a majority of the directors then in office and directors so chosen would hold office until the next election of the class for which such directors have been chosen and until their successors are elected and qualified. No decrease in the number of directors shall shorten the term of any incumbent director. At each annual meeting of shareholders the successors to the class of directors whose term shall then expire shall be elected to hold office for a term expiring at the third succeeding annual meeting.

3. Removal. Any director may be removed by the vote of a majority of the whole Board of Directors, but only for cause. Except as may otherwise be provided by law, cause for removal shall be construed to exist only if: (a) the director whose removal is proposed has been convicted of a felony by a court of competent jurisdiction; or (b) such director has been adjudicated by a court of competent jurisdiction to be liable for negligence or misconduct in the performance of his duty to the corporation in a matter of substantial importance to the corporation and such adjudication is no longer subject to direct appeal. In addition any director or the entire Board of Directors may be removed, with or without cause, by the affirmative vote of the holders of at least 67% of the outstanding shares of the corporation then entitled to vote generally in the election of directors cast at a meeting of the shareholders called for that purpose.

4. Vacancies. Any vacancies in the Board of Directors resulting from death, resignation, retirement, removal from office, the creation of a new directorship by an increase in the authorized number of directors, or otherwise shall be filled by a majority vote of the directors then in office, though less than a quorum of the entire Board of Directors. Directors so chosen to fill any vacancy shall hold office for a term expiring at the annual meeting of shareholders at which the term of the class to which they have been elected expires.

5. Amendment, Alteration, Repeal, Etc. Notwithstanding anything contained in these Articles of Incorporation to the contrary, the affirmative vote of the holders of at least 67% of the outstanding shares of the corporation then entitled to vote in the election of directors shall be required to amend, alter, or repeal or to adopt any provision inconsistent with this Article V.

ARTICLE VI

LIQUIDATION, REORGANIZATION, MERGER, CONSOLIDATION,

SALE OF SUBSTANTIALLY ALL ASSETS, OR RECLASSIFICATION OF

SECURITIES

Any liquidation, reorganization, merger, consolidation, sale of substantially all of the corporation’s assets, or the reclassification of its securities shall be approved by (a) the holders of at least a majority of the issued and outstanding Common Stock held by other than officers, directors, and those persons who hold 5% or more of the outstanding Common Stock, and (b) a vote of a majority of shares of issued and outstanding Common Stock held by the Company’s officers, directors, and those persons who hold 5% or more of the outstanding Common Stock.

SIGNATURE PAGE TO AMENDED AND RESTATED ARTICLES OF INCORPORATION

IN WITNESS WHEREOF, the undersigned executes these Amended and Restated Articles of Incorporation this _____ day of __________, 1989.

ATTEST:


Timothy R. Barnes, Secretary		Robert M. Irvin, President

CORPORATE SEAL

STATE OF FLORIDA

COUNTY OF PINELLAS

The foregoing instrument was acknowledged before me this _____ day of _____, 1989, by Robert M. Irvin and Timothy R. Barnes, President and Secretary of the corporation, respectively, on behalf of the corporation.


My Commission Expires:		Notary Public

EXHIBIT “B”

BYLAWS

MEDCROSS, INC.

ARTICLE I - OFFICES

The principal office of the corporation shall be at 3227 Bennet Street North, St. Petersburg, Florida, 33713, or at such other place as the Board of Directors may from time to time direct.

ARTICLE II - MEETINGS OF STOCKHOLDERS

Section 1. Annual Meetings. The annual meeting of the stockholders of the corporation for the election of directors and for the transaction of such other business as may properly come before such meeting shall be held on a day and at a time and place designated from time to time by the Board of Directors; provided, however, that there shall be an annual meeting every calendar year.

Section 2. Special Meetings. A special meeting of the stockholders may be called at any time by the President or the Board of Directors, and shall be called by the President upon the written request of stockholders of record holding in the aggregate 10% of the outstanding shares of the capital stock of the corporation entitled to vote, such written request to state the purpose or purposes of the meeting and to be delivered the President.

Section 3. Place of Meetings. The meetings of the stockholders of the corporation shall be held in the State of Florida, or any place in the world, as from time to time may be designated by the Board of Directors.

Section 4. Notice of Meetings and Record Date. Except as otherwise required by statute, notice of each meeting of the stockholders, whether annual or special, shall be in writing over the name of the President or the Secretary. Such notice shall state the purpose or purposes for which the meeting is called and the time and place where it is to be held, and a copy thereof shall be served, either personally or by first-class mail, or at the direction of the President, the Secretary, or the officer or person calling the meeting, upon each stockholder of record entitled to vote at such meeting not less than l0 or more than 60 days before such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the stockholder at his address as it appears on the stock transfer books of the corporation, with postage thereon prepaid. If the notice is mailed at least 30 days before the date of the meeting, it may be done by a class of United States mail other than first class. If mailed, it shall be directed to a stockholder at his or her address as it appears on the stock books of the corporation unless he or she shall have filed with the Secretary of the corporation a written request that notices intended for him or her be mailed to some other address, in which case it shall be mailed to the address designated in such request. If any stockholder in person or by attorney thereunto authorized shall waive in writing notice of any meeting, notice thereof need not be given to him or her.

Section 5. Closing of Transfer Books. In order to determine the holders of record of the capital stock of the corporation who are entitled to notice of meetings, to vote at a meeting or adjournment thereof, to receive payment of any dividend, or for any other purpose, the Board of Directors may fix a date not more than 60 days prior to the date set for any of the above-mentioned activities for such determination of stockholders. If the stock transfer books shall be closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for at least 10 days immediately preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the date for any such determination of stockholders, such date in any case to be not more than 60 days prior to the date on which the particular action requiring such determination of stockholders is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of stockholders entitled to notice or to vote at a meeting of stockholders, or to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of stockholders. When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this Section 5, such determination shall apply to any adjournment thereof, unless the Board of Directors fixes a new record date under this Section 5 for the adjourned meeting.

Section 6. Quorum. At all meetings of the stockholders the presence in person or by proxy of the holders of record of a majority of the shares then issued and outstanding and entitled to vote shall be necessary and sufficient to constitute a quorum for the transaction of business. In the absence of a quorum, a majority in interest of the stockholders entitled to vote, present in person or by proxy, or, if no stockholder entitled to vote is present in person or by proxy, any officer entitled to preside at or act as secretary of such meeting may adjournment meeting from time to time.

Section 7. Notice of Adjourned Meeting. Notice need no. given of any adjourned meeting of stockholders if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken. Any business may be transacted at the adjourned meeting that mig ht have been transacted on the original date of the meeting. If, however, after the adjournment, the Board of Directors fixed a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given as provided in Section 4 of this Art icle II to each stockholder of record on the new record date entitled to vote at such meeting.

Section 8. Presiding Officer; Order of Business. Meetings of the stockholders shall be presided over by the Chairman of the Board or, if he or she is not present or if there is no Chairman of the Board, by the President. The presiding officer of any meeting of the stockholders may delegate his or her duties and obligations as the presiding officer and he or she sees fit. The Secretary of the corporation or, in his or her absence, an Assistant Secretary shall act as secretary of every meeting of stockholders, but if neither the Secretary nor an Assistant Secretary is present, the presiding officer of the meeting shall choose any person present to act as secretary of the meeting. The order and topics of business to be transacted at any, meeting shall be determined by the presiding officer of the meeting in his or her sole discretion.

Section 9. Inspectors of Election. The Board of Directors shall appoint at each annual meeting two persons, who need not be stockholders, to act as Inspectors of Election at all meetings of the stockholders until the close of the next annual meeting. No candidate for the office of director shall act as Inspector of Election. If there be a failure to appoint Inspectors, or if any Inspector appointed be absent or refuse to act, or if his or her office becomes vacant, the Board of Directors present at the meeting may choose temporary Inspectors of the number required. The Inspectors appointed to act at any meeting of the Board, before entering upon the discharge of their duties, shall be sworn faithfully to execute the duties of Inspectors at such meeting with strict impartiality, and according to the best of their ability.

Section 10. Voting. Each outstanding share entitled to vote shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders. In case the transfer books have not been closed, and no date has been fixed as a record date for the determination of the stockholders entitled to vote, no share of stock shall be voted on at any election of directors which has been transferred on the books of the corporation within 20 days next preceding such election of directors. Any stockholder entitled to vote may vote by proxy, provided that the instrument authorizing such proxy to act shall have been executed in writing (which shall include telegraphing, cabling, and telephonic facsimile transmission) by the stockholder himself or herself or by his or her duly authorized attorney and filed with the Secretary of the corporation. The President, a Vice President, and the Secretary of the corporation shall constitute a Credentials Committee and shall pass upon the validity of all proxies submitted for use at any meeting. No proxy shall be valid after 11 months from the date of the proxy unless otherwise provided in the proxy. The decision of the Credentials Committee upon the validity of the proxies shall be conclusive. At all meetings of the stockholders, except as otherwise required by statute, the Articles of Incorporation, or these Bylaws, all matters shall be decided by the vote of a majority in interest of the stockholders entitled to vote present in person or by proxy. Election for directors need not be by ballot.

The presiding officer at any meeting of the stockholders shall have the power to determine the method and means of voting when any matter is to be voted upon. The method and means of voting may include, but shall not be limited to, vote by ballot, vote by hand, or vote by voice. No method of voting may be adopted, however, which fails to take account of any stockholder’s right to vote by proxy as provided for in this Article II.

Section 11. List of Stockholders. The directors shall cause the Secretary, or other officer designated by them who has charge of the transfer books and the stock books, to make at least l0 days before every election a full, true, and complete list, in alphabetical order, of all the stockholders entitled to vote at the ensuing election, and the post office address and the number of shares held by each. The Board of Directors shall produce such books and list at the time and place of election, to remain there during the election.

Section 12. Waiver of Irregularities. All informalities and irregularities in calls, notices of meeting, the manner of voting, form of proxy, credentials, and methods of ascertaining those present shall be deemed waived if no objection is made thereto at the meeting.

ARTICLE III - BOARD OF DIRECTORS

Section 1. General Powers and Qualifications. The property, affairs, and business of the corporation shall be managed under the direction of the Board of Directors. The Board of Directors may exercise all of the powers of the corporation, except such as are by law or by the Articles of Incorporation or by these Bylaws expressly conferred upon or reserved to the stockholders. The directors shall act only as a board; an individual director shall have no power to take any actions on behalf of the corporation unless the action is authorized by the Board of Directors. The Board of Directors may, by contract or otherwise, give general, limited, or special power and authority to the officers and employees of the corporation to transact the corporation’s general business or any special businesses, and nay give powers of attorney to agents of the corporation to transact any special business requiring that authorization.

Section 2. Number, Election and Term of Office. The number of directors shall be such number as set forth in or as determined in accordance with the provisions of the Articles of Incorporation. Subject to the provisions of the Articles of Incorporation and Section 6 of this Article III, the directors shall be elected annually by the stockholders entitled to vote at the annual meeting of stockholders, by a plurality of the votes at such election. Subject to the provisions of the Articles of Incorporation, each director (whether elected at an annual meeting or to fill a vacancy or otherwise) shall continue in offic e until the annual meeting of stockholders held next after his or her election and until his or her successor shall have been elected and qualified or until his or her death, resignation, or removal in the manner hereinafter provided.

Section 3. Meetings. A meeting of the Board of Directors shall be held for organization, for the election of officers, and for the transaction of such other business as properly may come before the meeting, within 30 days after each annual election of directors upon the notice hereinafter provided for a special meeting. The directors, however, may hold such meeting, without notice, at the place where the annual meeting of stockholders is held, immediately following such meeting.

The Board of Directors by resolution may provide for the holding of regular meetings, with or without notice, and may fix the times and places at which such meetings shall be held.

Special meetings of the Board of Directors may be called by the President, any Vice President, or by a majority of the members of the Board of Directors. Notice of each special meeting shall be mailed to each director, addressed to him or her at his or her address as it appears upon the records of the corporation, at least one day before the day on which the meeting is to be held, or shall be sent to him or her at such place by telegraph, telephone facsimile transmission, or cable, or telephoned or delivered to him or her personally, not later than the day before the day on which the meeting is to be held. Such notice shall state the time and place (which may be within or outside the State of Florida) of such meeting, but unless otherwise required by statute, the Articles of Incorporation, or these Bylaws, need not state the purposes thereof. Notice of any meeting need not be given to any director, however, if waived by him or her, before or after such meeting, in writing or by telegraph, telephone facsimile transmission, or cable. No notice need be given of any meeting at which every member of the Board of Directors shall be present.

Members of the Board of Directors may participate in a meeting of the Board by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation by such means shall constitute presence in person at a meeting.

Section 4. Quorum. The presence at any meeting of a majority of the total number of directors constituting the entire Board of Directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and except as otherwise required by statute, the Articles of Incorporation, or these Bylaws, the act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. In the absence of a quorum, a majority of the directors present at the time and place of any meeting may adjourn such meeting from time to time until a quorum is present. Notice of any adjourned meeting need not be given.

Section 5. Resignations and Removal. Any director may resign at any time by giving written notice of such resignation to either the Board of Directors, the President, a Vice president, the Secretary, or an Assistant Secretary of the corporation. Unless otherwise specified therein, such resignation shall take effect upon receipt thereof by the Board of Directors or by any such officer.

Section 6. Vacancies. If any vacancy shall occur among the directors by reason of death, resignation, disqualification, removal, or otherwise, such vacancy may be filled by a majority vote of the remaining directors, though less than a quorum. Any such vacancy may also be filled by a majority of the stockholders present and entitled to vote at any meeting held during the existence of such vacancy, provided that the filling of such vacancy is included in the corporation’s proxy material for the meeting. If a vacancy shall occur by an increase in the number of directors, the additional directors authorized by such increase shall be elected by the vote of a majority of the directors in office at the time of such increase.

Section 7. Compensation. Directors may be compensated for services as directors and as members of Committees of the Board of Directors. Nothing herein contained shall prevent any director from serving the corporation in any other capacity and receiving compensation therefor. The Board of Directors and any members of any Committee of the Board of Directors shall be entitled to reimbursement for any reasonable expenses incurred in attending any Board or Committee meeting.

ARTICLE IV - EXECUTIVE AND OTHER COMMITTEES

Section 1. Powers. Except as otherwise provided by statute or by these Bylaws, all the powers of the Board of Directors when not in session may be vested, to the extent from time to time determined by the Board of Directors, in Committees established for specific purposes, the members of which shall be appointed in accordance with Section 2 of this Article IV.

Section 2. Appointment, Qualification, and Term of Office. The Board of Directors, by the affirmative vote of a majority of the directors then in office, may appoin t Committee members from among its members. The Board of Directors may designate as Chairman of any Committee one of the members so appointed. Each member of each Committee shall continue in office until the first meeting of the Board of Directors held aft er the annual meeting of stockholders next following his or her election and until his or her successor is appointed and qualifies or until his or her death, resignation, or removal in the manner hereinafter provided, or until he or she shall cease to be a director. The Chairman of each committee shall preside at all meetings of the committee at which he or she shall be present.

Section 3. Meetings. Each Committee, by resolution, may provide for the holding of regular meetings, with or without notice, and may fix the time and place (within or outside the State of Florida) at which such meetings shall be held. Special meetings of each Committee may be called from time to time by any member of the committee. Notice of each special meeting shall be mailed to each member of the Committee addressed to him or her at his or her address as it appears upon the records of the corporation, at least two days before the day on which the meeting is to be held, or shall be sent to him or her at such place by telephone, telephone facsimile transmission, or cable, or telephoned or delivered to him or her personally, not later than the day before the day on which such meeting is to be held. Such notice shall state the time and place (which may be within or outside the State of Florida) but, unless otherwise required by statute, the Articles of Incorporation, or these Bylaws, need not state the purpose of such meeting. Notice of any meeting need not be given to any member of a committee, however, if waived by him or her, before or after such meeting, in writing or by telegraph, telephone facsimile transmission, or cable. Any meeting of a Committee shall be a legal meeting without any notice or waiver of notice thereof having been given if all the members of the Committee shall be present thereat.

Section 4. Resignations and Removal. Any member of a Committee may resign at any time by giving written notice of such resignation to either the Board of Directors, the President, a Vice President, the Secretary, or an Assistant Secretary of the corporation. Unless otherwise specified therein, such resignation shall take effect upon receipt thereof by the Board of Directors or by any such officer.

Any member of a Committee may be removed either with or without cause at any time by the affirmative vote of a majority of the directors then in office, given at a meeting of the Board of Directors called for that purpose.

Section 5. Vacancies. If the office of any member of a Committee becomes vacant by reason of death, removal, or otherwise, the Board of Directors may appoint one of the directors as a member of the Committee to fill such vacancy.

Section 6. Quorum. The presence, at any meeting of a Committee, of a majority of the members then in office shall constitute a quorum for the transaction of business. A majority of such quorum may decide any questions that may come before such meeting.

ARTICLE V - OFFICERS

Section 1. Number. The officers of the corporation shall be a Chairman of the Board of Directors, a President, one or more Vice Presidents, one or more of whom may be designated as an Executive or Senior Vice President, a Medical Director, a Secretary, a Treasurer, and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article V.

Section 2. Election, Term of Office, and Qualifications. Each officer specifically designated in Section 1 of this Article V shall be chosen by the Board of Directors and shall hold his or her office until his or her successor shall have been duly chosen and qualified or until his or her death or until he or she shall resign or shall have been removed in the manner provided in Section 4 of this Article V.

Section 3. Subordinate Officers. The Board of Directors from time to time may appoint other officers or agents, including one or more Assistant Treasurers and one or more Assistant Secretaries, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these Bylaws or as the Board of Directors from time to time may determine. The Board of Directors may delegate to any officer or Committee the power to appoint any such subordinate officers or agents and to prescribe their respective authorities and duties.

Section 4. Removal. Any officer may be removed either with or without cause by a majority of the directors then in office.

Section 5. Resignations. Any officer may resign at any time by giving written notice of such resignation to the Board of Directors or to the President, a Vice President, the Secretary, or an Assistant Secretary. Unless otherwise specified therein, such resignation shall take effect upon receipt thereof by the Board of Directors or by the President, a Vice President, the Secretary, or an Assistant Secretary.

Section 6. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification, or any other cause shall be filled for the unexpired portion of the term in the manner prescribed by these Bylaws for the regular election or appointment to such office.

Section 7. The Chairman of the Board of Directors. The Chairman of the Board of Directors shall preside over all meetings of the Board of Directors and over all meetings of the stockholders subject to such rules as to the conduct of such meetings as are established by the Board of Directors.

Section 8. The President. The president shall be the chief executive officer of the corporation and, subject to the direction of the Board of Directors, shall have general charge of the business, affairs, and property of the corporation as well as control over the corporation’s other officers. The President shall preside at all meetings of the stockholders and of the Board of Directors in the absence of the Chairman of the Board of Directors. The President shall do and perform such other duties and may exercise such other powers as from time to time may be assigned to him or her by these Bylaws or by the Board of Directors.

Section 9. The Vice Presidents. At the request of the President or in his or her absence or disability, the Vice President, or in the case there shall be more than one Vice President, the Vice President designated by the President (or in the absence of such designation, the Vice President designated by the Board of Directors) shall perform all the duties of the President, and when so acting, shall have a11 the powers of, and be subject to all the restrictions upon, the President. Any Vice President shall perform such other duties and may exercise such other powers as from time to time may be assigned to him or her by these Bylaws or by the Board of Directors or the President.

Section 10. The Medical Director. The Medical Director shall keep informed and advise the Board of Directors and the officers of the corporation as to those medical technologies that are related to the current operations of the corporation, as to those related to areas determined by the Board of Directors to be of interest to the corporation by way of expansion, and as to the needs of the medical community as they relate to the corporation’s operations. The Medical Director shall perform such other duties as from time to time may be assigned to him or her by these Bylaws or by the Board of Directors.

Section 11. The Secretary. The Secretary of the corporation shall keep the minutes of the meetings of the stockholders of the corporation and, unless provided otherwise by the Chairman at any meeting of the Board of Directors, the Secretary shall keep the minutes of the meetings of the Board of Directors of the corporation. The Secretary shall be the custodian of the minute books of the corporation and such other books and records of the corporation as the Board of Directors of the corporation may direct. The Secretary of the corporation shall have the general responsibility for maintaining the stock transfer books of the corporation or of supervising the maintenance of the stock transfer books of the corporation by the transfer agent, if any, of the corporation. The Secretary shall be the custodian of the corporate seal of the corporation and shall affix the corporate seal of the corporation on contracts and other instruments as the Board of Directors may direct. The Secretary shall perform such other duties as are assigned to him from time to time by the Board of Directors or the President of the corporation.

Section 12. The Treasurer. The Treasurer of the corporation shall have custody of all funds and securities owned by the corporation. The Treasurer shall cause to be entered regularly in the proper books of account of the corporation full and accurate accounts of the receipts and disbursements of the corporation. The Treasurer of the corporation shall render a statement of the cash, financial, and other accounts of the corporation whenever he is directed to render such a statement by the Board of Directors or by the President of the corporation. The Treasurer shall at all reasonable times make available the corporation’s books and financial accounts to any director of the corporation during normal business hours. The Treasurer shall perform all other acts incident to the office of treasurer of the corporation, and he shall have such other duties as are assigned to him from time to time by the Board of Directors or the President of the corporation.

Section 13. Assistant Secretaries and Assistant Treasurers. The Assistant Secretaries and Assistant Treasurers shall have such duties as from time to time may be assigned to them by the Board of Directors or by the President.

Section 14. Salaries. The salaries or other compensation of the officers shall be fixed from time to time by the Board of Directors, and no officer shall be prevented from receiving such salary or other compensation by reason of the fact that he or she is also a director of the corporation.

ARTICLE VI - EXECUTION OF INSTRUMENTS

All documents, instruments, or writings of any nature shall be signed, executed, verified, acknowledged, and delivered by such officers, agents, or employees of the corporation as may be determined from time to time by the Board of Directors.

ARTICLE VII - CAPITAL STOCK

Section 1. Certificates of Stock. Every stockholder shall have a certificate, signed by the President or a Vice President and either the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, certifying the number of shares owned by him or her in the corporation. When the certificate is signed by a transfer agent or an assistant transfer agent or by a transfer clerk on behalf of the corporation and a registrar, the signatures of the President, Vice President, Treasurer, Assistant Treasurer, Secretary, or Assistant Secretary may be facsimiles. Certificates for shares of the stock of the corporation shall be in such form as shall be approved by the Board of Directors, and the seal of the corporation shall be affixed thereto. There shall be entered upon the stock books of the corporation the number of each certificate issued, the name of the person owning the shares represented thereby, the number of shares, and the date thereof.

Section 2. Lost or Destroyed Certificates. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the corporation, alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to have been lost or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate, or his or her legal representatives, to advertise the same in such manner as it shall require or to give the corporation a bond sufficient to indemnify the corporation on account of the alleged loss of any such certificate or the issuance of such new certificate.

Section 3. Rights and Liabilities of Stockholders of Record. The corporation shall be entitled to treat the holder of record of any share or shares of stock as the owner thereof and shall not be bound to recognize any legal, equitable, or other claims to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by the laws of the State of Florida.

Section 4. Regulations. The Board of Directors may make such rules and regulations as it may deem expedient concerning the issuance and transfer of certificates for shares of the stock of the corporation, including the issuance of new certificates to replace lost or destroyed certificates, and may appoint transfer agents or registrars or both of any class of stock of the corporation.

ARTICLE VIII - CORPORATE SEAL

The corporate seal shall be in the form of a circle and shall bear the name of the corporation and year of its incorporation and shall indicate its formation under the laws of the State of Florida; provided, that the form of such seal shall be subject to alteration from time to time by the Board of Directors.

ARTICLE IX - INDEMNIFICATION

Section 1. Legal Proceedings. The corporation shall indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (other than an action by, or in the right of, the corporation), by reason of the fact that he or she is or was a director, officer, employee, or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit, or proceeding including any appeal thereof, if he or she acted in good faith and in a manner he or she reasonably believed to be in, and not opposed to, the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, or conviction or upon a plea of nolo contendre or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in, or not opposed to, the best interests of the corporation or, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.

Section 2. Actions by the Corporation. The corporation shall indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he or she is or was a director, officer, employee, or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against expenses, including attorneys’ fees, actually and reasonably incurred by him or her in connection with the defense or settlement of such action or suit, including any appeal thereof, if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation, except that no indemnification shall be made in respect of any claim, issue, or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to the corporation unless, and only to the extent that, the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.

Section 3. Expenses. To the extent that a director, officer, employee, or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit, or proceeding referred to in Section 1 or Section 2, or in defense of any claim, issue, or matter therein, he or she shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him or her in connection therewith.

Section 4. Determination to Indemnify. Any indemnification under Section 1 or Section 2, unless pursuant to a determination by a court, shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee, or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Section 1 or Section 2. Such determination shall be made:

(a) by the Board of Directors by a majority vote of a quorum consisting of directors who are not parties to such proceeding;

(b) if such a quorum is not obtainable or, even if obtainable, by majority vote of a Committee duly designated by the Board of Directors (in which directors who are parties may participate) consisting solely of two or more directors not at the time parties to the proceeding;

(i) selected by the Board of Directors prescribed in Section 4(a) or the Committee prescribed in Section 4(b); or

(ii) if a quorum of the directors cannot be obtained for Section 4(a) and the Committee cannot be designated under Section 4(b), selected by majority vote of the full Board of Directors (in which directors who are parties may participate); or

(d) by the stockholders by a majority vote of a quorum consisting of stockholders who were not parties to such proceeding or, if no such quorum is obtainable, by a majority vote of the stockholders who are not parties to such proceeding.

Section 5. Advance of Expenses. Expenses, including attorneys’ fees, incurred in defending a civil or criminal action, suit, or proceeding may be paid by the corporation in advance of the final disposition of such action, suit, or proceeding upon a preliminary determination following one of the procedures set forth in Section 4 that the director, officer, employee, or agent met the applicable standard of conduct set forth in Section 1 or Section 2 as authorized by the Board of Directors in the specific case and, in either event, upon receipt of an undertaking by or on behalf of the director, officer, employee, or agent to repay such amount, unless it shall ultimately be determined that he is entitled to be indemnified by the corporation as authorized in this Article.

Section 6. Other Indemnification. The corporation or the stockholders may make any other or further indemnification of any of the corporation’s directors, officers, employees, or agents under any agreement, vote of stockholders or disinterested directors, or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, except as prohibited by law.

Section 7. Continuation. Indemnification as provided in this Article shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person.

Section 8. Insurance. The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability under the provisions of this Article.

Section 9. Notice to Stockholders. If any expenses or other amounts are paid by way of indemnification other than by court order or action by the stockholders or by an insurance carrier pursuant to insurance maintained by the corporation, the corporation shall, not later than the time of delivery to stockholders of written notice of the next annual meeting of stockholders, unless such meeting is held within three months after the date of such payment, and, in any event, within 15 months after the date of such payment, deliver either personally or by mail to each stockholder of record at the time entitled to vote for the election of directors a statement specifying the persons paid, the amounts paid, and the nature and status at the time of such payment of the litigation or threatened litigation.

Section 10. Interpretation. This Article IX shall be interpreted to permit indemnification to the fullest extent permitted by law. If any part of this Article shall be found to be invalid or ineffective in any action, suit, or proceeding, the validity and effect of the remaining part thereof shall not be affected.

Exhibit 10.3

HERITAGE GLOBAL INC.

STOCK OPTION GRANT NOTICE UNDER THE
2003 STOCK OPTION AND APPRECIATION RIGHTS PLAN

Heritage Global Inc. (the “ Company ”), pursuant to its 2003 Stock Option and Appreciation Rights Plan (the “Plan”), hereby grants to the option holder set forth below an option to purchase the number of shares of the Company’s common stock as set forth below. The options are subject to all of the terms and conditions as set forth herein and in the Stock Option Agreement ( Attachment 1), the Plan ( Attachment 2), and the Notice of Exercise ( Attachment 3), all of which are attached hereto and incorporated herein in their entirety.

Option Holder:

Date of Grant:

Number of Shares Subject to Option:

Exercise Price (Per Share):		$

Expiration Date:		See the Stock Option Agreement.

Type of Grant:		.

Vesting Schedule:		Subject to the conditions of the Stock Option Agreement and the Plan, the option shall vest and shall become exercisable in equal parts on each of the first, second, third and fourth anniversaries of the Grant Date.

Payment:		See Section 7.1 of the Plan .

Additional Terms/Acknowledgements:		The undersigned option holder acknowledges receipt of, and understands and agrees to, this Grant Notice, the Stock Option Agreement and the Plan. Option holder further acknowledges that as of the Date of Grant, this Grant Notice, the Stock Option Agreement and the Plan set forth the entire understanding between option holder and the Company regarding the acquisition of stock in the Company and supersede all prior oral and written agreements on that subject.

Executed as of ,.

HERITAGE GLOBAL INC.			OPTION HOLDER:

By:
Name:
Title:

[ Signature Page – Stock Option Grant Notice]

ATTACHMENT 1

STOCK OPTION AGREEMENT

UNDER THE HERITAGE GLOBAL INC.

2003 STOCK OPTION AND APPRECIATION RIGHTS PLAN

Pursuant to your Stock Option Grant Notice (“Grant Notice”) and this Stock Option Agreement, Heritage Global Inc. (the “Company”) has granted you, __________________________ (the “Optionee”), an option under its 2003 Stock Option and Appreciation Rights Plan ( the “Plan”) to purchase the number of shares of the Company’s common stock indicated in your Grant Notice at the exercise price indicated in your Grant Notice. Defined terms not explicitly defined in this Stock Option Agreement but defined in the Plan shall have the same meaning as in the Plan.

1. GRANT OF OPTION . The Company has granted to the Optionee certain stock options under the Plan to purchase the number of shares of the Company’s common stock in the amounts and at exercise prices set forth in the Grant Notice.

2. VESTING . The option shall vest and become exercisable as provided in the Grant Notice except that no additional shares shall vest after the date of termination of the Optionee’s employment or consultancy with the Company, regardless of the reason for such termination.

3. NUMBER OF SHARES AND EXERCISE PRICE . The number of shares of common stock subject to the Optionee’s options and respective exercise prices per share referenced in the Grant Notice may be adjusted from time to time for changes in capital structure, as provided in Article IX of the Plan.

3. METHOD OF PAYMENT . Payment of the exercise price is due in full upon exercise of all or any part of the Optionee’s respective options. The Optionee may elect to make payment of the exercise price in cash or by check or in any other manner permitted by the Company.

5. WHOLE SHARES . The Optionee may exercise his/her respective options only for whole shares of common stock except to the extent the number of shares subject to any such option is a fractional amount, in which case an exercise for such fractional amount of shares will be permitted. In lieu of issuing a fraction of a share upon any exercise of an option, the Company will be entitled to pay to the Optionee an amount equal to the fair market value of such fractional share.

6. NO EXERCISE IN VIOLATION OF LAW . The Optionee may not exercise his or her respective options unless the shares of common stock issuable upon such exercise are then registered under the Securities Act of 1933 (the “Securities Act”) or, if such shares of common stock are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of the Optionee’s respective options must also comply with other applicable laws and regulations governing such options, and the Optionee may not exercise his or her respective options if the Company determines that such exercise would not be in material compliance with such laws and regulations.

7. TERM . The Optionee may not exercise the Optionee’s respective options before the commencement of its term or after its term expires. The term of the Optionee’s respective options commences on the Date of Grant and expires upon the earliest of the following:

(a) Seven (7) years after the date of the grant; or

(b) In accordance with Article VI of the Plan.

8. EXERCISE . The Optionee may exercise the vested portion of the Optionee’s respective options during its term by delivering a Notice of Exercise (in a form designated by the Company) and in compliance with Article VII of the Plan.

9. TRANSFERABILITY . The Optionee’s respective options are not transferable, except by will or by the laws of descent and distribution, and are exercisable during the Optionee’s life only by the Optionee. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, the Optionee may designate a third party who, in the event of his/her death, shall thereafter be entitled to exercise the Optionee’s respective options.

10. OPTION NOT A SERVICE CONTRACT . The Optionee’s respective options are not in and of themselves an employment or service contract, and nothing in such options shall be deemed to create in any way whatsoever any obligation on the

Optionee’s part to continue in the employ of the Company or any affiliate of the Company, or of the Company or any such affiliate to continue his or her employment. In addition, nothing in the Optionee’s respective options shall obligate the Company or any of its affiliates, their respective shareholders, board s of directors, officers or employees to continue any relationship that the Optionee might have as a director or consultant for the Company or any of its affiliates.

11. NO RIGHTS AS SHAREHOLDER . The Optionee shall not have any rights of a shareholder with respect to the shares subject to the options evidenced by this Stock Option Agreement, until a stock certificate has been duly issued following exercise of the option as provided herein.

12. WITHHOLDING OBLIGATIONS .

(a) At the time the Optionee exercises his/her option, in whole or in part, or at any time thereafter as requested by the Company, the Optionee hereby authorizes withholding from payroll and any other amounts payable to the Optionee, and otherwise agrees to make adequate provision for any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or any of its affiliates, if any, which arise in connection with the exercise of the Optionee’s respective options.

(b) Upon the Optionee’s request and subject to approval by the Company, in its sole discretion, and compliance with any applicable conditions or restrictions of law, the Company may withhold from fully vested shares of Common Stock otherwise issuable to the Optionee upon the exercise of the Optionee’s respective options a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law. If the date of determination of any tax withholding obligation is deferred to a date later than the date of exercise of such options, share withholding pursuant to the preceding sentence shall not be permitted unless the Optionee makes a proper and timely election under Section 83(b) of the Code, covering the aggregate number of shares of Common Stock acquired upon such exercise with respect to which such determination is otherwise deferred, to accelerate the determination of such tax withholding obligation to the date of exercise of such options. Notwithstanding the filing of such election, shares of Common Stock shall be withheld solely from fully vested shares of Common Stock determined as of the date of exercise of such options that are otherwise issuable to the Optionee upon such exercise. Any adverse consequences to the Optionee arising in connection with such share withholding procedure shall be the Optionee’s sole responsibility.

(c) The Optionee may not exercise his/her respective options unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly, the Optionee may not be able to exercise such options when desired even though such options are vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein.

13. NOTICES . Any notices provided for in the Optionee’s respective options or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to the Optionee, five (5) days after deposit in the United States mail, postage prepaid, addressed to the Optionee at the last address the Optionee provided to the Company.

14. GOVERNING PLAN DOCUMENT . The Optionee’s respective options are subject to all the provisions of the Plan, the provisions of which are hereby made a part of such options, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan.

15. VENUE AND JURY TRIAL . Exclusive venue for any action arising out of or related to this Agreement will be in state or federal court located in the County of New York, New York, and each party consents to the jurisdiction of such courts and waives any defense based on lack of personal jurisdiction or inconvenient forum. EACH PARTY IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATED TO THIS AGREEMENT BE TRIED BY JURY. EACH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS RIGHT TO DEMAND TRIAL BY JURY.

HERITAGE GLOBAL INC.			OPTION HOLDER:

By:
Name:
Title:

[ Signature Page – Stock Option Agreement]

ATTACHMENT 2

HERITAGE GLOBAL INC.

2003 STOCK OPTION AND APPRECIATION RIGHTS PLAN

See attached.

ATTACHMENT 3

NOTICE OF EXERCISE

1. Pursuant to a certain stock option notice (“Agreement”) between the undersigned (“Optionee”) and Heritage Global Inc. (the “Company”) evidencing that certain option granted ______________, 2012, Optionee hereby exercises the right to purchase ____________ shares of common stock of the Company (“Stock”) at an exercise price of $____ per share.

2. Optionee hereby represents and warrants to the Company and acknowledges and agrees as follows:

(a) Review of Materials; Advice and Consultation . Optionee is a sophisticated investor and has such knowledge and experience in financial and business matters that he or she is able to understand the information concerning the Company and to evaluate the risks in any investment in the Stock. Optionee has been advised to discuss this investment with his, her or its legal or other professional advisors, or with other investment representatives who have knowledge of business and financial matters. If he or she has not done so it is because, in his or her opinion, he or she is personally capable of evaluating the Company and does not need the advice of other persons. Optionee and, to the extent deemed necessary by him or her, any of the persons mentioned above, has been afforded the opportunity to ask questions concerning the Company and its business and has been furnished with such information with respect to the Company and its proposed operations as he or she has requested to his or her satisfaction.

(b) Risk of Loss; Transfer Restrictions . Optionee understands and has fully considered for purposes of this investment that (i) the investment involves a high degree of risk of loss, and (ii) there are substantial restrictions on the transferability of the Stock.

(c) Financial Ability . Optionee is able (i) to bear the economic risk of this investment, (ii) to hold the Stock for an indefinite period of time, and (iii) to afford a complete loss of this investment. Optionee represents that he or she has adequate means of providing for his or her current needs and possible personal contingencies and has no need for liquidity in this particular investment. Optionee’s overall commitment to investments which are not readily marketable is not disproportionate to his or her net worth, and his or her investment in the Stock will not cause such overall commitment to become excessive.

(d) Investment Purpose . Optionee is acquiring Stock for his or her own account and not for the account of any other person. Optionee is acquiring Stock solely for investment and not with a view to, or for resale in connection with, the distribution or other disposition thereof. Optionee understands that the sale and issuance of the Stock has not been registered under the Securities Act of 1933, as amended (the “Securities Act”), applicable state securities laws or the securities or similar laws of any other jurisdiction whatsoever, and, therefore, the Stock cannot be sold, resold, pledged, assigned or otherwise disposed of unless it is subsequently registered under the securities and similar laws of each applicable jurisdiction, or unless exemptions from such registration requirements are available. Optionee understands that dispositions of Stock can be made only in compliance with the Securities Act and the rules and regulations of the Securities and Exchange Commission promulgated thereunder and all applicable state securities and “blue sky” laws; and Optionee understands that the Company is under no obligation to register the offer or sale of any Stock in any jurisdiction whatsoever or to assist Optionee in complying with any exemption from registration under the securities or similar laws of any jurisdiction whatsoever. Optionee further understands that this transaction has not been reviewed by, passed on, or submitted to the United States Securities and Exchange Commission (the “SEC”), nor has the SEC or any other agency made any finding or determination as to the fairness of an investment in Stock, nor any recommendation or endorsement of this offering.

(e) Reliance by Company . Optionee understands that the Company is relying on the truth and accuracy of the representations, declarations and warranties made by Optionee in this Notice of Exercise in offering the Stock for sale to Optionee and in determining the availability of certain exemptions under applicable securities laws.

3. The foregoing representations and warranties and undertakings are made by Optionee with the intent that the Company may rely upon them in determining his or her suitability as an investor. Optionee agrees that such representations and warranties shall survive his or her investment. Optionee agrees to indemnify and hold harmless the Company from any damages, claims, expenses, losses or actions resulting from the untruth of any of the representations and warranties of Optionee contained in this Notice of Exercise.

4. Capitalized terms used in this Notice of Exercise but not defined herein have the meanings set forth in the Agreement.

Date:

			OPTIONEE:

Exhibit 10.9

COUNSEL RB CAPITAL INC.

STOCK OPTION GRANT NOTICE

Counsel RB Capital Inc. (the “ Company hereby grants to the option holder set forth below an option to purchase the number of shares of the Company’s common stock as set forth below. The options are subject to all of the terms and conditions as set forth herein and in the Stock Option Agreement ( Attachment 1) and the Notice of Exercise ( Attachment 2), all of which are attached hereto and incorporated herein in their entirety.

Option Holder:	Ross Dove

Date of Grant:	February 29, 2012

Number of Shares Subject to Option:	312,500

Exercise Price (Per Share):	$ 2.00

Expiration Date:	See the Stock Option Agreement.

Type of Grant:	Non-Qualified Option.

Vesting Schedule:	Subject to the conditions of the Stock Option Agreement, the option shall vest and shall become exercisable in four equal parts on each of the first four anniversaries of the Date of Grant.

Additional Terms/Acknowledgements:	The undersigned option holder acknowledges receipt of, and understands and agrees to, this Grant Notice and the Stock Option Agreement. Option holder further acknowledges that as of the Date of Grant, this Grant Notice and the Stock Option Agreement set forth the entire understanding between option holder and the Company regarding the acquisition of stock in the Company and supersede all prior oral and written agreements on that subject.

Executed as of , 2012.

COUNSEL RB CAPITAL INC.		OPTION HOLDER:

By:	/s/ Stephen Weintraub
Name:	STEPHEN WEINTRAUB	Ross Dove
Title:	EVP, Secretary & CFO

[ Signature Page – Stock Option Grant Notice]

Executed as of , 2012.

COUNSEL RB CAPITAL INC.			OPTION HOLDER:

By:			/s/ Ross Dove
Name:			Ross Dove
Title:

[ Signature Page – Stock Option Grant Notice]

ATTACHMENT 1

STOCK OPTION AGREEMENT

Pursuant to your Stock Option Grant Notice (“Grant Notice”) and this Stock Option Agreement, Counsel RB Capital Inc. (the “Company”) has granted you, Ross Dove (the “Optionee”), an option under its to purchase the number of shares of the Company’s common stock indicated in your Grant Notice at the exercise price indicated in your Grant Notice.

1. GRANT OF OPTION . The Company has granted to the Optionee certain stock options to purchase the number of shares of the Company’s common stock in the amounts and at exercise prices set forth in the Grant Notice.

2. VESTING . The option shall vest and become exercisable as provided in the Grant Notice.

3. NUMBER OF SHARES AND EXERCISE PRICE . In the event that the outstanding shares of common stock of the Company are hereafter increased or decreased, or changed into or exchanged for a different number of shares or kind of shares or other securities of the Company, or of another corporation, by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split, combination of shares, or a dividend payable in capital stock, appropriate adjustment may be made by the Board of Directors of the Company in the number and kind of shares as to which this option or portions thereof then unexercised shall be exercisable, to the end that the Optionee’s proportionate interest shall be maintained as before the occurrence to the unexercised portion of the option and with a corresponding adjustment in the Exercise Price per share. Any such adjustment made by the Board of Directors shall be conclusive. The grant of this option shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets. Upon the dissolution or liquidation of the Company, or upon a reorganization, merger or consolidation of the Company as a result of which the outstanding securities of the class then subject options are changed into or exchanged for cash or property or securities not of the Company’s issue, or upon a sale of substantially all the property of the Company to an association, person, party, corporation, partnership, or control group as that term is construed for purposes of the Securities Exchange Act, this option shall terminate unless provision be made in writing in connection with such transaction for the continuance and/or assumption of this option, or the substitution for this option of options covering the stock of a successor corporation, or a parent or a subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices, in which event the option shall continue in the manner and under the terms so provided. If this option shall terminate pursuant to the foregoing sentence, the Optionee shall have the right, at such time prior to the consummation of the transaction causing such termination as the Company shall designate, to exercise the unexercised portions of his options, including the portions thereof which would, but for this Section 3 not yet be exercisable.

8. EXERCISE. The Optionee may exercise the vested portion of the Optionee’s respective options during its term by delivering the Notice of Exercise.

9. TRANSFERABILITY. The stock certificate or certificates representing the shares issued upon exercise of the option shall bear, in addition to any other legend re quired to be placed thereon, a conspicuous legend to the effect that the shares of capital stock represented thereby are subject to legal restrictions against transfer and are held under and subject to the terms and provisions of this Stock Option Agreemen t as follows:

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

10. NO RIGHTS AS SHAREHOLDER. The Optionee shall not have any rights of a shareholder with respect to the shares subject to the options evidenced by this Stock Option Agreement, until a stock certificate has been duly issued following exercise of the option as provided herein.

11. WITHHOLDING OBLIGATIONS.

(b) The Optionee may not exercise his/her respective options unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly, the Optionee may not be able to exercise such options when desired even though such options are vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein.

12. NOTICES . Any notices provided for in the Optionee’s respective options shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to the Optionee, five (5) days after deposit in the United States mail, postage prepaid, addressed to the Optionee at the last address the Optionee provided to the Company.

13. VENUE AND JURY TRIAL . Exclusive venue for any action arising out of or related to this Agreement will be in state or federal court located in the County of Los Angeles, California, and each party consents to the jurisdiction of such courts and waives any defense based on lack of personal jurisdiction or inconvenient forum. EACH PARTY IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATED TO THIS AGREEMENT BE TRIED BY JURY. EACH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS RIGHT TO DEMAND TRIAL BY JURY.

COUNSEL RB CAPITAL INC.		OPTION HOLDER:

By:	/s/ Stephen Weintraub
Name:	STEPHEN WEINTRAUB	Ross Dove
Title:	EVP, Secretary & CFO

[ Signature Page – Stock Option Agreement]

COUNSEL RB CAPITAL INC.			OPTION HOLDER:

By:			/s/ Ross Dove
Name:			Ross Dove
Title:

[ Signature Page – Stock Option Agreement]

ATTACHMENT 2

NOTICE OF EXERCISE

1. Pursuant to a certain stock option notice (“Agreement”) between the undersigned (“Optionee”) and Counsel RB Capital Inc. (the “Company”) evidencing that certain options were granted ______________, 2012. Optionee hereby exercises the right to purchase _________ shares of common stock of the Company (“Stock”) at an exercise price of $2.00 per share.

2. Optionee hereby represents and warrants to the Company and acknowledges and agrees as follows:

4. Capitalized terms used in this Notice of Exercise but not defined herein have the meanings set forth in the Agreement.

Date:

			OPTIONEE: ROSS DOVE

Exhibit 10.10

COUNSEL RB CAPITAL INC.

STOCK OPTION GRANT NOTICE

Option Holder:	Kirk Dove

Date of Grant:	February 29, 2012

Number of Shares Subject to Option:	312,500

Exercise Price (Per Share):	$ 2.00

Expiration Date:	See the Stock Option Agreement.

Type of Grant:	Non-Qualified Option.

Vesting Schedule:	Subject to the conditions of the Stock Option Agreement, the option shall vest and shall become exercisable in four equal parts on each of the first four anniversaries of the Date of Grant.

Additional Terms/Acknowledgements:	The undersigned option holder acknowledges receipt of, and understands and agrees to, this Grant Notice and the Stock Option Agreement. Option holder further acknowledges that as of the Date of Grant, this Grant Notice and the Stock Option Agreement set forth the entire understanding between option holder and the Company regarding the acquisition of stock in the Company and supersede all prior oral and written agreements on that subject.

Executed as of , 2012 .

COUNSEL RB CAPITAL INC.		OPTION HOLDER:

By:	/s/ Stephen Weintraub
Name:	STEPHEN WEINTRAUB	Kirk Dove
Title:	EVP, Secretary & CFO

[ Signature Page – Stock Option Grant Notice]

Executed as of , 2012.

COUNSEL RB CAPITAL INC.				OPTION HOLDER:

By:				/s/ Kirk Dove
Name:				Kirk Dove
Title:

[ Signature Page – Stock Option Grant Notice]

ATTACHMENT 1

STOCK OPTION AGREEMENT

Pursuant to your Stock Option Grant Notice (“Grant Notice”) and this Stock Option Agreement, Counsel RB Capital Inc. (the “Company”) has granted you, Kirk Dove (the “Optionee”), an option under its to purchase the number of shares of the Company’s common stock indicated in your Grant Notice at the exercise price indicated in your Grant Notice.

1. GRANT OF OPTION. The Company has granted to the Optionee certain stock options to purchase the number of shares of the Company’s common stock in the amounts and at exercise prices set forth in the Grant Notice.

2. VESTING. The option shall vest and become exercisable as provided in the Grant Notice.

3. NUMBER OF SHARES AND EXERCISE PRICE. In the event that the outstanding shares of common stock of the Company are hereafter increased or decreased, or changed into or exchanged for a different number of shares or kind of shares or other securities of the Company, or of another corporation, by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split, combination of shares, or a dividend payable in capital stock, appropriate adjustment may be made by the Board of Directors of the Company in the number and kind of shares as to which this option or portions thereof then unexercised shall be exercisable, to the end that the Optionee’s proportionate interest shall be maintained as before the occurrence to the unexercised portion of the option and with a corresponding adjustment in the Exercise Price per share. Any such adjustment made by the Board of Directors shall be conclusive. The grant of this option shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets. Upon the dissolution or liquidation of the Company, or upon a reorganization, merger or consolidation of the Company as a result of which the outstanding securities of the class then subject options are changed into or exchanged for cash or property or securities not of the Company’s issue, or upon a sale of substantially all the property of the Company to an association, person, party, corporation, partnership, or control group as that term is construed for purposes of the Securities Exchange Act, this option shall terminate unless provision be made in writing in connection with such transaction for the continuance and/or assumption of this option, or the substitution for this option of options covering the stock of a successor corporation, or a parent or a subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices, in which event the option shall continue in the manner and under the terms so provided. If this option shall terminate pursuant to the foregoing sentence, the Optionee shall have the right, at such time prior to the consummation of the transaction causing such termination as the Company shall designate, to exercise the unexercised portions of his options, including the portions thereof which would, but for this Section 3 not yet be exercisable.

3. METHOD OF PAYMENT. Payment of the exercise price is due in full upon exercise of all or any part of the Optionee’s respective options. The Optionee may elect to make payment of the exercise price in cash or by check or in any other manner permitted by the Company.

5. WHOLE SHARES. The Optionee may exercise his/her respective options only for whole shares of common stock except to the extent the number of shares subject to any such option is a fractional amount, in which case an exercise for such fractional amount of shares will be permitted. In lieu of issuing a fraction of a share upon any exercise of an option, the Company will be entitled to pay to the Optionee an amount equal to the fair market value of such fractional share.

6. NO EXERCISE IN VIOLATION OF LAW. The Optionee may not exercise his or her respective options unless the shares of common stock issuable upon such exercise are then registered under the Securities Act of 1933 (the “Securities Act”) or, if such shares of common stock are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of the Optionee’s respective options must also comply with other applicable laws and regulations governing such options, and the Optionee may not exercise his or her respective options if the Company determines that such exercise would not be in material compliance with such laws and regulations.

7. TERM. The Optionee may not exercise the Optionee’s respective options before the commencement of its term or after its term expires. The term of the Optionee’s respective options commences on the Date of Grant and expires seven (7) years after the date of the grant.

8. EXERCISE. The Optionee may exercise the vested portion of the Optionee’s respective options during its term by delivering the Notice of Exercise.

9. TRANSFERABILITY. The stock certificate or certificates representing the shares issued upon exercise of the option shall bear, in addition to any other legend required to be placed thereon, a conspicuous legend to the effect that the shares of capital stock represented thereby are subject to legal restrictions against transfer and are held under and subject to the terms and provisions of this Stock Option Agreement as follows:

11. WITHHOLDING OBLIGATIONS.

12. NOTICES. Any notices provided for in the Optionee’s respective options shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to the Optionee, five (5) days after deposit in the United States mail, postage prepaid, addressed to the Optionee at the last address the Optionee provided to the Company.

13. VENUE AND JURY TRIAL. Exclusive venue for any action arising out of or related to this Agreement will be in state or federal court located in the County of Los Angeles, California, and each party consents to the jurisdiction of such courts and waives any defense based on lack of personal jurisdiction or inconvenient forum. EACH PARTY IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATED TO THIS AGREEMENT BE TRIED BY JURY. EACH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS RIGHT TO DEMAND TRIAL BY JURY.

COUNSEL RB CAPITAL INC.		OPTION HOLDER:

By:	/s/ Stephen Weintraub
Name:	STEPHEN WEINTRAUB	Kirk Dove
Title:	EVP, Secretary & CFO

[ Signature Page – Stock Option Agreement]

COUNSEL RB CAPITAL INC.				OPTION HOLDER:

By:				/s/ Kirk Dove
Name:				Kirk Dove
Title:

[ Signature Page – Stock Option Agreement]

ATTACHMENT 2

NOTICE OF EXERCISE

1. Pursuant to a certain stock option notice (“Agreement”) between the undersigned (“Optionee”) and Counsel RB Capital Inc. (the “Company”) evidencing that certain options were granted ______________, 2012. Optionee hereby exercises the right to purchase shares of common stock of the Company (“Stock”) at an exercise price of $2.00 per share.

2. Optionee hereby represents and warrants to the Company and acknowledges and agrees as follows:

4. Capitalized terms used in this Notice of Exercise but not defined herein have the meanings set forth in the Agreement.

Date:

				OPTIONEE: KIRK DOVE

Exhibit 10.15

PROMISSORY NOTE


US$2,500,000.00		Due: January 15, 2015

FOR VALUE RECEIVED, the undersigned Heritage Global Inc. (the “Promisor) acknowledges itself indebted to and unconditionally promises to pay on January 15, 2015 to or to the order of HARVEY FRISCH (the “Holder”) the amount of Two Million Five Hundred Thousand Dollars in lawful money of the United States of America (US$2,500,000.00), together with interest thereon as set out below.

The principal amount of this Promissory Note outstanding from time to time shall bear interest at the rate of 6% per annum, calculated from the date hereof, payable January 15, 2015.

Provided that the Promisor shall have the right to prepay, at any time or times, the whole or part of the balance of the principal amount from time to time outstanding without notice, bonus or penalty.

This Promissory Note shall be binding upon and enure to the benefit of the Promisor and the Holder and their respective successors and permitted assigns.

The Promisor hereby waives presentment, protest, notice of protest and notice of dishonour of this Promissory Note.

This Promissory Note shall be governed by and construed in accordance with the laws of the Province of Ontario and the Laws of Canada applicable therein.

Signed and sealed at Toronto as of the 19th day of June, 2014.


HERITAGE GLOBAL INC.

Per:
	Authorized Signing Officer

Exhibit 10.16

RENEWED NOTE

This Renewed Note (the “Note”) is made and effective the 31 ^ST day of December, 2014,

BETWEEN:

HERITAGE GLOBAL INC. (the “Promisor”), a corporation organized and existing under the laws of the State of Florida,

AND:	HARVEY FRISCH (the “Holder),

RECITALS

This Note is given as a renewal of a note for US$2,500,000.00 made by Promisor to Holder and dated the 19th day of June, 2014, upon which US$2,500,000.00 remains due and outstanding. A copy of the original note is attached hereto.

Except for the repayment obligations described below, all of the terms of the original note shall remain the same.

In further consideration of the Holder's renewal of the original note, the Promisor agrees to pay interest semi-annually commencing on July 15, 2015 and to pay the balance due on the Note on January 15, 2016.

IN WITNESS WHEREOF, the undersigned has caused this Note to be duly executed as of the date first written above.


HERITAGE GLOBAL INC.

Per:	/s/ Stephen Weintraub
	Authorized Signature

Exhibit 10.17

SECOND RENEWED NOTE

This Second Renewed Note (the “Note”) is made and effective the l5 ^th day of January, 2016.

BETWEEN:

HERITAGE GLOBAL INC. (the “Promisor”), a corporation organized and existing under the laws of the State of Florida,

AND:	HARVEY FRlSCH (the “Holder”).

RECITALS

This Note is given as a renewal of a note for US$2,500,000 made by Promisor and dated the 19 ^t ^h day of June, 2014 and renewed on the 31 ^st day of December, 2014, upon which US$2,500,000 remains due and outstanding. Copies of the original note and the renewed note are attached hereto.

Except for the repayment obligations described below, all of the terms of the original note and the renewed note remain the same.

In further consideration of the Holder’s renewal of the original note as amended and replaced by the renewed note, the Promisor agrees to pay interest semi-annually commencing on July 15 2016, and to pay the balance due on the Note on January 1, 2017.

IN WITNESS WHEREOF, the undersigned has caused this Note to be duly executed as of the date first written above.


HERITAGE GLOBAL INC.

Per:	/s/ Scott A West
	Authorized Party

Exhibit 10.19

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “ Agreement” ) is made as of the 29 ^th day of February, 2012 (the “ Effective Date” ) by and between Heritage Global Partners, Inc. (the “ Company ”) and Ross Dove (“ Executive ”).

Executive is skilled in business and financial matters as they relate to the capital asset auction and asset valuation business. The parties hereto believe that it is in their respective interests to enter into an employment agreement whereby, for the consideration specified herein, Executive shall provide the services specified herein. Certain definitions are set forth in Section 7 .

The parties hereto agree as follows:

Section 1. Employment .

(a) Employment Period . The Company agrees to employ Executive and Executive accepts such employment for the period (the “ Employment Period” ) beginning on the Effective Date and ending on the fifth anniversary of the Effective Date. The Employment Period will renew automatically on a year-to-year basis thereafter, until either party gives notice of non-renewal not less than sixty (60) days prior to an anniversary of the Effective Date. The Employment Period will end on an earlier date if Executive’s employment is terminated in accordance with Section 2 (the date of termination or non- renewal being hereinafter called the “ Termination Date ”).

(b) Position and Duties .

(i) During the Employment Period, Executive shall serve as President of the Company and Executive shall report to the Chief Executive Officer of CRB. Executive shall perform all duties and shall have all powers which are commonly and reasonably incident to his office as well as all powers that are reasonably delegated to Executive by the Chief Executive Officer of CRB.

(ii) Executive shall devote his best efforts and his full business time and attention to the business and affairs of the Company, except for permitted vacation periods in accordance with the Company’s policy, periods of illness or other incapacity, and reasonable time spent with respect to civic and charitable activities, provided that none of such activities materially interfere with Executive’s duties to the Company or its Subsidiaries.

(i) During the Employment Period, the Company shall pay Executive a base salary at the rate of no less than $300,000 per annum (the “ Base Salary ”) in accordance with the regular payroll practices of the Company with respect to executive officers of the Company. The Chairman of the Board of the Company’s corporate parent Counsel RB Capital Inc. (“CRB”) shall review the Base Salary annually for potential increases, but shall not reduce it.

(ii) During the Employment Period, Executive will be eligible for a discretionary annual bonus of up to fifty percent (50%) of the Base Salary, pro-rated for any periods that do not commence on January I or end on December 31 in any given year (based on the actual number of days elapsed over a year of 365 or 366 days, as applicable) (the “ Bonus ”). The Chairman of the Board of CRB shall determine in his reasonable discretion the amount of any Bonus to be awarded based on performance criteria established at the beginning of each fiscal year, and the timing of such award and the payment of any such Bonus shall be made within the ninety (90) day period beginning on March 1 of each year immediately following the fiscal year in which the services to which the Bonus applies were performed.

(iii) During the Employment Period, Executive will be entitled to participate in all employee stock option, health and welfare benefit plans, programs and practices maintained by CRB for its employees generally in accordance with the terms of such plans, programs and practices as in effect from time to time, and in any other insurance, health, retirement or welfare benefit plans, programs and practices which CRB generally provides to its executives from time to time.

(d) Expenses . The Company shall pay or reimburse Executive (at the Company's option) in accordance with CRB’s then-current policies for fully-documented (in accordance with the CRB’s policies) reasonable and necessary expenses and other disbursements incurred by Executive for or on behalf of the Company in the performance of his duties hereunder, including, without limitation, travel on behalf of or in connection with his services for the Company in a manner customary for the Company's executives, including food and lodging expenses while Executive is away from home performing services for the Company.

(e) Workplace and Work Schedule . Executive ’ s workplace will be located in Foster City, or such other office or offices as are approved by the Company. Executive is entitled to such holidays as are established by the Company's U.S. policies. Executive is entitled to four (4) weeks of paid vacation per year of employment at Executive ’ s then applicable Base Salary (prorated for the period of vacation), which may be taken in various periods, subject to the Company ’ s reasonable needs.

Section 2. Termination of Employment .

(a) Death or Disability . The Company may terminate Executive’s employment during the Employment Period due to his death or Disability. If Executive dies during the Employment Period, the Termination Date will be deemed to be the date of his death.

(b) Cause . The Company may terminate the employment of Executive immediately at any time during the Employment Period for Cause by giving him a Notice of Termination.

(c) Without Cause . Both the Company and Executive may terminate Executive's employment at any time during the Employment Period without Cause by giving him a Notice of Termination thirty (30) days prior to the Termination Date.

(d) Good Reason . Executive may terminate his employment during the Employment Period for Good Reason by providing the Company a Notice of Termination.

Section 3. Effect of Termination of Employment .

(a) Death or Disability . If Executive’s employment is terminated due to death or Disability pursuant to Section 2(a) , neither Executive nor his beneficiary or estate will have any further rights or claims against the Company under this Agreement, except the right to receive:

(i) the earned but unpaid portion, if any, of the Base Salary, computed on a pro-rata basis through the Termination Date (based on the actual number of days elapsed over a year of 365 or 366 days, as applicable);

(ii) any outstanding amounts owed to Executive, if any, pursuant to Section 1(d) , which amount shall be paid within ninety (90) after Executive incurred such expense (collectively, the “ Accrued Compensation ”); and

(iii) provided that Executive has met, as of the Termination Date, the performance criteria established with respect to the Bonus for the fiscal year in which the Termination Date occurs, the pro-rata portion of the Bonus for such fiscal year (based on the actual number of days elapsed from the beginning of the fiscal year to the Termination Date over a year of 365 or 366 days, as applicable), such pro-rated Bonus shall be paid after March 1 and on or before March 15 of the year immediately following the fiscal year in which the Termination Date occurs.

(b) Cause . If Executive’s employment is terminated by the Company for Cause pursuant to Section 2(b) , neither Executive nor his beneficiary or estate will have any further rights or claims against the Company under this Agreement, except the right to receive the Accrued Compensation as provided in Sections 3(a)(i) and (ii) .

(c) Without Cause . If Executive’s employment is terminated by the Company or by Executive without Cause pursuant to Section 2(c) , neither Executive nor his beneficiary or estate shall have any further rights or claims against the Company under this Agreement, except the right to receive:

(i) the Accrued Compensation as provided in Sections 3(a)(i) and (ii) ;

(ii) an amount equal to the amount of the Base Salary, payable in equal monthly installments, Executive would have received for the period commencing on the Termination Date and ending 12 months after the Termination Date as provided in Section 9(b) ; and

(d) Good Reason . If Executive ’ s employment is terminated by Executive for Good Reason pursuant to Section 2(d) , neither Executive nor his beneficiary or estate shall have any further rights or claims against the Company under this Agreement, except the right to receive:

(i) the Accrued Compensation as provided in Sections 3 (a)(i) and (ii) ; and

(e) Release . Executive acknowledges and agrees that the payments provided for in Sections 3(c)(ii) , 3(c)(iii) and 3(d)(ii) constitute liquidated damages for any claim of breach of contract under this Agreement as it relates to termination of his employment during the Employment Period without Cause pursuant to Section 2(c) or with Good Reason pursuant to Section 2(d) . Notwithstanding the foregoing, if Executive is entitled to the payments set forth in Section 3(c)(ii) , Section 3(c)(iii) or Section 3(d)(ii) , Executive shall execute and agree to be bound by an agreement, in form and substance reasonably satisfactory to the Company (the “ Release ”), relating to the waiver and general release of any and all claims arising out of or relating to Executive’s employment and termination of employment, and the Company will have no obligation to make the payments contemplated under Section 3(c)(ii) , Section 3(c)(iii) or Section 3(d)(ii) , as the case may be, if Executive fails to execute such Release or seeks to revoke such Release before it becomes effective. In addition, if Executive violates the terms of Section 4 , the continuing obligations of the Company to make the payments contemplated under Section 3(c)(ii) , Section 3(c)(iii) or Section 3(d)(ii) , as the case may be, shall immediately terminate.

Section 4. Restrictions .

(a) Executive shall at all times, both during the Employment Period and for a period of 12 months following the Termination Date (or, with respect to any trade secret, for so long as such trade secret retains its status as such under applicable law), keep strictly confidential and not use or disclose to any third party any trade secret, information, knowledge or data not generally known to the public which Executive may have learned, discovered, developed, conceived, originated, prepared or received during or as a result of Executive's employment by the Company or any Subsidiary or Affiliate with respect to the operations, businesses, affairs, products, services, technology, intellectual properties, Agents, customers, clients, pricing of products or services, policies, procedures, accounts, personnel, concepts, format, style, techniques or software of the Company or any Subsidiary or Affiliate (“ Proprietary Information ”). Executive acknowledges that Proprietary Information includes, without limitation, the business or other needs, requirements, preferences or other information relating to Agents and customers of the Company or any Subsidiary or Affiliate, acquisition targets of the Company or any Subsidiary or Affiliate and all information or data collected by the Company with reference thereto. Executive shall comply with any and all procedures which the Company may adopt from time to time to preserve the confidentiality of any trade secret or other confidential and proprietary information. Immediately upon the Termination Date, he shall (i) return to the Company all Proprietary Information he has received, regardless of how recorded, including all copies thereof made by him or any employee, agent or advisor of or to him, (ii) destroy (or cause to be destroyed) all materials incorporating or based on such Proprietary information, and (iii) certify in writing that the foregoing have been completed The Company may, in its sole discretion, upon or after the Termination Date, notify Executive’s new employer, clients or other parties that Executive has had access to certain trade secrets or other confidential and proprietary information which Executive is under a continuing obligation not to use or disclose. Notwithstanding the foregoing, the limitations imposed on Executive pursuant to this Section 4(a) will not apply to Executive’s disclosure pursuant to an order of a court or governmental agency, provided that Executive notifies the Company and affords it an opportunity to oppose such order. Notwithstanding the foregoing, “Proprietary Information” shall not include any information that is or becomes generally available to the public other than as a result of a disclosure by the Executive.

(b) In order to protect the Company from unfair competition and to prevent the unauthorized disclosure or use of the Proprietary Information, both during the Employment Period and for a period of 12 months following the Termination Date, Executive shall not, within the Restricted Territory (defined below), directly or indirectly engage in or become associated with any Competitive Activity (defined below). Executive will be considered to have become “associated with a Competitive Activity” if he becomes involved as an owner, employee, employer, consultant, principal, officer, director, independent contractor, agent, partner, advisor or in any other capacity, with or without compensation, calling for the rendition of personal services with any Person that is engaged in a Competitive Activity and his involvement relates to a significant extent to the Competitive Activity of such Person; provided, however, that Executive will not be prohibited from passive ownership of less than five percent (5%) of any publicly traded corporation that is in competition with the Company. “Competitive Activity” means (i) engaging in the planning and execution of commercial auctions, (ii) services and consultations related to commercial asset valuation, (iii) engaging any other services being offered by the Company on the Termination Date. “Restricted Territory” means the United States, Canada and anywhere else in the world that Executive has conducted or promoted the business of the Company or its Subsidiaries or Affiliates prior to the Termination Date. In the alternative, and only if the above territory is deemed by a court of competent jurisdiction to be unreasonable or otherwise invalid or

unenforceable, then the Restricted Territory means New York State, California, and any other state or province in which Executive maintained an office or otherwise provided services to the Company during the term of this agreement.

(c) In order to protect the Company from unfair competition and to prevent the unauthorized disclosure or use of the Proprietary Information, both during the Employment Period and for a period of 24 months following the Termination Date, Executive shall not, directly or indirectly, for his own account or as a partner, joint venturer, employee, agent, or consultant: (i) employ as an employee, engage as an independent contractor or agent or otherwise retain or solicit or seek to so employ, engage, retain or solicit any person who, during any portion of the two (2) years prior to the Termination Date was, directly or indirectly, employed as an employee, engaged as an independent contractor or Agent or otherwise retained by the Company or any Subsidiary or Affiliate; (ii) induce any Person (except for individuals considered to be clerical or secretarial staff) to leave his or her employment with the Company, terminate an independent contractor or Agent relationship with the Company or terminate or reduce any contractual relationship with the Company or any Subsidiary or Affiliate; or (iii) directly or indirectly induce or influence any Agent, customer, supplier, or other person that has a business relationship with the Company or any Subsidiary or Affiliate to discontinue or reduce the extent of such relationship.

(d) Both during and after the Employment Period, except as required by applicable law or compelled by legal process, neither Executive nor anyone acting on his behalf will (i) make any derogatory, disparaging or critical statement about the Company or any of its present or former officers, directors, employees, shareholders, Affiliates or Subsidiaries or (ii) without the prior written consent of the Company, communicate, directly or indirectly, with the press or other media concerning the Company or the present or former employees or business of the Company (other than incidental references to the Company or its business which are non-specific in nature and included as a part of Executive’s general market observations). Further, the Company agrees that, both during and after the Employment Period, except as required by applicable law or compelled by legal process, neither the Company nor anyone acting on its behalf will (i) make any derogatory, disparaging or critical statement about Executive or (ii) without the prior written consent of Executive, communicate, directly or indirectly, with the press or other media concerning Executive.

(e) All processes, improvements, formulations, ideas, inventions, designs and discoveries, whether patentable or not (collectively “ Discoveries ”) and all patents, copyrights, trademarks, and other intangible rights (collectively “ Intellectual Property Rights ”) that may be conceived or developed by Executive either alone or with others, during the Employment Period or any extension or renewal thereof, whether or not conceived or developed during working hours, and with respect to which any equipment, supplies, facilities, or trade secret information of the Company or any Subsidiary or Affiliate was used, or that related to the business of the Company or any Subsidiary or Affiliate or to the Company’s or any Subsidiary’s or Affiliate’s actual or demonstrably anticipated research and development, or that result from any work performed by Executive for the Company or any Subsidiary or Affiliate, will be the sole property of the Company or a Subsidiary of Affiliate, as applicable. As provided in Section 2870 of the California Labor Code, the requirement to assign inventions hereunder shall not apply to an invention that Executive develops entirely on his own time without using the Company’s or any Subsidiary's or Affiliate’s equipment, supplies, facilities, or trade secret information, except for those inventions that either (i) relate, at the time of conception or reduction to practice of the invention to the Company’s or any Subsidiary’s or Affiliate’s business, or actual or demonstrably anticipated research or development of the Company or any Subsidiary or Affiliate; or (ii) result from any work performed by Executive for the Company or any Subsidiary or Affiliate. Executive shall disclose to the Company all Discoveries and Intellectual Property Rights conceived during the Employment Period, or any extension or renewal thereof, which Executive believes meet the criteria set forth in California Labor Code Section 2870, whether or not the property of the Company or any Subsidiary or Affiliate under the terms of the preceding sentence.

(f) All Intellectual Property Rights that are subject to copyright protection and reduced to tangible form in whole or in part by Executive in the course of his employment shall be deemed to be a “work made for hire” as that term is used in 17 U.S.C. 101 et seq ., and Executive shall take all actions reasonably requested by the Company in order for the Company to obtain or register copyrights in such material. Executive hereby assigns to the Company the entire right, title, and interest in and to all Discoveries and all Intellectual Property Rights which are to be the property of the Company or any Subsidiary or Affiliate under Section 4(e) . Upon request of the Company, whether during or following Executive’s employment, Executive shall execute all such assignments, oaths, declarations, and other documents as may be prepared by the Company to effect the purposes of this paragraph. Upon request of the Company from time to time, whether during or following Executive’s employment, Executive shall provide the Company with all information, documentation, assistance, and other acts that the Company reasonably may request to evidence, perfect, enforce, transfer, or defend the Company’s proprietary rights in, to, or based upon Discoveries and/or Intellectual Property Rights which are to be the property of the Company or any Subsidiary or Affiliate under Section 4(e) . Executive shall provide all such information, documentation, assistance, and other acts for no additional consideration other than actual and necessary out-of-pocket expenses that are incurred at the Company's request. Executive hereby irrevocably designates and appoints the Company as his attorney-in-fact and agent to act for and on his behalf to execute and file any document and to do all other lawfully permitted acts to further the purposes of this paragraph with the same legal force and effect as if executed by Executive.

(g) Executive shall abide by policies related to his employment by the Company applicable to comparable executives as they are promulgated by the Company from time to time.

(h) All telephone and cellular numbers used by Executive in performing services for the Company shall be property of the Company, provided that: (i) if the employment of Executive is terminated by the Company without Cause pursuant to Section 2(c) or by Executive for Good Reason pursuant to Section 2(d) , then Executive may retain Executive’s cellular number; and (ii) Kirk Dove’s personal cell phone number (650-207-0627) shall be the property of Kirk Dove and the Company shall reasonably cooperate to transfer ownership of such phone number to Kirk Dove.

(i) Because the breach or attempted or threatened breach of this Section 4 may result in immediate and irreparable injury to the Company for which the Company may not have an adequate remedy at law, the Company shall be entitled, in addition to all other remedies, to a decree of specific performance thereof and to a temporary and permanent injunction enjoining such breach, without the necessity of posting bond or furnishing any similar security. The parties’ obligations under this Section 4 will survive any termination of Executive’s employment or this Agreement.

Section 5. Acknowledgments By Executive .

Executive understands that the restrictions contained in Section 4 may limit the ability of Executive to earn a livelihood in a competing business, but Executive nevertheless believes that Executive has received and will receive sufficient consideration and other benefits as an employee of the Company and as otherwise provided hereunder to clearly justify such restrictions which, in any event (given the education, skills and ability of Executive), Executive does not believe would prevent him from earning a livelihood. Executive further acknowledges that this Agreement would not have been entered into and the benefits described in Section 1 and Section 3 would not have been promised in the absence of Executive’s promises under Section 4 .

Section 6. Tax Withholding and Setoff .

The Company may withhold from any compensation or severance payable under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling. The Company shall have the right to set off any payments owed to Executive under this Agreement against amounts owed to Company or its Affiliates or Subsidiaries by Executive, provided, however, that such set off shall be made only if the set off does not cause the imposition of tax or additions to tax pursuant to section 409A(a)(l) of the Code.

Section 7. Definitions .

(a) “ Affiliate ” means any other Person controlling, controlled by, or under common control with the Company, where “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, by contract, or otherwise.

(b) “ Agent ” means any Person which has received or is entitled to receive a commission from the Company related to the sale or marketing of the Company’s products or services.

(c) “ Cause ” means actions or omissions by Executive: (i) constituting fraud, larceny, embezzlement, conversion or otherwise involving the misappropriation of assets of the Company or any Subsidiary or Affiliate or any other illegal conduct with respect to the Company or any Subsidiary or Affiliate which acts are harmful to, either financially, or to the business reputation of, the Company or any Subsidiary or Affiliate; (ii) constituting gross negligence or intentional misconduct; (iii) resulting in a conviction (or a plea of guilty or no contest) for any felony or any crime of moral turpitude; (iv) constituting habitual alcohol or substance abuse; (v) constituting a material breach of this Agreement which, if curable, is not cured within fifteen (15) days after receipt of written notice thereof; (vi) constituting a material failure by Executive to perform his duties, which nonperformance continues after written notice thereof and a fifteen (15) day chance to cure; (vii) resulting in an unauthorized breach of the CRB’s Code of Conduct; or (viii) constituting a breach of the fiduciary duty owed by Executive to the Company or any Subsidiary or Affiliate which, if curable, is not cured within fifteen (15) days after receipt of written notice thereof.

(d) “ Disability ” means that Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Company. Disability shall be determined by a physician acceptable to both the Company and Executive, or, if the Company and Executive cannot agree upon a physician within 15 days after the Company claims that Executive is suffering from a Disability, by a physician selected by two

physicians, one designated by each of the Company and Executive. Executive ’ s failure to submit to any physical examination by any such physician after such physician has given reasonable notice of time and place of such examination shall be conclusive evidence of Executive's inability to perform his duties hereunder.

(e) “ Good Reason ” means, during the Employment Period and without Executive’s consent: (i) a material diminution of Executive’s title, reporting structure, position or responsibilities; (ii) a material reduction in the Base Salary; (iii) any other action or inaction by the Company that constitutes a material breach of this Agreement; (iv) the Company’s decision to relocate Executive’s place of business more than 50 miles from its current location; and (v) a material reduction in Executive’s employee benefits other than a reduction which applies equally to all Company and CRB employees of comparable position and experience. Executive shall communicate any purported termination by Executive for Good Reason by a written Notice of Termination for Good Reason to the Company in accordance with Section 8 of this Agreement. For the purposes of this Agreement, a Notice of Termination for Good Reason shall mean a notice by Executive specifying the existence of one or more of the conditions described in this Section 7(e) within forty-five (45) days after the initial existence of the condition. Upon receipt of that notice, the Company shall have a period of thirty (30) days to remedy the condition or conditions specified in the Notice of Termination for Good Reason. The Notice of Termination for Good Reason must specify a Termination Date of not more than thirty (30) days after the last day of the Company’s cure period. If the Company remedies the condition within the 30-day period, the Notice of Termination for Good Reason shall become ineffective and the Company shall have no obligations under this Agreement as a result of it.

(f) “ Notice of Termination ” means a written notice that indicates the Termination Date, the specific termination provision in this Agreement relied upon, and the facts and circumstances, if any, claimed to provide a basis for such termination.

(g) “ Person ” means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

(h) “ Subsidiary ” means any corporation or other entity of which the securities having a majority of the ordinary voting power in electing the board of directors (or similar governing body or manager, as applicable) are, at the time as of which any determination is being made, owned by the Company either directly or indirectly.

Section 8. Notices .

Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) to the recipient at the address below indicated:

If to the Company:

Heritage Global Partners, Inc. c/o Counsel RB Capital Inc.

267 Central Avenue

White Plains, NY 10606

Fax: (914) 614-1801

Attention: Jonathan Reich and Ronald Schinik

with a copy to:

1 Toronto St., Suite 700

Toronto, ON M5C 2V6

Facsimile: (416) 866-3061

Attention: Allan Silber and R. Adam Levy

If to Executive:

330 Hatch Drive

Foster City, California 94404

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement will be deemed to have been given when so delivered or sent or, if mailed, five days after deposit in the U.S. or Canadian mail.

Section 9. Section 409A Savings Clause .

(a) Application of Section 409A . To the extent of any compliance issues or ambiguous terms, this Agreement shall be construed in such a manner so as to comply with the requirements of section 409A of the Code, and the rules set forth in this Section 9 shall apply with respect to any payments (but only such payments) that may be subject to section 409A of the Code notwithstanding any other provision of this Agreement.

(b) Timing of Payments . Notwithstanding the applicable provisions of this Agreement regarding the timing of payments, any payment due hereunder which is contingent upon receipt of the Release described in Section 3(e) shall be made, if at all, in accordance with this Section 9(b) , and only if Executive has delivered to the Company a properly executed Release for which all legally mandated revocation rights of Executive have expired prior to the sixtieth (60th) day following the Termination Date. Any such payment shall be made after receipt of such executed and irrevocable Release within such sixty (60) period, unless otherwise scheduled to be made after such period pursuant to the terms of this Agreement; provided, however, if the sixty (60) day period for such payments begins in one taxable year of Executive and ends in a second taxable year of Executive, any payments otherwise payable within such sixty (60) day period will be made in the second taxable year. Any payments due after such sixty (60) period shall be payable in accordance with their regularly scheduled payment date. All payments hereunder are subject to any required delay pursuant to Section 9(c) , if applicable. If the Company does not receive a properly executed Release, for which all rights of revocation have lapsed, prior to the time specified in this Section 9(b) , Executive shall forfeit all rights to any payments under Sections 3(c)(ii) and 3(d)(ii) of this Agreement.

(c) Delayed Payments . (i) Notwithstanding any other payment schedule provided herein to the contrary, if, and only if, Executive is deemed on the Termination Date to be a “specified employee” within the meaning of that term under section 409A(a)(2)(B) of the Code, then the terms of this Section 9(c) shall apply as required by section 409A of the Code. Any payment that is considered deferred compensation under section 409A of the Code payable on account of a “separation from service” shall be made on the date which is the earlier of (y) the expiration of the six (6) month period measured from the date of such “separation from service” of Executive or (z) the date of Executive’s death (the “Delay Period”) to the extent required under section 409A of the Code. Upon the expiration of the Delay Period, all payments delayed pursuant to the immediately preceding sentence (whether they otherwise would have been payable in a single sum or in installments in the absence of such delay) shall be paid to Executive in a lump sum by the Company, and all remaining payments due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein; and

(ii) To the extent that any benefits to be provided during the Delay Period are considered deferred compensation under section 409A of the Code provided on account of a “separation from service,” and such benefits are not otherwise exempt from section 409A of the Code, Executive shall pay the cost of such benefits during the Delay Period, and the Company shall reimburse Executive, to the extent that such costs otherwise would have been paid by the Company or to the extent that such benefits otherwise would have been provided by the Company at no cost to Executive, the Company’s share of the cost of such benefits upon expiration of the Delay Period, and any remaining benefits shall be reimbursed or provided by the Company in accordance with the procedures specified herein.

(d) Separation from Service . For purposes of this Agreement, the phrase termination of employment or any similar term or phrase shall mean Executive’s “Separation from Service” as defined by the default provisions of Treas. Reg.§ 1.409A-l(h).

(e) Series of Payments . For purposes of the application of Treas. Reg.§ 1.409A-l(b)(4) (or any successor provision), each payment in a series of payments to Executive will be deemed a separate payment.

Section 10. General Provisions .

(a) Severability . Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. Notwithstanding the foregoing, if the scope of any provision in Section 4 is found to be too broad to permit enforcement of such provision to its full extent, the parties consent to judicial modification of such provision and enforcement to the maximum extent permitted by law.

(b) Complete Agreement . This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. For the avoidance of doubt, the obligations contained in Section 4 herein shall be deemed to supplement, rather than supersede or

preempt, the obligations contained in Sections 7.1 and 7.2 of that certain Share Purchase Agreement by and among Company, Kirk and Ross Dove, as Sellers, and CRB.

(c) Counterparts . This Agreement may be executed in separate counterparts (and the same may be delivered by means of facsimile or PDF file), each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

(d) Successors and Assigns . Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company and their respective successors and assigns; provided that the rights and obligations of Executive under this Agreement shall not be assignable.

(e) Choice of Law; Venue . This Agreement will be governed by and construed in accordance with the laws of the State of California, without regard to conflict of laws principles. Exclusive venue for any action arising out of or related to this Agreement will be in state or federal court located in the County of Los Angeles, California, and each party consents to the jurisdiction of such courts and waives any defense based on lack of personal jurisdiction or inconvenient forum.

(f) Waiver of Jury Trial . EACH PARTY IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATED TO THIS AGREEMENT BE TRIED BY JURY. EACH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS RIGHT TO DEMAND TRIAL BY JURY.

(g) Amendment and Waiver . The provisions of this Agreement may be amended and/or waived only with the prior written consent of the Company and Executive.

(h) Insurance . The Company, at its discretion, may apply for and procure in its own name and for its own benefit life and/or disability insurance on Executive in any amount or amounts considered available. Executive agrees to cooperate in any medical or other examination, supply any information, and to execute and deliver any applications or other instruments in writing as may be reasonably necessary to obtain and constitute such insurance. Executive hereby represents that he has no reason to believe that his life is not insurable at rates now prevailing for men of his age and condition.

(i) Independent Legal Advice . Executive acknowledges that he has had the opportunity to seek independent legal and tax advice in his review of this Agreement, and that he has not relied on any statements by Company, its Subsidiaries and Affiliates, or their legal counsel with regard to the same.

* * * *

IN W ITNESS WHEREOF, the parti es hereto have executed this Em ployment Agreement as of the Effective Date.

HERITAGE GLOBAL PARTNERS, INC.
By:	/s/ Allan C. Silber
Name:	Allan C. Silber
Its:	Chairman


Ross Dove

[ Signature Page – Employment Agreement]

IN WITNESS WHEREOF , the parties hereto have executed this Employment Agreement as of the Effective Date.

HERITAGE GLOBAL PARTNERS, INC.
By:
Name:	Allan C. Silber
Its:	Chairman

/s/ Ross Dove
Ross Dove

[ Signature Page – Employment Agreement]

Exhibit 10.20

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “ Agreement ”) is made as of the 29 ^th day of February, 2012 (the “ Effective Date ”) by and between Heritage Global Partners, Inc. (the “ Company ”) and Kirk Dove (“ Executive ”).

The parties hereto agree as follows:

Section 1. Employment.

(a) Employment Period . The Company agrees to employ Executive and Executive accepts such employment for the period (the “ Employment Period ”) beginning on the Effective Date and ending on the fifth anniversary of the Effective Date. The Employment Period will renew automatically on a year-to-year basis thereafter, until either party gives notice of non-renewal not less than sixty (60) days prior to an anniversary of the Effective Date. The Employment Period will end on an earlier date if Executive’s employment is terminated in accordance with Section 2 (the date of termination or nonrenewal being hereinafter called the “ Termination Date ”).

(b) Position and Duties.

(i) During the Employment Period, Executive shall serve as Managing Partner and Secretary of the Company and Executive shall report to the Chief Executive Officer of CRB. Executive shall perform all duties and shall have all powers which are commonly and reasonably incident to his office as well as all powers that are reasonably delegated to Executive by the Chief Executive Officer of CRB.

(ii) During the Employment Period, Executive will be eligible for a discretionary annual bonus of up to fifty percent (50%) of the Base Salary, pro-rated for any periods that do not commence on January 1 or end on December 31 in any given year (based on the actual number of days elapsed over a year of 365 or 366 days, as applicable) (the “ Bonus ”). The Chairman of the Board of CRB shall determine in his reasonable discretion the amount of any Bonus to be awarded based on performance criteria established at the beginning of each fiscal year, and the timing of such award and the payment of any such Bonus shall be made within the ninety (90) day period beginning on March 1 of each year immediately following the fiscal year in which the services to which the Bonus applies were performed.

(d) Expenses . The Company shall pay or reimburse Executive (at the Company’s option) in accordance with CRB’s then-current policies for fully-documented (in accordance with the CRB’s policies) reasonable and necessary expenses and other disbursements incurred by Executive for or on behalf of the Company in the performance of his duties hereunder, including, without limitation, travel on behalf of or in connection with his services for the Company in a manner customary for the Company’s executives, including food and lodging expenses while Executive is away from home performing services for the Company.

(e) Workplace and Work Schedule . Executive ’ s workplace will be located in San Diego, California, or such other office or offices as are approved by the Company. Executive is entitled to such holidays as are established by the Company ’ s U.S. policies. Executive is entitled to four (4) weeks of paid vacation per year of employment at Executive ’ s then applicable Base Salary (prorated for the period of vacation), which may be taken in various periods, subject to the Company ’ s reasonable needs.

Section 2. Termination of Employment .

(b) Cause . The Company may terminate the employment of Executive immediately at any time during the Employment Period for Cause by giving him a Notice of Termination.

(c) Without Cause . Both the Company and Executive may terminate Executive’s employment at any time during the Employment Period without Cause by giving him a Notice of Termination thirty (30) days prior to the Termination Date.

(d) Good Reason . Executive may terminate his employment during the Employment Period for Good Reason by providing the Company a Notice of Termination.

Section3. Effect of Termination of Employment .

(i) the Accrued Compensation as provided in Sections 3(a)(i) and (ii) ;

(iii) provided that Executive has met, as of the Termination Date, the performance criteria established with respect to the Bonus for the fiscal year in which the Termination Date occurs, the pro-rata portion of the Bonus for such fiscal year (based on the actual number of days elapsed from the beginning of the fiscal year to the Termination Date over a year of 365 or 366 days, as applicable), such pro-rated Bonus shall be paid after March I and on or before March 15 of the year immediately following the fiscal year in which the Termination Date occurs.

(i) the Accrued Compensation as provided in Sections 3(a)(i) and (ii); and

(e) Release . Executive acknowledges and agrees that the payments provided for in Sections 3(c)(ii), 3(c)(iii) and 3(d)(ii) constitute liquidated damages for any claim of breach of contract under this Agreement as it relates to termination of his employment during the Employment Period without Cause pursuant to Section 2(c) or with Good Reason pursuant to Section 2(d). Notwithstanding the foregoing, if Executive is entitled to the payments set forth in Section 3(c)(ii) , Section 3(c)(iii) or Section 3(d)(ii) , Executive shall execute and agree to be bound by an agreement, in form and substance reasonably satisfactory to the Company (the “ Release ”), relating to the waiver and general release of any and all claims arising out of or relating to Executive’s employment and termination of employment, and the Company will have no obligation to make the payments contemplated under Section 3(c)(ii) , Section 3(c)(iii) or Section 3(d)(ii) , as the case may be, if Executive fails to execute such Release or seeks to revoke such Release before it becomes effective. In addition, If Executive violates the terms of Section 4 , the continuing obligations of the Company to make the payments contemplated under Section 3(c)(ii) , Section 3(c)(iii) or Section 3(d)(ii) , as the case may be, shall immediately terminate.

Section 4. Restrictions .

(a) Executive shall at all times, both during the Employment Period and for a period of 12 months following the Termination Date (or, with respect to any trade secret, for so long as such trade secret retains its status as such under applicable law), keep strictly confidential and not use or disclose to any third party any trade secret, information, knowledge or data not generally known to the public which Executive may have learned, discovered, developed, conceived, originated, prepared or received during or as a result of Executive’s employment by the Company or any Subsidiary or Affiliate with respect to the operations, businesses, affairs, products, services, technology, intellectual properties, Agents, customers, clients, pricing of products or services, policies, procedures, accounts, personnel, concepts, format, style, techniques or software of the Company or any Subsidiary or Affiliate (“ Proprietary Information ”). Executive acknowledges that Proprietary Information includes, without limitation, the business or other needs, requirements, preferences or other information relating to Agents and customers of the Company or any Subsidiary or Affiliate, acquisition targets of the Company or any Subsidiary or Affiliate and all information or data collected by the Company with reference thereto. Executive shall comply with any and all procedures which the Company may adopt from time to time to preserve the confidentiality of any trade secret or other confidential and proprietary information. Immediately upon the Termination Date, he shall (i) return to the Company all Proprietary Information he has received, regardless of how recorded, including all copies thereof made by him or any employee, agent or advisor of or to him, (ii) destroy (or cause to be destroyed) all materials incorporating or based on such Proprietary Information, and (iii) certify in writing that the foregoing have been completed. The Company may, in its sole discretion, upon or after the Termination Date, notify Executive’s new employer, clients or other parties that Executive has had access to certain trade secrets or other confidential and proprietary information which Executive is under a continuing obligation not to use or disclose. Notwithstanding the foregoing, the limitations imposed on Executive pursuant to this Section 4(a) will not apply to Executive’s disclosure pursuant to an order of a court or governmental agency, provided that Executive notifies the Company and affords it an opportunity to oppose such order. Notwithstanding the foregoing, “Proprietary Information” shall not include any information that is or becomes generally available to the public other than as a result of a disclosure by the Executive.

unenforceable, then the Restricted Territory means New York State, California, and any other state or province in which Executive maintained an offi ce or otherwise provided services to the Company during the term of this agreement.

(e) All processes, improvements, formulations, ideas, inventions, designs and discoveries, whether patentable or not (collectively “ Discoveries ”) and all patents, copyrights, trademarks, and other intangible rights (collectively “ Intellectual Property Rights ”) that may be conceived or developed by Executive either alone or with others, during the Employment Period or any extension or renewal thereof, whether or not conceived or developed during working hours, and with respect to which any equipment, supplies, facilities, or trade secret information of the Company or any Subsidiary or Affiliate was used, or that related to the business of the Company or any Subsidiary or Affiliate or to the Company’s or any Subsidiary’s or Affiliate’s actual or demonstrably anticipated research and development, or that result from any work performed by Executive for the Company or any Subsidiary or Affiliate, will be the sole property of the Company or a Subsidiary of Affiliate, as applicable. As provided in Section 2870 of the California Labor Code, the requirement to assign inventions hereunder shall not apply to an invention that Executive develops entirely on his own time without using the Company’s or any Subsidiary’s or Affiliate’s equipment, supplies, facilities, or trade secret information, except for those inventions that either (i) relate, at the time of conception or reduction to practice of the invention to the Company’s or any Subsidiary’s or Affiliate’s business, or actual or demonstrably anticipated research or development of the Company or any Subsidiary or Affiliate; or (ii) result from any work performed by Executive for the Company or any Subsidiary or Affiliate. Executive shall disclose to the Company all Discoveries and Intellectual Property Rights conceived during the Employment Period, or any extension or renewal thereof, which Executive believes meet the criteria set forth in California Labor Code Section 2870, whether or not the property of the Company or any Subsidiary or Affiliate under the terms of the preceding sentence.

(f) All Intellectual Property Rights that are subject to copyright protection and reduced to tangible form in whole or in part by Executive in the course of his employment shall be deemed to be a “work made for hire” as that term is used in 17 U.S.C. 101 et seq ., and Executive shall take all actions reasonably requested by the Company in order for the Company to obtain or register copyrights in such material. Executive hereby assigns to the Company the entire right, title, and interest in and to all Discoveries and all Intellectual Property Rights which are to be the property of the Company or any Subsidiary or Affiliate under Section 4(e) . Upon request of the Company, whether during or following Executive’s employment, Executive shall execute all such assignments, oaths, declarations, and other documents as may be prepared by the Company to effect the purposes of this paragraph. Upon request of the Company from time to time, whether during or following Executive’s employment, Executive shall provide the Company with all information, documentation, assistance, and other acts that the Company reasonably may request to evidence, perfect, enforce, transfer, or defend the Company’s proprietary rights in, to, or based upon Discoveries and/or Intellectual Property Rights which are to be the property of the Company or any Subsidiary or Affiliate under Section 4(e) . Executive shall provide all such information, documentation, assistance, and other acts for no additional consideration other than actual and necessary out-of-pocket expenses that are incurred at the Company’s request. Executive hereby irrevocably designates and appoints the Company as his attorney-in-fact and agent to act for and on his behalf to execute and file any document and to do all other lawfully permitted acts to further the purposes of this paragraph with the same legal force and effect as if executed by Executive.

( g) Executive shall abide by policies related to his employment by the Company applicable to comparable executives as they are promulgated by the Company from time to time.

Section 5. Acknowledgments By Executive .

Section 6. Tax Withholding and Setoff .

Section 7. Definitions .

(b) “ Agent ” means any Person which has received or is entitled to receive a commission from the Company related to the sale or marketing of the Company’s products or services.

(c) “ Cause ” means actions or omissions by Executive: (i) constituting fraud, larceny, embezzlement, conversion or otherwise involving the misappropriation of assets of the Company or any Subsidiary or Affiliate or any other illegal conduct with respect to the Company or any Subsidiary or Affiliate which acts are harmful to, either financially, or to the business reputation of, the Company or any Subsidiary or Affiliate;(ii) constituting gross negligence or intentional misconduct; (iii) resulting in a conviction (or a plea of guilty or no contest) for any felony or any crime of moral turpitude; (iv) constituting habitual alcohol or substance abuse; (v) constituting a material breach of this Agreement which, if curable, is not cured within fifteen (15) days after receipt of written notice thereof; (vi) constituting a material failure by Executive to perform his duties, which nonperformance continues after written notice thereof and a fifteen (15) day chance to cure; (vii) resulting in an unauthorized breach of the CRB’s Code of Conduct; or (viii) constituting a breach of the fiduciary duty owed by Executive to the Company or any Subsidiary or Affiliate which, if curable, is not cured within fifteen (15) days after receipt of written notice thereof.

Section 8. Notices .

Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class mail (postage prepaid and. return receipt requested) or sent by reputable overnight courier service (charges prepaid) to the recipient at the address below indicated:

If to the Company:

Heritage Global Partners, Inc. c/o Counsel RB Capital Inc.

267 Central Avenue

White Plains, NY 10606

Fax: (914) 614-1801

Attention: Jonathan Reich and Ronald Schinik

with a copy to:

1 Toronto St., Suite 700

Toronto, ON M5C 2V6

Facsimile: (416) 866-3061

Attention: Allan Silber and R. Adam Levy

If to Executive:

12625 High Bluff Drive

San Diego, California 92130

Section 9. Section 409A Savings Clause .

(c) Delayed Payments . (i) Notwithstanding any other payment schedule provided herein to the contrary, if, and only if, Executive is deemed on the Termination Date to be a “specified employee” within the meaning of that term under section 409A(a)(2)(B) of the Code, then the terms of this Section 9(c) shall apply as required by section 409A of the Code. Any payment that is considered deferred compensation under section 409A of the Code payable on account of a “separation from service” shall be made on the date which is the earlier of (y) the expiration of the six (6) month period measured from the date of such “separation from service” of Executive or (z) the date of Executive’s death (the “ Delay Period ”) to the extent required under section 409A of the Code. Upon the expiration of the Delay Period, all payments delayed pursuant to the immediately preceding sentence (whether they otherwise would have been payable in a single sum or in installments in the absence of such delay) shall be paid to Executive in a lump sum by the Company, and all remaining payments due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein; and

(ii) To the extent that any benefits to be provided during the Delay Period are considered deferred compensation under section 409A of the Code provided on account of a “separation from service” and such benefits are not otherwise exempt from section 409A of the Code, Executive shall pay the cost of such benefits during the Delay Period, and the Company shall reimburse Executive, to the extent that such costs otherwise would have been paid by the Company or to the extent that such benefits otherwise would have been provided by the Company at no cost to Executive, the Company’s share of the cost of such benefits upon expiration of the Delay Period, and any remaining benefits shall be reimbursed or provided by the Company in accordance with the procedures specified herein.

(d) Separation from Service . For purposes of this Agreement, the phrase termination of employment or any similar term or phrase shall mean Executive’ s “Separation from Service” as defined by the default provisions of Treas. Reg. § 1.409A-1(h).

(e) Series of Payments . For purposes of the application of Treas. Reg. § 1.409A-1(b)(4) (or any successor provision), each payment in a series of payments to Executive will be deemed a separate payment.

Section 10. General Provisions .

preempt, the obligations contained in Sections 7.1 and 7.2 of that certain Share Purchase Agreement by and among Company, Kirk and Ross Dove, as Sellers, and CRB.

(g) Amendment and Waiver . The provisions of this Agreement may be amended and/or waived only with the prior written consent of the Company and Executive.

(h) I nsurance . The Company, at its discretion, may apply for and procure in its own name and for its own benefit life and/or disability insurance on Executive in any amount or amounts considered available. Executive agrees to cooperate in any medical or other examination, supply any information, and to execute and deliver any applications or other instruments in writing as may be reasonably necessary to obtain and constitute such insurance. Executive hereby represents that he has no reason to believe that his life is not insurable at rates now prevailing for healthy men of his age.

* * * *

IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the Effective Date.

HERITAGE GLOBAL PARTNERS, INC.
By:	/s/ Allan C. Silber
Name:	Allan C. Silber
Its:	Chairman

Kirk Dove

[ Signature Page – Employment Agreement]

IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the Effective Date.

HERITAGE GLOBAL PARTNERS, INC.
By:
Name:	Allan C. Silber
Its:	Chairman

/s/ Kirk Dove

Kirk Dove

[ Signature Page – Employment Agreement]

Exhibit 10.21

June 13, 2013

James Sklar

5142 Whispering Oak Lane

West Bloomfield, Michigan 48322

Re: Offer of Employment by Heritage Global Partners, Inc.

Dear Jim:

I am pleased to confirm our offer to you of full-time employment with Heritage Global Partners, Inc. (“HGP”) in the position of Executive Vice President and General Counsel. You will report to the Managing Partner(s) of HGP and shall perform all duties and shall have all powers which are commonly and reasonably incident to this office as well as all powers that are reasonably delegated to you by the Managing Partner(s) of HGP. You shall devote your best efforts and full business time and attention to the business and affairs of HGP, except for permitted vacation periods in accordance with the HGP’s policy and periods of illness or other incapacity, provided that none of such activities materially interfere with yours duties to HGP or its Affiliates.

Your employment will commence on June 16, 2013 (the “ Effective Date ”). The terms of our offer and the benefits currently provided by HGP are as follows:

1. Salary. Your base salary will be paid at the rate of US$150,000.00 per year paid in accordance with HGP’s normal payroll procedures, and will be subject to annual review. You will also be eligible to receive an annual bonus of up to 200% of your annual base salary, pro-rated for any for any periods that do not begin on January 1or end on December 31, to be determined in the discretion of HGP in January and payable at or about the same time as other similar management bonuses. All payments to you will be subject to legally required withholdings.

2. Benefits. You will be entitled to participate in all employee stock option, health and welfare benefit plans, programs and practices maintained by HGP for its employees generally in accordance with the terms of such plans, programs and practices as in effect from time to time, and in any other insurance, health, retirement or welfare benefit plans, programs and practices and, if applicable, equity compensation plans which HGP generally provides to its executives from time to time.

3. Expenses. HGP shall pay or reimburse you (at HGP’s option) in accordance with HGP’s then-current policies for fully-documented (in accordance with HGP’s policies) reasonable and necessary expenses and other disbursements incurred by you for or on behalf of HGP in the performance of your duties here under, including, without limitation, travel on behalf of or in connection with your services for HGP in a manner customary for HGP’s executives, including food and lodging expenses while you are away from home performing services for HGP.

4. Workplace and Work Schedule. You shall work from a reasonably priced executive office within ten (10) miles from your home to be leased on such terms as are approved by HGP. You are entitled to such holidays as are established by HGP’s U.S. policies and to three (3) weeks of paid vacation per year at your then applicable base salary (prorated for the period of vacation),which may be taken in various periods, subject to HGP’s reasonable needs.

5. Confidential Information; Restrictions. As an employee of HGP, you will have access to certain confidential and proprietary information of HGP and you may, during the course of your employment, develop certain information or inventions that will be the property of HGP. To protect the interests of HGP, you will need to sign HGP’s standard “Employee Conduct Agreement” as a condition of your employment. We wish to impress upon you that we do not want you to, and we hereby direct you not to, bring with you any confidential or proprietary material of any former employer

Page 2

which would violate any other obligations you may have to such former employer(s). During the period that you render services to HGP, you agree to not engage in any employment, bu s iness or activity that is in any way competitive with the business or proposed business of HGP. You will disclose to HGP in writing any other gainful employment, business or activity that you are currently associated with or participate in that competes with HGP. You will not assist any other person or organ iza tion in competing with HGP or in preparing to engage in competition with the business or proposed business of HGP. You represent that your signing of this offer letter, HGP ’ s Confidentiality Agreement and your commencement of employment with HGP will not violate any agreement currently in place between yourself and current or past employers. You further warrant that you have the qualifications previously represented to HGP, including any required licenses or certifications. You also warrant that you will not use or disclose any of your former employer ’ s trade secrets in the course of your employment by HGP.

6. Notwithstanding Section 5 above, your employment will be “at will”; in other words, either you or HGP will have the right to terminate your employment at any time with or without cause. Notwithstanding HGP’s right of termination, HGP agrees that it terminates you for any reason other than for “cause,” HGP will pay you severance equal to six (6) months base salary plus a pro rata portion of any accrued bonus payment as described in Section 1. For the purposes of this Section 6, “cause” means actions or omissions by you: (i) constituting fraud, larceny, embezzlement, conversion or otherwise involving the misappropriation of assets of HGP or any Subsidiary or Affiliate or any other illegal conduct with respect to HGP or any Subsidiary or Affiliate which acts are harmful to, either financially, or to the business reputation of, HGP or any Subsidiary or Affiliate; (ii) constituting gross negligence or intentional misconduct; (iii) resulting in a conviction (or a plea of guilty or no contest) for any felony or any crime of moral turpitude;(iv) constituting habitual alcohol or substance abuse;(v) constituting a material failure by you to perform your duties, which nonperformance continues after written notice thereof and a fifteen (15) day chance to cure;(vi) resulting in an unauthorized breach of HGP’s Code of Conduct; or (vii) constituting a breach of the fiduciary duty owed by you to HGP or any Subsidiary or Affiliate which, if curable, is not cured within fifteen (15) days after receipt of written notice No act or failure to act by you shall be considered “willful” if done or omitted by you in good faith with a reasonable belief that your action or omission was in the best interest of HGP.

7. Company Policies. As a condition of your employment, you will be expected to comply with all of HGP’s policies and procedures, as may be modified from time to time in HGP’s discretion (including our policies protecting other employees against discrimination and sexual harassment). Please refer to the Employee Handbook for details regarding those policies and procedures.

8. In the event of any dispute between HGP and you arising out of your employment or the termination of your employment, we each agree to submit our dispute to binding arbitration in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association in San Diego County, California. This means that there will be no court or jury trial of disputes between us concerning your employment or the termination of your employment to the fullest extent permitted by law. While this agreement to arbitrate is intended to be broad (and covers, for example, claims under state and federal laws prohibiting discrimination on the basis of race, sex, age, disability, family leave, etc.) to the fullest extent permitted by law, it is not applicable to your rights under any Workers’ Compensation Law, which are governed under the special provisions of that law.

Please note that because of HGP regulations adopted in the Immigration Reform and Control Act of 1986, within three (3) business days of starting your new position you will need to present documentation to demonstrate that you are authorized to work in the United States. If you have questions about this requirement, which applies to U.S. citizens and non-U.S. citizens alike, you may contact our personnel office.

For the purposes of this Offer,(a) “Affiliate” means any other Person controlling, controlled by, or under common control with HGP, where “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, by contract, or otherwise; (b) “ Subsidiary ” means any corporation or other entity of which the securities having a majority of the ordinary voting power in electing the board of directors (or similar governing body or manager, as applicable) are, at the time as of which any determination is being made, owned by HGP either directly or indirectly; and (c) “Person” means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

This offer will remain open until June 28th, 2013. If you decide to accept this offer, please sign a copy of this letter in the space indicated and return it to me either electronically, via facsimile or U.S. mail. Your signature will acknowledge that you have read and understood and agreed to the terms and conditions of this offer letter. The terms set forth in this

Page 3

Agreement are intended to supersede all prior agreements, undertakings and representations concerning the subject matter of this Agreement.

We look forward to the opportunity to welcome you to HGP.

Very truly yours,

Heritage Global Partners, Inc.

/ s / Ross Dove

By: Ross Dove

Its: Managing Partner

I have read and understood this offer letter and hereby acknowledge, accept and agree to the terms as set forth above and further acknowledge that no other commitments were made to me as part of my employment except as specifically set forth in this letter.

/ s / James Sklar		Date signed:		6/23/13
James Sklar

Exhibit 10.22

March 6, 2014

Mr. Scott A. West

scottawest@yahoo.com

Re: Offer of Employment

Dear Scott:

I am pleased to confirm our offer to you of full-time employment with Heritage Global Partners, Inc. ("HGP") in the position of Chief Financial Officer. You will report to Kirk Dove, Managing Partner of HGP as well as to the Chairman of the Board of Heritage Global, Inc., HGP's parent company, and shall perform all duties and shall have all powers which are commonly and reasonably incident to this office as well as all powers that are reasonably delegated to you by Kirk Dove and/or the Chairman of the Boad of Heritage Global, Inc. You shall devote your best efforts and full business time and attention to the business and affairs of HGP, its Affiliates and Subsidiaries, except for permitted vacation periods in accordance with the HGP's policy and periods of illness or other incapacity, provided that none of such activities materially interfere with yours duties to HGP, its Affiliates or Subsidiaries.

Your employment will commence on March 11, 2014 (the "Effective Date"). The terms of our offer and the benefits currently provided by HGP are as follows:

1. Salary. Your base salary will be paid at the rate of US$150,000.00 per year paid in accordance with HGP’s normal payroll procedures, and will be subject to annual review. You will also be eligible to receive a year-end bonus of up to $10,000 based on your performance and the financial performance of HGP, to be determined by HGP at its discretion, payable after the year-end and pro-rated to the extent you have worked less than a full year. All payments to you will be subject to legally required withholdings. Subject to compliance with federal and state securities laws, your compensation package also will include, to the extent permitted by the Internal Revenue Code, an incentive stock option grant under the terms of Heritage Global, Inc.’s Stock Option Plan for 50,000 shares of Heritage Global, Inc.’s common stock at a strike price to be determined by the Board of Directors at its next meeting, which grant shall be subject to the terms of Heritage Global, Inc.'s Stock Option Plan (the Plan includes vesting restrictions, restrictions on exercise and restrictions on transfer of shares) and may be conditioned on your execution of a Stock Option Agreement related to your options.

2. Benefits. You will be entitled to participate in all employee stock option, health and welfare benefit plans. programs and practices maintained by HGP for its employees generally in accordance with the terms of such plans, programs and practices as in effect from time to time, and in any other insurance, health, retirement or welfare benefit plans, programs and practices HGP generally provides to its executives from time to time.

3. Expenses. HGP shall pay or reimburse you (at HGP's option) in accordance with HGP’s then-current policies for fully-documented (in accordance with HGP's policies) reasonable and necessary expenses and other disbursements incurred by you for or on behalf of HGP in the performance of your duties hereunder, including, without limitation, travel on behalf of or in connection with your services for HGP, including food and lodging expenses while you are away from home performing services for HGP. HGP will provide you with a cellular phone and a laptop computer for business use, provided such items shall be returned to HGP upon the termination of your employment with HGP for any reason.

4. Workplace and Work Schedule. You shall work from HGP's San Diego, California office. You are entitled to such holidays and vacations as are established by HGP's U.S. policies, such vacation to be taken in various periods subject to HGP's reasonable needs.

Scott A. West
Page 2

5. Confidential Information; Restrictions. As an employee of HGP, you will have access to certain confidential and proprietary information of HGP, its Affliates and Subsidiaries and you may, during the course of your employment, develop certain information or inventions that will be the property of HGP and/or its Affiliates or Subsidiaries. To protect the interests of HGP, its Affiliates and Subsidiaries, you will need to sign HGP's standard "Confidentiality Agreement" as a condition of your employment. We wish to impress upon you that we do not want you to, and we hereby direct you not to, bring with you any confidential or proprietary material of any former employer which would violate any other obligations you may have to such former employer(s). During the period that you render services to HGP and its Affiliates, you agree to not engage in any employment, business or activity that is in any way competitive with the business or proposed business of HGP, its Affiliates or Subsidiaries. You will disclose to HGP in writing any other gainful employment, business or activity that you are currently associated with or participate in that competes with HGP, its Affiliates or Subsidiaries. You will not assist any other perso n or organization in competing with HGP, its Affiliates or Subsidiaries or in preparing to engage in competition with the business or proposed business of HGP, its Affiliates or Subsidiaries. You represent that your signing of this offer letter, H GP's Confidentiality Agreement and your commencement of employment with HGP will not violate any agreement currently in place between yourself and current or past employers. You further warrant that you have the qualifications previously represented to HGP, including any required licenses or certifications. You also warrant that you will not use or disclose any of your former employer's trade secrets i n the course of your employment by HGP.

6. Notwithstanding Section 5 above, your employment will be "at will"; in other words, either you or HGP will have the right to terminate your employment at any time with or without cause.

7. Company Policies. As a condition of your employment you will be expected to comply with all of HGP's policies and procedures, as may be modified from time to time in HGP's discretion (including our policies protecting other employees against discrimination and sexual harassment). Please refer to the Employee Handbook for details regarding those policies and procedures.

8. In the event of any dispute between HGP and you arising out of your employment, or the termination of your employment, we each agree to submit our dispute to binding arbitration in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association in San Diego County, California. This means that there will be no court or jury trial of disputes between us concerning your employment or the termination of your employment to the fullest extent permitted by law. While this agreement to arbitrate is intended to be broad (and covers, for example, claims under state and federal laws prohibiting discrimination on the basis of race, sex, age, disability, family leave, etc.) to the fullest extent permitted by law, it is not applicable to your rights under any Workers' Compensation Law, which are governed under the special provisions of that law.

For the purposes of this Offer, (a) “Affiliate” means any other Person controlling, controlled by, or under common control with HGP, where "control" means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, by contract, or otherwise; (b) " Subsidiary " means any corporation or other entity of which the securities having a majority of the ordinary voting power in electing the board of directors (or similar governing body or manager, as applicable) are, at the time as of which any determination is being made, owned by HGP either directly or indirectly; and (c) "Person" means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or poiltical subdivision thereof.

This offer will remain open until March 11, 2014. If you decide to accept this offer, please sign a copy of this letter in the space indicated and return it to me either electronically, via facsimile or U.S. mail. Your signature will acknowledge that you have read and understood and agreed to the terms and conditions of this offer letter. The terms set forth in this Agreement are intended to supersede all prior agreements, undertakings and representations concerning the subject matter of this Agreement.

Scott A. West
Page 3

We look forward to the opportunity to welcome you to HGP.

Very truly yours,

Heritage Global Partners, Inc.

/s/ James Sklar

James Sklar

EVP and General Counsel

/s/ Scott West		Date signed:		3.6.2014
Scott West

Exhibit 10.23

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “ Agreement” ) is made as of the 31st day of May, 2014 (the “ Effective Date” ) by and between National Loan Exchange, Inc., an Illinois corporation (“ Company ”) and David Ludwig (“ Executive ”).

Executive is skilled in business and financial matters as they relate to the business of purchasing and selling distressed financial assets and facilitating such purchases and sales. The parties hereto believe that it is in their respective interests to enter into an employment agreement whereby, for the consideration specified herein, Executive shall provide the services specified herein. Certain definitions are set forth in Section 7.

The parties hereto agree as follows:

Section 1. Employment .

(a) Employment Period. Company agrees to employ Executive and Executive accepts such employment for the period beginning on the Effective Date and ending on the fourth anniversary of the Effective Date (the “ Employment Period” ). The Employment Period will renew automatically on a year-to-year basis thereafter, unless either party gives notice of non-renewal not less than sixty (60) days prior to an anniversary of the Effective Date. The Employment Period will end on an earlier date if Executive’s employment is terminated in accordance with Section 2 (the date of termination or non-renewal being hereinafter called the “ Termination Date ”).

(b) Position and Duties.

(i) During the Employment Period, Executive shall serve as President of Company and Executive shall report to Ross Dove so long as Ross Dove is still employed or otherwise affiliated with the Company. Should Ross Dove no longer be employed or otherwise affiliated with the Company, then Executive shall report to Ross Dove’s successor provided Executive approves of reporting to such successor, otherwise, should Executive not approve of reporting to such successor, then Executive shall report directly to Allan Silber. Executive shall perform all duties and shall have all duties and powers which are commonly and reasonably incident to his office as determined based upon Executive’s past conduct as President of Company, as well as all powers that are reasonably delegated (given Executive title as stated in this paragraph and past conduct with regard to his role as President of the Company) to Executive by Company’s Board of Directors.

(ii) Executive shall devote substantially all of his business time and attention to the business and affairs of Company given the Executive’s title as stated herein, except for permitted vacation periods in accordance with Company’s policy, periods of illness or other incapacity, and reasonable time spent with respect to civic and charitable activities, provided that none of such activities materially interfere with Executive’s duties to Company or its Affiliates. Executive shall comply will all policies and procedures of Company and its Affiliates, as applicable, including the written code of ethics of Heritage Global, Inc., the corporate parent of Company (“ Heritage ”), as will be delivered to Executive prior to the Effective Date.

(i) During the Employment Period, Company shall pay Executive a base salary at the rate of no less than $400,000 per annum (the “ Base Salary ”) in accordance with the regular payroll practices of Company with respect to executive officers of Company. Company’s Board of Directors shall review the Base Salary annually for potential increases of the Base Salary, but shall in no event reduce it.

(ii) During the Employment Period, Executive will be entitled to participate in all health and welfare benefit plans and practices maintained by Heritage for its employees generally in accordance with the terms of such plans and practices as in effect from time to time, and in any other insurance, health, retirement or welfare benefit plans, programs and practices which Heritage generally provides to its executives from time to time. Executive will be entitled to credit for his years of previous service with Company for purposes of determining Executive’s benefits under Company’s benefit plans.

(iii) During the Employment Period, Executive will be entitled to participate in Heritage’s stock option plan and Company will discuss with Executive the terms and conditions of any grant of stock options and such terms and conditions will be negotiated among Heritage, Company and Executive within a reasonable period after the Effective Date.

( iv) During the Employment Period, Company shall pay the reasonable costs of Executive’s membership in the Sunset Hills Country Club located in Edwardsville, Illinois.

(d) Expenses. Company shall pay or reimburse Executive (at Company’s option) in accordance with Company’s then-current policies for fully-documented (in accordance with the Company’s policies) reasonable and necessary expenses and other disbursements incurred by Executive for or on behalf of Company in the performance of his duties hereunder, including, without limitation, travel on behalf of or in connection with his services for Company in a manner customary for Company’s executives, including food and lodging expenses while Executive is away from home performing services for Company.

(e) Workplace and Work Schedule. Executive’s workplace will be located in Edwardsville, Illinois, or such other office or offices as are approved by Company. Executive is entitled to such holidays as are established by Company’s policies.

(f) Vacation. Executive is entitled to 4 weeks of paid vacation per year of employment at Executive’s then applicable Base Salary (prorated for the period of vacation), which may be taken in various periods, subject to Company’s reasonable needs.

Section 2. Termination of Employment.

(a) Termination Due to Death or Disability of Executive . Company may terminate Executive’s employment during the Employment Period due to his death or Disability. If Executive dies during the Employment Period, the Termination Date will be deemed to be the date of his death.

(b) Termination by Company for Cause. Company may terminate the employment of Executive immediately at any time during the Employment Period for Cause by giving him a Notice of Termination.

(c) Termination without Cause. Both Company and Executive may terminate Executive’s employment at any time during the Employment Period without Cause by giving the other party a Notice of Termination at least thirty (30) days prior to the Termination Date.

(d) Termination by Executive for Good Reason. Executive may terminate his employment during the Employment Period for Good Reason by providing Company a Notice of Termination. For the purposes of this Agreement, a Notice of Termination for Good Reason shall mean a notice by Executive specifying the existence of one or more of the conditions described in Section 7(d) within forty-five (45) days after the initial existence of the condition. Upon receipt of that notice, Company shall have a period of thirty (30) days to remedy the condition or conditions specified in the Notice of Termination for Good Reason. The Notice of Termination for Good Reason must specify a Termination Date of not more than thirty (30) days after the last day of Company’s cure period. If Company remedies the condition within the thirty (30) day period, the Notice of Termination for Good Reason shall become ineffective and Company shall have no obligations under this Agreement as a result of it.

Section 3. Effect of Termination of Employment.

(a) Death or Disability; Termination by Company for Cause; Termination by Employee without Cause . If Executive’s employment is terminated due to death or Disability pursuant to Section 2(a), or for Cause pursuant to Section 2(b) , or by Executive without Cause pursuant to Section 2(c), then neither Executive nor his beneficiary or estate will have any further rights or claims against Company or its Affiliates under this Agreement, except the right to receive:

(ii) any outstanding amounts owed to Executive, if any, pursuant to Section1(d) , which amount shall be paid within ninety (90) after Executive incurred such expense (collectively, the amounts paid under Sections 3(a)(i) and 3(a)(ii) are referred to herein as the “ Accrued Compensation ” ).

(b) Without Cause. If Executive’s employment is terminated by Company without Cause pursuant to Section 2(c), then neither Executive nor his beneficiary or estate shall have any further rights or claims against Company under this Agreement, except the right to receive:

(i) the Accrued Compensation; and

(ii) an amount equal to the amount of the Base Salary, payable in equal monthly installments and subject to Section 9(b), Executive would have received for the period commencing on the Termination Date and ending on the earlier of: (A) the last day of the Employment Period; and (B) the date on which Heritage satisfies in full its obligation to pay Executive any Earn-out Payments, as defined in the Stock Purchase Agreement.

(c) Good Reason. If Executive’s employment is terminated by Executive for Good Reason pursuant to Section 2(d), then neither Executive nor his beneficiary or estate shall have any further rights or claims against Company or its Affiliates, except the right to receive:

A. the Accrued Compensation; and

B. an amount equal to the amount of the Base Salary, payable in equal monthly installments and subject to Section 9(b), Executive would have received for the period commencing on the Termination Date and ending on the later of: (A) the last day of the Employment Period; (B) one year from the Termination Date; and (B) the date on which Heritage satisfies in full its obligation to pay Executive any Earn-out Payments, as defined in the Stock Purchase Agreement.

(d) Release. Executive acknowledges and agrees that the payments provided for in Sections 3(b)(ii) and 3(c)(ii) constitute liquidated damages for any claim of breach of contract under this Agreement as it relates to termination of Executive’s employment during the Employment Period without Cause pursuant to Section 2(c) or with Good Reason pursuant to Section 2(d). Notwithstanding the foregoing, as a condition to receiving the payments set forth in Section 3(b)(ii) or Section 3(c)(ii), Executive shall execute and agree to be bound by an agreement, in form and substance reasonably satisfactory to Company (the “Release”), relating to the waiver and general release of any and all claims arising out of or relating to Executive’s employment and termination of employment. Company will have no obligation to make the payments contemplated under Section 3(b)(ii) or Section 3(c)(ii), as the case may be, if Executive fails to execute such Release or seeks to revoke such Release before it becomes effective. In addition, if Executive violates the terms of Section 4, the continuing obligations of Company to make the payments contemplated under Section 3(b)(ii) or Section 3(c)(ii), as the case may be, shall immediately terminate.

Section 4. Restrictions.

(a) Executive shall at all times, both during the Employment Period and for a period of twenty-four (24) months following the Termination Date (or, with respect to any trade secret, for so long as such trade secret retains its status as such under applicable law), keep strictly confidential and not use or disclose to any third party any trade secret, information, knowledge or data not generally known to the public which Executive may have learned, discovered, developed, conceived, originated, prepared or received prior to, during or as a result of Executive’s employment by Company or any Affiliate with respect to the operations, businesses, affairs, products, services, technology, intellectual properties, Agents, customers, clients, pricing of products or services, policies, procedures, accounts, personnel, concepts, format, style, techniques or software of Company or any Affiliate, including the Intellectual Property Rights (defined below) of Company or its Affiliates (“ Proprietary Information ”). Executive acknowledges that Proprietary Information includes, without limitation, the business or other needs, requirements, preferences or other information relating to Agents and customers of Company or any Affiliate, acquisition targets of Company or any Affiliate and all information or data collected by Company with reference thereto. Executive shall comply with any and all procedures which Company may adopt from time to time to preserve the confidentiality of any trade secret or other confidential and proprietary information. Immediately upon the Termination Date, Executive shall, at the option of Company (i) return to Company all Proprietary Information he has received or obtained, regardless of how recorded, including all copies thereof made by him or any employee, agent or advisor of or to him or (ii) destroy (or cause to be destroyed) all materials incorporating or based on such Proprietary Information. In each case, Executive shall certify in writing that the foregoing has been completed. Company may, in its sole discretion, upon or after the Termination Date, notify Executive’s new employer, clients or other parties that Executive has had access to certain trade secrets or other confidential and proprietary information which Executive is under a continuing obligation not to use or disclose. Notwithstanding the foregoing, Executive may disclose Proprietary Information pursuant to an order of a court or governmental agency, provided that Executive notifies Company and affords it an opportunity to oppose such order, and provided further that Executive limits its disclosure to only such Proprietary Information as is required to be disclosed. Notwithstanding the foregoing, “Proprietary Information” shall not include any information that is or becomes generally available to the public other than as a result of a disclosure by the Executive.

(b) In order to protect Company from unfair competition and to prevent the unauthorized disclosure or use of the Proprietary Information, both during the Employment Period and for a period of twenty-four (24) months following the Termination Date, Executive shall not, within the Restricted Territory (defined below), directly or indirectly engage in or become associated with any Competitive Activity (defined below). Executive will be considered to have become “associated with a Competitive Activity” if he becomes, directly or indirectly, involved as an owner, employee, employer, consultant, principal, officer, director, independent contractor, agent, partner, advisor or in any other capacity, with or without compensation, calling for the rendition of personal services with any Person that is engaged in a Competitive Activity; provided, however, that Executive will not be prohibited from passive ownership of less than five percent (5%) of any publicly traded corporation that is in competition with Company. “Competitive Activity” means (i) engaging in the business of purchasing and selling distressed financial assets, facilitating such purchases and sales or (ii) engaging in any other services being offered or planning to be offered by Company or its Affiliates, on or before the Termination Date. “Restricted Territory” means the United States, Canada and anywhere else in the world that Executive has conducted or promoted the business of Company or its Affiliates prior to the Termination Date. In the alternative, and only if the above territory is deemed by a court of competent jurisdiction to be unreasonable or otherwise invalid or unenforceable, then the Restricted Territory means New York State, California, Illinois, Colorado and any other state or province in which Executive maintained an office or otherwise provided services for Company during the term of this Agreement. Notwithstanding anything in this Agreement to the contrary, in no event shall a restriction set forth in this Section 4(b) remain in effect after the Termination Date if Executive’s employment is terminated by Company without Cause pursuant to Section 2(c) or if Executive’s employment is terminated by Executive for Good Reason pursuant to Section 2(d).

(c) In order to protect Company from unfair competition and to prevent the unauthorized disclosure or use of the Proprietary Information, both during the Employment Period and for a period of twenty-four (24) months following the Termination Date, Executive shall not, directly or indirectly, for his own account or as a partner, joint venturer, employee, agent, or consultant: (i) employ as an employee, engage as an independent contractor or agent or otherwise retain or solicit or seek to so employ, engage, retain or solicit any person who, during any portion of the two (2) years prior to the Termination Date was, directly or indirectly, employed as an employee, engaged as an independent contractor or Agent or otherwise retained by Company or any Affiliates; (ii) induce any Person to leave his or her employment with Company or any Affiliates, terminate an independent contractor or Agent relationship with Company or terminate or reduce any contractual relationship with Company or any Affiliates; or (iii) directly or indirectly induce or influence any Agent, customer, supplier, or other person that has a business relationship with Company or any Affiliates to discontinue or reduce the extent of such relationship.

(d) Both during and after the Employment Period, except as required by applicable law or compelled by legal process, neither Executive nor anyone acting on his behalf will (i) make any derogatory, disparaging or critical statement about Company or its Affiliates, or any of their present or former officers, directors, employees, shareholders or (ii) without the prior written consent of Company, communicate, directly or indirectly, with the press or other media concerning Company or its Affiliates, or the present or former employees or business of Company or its Affiliates (other than incidental references to Company or its Affiliates or their business which are non-specific in nature and included as a part of Executive’s general market observations). Further, Company agrees that, both during and after the Employment Period, except as required by applicable law or compelled by legal process, neither Company nor anyone acting on its behalf will (i) make any derogatory, disparaging or critical statement about Executive or (ii) without the prior written consent of Executive, communicate, directly or indirectly, with the press or other media concerning Executive.

(e) All works of authorship, processes, improvements, formulations, ideas, inventions, designs and discoveries, whether patentable or not and all patents, copyrights, trademarks, trade secrets, and other intangible rights that may be or have been conceived or developed by Executive either alone or with others, during the Employment Period or any extension or renewal thereof, whether or not conceived or developed during working hours, and with respect to which any equipment, supplies, facilities, or trade secret information of Company or any Affiliate was used, or that related to the business of Company or any Affiliate or to Company’s or any Affiliate’s actual or demonstrably anticipated research and development, or that result from any work performed by Executive for Company or any Affiliate (collectively “Intellectual Property Rights”), will be the sole property of Company. Notwithstanding anything herein to the contrary, as provided in the Employee Patent Act, 765 Ill. Comp. Stat. Ann. 1060/2, this Section 4(e) does not apply to an invention for which no equipment, supplies, facility, or trade secret information of Company or any Affiliate was used and which was developed entirely on the Executive's own time, unless (i) the invention relates (A) to the business of Company or any Affiliate, or (B) to Company’s or any Affiliate’s actual or demonstrably anticipated research or development, or (ii) the invention results from any work performed by Executive for Company or any Affiliate.

Property Rights which are to be the property of Company or any Affiliate under Section 4(e). To the extent such Intellectual Property Rights cannot be assigned to Company, Executive hereby grants Company an exclusive, worldwide, royalty free, perpetual, irrevocable and fully sub-licensable license to use and exploit such Intellectual Property Rights, in Company’s sole discretion, in all media now known and hereafter discovered as though Company were owner thereof. Upon request of Company, whether during or following Executive’s employment, Executive shall execute all such assignments, oaths, declarations, and other documents as may be prepared by Company to effect the purposes of this paragraph. Upon request of Company from time to time, whether during or following Executive’s employment, Executive shall provide Company with all information, documentation, assistance, and other acts that Company reasonably may request to evidence, perfect, enforce, transfer, or defend Company’s proprietary rights in, to, or based upon Intellectual Property Rights which are to be the property of Company or any Affiliate under Section 4(e). Executive shall provide all such information, documentation, assistance, and other acts for no additional consideration other than actual and necessary out-of-pocket expenses that are incurred at Company’s request. Executive hereby irrevocably designates and appoints Company as his attorney-in-fact and agent to act for and on his behalf to execute and file any document and to do all other lawfully permitted acts to further the purposes of this paragraph with the same legal force and effect as if executed by Executive.

(g) Executive shall abide by policies related to his employment by Company applicable to comparable executives as they are promulgated by Company from time to time.

(h) Because the breach or attempted or threatened breach of this Section 4 will result in immediate and irreparable injury to Company for which Company will not have an adequate remedy at law, Company shall be entitled, in addition to all other remedies, to a decree of specific performance thereof and to a temporary and permanent injunction enjoining such breach, without the necessity of posting bond or furnishing any similar security. The parties acknowledge that the restrictions set forth in Sections 4(b), (c), and (d) are made in connection with the sale of a business. The parties’ obligations under this Section 4 will survive any termination of Executive’s employment or this Agreement.

Section 5. Acknowledgments By Executive.

Executive understands that the restrictions contained in Section 4 are being entered into in connection with the sale of the outstanding stock of the Company, pursuant to the Stock Purchase Agreement, and may limit the ability of Executive to earn a livelihood in a competing business. Executive nevertheless believes that Executive has received and will receive sufficient consideration and other benefits as an employee and Seller of Company and as otherwise provided hereunder to clearly justify such restrictions which, in any event (given the education, skills and ability of Executive), Executive does not believe would prevent him from earning a livelihood. Executive further acknowledges that this Agreement would not have been entered into and the benefits described in Section 1 and Section 3 would not have been promised in the absence of Executive’s promises under Section 4.

Section 6. Tax Withholding and Set off.

Company may withhold from any compensation or severance payable under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling. Company shall have the right to set off any payments owed to Executive under this Agreement against amounts owed to Company or its Affiliates by Executive; provided, however, that such set off shall be made only if the set off does not cause the imposition of tax or additions to tax pursuant to section 409A(a)(1) of the Code. Notwithstanding anything herein to the contrary, Executive shall be treated as an “employee” for federal and state tax purposes and also for purposes of any other state or federal laws governing unemployment compensation, disability benefits or similar such law.

Section 7. Definitions .

(a) “ Affiliate ” means any other Person controlling, controlled by, or under common control with Company, where “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, by contract, or otherwise.

(b) “ Agent ” means any Person which has received or is entitled to receive a commission from Company related to the sale or marketing of Company’s products or services.

(c) “ Cause ” means actions or omissions by Executive: (i) constituting fraud, larceny, embezzlement, conversion or otherwise involving the misappropriation of assets of Company or any Affiliate or any other illegal conduct with respect to Company or any Affiliate which acts are harmful to, either financially, or to the business reputation of, Company or any Affiliate, in each case involving an amount in excess of $5,000 individually or in the aggregate; (ii) constituting gross negligence or intentional misconduct which damages the Company or any Affiliate, in each case involving an amount in excess of $5,000 individually or in the aggregate;

(iii) resulting in a conviction (or a plea of guilty or no contest) for any felony or any crime of moral turpitude; (iv) constituting habitual alcohol or substance abuse; (v) constituting a material breach of this Agreement which, if curable, is not cured within fifteen (15) days after receipt of written notice thereof; (vi) constituting a material failure by Executive to perform his duties, which nonperformance continues after written notice thereof and a fifteen (15) day chance to cure; (vii) resulting in an unauthorized breach of the Heritage’s Code of Conduct; (viii) constituting a breach of the fiduciary duty owed by Executive to Company or any Affiliate which, if curable, is not cured within fifteen (15) days after receipt of written notice thereof; or (ix) otherwise constituting a material breach of this Agreement or the Stock Purchase Agreement that is not cured within any applicable cure period.

(d) “ Disability ” means that Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of Company. Disability shall be determined by a physician acceptable to both Company and Executive, or, if Company and Executive cannot agree upon a physician within fifteen (15) days after Company claims that Executive is suffering from a Disability, by a physician selected by two (2) physicians, one designated by each of Company and Executive. Executive’s failure to submit to any physical examination by any such physician after such physician has given reasonable notice of time and place of such examination shall be conclusive evidence of Executive’s Disability.

(e) “ Good Reason ” means, during the Employment Period and without Executive’s consent: (i) a material diminution of Executive’s title, position or responsibilities; (ii) a material reduction in the Base Salary; and (iii) any other action or inaction by Company that constitutes a material breach of this Agreement or the Stock Purchase Agreement that is not cured within any applicable cure period.

Section 8. Notices .

If to Company:		National Loan Exchange, Inc. c/o Heritage Global, Inc.
		12625 High Bluff Drive, Suite 211
		San Diego, CA 92130
		Attention: Ross Dove

with a copy to:		1 Toronto St., Suite 700
		Toronto, ON M5C 2V6
		Facsimile: (416) 866-3061
		Attention: Allan Silber and James Sklar

If to Executive:		10 Sunset Hills Professional Center
		Edwardsville, IL 62025

with a copy to:		Byron Carlson Petri & Kalb, LLC
		411 St. Louis Street
		P.O. Box 527
		Edwardsville, IL 62025
		Facsimile: (618) 655-4004
		Attention: Christopher W. Byron

Section 9. Section 409A Savings Clause .

(a) Application of Section 409A. To the extent of any compliance issues or ambiguous terms, this Agreement shall be construed in such a manner so as to comply with the requirements of section 409A of the Code, and the rules set forth in this Section 9 shall apply with respect to any payments that may be subject to section 409A of the Code notwithstanding any other provision of this Agreement.

(b) Timing of Payments. Notwithstanding the applicable provisions of this Agreement regarding the timing of payments, any payment due hereunder which is contingent upon receipt of the Release described in Section 3(e) shall be made, if at all, in accordance with this Section 9(b), and only if Executive has delivered to Company a properly executed Release for which all legally mandated revocation rights of Executive have expired prior to the sixtieth (60th) day following the Termination Date. Any such payment shall be made after receipt of such executed and irrevocable Release within such sixty (60) period, unless otherwise scheduled to be made after such period pursuant to the terms of this Agreement; provided, however, if the sixty (60) day period for such payments begins in one taxable year of Executive and ends in a second taxable year of Executive, any payments otherwise payable within such sixty (60) day period will be made in the second taxable year. Any payments due after such sixty (60) day period shall be payable in accordance with their regularly scheduled payment date. All payments hereunder are subject to any required delay pursuant to Section 9(c), if applicable. If Company does not receive a properly executed Release, for which all rights of revocation have lapsed, prior to the time specified in this Section 9(b), Executive shall forfeit all rights to any payments under Sections 3(c)(ii) and 3(d)(ii) of this Agreement.

(i) Notwithstanding any other payment schedule provided herein to the contrary, if, and only if, Executive is deemed on the Termination Date to be a “specified employee” within the meaning of that term under section 409A(a)(2)(B) of the Code, then the terms of this Section 9(c) shall apply as required by section 409A of the Code. Any payment that is considered deferred compensation under section 409A of the Code payable on account of a “separation from service” shall be made on the date which is the earlier of (y) the expiration of the six (6) month period measured from the date of such “separation from service” of Executive or (z) the date of Executive’s death (the “Delay Period”) to the extent required under section 409A of the Code. Upon the expiration of the Delay Period, all payments delayed pursuant to the immediately preceding sentence (whether they otherwise would have been payable in a single sum or in installments in the absence of such delay) shall be paid to Executive in a lump sum by Company, and all remaining payments due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein; and

(ii) To the extent that any benefits to be provided during the Delay Period are considered deferred compensation under section 409A of the Code provided on account of a “separation from service,” and such benefits are not otherwise exempt from section 409A of the Code, Executive shall pay the cost of such benefits during the Delay Period, and Company shall reimburse Executive, to the extent that such costs otherwise would have been paid by Company or to the extent that such benefits otherwise would have been provided by Company at no cost to Executive, Company’s share of the cost of such benefits upon expiration of the Delay Period, and any remaining benefits shall be reimbursed or provided by Company in accordance with the procedures specified herein.

(d) Separation from Service. For purposes of this Agreement, the phrase termination of employment or any similar term or phrase shall mean Executive’s “Separation from Service” as defined by the default provisions of Treas. Reg. § 1.409A-1(h).

(e) Series of Payments. For purposes of the application of Treas. Reg. §1.409A-1(b)(4) (or any successor provision), each payment in a series of payments to Executive will be deemed a separate payment.

(f) Additional Section 409A Provisions. For purposes of section 409A of the Code, (i) Executive may not, directly or indirectly, designate the calendar year of any payment; (ii) no acceleration of the time and form of payment of any nonqualified deferred compensation to Executive or any portion thereof, shall be permitted; and (iii) to the extent that any right to reimbursement of expenses or payment of any benefit in-kind under this Agreement may constitute nonqualified deferred compensation (within the meaning of section 409A of the Code, (A) any such expense reimbursement shall be made by the Company no later than the last day of the taxable year following the taxable year in which such expense was incurred by Executive, (B) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (C) the amount of expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind

benefits to be provided in any other taxable year; provided, that the foregoing clause shall not be violated with regard to expenses reimbursed under any arrangement covered by section105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect.

(g) No Liability for Damages. While the payments and benefits provided hereunder are intended to be structured in a manner to avoid the implication of any penalty taxes under section 409A of the Code, in no event whatsoever shall the Company or any of its Affiliates be liable for any additional tax, interest, or penalties that may be imposed on Executive as a result of Section 409A of the Code or any damages for failing to comply with section 409A of the Code.

Section 10. General Provisions .

(a) Severability . Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect anyother provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. Notwithstanding the foregoing, if the scope of any provision in Section 4 is found to be too broad to permit enforcement of such provision to its full extent, the parties consent to judicial modification of such provision and enforcement to the maximum extent permitted by law.

(c) Counterparts. This Agreement may be executed in separate counterparts (and the same may be delivered by means of facsimile or PDF file), each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

(d) Successors and Assigns. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive, Company and their respective successors and assigns; provided that the rights and obligations of Executive under this Agreement shall not be assignable.

(e) Choice of Law; Venue . This Agreement will be governed by and construed in accordance with the laws of the State of Illinois, without regard to conflict of laws principles. Exclusive venue for any action arising out of or related to this Agreement will be in state court located in Madison County or the United States District Court for the Southern District of Illinois located in East St. Louis, Illinois, and each party consents to the jurisdiction of such courts and waives any defense based on lack of personal jurisdiction or inconvenient forum.

(g) Amendment and Waiver . The provisions of this Agreement may be amended and/or waived only with the prior written consent of Company and Executive.

(h) Insurance . Company, at its discretion, may apply for and procure in its own name and for its own benefit life and/or disability insurance on Executive in any amount or amounts considered available. Executive agrees to cooperate in any medical or other examination, supply any information, and to execute and deliver any applications or other instruments in writing as may be reasonably necessary to obtain and constitute such insurance. Executive hereby represents that he has no reason to believe that his life is not insurable at rates now prevailing for men of his age and condition.

(i) Independent Legal Advice . Executive acknowledges that he has had the opportunity to seek independent legal and tax advice in his review of this Agreement, and that he has not relied on any statements by Company or its Affiliates, or their legal counsel with regard to the same.

* * * *

IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the Effective Date.

COMPANY:

NATIONAL LOAN N EXCHANGE, INC.

By:		/s/ David Ludwig
Name:		David Ludwig
Title:		President

EXECUTIVE:

/s/ David Ludwig
DAVID LUDWIG

[SIGNATURE PAGE TO LUDWIG EMPLOYMENT AGREEMENT]

Exhibit 10.24

PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND SALE AGREEMENT (“ Agreement ”) is made and entered into as of March 11 , 2016 (the “ Effective Date ”), by and between 737 GERRARD ROAD, LLC, a Delaware limited liability company (“ Seller ”), and INTERNATIONAL AUTO PROCESSING INC., a Georgia Corporation (“ Buyer ”).

Intending to be legally bound, the parties agree as follows:

1. Agreement to Sell and Purchase . Seller hereby agrees to sell and convey to Buyer, and Buyer hereby agrees to purchase and take from Seller, subject to and in accordance with all of the terms and conditions of this Agreement, all those certain parcels of real estate more particularly described on Exhibit A attached hereto (the “ Land ”), together with Seller’s rights, if any, in and to the following: (a) rights, ways and easements appurtenant to the Land (“ Appurtenant Rights ”) and (b) any, buildings, structures and other improvements located thereon (“ Improvements (the Land, the Appurtenant Rights and the Improvements herein collectively the “ Property ”).

2. Purchase Price; Method of Payment . The aggregate purchase price for the Property (the “ Purchase Price ”) shall be the sum of FOUR MILLION ONE HUNDRED THOUSAND DOLLARS ($4,100,000.00). The Purchase Price, after crediting the Earnest Money, and subject to the pro-rations and adjustments hereinafter described, shall be paid by Buyer to Seller at Closing.

3. Earnest Money .

(a) On or before 5:00 PM Eastern Standard Time on the date that is TWO (2) business days after the Effective Date, Buyer shall pay the sum of ONE HUNDRED THOUSAND DOLLARS ($100,000) (the “ Initial Deposit ”) to First American Title Insurance Company (the “ Escrow Agent ”) pursuant to the wiring instructions attached hereto as Exhibit B . The Initial Deposit payment shall, except as otherwise provided herein, be non-refundable and shall be made by wire delivery of funds through the Federal Reserve System to the Escrow Agent. If Buyer shall fail to timely deposit the Initial Deposit, then this Agreement shall terminate automatically, all rights and obligations of the parties under this Agreement shall expire, and this Agreement shall become null and void. Notwithstanding anything to the contrary contained in this Agreement, no such deposit shall be deemed timely, unless actually received by the date and time therefor set forth in this paragraph 3.

(b) Upon the expiration of the Inspection Period (defined below), if this Agreement has not been timely terminated by Buyer pursuant to paragraph 4 hereof, then Buyer shall pay the additional sum of ONE HUNDRED THOUSAND DOLLARS ($100,000) (the “ Subsequent Deposit ”) to Escrow Agent pursuant to the wiring instructions attached hereto as Exhibit B . The Subsequent Deposit payment shall be made by wire delivery of funds through the Federal Reserve System to the Escrow Agent. If Buyer shall fail to timely deposit the Subsequent Deposit, then this Agreement shall terminate automatically, all rights and obligations of the parties under this Agreement shall expire, Seller shall retain the Initial Deposit and this Agreement shall become null and void. Notwithstanding anything to the contrary contained in this Agreement, no such deposit shall be deemed timely, unless actually received by the date and time therefor set forth in this paragraph 3. The Initial Deposit and the Subsequent Deposit shall be referred to hereinafter, collectively, as the “ Earnest Money ”.

(d) In performing any of its duties hereunder, Escrow Agent shall not incur any liability to anyone for damages, losses or expenses, except for gross negligence or willful misconduct, and Escrow Agent shall accordingly, and without limitation, not incur any such liability with respect to: (i) any action taken or omitted in good faith; or (ii) any action taken or omitted in reliance upon any notice or instruction relating to this Agreement, not only as to the due execution and validity and effectiveness of such writing, but also as to the truth and accuracy of any information contained therein. Buyer and Seller shall and hereby do indemnify, defend, and hold harmless Escrow Agent against and in respect of any and all losses, claims, damage, liabilities, and expenses, including reasonable costs of investigation and counsel fees and disbursements, which may be imposed upon Escrow Agent or incurred by Escrow Agent hereunder or in the performance of its duties as Escrow Agent hereunder, including any litigation arising from this Agreement or involving the subject matter hereof. If Escrow Agent is unable to determine the sufficiency or authenticity of any consent or document delivered to it purportedly to satisfy any of the conditions set forth herein or for any other reason, or if Escrow Agent shall not deem itself able to satisfy its obligations hereunder, or if inconsistent demands are made on Escrow Agent, or if any disputes arise as to the application of the funds and documents held by Escrow Agent, Escrow Agent shall be entitled, with no liability for failure to do so: (a) to tender into the registry or custody of any court of competent jurisdiction any funds held by it, together with such legal pleadings or other documents as Escrow Agent may deem appropriate, and thereupon Escrow Agent shall be discharged from all further duties, liabilities and obligations under this Agreement; or (b) to retain such funds until resolution of such dispute or

inconsistent demands. The escrow shall terminate on the date of Closing or the date of termination of this Agreem ent as herein provided.

4. Inspection Period .

(a) Until Closing, and provided Buyer gives Seller at least two (2) business days prior notice, Buyer and its duly authorized representatives shall have access onto the Property for the determination of utility availability, surveying, soil, engineering, environmental quality, and feasibility testing, and other tests, inspections, and investigations reasonably deemed necessary by Buyer, provided, however, that in the event the Property is damaged by Buyer’ s and or its duly authorized agents’ activities on the Property relating to the rights granted under this section, Buyer shall return the Property, as soon as reasonably possible, to the condition existing immediately prior to the occurrence of such damage. Prior to entering the Property, Buyer shall provide to Seller evidence of liability insurance reasonably satisfactory to Seller covering Buyer’s and or its duly authorized agents activities on the Property relating to the rights granted under this section. Buyer shall indemnify, defend and hold Seller harmless from and against any and all claims, liabilities, damages, losses, costs and expenses of any kind or nature whatsoever (including reasonable attorney’s fees and expenses and court costs) suffered, incurred or sustained by Seller as a result of or in connection with Buyer’s and or its duly authorized agents activities on the Property relating to the rights granted under this section. Seller shall use good faith, diligent efforts to provide Buyer, within five (5) business days after the Effective Date, copies of any title policy and title documents, contracts, operating agreements, leases, site plans, surveys, and zoning, architectural, engineering and environmental reports that it has in its possession or control with respect to the Property (collectively, the “ Due Diligence Materials ”). The Due Diligence Materials will be provided on an “as-is” basis without any representation or warranty of any kind or nature whatsoever and are merely provided to Buyer for Buyer’s informational purposes. If Buyer does not purchase the Property, then Buyer shall, within five (5) business days after Buyer’s termination hereof or Buyer’s failure to close hereunder, return all of the Due Diligence Materials to Seller and, upon request by Seller and at Seller’s cost, provide Seller with copies of all title reports, surveys, engineering and environmental reports for the Property that Buyer obtained from parties other than Seller as part of its due diligence investigations of the Property.

(b) The period running from the Effective Date until 5:00 pm EST NINETY (90) days thereafter is hereinafter referred to as the “Inspection Period.” Purchaser shall have the right to terminate this Agreement for any reason (or for no reason) by delivery of written notice of such termination to Seller prior to the expiration of the Inspection Period. In the event Purchaser terminates this Agreement prior to the expiration of the Inspection Period, Purchaser shall receive a full refund of the Earnest Money within two (2) business days thereafter, and this Agreement shall thereafter be of no further force or effect, except as to such provisions as are expressly intended to survive such termination. In the event Purchaser fails to terminate this Agreement prior to the expiration of the Inspection Period, the Earnest Money shall be non- refundable to Purchaser except as otherwise expressly provided herein.

5. Closing . The closing of the purchase and sale of the Property (the “ Closing ”) shall be held by mail with all documents and the Buyer’s funds (including, the Purchase Price) to be delivered in escrow with the Escrow Agent on or before the date that is one hundred twenty (120) days following the Effective Date, or such earlier date as the parties may agree (the “ Closing Date ”).

In connection with the preparation of the documentation for Closing, Seller shall be responsible for preparation of the Seller’s Documents (as hereinafter defined). Buyer shall be responsible for preparation of all documents necessary to perform all of Buyer’s obligations under this Agreement. The physical attendance of either party at the Closing shall not be required.

6. Prorations and Adjustments to Purchase Price . The following prorations and adjustments shall be made between Buyer and Seller at Closing, or thereafter if Buyer and Seller shall agree:

(a) All city, state and county ad valorem taxes, governmental assessments and similar impositions levied or imposed upon or assessed against the Property (collectively, the “ Taxes ”) for the year or other applicable assessment period and/or billing period therefor in which Closing occurs shall be prorated as of the Closing Date.

(b) All, if any, utility charges for the Property (including, without limitation, telephone, water, storm and sanitary sewer, electricity, gas, garbage and waste removal) shall be prorated as of the Closing Date, transfer fees required with respect to any such utility shall be paid by or charged to Buyer, and Seller shall be credited with any deposits transferred to the account of Buyer.

(c) All assessments levied or imposed upon or assessed against the Property pursuant to any declaration, homeowners association, or related document/entity (the “Declaration Assessments”) for the applicable assessment period and/or billing period therefor in which the Closing occurs shall be prorated as of the Closing Date.

(d) Any other items which are customarily prorated in connection with the purchase and sale of properties similar to the Property shall be prorated as of the Closing Date.

In the event that the amount of any item to be prorated is not determinable at the time of Closing, such proration shall be made on the basis of the best available information and the parties shall re-prorate such item promptly upon receipt of the applicable bills therefor and shall make between themselves any equitable adjustment required by reason of any difference between the estimated amount used as a basis for the proration at Closing and the actual amount subject to proration. This obligation shall survive Closing. In the event any prorated item is due and payable at the time of Closing, the same shall be paid at Closing. If any prorated item is not paid at Closing, Buyer shall be responsible for the actual payment thereof, subject to the proration thereof as required by this paragraph. In making the prorations required by this paragraph 6, the economic burdens and benefits of ownership of the Property for the Closing Date shall be allocated to Buyer.

7. Title .

(a) For the purposes of this Agreement, “good and marketable fee simple title” shall mean such title as is insurable by a title insurance company licensed to do business in the State of Georgia, under its standard form of ALTA 2006 owner’s policy of title insurance, at its standard rates, subject only to the Permitted Exceptions (defined herein).

(b) Buyer may during the Inspection Period obtain a commitment for extended coverage owner’s title insurance (herein called the “ Title Commitment ”) and a current survey of the Property (“ Buyer’s Survey ”). Buyer shall have ten (10) days from the receipt of the Title Commitment and Buyer’s Survey in which to give Seller written notice of any objections thereto, provided that any monetary liens or encumbrances on the Property are hereby objected to by Buyer and in no event shall such liens be deemed Permitted Exceptions, regardless of whether Buyer delivers written notice of such objections to Seller. Buyer may reexamine title to the Property up to and including the Closing Date and give Seller written notice of any additional objections appearing of record subsequent to the effective date of the Title Commitment. Any exceptions listed on the Title Commitment (excluding monetary liens or encumbrances) or shown on Buyer’s Survey and not objected to by Buyer, shall be deemed Permitted Exceptions. Seller shall have until the date five (5) days after receipt of Buyer’s initial notice of title objections, in which to review Buyer’s initial notice of title objections and in which to give Buyer written notice of any objections specified therein which Seller does not intend to attempt to satisfy. Seller shall have until the expiration of the Inspection Period to satisfy all valid objections (except for monetary liens which may be satisfied out of Seller’s proceeds at Closing), and, if Seller fails to so satisfy any such objections or notifies Buyer that it does not intend to satisfy any such objections, then, at the option of Buyer, Buyer may (i) terminate this Agreement in which event Seller shall immediately refund the Earnest Money to Buyer, and all rights and obligations of the parties under this Agreement shall expire, and this Agreement shall become null and void; or (ii) waive such satisfaction and performance and elect to consummate the purchase and sale of the Property, in which event all unsatisfied objections shall constitute Permitted Exceptions under this Agreement. The remedies of Buyer as set forth in clauses (i) and (ii) above of this subparagraph (b) shall be Buyer’s sole and exclusive remedies in the event Seller fails to satisfy any such objections or notifies Buyer that it does not intend to satisfy any such objections. “ Permitted Exceptions ” shall include only those exceptions to title which are deemed Permitted Exceptions by the terms of this paragraph, and (i) the lien for Taxes for the current year which are not yet due and payable on the Closing Date; and (ii) municipal, zoning and subdivision laws and ordinances affecting the Property.

8. Proceedings at Closing . On the Closing Date, the Closing shall take place as follows:

(a) Seller shall deliver to Buyer the following documents and instruments, duly executed by or on behalf of Seller: (i) a special or limited warranty deed (the “ Deed ”), conveying the Land, the Appurtenant Rights and the Improvements constituting an interest in real estate in the form attached hereto as Schedule 1 ; (ii) a limited warranty bill of sale for the Personal Property that is not conveyed by the Deed, as-is, where-is and without warranty other than as to claims of Parties claiming under Seller in the form attached hereto as Schedule 2 , (iii) a certificate and affidavit of non-foreign status and completed 1099-S in the form attached hereto as Schedule 3 ; and (iv) evidence reasonably satisfactory to the issuer of Buyer’s policy of title insurance covering the Property that Seller, and the entities and individuals executing the foregoing documents on behalf of Seller, have authority to execute such documents and to consummate the purchase and sale of the Property pursuant to this Agreement (the “ Seller’s Documents ”). Buyer shall be entitled to the benefit of simultaneous issue of a lender’s policy of title insurance to insure Seller’s first priority lien on the Property. For purposes of this Agreement, the term “Personal Property” shall mean any and all personal property of Seller located in or on the Property as of the Closing.

(b) Buyer shall pay the Purchase Price to Seller.

9. Costs of Closing . Seller shall bear and pay Seller’s attorneys’ fees. Buyer shall pay all recording costs (for conveyance of the Property), survey costs, the premiums for any owner’s policy of title insurance issued in favor of Buyer insuring Buyer’s title to the Property, transfer taxes (for conveyance of the Property), and all escrow fees.

10. Disclaimer of Warranties . SELLER DOES NOT, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, AND, OTHER THAN THE WARRANTIES OF TITLE CONTAINED IN THE DEED, AND EXCEPT AS OTHERWISE

SPECIFICALLY SET OUT IN SECTIONS 17, 26 AND 28 HEREOF, SELLER SHALL NOT, BY THE EXECUTION AND DELIVERY OF ANY DOCUMENT OR INSTRUMENT EXECUTED AND DELIVERED IN CONNECTION WITH CLOSING, MAKE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF ANY KIND OR NATURE WHATSOEVER, WITH RESPECT TO THE PROPERTY, AND ALL SUCH WARRANTIES ARE HEREBY DISCLAIMED. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING PROVISION, EXCEPT AS SPECIFICALLY SET OUT IN SECTIONS 17, 26 AND 28 HEREOF, SELLER MAKES, AND SHALL MAKE, NO EXPRESS OR IMPLIED WARRANTY AS TO MATTERS OF TITLE, ZONING, TAX CONSEQUENCES, PHYSICAL OR ENVIRONMENTAL CONDITION (INCLUDING, WITHOUT LIMITATION, LAWS, RULES, REGULATIONS, ORDERS AND REQUIREMENTS PERTAINING TO THE USE, HANDLING, GENERATION, TREATMENT, STORAGE OR DISPOSAL OF ANY TOXIC OR HAZARDOUS WASTE OR TOXIC, HAZARDOUS OR REGULATED SUBSTANCE), VALUATION, GOVERNMENTAL APPROVALS, GOVERNMENTAL REGULATIONS OR ANY OTHER MATTER OR THING RELATING TO OR AFFECTING THE PROPERTY (COLLECTIVELY, THE “ DISCLAIMED MATTERS ” ). BUYER AGREES THAT, WITH RESPECT TO THE PROPERTY, BUYER HAS NOT RELIED UPON AND WILL NOT RELY UPON, EITHER DIRECTLY OR INDIRECTLY, ANY REPRESENTATION OR WARRANTY OF SELLER. BUYER WILL CONDUCT SUCH INSPECTIONS AND INVESTIGATIONS OF THE PROPERTY (INCLUDING, BUT NOT LIMITED TO, THE PHYSICAL AND ENVIRONMENTAL CONDITION THEREOF) AND RELY UPON SAME AND, UPON CLOSING, SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING, BUT NOT LIMITED TO, THE DISCLAIMED MATTERS, MAY NOT HAVE BEEN REVEALED BY BUYER ’ S INSPECTIONS AND INVESTIGATIONS. SUCH INSPECTIONS AND INVESTIGATIONS OF BUYER SHALL BE DEEMED TO INCLUDE AN ENVIRONMENTAL AUDIT OF THE PROPERTY, AN INSPECTION OF THE PHYSICAL COMPONENTS AND GENERAL CONDITION OF ALL PORTIONS OF THE PROPERTY, SUCH STATE OF FACTS AS AN ACCURATE SURVEY AND INSPECTION OF THE PROPERTY WOULD SHOW, PRESENT AND PROPOSED OR PENDING ZONING AND LAND USE ORDINANCES, RESOLUTIONS AND REGULATIONS OF THE CITY, COUNTY AND STATE WHERE THE PROPERTY IS LOCATED, AND THE VALUE AND MARKETABILITY OF THE PROPERTY. SELLER SHALL SELL AND CONVEY TO BUYER, AND BUYER SHALL ACCEPT, THE PROPERTY “ AS IS ” , “ WHERE IS ” , AND WITH ALL FAULTS, AND THERE ARE NO ORAL AGREEMENTS, WARRANTIES OR REPRESENTATIONS, COLLATERAL TO OR AFFECTING THE PROPERTY BY SELLER OR ANY THIRD PARTY. WITHOUT IN ANYWAY LIMITING ANY PROVISION OF THIS PARAGRAPH 10, BUYER SPECIFICALLY ACKNOWLEDGES AND AGREES THAT IT HEREBY WA I VES, RELEASES AND DISCHARGES ANY CLAIM IT HAS, MIGHT HAVE HAD OR MAY HAVE AGAINST SELLER WITH RESPECT TO (I) THE DISCLAIMED MATTERS, (II) THE CONDITION OF THE PROPERTY, EITHER PATENT OR LATENT. THE PAST, PRESENT OR FUTURE CONDITION OR COMPLIANCE OF THE PROPERTY WITH REGARD TO ANY ENVIRONMENTAL PROTECTION, POLLUTION CONTROL OR LAND USE LAWS, RULES, REGULATIONS, ORDERS OR REQUIREMENTS, INCLUDING, WITHOUT LIMITATION, THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF 1980, AND ANY OTHER STATE OF FACTS THAT EXISTS WITH RESPECT TO THE PROPERTY. THE TERMS AND CONDITIONS OF THIS PARAGRAPH 10 SHALL EXPRESSLY SURVIVE THE CONSUMMATION OF THE PURCHASE AND SALE OF THE PROPERTY ON THE CLOSING DATE, THE DELIVERY OF THE DEED AND THE PAYMENT OF THE PURCHASE PRICE, WITHOUT REGARD TO ANY LIMITATIONS UPON SURVIVAL SET FORTH IN THIS AGREEMENT.

11. Possession at Closing . Seller shall surrender possession of all of the Property to Buyer on the Closing Date, subject only to the Permitted Exceptions.

12. Remedies .

(a) If the purchase and sale of the Property contemplated hereby is not consummated in accordance with the terms and provisions of this Agreement due to circumstances or conditions which constitute a default by Buyer under this Agreement and Seller is not in default under this Agreement, then the Earnest Money shall be delivered to and retained by Seller as Seller’s full liquidated damages for such default. For the avoidance of doubt, if the purchase and sale of the Property has not occurred by the Closing Date, Buyer has become and continues to be obligated to close under this Agreement, and Seller is not in default of its obligations under this Agreement, Buyer shall be deemed to be in default of this Agreement.

The parties acknowledge that Seller’s actual damages in the event of a default by Buyer will be difficult to ascertain, and that such liquidated damages represent the parties’ best estimate of such damages. The parties expressly acknowledge that the foregoing liquidated damages are intended not as a penalty, but as full liquidated damages, in the event of a default. Such liquidated damages shall be the sole and exclusive remedy of Seller by reason of a default by Buyer, and Seller hereby waives and releases any right to sue Buyer for specific performance of this Agreement or to prove that Seller’s actual damages exceed the amount which is herein provided to Seller as full liquidated damages; provided, however, that the foregoing liquidated damages shall not apply to any duty, obligation, liability or responsibility which Buyer may have under the indemnification provisions of paragraphs 4 and 17 of this Agreement, as to which Seller shall have all rights and remedies provided for or allowed by law or in equity, including, without limitation, specific performance. Except as specifically set forth in this paragraph 12(a), Buyer shall have no liability to Seller under this Agreement.

(b) If the purchase and sale of the Property contemplated hereby is not consummated in accordance with the terms and provisions of this Agreement due to circumstances or conditions which constitute a default by Seller under this Agreement, and Buyer is not in default under this Agreement, then Buyer, as its sole and exclusive remedies, may exercise the following rights and remedies: (i) Buyer shall have the right to waive the default and proceed to close without an adjustment or abatement to the Purchase Price; (ii) Buyer shall have the right to terminate this Agreement, and receive the return in full of its Earnest Money Deposit (and interest earned thereon), in which event the rights and obligations of the parties under this Agreement shall expire and Seller shall reimburse Buyer for all its documented out-of-pocket expenses incurred in preparation for Closing including but not limited to title insurance premiums, attorneys ’ fees, costs for the Buyer ’ s Survey, costs for environmental consultants, travel expenses and other expense incurred by the Buyer up to an aggregate amount not to exceed Twenty Thousand Dollars ($20,000); or (iii) if, and only if, Seller ’ s only default is willful refusal by Seller ’ s to convey the Property to Buyer as required by this Agreement, then Buyer shall have the right to sue Seller for specific performance of this Agreement. The inability of Seller to convey good and marketable fee simple title to the Property on the Closing Date shall not constitute a default by Seller under this Agreement, unless such inability is caused by a defect in Seller ’ s title to the Property which is not a Permitted Exception under this Agreement, which arises subsequent to the date of Seller ’ s execution of this Agreement, and which arises solely by reason of an affirmative act of Seller. Except as specifically set f ort h in this paragraph 12(b), Seller shall have no liability to Buyer under this Agreement.

13. Risk of Loss; Damage or Destruction .

(a) Between the date of this Agreement and Closing, the risks and obligations of ownership and loss of the Property and the correlative rights against insurance carriers and third parties shall belong to Seller. If any portion of the Property is damaged or destroyed by casualty prior to Closing, Seller shall give Buyer written notice within five (5) days thereof. If any Material Portion (as defined below) of the Property is damaged or destroyed by casualty prior to Closing, Buyer shall have the right, at Buyer’s option, to terminate this Agreement by giving written notice to Seller on or before the Closing, in which event, the Earnest Money shall be paid to Buyer, all rights and obligations of the parties under this Agreement shall expire, and this Agreement shall become null and void. In the event less than a Material Portion of the Property is damaged or destroyed prior to Closing, Buyer shall have no right to terminate this Agreement by reason of such damage or destruction. For purposes of this Agreement, “Material Portion” shall mean damage or destruction or loss by taking for which the cost of repair or value is reasonably estimated by Buyer to exceed $100,000.00.

(b) If any portion of the Property is damaged or destroyed by casualty prior to Closing and the purchase and sale of the Property contemplated by this Agreement is thereafter actually consummated: (i) the Purchase Price shall be reduced by (x) the total of any insurance proceeds actually received by Seller on or before the Closing Date with respect to such casualty (net of costs and expenses of collection and amounts expended by Seller prior to Closing for repair or restoration of the Property) and (y) the portion of any deductible to be paid by Seller under the applicable insurance policy, which remains unpaid at the Closing; and (ii) at Closing, Seller shall assign to Buyer all rights of Seller in and to any insurance proceeds payable thereafter by reason of such casualty.

14. Condemnation .

(a) If a Material Portion of the Property is taken by eminent domain proceedings or if there is the commencement or bona fide threat of the commencement of any such proceedings prior to Closing, Buyer shall have the right, at Buyer’s option, to terminate this Agreement by giving written notice to Seller on or before Closing, in which event the Earnest Money shall be paid to Buyer, all rights and obligations of the parties under this Agreement shall expire, and this Agreement shall become null and void. In the event of a taking of less than a Material Portion of the Property, Buyer shall have no right to terminate this Agreement by reason of such taking.

(b) If all or any part of the Property is taken by eminent domain proceedings prior to Closing and the purchase and sale of the Property contemplated by this Agreement is thereafter actually consummated: (i) the Purchase Price shall be reduced by the total of any awards or other proceeds actually received by Seller on or before the Closing Date with respect to any taking (net of costs and expenses of collection and amounts expended by Seller prior to Closing for repair or restoration of the Property); and (ii) at Closing, Seller shall assign to Buyer all rights of Seller in and to any awards or other proceeds payable thereafter by reason of such taking.

15. Assignment . This Agreement may be assigned, in whole or in part, by Buyer without consent of the Seller to an entity controlled by or under common control with the Buyer, or to a special purpose entity formed by an Officer(s) of the Buyer, as long as Buyer remains liable under this Agreement and provided that (a) Buyer provides the name, address, employer identification number of such assignee(s) or tax identification number no less than fifteen (15) days prior to the Closing; (b) assignee(s) is not and shall not become subject to the limitations or prohibitions under any other U.S. Department of Treasury’s Office of Foreign Assets Control regulation or executive order; and (c) such assignee(s) is and shall remain in compliance, in all material respects, with (i) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto, and (ii) the Uniting And Strengthening America By Providing Appropriate Tools Required To Intercept And Obstruct Terrorism (USA Patriot Act of

2001). This Agreement may not otherwise be assigned or the rights hereunder transferred, either directly or indirectly, without the prior written consent of the Seller, which consent may be granted or denied in Seller ’ s sole discretion.

16. Parties . This Agreement shall be binding upon and enforceable against, and shall inure to the benefit of, Buyer, Seller, and their respective heirs, legal representatives, successors and permitted assigns.

17. Broker and Commission . Each party represents and warrants to the other that it has not dealt with any real estate broker, salesman or finder in connection with this transaction, other than Coldwell Banker Commercial Upchurch Realty, which has acted as the sole agent in this transaction (“Broker”). Seller shall be obligated to pay a fee to Broker upon the Closing, pursuant to a separate written agreement between Seller and Broker, provided, however, that Seller shall have no obligation to pay any portion of such fee if the Closing shall fail to occur for any reason. Buyer agrees to indemnify and hold Seller harmless from and against any and all claims, losses, costs, damages, liabilities or expenses, including, without limitation, reasonable attorneys’ fees, to the extent arising out of the claim to a commission by any party claiming by or through Buyer, other than Broker. Seller agrees to indemnify and hold Buyer harmless from and against any and all claims, losses, costs, damages, liabilities or expenses, including, without limitation, reasonable attorneys’ fees, to the extent arising out of the claim to a commission by any party claiming by or through Seller.

18. Modification . This Agreement supersedes all prior discussions and agreements between and among Seller and Buyer with respect to the purchase and sale of the Property and other matters contained in this Agreement, and this Agreement contains the sole and entire understanding among Seller and Buyer with respect thereto. This Agreement shall not be modified or amended, except by an instrument in writing executed by or on behalf of Seller and Buyer.

19. Applicable Law . This Agreement shall be governed by, construed under, and interpreted and enforced in accordance with the laws of the State of Georgia, without reference to its conflict of law provisions.

20. Counterparts . This Agreement may be executed in several counterparts, and by facsimile signature or an e-mail of a PDF signature, each of which shall be deemed an original, and all of such counterparts together shall constitute one and the same instrument.

21. Time . Time is and shall be of the essence of this Agreement. If any date set forth in this Agreement shall fall on, or any time period set forth in this Agreement shall expire on, a day which is a Saturday, Sunday, federal or state holiday, or other non-business day, such date shall automatically be extended to, and the expiration of such time period shall automatically be extended to, the next day which is not a Saturday, Sunday, federal or state holiday, or other nonbusiness day. Notwithstanding the foregoing, the parties agree that in the event performance of any obligation under this Agreement is impossible as a result of occurrences beyond the reasonable control of the defaulting party, including by way of illustration and not limitation, acts of God, severe weather, war, or terrorism attacks, then time to perform will be extended to as soon as reasonably practicable after the occurrence which prevents performance under this Agreement.

22. Captions . The captions and headings used in this Agreement are for convenience only and do not in any way restrict, modify, or amplify the terms of this Agreement.

23. Exhibits . Each and every Exhibit and Schedule referred to or otherwise mentioned in this Agreement is attached to this Agreement and is and shall be construed to be made a part of this Agreement by such reference or other mention at each point at which such reference or other mention occurs, in the same manner and with the same effect as if each Exhibit were set forth in full and at length every time it is referred to or otherwise mentioned.

24. Notices . Whenever any notice, demand, or request is required or permitted under this Agreement, such notice, demand, or request shall be in writing and shall be delivered by hand, be sent by registered or certified mail, postage prepaid, return receipt requested, or shall be sent by nationally recognized commercial courier for next business day delivery, to the addresses set forth below their respective executions of the parties hereof, or to such other addresses as are specified by written notice given in accordance herewith, or shall be transmitted by facsimile to the number for each party set forth below their respective executions hereof, or to such other numbers as are specified by written notice given in accordance herewith. All notices, demands, or requests delivered by hand shall be deemed given upon the date so delivered; those given by mailing as hereinabove provided shall be deemed given on the date of deposit in the United States Mail; those given by commercial courier as hereinabove provided shall be deemed given on the date of deposit with the commercial courier; and those given by facsimile shall be deemed given on the date of facsimile transmittal. Nonetheless, the time period, if any, in which a response to any notice, demand, or request must be given shall commence to run from the date of receipt of the notice, demand, or request by the addressee thereof. Any notice, demand, or request not received because of changed address or facsimile number of which no notice was given as hereinabove provided or because of refusal to accept delivery shall be deemed received by the party to whom addressed on the date of hand delivery, on the date of facsimile transmittal, on the first

calendar day after deposit with commercial courier, or on the third calendar day following deposit in the United States Mail, as the case may be.

25. Survival . Notwithstanding anything to the contrary set forth in this Agreement, the provisions of paragraphs 6, 10, 17, 25, 26 and 27 of this Agreement shall survive the consummation of the purchase and sale of the Property on the Closing Date, the delivery of the Deed and the payment of the Purchase Price and any termination of this Agreement in accordance with its terms and shall not become null or void.

26. Representations and Warranties . Each party hereby represents and warrants to the other as, of the Effective Date and as of the Closing Date, the following:

(a) Legal Capacity . It has full legal capacity to execute and deliver this Agreement and to perform all of its obligations hereunder.

(b) Power . This Agreement and all other agreements, instruments and documents required to be executed or delivered by it pursuant hereto have been or (if and when executed) will be duly executed and delivered by it, and are or will be legal, valid and binding obligations of it. No governmental consents and permissions are required to be obtained by it for the execution and performance of this Agreement and the other documents to be executed by it hereunder. The consummation of the transactions contemplated herein and the fulfillment of the terms hereof will not result in a breach of any of the terms or provisions of, or constitute a default under, any agreement or document to which it is a party or by which it is bound, or any order, rule or regulation of any court or of any federal or state regulatory body or any administrative agency or any other governmental body having jurisdiction over it.

(c) No proceedings . There is not now pending or, to its knowledge, threatened, any action, suit or proceeding, legal, equitable or otherwise, before any court or governmental agency or body that might adversely affect its ability to perform its obligations hereunder.

27. SELLER LIABILITY . UNDER NO CIRCUMSTANCES SHALL ANY DUTY, OBLIGATION, LIABILITY OR RESPONSIBILITY (COLLECTIVELY, A “SELLER LIABILITY”) OF SELLER ARISING UNDER THIS AGREEMENT OR ANY DOCUMENT OR INSTRUMENT EXECUTED OR DELIVERED IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY EXCEED SELLER’S INTEREST IN THE PROPERTY. FURTHER, ANY PARTY SEEKING TO ENFORCE A SELLER LIABILITY SHALL RELY SOLELY ON AND LOOK TO THE ASSETS OF SELLER AS IF SELLER WERE A CORPORATION ADEQUATELY CAPITALIZED FOR ALL PURPOSES. FURTHER, UNDER NO CIRCUMSTANCES SHALL ANY EMPLOYEE, OFFICER, DIRECTOR, SHAREHOLDER, AGENT, PARTNER OR MEMBER OF SELLER BE (I) LIABLE OR RESPONSIBLE FOR ANY DUTY, OBLIGATION, LIABILITY OR RESPONSIBILITY OF SELLER, OR (II) HAVE ANY OBLIGATION ENFORCEABLE BY OR FOR THE BENEFIT OF ANY PARTY DESCRIBED ABOVE TO MAKE CONTRIBUTIONS OF CAPITAL OR ANY OTHER CONTRIBUTIONS TO SELLER TO PAY OR SATISFY ANY SUCH DUTY, OBLIGATION, LIABILITY OR RESPONSIBILITY. NO RECOURSE SHALL BE SOUGHT, AND NO ACTION SHALL BE TAKEN, AGAINST ANY EMPLOYEE, OFFICER, DIRECTOR, SHAREHOLDER, AGENT, PARTNER OR MEMBER OF SELLER, OR AGAINST ANY OF THE ASSETS OF SELLER OTHER THAN THE PROPERTY OR AGAINST ANY ASSETS OF THE FOREGOING PARTIES, FOR THE PAYMENT OR SATISFACTION OF ANY SUCH DUTY, OBLIGATION, LIABILITY OR RESPONSIBILITY.

28. Miscellaneous .

(a) No failure or delay of any party to exercise any right or power given said party hereunder or to insist upon strict compliance by another party with their obligations hereunder and no custom or practice of the parties at variance with the terms hereof shall constitute a modification hereof or a waiver of any party’s right to demand strict compliance with the terms hereof.

(b) Any pronouns used in this Agreement shall include, when appropriate, either gender or the neuter form and both singular and plural.

(c) Each party hereto warrants and represents that such party has full and complete authority to enter into this Agreement, and each person executing this Agreement on behalf of a party warrants and represents that they have been fully authorized to execute this Agreement on behalf of such party and that such party is bound by the signature of such representative.

(d) Each party hereto warrants and represents that each party has been afforded the opportunity to be represented by counsel of its choice in connection with the execution of this Agreement and has had ample opportunity to read, review, and understand the provisions of this Agreement.

(e) No provision of this Agreement shall be construed against or interpreted to the disadvantage of any party by any court or other governmental or judicial authority by reason of such party ’ s having or being deemed to have prepared or imposed such provision.

(f) This Agreement is not and shall not be deemed or considered to convey or be an interest in or lien against the Property.

(g) All documents, certificates, insurance policies, and other items required under this Agreement to be executed by or delivered to Seller shall be reasonably satisfactory to Seller in form, scope, and substance.

(h) In no event shall this Agreement or any memorandum hereof be recorded, and any such recordation or attempted recordation shall constitute a breach of this Agreement by the party responsible for such recordation or attempted recordation.

(i) This Agreement, including the exhibits and schedules hereto, contains the entire agreement between the parties hereto pertaining to the subject matter hereof and fully supersedes all prior written or oral agreements and understandings between the parties pertaining to such subject matter.

29. Buyer’s Additional Representations and Warranties . (a) Buyer is not and shall not become subject to the limitations or prohibitions under any other U.S. Department of Treasury’s Office of Foreign Assets Control regulation or executive order; and (b) Buyer is and shall remain in compliance, in all material respects, with (i) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto, and (ii) the Uniting And Strengthening America By Providing Appropriate Tools Required To Intercept And Obstruct Terrorism (USA Patriot Act of 2001).

[SIGNATURE PAGES FOLLOW]

The parties hereto have caused this Agreement to be executed and delivered as of the Effective Date.

BUYER:

INTERNATIONAL AUTO PROCESSING INC., a Georgia Corporation

By:	/s/ Frederick W. Newton
Name:	Frederick W. Newton
Title:	Chairman

Date Executed:		3/11/16

Initial address for notices:

1 Joe Frank Harris Blvd.
Brunswick GA. 31523

With a copy to:

Maynard, Cooper & Gale, P.C.
655 Gallatin Street SW
Huntsville, AL. 35801
Attention: Daniel M. Wilson
Telephone No.: 256 512 0102
Fax No.: 256 512 0119

[Signatures continued on next page]

[Signatures continued from previous page]


SELLER:

737 GERRARD ROAD, LLC a Delaware limited liability company

By:	/s/ James Sklar
Name:	James Sklar
Title:	Authorized Party

Date Executed:		3/11/16

Initial address for notices:

Heritage Global Inc. 30665 Northwestern Hwy., Suite 200 Farmington Hills, MI 48334 Attention: James Sklar, Executive Vice President, General Counsel and Secretary Telephone No.: (248) 906-8650

With a copy to:

Bass Berry Sims PLC 150 Third Avenue South, Suite 2800 Nashville, Tennessee 37201 Attention: Curtis Capeling Telephone No.: (615) 742-6292 Facsimile No.: (615) 742-2898

[Signatures continued on next page]

[Signatures continued from previous page]

ESCROW AGENT ACKNOWLEDGMENT

Escrow Agent acknowledges receipt of the Earnest Money, and agrees to hold and disburse the Earnest Money in accordance with the terms and conditions of this Agreement.


ESCROW AGENT:

FIRST AMERICAN TITLE INSURANCE COMPANY

By:
Name:
Title:

Initial address for notices:

414 Union Street, Suite 1205 Nashville, TN 37219 Attention: Susan Felts Telephone No.: (615) 932-6521 Facsimile No.: (714) 481-9257

Signature Page to Purchase and Sale Agreement

S-3

EXHIBIT A

LEGAL DESCRIPTION

All that tract or parcel of land lying and being in the County of Franklin, State of Georgia, adjacent to Gerrard Road (County Road #385) and Interstate 85, containing 59.209 acres, more or less and being shown on ALTA/ACSM Land Title Survey prepared for Wellstone Holdings, LLC by Site Design, Inc. dated January 24, 2003, revised February 28, 2003, and recorded in the Office of the Register of Deeds for Franklin County in Plat Book 27 at Page 29, and having such metes and bounds as appears thereon, incorporated herein by reference.

LESS AND EXCEPT: All that tract or parcel of land lying and being in the 206th District, G.M., Franklin County, Georgia, containing 3.26 acres, more or less and being more particularly described in that certain plat of survey dated July 18, 2002, by Russell Bartlett, Bartlett & Cash Land Surveyors, Inc., and recorded in Plat Book 27 at Page 42 Public Records for Franklin County, Georgia, and having such metes and bounds as appears thereon, incorporated herein by reference.

This being the same property conveyed to 737 Gerrard Road, LLC, a Delaware limited liability company by deed from Real Property Holding - W ellstone, LLC dated as of October 12, 2012, recorded in the Office of the Clerk of the Superior Court of Franklin County Georgia, in Deed Book 1094 at Page 74; and all of Grantor's right, title and interest in and to rights appurtenant thereto, including easement rights

EXHIBIT B

EARNEST MONEY WIRING INSTRUCTIONS


PAYABLE TO:	First American Title Insurance Company National Commercial Services
BANK:	First American Trust-Santa Ana
ADDRESS:	5 First American Way, Santa Ana, CA 91701
ACCOUNT NO:	3019340000
ROUTING NUMBER:	122241255

PLEASE REFERENCE THE FOLLOWING:
PROPERTY:
BORROWER NAME:
FILE NUMBER:

PLEASE USE THE ABOVE INFORMATION WHEN WIRING FUNDS TO F irst American Title Insurance Company National Commercial Services . FUNDS MUST BE WIRED FROM A BANK WITHIN THE UNITED STATES. PLEASE NOTIFY YOUR ESCROW OFFICER AT OR WHEN YOU HAVE TRANSMITTED YOUR WIRE.

IF YOUR FUNDS ARE BEING WIRED FROM A NON-U.S. BANK, ADDITIONAL CHARGES MAY APPLY. PLEASE CONTACT YOUR ESCROW OFFICER/CLOSER FOR INTERNATIONAL WIRING INSTRUCTIONS.

AN ACH TRANSFER CANNOT BE ACCEPTED FOR CLOSING, BECAUSE IT IS NOT THE SAME AS A WIRE AND REQUIRES ADDITIONAL TIME FOR CLEARANCE.

FIRST AMERICAN TRUST CONTACT INFO : Banking Services 1-877-600-9473

A LL WIRES WILL BE RETURNED IF THE FILE NUMBER AND/OR PROPERTY REFERENCE ARE NOT INCLUDED

SCHEDULE 1

DEED

FORM LIMITED WARRANTY DEED

See attached.

[ 3” MARGIN REQUIRED]

Return to:

STATE OF

COUNTY OF

LIMITED WARRANTY DEED

THIS INDENTURE (“Deed”), made as of , 2016 between 737 Gerrard Road, LLC, a Delaware limited liability company (“Grantor”), whose address is c/o Heritage Global, Inc., 30665 Northwestern Highway, Suite 200, Farmington Hills, MI, Attention: James Sklar, Executive Vice President, General Counsel and Secretary and , (“Grantee”),whose address is , (the words “Grantor” and “Grantee” include their respective heirs, successors and assigns).

WITNESSETH that Grantor, for and in consideration of TEN and 00/100ths DOLLARS ($10.00) in hand paid at and before the sealing and delivery of these presents, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, has granted, bargained, sold, aliened, conveyed and confirmed, and by these presents does grant, bargain, sell, alien, convey and confirm unto Grantee the following described real property (the “Property”), to-wit:

All that tract or parcel of land lying and being in the City of Lavonia, Franklin County, Georgia, and being more particularly described on the attached Exhibit “A” .

TO HAVE AND TO HOLD the Property with all and singular the rights, members and appurtenances thereof, to the same being, belonging, or in anywise appertaining, to the only proper use, benefit and behalf of Grantee, forever, in FEE SIMPLE.

SUBJECT however, to the Permitted Exceptions set forth on Exhibit “B” hereto.

AND Grantor will warrant and forever defend the right and title to the Property unto Grantee against the claims of all persons claiming by, through or under Grantor, but not otherwise.

IN WITNESS WHEREOF, Grantor has signed and sealed this Deed as of the day and year first above written.

	GRANTOR:

Signed, sealed and delivered as to
all signatories in the presence of:
	By :

Unofficial Witness		(SEAL)

Notary Public (Affix seal and commission expiration date)

EXHIBIT “ A ” TO LIMITED WARRANTY DEED

LEGAL DESCRIPTION

[Insert Property Legal Description]

Being [the same] [a portion of ] the property that , by Deed dated and recorded at [Instrument # ] [Book , Page ] of the County records granted and conveyed unto , the Grantor herein.

EXHIBIT “B” TO LIMITED WARRANTY DEED

Permitted Exceptions

(a)

Any lien for taxes and assessments for the current year which are not yet due and payable

(b)

Municipal, zoning and subdivision laws and ordinances affecting the Property;

(c)

[Remaining Permitted Exceptions to be Included Once Determined]

SCHEDULE2

BILL OF SALE

This Bill of Sale (this “Bill of Sale”) is given as of , 2016 (the “Effective Date”) by 7 3 7 GERRARD ROAD, LLC (“Seller”) to , a (“Buyer”) in connection with that certain Purchase and Sale Agreement, dated as of (the “Agreement”), by and between Buyer and Seller. Capitalized terms used in this Bill of Sale and not otherwise defined herein, shall have the meaning specified in the Agreement.

For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, pursuant to and on the terms and conditions set forth in the Agreement, Seller does hereby sell, convey, assign, transfer and deliver unto Buyer, and its successors and assigns, all of its right, title and interest in the Personal Property (as defined in the Agreement), free and clear of all Liens.

The representations and warranties of Seller set forth in the Agreement and this Bill of Sale are exclusive and in lieu of all other representations and warranties of Seller of any kind whatsoever, whether written, oral, express or implied, and Seller has not made and shall not be deemed to have made, and SELLER HEREBY DISCLAIMS, ANY REPRESENTATION OR WARRANTY (EXCEPT THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THE AGREEMENT AND THIS BILL OF SALE) AS TO THE TITLE, EXISTENCE, CONDITION, DESIGN, VALUE, OPERATION, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF ANY UNIT, PART OR PORTION OF THE TRANSFERRED ASSETS, THE FREEDOM OF ANY OF THE TRANSFERRED ASSETS (OR ANY PART THEREOF) FROM ANY LATENT OR OTHER DEFECTS (WHETHER OR NOT DISCOVERABLE) OR ANY LIEN, CLAIM OR ENCUMBRANCE, THE COMPLIANCE OF ANY OF THE TRANSFERRED ASSETS (OR ANY PART THEREOF) WITH ANY APPLICABLE LAW OR REGULATIONS OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, WHETHER WRITTEN, ORAL, EXPRESS OR IMPLIED (EXCEPT THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THE AGREEMENT AND THIS BILL OF SALE), WITH RESPECT TO ANY PART OR PORTION OF THE TRANSFERRED ASSETS, OR ANY WARRANTY AGAINST INFRINGEMENT, IT BEING UNDERSTOOD THAT ALL SUCH DISCLAIMED RISKS, AS BETWEEN PNC AND THE PURCHASER, ARE TO BE BORNE BY THE PURCHASER. EXCEPT AS EXPRESSLY PROVIDED IN THE AGREEMENT AND THIS BILL OF SALE, THERE IS NO WARRANTY RELATING TO TITLE, POSSESSION, QUIET ENJOYMENT, OR THE LIKE.

The Personal Property is being conveyed in its present condition “AS IS” “WHERE IS” AND “WITH ALL FAULTS”.

Seller has caused this Bill of Sale to be executed by its duly authorized officer or representative as of the Effective Date.


737 GERRARD ROAD, LLC


By:
Title:

SCHEDULE 3

FIRPTA-1099


STATE OF			AFFIDAVIT OF NONFOREIGN
			STATUS OF TRANSFEROR
COUNTY OF

Section 1445 of the Internal Revenue Code, as part of the “Foreign Investment in Real Property Tax Act,” provides that a transferee (buyer) of a U. S. real property interest must withhold tax if the transferor (seller) is a foreign person. A brief summary of major provisions of the law is printed on the reverse side of this form. To inform the transferee (buyer) that withholding of tax is not required upon disposition of a U. S. real property interest the undersigned transferor (seller), being duly sworn, hereby certifies the following:

The description of United States real property to be transferred is set forth on Exhibit A attached hereto.

The names, addresses and United States taxpayer identification numbers of all the transferors (owners) of the above real property (“Property”) are as follows:

Name	Address	Taxpayer ID Number

There is no other person or entity who has an ownership interest in the Property; and

3. None of the undersigned transferors is a nonresident alien or a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations).

The undersigned understand(s) that this certification may be disclosed to the Internal Revenue Service by the Transferee and any false statements made here could be punished by fine, imprisonment, or both.

Under penalties of perjury, the undersigned declare(s) that the under-signed have (has) examined this certification and to the best of the undersigned’s knowledge and belief, it is true, correct and complete, and that the undersigned have (has) authority to sign.


[OWNER SIGNATURE PAGE]


By:
		President


SWORN TO and subscribed before me this day of , 2016.


Notary Public
My commission expires:

The Foreign Investment in

Real Property Tax Act (FIRPTA)

Effective January 1, 1985, the Internal Revenue Code requires that, unless an exemption applies, every buyer of real estate in the United States deduct and withhold from the seller's proceeds an amount equal to ten percent of the amount realized on the disposition (the gross sales price) if the seller is a “foreign person” as defined in the Internal Revenue Code. The primary exemptions are:

If the seller furnished to the buyer an affidavit by the seller stating under penalty of perjury the seller's United States taxpayer identification number and that the seller is not a foreign person. (A foreign person is any foreign citizen or entity other than a United States resident alien).

If the property is acquired by the buyer for use as his or her residence and the amount paid for the property is $300,000 or less.

If the Buyer fails to deduct and withhold the correct amount of tax on a nonexempt sale, the buyer will be liable to the Internal Revenue Service for that tax.

If the initial cash consideration paid by the buyer prior to the transfer of title is not enough to cover the withholding liability, the buyer will be liable for the higher amount unless the buyer and seller obtain a qualifying statement from the I.R.S. before transfer of title.

Even though the seller provides the buyer with a nonforeign affidavit, the buyer must still withhold the tax if the buyer has actual knowledge that the affidavit is false or if the buyer receives notice from the buyer's agent or seller's agent that the affidavit is false.

EXHIBIT A

That certain tract or parcel of land located in and being more particularly described as follows:

[Insert Property Legal Description]

Exhibit 21

List of Subsidiaries of the Registrant

Name		State of Incorporation
C2 Communications Technologies, Inc.		Delaware
C2 Investments Inc.		Delaware
I-Link Systems Inc.		Utah
Mibridge Inc.		Utah
Heritage Global LLC		Delaware
Equity Partners HG LLC		Delaware
Heritage Global Partners, Inc.		California
Heritage Global Partners UK Limited		N/A
Heritage Global Partners Germany GmbH		N/A
Heritage Global Partners Spain, S.L.		N/A
National Loan Exchange, Inc.		Illinois
Moving Images NY LLC		Delaware
Greystone Post Production Equipment		Delaware
FP Acquisitions LLC		Delaware
737 Gerrard Rd, LLC		Delaware
1701 Vine, LLC		Missouri

Exhibit 31.1

CERTIFICATION

I, Ross Dove, certify that:

I have reviewed this Annual Report on Form 10-K of Heritage Global Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3 .

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a )

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 17, 2016

By:		/s/ Ross Dove
		Ross Dove
		Chief Executive Officer
		(Principal Executive Officer)

Exhibit 31.2

CERTIFICATION

I, Scott A. West, certify that:

I have reviewed this Annual Report on Form 10-K of Heritage Global Inc.;

3 .

(a)

(b)

(c)

(d)

(a )

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 17, 2016

By:		/s/ Scott A. West
		Scott A. West
		Chief Financial Officer
		(Principal Financial Officer)

Exhibit 32.1

HERITAGE GLOBAL INC.

OFFICER’S CERTIFICATION

PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. 1350)

The undersigned Ross Dove, duly appointed and incumbent officer of Heritage Global Inc., a Florida corporation (the “Corporation”), in connection with the Corporation’s Annual Report on Form 10-K for the annual period ended December 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), does hereby certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended, that, to the best of his knowledge:

The Report is in full compliance with reporting requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

March 17, 2016

		/s/ Ross Dove
		Ross Dove
		Chief Executive Officer
		(Principal Executive Officer)

Exhibit 32.2

HERITAGE GLOBAL INC.

OFFICER’S CERTIFICATION

PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. 1350)

The undersigned Scott A. West, duly appointed and incumbent officer of Heritage Global Inc., a Florida corporation (the “Corporation”), in connection with the Corporation’s Annual Report on Form 10-K for the annual period ended December 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), does hereby certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended, that, to the best of his knowledge:

The Report is in full compliance with reporting requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

March 17, 2016

		/s/ Scott A. West
		Scott A. West
		Chief Financial Officer
		(Principal Financial Officer)