MEMORANDUM

By Email steve-henchel@intimateattitudes.com

Date: April 4, 2003

To: Steve Henchel cc: Eric Telford

Sheila Henchel

From: Brian Alexander, CA

Re: Telford Group

Proposed Acquisition of Intimate Attitudes (“IA”)

Eric Telford and I have examined the proposed scenario forwarded last week in respect of an acquisition by Telford Group (“TG”) of the business operations of IA.

We believe that there are two fundamental concerns with proceeding in this manner:

1. The substantial risk inherited by TG relative to the proposed initial payment(s), and assurance of recovery of same through ongoing business operations.

2. The immediate association of TG to existing liabilities of IA. The type of arrangement you are proposing is not necessarily straightforward, and can be time-consuming and expensive.

Accordingly, the only method of proceeding with an arrangement that will be acceptable to TG will be as previously outlined, i.e. consideration paid by TG will be primarily linked to future, not past, financial activities of the IA business. Notwithstanding that, Eric recognizes that there are a number of personal obligations relative to family and friends’ prior financial assistance, and will endeavour to develop an agreement that will help in this regard.

The proposed basic structure of an agreement will include the following:

1. Employment of Sheila and Steve Henchel at a remuneration rate of 15% of net sales (as previously defined):

(a) 10% to be paid through regular payroll periods.

(b) 5% to be applied to whatever arrangements are made by the Henchels relative to debts owed personally or by IA.

(TG will guarantee that a minimum $6,000 per month will be paid under (b) for an initial period of 6 months.)

2. TG will employ ___________ at a wage rate of $__________, to assist with warehousing in Edmonton.

3. TG will pay $12,984 to cover outstanding payroll remittances and GST of IA.

4. TG will legally be enabled to acquire the business name “IA” for $5,000.

5. TG will acquire all existing saleable inventory of IA, subject to approval of value by TG, at IA’s cost.

6. TG will successfully arrange to acquire the software, etc. rights and an ongoing service agreement with Zector.

Each of 1, 2, 3, 4, 5 and 6 are mutually inclusive. i.e. all have to occur or TG is not obliged to proceed with any.

Points 3,4 and 5 will require that you consult with a corporate bankruptcy trustee. TG cannot proceed with an arrangement that may expose it to unanticipated liabilities, and is not in a legal position to take on the responsibility of dealing with the issues that will arise as a result of IA’s effective insolvency.

Eric has also advised of the following:

- At the end of an initial six-month period, he will be prepared to re-examine the remuneration structure with potential for acceleration of payments under 1(b) above, but only in reference to the status of operating results of the ongoing IA business.

- He will be prepared to discuss matters with Ultra Love, not in respect of making an initial payment (although the bankruptcy process might yield some monies?), but rather in relation to the potential for their participation in the earnings stream from 1(b) above.

- He will require that you prepare a “transition” plan.

Please advise either Eric or myself of your comments.

Thank you.