<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use by the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
FUTURELINK CORP.
--------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 2
FUTURELINK CORP.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 27, 2000
TO OUR STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of
FutureLink Corp., a Delaware corporation ("FutureLink"), will be held at the
Westin South Coast Plaza, 686 Anton Boulevard, Costa Mesa, California 92626, on
Tuesday, June 27, 2000, at 11:00 a.m., Pacific Daylight Time, for the following
purposes:
1. To elect eight Directors;
2. To approve the Second Amended and Restated Stock Option Plan and the
First and Second Amendments to the Second Amended and Restated Stock Option
Plan;
3. To ratify and approve FutureLink's independent public accountants for
fiscal 2000; and
4. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on May 26, 2000 as
the record date for the determination of the holders of common stock entitled to
notice of and to vote at the Annual Meeting.
A list of stockholders entitled to vote at the Annual Meeting will be open
for examination by any stockholder for any purpose germane to the Meeting during
ordinary business hours for a period of ten days prior to the Annual Meeting at
the offices of FutureLink Corp., 6 Morgan, Suite 100, Irvine, California 92618,
and will also be available for examination at the Annual Meeting until its
adjournment.
YOUR ATTENTION IS DIRECTED TO THE ACCOMPANYING PROXY STATEMENT. WE INVITE
ALL STOCKHOLDERS TO ATTEND THE ANNUAL MEETING. TO ENSURE THAT YOUR SHARES WILL
BE VOTED AT THE ANNUAL MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED
PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU ATTEND THE ANNUAL
MEETING, YOU MAY VOTE YOUR SHARES IN PERSON EVEN IF YOU HAVE PREVIOUSLY
SUBMITTED A PROXY.
By Order of the Board of Directors
Philip R. Ladouceur
Chairman and Chief Executive Officer
Irvine, California
June 12, 2000
PLEASE VOTE
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING,
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND PROMPTLY RETURN IT IN THE
ENVELOPE PROVIDED.
<PAGE> 3
PROXY STATEMENT
------------------------
FUTURELINK CORP.
6 MORGAN, SUITE 100
IRVINE, CALIFORNIA 92618
------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 27, 2000
------------------------
SOLICITATION AND REVOCATION OF PROXIES
The enclosed proxy is solicited by the board of directors of FutureLink
Corp., a Delaware Corporation ("FutureLink"), for use at its 2000 Annual Meeting
of Stockholders (the "Annual Meeting") to be held on Tuesday June 27, 2000 at
11:00 A.M., Pacific Daylight Time, at the Westin South Coast Plaza, 686 Anton
Boulevard, Costa Mesa, California 92626, and at any and all adjournments or
postponements thereof, for the purposes stated in the accompanying Notice of
Annual Meeting of Stockholders.
In addition to solicitation by mail, officers, directors and regular
employees of FutureLink (who will receive no additional compensation for their
services), may solicit proxies by mail, telegraph, facsimile transmission,
electronic mail or personal calls. All costs of solicitation, which are expected
to be approximately $62,000, will be borne by FutureLink. FutureLink has
requested brokers and nominees who hold stock in their name to furnish this
proxy material to their customers and FutureLink will reimburse such brokers and
nominees for their related out-of-pocket expenses. This Proxy Statement of
FutureLink is being mailed on or about June 13, 2000 to each stockholder of
record as of the close of business on May 26, 2000, the "Record Date".
VOTING AT THE MEETING
FutureLink had 61,496,355 shares of common stock, par value $0.0001 per
share, outstanding as of the Record Date. Holders of record of shares of common
stock at the Record Date will be entitled to notice of and to vote at the Annual
Meeting and will be entitled to one vote for each such share so held of record.
The holders of one-third of the issued and outstanding stock, present in person
or by proxy at the Annual Meeting, constitute a quorum for the transaction of
business. When a quorum is present, the vote of a majority of the stock present
in person or by proxy shall decide any question.
Any stockholder has the power to revoke his or her proxy at any time before
it is voted. A proxy may be revoked by: (i) delivering written notice of
revocation to FutureLink at its principal office, Attention: Secretary, (ii) by
a subsequent proxy executed by the person executing the prior proxy and
presented at the meeting, or (iii) by attendance at the Annual Meeting and
voting in person by the person executing the proxy.
If not revoked, the proxy will be voted at the Annual Meeting in accordance
with the instructions indicated on the proxy card by the stockholder or, if no
instructions are indicated, will be voted FOR the slate of directors nominated
herein, FOR the approval of the adoption of the First Amendment and Second
Amendments to our Second Amended and Restated Stock Option Plan, FOR the
ratification and approval of Ernst & Young LLP as FutureLink's independent
public accountants, and, as to any other matter that may properly be brought
before the Annual Meeting, in accordance with the judgment of the proxy holders.
Abstentions and broker non-votes are included in the determination of the
number of shares present and voting for the purpose of determining whether a
quorum is present, but tabulated separately. In determining whether a proposal
has been approved, abstentions are counted as votes against a proposal. Broker
non-votes are not counted as votes for or against a proposal or as votes present
and voting on a proposal.
<PAGE> 4
PROPOSAL 1
NOMINATION AND ELECTION OF DIRECTORS
The persons named in the enclosed proxy will vote to elect the eight
nominees described below unless instructed otherwise in the proxy. The persons
receiving the greatest number of votes, up to the number of Directors to be
elected, shall be the persons elected as the Directors. Holders of common stock
are not allowed to cumulate their votes in the election of Directors. Shares
represented by proxies which are marked "withhold authority" will have the same
effect as a vote against the nominees. Except as otherwise provided by the
Bylaws of FutureLink, the Certificate of Incorporation of FutureLink or the
Delaware General Corporation Law, the Directors are to hold office until the
2001 Annual Meeting of Stockholders and until their respective successors are
duly qualified and elected.
The names and certain information concerning the persons nominated to be
elected as Directors by the Board of Directors at the Annual Meeting are set
forth below. THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
THE ELECTION OF EACH NOMINEE NAMED BELOW. Shares represented by the proxies will
be voted FOR the election to the Board of Directors of the persons named below
unless authority to vote for the nominees has been withheld in the proxy.
Although the persons nominated have consented to serve as Directors if elected,
and the Board of Directors has no reason to believe that the nominees will be
unable to serve as Directors, if any nominee withdraws or otherwise becomes
unavailable to serve, the persons named as proxies will vote for any substitute
nominee designated by the Board of Directors.
The following information regarding FutureLink's Directors is relevant to
your consideration of the nominees proposed by your Board of Directors:
DIRECTORS
There is one class of Directors of FutureLink and they serve one year
terms. The nominees, who are all current Directors of FutureLink, are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Philip R. Ladouceur...... 59 Chairman, Chief Executive Officer and Director
Glen C. Holmes........... 43 President, Chief Operating Officer and Director
Raghu N. Kilambi......... 34 Executive Vice President, Chief Financial Officer and Director
F. Bryson Farrill........ 71 Director
Michael S. Falk.......... 38 Director
Timothy P. Flynn......... 49 Director
Gerald A. Poch........... 53 Director
James P. McNiel.......... 37 Director
</TABLE>
MR. LADOUCEUR has served as FutureLink's Chairman since June 1999, Chief
Executive Officer since August 1999 and as a Director since August 1998. From
October 1996 to April 1998, Mr. Ladouceur was President, Chairman and Chief
Executive Officer of MetroNet Communications Corp. and served as MetroNet's
Executive Chairman until its merger with AT&T Canada in June, 1999. From
February 1995 to October 1996, Mr. Ladouceur was Executive Vice President of
Operations at Bell Canada International Inc. From October 1992 to February 1995,
Mr. Ladouceur was the founding President and Chief Executive Officer of ISM
Information Systems Management (Alberta) Ltd., a computer and network management
outsourcing company which IBM Global Services acquired. Mr. Ladouceur currently
serves as a director of AT&T Canada, Cell-Loc Inc., Plan B Communications and
Intellispan, Inc.
MR. HOLMES was elected to FutureLink's Board of Directors and has served as
FutureLink's President and Chief Operating Officer since September 1999. Mr.
Holmes is the founder of Micro Visions, a leading server-based computing
integrator, and served as its Chairman and President from 1987 until
FutureLink's acquisition of Micro Visions in October 1999.
2
<PAGE> 5
MR. KILAMBI has served as FutureLink's Executive Vice President since
October 1999, FutureLink's Chief Financial Officer since March 1998 and as a
Director since June 1998. From November 1995 to March 1998, Mr. Kilambi invested
in and arranged equity financing for high technology companies as President of
New Economy Capital Inc., a merchant banking firm. Mr. Kilambi is a Chartered
Accountant (Canada).
MR. FARRILL has been a Director since January 1998. Since April 1989, Mr.
Farrill has been a consultant and advisor to various companies unrelated to
FutureLink. Since July 1997, Mr. Farrill has held the position of President and
Chairman of Solar Pharmaceuticals Ltd. Mr. Farrill is currently a director of
Power Technology, Inc., Devine Entertainment Inc. and Home Life Inc.
MR. FALK has been a Director since May 1999. Mr. Falk is the co-founder of
Commonwealth Associates, a New York-based merchant bank and investment bank
established in May 1988 that specializes in early stage investments in Internet,
technology and telecommunications businesses. Mr. Falk has served as
Commonwealth Associate's Chairman and Chief Executive Officer since 1995. Mr.
Falk currently serves as a director of Intellispan Inc.
MR. FLYNN has been a Director since May 1999. Since August 1996, Mr. Flynn
has been a principal at Flynn Corporation. Previously, Mr. Flynn co-founded and
served as a director of Valujet Airlines from June 1993 until November 1996. Mr.
Flynn currently serves on the board of directors of Mpower Communications Corp.
MR. POCH has been a Director since October 1999. Since August 1998, Mr.
Poch has been a Manager Director/Portfolio Manager of Pequot Capital Management,
Inc. From August 1996 to August 1998, Mr. Poch acted as Chairman and President
of GE Capital Information Technology Solutions. From September 1992 to August
1998, Mr. Poch was President of AmeriData Technologies, Inc. Mr. Poch is
co-chairman and director of MessageMedia, Inc. and serves as a director of Brite
Smile, Inc. Channel Health, Inc., Elastic Networks, NewRiver Communications,
Lucent Digital Radio, Everest Broadband Networks, Online Retail Partners,
WatchMark and HomeSpace.com.
MR. MCNIEL has been a Director since October 1999. Since July 1999, Mr.
McNiel has been a Senior Vice President at Pequot Capital Management. From May
1997 until joining Pequot, Mr. McNeil was President of McNeil Group Ltd., a
technology consulting and investment firm. From March 1990 until May 1997, Mr.
McNeil served at Cheyenne Software, initially as Vice President of Business
Development, then as Executive Vice President of Business Development and
ultimately as Executive Vice President of Corporate Development. Mr. McNeil is a
member of the board of directors for Netegrity, Inc. and Asia Online.
ATTENDANCE AT MEETINGS AND BOARD COMMITTEES
During the fiscal year ended December 31, 1999, the Board of Directors held
a total of thirteen meetings. Each member of the Board of Directors attended
more than 75% of the meetings of the Board and of the committees on which he
served during 1999.
The standing committees of the Board of Directors are the audit committee,
the compensation committee and the executive committee. The Board of Directors
has no nominating committee or committee performing a similar function.
Audit Committee
The Audit Committee, which met on five occasions in 1999, consists of
non-employee Directors Timothy P. Flynn, who serves as Chairman, and Gerald A.
Poch. The audit committee has the authority to review FutureLink's financial
reporting and financial statements and to sign quarterly and annual financial
statements on behalf of the Board of Directors. The audit committee acts on and
reports to the Board of Directors with respect to various auditing and
accounting matters, including the engagement of FutureLink's auditors, the scope
of the annual audits, the reasonableness of fees to be paid to the auditors, the
performance of FutureLink's independent auditors and FutureLink's accounting
practices.
3
<PAGE> 6
Compensation Committee
The Compensation Committee, which met on ten occasions in 1999, consists of
non-employee Directors F. Bryson Farrill, who serves as Chairman, James P.
McNiel and Timothy P. Flynn. The Compensation Committee has the authority to
review and approve executive compensation, make recommendations for the
appointment of executive officers and to act as the plan administrator of
FutureLink's Second Amended and Restated Stock Option Plan.
Executive Committee
The Executive Committee, which met on five occasions in 1999, consists of
Gerald A. Poch, who serves as Chairman, Philip R. Ladouceur, Glen C. Holmes and
Michael S. Falk. The Executive Committee has the authority to approve:
- FutureLink's daily operational matters,
- FutureLink's corporate policies and strategy, and
- FutureLink's contractual commitments, payments of funds or issuances of
securities up to a level of $1.0 million.
APPOINTMENT OF DIRECTORS
In an Agency Agreement that FutureLink entered into with Commonwealth
Associates on April 14, 1999, FutureLink granted Commonwealth the right, until
April 2001, to appoint one person to serve on FutureLink's Board of Directors.
Mr. Falk was appointed at the request of Commonwealth Associates.
In a Securities Purchase Agreement with Pequot Private Equity Fund II, L.P.
and other investors on October 15, 1999 relating to a private placement of
equity securities, FutureLink granted Pequot Private Equity Fund II, L.P. and
the other investors in such financing the right to appoint two Directors as long
as they hold 50% or more of the common stock purchased in the private placement.
Pequot Private Equity Fund II, L.P. and these investors will lose the right to
appoint two Directors if their ownership falls below 50% of the common stock
purchased in the private placement. In such instance, Pequot Private Equity Fund
II, L.P. and these investors will retain the right to appoint one Director as
long as they hold 25% or more of the common stock purchased in the private
placement. Pequot Private Equity Fund II, L.P. and these investors can transfer
these rights to other investors that purchased FutureLink's common stock from
FutureLink under the Securities Purchase Agreement of October 15, 1999. Mr.
McNeil and Mr. Poch were appointed at the request of these investors.
In the Agreement and Plan of Reorganization and Merger dated June 2, 1999,
between FutureLink, The Holmes Trust and various other parties, relating to
FutureLink's acquisition of Executive LAN Management, Inc., doing business as
Micro Visions, FutureLink agreed to elect to the board one Director that The
Holmes Trust designates to serve until the next annual meeting of shareholders
or until a successor is appointed or elected. Mr. Holmes was appointed at the
request of the Holmes Trust.
4
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth specified information with respect to the
beneficial ownership of our common stock as of May 31, 2000 by:
- each person or group of affiliated persons that we know beneficially owns
5% or more of our outstanding shares of common stock,
- each of our directors,
- each of FutureLink's present and former chief executive officers and the
three next most highly compensated executive officers, (the "named
executive officers"), and
- all of our directors and executive officers as a group.
The number and percentage of shares beneficially owned are based on
61,496,355 shares of common stock outstanding as of May 31, 2000; 2,627,242
shares of common stock issuable upon the exercise of options exercisable within
60 days of May 31, 2000; 8,205,491 shares issuable upon the exercise of warrants
exercisable within 60 days of May 31, 2000 and 67,965 shares issuable upon the
conversion of convertible debentures convertible within 60 days of May 31, 2000.
Beneficial ownership is determined in accordance with the rules of the SEC. In
general, a person who has voting power or investment power with respect to
securities is treated as a beneficial owner of those securities. These rules
treat the person holding any options, warrants or rights of the beneficial owner
of the shares underlying these options, warrants or rights currently exercisable
or exercisable within 60 days of May 31, 2000 as the beneficial owner. We
believe the persons named in the table below have sole voting and investment
power with respect to all shares beneficially owned unless otherwise indicated
and except as otherwise may be affected by community property laws.
<TABLE>
<CAPTION>
OWNERSHIP PRIOR TO THE OWNERSHIP AFTER THE
OFFERING OFFERING
----------------------- ---------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
------------------------------------ ----------- -------- ---------- -------
<S> <C> <C> <C> <C>
The Holmes Trust(1)(2)......................... 8,400,000 13.7% 8,400,000 12.4%
Glen C. Holmes(1)(2)(3)........................ 8,475,000 13.8% 8,475,000 12.5%
Pequot Capital Management, Inc.(4)............. 10,247,656 16.6% 10,247,656 15.1%
Philip R. Ladouceur(5)......................... 998,000 1.6% 998,000 1.5%
Raghu N. Kilambi(6)............................ 570,563 0.9% 570,563 0.8%
F. Bryson Farrill(7)........................... 120,000 0.2% 120,000 0.2%
Michael S. Falk(8)............................. 3,602,146 5.8% 3,602,146 5.3%
Timothy P. Flynn(9)............................ 775,133 1.3% 775,133 1.1%
Gerald A. Poch(4)(10).......................... 10,272,656 16.6% 10,272,656 15.1%
James P. McNiel(4)(11)......................... 10,272,656 16.6% 10,272,656 15.1%
Vincent Romano, Jr............................. 345,408 0.6% 345,408 0.5%
Cameron Chell.................................. 929,733 1.5% 929,733 1.4%
Robert Priddy(12).............................. 3,495,885 5.7% 3,495,885 5.2%
All directors and executive officers as a group
(20 persons)(13)............................. 29,203,757 45.1% 29,203,757 41.3%
</TABLE>
-------------------------
(1) The business address of Glen C. Holmes, the trustee of The Holmes Trust, is
6 Morgan, Suite 100, Irvine, California 92618.
(2) On May 26, 2000, The Holmes Trust granted to us an option to purchase up to
600,000 shares of our common stock at a purchase price of $5.50 per share.
On the same date, The Holmes Trust granted two of our employees options to
purchase 2,400,000 shares of common stock at a purchase price of $5.50 per
share. The shares underlying these options shall remain beneficially owned
by The Holmes Trust until such options are exercised.
(3) Includes 75,000 shares issuable upon the exercise of stock options
exercisable within 60 days of May 31, 2000. Also includes 8,400,000 shares
of common stock held by The Holmes Trust as a result of Mr. Holmes' power
to control The Holmes Trust.
(4) Includes 441,176 shares issuable upon the exercise of currently exercisable
warrants held by Pequot Private Equity Fund II, L.P. and Pequot Endowment
Fund, L.P. The address of Pequot Capital Management, Inc., Gerald A. Poch
and James P. McNiel is 500 Nyala Farm Road, Westport, Connecticut 06880.
5
<PAGE> 8
(5) Includes 950,000 shares issuable upon the exercise of currently exercisable
stock options and 48,000 shares attributable to Mr. Ladouceur as a result
of his power to control Mardale Investments Ltd.
(6) Includes 350,000 shares issuable upon the exercise of stock options
exercisable within 60 days of May 31, 2000.
(7) Includes 75,000 shares issuable upon the exercise of stock options
exercisable within 60 days of May 31, 2000.
(8) Includes 50,000 shares issuable upon the exercise of stock options which
are exercisable within 60 days of May 31, 2000. Also includes 82,574 shares
attributable to Mr. Falk as a result of his control of the Michael Falk
IRA. Also includes 34,353 shares issuable upon the exercise of currently
exercisable warrants that Mr. Falk holds. Also includes 2,433,828 shares of
common stock and 104,198 shares issuable upon the exercise of warrants that
Commonwealth Associates, L.P. holds. Mr. Falk is Chairman and Chief
Executive Officer of Commonwealth Associates, L.P. Mr. Falk disclaims
beneficial ownership of the shares and warrants that Commonwealth
Associates, L.P. holds.
(9) Includes 50,000 shares issuable upon the exercise of stock options which
are exercisable within 60 days of May 31, 2000, and 213,021 shares issuable
upon the exercise of currently exercisable warrants.
(10) Includes 25,000 shares issuable upon the exercise of stock options which
are exercisable within 60 days of May 31, 2000. Includes 441,176 shares
issuable upon the exercise of currently exercisable warrants held by Pequot
Private Equity Fund II, L.P. and Pequot Endowment Fund, L.P. Also includes
9,806,480 shares of common stock that Pequot Private Equity Fund II, L.P.,
Pequot Partners Fund, L.P., Pequot International Fund, Inc. and Pequot
Endowment Fund, L.P. hold. Pequot Capital Management, Inc. manages these
entities. Mr. Poch is a principal of Pequot Capital Management, Inc. Mr.
Poch disclaims beneficial ownership of the shares attributed to Pequot
Capital Management, Inc.
(11) Includes 25,000 shares issuable upon the exercise of stock options which
are exercisable within 60 days of May 31, 2000. Includes 441,176 shares
issuable upon the exercise of currently exercisable warrants held by Pequot
Private Equity Fund II, L.P. and Pequot Endowment Fund, L.P. Also includes
9,806,480 shares of common stock that Pequot Capital Management, Inc.
manages. Mr. McNiel is a principal of Pequot Capital Management, Inc. Mr.
McNiel disclaims beneficial ownership of the shares attributed to Pequot
Capital Management, Inc.
(12) Includes 198,021 shares of common stock issuable upon the exercise of
currently exercisable warrants. Also includes 2,433,828 shares of common
stock and 104,198 shares issuable upon the exercise of warrants that
Commonwealth Associates holds. Mr. Priddy disclaims beneficial ownership of
the shares and warrants attributed to Commonwealth Associates, L.P.
(13) Includes shares listed in footnotes 2, 4-10 and 12 above, as well as
1,755,007 shares our other executives not listed in this table hold,
2,199,000 shares issuable upon the exercise of stock options which are
exercisable within 60 days of May 31, 2000 and 1,006,519 shares issuable on
exercise of currently exercisable warrants.
COMPENSATION OF DIRECTORS
FutureLink's outside Directors currently receive compensation of $25,000
per year plus $5,000 for each committee of FutureLink's Board of Directors on
which they serve, payable in stock. They also receive $500 for each meeting of
the Board of Directors or board committee they attend in person, and $250 for
each meeting attended by telephone. FutureLink also reimburses the outside
Directors for their expenses in attending board of directors and committee
meetings.
At the time Mr. Ladouceur joined the Board of Directors he entered into an
agreement dated July 16, 1998. Under the terms of this agreement, FutureLink
paid Mardale Investments Ltd., of which Mr. Ladouceur is a principal, a fee of
$68,000 and granted Mr. Ladouceur options to purchase 100,000 shares of
FutureLink common stock at an exercise price of $3.80 per share.
FutureLink has granted options to each of the outside Directors of the
Company upon their election to the Board of Directors. FutureLink granted Mr.
Falk, Mr. Farrill, Mr. Flynn, Mr. Poch and Mr. McNeil options to purchase
100,000 shares of common stock with exercise prices ranging from $3.15 to $8.97
per share. FutureLink expects to grant additional options to outside Directors
upon their joining the Board of Directors for the first time and their
subsequent re-election as a Director.
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<PAGE> 9
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table summarizes the compensation earned by or paid to
FutureLink's chief executive officers and the named executive officers whose
total salary and bonuses exceeded $100,000 for services rendered in all
capacities to FutureLink and its subsidiaries during 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -----------------
---------------------------------- OTHER ANNUAL SHARES UNDERLYING
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY($) BONUS($) COMPENSATION OPTIONS(#)
--------------------------- ----------- --------- -------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
Cameron B. Chell(1)................ 1999 $149,658 -- -- 350,000(2)
Former Chairman, President and 1998 $ 84,291 -- $ 7,000 100,000
Chief Executive Officer
Philip R. Ladouceur................ 1999 $110,000 $200,000(3) -- 1,300,000
Executive Chairman and Chief
Executive Officer
Glen C. Holmes..................... 1999 $ 64,412 $ 90,000(4) -- 100,000
President and Chief Operating
Officer
Raghu N. Kilambi................... 1999 $146,771 $ 90,000(5) -- 500,000
Executive Vice President and 1998 $ 67,433 -- $ 4,700 100,000
Chief Financial Officer
Vincent L. Romano, Jr.............. 1999 $ 75,000 $185,000(6) $278,359 250,000
Executive Vice President, Special
Projects
</TABLE>
-------------------------
(1) Mr. Chell served as Chief Executive Officer from April 1998 through August
1999 and was President from March 1999 through August 1999. FutureLink no
longer employs him in any capacity. Other annual compensation for 1998
includes consulting fees. On March 13, 2000, Mr. Chell exercised 275,000
vested stock options. See Certain Relationships and Related Transactions.
(2) Excludes 350,000 shares underlying options granted in 1999 which expired
under the Stock Option Plan when Mr. Chell's employment with FutureLink
terminated.
(3) Accrued in 1999 but paid in 2000.
(4) Includes $50,000 accrued in 1999 but paid in 2000.
(5) Accrued in 1999 but paid in 2000.
(6) Includes $90,000 accrued in 1999 but paid in 2000.
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<PAGE> 10
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information related to options granted to
FutureLink's named executive officers during fiscal year ended December 31,
1999. The information in this table reflects options granted under FutureLink's
Stock Option Plan. FutureLink granted options to purchase 6,559,000 shares of
common stock to FutureLink's employees and directors in 1999. FutureLink granted
all options at an exercise price equal to the fair market value of FutureLink's
common stock on the date of grant as determined based on the closing price of
FutureLink's common stock on the day preceding the grant, except options granted
to Mr. Holmes on May 14, 1999, which grant has an exercise price based on the
average closing bid and ask prices for the ten trading days prior to the date of
the grant. The options granted on May 14, 1999 have an exercise price that is
74% of the market value of the common stock on such date, on which date the
average closing bid and ask price was $6.72. Options granted to FutureLink's
named executive officers during the 1999 fiscal year vest in either three or
four yearly increments and expire between March 2000 and June 2004.
<TABLE>
<CAPTION>
OPTIONS GRANTED IN LAST FISCAL YEAR
-------------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
TOTAL ANNUAL RATES
NUMBER OF OPTIONS OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM
OPTIONS IN FISCAL PRICE PER ---------------------
NAME GRANTED YEAR SHARE EXPIRATION DATE 5% 10%
---- ---------- ---------- --------- ------------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Cameron B. Chell......... 350,000(1) 3.0% $3.15 September 15, 2000 $ 55,125 $ 110,250
Philip R. Ladouceur...... 700,000(2) 12.1% $3.15 June 1, 2004 $609,242 $1,346,153
600,000(3) 10.3% $7.56 August 31, 2003 $977,508 $2,105,158
Glen C. Holmes........... 100,000 1.7% $5.00 June 1, 2004 $357,674 $ 582,256
Raghu N. Kilambi......... 500,000 8.6% $3.15 June 1, 2004 $435,172 $ 961,538
Vincent L. Romano,
Jr. ................... 250,000(4) 4.3% $6.08 June 30, 2004 $419,976 $ 927,960
</TABLE>
-------------------------
(1) 350,000 of the options granted to Mr. Chell in 1999 expired under the Stock
Option Plan when Mr. Chell's employment with FutureLink terminated in
August, 1999. On March 13, 2000, Mr. Chell exercised 275,000 stock options.
See Certain Relationships and Related Transactions.
(2) 500,000 of the options were granted under the Stock Option Plan. The
remaining 200,000 options were granted by the Board of Directors outside of
our Stock Option Plan.
(3) All of the options were granted by the Board of Directors outside of our
Stock Option Plan.
(4) Mr. Romano exercised options to purchase 62,500 shares of common stock in
early January 2000.
The potential realizable values in the table above represent amounts, net
of exercise price before taxes, that may be realized upon exercise of the
options immediately prior to the expiration of their terms assuming appreciation
of 5% and 10% over the option term. The 5% and 10% are calculated based on SEC
rules and do not reflect our estimate of future stock price growth. The actual
value realized may be greater or less than the potential realizable value set
forth in the table.
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<PAGE> 11
AGGREGATED OPTION EXERCISES IN 1999 AND LAST FISCAL YEAR-END OPTION VALUES
The following table shows the number of shares FutureLink's named executive
officers acquired upon exercise of stock options during 1999, the aggregate
value received from those exercises, the number of shares underlying both
exercisable and unexercisable options as of December 31, 1999 and the year-end
value of exercisable and unexercisable options as of December 31, 1999.
The value of unexercised in-the-money options at December 31, 1999, is
based on a year-end stock price of $26.00, the last reported trade of
FutureLink's common stock on the OTC Bulletin Board on December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1999 DECEMBER 31, 1999
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Cameron B. Chell............ 0 0 275,000 175,000(1) $ 6,283,750 $3,998,750
Philip R. Ladouceur......... 0 0 950,000 450,000 $20,981,000 $8,298,000
Glen C. Holmes.............. 0 0 50,000 50,000 $ 1,050,000 $1,050,000
Raghu N. Kilambi............ 0 0 225,000 375,000 $ 5,076,250 $8,568,750
Vincent L. Romano, Jr.(2)... 0 0 62,500 187,500 $ 1,245,000 $3,735,000
</TABLE>
-------------------------
(1) During 1999, Mr. Chell held an additional 350,000 options that expired under
the terms of the Stock Option Plan when Mr. Chell's employment with
FutureLink terminated.
(2) Mr. Romano exercised options to purchase 62,500 shares of common stock in
early January 2000.
EMPLOYMENT AGREEMENTS
FutureLink has entered into employment agreements with each of FutureLink's
named executive officers. Each agreement provides for a fixed base salary and an
annual performance bonus that FutureLink's compensation committee or the board
of directors determines.
The employment agreements with Mr. Ladouceur and Mr. Kilambi are at-will
and either party can terminate the agreement at any time. Mr. Romano's agreement
has a three-year term which expires on August 1, 2002. Mr. Ladouceur's and Mr.
Kilambi's employment agreements provide that if there is a change in control,
and either of them is terminated without just cause within six months of a
change in control, his level of responsibility or compensation is reduced and he
elects within six months of such change in control to treat his employment as
terminated, or he elects within three months of such change in control to
terminate his employment, FutureLink must pay him an amount equal to one year's
salary, his most recent performance bonus, and one year's premium contributions
to FutureLink's employee benefit plan paid on his behalf, provide up to $10,000
in relocation and financial consulting services, or, at his option, pay him
$10,000, and cause his unvested stock options to accelerate and become
exercisable for three months. If FutureLink terminates either Mr. Ladouceur's or
Mr. Kilambi's employment without just cause or changes his level of
responsibility, and he elects to terminate, FutureLink must pay him an amount
equal to one year's salary, his most recent performance bonus, and one year's
premium contributions to FutureLink's employee benefit plan paid on his behalf,
and provide him with up to $10,000 in relocation and financial consulting
services or, at his option, pay him $10,000.
Mr. Ladouceur's employment agreement provides for an annual base salary of
$200,000, and he is eligible to earn an annual performance bonus of up to
$400,000.
Mr. Holmes' employment agreement provides for an annual base salary of
$200,000. Mr. Holmes is also entitled to receive a minimum bonus of $50,000 each
quarter and is eligible to receive a discretionary bonus to be determined by the
board of directors. His agreement also provides for 18 months severance pay
(including the minimum bonus for such period), if FutureLink terminates Mr.
Holmes without cause, his employment is terminated within 18 months of a change
of control, or Mr. Holmes voluntarily terminates because
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<PAGE> 12
FutureLink materially reduces his duties or his compensation, or FutureLink
moves his place of business out of Orange County, California.
Mr. Kilambi's employment agreement provides for an annual basic salary of
$180,000, and he is eligible to earn an annual bonus of up to $180,000.
Mr. Romano's employment agreement provides for an annual base salary of
$180,000. He is eligible to earn an annual bonus of up to $180,000. Upon
commencement of his employment, Mr. Romano received a signing bonus of $95,000,
a one time payment of $5,000 to cover certain fees relating to his joining
FutureLink, and 250,000 stock options. His employment agreement provides for a
separate loan agreement between FutureLink and Mr. Romano under which FutureLink
loaned Mr. Romano $2.0 million at an annual interest rate of 5.625% to purchase
232,829 shares of FutureLink common stock. The loan is forgiven in quarterly
installments of $250,000. In October 1999, FutureLink forgave the first
installment of $250,000 of this loan, comprising most of Mr. Romano's "other
compensation" in 1999.
FutureLink has insured its directors, officers, employees and agents and
persons serving at its request as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against such person and incurred by such person
in any such capacity or arising out of such person's status as such, regardless
of whether indemnification would be permitted under Delaware law.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Each of the following persons was either a Director, officer or beneficial
owner of more than ten percent (10%) of a class of FutureLink's equity
securities registered pursuant to Section 12 of the Exchange Act, and, failed to
file on a timely basis one or more reports required by Section 16(a) of the
Exchange Act during 1999 or years prior thereto, as described below:
Robert J. Kubbernus filed a Form 4 on July 15, 1999 reporting a
securities transaction which took place in May 1999.
Philip R. Ladouceur filed a Form 4 on December 24, 1999 reporting a
grant of stock options made to Mr. Ladouceur in August 1999.
Gerald A. Poch filed a Form 5 on March 23, 2000 reporting a grant of
stock options made to Mr. Poch in October 1999.
James P. McNiel filed a Form 5 on March 23, 2000 reporting a grant of
stock options made to Mr. McNiel in October 1999.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 20, 1998, Core Ventures, Inc., our predecessor-in-interest,
purchased 46% of FutureLink Alberta in exchange for 308,000 shares of our common
stock. On November 23, 1998, Core Ventures purchased another 50.4% of FutureLink
Alberta in exchange for 334,755 shares of our common stock, and on February 26,
1999, it acquired the remaining 3.6% of FutureLink Alberta in exchange for
23,500 shares of our common stock. Cameron Chell was the President and Chief
Executive Officer of FutureLink Alberta, and after the first purchase in January
1998, Mr. Chell became our President, a director and a significant stockholder.
Mr. Chell resigned as our President and a director effective August 27, 1999.
Mr. Chell and Robert Kubbernus were directors and holders of stock of both
us and JAWS Technology Inc. at the time we entered into an Alliance Partner
Agreement dated February 12, 1999.
On August 12, 1998, Mr. Chell loaned us approximately $145,000 at an annual
interest rate of 8%. On February 22, 1999, we issued Mr. Chell a convertible
debenture in the principal amount of approximately $150,000, the outstanding
balance of his loan to us. This convertible debenture was convertible at $2.00
per share after adjustment for our five-for-one reverse stock split, for a total
of 75,310 shares. Mr. Chell also received a warrant to acquire 75,310 shares at
$2.00 per share for the first year, $3.00 per share for the second
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<PAGE> 13
year, and $4.00 per share for the third year. On April 29, 1999, Mr. Chell
surrendered his debenture having an outstanding balance of approximately
$153,000, our notes payable having an outstanding balance of approximately
$67,000 and our trade loans payable having an outstanding balance of $30,000 in
return for a $250,000 aggregate principal amount 8% convertible note convertible
at $1.50 per share and a warrant to acquire 125,000 shares at $1.50 per share.
We reduced the conversion and exercise prices for these securities from $1.50
per share to $1.335 per share due to the effect of anti-dilution provisions. Mr.
Chell has exercised and converted all of these securities.
In May 1999, Commonwealth Associates privately placed our units consisting
of 8% senior subordinated convertible notes convertible to shares of common
stock at $1.00 per share after adjustment for our five-for-one reverse stock
split and warrants to purchase 500 shares of common stock at $1.25 per share
after adjustment for our five-for-one reverse stock split for each $1,000
invested. Mr. Chell purchased $250,000 of our units and Mr. Kilambi purchased
$127,500 of our units.
Michael Falk, Chief Executive Officer of Commonwealth Associates, L.P. was
appointed to our board of directors on May 7, 1999 following the consummation of
the private placement of our securities concluded in April 1999 for which we
retained Commonwealth Associates as our placement agent. We subsequently
retained Commonwealth Associates as placement agent on July 1, 1999.
As of December 31, 1999, we had provided $550,000 in services and products
to Willson Stationers Ltd. and e-Supplies Inc. At December 31, 1999, $543,000
remained due from these entities. An allowance for doubtful accounts was
recorded for the entire amount because of the uncertainty of collection. We have
recently settled this account for $400,000. Mr. Chell was a director of both
companies at the time some of the transactions took place. In addition, we have
reason to believe that Mr. Chell was a principal of e-Supplies Inc., at the time
of the transactions. Mr. Kilambi served on the board of directors of Willson
Stationers, Ltd., as our representative, at the request of Willson Stationers,
Ltd., for approximately one month in early 1999.
On August 1, 1999, we loaned Vincent Romano, one of our executive officers,
$2.0 million, which he used to purchase 232,829 shares of our common stock. Mr.
Romano deposited the shares in escrow and the escrow agent releases
approximately 12.5% of the shares quarterly as the loan is forgiven in quarterly
installments of $250,000. We loaned the money to Mr. Romano under the terms of
his employment agreement. As of January 31, 2000, we have forgiven $500,000 of
this loan.
In October 1999, we issued warrants to acquire 1,658,350 shares of common
stock to Pequot Private Equity Fund II, L.P., Pequot Partners Fund and Pequot
International Fund, which, after giving effect to anti-dilution adjustments
since their issuance, entitled the holders to purchase 1,678,139 shares of
common stock at $8.40 per share. On February 29, 2000, the funds exercised their
warrants to acquire all 1,678,139 shares of our common stock, with net proceeds
to us of approximately $12.6 million, taking into account the warrant exercise
fee of $0.90 for each warrant exercised. On April 28, 2000, in a private
placement we issued to Pequot Private Equity Fund II, L.P. and Pequot Endowment
Fund, L.P. for just under $15.0 million, 1,764,704 shares of common stock and
warrants to purchase at a purchase price of $9.25 per share 441,176 shares of
common stock. Pequot Capital Management, Inc. manages the funds and therefore
has the power to direct the vote of the common stock that the funds hold, which
constitute more than 5% of our outstanding common stock both before and after
this warrant exercise. In addition, James McNiel, one of our directors, is a
Senior Vice President at Pequot Capital Management, Inc., and Gerald Poch, also
a director, is a Manager Director/Portfolio Manager at Pequot Capital
Management, Inc.
The two securities purchase agreements we have entered into with the Pequot
funds and two other institutional investors restrict us and our material
subsidiaries without the prior written consent of the Pequot funds from:
- completing any merger, acquisition or sale of assets if our assets or
revenues are likely to be increased or decreased by 25% or more,
- buying any of our equity securities with a fair market value in excess of
$5.0 million, or
- changing the business in which we are currently engaged.
11
<PAGE> 14
These restrictions will no longer apply at the earliest to occur of:
- the investors under these securities purchase agreements hold less than
5% of our fully-diluted common stock,
- the investors under these securities purchase agreements no longer have
the right to nominate any of our directors under these agreements, and
- October 15, 2002.
On May 31, 2000, Glen Holmes, our President and Chief Operating Officer and
one of our directors, granted to us an option to purchase 600,000 shares of
common stock at $5.50 per share. We may only exercise this option to the extent
employees to whom we granted reciprocal options exercise those options.
PROPOSAL 2
APPROVAL OF THE ADOPTION OF THE SECOND AMENDED AND RESTATED
STOCK OPTION PLAN AND THE FIRST AND SECOND AMENDMENTS TO
THE SECOND AMENDED AND RESTATED STOCK OPTION PLAN
On November 17, 1999, December 10, 1999 and June 1, 2000, the Board of
Directors unanimously approved the adoptions of, respectively, the Second
Amended and Restated Stock Option Plan (the "Second Restated Plan"), the First
Amendment to the Second Amended and Restated Stock Option Plan, and the Second
Amendment to the Second Amended and Restated Stock Option Plan (collectively,
the "Amendments"), and directed that the Second Restated Plan and the Amendments
be submitted to the stockholders for approval at the Annual Meeting (the Second
Restated Plan, as amended by the Amendments, is sometimes collectively referred
to herein as the "Plan"). The Second Restated Plan and the Amendments make the
following material changes to FutureLink's Amended and Restated Stock Option
Plan (the "Original Plan"):
- Limit the aggregate number of shares of common stock which may be granted
with respect to Incentive Stock Options under Section 422 of the Internal
Revenue Code of 1986, as amended, to 2,000,000. The Original Plan does
not limit the number of Incentive Stock Options which may be issued,
except to the extent of the total number of options available under the
Original Plan;
- Place a minimum purchase price for shares subject to non-qualified stock
options, of eighty-five percent (85%) of the fair market value of such
shares on the date of grant. The Original Plan does not provide for a
minimum purchase price for non-qualified stock options;
- Decrease the minimum rate of vesting of options from twenty-five percent
(25%) per year to twenty percent (20%) per year; and
- Authorize the deferral of compensation through awards in the form of
shares ("Deferred Shares") of FutureLink's common stock that are
deliverable in the future.
THE AMENDMENTS AND RESTATEMENT
Stock options are an important and critical element of compensation in the
technology industry without which FutureLink would have difficulty retaining and
recruiting valuable employees. Without approval of the Amendments and the Second
Restated Plan, FutureLink will not have sufficient flexibility to grant adequate
12
<PAGE> 15
options under stockholder approved plans available to grant to current and
future employees. Furthermore, since the 1999 Annual Meeting of Stockholders, we
moved our corporate headquarters to California. It was therefore necessary to
amend the Original Plan to conform to California securities law requirements. In
addition, the availability of a Deferred Share program will encourage
substitution of long-term stock interests for compensation otherwise provided in
cash.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
PROPOSAL TO APPROVE THE ADOPTION OF THE SECOND AMENDED AND RESTATED STOCK OPTION
PLAN AND BOTH THE FIRST AND SECOND AMENDMENTS TO THE SECOND AMENDED AND RESTATED
STOCK OPTION PLAN.
To be adopted, this resolution requires approval of the holders of common
stock representing a majority of the votes cast at the Annual Meeting.
DESCRIPTION OF THE PLAN
The following is a summary of the principal provisions of the Plan, but it
is not intended to be a complete description of all of the terms and provisions
of the Plan. A copy of the Second Restated Plan is attached as Exhibit A to this
Proxy Statement, the First Amendment to the Second Restated Plan is attached as
Exhibit B to this Proxy Statement and the Second Amendment to the Second
Restated Plan is attached as Exhibit C to this Proxy Statement.
History. The Stock Option Plan originally became effective on June 29,
1998, and was amended with the approval of the stockholders on each of December
1, 1998 and September 23, 1999 and by the Board on December 15, 1999 and June 1,
2000.
Purpose. The purpose of the Plan is to further the growth and development
of FutureLink by providing, through the ownership of stock, incentive to
officers, employees, directors and consultants who are in a position to
contribute materially to the prosperity of FutureLink, to increase such persons'
interest in FutureLink's welfare, to encourage them to continue their services
to FutureLink or its subsidiaries, and to attract individuals of outstanding
ability to enter the employment or service of FutureLink or its subsidiaries, to
remain or become directors of FutureLink and to provide valuable services to
FutureLink or FutureLink's subsidiaries.
Types of Stock Options. The Plan includes two types of options: options
intended to qualify as Incentive Stock Options under Section 422 of the Internal
Revenue Code of 1986, as amended from time to time (the "Code"), and
non-qualified stock options not specifically authorized or qualified for
favorable income tax treatment by the Code.
Administration. The Plan is administered by the Board, or in the
discretion of the Board, by a Committee ("Committee") consisting of two or more
directors of FutureLink who are "outside directors" as defined in I.R.S.
Treasury Regulation Section 1.162-27(e)(3) and "non-employee directors" (within
the meaning of amended Rule 16b-3 under the Securities Exchange Act of 1934).
The administrator of the Plan (the "Plan Administrator") has exclusive authority
to determine employees, directors and consultants to whom options or Deferred
Shares will be granted, the timing and manner of the grant of options, the
exercise price, the number of shares covered by and all of the terms of options,
the duration and purpose of leaves of absence which may be granted to optionees
without constituting termination of employment for purposes of the Plan and all
other determinations necessary or advisable for administration of the Plan.
Members of the Committee are appointed by and serve at the pleasure of the Board
and may be removed by the Board at its discretion.
Eligibility. Any employee, director or consultant of FutureLink or any of
its subsidiaries is eligible to receive a grant of options under the Plan.
FutureLink currently has 8 directors, approximately 600 employees and various
consultants who are eligible to receive a grant of options under the Plan.
Shares Subject to the Plan. The aggregate number of shares of common stock
of FutureLink which may be issued pursuant to the Plan shall not exceed twenty
percent (20%) of the outstanding shares of common
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<PAGE> 16
stock of FutureLink, calculated on a fully diluted basis, not including common
stock underlying outstanding stock options, and including shares of common stock
previously issued under the Plan. In addition, at no time may the total number
of shares of common stock of FutureLink issuable upon the exercise of all
outstanding options and the total number of shares of common stock of FutureLink
provided for under any stock bonus or similar plan of FutureLink exceed thirty
percent (30%) of the outstanding shares of common stock of FutureLink,
calculated on a fully diluted basis. The maximum number of shares of common
stock with respect to which options may be granted to an employee in any one
calendar year is 500,000. The maximum number of shares with respect to which
Incentive Stock Options may be granted under the Plan may not exceed 2,000,000
in the aggregate.
Stock Option Price. The exercise price for the common stock subject to any
option shall be determined by the Plan Administrator at the time of grant, but
shall not be less than eighty-five (85%) of the fair market value of the common
stock of FutureLink on the date the option is granted, provided, however, if the
option is an Incentive Stock Option, the exercise price shall not be less than
one hundred percent (100%) of the fair market value of such shares on the date
of the grant. Notwithstanding the foregoing, in the case of any option granted
to any person who owns stock possessing more than 10% of the total combined
voting power of all classes of stock of FutureLink or any of its parent or
subsidiary corporations, the option price shall not be less than 110% of the
fair market value of the common stock of FutureLink on the date the option is
granted.
Term of Stock Option. No option shall be exercisable after the expiration
of the earliest of (a) ten years after the date the option is granted, (b) three
months after the date the optionee's employment with FutureLink and its
subsidiaries terminates if such termination is for any reason other than
disability (as defined in the Plan) or death, (c) one year after the date the
optionee's employment with FutureLink and its subsidiaries terminates if such
termination is a result of death or disability; provided, however, that the
option agreement for any option may provide for shorter periods in each of the
foregoing instances, except that such shorter periods shall not be less than
thirty (30) days in the event of termination of employment for any reason other
than death or disability and not less than six (6) months in the event of
termination as a result of death or disability. In the case of an Incentive
Stock Option granted to an employee who owns stock possessing more than 10% of
the total combined voting power of all classes of stock of FutureLink or any of
its parent or subsidiary corporations, the term set forth in (a), above, shall
not be more than five years after the date the option is granted.
Vesting and Exercise of Stock Options. No option shall be exercisable
during the lifetime of an optionee by any person other than the optionee.
Subject to the foregoing, the Plan Administrator shall have the power to set the
time or times within which each option shall be exercisable and to accelerate
the time or times of exercise. Unless otherwise provided by the Plan
Administrator, each option granted under the Plan shall become exercisable on a
cumulative basis as to one-third (1/3) of the total number of shares of common
stock covered thereby at any time after one year from the date the option is
granted and an additional one-third (1/3) of such total number of shares of
common stock at any time after the end of each consecutive one-year period
thereafter until the option has become exercisable as to all of such total
number of shares of common stock. The minimum vesting provision which can be
imposed by the Plan Administrator for any option granted under the Plan shall be
twenty percent (20%) per year. To the extent that an optionee has the right to
exercise an option and purchase shares pursuant thereto, the option may be
exercised from time to time by written notice to FutureLink, stating the number
of shares of common stock being purchased and accompanied by payment in full of
the exercise price for such shares.
No Transfer of Options. Options are not transferable by optionees other
than by will or the laws of decent and distribution.
Limit on Incentive Stock Options. The aggregate fair market value
(determined at the time the option is granted) of the shares of common stock
with respect to which Incentive Stock Options granted to an optionee are
exercisable for the first time by an optionee during any calendar year (under
all Incentive Stock Option Plans of the Company and its subsidiaries) shall not
exceed $100,000. To the extent that the aggregate fair market value (determined
at the time the option is granted) of the shares of common stock with respect to
which Incentive Stock Options are exercisable for the first time by an optionee
during any calendar year
14
<PAGE> 17
(under all Incentive Stock Option Plans of the Company and any parent or
subsidiary corporations) exceeds $100,000, such options shall be treated as
Non-Qualified Stock Options. The determination of which options shall be treated
as Non-Qualified Stock Options shall be made by taking options into account in
the order in which they were granted.
Deferred Stock. The Plan Administrator has the discretion under the Plan
to permit deferred compensation elections by select management employees,
directors, and consultants. Basically, the eligible person may irrevocably elect
on a fiscal year basis to forego a portion of their cash compensation in
exchange for Deferred Shares. As soon as practicable after the end of each
fiscal quarter beginning July 1, 2000, each optionee's deferred compensation
during the quarter (plus cash dividends paid on shares equal in number to all
previously credited Deferred Shares) will be credited by the Plan Administrator
to an internal bookkeeping account in the form of Deferred Shares having a fair
market value when credited equal to the compensation deferred (plus any accrued
dividends).
Each optionee's Deferred Shares account will be distributed in the form of
freely-transferable shares of FutureLink's common stock, with distributions made
in five substantially equal installments after the optionee leaves employment;
subject to each optionee's right to elect a different schedule for
distributions. Fifty-percent of each optionee's Deferred Shares (including
shares already transferred to the optionee) will be forfeited upon a
determination by the Plan Administrator that the optionee has violated a
non-competition or non-disclosure agreement with FutureLink. An optionee shall
have not have any stockholder rights with respect to Deferred Shares until
shares of FutureLink's common stock are transferred to the optionee. As of June
1, 2000, the Committee has not selected which employees are eligible to make
deferred compensation elections. If this amendment fails to receive stockholder
approval, any optionee who defers compensation will receive a cash refund, with
accrued interest, for the deferrals.
Termination or Amendment of the Plan. The Board may at any time terminate
or amend the Plan; provided that, without approval of the holders of a majority
of the shares of common stock of FutureLink represented and voting at a duly
held meeting at which a quorum is present (which shares voting affirmatively
also constitute a majority of the required quorum) or by the written consent of
a majority of the outstanding shares of common stock, there shall be no increase
in the total number of shares of common stock covered by the Plan, no change in
the class of persons eligible to receive options granted under the Plan, and no
extension of the term of the Plan beyond ten years after the earlier of the date
the Plan is adopted or the date the Plan is approved by FutureLink's
stockholders.
Effective Date and Term of Plan. The Stock Option Plan was first effective
(the "Effective Date") June 29, 1998. Unless sooner terminated by the Board in
its sole discretion, the Plan will expire on June 28, 2008.
CERTAIN UNITED STATES FEDERAL INCOME TAX INFORMATION
General. The following is a general summary as of the date of this Proxy
Statement of the United States federal income tax consequences associated with
participation in the Plan. The federal tax laws may change and the federal,
state and local tax consequences for any participant will depend upon his or her
individual circumstances. This information may not be applicable to employees of
foreign subsidiaries or to participants who are not residents of the United
States. All participants have been and are encouraged to seek the advice of a
qualified tax advisor regarding the tax consequences of participation in the
Plan. Any tax effects that accrue to foreign employees as a result of
participation in the Plan will be subject to the tax laws of the countries in
which such employees reside.
Incentive Stock Options. The optionee will recognize no income upon grant
of an Incentive Stock Option ("ISO") and incur no tax on its exercise unless the
optionee is subject to the alternative minimum tax described below. If the
optionee holds the stock acquired upon exercise of an ISO (the "ISO Shares") for
more than one year after the date the option was exercised and for more than two
years after the date the option was granted, the optionee generally will realize
long-term capital gain or loss (rather than ordinary income or loss) upon
disposition of the ISO Shares. This gain or loss will be equal to the difference
between the amount realized upon such disposition and the amount paid for the
ISO Shares.
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<PAGE> 18
If the optionee disposes of ISO Shares prior to the expiration of either of
the above required holding periods (a "disqualifying disposition"), the gain
realized upon such disposition, up to the difference between the fair market
value of the ISO Shares on the date of exercise and the option exercise price,
will be treated as ordinary income and reported on the employee's W-2 form.
Income tax withholding on this income is optional. Any additional gain will be
long-term or short-term capital gain, depending upon whether or not the ISO
Shares were held for more than one year following the date of exercise by the
optionee. A disposition of ISO Shares for this purpose includes not only a sale
or exchange, but also a gift or other transfer of legal title (with certain
exceptions). Long-term capital gain is taxed at a maximum federal income tax
rate of 20% rather than the 39.6% maximum rate applicable to other income.
Alternative Minimum Tax. Generally, the difference between the fair market
value of stock purchased by exercise of an ISO (generally measured as of the
date of exercise) and the amount paid for that stock upon exercise of the ISO is
an adjustment to income for purposes of the alternative minimum tax. An
alternative minimum tax adjustment applies unless a disqualifying disposition of
the ISO Shares occurs in the same calendar year as exercise of the ISO. The
alternative minimum tax (imposed to the extent it exceeds the taxpayer's regular
tax) is 26% of an individual taxpayer's alternative minimum taxable income for
alternative minimum taxable income up to $175,000 ($87,500 for a married
taxpayer filing a separate return) and 28% thereafter. Alternative minimum
taxable income is determined by adjusting regular taxable income for certain
items, increasing that income by certain tax preference items and reducing this
amount by the applicable exemption amount ($45,000 in the case of a joint
return, $33,750 for an unmarried taxpayer and $22,500 for a married taxpayer
filing a joint return subject to reduction under certain circumstances). The
alternative minimum tax will, however, be payable only to the extent that it
exceeds an optionee's regular federal income tax for the year (computed without
regard to certain credits and taxes).
Nonqualified Stock Options. An optionee will not recognize any taxable
income at the time a nonqualified stock option ("NQSO") is granted. However,
upon exercise of an NQSO the optionee will include in income as compensation an
amount equal to the difference between the fair market value of the shares on
the date of exercise (in most cases) and the optionee's purchase price. The
included amount will be treated as ordinary income and reported on an employee's
W-2 form, or in the case of a non-employee, on a 1099 form and will be subject
to income tax and FICA withholding by FutureLink (either by payment in cash or
withholding out of the optionee's salary) if the optionee is an employee. Upon
the sale of the shares by the optionee, any subsequent appreciation or
depreciation in the value of the shares will be treated as short term or long
term capital gain or loss depending upon whether or not the optionee held the
shares for more than one year following exercise of the NQSO.
Tax Treatment of Insiders. Optionees who are officers or directors of
FutureLink subject to Section 16(b) of the Securities Exchange Act of 1934 may
be subject to special federal income tax treatment upon exercise of their
options. In general, such optionees will be subject to tax with respect to
income recognized upon exercise of their options upon the later to occur of (1)
the date such income normally would be recognized under the principles described
above, or (2) the expiration of the six-month forfeiture period under Section
16(b), unless such an optionee makes the election under Section 83(b) of the
Code to be taxed as of the date specified in (1) above. The amount of income
will be measured by reference to the value of the shares acquired upon exercise
as of the applicable date. Optionees subject to this special treatment should
consult their own tax advisors for further information.
Deferred Shares. An optionee who receives a Deferred Shares award will not
recognize any taxable income until unrestricted shares of FutureLink's common
stock are transferred to the optionee pursuant to the Plan. At such time or
times, the fair market value of the shares received will be ordinary income for
the optionee, will be subject to FICA withholding, and will be reported as
compensation on a Form W-2 for employees and on a Form 1099 for non-employees.
Tax Treatment of FutureLink. FutureLink will be entitled to a deduction in
connection with the exercise of an NQSO, as well as the delivery of shares
pursuant to a Deferred Shares award, by a domestic optionee to the extent that
the optionee recognizes ordinary income provided that the deduction is not
disallowed under the provisions of Section 162(m) of the Code. FutureLink will
be entitled to a deduction in
16
<PAGE> 19
connection with the disposition of ISO Shares only to the extent that the
optionee recognizes ordinary income on a disqualifying disposition of the ISO
Shares and will not be entitled to any deduction upon exercise of an ISO.
PROPOSAL 4
RATIFICATION AND APPROVAL OF THE SELECTION OF ERNST & YOUNG AS
FUTURELINK'S INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Ernst & Young LLP to audit the
financial statements of FutureLink for the year ended December 31, 2000. Ernst &
Young LLP has audited FutureLink's financial statements since 1998.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS RATIFY AND APPROVE
THE SELECTION OF ERNST & YOUNG LLP AS FUTURELINK'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR FISCAL 2000.
It is expected that a representative of Ernst & Young LLP will be present
at the Annual Meeting to respond to any questions and to make a statement on
behalf of his or her firm, if such representative so desires.
TRANSACTION OF OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors is not aware
of any matters other than those set forth herein and in the Notice of Annual
Meeting of Stockholders that will come before the meeting. Should any other
matters arise requiring the vote of stockholders, it is intended that proxies
will be voted in respect thereto in accordance with the best judgment of the
person or persons voting the proxies.
17
<PAGE> 20
STOCKHOLDER PROPOSALS
FutureLink must receive at its principal office before January 20, 2001,
any proposal which a stockholder wishes to submit to the 2001 Annual Meeting of
Stockholders, if the proposal is to be considered by the board of directors for
inclusion in the proxy materials for that Annual Meeting.
FutureLink's Bylaws provide that a stockholder wishing to present a
nomination for Director or to bring any other matter before the annual meeting
of stockholders must give written notice to the Secretary of FutureLink not less
than sixty days prior to the meeting. If less than sixty days notice or prior
public disclosure of the date of the meeting is given to stockholders, notice of
the stockholder proposal must be received no later than seven days after the
notice or announcement of the meeting date.
A stockholder's notice to the Secretary shall include (i) a brief
description of the matter or nomination and the reason for addressing the matter
at the meeting; (ii) the stockholder's name and address, (iii) the number of
shares of FutureLink owned or controlled by the stockholder, (iv) any material
interest of the stockholder in the matter or nomination proposed and (v) all
other required information under Regulation 14A under the Securities Exchange
Act of 1934.
FutureLink's proxy related to the 2001 annual meeting will give
discretionary voting authority to the proxy holders to vote with respect to any
stockholder proposal that is received more than seven days after the date of
notice of the 2001 annual meeting of stockholders. Any stockholder wishing to
make a nomination or proposal should obtain a copy of the relevant provisions of
FutureLink's Bylaws from the Secretary.
------------------------
Please return your proxy as soon as possible. Unless a quorum, consisting
of a majority of the outstanding shares entitled to vote, is represented at the
meeting no business can be transacted. Therefore, please be sure to date and
sign your proxy exactly as your name appears on your stock certificate and
return it in the enclosed prepaid return envelope. Please act promptly to ensure
that you will be represented at this important meeting.
If requested, we will furnish you any exhibit listed on the exhibit index
to our Annual Report on Form 10-KSB/A for the fiscal year ended December 31,
1999 upon payment of a reasonable copying fee.
By Order of the Board of Directors
Philip R. Ladouceur
Chairman and Chief Executive Officer
June 12, 2000
18
<PAGE> 21
EXHIBIT INDEX
Exhibit A -- Second Amended and Restated Stock Option Plan.
Exhibit B -- First Amendment to Second Amended and Restated Stock Option Plan.
Exhibit C -- Second Amendment to Second Amended and Restated Stock Option Plan.
<PAGE> 22
EXHIBIT A
FUTURELINK CORP.
SECOND AMENDED
AND RESTATED
STOCK OPTION PLAN
<PAGE> 23
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
1. Purpose..................................................... A-1
2. Incentive and Non-Qualified Stock Options................... A-1
3. Definitions................................................. A-1
3.1 Board................................................. A-1
3.2 Code.................................................. A-1
3.3 Common Stock.......................................... A-1
3.4 Company............................................... A-1
3.5 Disabled or Disability................................ A-1
3.6 Fair Market Value..................................... A-1
3.7 Incentive Stock Option................................ A-1
3.8 Non-Qualified Stock Option............................ A-1
3.9 Optionee.............................................. A-1
3.10 Plan.................................................. A-1
3.11 Plan Administrator.................................... A-1
3.12 Stock Option or Option................................ A-1
4. Administration.............................................. A-2
4.1 Administration by Board............................... A-2
4.2 Administration by Committee........................... A-2
5. Eligibility................................................. A-2
6. Shares Subject to Options................................... A-2
7. Terms and Conditions of Options............................. A-3
7.1 Number of Shares Subject to Option.................... A-3
7.2 Option Price.......................................... A-3
7.3 Notice and Payment.................................... A-3
7.4 Term of Option........................................ A-4
7.5 Exercise of Option.................................... A-4
7.6 No Transfer of Option................................. A-4
7.7 Limit on Incentive Stock Options...................... A-4
7.8 Restriction on Issuance of Shares..................... A-4
7.9 Investment Representation............................. A-5
7.10 Rights as a Shareholder or Employee................... A-5
7.11 No Fractional Shares.................................. A-5
7.12 Exercisability in the Event of Death.................. A-5
7.13 Recapitalization or Reorganization of Company......... A-5
7.14 Modification, Extension, and Renewal of Options....... A-6
7.15 Other Provisions...................................... A-6
8. Termination or Amendment of the Plan........................ A-6
9. Indemnification............................................. A-6
10. Effective Date and Term of Plan............................. A-6
</TABLE>
i
<PAGE> 24
FUTURELINK CORP.
SECOND AMENDED AND RESTATED STOCK OPTION PLAN
1. Purpose. The purpose of this FutureLink Corp. Stock Option Plan ("Plan")
is to further the growth and development of FutureLink Corp. (the "Company") by
providing, through ownership of stock of the Company, an incentive to officers,
other key employees and directors who are in a position to contribute materially
to the prosperity of the Company, to increase such persons' interests in the
Company's welfare, to encourage them to continue their services to the Company
or its subsidiaries, and to attract individuals of outstanding ability to enter
the employment or service of the Company or its subsidiaries, to remain or
become directors of the Company and to provide valuable services to the Company
or its subsidiaries.
2. Incentive and Non-Qualified Stock Options. Two types of Stock Options
(referred to herein as "Options" without distinction between such two types,
except as provided herein) may be granted under the Plan: Options intended to
qualify as Incentive Stock Options under Section 422 of the Code and Non-
Qualified Stock Options not specifically authorized or qualified for favorable
income tax treatment by the Code.
3. Definitions. The following definitions are applicable to the Plan:
3.1 Board. The Board of Directors of the Company.
3.2 Code. The Internal Revenue Code of 1986, as amended from time to
time.
3.3 Common Stock. The shares of the $.0001 par value per share common
stock of the Company.
3.4 Company. FutureLink Corp., a Delaware corporation.
3.5 Disabled or Disability. For the purposes of Section 7.4, a
disability of the type defined in Section 22(e)(3) of the Code. The
determination of whether an individual is disabled or has a Disability is
determined under procedures established by the Plan Administrator for
purposes of the Plan.
3.6 Fair Market Value. For purposes of the Plan, the "fair market
value" per share of the Common Stock of the Company at any date shall be
(a) if the Common Stock is listed on an established stock exchange or
exchanges or The Nasdaq Stock Market's National Market System, the closing
price per share on the last trading day immediately preceding such date on
the principal exchange on which it is traded or as reported by The Nasdaq
Stock Market, or (b) if the Common Stock is not then listed on an exchange
or The Nasdaq Stock Market's National Market System, the closing price per
share on the last trading day immediately preceding such date reported by
The Nasdaq Stock Market, or if sales are not reported by The Nasdaq Stock
Market, the average of the closing bid and asked prices per share for the
Common Stock in the over-the-counter market as quoted on the last trading
day immediately preceding such date, or (c) if the Common Stock is not then
listed on an exchange, The Nasdaq Stock Market's National Market System or
reported by The Nasdaq Stock Market or quoted in the over-the-counter
market, a value determined in good faith by the Plan Administrator.
3.7 Incentive Stock Option. Any Stock Option which qualifies as an
"incentive stock option" within the meaning of Section 422 of the Code.
3.8 Non-Qualified Stock Option. Any Stock Option that is not an
Incentive Stock Option.
3.9 Optionee. The recipient of a Stock Option.
3.10 Plan. The FutureLink Corp. Second Amended and Restated Stock
Option Plan, as amended from time to time.
3.11 Plan Administrator. The Board or the Compensation Committee
designated pursuant to Section 4.2 hereof to administer, construe and
interpret the terms of the Plan.
3.12 Stock Option or Option. Any option to purchase shares of Common
Stock granted pursuant to Section 7 hereof.
A-1
<PAGE> 25
4. Administration.
4.1 Administration by Board. Subject to Section 4.2 hereof, the Plan
Administrator shall be the Board of Directors of the Company (the "Board")
during such periods of time as all members of the Board are "outside
directors" as defined in Treas. Regs. sec.1.162-27(e)(3) ("outside
directors"). Anything to the contrary notwithstanding, the requirement that
all members of the Board be outside directors shall not apply for any
period of time during which the Company's Common Stock is not registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended.
Subject to the provisions of the Plan, the Plan Administrator shall have
authority to construe and interpret the Plan, to promulgate, amend, and
rescind rules and regulations relating to its administration, from time to
time to select from among the eligible employees and directors (as
determined pursuant to Section 5) of the Company and its subsidiaries those
employees and directors to whom Stock Options will be granted, to determine
the timing and manner of the grant of the Options, to determine the
exercise price, the number of shares covered by and all of the terms of the
Stock Options, to determine the duration and purpose of leaves of absence
which may be granted to Stock Option holders without constituting
termination of their employment for purposes of the Plan, and to make all
of the determinations necessary or advisable for administration of the
Plan. The interpretation and construction by the Plan Administrator of any
provision of the Plan, or of any agreement issued and executed under the
Plan, shall be final and binding upon all parties. No member of the Board
shall be liable for any action or determination undertaken or made in good
faith with respect to the Plan or any agreement executed pursuant to the
Plan.
4.2 Administration by Committee. The Board may, in its sole
discretion, delegate any or all of its duties as Plan Administrator and,
subject to the provisions of Section 4.1 of the Plan, if at any time the
Board includes any person who is not an outside director, the Board shall
delegate all of its duties as Plan Administrator during such period of time
to a compensation committee (the "Committee") of not fewer than two (2)
members of the Board, all of the members of which Committee shall be
persons who, in the opinion of the counsel to the Company are outside
directors and "non-employee directors" within the meaning of Rule
16b-3(b)(3)(i) promulgated by the Securities and Exchange Commission, to be
appointed by and serve at the pleasure of the Board. Anything to the
contrary notwithstanding, the requirement that all members of the Committee
be non-employee directors and outside directors shall not apply for any
period of time during which the Company's Common Stock is not registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended.
Those provisions of the Plan that make express reference to Rule 16b-3
under the Securities Exchange Act of 1934, as amended, shall apply only to
reporting persons under such act. From time to time, the Board may increase
or decrease (to not less than two members) the size of the Committee, and
add additional members to, or remove members from, the Committee. The
Committee shall act pursuant to a majority vote, or the written consent of
a majority of its members, and the minutes shall be kept of all of its
meetings and copies thereof shall be provided to the Board. Subject to the
provisions of the Plan and the directions of the Board, the Committee may
establish and follow such rules and regulations for the conduct of its
business as it may deem advisable. No member of the Committee shall be
liable for any action or determination undertaken or made in good faith
with respect to the Plan or any agreement executed pursuant to the Plan.
5. Eligibility. Subject to the determination of the Plan Administrator, any
employee, director or consultant (including any officer or director who is an
employee) of the Company or any of its subsidiaries shall be eligible to receive
Options under the Plan; provided, however any person who owns more than ten
percent (10%) of the total combined voting power of all classes of outstanding
stock of the Company, its parent or any of its subsidiaries shall not receive an
Option unless (i) the purchase price of the shares subject to the Option is at
least one hundred ten percent (110%) of the Fair Market Value of such shares on
the date of grant, and (ii) if such Option is intended to be an Incentive Stock
Option, such Option by its terms is not exercisable after the expiration of five
(5) years from the date of grant. An Optionee may receive more than one Option
under the Plan. Non-employee directors and non-employee consultants shall not be
eligible to receive any Incentive Stock Option under the Plan.
6. Shares Subject to Options. The stock available for grant of Options
under the Plan shall be shares in the Company's authorized but unissued or
reacquired, Common Stock. The aggregate number of shares which
A-2
<PAGE> 26
may be issued pursuant to exercise of Options granted under the Plan, as
amended, shall not exceed twenty percent of the shares of Common Stock,
calculated on a fully diluted basis not including Common Stock underlying
outstanding stock options, at the time of each grant (subject to adjustment as
provided in Section 7.13 hereof) including shares previously issued under the
Plan. The maximum number of shares with respect to which options may be granted
to any employee in any one calendar year shall be 500,000 shares (subject to
adjustment as provided in Section 7.13 hereof). The maximum number of shares
with respect to which Incentive Stock Options may be granted under this Plan
shall not exceed 2,000,000 in the aggregate (subject to adjustment as provided
in Section 7.13 hereof). In the event that any outstanding Option under the Plan
for any reason expires, or is terminated, the shares of Common Stock allocable
to the unexercised portion of the Option shall again be available for Options
under the Plan as if no Option had been granted with respect to such shares.
7. Terms and Conditions of Options. Options granted under the Plan shall be
evidenced by agreements (which need not be identical) in such form and
containing such provisions which are consistent with the Plan as the Plan
Administrator shall from time to time approve. Such agreements may incorporate
all or any of the terms hereof by reference and shall comply with and be subject
to the following terms and conditions.
7.1 Number of Shares Subject to Option. Each Option agreement shall
specify the number of shares subject to the Option.
7.2 Option Price. The purchase price for any shares subject to an
Option granted under the Plan shall be determined by the Plan Administrator
at the time of grant in accordance with the requirements of this Section
7.2. In all instances, the purchase price for any shares subject to an
Option under the Plan shall be at least eighty-five percent (85%) of the
Fair Market Value of such shares on the date of grant; provided, however,
if such Option is an Incentive Stock Option, the purchase price for the
shares subject to such Option shall not be less than one hundred percent
(100%) of the Fair Market Value of such shares on the date of grant.
Notwithstanding the foregoing, with respect to any Option granted to any
person who owns more than ten percent (10%) of the total combined voting
power of all classes of outstanding stock of the Company, its parent or any
of it's subsidiaries, the purchase price of the shares subject to such
Option shall be at least one hundred ten percent (110%) of the Fair Market
Value of such shares on the date of grant.
7.3 Notice and Payment. Any exercisable portion of a Stock Option may
be exercised only by:
(a) delivery of a written notice to the Company, prior to the time
when such Stock Option becomes unexercisable under Section 7.4 hereof,
stating the number of shares being purchased and complying with all
applicable rules established by the Plan Administrator;
(b) payment in full of the exercise price of such Option by, as
applicable (i) cash or cheque for an amount equal to the aggregate
Option exercise price for the number of shares being purchased, (ii) in
the discretion of the Plan Administrator, upon such terms as the Plan
Administrator shall approve, a copy of instructions to a broker
directing such broker to sell the Common Stock for which such Option is
exercised, and to remit to the Company the aggregate exercise price of
such Options (a "cashless exercise"), or (iii) in the discretion of the
Plan Administrator, upon such terms as the Plan Administrator shall
approve, the Optionee may pay all or a portion of the purchase price for
the number of shares being purchased by tendering shares of the
Company's Common Stock owned by the Optionee, duly endorsed for transfer
to the Company, with a Fair Market Value on the date of delivery equal
to the aggregate purchase price of the shares with respect to which such
Stock Option or portion is thereby exercised (a "stock for stock
exercise");
(c) payment of the amount of tax required to be withheld (if any)
by the Company or any parent or subsidiary corporation as a result of
the exercise of a Stock Option. At the discretion of the Plan
Administrator, upon such terms as the Plan Administrator shall approve,
the Optionee may pay all or a portion of the tax withholding by (i) cash
or cheque payable to the Company, (ii) cashless exercise, (iii)
stock-for-stock exercise, or (iv) a combination of one or more of the
foregoing payment methods; and
A-3
<PAGE> 27
(d) delivery of a written notice to the Company requesting that the
Company direct the transfer agent to issue to the Optionee (or to his or
her designee) a certificate for the number of shares of Common Stock for
which the Option was exercised or, in the case of a cashless exercise,
for any shares that were not sold in the cashless exercise.
Notwithstanding the foregoing, the Company may, in its sole and absolute
discretion, extend and maintain, or arrange for the extension and
maintenance of, credit to any Optionee to finance the Optionee's
purchase of shares pursuant to exercise of any Stock Option, on such
terms as may be approved by the Plan Administrator, subject to
applicable regulations of the Federal Reserve Board and any other laws
or regulations in effect at the time such credit is extended.
7.4 Term of Option. No Option shall be exercisable after the
expiration of the earliest of (a) ten years after the date the option is
granted, (b) three months after the date the Optionee's employment with the
Company and its subsidiaries terminates if such termination is for any
reason other than disability or death, (c) one year after the date the
Optionee's employment with the Company and its subsidiaries terminates if
such termination is a result of death or disability; provided, however,
that the Option agreement for any Option may provide for shorter periods in
each of the foregoing instances. Notwithstanding the foregoing, in the case
of any Incentive Stock Option granted under the Plan to an employee who
owns stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company, its parent or any of its subsidiary
corporations, the term of such Option shall not be more than five years
from the date the Option is granted.
7.5 Exercise of Options. No Option shall be exercisable during the
lifetime of an Optionee by any person other than the Optionee. Subject to
the foregoing, the Plan Administrator shall have the power to set the time
or times within which each Option shall be exercisable and to accelerate
the time or times of exercise. Unless otherwise provided by the Plan
Administrator, each Option granted under the Plan shall become excisable on
a cumulative basis as to one-third ( 1/3) of the total number of shares
covered thereby at any time after one year from the date the Option is
granted and an additional one third ( 1/3) of such total number of shares
at any time after the end of each consecutive one-year period thereafter
until the Option has become exercisable as to all of such total number of
shares. Notwithstanding the foregoing, any Options granted under the Plan
shall become exercisable at a minimum rate of twenty percent (20%) per
year. To the extent that an Optionee has the right to exercise an Option
and purchase shares pursuant thereto, the Option may be exercised from time
to time by written notice to the Company, stating the number of shares
being purchased and accompanied by payment in full of the exercise price
for such shares.
7.6 No Transfer of Option. No Option shall be transferable by an
Optionee other than by will or the laws of decent and distribution.
7.7 Limit on Incentive Stock Options. The aggregate Fair Market Value
(determined at the time the Option is granted) of the Common Stock with
respect to which any Incentive Stock Options granted to an Optionee are
exercisable for the first time by an Optionee during any calendar year
(under all stock option plans of the Company and its subsidiaries) shall
not exceed $100,000. To the extent that the aggregate Fair Market Value
(determined at the time the Stock Option is granted) of the Common Stock
with respect to which Incentive Stock Options are exercisable for the first
time by an Optionee during any calendar year (under all Incentive Stock
Option plans of the Company and any parent or subsidiary corporations)
exceeds $100,000, such Stock Options shall be treated as Non-Qualified
Stock Options. The determination of which Stock Option shall be treated as
Non-Qualified Stock Options shall be made by taking Stock Options into
account in the order in which they were granted.
7.8 Restriction on Issuance of Shares. The issuance of Options and
shares shall be subject to compliance with all of the applicable
requirements of law with respect to the issuance and sale of securities,
including, without limitation, any required qualification under the
securities laws of the United States, Canada, any state of the United
States or any province of Canada. If an Optionee acquires shares of Common
Stock pursuant to the exercise of an Option at a time when the shares are
not registered pursuant to Section 12 of the Securities Exchange Act of
1934, as amended, the Plan Administrator, in
A-4
<PAGE> 28
its sole discretion, may require as a condition of issuance of shares
covered by the Option that the shares of Common Stock shall be subject to
restrictions on transfer. The Company may place a legend on the
certificates evidencing the shares, reflecting the fact that they are
subject to restrictions on transfer pursuant to the terms of this Section.
7.9 Investment Representation. Each Option shall contain and any
Optionee may be required, as a condition of the grant of the Option and the
issuance of shares covered by his or her Option, to represent that the
Option and the shares to be acquired pursuant to exercise of the Option
will be acquired for investment purposes only without a view to
distribution thereof; and in such case, the Company may place a legend on
the certificate evidencing the shares reflecting the fact that they were
acquired for investment and cannot be sold or transferred unless registered
under the Securities Act of 1933, as amended, or unless counsel for the
Company is satisfied that the circumstances of the proposed transfer do not
require such registration.
7.10 Rights as a Shareholder or Employee. An Optionee or transferee of
an Option shall have no right as a shareholder of the Company with respect
to any shares covered by any Option until the date of the issuance of a
share certificate for such shares. No adjustment shall be made for
dividends (ordinary or extraordinary, whether cash, securities, or other
property) or distributions or other rights for which the record date is
prior to the date such share certificate is issued, except as provided in
Section 7.13. Nothing in the Plan or in any Option agreement shall confer
upon any employee any right to continue in the employ of the Company or any
of its subsidiaries or interfere in any way with any right of the Company
or any subsidiary to terminate the Optionee's employment at any time.
7.11 No Fractional Shares. In no event shall the Company be required
to issue fractional shares upon the exercise of an Option.
7.12 Exercisability in the Event of Death. In the event of the death
of the Optionee, any Option or unexercised portion thereof granted to the
Optionee, to the extent exercisable by him or her on the date of death, may
be exercised by the Optionee's personal representatives, heirs, or legatees
subject to the provisions of Section 7.4 hereof.
7.13 Recapitalization or Reorganization of Company. Except as
otherwise provided herein, appropriate and proportionate adjustments shall
be made in the number and class of shares subject to the Plan, to the
Option rights granted under the Plan, including any formula grants or
automatic grant authorizations, and the exercise price of such Option
rights, in the event that the number of shares of Common Stock of the
Company are increased or decreased as a result of a stock dividend (but
only on Common Stock), stock split, reverse stock split, recapitalization,
reorganization, merger, consolidation, separation, or like change in the
corporate or capital structure of the Company. In the event there shall be
any other change in the number or kind of the outstanding shares of Common
Stock of the Company, or any stock or other securities into which such
Common Stock shall have been changed, or for which it shall have been
exchanged, whether by reason of a complete liquidation of the Company or a
merger, reorganization, or consolidation of the Company with any other
corporation in which the Company is not the surviving corporation or the
Company becomes wholly-owned subsidiary of another corporation, then if the
Plan Administrator shall, it its sole discretion, determine that such
change equitably requires an adjustment to shares of the Common Stock
currently subject to Options under the Plan, or to prices or terms of
outstanding Options, such adjustment shall be made in accordance with such
determination.
To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Plan
Administrator, the determination of which in that respect shall be final,
binding and conclusive. No right to purchase fractional shares shall result
from any adjustment of Options pursuant to this Section. In case of any
such adjustment, the shares subject to the option shall be rounded down to
the nearest whole share. Notice of any adjustment shall be given by the
Company to each Optionee whose Options shall have been so adjusted and such
adjustment (whether or not notice is given) shall be effective and binding
for all purposes of the Plan.
A-5
<PAGE> 29
In the event of a complete liquidation of the Company or a merger,
reorganization, or consolidation of the Company with any other corporation
in which the Company is not the surviving corporation or the Company
becomes a wholly-owned subsidiary of another corporation, any unexercised
Options theretofore granted under the Plan shall be deemed cancelled unless
the surviving corporation in any such merger, reorganization, or
consolidation elects to assume the Options under the Plan or to issue
substitute Options in place thereof; provided, however, that,
notwithstanding the foregoing, if such Options would be cancelled in
accordance with the foregoing, the Optionee shall have the right,
exercisable during a ten-day period ending on the fifth day prior to such
liquidation, merger, or consolidation, to exercise such Option in whole or
in part without regard to any installment exercise provisions in the Option
Agreement.
7.14 Modification, Extension, and Renewal of Options. Subject to the
terms and conditions and within the limitations of the Plan, the Plan
Administrator may modify, extend, or renew outstanding Options granted
under the Plan, and accept the surrender of outstanding Options (to the
extent not theretofore exercised). The Plan Administrator shall not,
however, modify any outstanding Incentive Stock Option in any manner which
would cause the Option not to qualify as an Incentive Stock Option within
the meaning of Section 422 of the Code. Notwithstanding the foregoing, no
modification of an Option shall, without the consent of the Optionee, alter
or impair any rights of the Optionee under the Option. However, a
termination of the Option in which the Optionee receives a cash payment
equal to the difference between the Fair Market Value and the exercise
price for all shares subject to exercise under any outstanding Option shall
not alter or impair any rights of the Optionee.
7.15 Other Provisions. Each Option may contain such other terms,
provisions, and conditions not inconsistent with the Plan as may be
determined by the Plan Administrator.
8. Termination or Amendment of the Plan. The Board may at any time
terminate or amend the Plan; provided that, without approval of the holders of a
majority of the shares of Common Stock of the Company represented and voting at
a duly held meeting at which a quorum is present (which shares voting
affirmatively also constitute a majority of the required quorum) or by the
written consent of a majority of the outstanding shares of Common Stock, there
shall be, except by operation of the provisions of Section 7.13, no increase in
the total number of shares covered by the Plan, no change in the class of
persons eligible to receive Options granted under the Plan, and no extension of
the term of the Plan beyond ten (10) years after the earlier of the date the
Plan is adopted or the date the Plan is approved by the Company's shareholders;
and provided further that, without the consent of the Optionee or as provided by
Section 7.14 hereof, no amendment may adversely affect any then outstanding
Option or any unexercised portion thereof.
9. Indemnification. To the extent permitted by law, the Certificate of
Incorporation of the Company, the Bylaws of the Company and any indemnity
agreements between the Company and its directors or employees, between the
Company and its directors or employees, the Company shall indemnify each member
of the Board and of the Plan Administrator, and any other employee of the
Company with duties under the Plan, against expenses (including any amount paid
in settlement) reasonably incurred by him in connection with any claims against
him by reason of his conduct in the performance of his duties under the Plan.
10. Effective Date and Term of Plan. This Plan shall become effective (the
"Effective Date") on June 29, 1998. No options granted under the Plan will be
effective unless the Plan is approved by shareholders of the Company within 12
months of the date of adoption. Unless sooner terminated by the Board in its
sole discretion, the Plan will expire on June 28, 2008.
A-6
<PAGE> 30
Amended as of November 17, 1999.
FUTURELINK CORP.
By: /s/ Raghu Kilambi
------------------------------------
Raghu Kilambi
Chief Financial Officer
By: /s/ Kyle B.A. Scott
------------------------------------
Kyle B.A. Scott
General Counsel & Secretary
A-7
<PAGE> 31
EXHIBIT B
FIRST AMENDMENT TO SECOND AMENDED AND
RESTATED STOCK OPTION PLAN
OF
FUTURELINK CORP.
A DELAWARE CORPORATION
Sections 6 and 7.4 of the Second Amended and Restated Stock Option Plan of
this Company are hereby amended to read in their entirety as follows:
"6. Shares Subject to Options. The stock available for grant of Options
under the Plan shall be shares in the Company's authorized but unissued or
reacquired, Common Stock. The aggregate number of shares which may be issued
pursuant to exercise of Options granted under the Plan, as amended, shall not
exceed twenty percent (20%) of the shares of Common Stock, calculated on a fully
diluted basis not including Common Stock underlying outstanding stock options,
at the time of each grant (subject to adjustment as provided in Section 7.13
hereof) including shares previously issued under the Plan; provided, however,
that at no time shall the total number of shares of Common Stock issuable upon
the exercise of all outstanding options and the total number of shares of Common
Stock provided for under any stock bonus or similar plan of the Company exceed
the applicable percentage as calculated in accordance with the conditions and
exclusions of Rule 260.140.45 of Title 10 of the California Code of Regulations,
based on the shares of Common Stock of the Company which are outstanding at the
time the calculation is made. The maximum number of shares with respect to which
options may be granted to any employee in any one calendar year shall be 500,000
shares (subject to adjustment as provided in Section 7.13 hereof). The maximum
number of shares with respect to which Incentive Stock Options may be granted
under this Plan shall not exceed 2,000,000 in the aggregate (subject to
adjustment as provided in Section 7.13 hereof). In the event that any
outstanding Option under the Plan for any reason expires, or is terminated, the
shares of Common Stock allocable to the unexercised portion of the Option shall
again be available for Options under the Plan as if no Option had been granted
with respect to such shares.
7.4 Term of Option. No Option shall be exercisable after the expiration of
the earliest of (a) ten years after the date the option is granted, (b) three
months after the date the Optionee's employment with the Company and its
subsidiaries terminates if such termination is for any reason other than
disability or death, (c) one year after the date the Optionee's employment with
the Company and its subsidiaries terminates if such termination is a result of
death or disability; provided, however, that the Option agreement for any Option
may provide for shorter periods in each of the foregoing instances, except that
such shorter periods shall not be less than thirty (30) days in the event of
termination of employment for any reason other than death or disability and not
less than six (6) months in the event of termination as a result of death or
disability. Notwithstanding the foregoing, in the case of any Incentive Stock
Option granted under the Plan to an employee who owns stock possessing more than
10% of the total combined voting power of all classes of stock of the Company,
its parent or any of its subsidiary corporations, the term of such Option shall
not be more than five years from the date the Option is granted."
B-1
<PAGE> 32
EXHIBIT C
SECOND AMENDMENT TO SECOND AMENDED AND RESTATED STOCK OPTION PLAN
OF
FUTURELINK CORP.
A DELAWARE CORPORATION
The following new Section 11 is added to the end of the Second Amended and
Restated Stock Option Plan:
"11. Deferred Shares:
11.1 Elections to Defer. The Plan Administrator shall have the
discretion to permit deferred compensation elections hereunder by select
employees, directors, and consultants of the Company or any of its
subsidiaries, who in all cases must be members of a select group of
management or highly compensated employees (within the meaning of the
Employees' Retirement Income Security Act of 1973, as amended). Each
eligible individual who is eligible to make such an election (referred to
herein as an "Optionee" solely because the Plan uses that term to
generically refer to all participating individuals) may irrevocably elect
to forego the receipt of cash compensation that would otherwise be paid in
such form or forms as the Plan Administrator may authorize for deferral. In
lieu of such cash compensation, the Optionee shall be entitled to have
Shares ("Deferred Shares") credited pursuant to Section 11.3 hereof.
11.2 Timing and Manner of Election. Any election pursuant to this
Section shall be made on a form provided by the Plan Administrator (the
"Election Form"). Each Election Form shall take effect on the January 1st
after its delivery to the Plan Administrator, provided that any election
made on or before June 23, 2000 shall take effect July 1, 2000. The Plan
Administrator shall in all case have the discretion to reject any election
during the five business day period after its delivery to the Plan
Administrator, in which case the election will be treated as null and void
provided the Plan Administrator sends the Optionee a written notice
explaining why the Election Form is invalid. In addition, Election Forms
shall be ineffective with respect to any compensation to which an Optionee
has a legal right before the effective date of the Election Form).
11.3 Quarterly Credits. As soon as practicable after the end of each
calendar quarter beginning on or after July 1, 2000, the Plan Administrator
shall make a credit hereunder to an internal bookkeeping account that the
Plan Administrator establishes and maintains in the name of each Optionee
who has filed an Election Form. The Plan Administrator shall credit each
Optionee's account with a number of Deferred Shares having a Fair Market
Value on the date of the credit equal to the sum of:
(I) 110% of any cash compensation that the Optionee defers
pursuant to Section 11.1 during the calendar quarter, and
(II) any cash dividends paid with respect to Shares equal in
number to the Deferred Shares credited to the Optionee's account at the
end of the immediately preceding calendar quarter.
11.4 Distributions. The Company shall hold each Optionee's Deferred
Shares for distribution in the form of freely-transferable and unencumbered
Shares, with distributions made to the Optionee in five substantially equal
annual installments before the last day of each of the five fiscal years of
the Company that end after the date on which the Optionee's service
terminates, unless (I) the Optionee has properly executed a form (the
"Distribution Election Form") provided by the Plan Administrator for the
purpose of controlling the time and manner for Share distributions, which
form shall not permit more than 50% of an Optionee's Deferred Shares to be
distributed within one year of the Optionee's termination of service with
the Company for any reason other than death, and (II) the Plan
Administrator has received the Optionee's Distribution Election Form either
more than 90 days before a Change in Control or more than one year before
the date on which the Participant's service terminates for any reason.
Fractional Shares shall be cancelled upon a Participant's receipt of their
fractional Market Value.
C-1
<PAGE> 33
Notwithstanding the foregoing, an Optionee shall immediately forfeit
50% of the maximum number of Deferred Shares ever credited to his or her
Account upon a rationally-based determination by the Plan Administrator
that the Optionee has materially violated any provision of any
non-competition or non-disclosure agreement that the Optionee has entered
into with the Company.
11.5 Rights regarding Deferred Shares. The right of an Optionee to
whom Deferred Shares have been credited hereunder shall be solely an
unsecured claim against the general assets of the Company. The Optionee
shall not have any voting or other rights or claims in any specific assets,
shares, or other funds of the Company, until Shares are distributed
pursuant to Section 11.4.
11.6 Stockholder Approval; Other Restrictions. No Shares shall be
distributed hereunder (I) until this Section receives stockholder approval
by vote of a majority of the votes cast at a duly held meeting of the
Company's stockholders, and (II) unless and until all of the requirements
of all applicable law and regulations shall have been fully complied with.
A failure to receive stockholder approval of this Section will invalidate
any Election Form filed hereunder, in which case cash plus earnings accrued
at 10% per annum shall be paid to each Optionee whose Election Form is
invalidated.
11.7 Incorporation of Other Plan Terms and Limitations. The stock
available for Option grants under Section 6 of the Plan shall be reduced by
any Common Stock subject to Deferred Share Awards, with the limitation
therein being applicable to all Awards. In addition, references to Options
within the following provisions of the Plan shall refer with equal
application to Deferred Shares granted pursuant to this Section: Plan
Sections 4, 6, 7.8, 7.9, 7.10, 7.11, 7.13, 7.14, 8, and 9."
C-2
<PAGE> 34
APPENDIX A
Proxy card states the following:
FUTURELINK CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
JUNE 27, 2000
Philip R. Ladouceur, and Raghu N. Kilambi and each of them, with full
power of substitution, are hereby authorized to represent and to vote as
directed on this proxy the shares of common stock of FutureLink Corp. held of
record by the undersigned at the close of business on May 26, 2000, at the
Annual Meeting of Stockholders to be held on June 27, 2000, and at any
adjournments or postponements, as if the undersigned were present and voting at
the meeting.
The shares represented by this proxy will be voted as directed by the
stockholder. Where no direction is given when the duly executed proxy is
returned, such shares will be voted FOR each of the proposals set forth on this
proxy.
Whether or not you expect to attend the meeting, you are urged to
execute and return this proxy, which may be revoked at any time prior to its
use.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
1. ELECTION OF NOMINEES PHILIP R. LADOUCEUR, GLEN C. HOLMES, RAGHU N.
KILAMBI, F. BRYSON FARRILL, MICHAEL S. FALK, TIMOTHY P. FLYNN, GERALD A.
POCH AND JAMES P. MCNIEL AS DIRECTORS OF FUTURELINK CORP.
FOR all nominees [ ]
WITHHOLD AUTHORITY to vote for all nominees [ ]
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, WRITE HIS NAME IN THE
SPACE PROVIDED OR STRIKE THROUGH THE NAME(S): __________________________
2. APPROVAL OF THE ADOPTION OF THE SECOND AMENDED AND RESTATED STOCK OPTION
PLAN AND THE FIRST AND SECOND AMENDMENTS TO THE SECOND AMENDED AND
RESTATED STOCK OPTION PLAN
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. RATIFICATION AND APPROVAL OF ERNST & YOUNG LLP AS INDEPENDENT PUBLIC
ACCOUNTANTS FOR FISCAL 2000
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
NOTE: Signatures should agree with the names stenciled hereon. When signing as
executor, administrator, trustee, guardian or attorney, please give the title as
such. For joint accounts or co-fiduciaries, all joint owners or co-managers
should sign.
Dated: , 2000
---------------
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