SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
File No. 0-17973
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to section240.14a-11(c) or section240.14a-12
I-LINK INCORPORATED
(Name of Registrant As Specified in its Charter)
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:
N/A
2) Aggregate number of securities to which transaction applies:
N/A
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
N/A
4) Proposed maximum aggregate value of transaction:
N/A
5) Total fee paid: $______________
[ ] Fee paid previously with preliminary materials.
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[I-Link Incorporated Logo]
13751 S. Wadsworth Park Drive
Suite 200
Draper, Utah 84020
John W. Edwards
Chairman, Chief Executive
Officer and President
March 10, 1999
Dear Stockholder:
It is my pleasure to invite you to a Special Meeting of Stockholders of I-
Link Incorporated.
We will hold the meeting on Wednesday, April 14, 1999 at 10:00 a.m. at the
Marriott Courtyard Hotel, 10701 South Holiday Park Drive, Sandy, Utah
84070. In addition to the formal items of business, I will be available at
the meeting to answer your questions. The Special Meeting is not being
held in lieu of our annual meeting; that will be held as soon as reasonably
possible after financial statements for 1998 are prepared for distribution
to you and other stockholders. This booklet includes the notice of the
Special Meeting and the proxy statement. The proxy statement describes the
business that we will conduct at the meeting, and provides information
about I-Link.
Stockholders of record at the close of business on March 1, 1999 may vote
at the meeting. Your vote is important. Whether or not you plan to attend
the meeting, please complete, date, sign and return the enclosed proxy card
promptly. If you attend the meeting and prefer to vote in person, you may
do so.
We look forward to seeing you at the meeting.
Very truly yours,
John W. Edwards
<PAGE>
[I-Link Incorporated Logo]
Notice of Special Meeting of Stockholders
Date: Wednesday, April 14, 1999
Time: 10:00 a.m.
Place: Marriott Courtyard
10701 South Holiday Park Dr.
Sandy, Utah 84070
Dear Stockholders:
At our Special Meeting we will ask you to:
1. Approve a plan of financing that includes the issuance of warrants to
purchase up to 11,000,000 shares of common stock, with a variable
exercise price ranging from $1.25 to $2.78 per share, to Winter Harbor,
L.L.C. in the event that management elects not to repay certain debt
owing to Winter Harbor on April 26, 1999. Any unsatisfied obligations
under such debt will still come due on the October 31, 1999 maturity
date even if the warrants are issued;
2. Approve an amendment to the Articles of Incorporation increasing the
authorized common stock from 75,000,000 shares to 150,000,000 shares to
allow for the issuance of the warrants in the first proposal and a
rights offering of convertible preferred stock to be conducted in
connection with the Winter Harbor Financing Arrangement; and
3. Transact any other business that may properly be presented at the
Special Meeting.
If you were a stockholder of record at the close of business on March 1,
1999, you may vote at the Special Meeting.
By Order of the Board of Directors,
David E. Hardy
Secretary
Draper, Utah
March 10, 1999
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TABLE OF CONTENTS
INFORMATION ABOUT THE SPECIAL MEETING AND VOTING . . . . . . . . . .1
Why Did You Send Me This Proxy Statement? . . . . . . . . . . .1
How Many Votes Do I Have? . . . . . . . . . . . . . . . . . . .1
What Proposals Will Be Addressed At The Special Meeting?. . . .1
How Do I Vote In Person?. . . . . . . . . . . . . . . . . . . .2
Why Would the Special Meeting Be Postponed? . . . . . . . . . .2
How Do I Vote By Proxy? . . . . . . . . . . . . . . . . . . . .2
May I Revoke My Proxy?. . . . . . . . . . . . . . . . . . . . .2
Where Are I-Link's Principal Executive Offices? . . . . . . . .3
What Vote Is Required to Approve Each Proposal? . . . . . . . .3
Are There Any Dissenters' Rights of Appraisal?. . . . . . . . .3
Who Bears the Cost of Soliciting Proxies? . . . . . . . . . . .3
INFORMATION ABOUT I-LINK STOCK OWNERSHIP . . . . . . . . . . . . . .3
Which Stockholders Own at Least 5% of I-Link? . . . . . . . . .3
How Much Stock is Owned by Directors and Executive Officers?. .5
Do Any of the Officers and Directors Have an Interest in the
Matters to be Acted Upon? . . . . . . . . . . . . . . . . . . .6
DISCUSSION OF PROPOSALS RECOMMENDED BY THE BOARD . . . . . . . . . .7
Proposal 1: Approval of a plan of financing that includes
the issuance of warrants to purchase up to 11,000,000 shares
of common stock, with a variable exercise price ranging from
$1.25 to $2.78 per share, to Winter Harbor in the event that
management elects not to repay certain debt owing to Winter
Harbor on April 26, 1999. Any unsatisfied obligations under
such debt will still come due on the October 31, 1999
maturity date even if the warrants are issued . . . . . . . . .7
Proposal 2: Approve an amendment to the Articles of
Incorporation increasing the authorized common stock from
75,000,000 shares to 150,000,000 shares to allow for the
issuance of the warrants in the first proposal and a rights
offering of convertible preferred stock to be conducted in
connection with the Winter Harbor Financing Arrangement . . . .10
Other Proposed Action . . . . . . . . . . . . . . . . . . . . .11
ATTACHMENT: PROXY CARD
<PAGE>
I-LINK INCORPORATED
Proxy Statement
Dated March 10, 1999
Special Meeting of Stockholders
INFORMATION ABOUT THE SPECIAL MEETING AND VOTING
Why Did You Send Me This Proxy Statement?
We sent you this proxy statement and the enclosed proxy card because the
Board of Directors of I-Link Incorporated, a Florida corporation, is
soliciting your proxy vote at a Special Meeting of Stockholders. This proxy
statement summarizes the information you need to know to vote intelligently
at the Special Meeting. However, you do not need to attend the Special
Meeting to vote your shares. Instead you may simply complete, sign and
return the enclosed proxy card.
How Many Votes Do I Have?
We will be sending this proxy statement, the attached Notice of Special
Meeting and the enclosed proxy card on or about March 10, 1999 to all
stockholders. Stockholders who owned I-Link common stock at the close of
business on March 1, 1999 (the "Record Date") are entitled to one vote for
each share of common stock they held on that date, in all matters properly
brought before the Special Meeting. Similarly, holders of Series M preferred
stock are entitled to vote with the common stock on an as-converted basis.
On the Record Date, the following classes of stock were issued and
outstanding, and had the voting powers indicated. Each share of Common Stock
is entitled to one vote and each share of Series M preferred stock is
entitled to approximately 1,540.6 votes.
Shares Equivalent
Class of Stock Outstanding Votes
- ----------------------------- --------------- --------------
Common stock 19,529,029 19,529,029
Class C preferred stock 40,218 0(non-voting)
Series F preferred stock 859 0(non-voting)
Series M preferred stock 4,400 6,778,524
----------
Total Votes at Special Meeting of Stockholders: 26,307,553
What Proposals Will Be Addressed At The Special Meeting?
We will address the following proposals at the Special Meeting:
1. The approval of a plan of financing that includes the issuance of
warrants to purchase up to 11,000,000 shares of common stock, with a
variable exercise price ranging from $1.25 to $2.78 per share, to Winter
Harbor in the event that management elects not to repay certain debt
owing to Winter Harbor on April 26, 1999. Any unsatisfied obligations
under such debt will still come due on the October 31, 1999 maturity
date even if the warrants are issued;
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2. The approval of an amendment to the Articles of Incorporation increasing
the authorized common stock from 75,000,000 shares to 150,000,000 shares
to allow for the issuance of the warrants in the first proposal and a
rights offering of convertible preferred stock to be conducted in
connection with the Winter Harbor Financing Arrangement; and
3. The transaction of such other business as may properly come before the
meeting or any adjournment thereof.
How Do I Vote In Person?
If you plan to attend the Special Meeting in Sandy, Utah on Wednesday,
April 14, 1999, or at a later date due to postponement, and vote in person,
we will give you a ballot when you arrive. However, if your shares are held
in the name of your broker, bank or other nominee, you must bring a power of
attorney executed by the broker, bank or other nominee that owns the shares
of record for your benefit and authorizing you to vote the shares.
Why Would the Special Meeting Be Postponed?
The Special Meeting will be postponed if a quorum is not present on
April 14, 1999. If more than half of all of the shares of stock entitled to
vote at the Special Meeting are present in person or by proxy, a quorum will
be present and business can be transacted at the Special Meeting. If a
quorum is not present, the Special Meeting may be postponed to a later date
when a quorum is obtained. Abstentions and broker non-votes are counted for
purposes of determining the presence or absence of a quorum for the
transaction of business but are not counted as an affirmative vote for
purposes of determining whether a proposal has been approved.
How Do I Vote By Proxy?
Whether you plan to attend the Special Meeting or not, we urge you to
complete, sign and date the enclosed proxy card and return it promptly in the
envelope provided. Returning the proxy card will not affect your right to
attend the Special Meeting and vote.
If you properly fill in your proxy card and send it to us in time to
vote, your "proxy" (one of the individuals named on your proxy card) will
vote your shares as you have directed. If you sign the proxy card but do not
make specific choices your proxy will vote your shares as recommended by the
Board of Directors as follows:
* "FOR" approval of a plan of financing that includes the issuance of
warrants to purchase up to 11,000,000 shares of common stock, with a
variable exercise price ranging from $1.25 to $2.78 per share, to Winter
Harbor in the event that management elects not to repay certain debt
owing to Winter Harbor on April 26, 1999. Any unsatisfied obligations
under such debt will still come due on the October 31, 1999 maturity
date even if the warrants are issued; and
* "FOR" approval of an amendment to the Articles of Incorporation increasing
the authorized common stock from 75,000,000 shares to 150,000,000 shares
to allow for the issuance of the warrants in the first proposal and a
rights offering of convertible preferred stock to be conducted in
connection with the Winter Harbor Financing Arrangement.
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If any other matter is presented, your proxy will vote your shares in
accordance with his or her best judgment. At the time this proxy statement
went to press, we knew of no matters that needed to be acted on at the
Special Meeting, other than those discussed in this proxy statement.
May I Revoke My Proxy?
If you give a proxy, you may revoke it at any time before it is
exercised. You may revoke your proxy in any one of three ways:
* You may send in another proxy with a later date.
* You may notify I-Link in writing (by you or your attorney authorized
in writing, or if the stockholder is a corporation, under its
corporate seal, by an officer or attorney of the corporation) at our
principal executive offices before the Special Meeting, that you have
revoked your proxy.
* You may vote in person at the Special Meeting.
Where Are I-Link's Principal Executive Offices?
Our principal executive offices are located at 13751 S. Wadsworth Park
Drive, Draper, Utah 84020.
What Vote Is Required to Approve Each Proposal?
Proposal 1: Approval of a plan of financing that includes the issuance
of warrants to purchase up to 11,000,000 shares of common stock, with a
variable exercise price ranging from $1.25 to $2.78 per share, to Winter
Harbor in the event that management elects not to repay certain debt owing to
Winter Harbor on April 26, 1999. Any unsatisfied obligations under such debt
will still come due on the October 31, 1999 maturity date even if the
warrants are issued.
Proposal 1 must be approved by a majority of the votes cast.
Proposal 2: Approval of an Amendment to the Articles of Incorporation
Increasing the Authorized Common Stock from 75,000,000 Shares to 150,000,000
Shares to allow for the issuance of the warrants in the first proposal and a
rights offering of convertible preferred stock to be conducted in connection
with the Winter Harbor Financing Arrangement.
The affirmative vote of a majority of the outstanding shares of common
stock and the Series M preferred stock, voting on an as-converted basis, is
required for approval of Proposal 2. If you "abstain" from voting, it has
the same effect as if you voted "against" this proposal.
Are There Any Dissenters' Rights of Appraisal?
The Board of Directors has not proposed any action for which the laws of
the State of Florida, the Articles of Incorporation or By-Laws of I-Link
provide a right to a stockholder to dissent and obtain payment for shares.
Who Bears the Cost of Soliciting Proxies?
I-Link will bear the cost of soliciting proxies in the accompanying form
and will reimburse brokerage firms and others for those expenses involved in
forwarding proxy materials to beneficial owners and soliciting their
execution.
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INFORMATION ABOUT I-LINK STOCK OWNERSHIP
Which Stockholders Own at Least 5% of I-Link?
The common stock and the Series M preferred stock, which votes on an as-
converted basis with the common stock, constitute the only voting securities
of I-Link. Each share of Class C preferred stock is convertible, at the
option of its holder, into 24 shares of common stock, and each share of
Series M preferred stock is convertible, at the option of its holder, into
approximately 1,540.6 shares of common stock (which figure includes
conversion price adjustments and the allowance for dividends accrued but not
paid on the Series M preferred stock, through the Record Date). The following
table shows, as of as the Record Date and to the best of our knowledge, all
persons we know to be "beneficial owners" of more than 5% of the common
stock, or "beneficial owners" of a sufficient number of shares of Class C
preferred stock, Series F preferred stock or Series M preferred stock to be
converted into at least 5% of the common stock. JNC Opportunity Fund Ltd.
("JNC") is the only holder of Series F preferred stock. JNC is not listed on
the table below because, under the terms of the Series F preferred stock, JNC
may not convert shares of Series F preferred stock (or receive related
dividends in common stock) to the extent that the number of shares of common
stock beneficially owned by it and its affiliates after such conversion or
dividend payment would exceed 4.999% of the issued and outstanding shares of
common stock following such conversion. This limitation applies to the number
of shares of common stock held at any one time and does not prevent JNC from
converting some of its shares of Series F preferred stock, selling the common
stock received, then, subject to the aforementioned limitation, converting
additional shares of Series F preferred stock. The 4.999% limitation may be
waived by JNC upon 75 days notice to the Company.) However, if no effect
were given to the 4.999% limitation, then JNC would be deemed to be the
beneficial owner of approximately 4,157,350 shares of common stock, or 17.6%
of the then-outstanding common stock of I-Link. On the Record Date, there
were 19,529,029 shares of common stock issued and outstanding, 40,218 shares
of Class C preferred stock issued and outstanding, 859 shares of Series F
preferred stock issued and outstanding and 4,400 shares of Series M preferred
stock issued and outstanding.
Number of % of Common
Shares Stock
Name and Address Beneficially Beneficially
of Beneficial Owner(1) Title of Class Owned Owned(2)
- ------------------------------ ----------------- ------------- ------------
John W. Edwards Common Stock 1,288,328(3) 6.4%
13751 S. Wadsworth Park Drive
Draper, UT 84020
Clay Wilkes Common Stock 1,262,976(4) 6.5%
1077 E. Duffer Lane
North Salt Lake City, UT 84054
Winter Harbor, L.L.C. Common Stock 44,139,479(5) 69.3%
c/o First Media, L.P. Series M 4,400
11400 Skipwith Lane Preferred Stock
Potomac, MD 20854
- ---------------
(1) Unless noted, all of such shares of common stock are owned of
record by each person or entity named as beneficial owner and such
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person or entity has sole voting and dispositive power with respect to
the shares of common stock owned by each of them.
(2) As to each person or entity named as beneficial owners, such
person's or entity's percentage of ownership is determined by assuming
that any options or convertible securities held by such person or entity
which are exercisable or convertible within 60 days from the date hereof
have been exercised or converted, as the case may be.
(3) Represents 833,330 shares of common stock subject to the vested
portion of Mr. Edwards' option to purchase 1,000,000 shares of common
stock and 454,998 shares of common stock subject to warrants and other
options.
(4) Includes 375,000 shares of common stock which represents the
exercisable portion of an option to purchase 1,500,000 shares of Common
Stock.
(5) Includes 6,778,524 shares of common stock issuable upon conversion
of Series M preferred stock, 3,820,955 shares of common stock issuable
upon conversion of Series M preferred stock which may be issued on
conversion of promissory notes held by the named stockholder, and
18,640,000 shares of common stock issuable upon exercise of warrants. In
addition, I-Link includes herein 5,000,000 shares of common stock
issuable upon exercise of warrants which the named stockholder will be
entitled to receive should it convert its promissory notes to common
stock, and 9,900,000 shares of common stock issuable under warrants to
be issued to Winter Harbor in the event that a bridge loan is not repaid
by April 26, 1999. Winter Harbor is owned by First Media, L.P., a
private media and communications company which is a private investment
principally of Richard E. Marriott and his family. I-Link's general
counsel, David E. Hardy, is a brother of Ralph W. Hardy, Jr. who is
general counsel and a minority equity holder in Winter Harbor. David E.
Hardy has no ownership in or association with Winter Harbor. Thomas A.
Keenan's wife has an interest in First Media, L.P. See Directors and
Officers Table below, Footnote 6.
How Much Stock is Owned by Directors and Executive Officers?
The following table shows, as of the Record Date, the common stock and
any preferred stock owned by each director and executive officer. As of the
Record Date, all of the present directors, as a group of five persons, own
beneficially 2,017,829 shares (9.7% of the total outstanding shares) and all
of our present directors and executive officers, as a group of eight persons,
own beneficially 3,500,896 shares (15.6% of the total outstanding shares) of
our common stock. We believe that such officers and directors intend to vote
their shares for each of the proposals set forth herein. To the knowledge of
management, as of the Record Date, John W. Edwards is the only executive
officer or director who owns beneficially 5% or more of our outstanding
shares of common stock.
Number of % of Common
Shares Stock
Name and Address Beneficially Beneficially
of Beneficial Owner(1) Title of Class Owned Owned(2)
- ------------------------------ ----------------- ------------- ------------
John Ames Common Stock 1,000 *
David Bradford Common Stock 0 0%
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Number of % of Common
Shares Stock
Name and Address Beneficially Beneficially
of Beneficial Owner(1) Title of Class Owned Owned(2)
- ------------------------------ ----------------- ------------- ------------
Joseph A. Cohen Common Stock 381,000(3) 2.0%
Class C 3,000
Preferred Stock
John W. Edwards Common Stoc 1,288,328(4) 6.4%
David E. Hardy Common Stock 827,388(5) 4.2%
Thomas A. Keenan Common Stock 105,000(6) *
Karl S. Ryser, Jr. Common Stock 654,679(7) 3.3%
Henry Y.L. Toh Common Stock 243,501(8) 1.3%
All Executive Officers and Common Stock 3,500,896(9) 15.6%
Directors as a Group (8 people) Class C 3,000
Preferred Stock
- ----------------
* Indicates less than one percent.
(1) Unless noted, all of such shares of common stock are owned of record by
each person or entity named as beneficial owner and such person or entity
has sole voting and dispositive power with respect to the shares of common
stock owned by each of them.
(2) As to each person or entity named as beneficial owners, such person's or
entity's percentage of ownership is determined by assuming that any options
or convertible securities held by such person or entity which are
exercisable or convertible within 60 days from the date hereof have been
exercised or converted, as the case may be.
(3) Includes 309,000 shares of common stock issuable pursuant to options and
72,000 shares of common stock issuable to the Leslie Group, Inc. upon
conversion of 3,000 shares of Class C preferred stock held of record by
Leslie Group, Inc., of which Mr. Cohen is President.
(4) Represents 833,330 shares of common stock subject to the vested portion
of Mr. Edwards' option to purchase 1,000,000 shares of common stock and
454,998 shares of common stock subject to warrants and other options.
(5) Includes 823,388 shares of common stock issuable pursuant to options and
warrants.
(6) Includes 35,000 shares of common stock subject to options and 70,000
shares of common stock held of record by members of Mr. Keenan's
immediately family. Mr. Keenan serves on the Board of Directors as the
designee of Winter Harbor. Mr. Keenan's wife is the beneficiary of a trust
which owns non-voting stock in the corporate general partner of First
Media, L.P., the parent of Winter Harbor. For further information about
Winter Harbor, see "Discussion of Proposals Recommended By The Board -
Proposal 1." Neither Mr. Keenan nor his wife has dispositive power or
voting control over these securities of I-Link held by Winter Harbor. See
Footnote 5 of the previous table. Mr. Keenan disclaims beneficial
ownership of the securities held by Winter Harbor.
(7) Represents shares of common stock issuable pursuant to options and
warrants.
(8) Represents shares of common stock issuable pursuant to options. Does
not include shares held of record by Four M International, Ltd., of which
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Mr. Toh is a director. Mr. Toh disclaims any beneficial ownership of such
shares.
(9) Represents 75,000 shares of common stock issued, 3,353,896 shares of
common stock which may be obtained pursuant to options and warrants
exercisable within 60 days of the date hereof and 72,000 shares of common
stock into which 3,000 shares of Class C preferred stock are convertible.
Do Any of the Officers and Directors Have an Interest in the Matters to be
Acted Upon?
Mr. Thomas A. Keenan, a Class I Director, may be deemed to have an
indirect interest in the outcome of Proposal 1. Mr. Keenan's wife is a
beneficiary of a trust which owns non-voting stock in the corporate general
partner of First Media, L.P., the parent of Winter Harbor. For further
information about Winter Harbor and Proposal 1 see "Discussion of Proposals
Recommended By The Board - Proposal 1" and "How Much Stock is Owned by
Directors and Executive Officers?"
DISCUSSION OF PROPOSALS RECOMMENDED BY THE BOARD
PROPOSAL 1:
APPROVAL OF A PLAN OF FINANCING THAT INCLUDES THE ISSUANCE OF WARRANTS TO
PURCHASE UP TO 11,000,000 SHARES OF COMMON STOCK, WITH A VARIABLE EXERCISE
PRICE RANGING FROM $1.25 TO $2.78 PER SHARE, TO WINTER HARBOR
IN THE EVENT THAT MANAGEMENT ELECTS NOT TO REPAY CERTAIN
DEBT OWING TO WINTER HARBOR ON APRIL 26, 1999. ANY UNSATISFIED
OBLIGATIONS UNDER SUCH DEBT WILL STILL COME DUE ON THE
OCTOBER 31, 1999 MATURITY DATE EVEN IF THE WARRANTS ARE ISSUED
On January 15, 1999, I-Link entered into an agreement with Winter Harbor
for additional financing (the "Winter Harbor Financing Arrangement") which
includes, among other features, the issuance of warrants and a rights
offering that will be highly dilutive to current shareholders. The Winter
Harbor Financing Arrangement consists of an $8,000,000 bridge loan facility
(the "Bridge Loan") and a $3,000,000 standby letter of credit (the "Letter of
Credit") to secure additional capital leases of equipment and telephone lines
relative to the expansion of our telecommunications network. In addition,
Winter Harbor may receive warrants to purchase up to 11,000,000 shares of
common stock. As of March 5, 1999, the amount borrowed under the Bridge Loan
was $8,041,712, which entitles Winter Harbor to warrants to purchase 804,171
shares of common stock, as of the same date I-Link had not drawn on the
Letter of Credit.
I-Link also intends to issue up to 20,000 shares of a new series of
preferred stock (the Series N preferred stock) in a registered offering.
Under the offering, I-Link will distribute to each record holder of common or
preferred stock, free of charge, non-transferable rights to purchase one
Series N preferred stock for approximately every 1,554 shares held of common
stock or preferred stock on an as-converted basis. Each share of Series N
preferred stock may be purchased for $1,000. On January 15, 1999, I-Link
filed a registration statement on Form S-2 to register the Series N preferred
stock to be sold in the offering. I-Link will commence the offering as soon
as practicable after the SEC declares the registration statement effective.
The registration is subject to SEC review and comment, therefore, the time of
commencement of the rights offering cannot be determined at this time. This
solicitation is not an offer to sell or a solicitation of an offer to sell
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shares of Series N preferred stock or a solicitation of an offer to buy
shares of Series N preferred stock. The offering will only be made by means
of a prospectus, which is part of I-Link's registration statement, and a copy
of the prospectus will be mailed to all registered holders of common stock
and preferred stock as of the record date for the rights offering.
Winter Harbor has agreed it will exchange the Bridge Loan debt and
interest, plus any amounts represented by the Letter of Credit, into shares
of Series N preferred stock, to the extent of any rights available to it. I-
Link anticipates that by the time the rights are offered it will have
obligations of approximately $8,200,000 including accrued interest under the
Bridge Loan (but no draws against the Letter of Credit); thus Winter Harbor
will be obligated to exchange that amount into approximately 8,200 shares of
Series N preferred stock. Winter Harbor will have the right to register the
resale of those shares in the offering. (As a stockholder, Winter Harbor will
automatically receive rights to purchase 4,362 shares of Series N preferred
stock in the rights offering. Satisfaction of Winter Harbor's obligation to
purchase more than 4,362 shares of Series N preferred stock will depend on
whether there are sufficient unsubscribed rights for Series N preferred stock
available in the rights offering.) Winter Harbor is entitled, but not
obligated, to subscribe for any unexercised rights, and has indicated its
intention to do so; consequently, Winter Harbor could conceivably purchase
all 20,000 shares of the Series N preferred stock if no other stockholders
subscribe for Series N preferred stock. In the event that Winter Harbor
receives the maximum number of warrants, and purchases all 20,000 shares of
Series N preferred stock, it would hold additional securities exercisable or
exchangeable for a total of 11,000,000 shares of common stock (under the
warrants) plus approximately 7,194,245 shares of common stock (under the
Series N preferred Stock). If all of these shares of common stock were
issued, Winter Harbor's beneficial holding in I-Link would increase from
69.3% (prior the Winter Harbor Financing Arrangement) to 72.4%, and current
common stock holdings would be diluted by approximately 46.7%. The Winter
Harbor Financing Arrangement is described in greater detail below.
I-Link's common stock is listed for quotation and trading on the Nasdaq
SmallCap Market ("Nasdaq"). In order for us to continue that listing, we
must comply with certain rules, called Marketplace Rules, that govern the
continued listing of securities on Nasdaq. To the extent that we choose not
to repay the Bridge Loan prior to April 26, 1999, the Marketplace Rules
require your approval of the Winter Harbor Financing Arrangement.
Specifically, Marketplace Rule 4310(c)(25)(H)(i)(d)(2) requires I-Link to
obtain stockholder approval of any plan involving "the sale or issuance by
the Company of common stock (or securities convertible into or exercisable
for common stock) equal to 20% or more of the common stock or 20% or more of
the voting power outstanding before the issuance for less than the greater of
book or market value of the stock." The terms of the Winter Harbor Financing
Arrangement require I-Link to issue to Winter Harbor additional warrants to
purchase up to 11,000,000 shares of common stock in the event that it elects
not to repay the Bridge Loan by April 26, 1999 and if there is a draw on the
Letter of Credit. Management expects to issue the warrants as opposed to
repaying the Bridge Loan, because it lacks the financial resources to repay
the Bridge Loan. In the event that I-Link fails to issue the warrants on
April 26, 1999 it will be in default on the Bridge Loan. To the extent that
it is not exchanged, the Bridge Loan matures and must be repaid in cash by
October 31, 1999. I-Link has 19,529,029 common shares currently issued and
outstanding. The issuance of warrants to purchase 11,000,000 shares of
common stock would represent 56% of the number of currently outstanding
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common shares. To date, I-Link owes $8,041,712 on the Bridge Loan,
obligating I-Link to issue to Winter Harbor additional warrants to purchase
at least 8,041,712 shares of common stock if the financing is not repaid by
April 26, 1999 (approximately 73% of the 11,000,000 and 41% of the current
number of shares outstanding). If I-Link issues these warrants and fails to
obtain stockholder approval of the plan then it will be in violation of the
Marketplace Rule, and its common stock will be subject to being delisted from
the Nasdaq SmallCap Market. We have not been able to find alternative
financing on terms that are preferable to the terms of the Winter Harbor
Financing Arrangement. The Board of Directors has adopted a resolution
declaring it advisable and in our best interest to carry out the Winter
Harbor Financing Arrangement, and to seek stockholder approval of the Winter
Harbor Financing Arrangement.
In addition to the considerations of Rule 4310 set forth in the last
paragraph, the staff of the Nasdaq SmallCap Market has raised concerns, in
general, about securities with conversion prices which will be determined in
the future, such as the securities issuable or to be issued under the Winter
Harbor Financing Arrangement. Those other concerns include whether or not a
given financing arrangement would violate Marketplace Rules having to do with
voting rights, bid prices of Nasdaq-listed securities and changes in control.
I-Link considered these Marketplace Rules when negotiating the terms of the
Winter Harbor Financing Arrangement, and believes that the Winter Harbor
Financing Arrangement complies with them. However, should the Nasdaq staff
differ with I-Link's determination and choose to bring a delisting proceeding
against I-Link by claiming there is a violation of these rules, there can be
no assurance that I-Link's common stock would not be delisted from trading on
the Nasdaq SmallCap Market.
The Bridge Loan and Letter of Credit under the Winter Harbor Financing
Arrangement
Borrowings under the Bridge Loan may be made in increments of up to
$1,000,000 in notes (the "Bridge Notes") upon five days prior notice. To
date, I-Link has borrowed $7,441,712 against the bridge loan and owes Winter
Harbor an additional $600,000 under the bridge loan. The $600,000 represents
$300,000 in accrued and unpaid interest due to Winter Harbor from prior
financings and $300,000 in legal fees owed to Winter Harbor. Winter Harbor
and I-Link agreed to include this outstanding amount in the Winter Harbor
Financing Arrangement. This amount is considered to be owing under the
Bridge Loan and counts toward the warrants to be issued under the Bridge
Loan. The Bridge Notes and the Letter of Credit will accrue interest at a
variable rate calculated daily as the Wall Street Journal Prime Rate, plus a
spread beginning at 4 points through and including February 9, 1999, and
increasing 1 point every three months thereafter, to a maximum of 7 points.
The current interest rate is the Prime Rate as reported in the Wall Street
Journal plus 4 points. Any unsatisfied obligations under the Bridge Loan will
come due on the October 31, 1999.
Warrants to be Issued Under the Winter Harbor Financing Arrangement
Winter Harbor will receive one warrant for every $10 borrowed under the
Bridge Loan and one warrant for every $10 of the total amount of the Letter
of Credit. In the event that the Bridge Loan is in default or has not been
repaid in full by April 26, 1999, Winter Harbor will be entitled to receive
nine additional warrants for every $10 borrowed under the Bridge Loan.
Winter Harbor will also be entitled to receive nine additional warrants for
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every $10 of the total amount of the Letter of Credit, if the Bridge Notes
are in default or have not been repaid in full by April 26, 1999, or if there
is a draw upon the Letter of Credit. In effect, Winter Harbor will receive
warrants to purchase 300,000 shares of common stock for its help in
establishing the Letter of Credit. In addition, should there be any draw
upon the Letter of Credit, Winter Harbor is entitled to receive additional
warrants to purchase 2,700,000 shares of common stock.
The following events are among those that result in a default under the
Bridge Loan: I-Link's failure to pay any installment when due, perform under
the Bridge Loan, or to pay any other indebtedness when due; I-Link's
involvement with a Chapter 11 or any other bankruptcy filing, or the
application for or appointment of a receiver or trustee or having any court
or government agency taking control of I-Link's assets; any person or entity
acquiring 25% or more of I-Link or I-Link no longer owning legal title to its
subsidiaries; John W. Edwards ceasing to be the President and Chief Executive
Officer; or if there is a change in Winter Harbor's priority security
interest on the pledged collateral.
The warrants may be exercised for a price ranging from a maximum of
$2.78 to a minimum of $1.25 per share. The exercise price will fluctuate
depending on recent market prices of the common stock, but it can never be
higher than the conversion rate for I-Link's outstanding Series F stock, nor
can it be higher than any price at which I-Link sells common stock or
convertible securities in the future. As of the Record Date, the exercise
price was $2.033 (which is equal to the lowest price used for conversion of
Series F preferred stock to date). The warrants will terminate seven and
one-half years from the date of their issuance.
Rights Offering for Series N Preferred Stock
The Winter Harbor Financing Arrangement also obligates I-Link to conduct
a $20 million offering for 20,000 shares of the soon-to-be-created Series N
preferred stock. Under the offering, I-Link will distribute to each record
holder of common or preferred stock, free of charge, non-transferable rights
to purchase one Series N preferred stock for approximately every 1,554 shares
held of common stock or preferred stock on an as-converted basis. Each share
of Series N preferred stock may be purchased for $1,000. Winter Harbor has
already agreed to purchase Series N preferred stock by exchanging its debt
under the Bridge Loan, and Winter Harbor will have the right to register the
resale of those shares in the offering. Winter Harbor may purchase for cash
additional Series N preferred stock to the extent that there are unexercised
Rights. The offering will be open for thirty (30) days. No partial or
fractional rights will be issued or exercisable.
The new Series N preferred stock will be paid dividends on an as-
converted basis equal to the common stock, when and if common stock dividends
are paid by I-Link. The Series N preferred stock will be senior in all
rights to other preferred common stock of I-Link, except that the Series N
preferred stock will be ranked equally and in proportion with the previously
issued Series F preferred stock. The Series N preferred stock can be
converted into common stock at any time at a conversion price of $2.78. The
Series N preferred stock conversion price is subject to adjustment in the
event of reclassifications, mergers, splits and reverse splits, and other
similar events. The Series N preferred stock will vote with the common stock
on an as-converted basis on all matters that are submitted to a vote of the
stockholders.
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Mr. Thomas A. Keenan, a director, may be deemed to have an interest in
the outcome of Proposal 1. Mr. Keenan's wife is the beneficiary of an
irrevocable trust which owns non-voting stock in the corporate general
partner of First Media, L.P., the parent of Winter Harbor.
Approval of Proposal 2 is also necessary for the consummation of
Proposal 1.
Vote Required for Approval of Proposal 1
Proposal 1 must be approved by a majority of the votes cast in order
to be effective. The Board of Directors unanimously recommends a vote FOR
the approval of Proposal 1.
PROPOSAL 2:
TO APPROVE AN AMENDMENT TO THE ARTICLES OF INCORPORATION
INCREASING THE AUTHORIZED COMMON STOCK FROM 75,000,000 SHARES TO
150,000,000 SHARES TO ALLOW FOR THE ISSUANCE OF THE WARRANTS
IN THE FIRST PROPOSAL AND A RIGHTS OFFERING OF CONVERTIBLE
PREFERRED STOCK TO BE CONDUCTED IN CONNECTION WITH
THE WINTER HARBOR FINANCING ARRANGEMENT
In order to allow for the Winter Harbor Financing Arrangement, and for
other future corporate purposes, the Board of Directors recommends increasing
the authorized common stock from 75,000,000 shares to 150,000,000 shares.
The 75,000,000 shares currently authorized are not sufficient to allow for
the exercise or conversion into common stock of all the securities called for
under the Winter Harbor Financing Arrangement. Specifically, the Board of
Directors recommends amending Article III of the Articles of Incorporation by
deleting paragraph (a) as it is now in its entirety and substituting the
following:
(a) One Hundred and Fifty Million (150,000,000) shares of common
stock, having a par value of $.007 per share (the "Common Stock").
Purpose of Request for Increase in Authorized Shares of Common Stock
I-Link has issued 19,529,029 shares of common stock, and numerous
options, warrants, debt and shares of preferred stock that may be exercised
for, or converted into, shares of common stock in the future. As of the
Record Date we have reserved an additional 67,099,620 shares of common stock
for issuance in the future, as follows:
Common
Why Common Stock Would be Issued Stock Issuable
- ---------------------------------------------------------- --------------
Conversion of 40,218 shares of Class C preferred stock 965,232
Conversion of 859 shares of Series F preferred stock 3,702,586
Conversion of 4,400 shares of Series M preferred stock 6,778,524
Conversion of 20,000 shares of Series N preferred stock 7,194,245
Dividends on Class C preferred stock 239,138
(estimate, through December 2000)
Dividends on Series F preferred stock 588,293
(estimate, through December 2000)
Exercise of Winter Harbor warrants (1998) 17,540,000
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Common
Why Common Stock Would be Issued Stock Issuable
- ---------------------------------------------------------- --------------
Exercise of Winter Harbor Financing Arrangement warrants 11,000,000
(Proposal 1)
Conversion of $7,768,000 of Winter Harbor convertible debt 3,820,955
Exercise of additional Winter Harbor warrants 5,000,000
(contingent on debt conversion)
Exercise of JNC warrants 350,000
Exercise of other options and warrants 9,920,647
----------
Total 67,099,620
The conversion rate for the Series F preferred stock listed above is
subject to substantial variation because it is based on a discount to the
market price of I-Link common stock. For your convenience we are providing
a table to demonstrate several possible conversion rates. In this table,
"Market Price of Common Stock" means the amount derived by taking the average
of the three lowest per share market values during the twenty-two trading day
period immediately preceding an applicable conversion date. Pursuant to the
terms of the Series F preferred stock, the highest the conversion price can
be is $3.76 and the lowest the conversion price can be is $1.25.
Common Shares Issuable
Market Price of Upon Conversion of All
Common Stock Conversion Price Series F Preferred Shares
----------------- ---------------- -------------------------
$4.64 or greater $3.76 2,553,191
$3.09 $2.50 3,840,000
$1.54 or lower $1.25 7,680,000
If Proposal 2 is approved, the Board of Directors may, at any time,
issue additional shares of common stock without any further action or
authorization by the shareholders, unless applicable laws or regulations
would require approval. I-Link intends to use the newly issued shares as
consideration for the Winter Harbor Financing Arrangement and future
acquisitions and financing arrangements.
Other than disclosed in this Proxy Statement there are no present plans,
agreements or undertakings with respect to I-Link issuance of any shares of
stock or related convertible securities, however, the issuance of any such
securities by I-Link could have anti-takeover effects insofar as such
securities could be used as a method of discouraging, delaying or preventing
a change I-Link's control.
Approval of Proposal 2 is necessary for the consummation of Proposal 1.
Vote Required for Approval of Proposal 2
Proposal 2 must receive the affirmative vote of a majority of the
outstanding shares of common stock and Series M preferred stock, voting on an
as-converted basis, to be effective. The Board of Directors unanimously
recommends a vote FOR the approval of Proposal 2.
OTHER PROPOSED ACTION
The Board of Directors does not intend to bring any other matters before
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the Special Meeting, nor does the Board know of any matters that others
intend to bring before the Special Meeting. If, however, other matters not
mentioned in this proxy statement properly come before the Special Meeting,
the persons named in the accompanying form of proxy will vote thereon in
accordance with the recommendation of the Board of Directors.
You should be aware that I-Link's By-Laws provide that no proposals or
nominations of Directors by Stockholders shall be presented for vote at a
Special Meeting of Stockholders unless notice complying with the requirements
in the By-Laws is provided to the Board of Directors or I-Link's Secretary no
later than the close of business on the fifth day following the day that
notice of the Special Meeting is first given to Stockholders.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE SIGN AND
RETURN THE ENCLOSED PROXY PROMPTLY. YOUR VOTE IS IMPORTANT. IF YOU ARE A
STOCKHOLDER OF RECORD AND ATTEND THE MEETING AND WISH TO VOTE IN PERSON, YOU
MAY WITHDRAW YOUR PROXY AT ANY TIME PRIOR TO VOTING.
I-LINK INCORPORATED
David E. Hardy, Secretary
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PROXY
SPECIAL MEETING OF STOCKHOLDERS OF
I-LINK INCORPORATED
April 14, 1999
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints John W. Edwards, Henry Y.L. Toh, Joseph
A. Cohen, Thomas A. Keenan and David Bradford, and each or any of them
proxies, with power of substitution, to vote all shares of the undersigned at
the Special Meeting of Stockholders to be held on April 14, 1999, at 10:00
a.m. at the Marriott Courtyard Hotel, 10701 South Holiday Park Drive, Sandy,
Utah 84070, or at any adjournment thereof, upon the matters set forth in the
Proxy Statement for such meeting, and in their discretion, on such other
business as may properly come before the meeting.
1. TO APPROVE A PLAN OF FINANCING THAT INCLUDES THE ISSUANCE OF WARRANTS TO
PURCHASE UP TO 11,000,000 SHARES OF COMMON STOCK, WITH A VARIABLE EXERCISE
PRICE RANGING FROM $1.25 TO $2.78 PER SHARE, TO WINTER HARBOR IN THE EVENT
THAT MANAGEMENT ELECTS NOT TO REPAY CERTAIN DEBT OWING TO WINTER HARBOR
ON APRIL 26, 1999. ANY UNSATISFIED OBLIGATIONS UNDER SUCH DEBT WILL STILL
COME DUE ON THE OCTOBER 31, 1999 MATURITY DATE EVEN IF THE WARRANTS ARE
ISSUED.
2. TO APPROVE AN AMENDMENT TO THE ARTICLES OF INCORPORATION INCREASING THE
AUTHORIZED COMMON STOCK FROM 75,000,000 SHARES TO 150,000,000 SHARE TO
ALLOW FOR THE ISSUANCE OF THE WARRANTS IN THE FIRST PROPOSAL AND A RIGHTS
OFFERING OF CONVERTIBLE PREFERRED STOCK TO BE CONDUCTED IN CONNECTION WITH
THE WINTER HARBOR FINANCING ARRANGEMENT.
Signature
Dated:______________________ ________________________________
Dated:______________________ ________________________________
Signature if held jointly
NOTE: When shares are held by joint tenants, both should sign. Persons
signing as Executor, Administrator, Trustee, etc. should so indicate. Please
sign exactly as the name appears on the proxy.
IF NO CONTRARY SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS
1 AND 2.
PLEASE MARK, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
