<PAGE>
As filed with the Securities and Exchange Commission on June 24, 1999.
Registration No. 333-70645
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------------
PRE-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------------
I-LINK INCORPORATED
(Exact name of registrant as specified in its charter)
(formerly Medcross, Inc.)
FLORIDA 59-2291344
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
13751 S. WADSWORTH PARK DRIVE, SUITE 200, DRAPER, UT 84020
TELEPHONE (801) 576-5000, FACSIMILE (801) 576-4295
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
JOHN W. EDWARDS, CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
I-LINK INCORPORATED
13751 S. WADSWORTH PARK DRIVE, SUITE 200, DRAPER, UT 84020 (801)
576-5000, FACSIMILE (801) 576-4295
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Ralph V. De Martino, Esquire David Hardy, Esquire
De Martino Finkelstein Rosen & Virga Hardy & Allen
1818 N Street, N.W., Suite 400 818 East South Temple
Washington, DC 20036-2492 Salt Lake City, UT 84102
Phone (202) 659-0494, Phone (801) 364-6660,
Facsimile (202) 659-1290 Facsimile (801) 364-6664
------------------------------
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [X]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legal facsimile thereof, pursuant to item 11(a)(1) of
this Form, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT OFFERING PRICE REGISTRATION FEE
- -------------------------------- --------------------- ------------------ ------------------- -------------------
<S> <C> <C> <C> <C>
Rights to purchase Series N
Preferred Stock 15,560 (1) --- --- ---
- -------------------------------- --------------------- ------------------ ------------------- -------------------
Series N Preferred Stock 20,000 (2) $1,000.00 $20,000,000 $5,560.00
- -------------------------------- --------------------- ------------------ ------------------- -------------------
Common Stock 16,000,000 (3) --- --- ---
- -------------------------------- --------------------- ------------------ ------------------- -------------------
- -------------------------------- --------------------- ------------------ ------------------- -------------------
Total (previously paid) $5,560.00
- -------------------------------- --------------------- ------------------ ------------------- -------------------
</TABLE>
(1) Includes rights to be offered to shareholders of the registrant (the "Basic
Public Rights") but excludes 4,340 rights previously offered to Winter
Harbor, L.L.C. (the "Basic Winter Harbor Rights").
(2) Includes 15,560 shares of Series N preferred stock issuable pursuant to the
Basic Public Rights and 4,340 shares issuable pursuant to the Basic Winter
Harbor Rights. The registration statement and the included prospectus
covers the issuance, offer, sale, reoffer or resale (as the case may be) of
shares of Series N preferred stock issuable under both the Basic Public
Rights and the Basic Winter Harbor Rights.
(3) Issuable for no additional consideration upon conversion of Series N
preferred stock. Assumes a conversion factor of $1.25, the minimum provided
by the terms of the Series N preferred stock, as they may be amended. (See
"Related Party Transactions.") The registration statement and the included
prospectus covers the issuance, offer, sale, reoffer or resale (as the case
may be) of shares of common stock issuable upon conversion of Series N
preferred stock issued under both the Basic Public Rights and the Basic
Winter Harbor Rights. Pursuant to Rule 416, this registration statement
also covers such additional number of shares of common stock as may be
issuable pursuant to anti-dilution provisions of the Series N preferred
stock relating to stock splits, stock dividends or similar transactions.
<PAGE>
PROSPECTUS
20,000 SUBSCRIPTION RIGHTS
20,000 SHARES OF SERIES N PREFERRED STOCK
16,000,000 SHARES OF COMMON STOCK
[LOGO] I-LINK INCORPORATED
BASIC INFORMATION REGARDING THE SUBSCRIPTION RIGHTS OFFERING
- - I-Link is distributing non-transferable rights to purchase Series N
convertible preferred stock to common and preferred stockholders as of
the record date, May 11, 1999.
- - Each shareholder will receive a right to purchase one share of Series N
preferred stock for each 1,589 shares of common stock owned on the
record date or each 1,589 shares of common stock that preferred stock
is convertible into as of the record date. No fractional rights will be
issued.
- - The purchase price for a share of Series N preferred stock is $1,000
per share.
- - The subscription rights expire on July 23, 1999.
BASIC TERMS OF THE SERIES N PREFERRED STOCK
- - Convertible into I-Link common stock at any time.
- - Conversion price of $2.78, but upon approval of I-Link's shareholders,
the conversion price may be adjusted, downward but not upward, based on
the market price of I-Link common stock and other factors.
- - Senior to all other preferred common stock of I-Link, except that the
Series N preferred stock will in all rights be equal in seniority to
the already outstanding Series F preferred stock.
- - Votes with the common stock on an as-converted basis.
- - Will be paid dividends on an as-converted basis equal to common stock
dividends.
This prospectus relates to 4,340 rights previously offered to Winter
Harbor, L.L.C. and 15,560 rights being offered to all other stockholders of
I-Link. This prospectus may be used in connection with the reoffer or resale
of securities under Winter Harbor's rights, as well as the offer, sale or
resale of securities under the other stockholders' rights.
Our common stock is listed on the Nasdaq SmallCap Market under the
symbol "ILNK." On June 23, 1999 the closing sale price of the common stock as
reported by Nasdaq was $4.063.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK AND
DILUTION. SEE "RISK FACTORS" BEGINNING ON PAGE 7.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is [_____________], 1999
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission (SEC). Our SEC
filings are available to the public over the Internet at the SEC's web site
at http://www.sec.gov. You may also read and copy any document we file at the
SEC's public reference rooms located in Washington, DC, New York, NY and
Chicago, IL. Please call the SEC at (800) SEC-0330 for further information on
the public reference rooms.
The SEC allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information about
us by referring you to those documents. The information incorporated by
reference is an important part of this prospectus. We incorporate by
reference the following documents, filed with the SEC under the Exchange Act
of 1934: (1) Annual Report on Form 10-K for the fiscal year ended December
31, 1998; (2) Quarterly Report on Form 10-Q for the quarter ended March 31,
1999; and (3) Current Report on Form 8-K, filed on May 3, 1999.
A copy of the Form 10-K and the Form 10-Q are included with this
prospectus. You may request a copy of each at no cost, by writing or
telephoning us at the following address:
Corporate Secretary
I-Link Incorporated
13751 S. Wadsworth Park Drive, Suite 200
Draper, UT 84020
(801) 576-5000
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not
authorized anyone else to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this prospectus or
any prospectus supplement is accurate as of any date other than the date on
the front of those documents.
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. IT DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD
CONSIDER BEFORE INVESTING IN THE SERIES N PREFERRED STOCK. IT SHOULD BE READ
IN CONJUNCTION WITH THE MORE DETAILED INFORMATION ELSEWHERE IN THIS
PROSPECTUS AND THE FINANCIAL STATEMENTS AND NOTES THERETO INCORPORATED BY
REFERENCE. EACH PROSPECTIVE INVESTOR IS URGED TO READ THIS PROSPECTUS
CAREFULLY, AND IN ITS ENTIRETY.
GENERAL
I-Link....................... I-Link Incorporated was incorporated in the State
of Florida in 1983, and acquired its subsidiary
I-Link Communications, an FCC-licensed long
distance carrier, in January 1997. With this
merger we began providing telecommunications
products and services designed to surpass those
offered by traditional telecommunications
companies. We market our products and services
primarily through independent representatives to
residential and small business subscribers
throughout the United States. Our enhanced
products and services include lower rate
long-distance service, single number service, call
screening, conference calling without operator
assistance, fax store and forwarding, and voice
mail.
In 1997, we launched a network marketing program
for our products and services through a subsidiary
company, I-Link Worldwide, L.L.C. We acquired
I-Link Worldwide, Inc. in 1996. In August 1997 we
acquired MiBridge, Inc. and in the first quarter
of 1998 formed the subsidiary ViaNet Technologies,
Ltd., which has its headquarters in Ramat
Hasharon, Israel, to advance our research and
development capabilities. We employ proprietary
technology acquired and developed by our
subsidiaries I-Link Systems, Inc. (formerly I-Link
Worldwide, Inc.), ViaNet and MiBridge. The
software based technology allows us to provide the
enhanced communications products and services
discussed above.
Our corporate offices are located at 13751 S.
Wadsworth Park Drive, Suite 200, Draper, Utah
84020; telephone (801) 576-5000.
2
<PAGE>
THE RIGHTS OFFERING
Rights....................... You will receive one subscription right for each
1,589 shares of common stock you hold of record
and one right for each 1,589 shares of common
stock that your preferred stock is convertible
into, on an as-converted basis, including accrued
and unpaid dividends, as of the record date. If
you have fewer than 1,589 shares of common stock
you will receive no rights. No fractional rights
will be offered or issued; the number of rights
distributed by I-Link to each holder of common and
preferred stock will be rounded down to the
nearest whole number. The distribution of the
rights and the issuance of Series N preferred
stock upon the exercise of the rights or under the
oversubscription privilege are referred to as the
rights offering. See "The Rights Offering - The
Rights and Subscription Privileges."
Securities Outstanding Assuming that all 20,000 shares of Series N
After Rights Offering........ preferred stock are issued in the rights offering,
and assuming they were all converted into shares
of common stock, there would then be 28,467,645
shares of common stock outstanding. This compares
to 21,273,400 shares of common stock outstanding
before the rights offering.
Record Date.................. May 11, 1999.
Expiration Date.............. July 23, 1999, 5:00 p.m., New York City local
time.
Nontransferability of Rights. The rights are not transferable.
Basic Subscription Privilege. The basic subscription privilege entitles you to
purchase one share of Series N preferred stock for
each of your rights.
Oversubscription Privilege... If you purchase all the Series N preferred shares
that you are entitled to pursuant to the basic
subscription privilege, you may also subscribe, at
the subscription price, for additional shares of
Series N preferred stock. See "The Rights Offering
- Subscription Privileges - Oversubscription
Privilege."
Subscription Price........... The subscription price is $1,000 per share of
Series N preferred stock under the basic
subscription privilege or the oversubscription
privilege. See "The Rights Offering -
Determination of Subscription Price."
3
<PAGE>
Procedure for To exercise your rights, you should complete the
Exercising Rights............ subscription certificate and forward it, along
with payment of the subscription price for the
number of Series N preferred shares you would like
to purchase, to the subscription agent for receipt
on or prior to the expiration date. If you plan to
mail the subscription certificate, we recommend
that you use insured, registered mail. See "The
Rights Offering - Exercise of Rights."
No Revocation................ You may not revoke your subscription after the
subscription agent receives your subscription
certificate. See "The Rights Offering - No
Revocation."
Amendments and We reserve the right to amend the terms and
Termination ................. conditions of the rights offering.
As of the date of this prospectus the conversion
price of the Series N preferred stock is $2.78.
However, at an annual meeting of stockholders
scheduled for July 19, 1999, a proposal will be
considered to amend the conversion terms of the
Series N preferred stock. See "Description of
Securities - Series N Preferred Stock" and
"Related Party Transactions."
We may terminate the rights offering at any time
prior to delivery of the Series N preferred
shares. See "The Rights Offering - Amendments and
Termination."
Persons Holding Shares, or If you hold shares of common or preferred stock
Wishing to Exercise Rights through a broker, dealer, commercial bank, trust
Through Others............... company or other nominee and would prefer to have
those institutions act on your behalf with respect
to the rights, you should contact the appropriate
institution or nominee and inform them of your
wishes. See "The Rights Offering - Exercise of
Rights."
Subscription Agent........... American Stock Transfer & Trust Company. See "The
Rights Offering - Subscription Agent."
TERMS OF THE SERIES N PREFERRED STOCK
Conversion................... The Series N preferred stock may be converted into
common stock at the option of the holder. The rate
of conversion is determined by dividing $1,000 by
the Series N conversion price. The Series N
conversion price is set at $2.78. However, at an
annual meeting of stockholders scheduled for July
19, 1999, a proposal will be considered to amend
the conversion terms of the Series N preferred
stock. See "Description of Securities - Series N
Preferred Stock" and "Related Party Transactions."
4
<PAGE>
Dividends.................... The Series N preferred stock will be entitled to
receive dividends on an as-converted basis equal
to the common stock, if dividends are paid on
common stock.
Subordination................ If I-Link were to be liquidated, the Series N
preferred stock would be senior to all other
series of preferred stock or common stock, except
that it will be equal in seniority to the already
outstanding Series F preferred stock.
Voting....................... The Series N preferred stock will vote along with
the common stock, on an as-converted basis, on all
matters which are submitted to a vote of the
stockholders. There could be exceptions to this
rule, as provided by law or by I-Link's articles
of incorporation or by-laws.
OTHER INFORMATION
Agreement Between I-Link and At I-Link's option, Winter Harbor may be required
Winter Harbor as to to reduce all balances due under the $8,000,000
Subscription Privileges...... bridge loan and the $4,000,000 new loan (plus
approximately $500,000 in accrued interest) in
exchange for Series N preferred stock. I-Link
expects to require that Winter Harbor exercise its
basic subscription privilege for 4,340 Series N
preferred shares and, to the extent that other
rights are available, I-Link intends to require
that Winter Harbor subscribe for at least 8,260
additional shares of Series N preferred stock. In
that case, the amounts due and accrued to Winter
Harbor under the bridge loan and new loan will be
reduced to $0. In addition, Winter Harbor may, if
it chooses, purchase any Series N preferred shares
which are not subscribed for by others, by
exercising its oversubscription privilege.
Additional Series N preferred shares purchased by
Winter Harbor under the oversubscription privilege
will be paid for in cash. See "Related Party
Transactions."
Use of Proceeds.............. If all shares of Series N are sold in the rights
offering, net proceeds will be approximately
$19,900,000. Since Series N preferred shares
purchased by Winter Harbor under its basic
subscription privilege may be paid for, at
I-Link's option, by the exchange of debt, at least
$4,340,000 of the proceeds is expected to be used
to repay debt which I-Link owes to Winter Harbor.
Assuming that I-Link elects to have all Winter
Harbor debt exchanged for shares of Series N
preferred stock or I-Link repays any debt amounts
not exchanged, the maximum cash proceeds to I-Link
are estimated to be approximately $7,300,000. We
intend to use any cash proceeds from the offering
for working capital purposes. For more information
see "Related Party Transactions," and "Use of
Proceeds."
5
<PAGE>
Risk Factors................. For a discussion of the high degree of risk
involved in investing in the Series N preferred
shares, see "Risk Factors."
SELECTED FINANCIAL INFORMATION
The following selected financial information is not complete and
should be read together with the detailed information and financial
statements, including the financial statement notes, incorporated in this
prospectus by reference. The information at March 31, 1999 and 1998 and for
the three month periods ended March 31, 1999 and 1998 is derived from
unaudited financial information, but, in the opinion of management, reflects
all adjustments, consisting only of normal recurring adjustments, necessary
for a fair presentation of the financial position and results of operations
on those dates and for the periods then ended. The financial position and
results of operations at March 31, 1999 and for the three months ended March
31, 1999 may not be indicative of financial data for the entire fiscal year.
The selected consolidated financial information for each of the past five
years including the year ended December 31, 1998, is derived from the audited
financial statements and related financial statement notes, which are
incorporated in this prospectus by reference. The selected consolidated
financial information should be read together with the detailed information
and financial statements incorporated herein by reference.
<TABLE>
<CAPTION>
Three Months
Ended March 31, Year Ended December 31,
----------------------- ------------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
(in thousands, except for per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Telecommunications services $ 6,183 $ 4,781 $ 19,635 $ 11,081 $ - $ - $ -
Marketing services 760 1,341 4,548 2,637 - - -
Technology licensing and
development 294 206 1,466 347 - - -
Other - - - - 171 - -
------- -------- -------- -------- ------ ------- -----
Total revenues 7,237 6,328 25,649 14,065 171 - -
------- -------- -------- -------- ------ ------- -----
Operating expenses:
Telecommunications
network expenses 4,323 4,898 19,099 14,635 1,121 - -
Marketing services costs 1,216 1,867 5,851 4,294 - - -
Selling, general,
administrative and other 7,507 4,765 20,345 20,997 18,536 - -
------- -------- -------- -------- ------ ------- -----
Total operating
expenses 13,046 11,530 45,295 39,926 19,657 - -
------- -------- -------- -------- ------ ------- -----
Operating loss (5,809) (5,202) (19,646) (25,861) (19,486) - -
Other income (expense) (1,102) (2,136) (8,134) (2,807) (2,678) - -
------- -------- -------- -------- ------ ------- -----
Loss from continuing
operations (6,911) (7,338) (27,780) (28,668) (22,164) - -
Loss from discontinued
operations (350) (7) (178) (1,191) (900) (552) (715)
------- -------- -------- -------- ------ ------- -----
Net loss $(7,261) $ (7,345) $(27,958) $(29,859) $(23,064) $ (552) $(715)
------- -------- -------- -------- ------ ------- -----
------- -------- -------- -------- ------ ------- -----
Loss from continuing
operations applicable
to Common Stock $(7,405) $(7,670) $(37,621) $(118,361) $(43,388) $ (129) $(121)
------- -------- -------- -------- ------ ------- -----
------- -------- -------- -------- ------ ------- -----
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Three Months
Ended March 31, Year Ended December 31,
----------------------- ------------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net loss per common share
basic and diluted:
Loss from continuing operations $ (0.38) $ (0.48) $ (2.13) $ (10.07) $ (6.40) $ (0.07) $ (0.08)
Loss from discontinued
operations (0.02) - (0.01) (0.10) (0.13) (0.32) (0.47)
------- -------- -------- -------- -------- -------- -------
Net loss per common
share $ (0.40) $ (0.48) $ (2.14) $ (10.17) $ (6.53) $ (0.39) $ (0.55)
------- -------- -------- -------- -------- -------- -------
------- -------- -------- -------- -------- -------- -------
</TABLE>
<TABLE>
<CAPTION>
As of March 31, As of December 31,
----------------------- ------------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (6,676) (6,163) $ (4,488) $ (2,955) $ 1,306 $ - $ -
Property and equipment, net 6,481 3,925 7,263 3,552 1,576 - -
Net assets of discontinued
operations 67 588 417 595 1,668 2,125 2,461
Total assets 23,121 25,582 23,855 24,253 9,865 2,125 2,461
Long-term obligations 8,839 269 8,372 1,922 237 670 525
Stockholders' equity (deficit) (19,628) 10,789 (16,953) 814 6,299 1,455 1,936
</TABLE>
In January 1997, our company acquired I-Link Communications, an
FCC-licensed long distance carrier. With that acquisition, we began our
telecommunications services operations. Effective December 31, 1997 we made
the decision to discontinue the operations of our Medical Imaging Division.
The Board of Directors approved the plan of disposal on March 23, 1998. The
net operating activities and net assets from the Medical Imaging Division are
presented separately as discontinued operations in the above table. In 1997,
we launched operations of a network marketing program through I-Link
Worldwide, L.L.C., to market our products. Through our wholly-owned
subsidiaries, MiBridge, Inc., and ViaNet Technologies Ltd., we undertake the
research and development of new telecommunications products and technologies,
and the licensing of certain of these products and technologies to other
telecommunications companies. MiBridge was acquired during the third quarter
of 1997 and ViaNet was formed in the first quarter of 1998.
RISK FACTORS
THE SECURITIES DESCRIBED IN THIS PROSPECTUS ARE SPECULATIVE IN
NATURE AND INVOLVE A HIGH DEGREE OF RISK. YOU SHOULD ONLY PURCHASE THESE
SECURITIES IF YOU CAN AFFORD TO LOSE YOUR ENTIRE INVESTMENT. THEREFORE, PRIOR
TO PURCHASE, YOU SHOULD CONSIDER VERY CAREFULLY THE FOLLOWING RISK FACTORS,
AS WELL AS ALL OF THE OTHER INFORMATION SET FORTH ELSEWHERE IN THIS
PROSPECTUS.
MARKET-RELATED RISKS
CURRENT SHAREHOLDINGS MAY BE ADVERSELY AFFECTED BY THE ISSUANCE OF NEW STOCK
AND THE CONVERSION OF DEBT.
I-Link's issuance of additional stock, warrants, convertible
preferred stock and convertible debt, including the Series N preferred stock
which is a part of the current rights offering, will result in substantial
dilution to the interests of shareholders and may also result in the
reduction of your stock price. I-Link has issued a substantial amount of
stock and
7
<PAGE>
convertible securities to finance our operations and to meet our obligations.
I-Link may continue to issue stock and convertible securities in the future
to finance operations and expansion in the event that we are unable to
generate sufficient revenue from operations or other funds. The sale of a
substantial number of shares into the market, or even the perception that
sales could occur, could depress the price of the common stock. Substantially
all of I-Link's currently outstanding shares and shares issuable upon
conversion can be sold into the public market.
CURRENT SHAREHOLDERS WILL BE SIGNIFICANTLY DILUTED IF CONVERTIBLE
SECURITIES AND OUTSTANDING DEBT ARE CONVERTED INTO SHARES OF COMMON
STOCK.
"Dilution" refers to the reduction in the voting effect and
proportionate ownership interest of a given number of shares of common stock
as the total number of shares increases. Holders of I-Link common stock have
suffered significant dilution as a result of equity and debt financing and
will suffer further dilution in the event that holders of I-Link's
outstanding convertible securities, including shares of Class C preferred
stock, Series F preferred stock and Series M preferred stock, warrants and
options, convert their holdings. The exercise of warrants and options,
including options granted under I-Link's stock option plans and employment
agreements, may result in additional dilution.
The actual number of shares that could potentially be converted and
sold is uncertain because the Series F preferred stock and the Series M
preferred stock are convertible at variable rates based on a discount to the
market price of I-Link common stock. Currently there are shares of preferred
stock, options and warrants outstanding which may be converted to or
exercised for approximately 62,300,000 shares of common stock, which is
nearly three times the current number of shares outstanding. If all of these
securities were exercised or converted, the 62,300,000 new shares of common
stock to be issued would represent nearly 75% of the then-outstanding shares
of common stock.
As a result of the equity and debt financings entered into with
Winter Harbor, Winter Harbor would beneficially own over a majority (68%) of
I-Link's then-outstanding stock and already has the potential to take over
voting control of I-Link. In the event Winter Harbor were to acquire all
available share of Series N preferred stock, it would beneficially own
approximately 73% of the outstanding common stock. The potential of all of
these shares of common stock being issued and then sold into the market, or
the anticipation of those sales occurring, may result in a decrease in the
market price of I-Link's common stock, and may make it more difficult for
I-Link to attract additional equity financing. See "Description of
Securities," "Dilution" and "Related Party Transactions."
PROPOSAL TO BE PRESENTED TO I-LINK STOCKHOLDERS RELATING TO CHANGES IN
CONVERSION TERMS OF SERIES N PREFERRED STOCK
At the annual meeting of stockholders scheduled for July 19, 1999,
I-Link stockholders will consider a proposal to change the conversion terms
of the Series N preferred stock. If the proposal is approved, there would be
a significant additional dilutive effect on the holders of
8
<PAGE>
I-Link common stock, especially those stockholders who do not choose to
purchase shares of Series N preferred stock under this rights offering.
Assuming that all 20,000 shares of Series N preferred stock are sold in the
rights offering, under the conversion terms that are currently in effect
approximately 7,200,000 shares of common stock would be issued upon
conversion of the Series N preferred stock. If the proposed change in
conversion terms is approved by the stockholders, the number of shares of
common stock issuable when Series N preferred stock is converted could be as
many as 16,000,000. For a more complete description of the dilutive and other
effects of approving this proposal, see "Description of Securities --Series N
Preferred Stock."
THE ADDITIONAL DILUTIVE IMPACT OF OUTSTANDING OPTIONS, WARRANTS AND
CONVERTIBLE SECURITIES.
The holders of outstanding options, warrants and convertible
securities have the opportunity to profit from a rise in the market price of
the common stock, if any, without assuming the risk of ownership, with a
resulting dilution in the interests of other shareholders. I-Link may find it
more difficult to raise additional equity capital if it should be needed for
its business while the options and warrants are outstanding. At any time at
which the holders of the options, warrants or convertible securities might be
expected to exercise them, I-Link would probably be able to obtain additional
capital on terms more favorable than those provided by those securities.
Also, some holders of the options and warrants have the right to require
registration under the Securities Act of the shares of common stock that are
issuable upon exercise of their options and warrants. The cost to I-Link of
effecting any required registration may be substantial. See "Dilution."
I-LINK DOES NOT ANTICIPATE PAYING CASH DIVIDENDS ON ITS SECURITIES.
I-Link has not paid any dividends on any of its outstanding
securities to date, except to the extent that accrued dividends have been
calculated and added to the value of the shares of Series F preferred stock
which have been already converted. Other than as set forth in this
prospectus, I-Link does not anticipate paying any cash dividends on its
securities in the foreseeable future. I-Link currently intends to retain all
cash flow from operating activities, if any, to finance its operations and to
expand its businesses. I-Link's future cash flow may be insufficient to
enable payment of cash dividends. As of May 11, 1999, the aggregate amount of
undeclared and unpaid cumulative dividends for each class of I-Link's
preferred stock, and the number of shares of common stock which could be
issued in lieu of the cash dividends, is as follows:
<TABLE>
<CAPTION>
Accrued Dividends Number of Shares of Common Stock
Class of Security Payable Issuable as Dividends
- ---------------------------------- ------------------ --------------------------------
<S> <C> <C>
Class C preferred stock $452,880 95,696
Series F preferred stock $276,667 136,088
Series M preferred Stock $1,889,589 n/a
</TABLE>
9
<PAGE>
Dividends on the Class C preferred stock will be payable when declared by the
Board of Directors, to the extent permissible under the Florida Business
Corporation Act, to the holders of the Class C preferred stock in cash or, at
the option of I-Link as determined by the Board of Directors, in shares of
common stock. Dividends may be paid in shares of common stock only if the
shares have been registered under the Securities Act. Dividends on the Series
F preferred stock are payable in shares of common stock. In connection with
the Winter Harbor equity investment in I-Link, I-Link issued an aggregate of
4,400 shares of Series M preferred stock. The Series M preferred stock will
be entitled to receive cumulative dividends in the amount of 10% per annum.
OPERATIONAL RISKS
I-LINK MUST RAISE ADDITIONAL FINANCING TO MEET ITS ONGOING CAPITAL
REQUIREMENTS
I-Link currently has no material commitments for capital or other
expenditures, other than as set forth in this prospectus. There is the risk
that necessary additional financing may not be available to I-Link on terms
that it considers reasonable or favorable; or needed financing may not be
available at all. Failure to secure necessary financing when needed would
have a serious detrimental effect on the continued growth of the business.
However, it is I-Link's intention to continue to implement the growth of our
business and expand our operations. We anticipate that revenues generated in
1999 from our continuing operations will not be sufficient to fund our
ongoing operations, including the continued expansion of our private
telecommunications network facilities, product development and anticipated
growth in our subscriber base. To provide a portion of the required capital,
I-Link has entered into the following financing arrangements:
(1) In November 1998, I-Link reached an agreement with Winter
Harbor for a four part financing plan for:
(a) bridge loans of up to $8,000,000;
(b) a standby letter of credit of up to $3,000,000;
(c) a commitment from Winter Harbor to not demand repayment
of the $7,768,000 financing (from 1998) prior to
April 15, 2000; and
(d) an additional $12,000,000 in connection with this rights
offering; and
(2) In April 1999, an agreement was reached with Winter Harbor to
borrow an additional $4,000,000.
Beyond these arrangements, additional funds will be necessary from
public or private financing markets to successfully integrate and finance the
planned expansion of our business communications services, and to discharge
our financial obligations.
I-LINK WILL INCUR ADDITIONAL OBLIGATIONS IF IT FAILS TO MEET MINIMUM PURCHASE
REQUIREMENTS UNDER ITS SPRINT AND OTHER CONTRACTS.
I-Link has a contract with Sprint Communications Company for the
purchase of long distance services which are resold to some I-Link customers.
Our agreement with Sprint
10
<PAGE>
requires that we pay a minimum monthly amount to Sprint, whether or not we
need or use that amount of services. If we are unable to resell enough long
distance services to our own customers which will cover the minimum
contracted monthly level of service, we will have a loss in that area of our
business equal to the difference. The original Sprint contract called for a
monthly minimum payment of $1,200,000. Because we moved many customers to
services provided exclusively on our own private network and no longer needed
to purchase higher volumes from Sprint, in late 1998 we negotiated an
amendment of the Sprint agreement, and now we are required to purchase and
pay for at least $550,000 in services from Sprint per month. As a result of
our negotiations, Sprint waived all prior shortfalls in reaching the prior
monthly minimum. Currently I-Link is meeting its monthly obligations under
the amended arrangement.
In January 1999, I-Link entered into an agreement with another
national carrier to lease local access spans. Local access spans allow
customers connectivity from their local dial-up service to I-Link's
network-supplied services. The three-year agreement includes minimum usage
commitments of $1,512,000 during the first year and $2,160,000 in the second
and third years. If we were to terminate the agreement early, we would be
required to pay any remaining first year minimum monthly usage requirements
and pay 25% of any remaining second and third year minimum monthly usage
requirements. I-Link is currently meeting its monthly obligations under this
agreement.
I-LINK MUST CONTINUE TO EXPLOIT ITS NETWORK MARKETING SALES PROGRAM AND
REALIZE SUBSCRIBER GROWTH TO COMPETE WITH BETTER CAPITALIZED ENTERPRISES.
I-Link's future subscription growth is largely dependent on the
subscriber base initially achieved through its network sales program launched
in June 1997. As an expanding business, I-Link must realize subscriber growth
in order to compete with larger, more mature, better capitalized enterprises.
In order to realize subscriber growth, I-Link must be able to replace
terminating subscribers and attract additional subscribers. However, the
sales and marketing expenses and other costs associated with attracting new
subscribers are substantial. Accordingly, our ability to improve operating
margins will depend in part on our ability to attract new subscribers and
retain existing subscribers. We plan to invest significant resources in our
telecommunications infrastructure, customer support resources, sales and
marketing expenses and subscriber acquisition costs. There is no guarantee
that our future efforts in this area will improve subscriber growth and
retention. Since the market for our services is relatively new and the
utility of available services is not well understood by new and potential
subscribers, it is not possible to predict future subscriber retention rates.
I-LINK'S BOARD OF DIRECTORS MAY ISSUE ADDITIONAL SHARES OF PREFERRED STOCK
WITHOUT SHAREHOLDER APPROVAL.
Our articles of incorporation authorize the issuance of up to
10,000,000 shares of preferred stock with rights and preferences that may be
determined from time to time by the Board of Directors. To date, 513,500
shares of preferred stock have been designated. Accordingly, the Board of
Directors may, without stockholder approval, issue one or more
11
<PAGE>
new series of preferred stock with rights which are senior to the Series N
preferred shares or which could adversely affect the voting power or other
rights of the holders of outstanding shares of preferred stock or common
stock. In addition, the issuance of additional shares of preferred stock may
have the effect of rendering more difficult, or discouraging, an acquisition
or change in control of I-Link. Although I-Link does not have any current
plans to issue any additional series or shares of preferred stock, except for
the preferred stock to be issued in this rights offering, I-Link may do so in
the future. See "Risk Factors --Current shareholdings may be adversely
affected by the issuance of new stock and the conversion of debt."
I-LINK'S CLASSIFICATION OF BOARD OF DIRECTORS MAKES IT DIFFICULT FOR
SHAREHOLDERS TO EFFECT CHANGES IN MANAGEMENT.
The classification of the Board of Directors makes it difficult for
shareholders to effect a change in management. Our Board of Directors is
divided into three classes. Members of each class serve for staggered three
year terms, with members of one class coming up for election each year.
WINTER HARBOR HAS POTENTIAL VOTING CONTROL OVER I-LINK.
If Winter Harbor exercises all of its warrants, including the
warrants potentially available under the new loan, converts its Series M
preferred stock to common stock and buys all the rights to purchase Series N
preferred stock, it has the potential to own approximately 56,233,000 shares,
or 73%, of I-Link's then-outstanding common stock. These include:
- nearly 6,900,000 shares of common stock from the conversion of 4,400
shares of Series M preferred stock;
- over 9,600,000 shares of common stock directly and indirectly available
from the optional conversion by Winter Harbor of $7,768,000 in
promissory notes issued in 1998;
- nearly 7,200,000 shares of common stock underlying all 20,000 shares of
Series N preferred stock;
- up to 28,540,000 shares of common stock underlying warrants which are
exercisable at any time; and
- up to 4,000,000 shares of common stock underlying warrants to be issued
on or after September 30, 1999 in the event that I-Link elects to
extend the maturity date under the new loan and shareholders do not
approve modifications to the Series N preferred stock conversion price.
See "Related Party Transactions."
Thus Winter Harbor could at any time obtain sufficient voting power
to take control of I-Link. Mr. Keenan serves on the Board of Directors as the
designee of Winter Harbor. See "The Rights Offering," "Description of
Securities" and "Related Party Transactions."
12
<PAGE>
WINTER HARBOR CAN PREVENT I-LINK FROM ENGAGING IN CERTAIN BUSINESS MATTERS.
I-Link faces the risk of being forced to forego business
opportunities, conducting its business in a routine manner or otherwise
increasing shareholder value because Winter Harbor has the right to preclude
I-Link from engaging in a variety of business activities without its
concurrence, including among other things: mergers, acquisitions and
dispositions of corporate assets and businesses, hiring or discharging key
employees and auditors, transactions with affiliates, commitments in excess
of $500,000, the adoption or settlement of employee benefit plans and filing
for protection from creditors.
INDUSTRY RISKS
I-LINK MUST STAY CURRENT IN INDUSTRY STANDARDS AND GENERAL ECONOMIC TRENDS TO
COMPETE IN THE COMMUNICATIONS SERVICES INDUSTRY.
Our ability to compete in the communications services industry
requires that we stay current in industry standards and general economic
trends. Our ability to compete is dependent on maintaining the following: the
capacity, reliability, and security of our Intranet infrastructure; our
market presence; the timing of introductions of new products and services
into the market; our ability to support existing and emerging industry
standards; preserving the balance of network demand with our fixed expenses.
We believe that no competitor in North America currently provides
capabilities and an Internet Protocol (IP)-based platform for delivering
enhanced services in a manner comparable with I-Link. However, there are many
companies that offer communications services, including a few that have
recently introduced IP-based standard services or announced an intention to
do so, and therefore compete with I-Link on some level. These entities
include large telecommunications companies and carriers such as AT&T, MCI
WorldCom and Sprint, and smaller, regional resellers of telephone line
access. These companies and others, including manufacturers of hardware and
software used in the business communications industry, could in the future
develop products and services that compete with I-Link on a more direct
basis, which would pose the risk of costing I-Link its customers. In many
instances these entities are better capitalized than I-Link and control
significant market share in their respective industry segments. In addition,
other businesses may be attempting to introduce products similar to those
used by I-Link for the transmission of business information over the
Internet. Our inability to compete in the communications industry will
negatively affect our profitability.
IF I-LINK CANNOT CONTINUE TO PROVIDE A LOWER RATE TO CUSTOMERS IT MAY LOSE
PROFITS.
Our ability to undersell primary sellers is essential to our ability
to attract and retain customers. We are able to provide customers with lower
rates as a result of the volume discount offered to I-Link in accordance with
the terms of its contract with Sprint. Currently the total charged to our
customers for various long distance services is comparatively less than the
rates charged by a primary seller of similar services. We believe that lower
rates are essential to our ability to attract and retain customers.
Therefore, narrowing of the difference between our rates and the cost of the
bulk-rate long distance services we purchase for resale to
13
<PAGE>
our customers could have a significant negative effect on our profitability.
To the extent this differential decreases, we will need to spend even more
effort to maintain and attract new customers.
IF I-LINK IS UNABLE TO CONTINUE TO LEASE TELECOMMUNICATION LINES FROM MAJOR
SUPPLIERS ITS OPERATIONS MAY BE SIGNIFICANTLY IMPAIRED.
I-Link's ability to transmit long distance telephone calls on a cost
effective basis, is dependent on transmission facilities leased from carriers
that compete with I-Link. A significant portion of these leased
telecommunications lines are currently provided by Sprint, MCI WorldCom, US
West, Pacific Telesis, Southwest Bell, IXC, Qwest Communications, and Level
III. Further, we use Sprint as our primary supplier of inbound and outbound
telephone services in geographic areas our own network does not cover.
I-Link, like other companies in its industry, is vulnerable to changes in its
lease arrangement. While I-Link has no prior history of lease-related
problems, if any of these suppliers are unable or unwilling to provide or
expand their current levels of service to us in the future, our operations
could be significantly impaired. Although leased telecommunications lines are
available from several alternative suppliers, there can be no assurance of
our being able to obtain substitute services from them at reasonable or
comparable prices or in a timely fashion. We are also subject to those risks
relating to the potential disruptions in these telecommunications services
that could occur in the future. Changes in tariffs, regulations, or policies
by any of our telecommunications providers may impede our ability to continue
to offer long distance service on what we consider to be commercially
reasonable or profitable terms.
I-LINK AND THE LONG-DISTANCE INDUSTRY IN GENERAL EXPERIENCE HIGH RATES OF
CUSTOMER ATTRITION.
We believe that a high level of customer attrition is common in the
direct dial, long distance industry. I-Link does not have a long history of
operations and accordingly, the level of customer attrition experienced to
date may not be indicative of future attrition levels. In addition, any steps
taken by I-Link to counter increased customer attrition could prove to be
unsuccessful.
CHANGES IN REGULATIONS AFFECTING I-LINK'S OPERATIONS COULD HAVE A MATERIAL
ADVERSE EFFECT ON THE VALUE OF I-LINK COMMON STOCK.
Changes in the regulation of, or the enactment or changes in
interpretation of legislation affecting, our operations could have a material
adverse effect on I-Link and the value of the common stock. Some of I-Link's
operations are subject to regulation by the FCC. In addition, some of our
businesses are subject to regulation by state public utility or public
service commissions. Recently, the Federal Government enacted the
Telecommunications Act of 1996, which, among other things, allows the
Regional Bell Operating Companies and others to enter the long distance
business. Entry of the Regional Bell Operating Companies or other entities,
such as electric utilities and cable television companies, into the long
distance business may have a negative impact on I-Link or its customers. We
anticipate that some of those
14
<PAGE>
companies entering this business will be strong competitors because, among
other reasons, they may enjoy one or more of the following advantages: they
may (a) be well capitalized; (b) already have substantial end user customer
bases; or (c) enjoy cost advantages relating to local loops and access
charges. The introduction of additional strong competitors into the switched
long distance business would mean that I-Link would face substantially
increased competition. This could have a material adverse effect on I-Link
and the value of the common stock. In addition, the Telecommunications Act
provides that state proceedings may in some instances determine access
charges I-Link is required to pay to the local exchange carriers. No
assurance can be given that these sorts of proceedings will not result in
increases in rates. Increases could have a material adverse effect on I-Link
or its customers, and on the value of the common stock.
I-Link Communications' activities are regulated by the public
utility commissions of the various states in which I-Link operates. Also,
decisions by the FCC with respect to the permissible business activities or
pricing practices may have an adverse impact on I-Link Communications'
operations. I-Link Communications could be subject to complaints seeking
damages and other relief filed by parties claiming to be harmed by I-Link
Communications' failure to file tariffs. Moreover, any significant change in
regulations by state governmental agencies could significantly increase
I-Link Communications' costs or otherwise have an adverse impact on I-Link
Communications' activities and on its expansion efforts. The FCC has recently
taken or is currently considering action on various proposals, including
proposals relating to interstate access transport services, public filing of
rates, proprietary calling cards and billed party preference. Additionally,
legislation has recently been enacted in Congress further liberalizing the
telecommunications industry, specifically by permitting the Bell Operating
Companies, to provide service in the long distance market and allowing the
long distance carriers such as AT&T, MCI WorldCom, and I-Link into the local
markets. Although safeguards have been inserted into the legislation to
ensure fair competition, there can be no assurance that the entry of the Bell
Operating Companies into the long distance market will not have a material
adverse effect on I-Link's business.
I-LINK'S INTERNET-RELATED BUSINESS MAY BE SUBJECT TO ADDITIONAL GOVERNMENTAL
REGULATION.
I-Link has been moving its customers off the facilities of existing
long distance carriers, and has increased its reliance on its own proprietary
Internet protocol network, or I-Link Intranet, for transmission in the hope
of enjoying minimal federal regulation under current rules. However, the
FCC's potential jurisdiction over the Internet is broad given that the
Internet relies on wire and radio communication facilities over which the FCC
has long standing authority. While historically the FCC has not regulated
companies that provide the software and hardware for Internet telephony or
other Internet data functions, as common carriers or telecommunications
service providers, and in May 1997 the FCC concluded that information and
enhanced service providers are not required to contribute to federal
universal service funding mechanisms, the FCC's framework for "enhanced
services" confirms that the FCC has authority to regulate computer-enriched
services.
15
<PAGE>
I-LINK FACES CONTINUED EXPOSURE TO TORT LIABILITY IN THE MEDICAL INDUSTRY
THROUGH ITS DISCONTINUED MEDICAL DIVISION.
I-Link directly or indirectly controls two business entities that
comprise I-Link's discontinued medical facilities. As such, I-Link is exposed
to general liability for contracts entered into by those businesses and for
torts committed by I-Link's agents and employees. I-Link is also exposed to
tort liability in the events of claims of harm to patients due to the
negligence of I-Link, its agents or employees. Any liability claim could have
a substantial negative effect on I-Link's financial position. I-Link's
discontinued medical division operated medical equipment which was used to
perform procedures on or diagnose disease in patients; however, I-Link has
sold substantially all of the assets of those businesses and only operates
them now in order to collect accounts receivable and pay liabilities. I-Link
currently maintains professional liability insurance coverage in the amount
of $1,000,000, and I-Link also maintains an umbrella policy covering, among
other things, workers compensation, general, and automobile liability in an
amount of $9,000,000 in coverage. There is no assurance that I-Link will be
able to continue to maintain similar insurance coverage in the future.
TECHNOLOGICAL RISKS
THE SUCCESS OF I-LINK'S OPERATIONS REQUIRES CONTINUED ADAPTATION TO NEW
SERVICES AND TECHNOLOGICAL CHANGE.
Our success is highly dependent upon our ability to develop new
software and services, and network infrastructure to meet changing customer
requirements. The market for our services is characterized by rapidly
changing technology, evolving industry standards, emerging competition and
frequent new software and service introductions. Our future success will
depend, in part, on our ability to anticipate changes and to offer on a
timely basis market responsive services that meet evolving industry
standards. Our pursuit of technological advances will require substantial
time and expense. In the event that we fail to develop new software and
network infrastructure expansion in a timely manner, it will adversely affect
our overall business, financial condition and results of operations in the
future. See "Technological Risks -The success of I-Link's operations requires
continued adaptation to new services and technological change."
IMPACT OF YEAR 2000
I-Link's Year 2000 program is designed to minimize the possibility
of serious Year 2000 interruptions. Possible worst case scenarios include the
interruption of significant parts of I-Link's business as a result of
critical telecommunication networks and/or information systems failure. Any
such interruption may have a material adverse impact on future results. Since
their possibility cannot be eliminated, I-Link formed a "Year 2000 Team"
during 1998 to evaluate its information technology systems as well as its
non-information technology devices, such as building security, heating and
air-conditioning, safety devices and other devices containing embedded
electronic circuits. I-Link does not believe its non-information technology
systems will be significantly affected by Year 2000 problems. Nevertheless,
the Year 2000
16
<PAGE>
project team is continuing to evaluate the readiness of all of the facilities
that we occupy to be certain that the non-information technology systems will
be compliant. I-Link anticipates its information technology and
non-information technology systems will be Year 2000 compliant by September
30, 1999.
STATE OF READINESS. Our approach to the Year 2000 issue includes six major
phases: Inventory, Assessment, Remediation, Testing, Implementation, and
Contingency Planning. Several phases of this methodology are well underway.
The Inventory and Assessment phases are nearly complete, and efforts have
begun in Remediation and Testing. Based upon the results of the assessment, a
significant portion of our software and hardware already appears to be Year
2000 compliant, though we intend to confirm that opinion in the Testing
phase. As we began operations in 1996, much of the hardware and software
currently in use at I-Link was Year 2000 compliant when acquired and
implemented.
While we continue to assess various aspects of our Year 2000
vulnerability, the project team has begun the process of remediating or
replacing systems and devices that do not appear to be fully compliant. Much
of this remediation effort involves readily available, simple upgrades to
hardware and software components, or relatively minor changes to I-Link's
in-house developed systems. We intend to complete the Remediation phase,
except for the billing system discussed below, by July 31, 1999. Total costs,
past and future, of all remediations, including the billing system discussed
below, are not expected to exceed $250,000. We do not believe that our use of
internal resources will significantly delay any other systems development
efforts. We have initiated testing of some systems to confirm that they can
process calendar dates after December 31, 1999.
I-Link believes that reliance on other telecommunications providers
represents our greatest Year 2000 exposure and is the primary third-party
relationship that is critical to our ongoing operations. While we have our
own communications network to carry much of our traffic, our network is
dependent upon significant third-party carriers, such as Sprint, and all
local exchange carriers, such as U.S. West and PacBell. These entities
originate and terminate local and long-distance caller traffic which accesses
the I-Link communications network or services areas not covered by I-Link's
network. This is substantially the same risk faced by other
telecommunications providers. I-Link is in the process of evaluating the Year
2000 preparedness of its carriers and the many local exchange carriers.
I-Link's carriers have indicated they intend to be Year 2000 compliant in
public filings and other notifications. In the event that these carriers do
not become Year 2000 compliant prior to December 31, 1999, we would need to
switch to carriers who were Year 2000 compliant or face a significant impact
on our ability to deliver telecommunications services. In the event our
current carriers do not become Year 2000 compliant and we are unable to
switch to a carrier(s) that is Year 2000 compliant, we would not be able to
deliver our services, which would have a substantial negative impact on
I-Link and its results of operations, liquidity, and financial position. In
the event that certain local exchange carriers are not Year 2000 compliant,
I-Link's customers would not be able to originate or terminate a call in
geographic areas serviced by that local exchange carrier, which would
negatively impact the financial condition of I-Link.
17
<PAGE>
In order to assess the preparedness of third party vendors including
I-Link's carriers and local exchange carriers, we are surveying the vendors
and their public statements and Web sites. At the conclusion of our internal
and third party assessments, we intend to complete contingency plans to
address various scenarios in which key vendors and suppliers may not be Year
2000 compliant.
The internal system I-Link believes most vulnerable to Year 2000
problems is the existing billing system which: (1) gathers call detail
records; (2) processes the call detail records into billable call detail
records; (3) rates the call detail records; (4) prepares invoices to
customers; and (5) records payments received. The inability of our billing
system to operate in the Year 2000 would adversely impact the recognition and
collection of revenue, and therefore, could negatively impact the results of
operations and financial position. The current billing system contains some
programs that are not Year 2000 compliant. I-Link has discontinued its
project with an outside consulting company that would have replaced the
existing billing system with a Year 2000 compliant system. However, we have
been making and will continue to make enhancements to the existing billing
system in order for that system to be Year 2000 compliant by August 31, 1999.
The cost of these modifications to the existing billing system are not
anticipated to exceed $50,000, and would involve internal resources only such
as salaries and benefits.
COSTS. I-Link is primarily using internal resources to identify, assess,
correct, test, and implement solutions for minimizing Year 2000 consequences,
but expects to incur some additional consulting, upgrade, and other expenses.
We have already expended approximately $30,000 to date for upgrades, and
approximately $25,000 on internal resources for Year 2000 preparation. We
estimate the remaining expenditures for outside services and upgrades should
not exceed $100,000 and internal resources should not exceed $95,000.
However, the ultimate final cost of modifications and conversions could
change and is not definitively known at this time. I-Link expects to fund
such expenditures from public or private financing markets.
RISKS. The failure to correct a material Year 2000 problem could result in an
interruption of normal business activities. Such a disruption could
materially and adversely affect our results of operations, liquidity and
financial condition. Our assessment of Year 2000 risk does not cover all
possible catastrophic events, such as the failure of electrical power grids
or the general telecommunications infrastructure. The following reasonably
likely worst case scenario is based upon conceivable, though not probable,
worst-case disruptions to I-Link's revenue cycle.
I-Link's revenue cycle is dependent on the ability to complete
customer calls and integrate the related call detail records into the billing
system described above. Our ability to complete calls is contingent upon the
Year 2000 compliance of its underlying carriers and local exchange carriers,
which have represented that they will be ready. Barring a long-term,
catastrophic failure of electrical services or the telecommunications
industry in general, the most likely worst-case scenario would be a general
failure of I-Link's own communications network, which carries its call
traffic. In that case, we would not be able to provide enhanced services,
such as V-Link, but customers could still complete long-distance calls as
those calls
18
<PAGE>
would be routed over I-Link's carriers' networks. However unlikely, such an
event would seriously and adversely affect operating margins, but operations
could continue until repairs were made. Continuing with the worst-case
scenario, a failure of our ability to collect call detail records might
prevent the timely billing of services. Such a failure would result in a
cash-flow exposure to I-Link for as long as it may require to correct call
detail record collection programs. Since the billing process occurs two to
three weeks after the close of any period, minor problems would probably have
minimal financial impact. Nevertheless, if corrections required a
significantly longer time period, customer billing, revenue collection and
cash flows could be delayed and bad debts increased to the extent that
material damages to I-Link could result. We intend to test various components
of this scenario to reduce exposure to this reasonably likely worst case
scenario.
Milestones and implementation dates and the costs of our Year 2000
readiness program are subject to change based on new circumstances that may
arise or new information becoming available that may alter underlying
assumptions or requirements.
STATEMENTS INCLUDED IN THIS PROSPECTUS UNDER THE HEADING "RISK
FACTORS," IN ADDITION TO STATEMENTS CONTAINED ELSEWHERE IN THIS PROSPECTUS OR
INCORPORATED BY REFERENCE, THAT ARE NOT STATEMENTS OF FACT ARE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995, AND ARE THUS PROSPECTIVE. THE FORWARD-LOOKING
STATEMENTS ARE SUBJECT TO RISKS, UNCERTAINTIES AND OTHER FACTORS THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM FUTURE RESULTS EXPRESSED OR
IMPLIED BY ANY FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS CAN BE
IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY," "WILL,"
"SHOULD," "EXPECT," "INTEND," "ESTIMATE" OR "CONTINUE" OR THE NEGATIVE
THEREOF OR COMPARABLE TERMINOLOGY. THE MATTERS SET FORTH UNDER THE CAPTION
"RISK FACTORS" IN THE PROSPECTUS CONSTITUTE CAUTIONARY STATEMENTS IDENTIFYING
IMPORTANT FACTORS WITH RESPECT TO FORWARD-LOOKING STATEMENTS. UNDUE RELIANCE
SHOULD NOT BE PLACED ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS
OF THE DATE OF THIS PROSPECTUS, AND I-LINK UNDERTAKES NO OBLIGATION TO UPDATE
THESE FORWARD-LOOKING STATEMENTS.
USE OF PROCEEDS
The net proceeds available from the rights offering will be
approximately $19,900,000. Since Series N preferred shares purchased by
Winter Harbor under its basic subscription privilege may be paid for, at
I-Link's option, by the exchange of debt, at least $4,340,000 of the proceeds
is expected to be used to repay debt which I-Link owes to Winter Harbor. We
have the option to require Winter Harbor to exchange up to an additional
$8,260,000 of debt, an amount which represents the balance due under the
$8,000,000 bridge loan and $4,000,000 new loan (including estimated accrued
interest). To the extent that Winter Harbor chooses to exercise its
oversubscription privilege for Series N preferred stock in excess of the
above amounts, or other stockholders choose to exercise their basic
subscription privileges or oversubscription privileges, I-Link will receive
cash. Thus, assuming that I-Link elects to have all Winter Harbor debt
exchanged for shares of Series N preferred stock or I-Link repays any debt
amounts not exchanged, the maximum cash proceeds to I-Link are estimated to
be approximately $7,300,000. The terms of the bridge loan require that I-Link
prepay the debt
19
<PAGE>
incurred under that loan with any cash proceeds received from other loans, or
from the issue or sale of any equity interest. Therefore, to the extent that
there is participation in the rights offering beyond the exchange of Winter
Harbor debt, I-Link will be obligated to use any proceeds to satisfy the
outstanding balance under the $8,000,000 bridge loan. As to the new loan,
should the value of Series N preferred stock obtained by Winter Harbor be
less than the amount of I-Link's debt owed to Winter Harbor, I-Link may in
fact elect to exchange less than all of its outstanding debt at the time the
rights offering closes and it reserves the right to retain any cash proceeds
and repay the balance of the debt to Winter Harbor when it comes due by its
terms. In the latter case, the amount of cash proceeds would be increased by
the amount of debt not immediately repaid to Winter Harbor. However, I-Link
does not intend to extend the maturity date under the new loan, but
anticipates repaying the new loan with the proceeds of the rights offering.
We intend to use any cash proceeds from the offering for working capital
purposes.
DETERMINATION OF OFFERING PRICE
The subscription price of the rights was determined by I-Link in
negotiation with Winter Harbor, and is not necessarily related to the assets,
book value or net worth of I-Link or any other established criteria of value,
and may not be indicative of the fair value of the securities offered.
DILUTION
Although, other than as disclosed in this prospectus, there are no
present plans, agreements or undertakings with respect to I-Link's issuance
of any shares of stock or related convertible securities, any such issuance
could dilute I-Link's publicly held ownership. Inasmuch as I-Link may, in the
future, issue authorized shares of common stock or preferred stock without
prior stockholder approval, there may be substantial dilution to the
interests of I-Link's stockholders. Common stockholders will also suffer
significant dilution in the event that any of I-Link's outstanding
convertible securities, including outstanding shares of Class C preferred
stock, Series F preferred stock and Series M preferred stock, warrants and
options are converted by the holders thereof. See "Description of
Securities." Additional dilution may result in the event of the exercise of
warrants and options, including options granted under I-Link's stock option
and purchase plans and employment agreements.
I-Link has authorized capital stock of 150,000,000 shares of common
stock, $.007 par value per share and 10,000,000 shares of preferred stock,
$10.00 par value per share. As of May 11, 1999, there were 21,273,400 shares
of common stock issued and outstanding. Currently the following securities
are outstanding, which may be converted to, or exercised for, shares of
common stock. See also "Risk Factors - Future Issuances of Stock by I-Link;
Potential Anti-Takeover Effect."
- 34,677 shares of Class C preferred stock, convertible into 832,248
shares of common stock
20
<PAGE>
- 540 shares of Series F preferred stock convertible into 2,656,173
shares of common stock
- 4,400 shares of Series M preferred stock, convertible into 6,894,300
shares of common stock (includes 942,504 shares payable in dividends on
Series M preferred stock)
- $7,768,000 of Winter Harbor Convertible Debt, convertible into
4,604,395 shares of common stock (includes 401,345 shares payable as
accrued interest, which is also convertible)
- Winter Harbor Warrants (contingent on debt conversion) exercisable for
5,000,000 shares of common stock
- Winter Harbor Warrants, exercisable for 28,540,000 shares of common
stock
- Other Options and Warrants, exercisable for 13,565,170 shares of
common stock
If all of the above securities were exercised or converted, a total
of 62,092,286 new shares of common stock would be issued. That number
represents nearly three times the current number of shares outstanding, and
would represent approximately 74% of the common stock outstanding after all
62,092,286 shares were issued. The potential of these underlying shares of
common stock being issued and then sold into the market, or the perception
that sales may occur, may result in a decrease in the market price of
I-Link's common stock, and may make it more difficult for I-Link to receive
additional equity financing.
RELATED PARTY TRANSACTIONS
During the first and second quarters of 1998 I-Link obtained an
aggregate of $7,768,000 in interim debt financing from Winter Harbor. As
consideration for Winter Harbor's commitment to make the loan, I-Link agreed
to issue 6,740,000 warrants to purchase I-Link common stock at exercise
prices ranging from $5.50 to $7.22. The warrants have exercise periods of 7.5
years from issuance. I-Link also agreed to extend the exercise period on all
10,800,000 warrants previously issued to Winter Harbor to seven and one-half
years. According to the terms of that loan agreement with Winter Harbor, the
initial borrowings of $5,768,000 were payable upon demand by Winter Harbor no
earlier than May 15, 1998, and were collateralized by essentially all of the
assets of I-Link subsidiaries. Because the loan was not repaid by May 15,
1998, the total loan, including additional borrowings of $2,000,000 obtained
in the second quarter, continues on a demand basis with interest accruing at
prime plus four percent. (On April 15, 1999 Winter Harbor agreed that it will
not demand payment under these promissory notes prior to April 15, 2000.)
Additionally, Winter Harbor has the right to elect at any time until the loan
is repaid to (1) convert the unpaid balance of the loan into additional
shares of I-Link Series M preferred stock using an assumed stated value of
$2,500 per share of Series M preferred stock instead of $2,750 (representing
a 10% premium on convertibility), (2) reduce the exercise price of the
6,740,000 Loan Warrants to $2.50 per share, and (3) receive an additional
5,000,000 warrants to purchase common stock of I-Link at an exercise price of
$2.50 per share.
21
<PAGE>
In June 1998, JNC Opportunity Fund Ltd. purchased 1,000 shares of
Series F preferred stock for cash consideration of $10,000,000. Each share of
Series F preferred stock has a stated value of $10,000 plus any accrued
unpaid dividends, and may be converted at any time. As of May 11, 1999 JNC
has converted 460 shares of Series F preferred stock into 2,293,929 shares of
common stock, and 540 shares of Series F preferred stock remain outstanding.
As of the record date, each outstanding share of Series F preferred stock may
be converted into approximately 4,919 shares of common stock. If all
outstanding shares of Series F preferred stock were converted on that date,
2,656,173 new shares of common stock would be issued, without giving effect
to the limitations contained in the terms of the Series F preferred stock.
I-Link is currently addressing the possible elimination of one of these
restrictions, as JNC has requested that I-Link hold a shareholders meeting to
approve the issuance of shares of common stock by conversion of the Series F,
in excess of 20% of the number of shares of common stock outstanding on the
date the Series F was originally issued.
In November 1998, I-Link reached an agreement in principal for a new
financing arrangement with Winter Harbor. Under the terms of the new
financing arrangement, Winter Harbor provided I-Link a new bridge loan
facility of up to $8,000,000. The maturity date for the bridge loan facility
is October 31, 1999. The bridge loan is junior to I-Link's existing debt to
Winter Harbor and shall be on an equal basis with the balance of I-Link's
general obligations. The bridge loan is secured by the assets of I-Link via a
second priority lien that is junior to the existing first lien granted by
I-Link to Winter Harbor. Amounts drawn against the bridge loan bear interest
at rates that increase from quarter to quarter until the maturity date. The
initial interest rate was the Wall Street Journal prime rate plus four
points. The rate is increase by one point every succeeding three-month period
subject to a maximum rate equal to the Wall Street Journal prime rate plus
seven points. To date, I-Link has drawn the entire allowable amount
(approximately $7,400,000) against the bridge loan and owes Winter Harbor an
additional $600,000 in accumulated interest and legal fees related to the
prior Winter Harbor financing. For each ten dollars of bridge loan drawn,
I-Link will issue to Winter Harbor a warrant to purchase one share of common
stock, at an exercise price of $2.78 per share. The warrants have a maturity
date of 7.5 years from the date of issue, and will have demand and piggyback
registration rights. Because I-Link elected not to repay all amounts drawn
down on the bridge loan by April 26, 1999, in lieu thereof, it issued
additional warrants to Winter Harbor, so that the total number of warrants
issued increased to one warrant for each one dollar outstanding (or a total
of 8,000,000 warrants). I-Link anticipates there will be a change in our
financial statements related to the additional warrants issued as the
remaining funds available are drawn down. I-Link obtained stockholder
approval under the maintenance criteria of the Nasdaq Stock Market in
connection with its election not to repay all amounts drawn down on the
bridge loan by April 26, 1999.
Additionally, Winter Harbor assisted I-Link in obtaining a standby
letter of credit in the amount of $3,000,000, by acting as the account party
thereto, to secure additional capital leases of equipment and telephone lines
relative to the proposed expansion of I-Link's telecommunications network.
For its assistance, I-Link will pay Winter Harbor a facility fee of 1% per
annum on the portion of the letter of credit that is not used, and issue to
Winter Harbor warrants to purchase 300,000 shares of common stock on the same
terms as the bridge
22
<PAGE>
loan warrants. Since I-Link elected not to repay all amounts drawn down on
the bridge loan by April 26, 1999, then Winter Harbor will receive similar
warrants to purchase an additional 2,700,000 shares of common stock.
In April 1999 I-Link and Winter Harbor agreed in principal to a new
loan of up to $4,000,000. The terms of the new loan will be substantially
identical to the terms of the bridge loan except that no warrants were issued
upon origination of the new loan. The September 30, 1999 maturity date under
the new loan may be extended, at I-Link's option, to April 15, 2000. In the
event that I-Link elects to extend the maturity date to April 15, 2000 and
I-Link's shareholders approve a modification to the conversion price of the
Series N preferred stock, then no additional warrants will be issued to
Winter Harbor. The proposed modification of conversion terms would link the
Series N preferred stock rate of conversion (A) to the market price of the
common stock, by calculating 110% of the average trading price for any 20 day
period following the date any Series N preferred stock is first issued or (B)
to the exercise price or conversion rate of any new options, warrants,
preferred stock or other convertible security that I-Link may issue,
including the conversion rate of the Series F preferred stock. The Series F
conversion rate is derived by determining the lower of (1) $3.76 or (2) the
average of the three lowest common stock closing prices during the twenty
trading days prior to conversion, and multiplying that average by 81%. The
modification of terms would also establish a floor to the conversion price of
$1.25 per share. This proposal will be considered by I-Link stockholders at
their annual meeting tentatively scheduled to occur in June 1999. I-Link does
not know if it will elect to extend that maturity date, but it does intend to
seek shareholder approval of the conversion price modification. There is no
assurance that the conversion price modification will be approved. In the
event that the modification to the Series N conversion price is not approved
and the maturity date is extended to April 15, 2000, I-Link will be required
to issue to Winter Harbor one warrant for each one dollar of principal
outstanding under the new loan (or, up to 4,000,000 new warrants) as of the
date of such extension. The new warrants issued as a result of the extension
under the new loan will be issued on the same terms and conditions as the
warrants issued under the bridge loan.
THE RIGHTS OFFERING
THE RIGHTS
I-Link is distributing to each record holder, at no cost to the
record holder, nontransferable rights to purchase Series N preferred stock.
One right will be distributed for each 1,589 shares of common stock currently
held, and for each 1,589 shares of common stock that the Series M preferred
stock is convertible into (including accrued dividends), as of the record
date. The rights will be evidenced by nontransferable subscription
certificates.
No fractional rights or cash in lieu thereof will be issued or paid,
and the number of rights distributed to each holder of common or preferred
stock will be rounded down to the nearest whole number. The following table
illustrates the number of rights to be issued in various situations:
23
<PAGE>
<TABLE>
<CAPTION>
Shares of common stock
(or equivalents) owned Number of
on the record date rights
---------------------- ---------
<S> <C>
0 - 1,588 0
1,589 - 3,177 1
3,178 - 4,766 2
4,767 - 6,355 3
etc.
</TABLE>
No subscription certificate may be divided in such a way as to
permit the holders of common or preferred stock to receive a greater number
of rights than the number to which the subscription certificate entitles its
holder, except that a depository, bank, trust company and securities broker
or dealer holding shares of common stock on the record date for more than one
beneficial owner may, upon proper showing to the subscription agent, exchange
its subscription certificate to obtain a subscription certificate for the
number of rights to which all of those beneficial owners in the aggregate
would have been entitled had each been a holder on the record date. I-Link
reserves the right to refuse to issue any subscription certificate if its
issuance would be inconsistent with the principle that each beneficial
owner's holdings will be rounded down to the nearest whole right.
EXPIRATION DATE
The rights will expire at 5:00 p.m., New York City local time, on
July 23, 1999. After the expiration date, unexercised rights will be null and
void. I-Link will not be obligated to honor any purported exercise of rights
received by the subscription agent after the expiration date, regardless of
when the documents relating to exercise were sent.
SUBSCRIPTION PRIVILEGES
BASIC SUBSCRIPTION PRIVILEGE
Each right entitles its holder to the basic subscription privilege
to receive, upon payment of the subscription price, one share of Series N
preferred stock. Certificates representing the Series N preferred shares
purchased according to the basic subscription privilege will be delivered to
subscribers as soon as practicable after the expiration date.
Banks, brokers and other nominee rights holders who exercise the
basic subscription privilege on behalf of beneficial owners of rights will be
required to certify to the subscription agent and I-Link, in connection with
the subscription under the basic subscription privilege, as to the aggregate
number of rights that have been exercised and the amount of Series N
preferred shares that is being subscribed for under the basic subscription
privilege by each beneficial owner of rights on whose behalf the nominee
holder is acting.
24
<PAGE>
OVERSUBSCRIPTION PRIVILEGE
In addition to your basic subscription privilege, you may subscribe
for additional shares of Series N preferred stock upon delivery of the
required documents and payment of the subscription price before the
expiration date, if (1) you exercised your basic subscription privilege in
full and (2) other holders of rights do not exercise their basic subscription
privileges in full.
If there are not enough shares to satisfy all subscriptions upon the
exercise of the oversubscription privileges, we will allocate the remaining
shares pro rata (subject to the elimination of fractional shares, rounding
down) among those who oversubscribe. Pro rata means in proportion to the
number of shares you and the other holders have purchased pursuant to the
exercise of the basic subscription privilege. If there is a pro rata
distribution of the remaining shares and the pro ration results in the
allocation to you of a grater number of shares than you subscribed for
pursuant to the oversubscription privilege, then we will allocate to you only
the number of shares for which you subscribed. We will allocate the remaining
shares among all other holders exercising their oversubscription privilege.
You may exercise the oversubscription privilege only if you exercise
your basic subscription privilege in full. To determine if you have fully
exercised your basic subscription privilege, we will consider only the basic
subscription privileges held by you in the same capacity. For example,
suppose you hold rights stemming from shares of I-Link common stock you own
(1) individually and (2) collectively with your spouse. If you wish to
exercise your oversubscription privilege with respect to the rights you own
individually, but not with respect to rights you own collectively with your
spouse, you only need to exercise your basic subscription right with respect
to your individually held rights. You do not have to subscribe for any shares
under the basic subscription privilege owned collectively with your spouse to
exercise your individual oversubscription privilege.
Similarly, for example, if you hold rights because of your ownership
of (1) common stock and (2) Class C preferred stock, then you will be issued
two separate subscription certificates. If you wish to exercise your
oversubscription privilege with respect to the rights you hold because of
your common stock holdings, but not with respect to rights you hold because
of your Class C preferred stock, you only need to exercise your basic
subscription right with respect to your common stock-derived rights. You do
not have to subscribe for any shares under the basic subscription privilege
derived from your Class C preferred stock ownership to exercise your common
stock-derived oversubscription privilege. Please note that if your holdings
as of the record date included, for example, 1,000 shares of common stock and
50 shares of Class C preferred stock (which are convertible into 1,200 shares
of common stock), you will receive NO RIGHTS, even though the sum of the
common stock and common stock equivalents exceeds 1,589, the number required
to obtain a right. This is because rights derived from different classes of
securities holdings may not be combined.
When you complete the portion of the subscription certificate to
exercise the oversubscription privilege, you will be representing and
certifying that you have fully
25
<PAGE>
exercised your basic subscription privilege received in respect of the I-Link
securities you hold in that capacity. You must exercise your oversubscription
privilege at the same time you exercise your basic subscription privilege in
full.
If you own your shares of I-Link common stock or preferred stock
convertible to common stock through your bank, broker or other nominee holder
who will exercise your oversubscription privilege on your behalf, the nominee
holder will be required to certify to I-Link and the subscription agent:
(1) the number of shares held on the record date on your behalf;
(2) the number of rights you exercised under your basic subscription
privilege;
(3) that your entire basic subscription privilege held in the same
capacity has been exercised in full; and
(4) the number of shares of Series N preferred stock you subscribed
for pursuant to the oversubscription privilege.
Your nominee holder must also disclose to us certain other
information received from you.
If you exercise your oversubscription privilege and are allocated
less than all of the shares of Series N preferred stock for which you wished
to subscribe, the excess funds you paid for shares of Series N preferred
stock that are not allocated to you will be returned by the subscription
agent by mail without interest or deduction as soon as practicable after the
expiration date of the rights offering.
SUBSCRIPTION PRICE
The subscription price is $1,000 per share of Series N preferred
stock purchased under the basic subscription privilege or the
oversubscription privilege. If I-Link so chooses, Winter Harbor will cancel a
portion of I-Link's indebtedness to Winter Harbor as payment of its
subscription price. See "--Exercise of Rights."
EXERCISE OF RIGHTS
Rights may be exercised by delivering to the subscription agent,
American Stock Transfer & Trust Company, on or prior to the expiration date,
the properly completed and executed subscription certificate evidencing such
rights with any required signature guaranties, together with payment in full
of the subscription price for the Series N preferred shares to be purchased
under the basic subscription privilege. Payment in full must be by check or
bank draft drawn upon a U.S. bank or postal, telegraphic or express money
order payable to American Stock Transfer & Trust Company as subscription
agent, along with the subscription certificate, to American Stock Transfer &
Trust Company for cancellation by I-Link (or any combination thereof). The
subscription price will be considered to have been received by the
subscription agent only upon (a) clearance of any uncertified check or (b)
receipt by the subscription agent of any certified check or bank draft drawn
upon a U.S. bank or of any
26
<PAGE>
postal, telegraphic or express money order. IF PAYING BY UNCERTIFIED PERSONAL
CHECK, PLEASE NOTE THAT THE FUNDS PAID THEREBY MAY TAKE AT LEAST FIVE
BUSINESS DAYS TO CLEAR. ACCORDINGLY, RIGHTS HOLDERS WHO WISH TO PAY THE
SUBSCRIPTION PRICE BY MEANS OF UNCERTIFIED PERSONAL CHECK ARE URGED TO MAKE
PAYMENT SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO ENSURE THAT PAYMENT
IS RECEIVED AND CLEARS BY THAT DATE AND ARE URGED TO CONSIDER PAYMENT BY
MEANS OF CERTIFIED OR CASHIER'S CHECK OR MONEY ORDER.
The address to which the subscription certificates and payment of
the subscription price should be delivered, whether by mail, overnight
courier or hand delivery, is:
American Stock Transfer & Trust Company
Reorganization Department
40 Wall Street
New York, NY 10005
If an exercising rights holder does not indicate the number of rights
being exercised, or does not forward full payment of the aggregate
subscription price for the number of rights that the rights holder indicates
are being exercised, then the rights holder will be considered to have
exercised the basic subscription privilege with respect to the maximum number
of rights that may be exercised for the aggregate subscription price payment
delivered by the rights holder.
If a subscription certificate provides that the Series N preferred
shares to be issued upon the exercise of rights are to be delivered to a
party or person other than the holder of the rights, signatures on each
subscription certificate must be guaranteed by a participant in the
Securities Transfer Agents Medallion Program, the Stock Exchange Medallion
Program or the American Stock Exchange, Inc. Medallion Signature Program.
Persons who hold shares of common stock for the account of others,
such as brokers, trustees or depositories for securities, should notify the
respective beneficial owners of those shares as soon as possible to ascertain
the beneficial owners' intentions and to obtain instructions with respect to
the rights. If the beneficial owner so instructs, the record holder of the
right should complete subscription certificates and submit them to the
subscription agent with the proper payment. In addition, beneficial owners of
rights held through a record holder should contact the holder and request the
holder to effect transactions in accordance with the beneficial owners'
instructions.
The instructions accompanying the subscription certificates should
be read carefully and followed in detail. DO NOT SEND SUBSCRIPTION
CERTIFICATES OR PAYMENTS TO I-LINK.
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF
THE SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND
RISK OF THE RIGHTS HOLDERS, BUT IF THEY ARE SENT BY MAIL IT IS RECOMMENDED
THAT THEY BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT
REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO ENSURE DELIVERY
TO THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO 5:00 P.M., NEW
YORK CITY LOCAL TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED PERSONAL
CHECKS
27
<PAGE>
MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, YOU ARE STRONGLY URGED TO PAY,
OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK OR MONEY
ORDER.
All questions concerning the timeliness, validity, form and
eligibility of any exercise of rights will be determined in I-Link's
reasonable discretion. I-Link, in its reasonable discretion, may also waive
any defect or irregularity, or permit a defect or irregularity to be
corrected within such time as it may determine, or reject the purported
exercise of any right. Subscriptions will not be considered to have been
received or accepted until all irregularities have been waived or cured
within such time as I-Link determines in its reasonable discretion. Neither
I-Link nor the subscription agent will be under any duty to give notification
of any defect or irregularity in connection with the submission of
subscription certificates or incur any liability for failure to give
notification.
Any questions or requests for assistance concerning the method of
exercising rights or requests for additional copies of the prospectus should
be directed to the subscription agent, American Stock Transfer & Trust
Company at one of its addresses set forth under "Subscription Agent." The
telephone number of the subscription agent is (718) 921-8200 (ask for the
Shareholder Relations Department) and the facsimile number is (718) 234-5001.
NO REVOCATION
Once a rights holder has exercised the basic subscription privilege,
his or her exercise or subscription may not be revoked.
RIGHTS OF SUBSCRIBERS
Subscribers have no rights as stockholders of I-Link with respect to
the shares of common stock into which the Series N preferred shares are
convertible until shares of common stock are issued upon conversion of the
Series N preferred shares.
DTC PARTICIPANTS
I-Link anticipates but does not guarantee that the exercise of basic
subscription privileges and oversubscription privileges may be effected
through the facilities of the Depository Trust Company.
AMENDMENTS AND TERMINATION
I-Link reserves the right to amend the terms and conditions of the
rights offering, whether the amended terms are more or less favorable to
rights holders. If I-Link amends the terms of the rights offering, the
registration statement of which this prospectus forms a part will be amended,
and a new definitive prospectus will be distributed to all rights holders who
have exercised rights up to that time and to holders of record of unexercised
rights on the date the terms are amended; provided, however, that any change
in the conversion terms of the Series N preferred stock, as discussed in the
following paragraph and elsewhere in this
28
<PAGE>
prospectus, will not constitute an "amendment of the terms and conditions" of
the rights offering. In that case, the registration statement will not be
amended and the other procedures discussed in the balance of this paragraph
will not apply. However, if there is any change in other terms and conditions
of the rights offering, all rights holders who have exercised rights by that
time, or who exercise rights within four business days after the mailing of
the new definitive prospectus, shall be provided with a consent form, on
which they can confirm their exercise of rights and their subscriptions under
the terms of the rights offering as amended by I-Link; any rights holder who
has exercised any rights, or who exercises rights within four business days
after the mailing of the new definitive prospectus, and who does not return
the consent within ten business days after the mailing of the consent by
I-Link will be considered to have canceled his or her exercise of rights, and
the full amount of the subscription price paid by that rights holder will be
returned promptly by mail, without interest or deduction. Any completed
subscription certificate received by the subscription agent five or more
business days after the date of the amendment will be assumed to mean that
the rights holder who completed a subscription certificate consents to the
amended terms.
An amendment to the conversion terms of the Series N preferred stock
will be considered at the annual meeting of stockholders scheduled for July
19, 1999. See "Description of Securities - Series N Preferred Stock" and
"Related Party Transactions." As soon as practical after that stockholder
meeting, I-Link's management will redistribute this prospectus along with
supplemental information about the outcome of the stockholder vote on the
proposal to change the conversion terms of the Series N preferred stock.
I-Link will also file a Current Report on Form 8-K with the SEC in order to
make public the same information.
I-Link reserves the right at any time prior to delivery of the
Series N preferred shares purchased in the rights offering to terminate the
rights offering. Termination would be effected by I-Link by giving oral or
written notice of termination to the subscription agent and making a public
announcement. If the rights offering is terminated in this manner, the
subscription price will be promptly returned by mail to exercising rights
holders, without interest or deduction. I-Link will have no obligation to a
rights holder, whether purchase was made through the subscription agent or
otherwise, in the event that the rights offering is terminated.
DETERMINATION OF SUBSCRIPTION PRICE
The subscription price was determined by I-Link, based on I-Link's
objective of achieving the maximum net proceeds obtainable from the rights
offering while providing the common and preferred stock holders with an
opportunity to make an additional investment in I-Link, thus avoiding a
dilution of their ownership position in I-Link.
SUBSCRIPTION AGENT
I-Link has appointed American Stock Transfer & Trust Company as
subscription agent for the rights offering. The subscription agent's address,
which is the address to which the
29
<PAGE>
subscription certificates and payment of the subscription price must be
delivered, whether by mail, overnight courier or hand delivery, is:
American Stock Transfer & Trust Company
Reorganization Department
40 Wall Street
New York, NY 10005
The subscription agent's telephone number is (718) 921-8200 (ask for
Shareholder Relations Department), and the facsimile number is (718) 234-5001.
I-Link will pay the fees and expenses of the subscription agent.
I-Link has been informed by the subscription agent that it is a bank within
the meaning of Section 3(a)(6) of the Exchange Act.
OBLIGATIONS AND INTENTIONS OF WINTER HARBOR, L.L.C.
Winter Harbor is obligated to exercise its basic subscription
privileges in full. In addition, Winter Harbor has advised I-Link that it
intends (but it has no obligation) to subscribe for any or all of the Series
N preferred shares that it may be entitled to purchase under its
oversubscription privilege. As of May 11, 1999, Winter Harbor owned
beneficially 45,038,694 shares of common stock, all of which would be
issuable upon conversion of the Series M Shares, certain debt, and the
warrants that Winter Harbor holds. If all of that common stock were issued,
it would equal approximately 68% of the outstanding common stock. In the
event Winter Harbor were to acquire all available share of Series N preferred
stock, it would beneficially own the equivalent of 56,232,939 shares of
common stock, or approximately 73% of the outstanding common stock.
NO BOARD RECOMMENDATION
An investment in the Series N preferred stock must be made according
to each rights holder's evaluation of his, her or its best interests.
ACCORDINGLY, THE BOARD DOES NOT MAKE ANY RECOMMENDATION TO ANY RIGHTS HOLDER
OR PROSPECTIVE INVESTOR REGARDING THE EXERCISE OF HIS, HER OR ITS RIGHTS.
OTHER MATTERS
We are not making the rights offering in any state or other
jurisdiction in which it is unlawful to do so. We will not sell or accept an
offer to purchase Series N preferred stock from you if you are a resident of
any such state or other jurisdiction. We may delay the commencement of the
rights offering in certain states or other jurisdictions in order to comply
with the laws of such states or other jurisdictions. We do not expect that
there will be any changes in the terms of the rights offering. However, we
may decide, in our sole discretion, not to modify the terms of the rights
offering as may be requested by certain states or other
30
<PAGE>
jurisdictions. If that happens and you are a resident of that state, you will
not be eligible to participate in the rights offering.
Subscription Certificates will not be mailed to rights holders whose
addresses are outside the United States and Canada or who have an APO or FPO
address, but will be held by the subscription agent for each rights holder's
account. To exercise their rights, such persons must notify the subscription
agent at or prior to the expiration date.
DESCRIPTION OF SECURITIES
COMMON STOCK
I-Link is currently authorized to issue 150,000,000 shares of common
stock, par value $.007 per share. As of May 11, 1999, there were 21,273,400
shares of common stock issued and outstanding and approximately 500 holders
of record of the common stock, and approximately 11,300 beneficial owners.
Each share of common stock entitles the holder thereof to one vote on each
matter submitted to the stockholders of I-Link for a vote thereon. The
holders of common stock: (a) have equal ratable rights to dividends from
funds legally available therefor when, as and if declared by the Board of
Directors; (b) are entitled to share ratably in all of the assets of I-Link
available for distribution to holders of common stock upon liquidation,
dissolution or winding up of the affairs of I-Link; (c) do not have
preemptive, subscription or conversion rights, or redemption or applicable
sinking fund provisions; and (d) as noted above, are entitled to one
non-cumulative vote per share on all matters submitted to stockholders for a
vote at any meeting of stockholders. Prior to any payment of dividends to the
holders of common stock, all accrued and unpaid dividends on any outstanding
shares of preferred stock must be paid. Other than as set forth in this
prospectus, I-Link anticipates that, for the foreseeable future, it will
retain earnings, if any, to finance the operations of its businesses. The
payment of dividends in the future will depend upon, among other things, the
capital requirements and the operating and financial conditions of I-Link.
PREFERRED STOCK
The Articles of Incorporation authorize the issuance of up to
10,000,000 shares of preferred stock, $10.00 par value per share. The Board
of Directors is authorized to issue shares of preferred stock from time to
time in one or more series and, subject to the limitations contained in the
Articles of Incorporation and any limitations prescribed by law, to establish
and designate a series and to fix the number of shares and the relative
conversion rights, voting rights and terms of redemption (including sinking
fund provisions) and liquidation preferences. New issuances of shares of
preferred stock with voting rights can affect the voting rights of the
holders of outstanding shares of preferred stock and common stock by
increasing the number of outstanding shares having voting rights, and by the
creation of class or series voting rights. Furthermore, additional issuances
of shares of preferred stock with conversion rights can have the effect of
increasing the number of shares of common stock outstanding up to the amount
of common stock authorized by the Articles of Incorporation and can also, in
some circumstances, have the effect of delaying or preventing a change in
control of I-Link and/or
31
<PAGE>
otherwise adversely affect the rights of holders of outstanding shares of
preferred stock and common stock. To the extent permitted by the Articles of
Incorporation, a series of preferred stock may have preferences over the
common stock (and other series of preferred stock) with respect to dividends
and liquidation rights. As of May 11, 1999, 240,000 shares of preferred stock
had been designated Class C preferred stock, of which 34,677 are issued and
outstanding; 29,000 shares of preferred stock had been designated Series M
preferred stock, of which 4,400 are outstanding; and 1,000 shares of
preferred stock had been designated Series F preferred stock, of which 540
are outstanding.
SERIES N PREFERRED STOCK. The Series N preferred stock will be paid
dividends on an as-converted basis equal to I-Link common stock, when and if
common stock dividends are paid. The Series N preferred stock is senior in
all rights to other preferred common stock of I-Link, except that the Series
N preferred stock will be equal in seniority to the previously issued Series
F preferred stock. The Series N preferred stock can be converted into common
stock at any time at an initial Series N conversion price of $2.78. The
Series N preferred stock will vote with the common stock on an as-converted
basis on all matters which are submitted to a vote of the stockholders,
except if Florida law or by I-Link's Articles of Incorporation or By-laws
direct otherwise.
Under the terms of a new loan agreement between I-Link and Winter
Harbor, I-Link agreed to hold a shareholders meeting to seek shareholder
approval of a modification to the Series N preferred stock conversion price,
that (1) links the Series N conversion price to the exercise price or
conversion rate of any new options, warrants, preferred stock or other
convertible security, including the conversion rate of the Series F preferred
stock (which is derived by determining the lower of (a) $3.76 or (b) the
average of the three lowest common stock closing prices during the twenty
trading days prior to conversion, and multiplying that average by 81%), and
(2) establishes a floor to the conversion price of $1.25 per share.
The following paragraphs explain more about the effects of the
changes in the Series N conversion terms which will be proposed for
stockholder approval at the annual meeting of stockholders scheduled for
July 19, 1999.
WHAT ARE THE CURRENT TERMS OF THE SERIES N CONVERSION PRICE?
Currently, the conversion price of the Series N preferred stock is
$2.78. Based on the $1,000 stated value per share, this would mean each share
of Series N preferred stock would be convertible into approximately 360
shares of common stock.
WHAT IS THE PROPOSED MODIFICATION TO THE TERMS OF THE SERIES N CONVERSION
PRICE?
In the event that the proposal is approved, the Series N conversion
price shall be set initially at $2.78, but may be reset to the lowest of:
32
<PAGE>
- 110% of the average trading price for any 20 day period following
the date that Series N preferred stock is first issued;
- the price at which any new common stock or common stock equivalent
is issued (whether by conversion, exercise or otherwise);
- the price at which common stock issued upon the exercise or
conversion of any new options, warrants, preferred stock or other
convertible security;
- the conversion price of any Series F preferred stock converted
after the date that Series N preferred stock is first issued;
- provided, however, that the conversion price may not be any lower
than $1.25.
Based on the $1,000 stated value per share, this means that each
share of Series N preferred stock could become convertible into as many as
800 shares of common stock.
WHAT ARE THE SERIES F PREFERRED STOCK CONVERSION PRICE TERMS?
The conversion price of the Series F preferred stock is determined
partly in relation to a discount to the market price of the common stock. The
lower the market price for the common stock, the more shares of common stock
are issued at the time of a conversion. The terms of the Series F preferred
stock provide that the conversion price shall be the lower of $3.76 or 81% of
the average of the three lowest per share market values during the twenty-two
trading day period immediately preceding the applicable conversion date.
The conversion price of the Series F is also adjusted in the event of:
- stock dividends payments;
- divisions, combinations and reclassifications of common stock; and
- a lower issuance price of any new common stock, warrants, options,
or rights.
The Series F conversion price will not be less than the floor price
$2.50, unless the market price remains below $2.50 for five consecutive
trading days. In such case the floor price is re-set at the average of the
five consecutive trading days. Subsequent resets may occur, provided that the
floor price shall never be less than $1.25. As of May 11, 1999, the floor
price has been reset to $2.033.
To the extent the holder of the Series F preferred stock converts
and then sells shares of common stock, the price of common stock may decrease
even further due to the additional shares in the market, allowing the holder
to convert additional Series F preferred stock into greater amounts of common
stock, providing the potential to depress the price of common stock even
further. Dividends on the Series F preferred stock may, at the option of the
Company, be paid in shares of common stock. Consequently, lower market prices
of common stock would mean higher amounts of common stock being issued as
dividends, or being issued upon conversion of Series F preferred stock,
resulting in substantial dilution to the interests of other holders of common
stock.
33
<PAGE>
WHAT IS THE POTENTIAL IMPACT TO SHAREHOLDERS OF LINKING THE SERIES N CONVERSION
PRICE TO THE CONVERSION PRICE OF THE SERIES F?
If the Series N conversion price were linked to the current Series F
conversion price, and Winter Harbor purchased all of the outstanding shares
of Series N preferred stock under the rights offering, and converted those
shares, then 8,557,980 shares of common stock would be issued, which would
then represent 28.7% of the shares of common stock outstanding. As an
illustration, assuming the new conversion terms are implemented, the
following table shows the number of shares of common stock issuable upon
conversion of Series N preferred stock based upon a range of conversion
prices. The information in the table assumes a discount rate of 81% (equal to
that to the Series F preferred stock). As used in the 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 N preferred stock, the highest the conversion price can be is
$2.78 and the lowest the conversion price can be is $1.25.
<TABLE>
<CAPTION>
MARKET PRICE OF COMMON COMMON SHARES ISSUABLE UPON CONVERSION OF ALL
STOCK CONVERSION PRICE SERIES N PREFERRED STOCK
- ------------------------ ------------------- ------------------------------------------------
<S> <C> <C>
$3.43 or greater $2.78 7,194,245
$3.09 $2.50 8,000,000
$1.54 or lower $1.25 16,000,000
</TABLE>
WHAT IS THE POTENTIAL IMPACT TO SHAREHOLDERS OF LINKING THE SERIES N
CONVERSION PRICE TERMS TO THE EXERCISE PRICE OF OTHER OUTSTANDING SERIES OR
CLASSES?
In addition to the Series F preferred stock discussed above, the
Series M and the Class C preferred stock are the only other outstanding
series or classes of I-Link securities. Each outstanding share of Class C
preferred stock is convertible into 24 shares of common stock. Any shares of
Class C preferred stock still outstanding on September 6, 2001 shares convert
to common stock automatically at a conversion rate determined by dividing
$60.00 by the lower of $2.50 or 50% of the average closing bid price of the
common stock for ten trading days immediately preceding September 6, 2001. If
the modification to the Series N conversion rate terms is approved, and
Winter Harbor was to purchase all of the outstanding shares of Series N
preferred stock and convert those shares in accordance with the conversion
terms of the Class C preferred stock now in effect, 8,000,000 shares of
common stock would be issued, representing 27.3% of the shares outstanding.
The Series M preferred stock is convertible into shares of common
stock at $2.033 per share. This price may be adjusted downward in the event
of specified dilutive transactions such as stock splits, dividends or
reclassifications, mergers and reorganizations. If all 4,400 outstanding
shares of Series M preferred stock were converted as of the record date,
6,894,300 shares of common stock would be issued (which includes shares
issuable to pay accrued dividends). On October 10, 2002, all shares of Series
M preferred stock still outstanding shall
34
<PAGE>
be converted to common stock automatically, at the lower of $2.033 per share,
subject to adjustment, or 50% of the average closing bid price of the common
stock ten trading days preceding October 10, 2002. If the modification to the
Series N conversion rate terms is approved, and Winter Harbor was to purchase
all of the outstanding shares of the Series N preferred stock and convert
those shares in accordance with the conversion terms of the Series M
preferred stock now in effect, 9,837,678 shares of common stock would be
issued, representing 31.6% of the shares outstanding.
SERIES F PREFERRED STOCK. There are 1,000 shares of Series F
preferred stock designated, all of which were issued on July 28, 1998. As of
May 11, 1999, the adjustable conversion price equaled $2.033, which is the
figure determined to be the lower of $3.76 or 81% of the average of the three
lowest per share market values during the twenty-two trading day period
immediately preceding the applicable conversion date. Since the conversion
terms of the Series F preferred stock are determined partly in relation to a
discount to the market price of I-Link's common stock, the result is that the
lower the common stock market price is at the time of conversion, the more
shares of common stock will be issued. As of May 11, 1999, 460 shares of
Series F preferred stock had been converted to common stock and 540 Series F
Shares remained outstanding. If all the outstanding shares of Series F
preferred stock were converted using the conversion price in effect on that
date, 2,656,173 shares of common stock would be issued, which would represent
11.1% of the then outstanding shares. The factors determining the conversion
price of the Series F preferred stock are subject to further downward
adjustment, subject to a minimum conversion price of $1.25. To the extent the
holders of the Series F preferred stock convert and then sell their shares of
common stock, the price of common stock may decrease even further due to the
additional shares in the market, allowing the holders to convert additional
Series F preferred stock into greater amounts of common stock, providing the
potential to depress the price of common stock even further. Dividends on the
Series F preferred stock may, at the option of I-Link, be paid in shares of
common stock. Consequently, lower market prices of common stock would mean
higher amounts of common stock being issued as dividends, or being issued
upon conversion of Series F preferred stock, resulting in substantial
dilution to the interests of other holders of common stock. As illustration,
the following table shows the number of shares of common stock issuable upon
conversion of Series F preferred stock and as payment of dividends based upon
a range of conversion prices. The information in the table assumes a discount
rate of 81%; the discount rate is used to determine both conversion rates and
dividend payments when dividends are paid in shares of common stock. As used
in the 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. According to the terms of the Series F preferred stock, as of May 11,
1999 the highest the Series F conversion price can be is $3.76 and the lowest
the Series F conversion price can be is $1.25.
35
<PAGE>
<TABLE>
<CAPTION>
Common Stock
Issuable Upon Percent Of
Series F Conversion of All Outstanding Common Shares
Market Price of Common Conversion Series F Preferred Common Stock Issuable Upon Payment
Stock Price Stock After Conversion of Quarterly Dividend
- ---------------------- ----------- ------------------ ---------------- ----------------------
<S> <C> <C> <C> <C>
$4.64 or greater $3.76 1,765,957 7.9% 22,074
$3.09 $2.50 2,656,000 11.4% 33,200
$1.54 or lower $1.25 5,312,000 20.5% 66,400
</TABLE>
The terms of the Series F preferred stock provide that a holder of
Series F preferred stock may not convert shares of or receive dividends on
Series F preferred stock to the extent the conversion or dividend would
result in the holder of Series F preferred stock beneficially owning, in the
aggregate, in excess of 4.999% of the then issued and outstanding shares of
common stock following that conversion; provided, however, that the
percentage limitation may be waived (as to conversions) by the holder of the
Series F preferred stock upon 75 days written notice to I-Link. It should be
noted that this limitation applies only to the number of shares of common
stock held at any one time, and does not prevent the holder of Series F
preferred stock from converting and selling some of its holdings, then,
subject to the limitation just described, converting additional holdings.
Further, the Series F preferred stock may be converted at any time, and will
be automatically converted on July 28, 2001.
The Series F preferred stock is subject to specific provisions that
would prevent any issuance of common shares upon conversion or upon payment
of dividends, and in some cases, 100,000 shares covered by a warrant held by
JNC, at a price below the market or book value of the common stock if and to
the extent that those shares of common stock would equal or exceed in the
aggregate 20% of the number of shares of common stock outstanding on July 28,
1998, the date of initial issuance of the Series F preferred stock, absent
shareholder approval as contemplated by the Nasdaq Stock Market
Non-Quantitative Designation Criteria. Should the holder of Series F
preferred stock elect to convert Series F preferred stock on terms that would
require shareholder approval, and shareholder approval has not been obtained,
then, with respect to the issuance of any additional shares of common stock
in excess of the 20% threshold, I-Link may be obligated to either (a) use its
best efforts to obtain shareholder approval of the issuance of the excess
shares within 60 days of receiving request therefor, (b) issue the excess
shares and accrued dividends thereunder at a conversion price equal to the
closing sale price of the common stock on July 28, 1998 and pay to the
converting holder of Series F preferred stock an amount in cash equal to the
product of the conversion price on the applicable conversion date and the
number of excess shares that would have been issuable but for the application
of the 20% limitation provision, or (c) redeem from the converting holder of
Series F preferred stock the shares of Series F preferred stock relating to
the excess shares.
JNC has requested that I-Link obtain shareholder approval to allow
the issuance of common stock, upon conversion of the Series F preferred
stock, to exceed, in the aggregate,
36
<PAGE>
20% of the number of shares of common stock outstanding on the date the
Series F preferred stock was initially issued. See "Related Party
Transactions".
CLASS C PREFERRED STOCK. Each outstanding share of Class C preferred
stock may be converted into 24 shares of common stock. Any shares of Class C
preferred stock still outstanding on September 6, 2001 shall convert to
common stock automatically at a conversion rate determined by dividing $60.00
by the lower of (a) $2.50 or (b) 50% of the average closing bid price of the
common stock for the ten trading days immediately preceding September 6,
2001. As of May 11, 1999, if all outstanding shares of Class C preferred
stock were converted, I-Link would issue 832,248 shares of common stock
therefor.
SERIES M PREFERRED STOCK. The Series M preferred stock has a
conversion value of $2,750 per share plus any accrued unpaid dividends, and
is currently convertible into shares of common stock at $2.033 per share of
common stock, which price may be adjusted downward in the event of specified
dilutive transactions such as stock splits, dividends or reclassifications,
mergers and reorganizations. Each outstanding share of Series M preferred
stock may be converted into approximately 1,353 shares of common stock. If
all 4,400 outstanding shares of Series M preferred stock were converted on
May 11, 1999, I-Link would issue 5,951,795 shares of common stock therefor,
and an additional 942,504 shares of common stock as payment for accrued but
unpaid dividends. On October 10, 2002, all shares of Series M preferred stock
still outstanding shall be converted to common stock automatically, at the
lower of (a) $2.75 per share of common stock, subject to adjustment, or (b)
50% of the average closing bid price of the common stock in the ten trading
days preceding October 10, 2002.
WINTER HARBOR 1998 CONVERTIBLE DEBT. Winter Harbor, the holder of
the Series M preferred stock, may elect at any time after April 15, 2000 to
convert up to $7,768,000 of I-Link debt into approximately 3,404 shares of
Series M preferred stock as of the record date. Those additional shares of
Series M preferred stock would be convertible into 4,604,395 shares of common
stock.
WINTER HARBOR WARRANTS. As of May 11, 1999, Winter Harbor held
warrants, exercisable at any time, for the purchase of up to 28,540,000
shares of common stock. In addition, if Winter Harbor elects to convert up to
$7,768,000 in debt into additional shares of Series M preferred stock, it is
entitled to receive additional warrants to purchase 5,000,000 shares of
common stock. The exercise prices of all of Winter Harbor's warrants varied
at the time of their respective issuances, however, all are subject to
adjustment downward to equal the market price of common stock in the event
the common stock market price is below the original exercise price at the
time of exercise. All but 800,000 of Winter Harbor's warrants have a current
exercise price of $2.033 per share.
Winter Harbor New Loan Warrants. Winter Harbor may be issued
warrants exercisable for the purchase of up to 4,000,000 shares of common
stock as part of a new loan to I-Link. The warrants will be issued to Winter
Harbor in the event that the maturity date of the new loan is extended and
shareholders do not approve modifications to the Series N preferred stock
linking the Series N conversion price to the exercise price or conversion
rate of
37
<PAGE>
any new options, warrants, preferred stock or other convertible security, or
to the conversion rate of the Series F preferred stock, and establishes a
floor to the conversion price of $1.25 per share. See "Related Party
Transactions."
OTHER OUTSTANDING OPTIONS AND WARRANTS. I-Link has issued options
and warrants to purchase an aggregate of 13,565,170 shares of common stock to
employees and others, at exercise prices ranging from $0.88 to $7.00.
ANTI-TAKEOVER MEASURES
Although, other than as disclosed in this prospectus, there are no
present plans, agreements or undertakings with respect to I-Link's issuance
of any shares of stock or related convertible securities, any issuance such
as these could have anti-takeover effects insofar as the securities could be
used as a method of discouraging, delaying or preventing a change in I-Link's
control. The issuance of additional shares of common stock may have the
effect of rendering more difficult or discouraging an acquisition or change
in control of I-Link.
Moreover, the Articles of Incorporation and Bylaws contain
provisions that could discourage potential takeover attempts and prevent
shareholders from changing I-Link's management. The Articles of Incorporation
provide for a classified Board of Directors and that vacancies on the Board
of Directors shall be filled only by a majority of the remaining directors
then in office.
In addition, the Bylaws provide, among other things, that no
proposal by a stockholder shall be presented for vote at a special or annual
meeting of stockholders unless the stockholder shall, not later than the
close of business on the fifth day following the date on which notice of the
meeting is first given to stockholders, provide the Board of Directors or the
Secretary of I-Link with written notice of intention to present a proposal
for action at the forthcoming meeting of stockholders, which notice shall
include the name and address of the proposing stockholder, the number of
voting securities he or she holds of record and which he or she holds
beneficially, the text of the proposal to be presented at the meeting and a
statement in support of the proposal. Any stockholder may make any other
proposal at an annual meeting or special meeting of stockholders and the same
may be discussed and considered, but unless stated in writing and filed with
the Board of Directors or the Secretary prior to the date set forth above,
the proposal shall be laid over for action at an adjourned, special, or
annual meeting of the stockholders taking place sixty days or more
thereafter. This provision shall not prevent the consideration and approval
or disapproval at the annual meeting of reports of officers, directors, and
committees; but in connection with those reports, no new business proposed by
a stockholder (acting in that capacity) shall be acted upon at an annual
meeting unless stated and filed as described above.
TRANSFER AGENT
American Stock Transfer & Trust Company, New York, New York is the
Registrar and Transfer Agent for I-Link's common stock, and will act as
subscription agent.
38
<PAGE>
PLAN OF DISTRIBUTION
The Series N preferred shares offered in the rights offering are
being offered by I-Link directly to its holders of common stock and its
holders of Series N preferred shares. I-Link estimates that its expenses in
connection with the rights offering will be $100,000.
I-Link will pay the fees and expenses of American Stock Transfer &
Trust Company, as subscription agent.
Rights holders who desire to purchase Series N preferred shares in
the rights offering are urged to complete, date and sign the subscription
certificate accompanying this prospectus and return it to the subscription
agent on or before the expiration date of the rights offering, together with
payment in full of the aggregate subscription price. See "The Rights Offering
- - Exercise of Rights." Subscription rights are nontransferable. See
"Prospectus Summary -Terms of the Rights - Nontransferability of Rights." Any
questions concerning the procedure for subscribing for the purchase of Series
N Notes should be directed to the subscription agent.
INTERESTS OF NAMED EXPERTS AND COUNSEL
No expert or counsel named in this prospectus has or is to receive
in connection with this offering any interest, direct or indirect, in I-Link
or any of its subsidiaries, nor was any expert or counsel connected with
I-Link or any of its subsidiaries as a promoter, underwriter, voting trustee,
director, officer or employee.
LEGAL MATTERS
Legal matters in connection with the registration of the securities
offered hereby will be passed upon for I-Link by De Martino Finkelstein Rosen
& Virga, Washington, D.C.
EXPERTS
The consolidated financial statements of I-Link Incorporated
incorporated in this Prospectus by reference to the Annual Report on Form
10-K for the year ended December 31, 1998 have been so incorporated in
reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
39
<PAGE>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION
WITH THIS OFFERING TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. THE PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR A SOLICITATION IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
CIRCUMSTANCES OF I-LINK OR THE FACTS SET FORTH IN THIS PROSPECTUS SINCE THE
DATE INDICATED BELOW.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Where You Can Find More Information...................[xx]
Prospectus Summary....................................[xx]
General.........................................[xx]
The Rights Offering.............................[xx]
Terms of the Series N Preferred Stock...........[xx]
Other Information...............................[xx]
Selected Financial Information..................[xx]
Risk Factors..........................................[xx]
Use of Proceeds.......................................[xx]
Determination of Offering Price.......................[xx]
Dilution..............................................[xx]
Related Party Transactions............................[xx]
The Rights Offering...................................[xx]
Description of Securities.............................[xx]
Plan of Distribution..................................[xx]
Interests of Named Experts and Counsel................[xx]
Legal Matters........................................ [xx]
Experts...............................................[xx]
</TABLE>
20,000 SUBSCRIPTION RIGHTS
20,000 SHARES OF
SERIES N PREFERRED STOCK
16,000,000 SHARES OF
COMMON STOCK
I-LINK INCORPORATED
----------
PROSPECTUS
----------
[____________], 1999
<PAGE>
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses to be incurred by the Company in connection
with the registration of the securities subject of this registration
statement, other than underwriting discounts and commissions, are estimated
as follows:
<TABLE>
<S> <C>
SEC Registration Fee....................... $ 5,560
Printing and Engraving Expenses............ 7,500
Registrant's Counsel Fees and Expenses..... 50,000
Accountant's Fees and Expenses............. 10,000
Subscription Agent Fees and Expenses....... 15,000
Miscellaneous Expenses..................... 11,940
---------
Estimated Total............................ $ 100,000
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 607.0850 of the Florida Business Corporation Act empowers a
corporation to indemnify any person who was or is a party to a proceeding by
reason of the fact that he was or is an officer, director, employee or agent
of the corporation against liability incurred in connection with such
proceeding. Such person must have acted in good faith and in a manner
reasonably believed to be in or not opposed to, the best interests of the
corporation. With respect to any criminal proceeding, such person must have
had no reasonable cause to believe his conduct was unlawful. Any such
indemnification may only be made upon a determination by the corporation that
such indemnification is proper because the person met the applicable standard
of conduct.
The Florida Business Corporation Act provides further that the
indemnification permitted thereunder is not exclusive; provided, however,
indemnification is not permitted to be made on behalf of any such person if a
judgment or final adjudication establishes (a) a violation of the criminal
law unless such person had reasonable cause to believe his conduct was lawful
or no reasonable cause to believe his conduct was unlawful; (b) such person
derived an improper personal benefit from the transaction; (c) as to any
director such proceeding arose from an unlawful distribution under Section
607.0834; or (d) willful misconduct or a conscious disregard for the best
interests of the corporation in a proceeding by the corporation or a
shareholder.
The Company's Bylaws provide that the Company shall indemnify any
such person to the fullest extent provided by law and empowers the Company to
purchase and maintain insurance on behalf of any such person.
The Company previously entered into indemnification agreements with
certain officers and directors of the Company for indemnification against
expenses (including attorneys' fees, through all proceedings, trials, and
appeals), judgments, and amounts paid in settlement
II-1
<PAGE>
actually and reasonably incurred in connection with any threatened, pending,
or contemplated action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, arising from any actual or alleged breach
of duty, neglect, effort, or other action taken or omitted, solely in the
capacity as an officer and/or a director of the Company; provided that no
indemnification will be made in respect of any acts or omissions (a)
involving gross negligence or willful misconduct, (b) involving libel or
slander, or (c) based upon or attributable to gaining, directly or
indirectly, any profit or advantage to which he was not legally entitled.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE
SECURITIES ACT MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING
THE COMPANY PURSUANT TO THE FOREGOING PROVISIONS, THE COMPANY HAS BEEN
INFORMED THAT IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, SUCH
INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE SECURITIES ACT
AND IS THEREFORE UNENFORCEABLE.
ITEM 16. EXHIBITS.
<TABLE>
<S> <C>
3.1 Amended and Restated Articles of Incorporation, as further
amended, incorporated herein by reference to the Company's
Annual Report on Form 10-K for the year ended December 31,
1997, File Number 0-17973
3.9 * Form of Articles of Amendment to the Company's Amended and
Restated Articles of Incorporation, establishing the terms of
Series N Preferred Stock
5.1 * Opinion of Counsel
23.1 * Consent of PricewaterhouseCoopers LLP
23.2 * Consent of Counsel, included in Exhibit 5.1
99.1 * Form of Subscription Certificate
99.2 * Form of Instructions to Rights Holders
99.3 * Form of Notice of Guaranteed Delivery
99.4 * Form of Nominee Holder Certification
</TABLE>
- -------------------
* Filed herewith.
ITEM 17. UNDERTAKINGS
The Company hereby undertakes:
(a) Rule 415 Offering.
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement to
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement;
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to
II-2
<PAGE>
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) Indemnification.
(1) Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers, and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise,
the Company has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer, or controlling person of the Company
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Company certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Draper, Utah, on June 23, 1999.
I-LINK INCORPORATED
By: /s/ John W. Edwards
--------------------------------
John W. Edwards, Chairman of the
Board, President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
/s/ John W. Edwards Chairman of the Board, President June 23, 1999
- ----------------------- and Chief Executive Officer
John W. Edwards
/s/ Karl S. Ryser, Jr. Treasurer, Chief Financial Officer June 23, 1999
- ----------------------- and Chief Accounting Officer
Karl S. Ryser, Jr.
/s/ David E. Hardy Secretary June 23, 1999
- -----------------------
David E. Hardy
/s/ Henry Y.L. Toh Director June 23, 1999
- -----------------------
Henry Y.L. Toh
/s/ Thomas A. Keenan Director June 23, 1999
- -----------------------
Thomas A. Keenan
/s/ Joseph A. Cohen Director June 23, 1999
- -----------------------
Joseph A. Cohen
/s/ David R. Bradford Director June 23, 1999
- -----------------------
David R. Bradford
</TABLE>
II-4
<PAGE>
Exhibit 3.9
ARTICLES OF AMENDMENT TO THE AMENDED
AND RESTATED ARTICLES OF INCORPORATION OF
I-LINK INCORPORATED
Pursuant to the Amended and Restated Articles of Incorporation of the
Corporation, as amended (the "Articles of Incorporation") and the provisions
of Section 607.1003 of the Florida Business Corporation Act, the Shareholders
of the Corporation have resolved to amend Article III(a) of the Articles of
Incorporation, as set forth in Section B. herein.
Pursuant to Article III(b) of the Articles of Incorporation, and the
provisions of Section 607.0602 of the Florida Business Corporation Act, the
board of directors of the Corporation (the "Board of Directors") has resolved
to amend Article III of the Articles of Incorporation, as set forth in
Section C. herein.
A. The name of the corporation is I-Link Incorporated.
B. Article III of the Articles of Incorporation shall be amended by the
substitution of the following paragraph (a) for paragraph (a) of Article III:
"(a) One Hundred Fifty Million (150,000,000) shares of common
stock, having a par value of $.007 per share (the "Common Stock");
and"
C. Article III is hereby amended by adding Section III(k), which shall read
in its entirety as follows:
"(k) Of the ten million (10,000,000) shares of Preferred Stock
authorized hereunder, twenty thousand (20,000) shares of Preferred Stock
shall be designated as Series N Convertible Preferred Stock (the "Series N
Preferred Stock"), shall have a par value of $10.00 per share, and shall have
the following rights and preferences:
1. DIVIDENDS. If and when dividends are declared by the Board of
Directors on the shares of Common Stock, the holders of Series N Preferred
Stock shall be entitled to receive the same dividend as declared on the
shares of Common Stock based on the number of shares of Common Stock which
would have been held by the holder of each issued and outstanding share of
Series N Preferred Stock, if that share of Series N Preferred Stock had been
converted in accordance with Section III(k)(4) below to shares of Common
Stock immediately prior to the record date for the dividend.
<PAGE>
2. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the sale of all or
substantially all of its assets, or the merger or consolidation of the
Corporation as a result of which the then shareholders of the Corporation do
not continue to hold more than a 67% interest in the successor entity or a
transaction or series of related transactions in which the Corporation's
shareholders transfer more than 33% of the voting power of the Corporation
(each such event, a "Liquidation"), except as provided in Section
III(k)(2)(b) below, the holder of each share of Series N Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the Corporation
available for distribution to its shareholders before payment to the holders
of Common Stock by reason of their ownership thereof, an amount (the
"Liquidation Price"), payable in cash (and, to the extent sufficient cash is
not available for such payment, property at its fair market value), equal to
$1,000.00 per share.
(b) If upon any such Liquidation the remaining assets of the
Corporation available for distribution to its shareholders shall be
insufficient to pay the holders of shares of Series N Preferred Stock and the
holders of shares of the Class C Preferred Stock, the Series F Preferred
Stock and the Series M Preferred Stock the full amount to which they shall be
entitled, then the entire assets of the Corporation shall be distributed
among the holders of shares of Series N Preferred Stock and the holders of
shares of the Series F Preferred Stock ratably in proportion to the full
amount to which such holders are entitled, prior to any distribution to
holders of Class C Preferred Stock or Series M Preferred Stock.
3. VOTING RIGHTS. Each share of Series N Preferred Stock shall
entitle the holder thereof to that number of votes which is equal to the
number of shares of Common Stock into which such share of Series N Preferred
Stock would be convertible if that share of Series N Preferred Stock had been
converted in accordance with Section III(k)(4) below to shares of Common
Stock immediately prior to the record date for the vote.
4. CONVERSION INTO COMMON STOCK. The holders of the Series N
Preferred Stock shall have conversion rights as follows (the "Conversion
Rights"):
(a) RIGHT TO CONVERT. Each share of Series N Preferred Stock
shall be convertible, at the option of the holder thereof, at any time and
from time to time after January 15, 1999, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing (i) the
Conversion Value (as defined below) of such share by (ii) the Conversion
Price (as defined below). In the event of a Liquidation of the Corporation,
the Conversion Rights shall terminate at the close of business on the last
full day preceding the date fixed for the payment of any amounts
distributable on Liquidation to the holders of Series N Preferred Stock.
(b) CONVERSION VALUE. The "Conversion Value" of each share of
Series N Preferred Stock shall be $1,000.00.
2
<PAGE>
(c) CONVERSION PRICE.
(i) The Conversion Price (the "Conversion Price") shall be
determined in the manner set forth in subsection (III)(k)(4)(c)(ii) below and
without regard to the provisions of subsection (III)(k)(4)(c)(iii) below;
provided, however, that when, as and if a plurality of eligible voting shares
outstanding approve the use of the provision set forth in Section
(III)(k)(4)(c)(iii) in lieu of that provision set forth in subsection
(III)(k)(4)(c)(ii) for purposes of determining the Conversion Price hereunder
at a duly convened shareholders meeting, then from and after the date of such
vote, the Conversion Price shall be computed as set forth in subsection
(III)(k)(4)(c)(iii) and without regard to the provisions set forth in
subsection (III)(k)(4)(c)(ii).
(ii) The Conversion Price at which shares of Common Stock
shall be deliverable upon conversion of Series N Preferred Stock without the
payment of additional consideration by the holder thereof shall initially be
$2.78. The Conversion Price, and the rate at which shares of Series N
Preferred Stock may be converted into shares of Common Stock, shall be
subject to adjustment as provided in this Section III(k)(4).
(iii) The Conversion Price at which shares of Common Stock
shall be deliverable upon conversion of Series N Preferred Stock without the
payment of additional consideration by the holder thereof shall initially be
$2.78. The Conversion Price shall reset ("Reset") to the lowest of, but in
no event lower than $1.25, (i) 110% of the average trading price for any 20
day period subsequent to the date any Series N preferred stock is first
issued (the "Original Issue Date"), (ii) the price at which common stock or
common stock equivalent is issued (whether by conversion, exercise or
otherwise but excluding options granted to employees or issued to consultants
of the Company or warrants which, in each such case, are outstanding as of
the Original Issue Date), (iii) the exercise price or conversion rate of any
new options, warrants, preferred stock or other convertible security
(excluding options granted to employees, directors or consultants pursuant to
stock option plans adopted by the Board of Directors and approved by the
Compensation Committee of the Board of Directors after the Original Issue
Date) and (iv) if at any time the "Conversion Price" set forth in Section
III(j)(5)(c) for which the Series F Convertible Preferred Stock is converted
into the Corporation's Common Stock is less than the applicable Conversion
Price for the Series N Preferred Stock then in effect, then and in any such
event, the Conversion Price for the Series N Preferred Stock shall be reduced
to equal the Conversion Price of the Series F Convertible Preferred Stock.
The Conversion Price, and the rate at which shares of Series N Preferred
Stock may be converted into shares of Common Stock, shall be subject to
further adjustment as provided in this Section III(k)(4).
(d) FRACTIONAL SHARES. No fractional shares of Common Stock shall
be issued upon conversion of the Series N Preferred Stock pursuant to this
Section III(k)(4). In lieu of any fractional shares to which the holder
would otherwise be entitled, the Corporation shall pay cash equal to such
fraction multiplied by the then effective Conversion Price.
(e) MECHANICS OF CONVERSION.
(i) In order for a holder of Series N Preferred Stock to
convert shares of Series N Preferred Stock into shares of Common Stock, such
holder shall surrender the certificate or certificates for such shares of
Series N Preferred Stock at the office of the transfer agent for the Series N
Preferred Stock (or at the principal office of the Corporation if the
Corporation serves as its own transfer agent), together with written notice
that such holder elects to convert
3
<PAGE>
all or any number of the shares of Series N Preferred Stock represented by
such certificate or certificates. If required by the Corporation,
certificates surrendered for conversion shall be endorsed or accompanied by a
written instrument or instruments of transfer, in form satisfactory to the
Corporation, duly executed by the registered holder or its attorney duly
authorized in writing. The date of receipt of such certificates and notice
by the transfer agent (or by the Corporation if the Corporation serves as its
own transfer agent) shall be the conversion date ("Conversion Date"). The
Corporation shall, as soon as practicable after the Conversion Date, issue
and deliver at such office to such holder of Series N Preferred Stock a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled, together with cash in lieu of any fraction of
a share. As of the Conversion Date, the person entitled to receive
certificates of Common Stock shall be regarded for all corporate purposes as
the holder of the number of shares of Common Stock to which it is entitled
upon the conversion.
(ii) The Corporation shall at all times when the Series N
Preferred Stock shall be outstanding, reserve and keep available out of its
authorized but unissued stock, for the purpose of effecting the conversion of
the Series N Preferred Stock, such number of its duly authorized shares of
Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding Series N Preferred Stock.
(iii) All shares of Series N Preferred Stock which shall
have been surrendered for conversion as herein provided in this Section
III(k)(4) shall no longer be deemed to be outstanding and all rights with
respect to such shares shall immediately cease and terminate on the
Conversion Date, except only the right of the holders thereof to receive
shares of Common Stock in exchange therefor. Any shares of Series N
Preferred Stock so converted shall be retired and canceled and shall not be
reissued, and the Corporation may from time to time take such appropriate
action as may be necessary to reduce the authorized Series N Preferred Stock
accordingly.
(f) [reserved]
(g) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation shall at any time or from time to time after the date of first
issuance of any shares of Series N Preferred Stock (the "Original Issue
Date") effect a subdivision of the outstanding Common Stock, the Conversion
Price then in effect immediately before that subdivision shall be
proportionately decreased and the number of shares of Common Stock issuable
upon conversion of a share of the Series N Preferred Stock shall be
proportionately increased. If the Corporation shall at any time or from time
to time after the Original Issue Date combine the outstanding shares of
Common Stock, the Conversion Price then in effect immediately before the
combination shall be proportionately increased and the number of shares of
Common Stock issuable upon conversion of a share of the Series N Preferred
Stock shall be proportionately decreased. Any adjustment under this
paragraph shall become effective at the close of business on the date the
subdivision or combination becomes effective.
4
<PAGE>
(h) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time or from time to time after the Original
Issue Date shall make or issue, or fix a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other distribution
payable in additional shares of Common Stock, then and in each such event the
Conversion Price for the Series N Preferred Stock then in effect shall be
decreased as of the time of such issuance or, in the event such a record date
shall have been fixed, as of the close of business on such record date, by
multiplying the Conversion Price for the Series N Preferred Stock then in
effect by a fraction:
(i) the numerator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date, and
(ii) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date plus the number
of shares of Common Stock issuable in payment of such dividend or
distribution; PROVIDED, HOWEVER, if such record date shall have been fixed
and such dividend is not fully paid or if such distribution is not fully made
on the date fixed therefor, the Conversion Price for the Series N Preferred
Stock shall be recomputed accordingly as of the close of business on such
record date and thereafter the Conversion Price for the Series N Preferred
Stock shall be adjusted pursuant to this paragraph as of the time of actual
payment of such dividends or distributions.
5
<PAGE>
(i) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time or from time to time after the Original
Issue Date shall make or issue, or fix a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other distribution
payable in securities of the Corporation other than shares of Common Stock,
then and in each such event provision shall be made so that the holders of
the Series N Preferred Stock shall receive upon conversion thereof in
addition to the number of shares of Common Stock receivable thereupon, the
amount of securities of the Corporation that they would have received had
their Series N Preferred Stock been converted on the date of such event and
had thereafter, during the period from the date of such event to and
including the conversion date, retained such securities receivable by them as
aforesaid during such period giving application to all adjustments called for
during such period, under this paragraph with respect to the rights of the
holders of the Series N Preferred Stock.
(j) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE, OR SUBSTITUTION.
If the Common Stock issuable upon the conversion of the Series N Preferred
Stock shall be changed into the same or a different number of shares of any
class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of
shares or stock dividend provided for above, or a reorganization, merger,
consolidation, or sale of assets provided for below), then and in each such
event each holder of the Series N Preferred Stock shall have the right
thereafter to convert each such share of Common Stock issuable upon the
conversion of the Series N Preferred Stock into the kind and amount of shares
of stock and other securities and property receivable upon such
reorganization, reclassification, or other change, by holders of the number
of shares of Common Stock into which such shares of Series N Preferred Stock
might have been converted immediately prior to such reorganization,
reclassification, or change, all subject to further adjustment as provided
herein.
(k) ADJUSTMENT FOR MERGER OR REORGANIZATION. In case of any
consolidation or merger of the Corporation with or into another corporation,
each share of Series N Preferred Stock shall thereafter be convertible into
the kind and amount of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock of the Corporation
deliverable upon conversion of such Series N Preferred Stock would have been
entitled upon such consolidation or merger; and, in such case, appropriate
adjustment (as determined in good faith by the Board of Directors) shall be
made in the application of the provisions in this Section III(k)(4) set forth
with respect to the rights and interest thereafter of the holders of the
Series N Preferred Stock, to the end that the provisions set forth in this
Section III(k)(4) (including provisions with respect to changes in and other
adjustments of the Conversion Price) shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares of stock or other
property thereafter deliverable upon the conversion of the Series N Preferred
Stock.
(l) NO IMPAIRMENT. The Corporation will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed hereunder by the Corporation, but
will at all times in good faith assist in the carrying out of all the
provisions of
6
<PAGE>
this Section III(k)(4) and in the taking of all such action as may be
necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series N Preferred Stock against impairment.
(m) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section
III(k)(4), the Corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and furnish to
each holder of Series N Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series N Preferred Stock, furnish or
cause to be furnished to such holder a similar certificate setting forth (i)
such adjustments and readjustments; (ii) the Conversion Price then in effect;
and (iii) the number of shares of Common Stock and the amount, if any, of
other property which then would be received upon the conversion of Series N
Preferred Stock.
(n) NOTICE OF RECORD DATE. In the event:
(i) that the Corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or other securities
of the Corporation;
(ii) that the Corporation subdivides or combines its
outstanding shares of Common Stock;
(iii) of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination of its outstanding
shares of Common Stock or a stock dividend or stock distribution thereon), or
of any consolidation or merger of the Corporation into or with another
corporation; or
(iv) of the Liquidation of the Corporation;
then the Corporation shall cause to be filed at its principal office or at
the office of the transfer agent of the Series N Preferred Stock, and shall
cause to be mailed to the holders of the Series N Preferred Stock at their
last addresses as shown on the records of the Corporation or such transfer
agent, at least ten days prior to the record date specified in (A) below or
twenty days before the date specified in (B) below, a notice stating:
(A) the record date of such dividend, distribution,
subdivision or combination, or, if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such
dividend, distribution, subdivision or combination are to be determined, or
(B) the date on which such reclassification,
consolidation, merger, or Liquidation is expected to become effective, and
the date as of which it is expected that holders of Common Stock of record
shall be entitled to exchange their shares of Common Stock
7
<PAGE>
for securities or other property deliverable upon such reclassification,
consolidation, merger, or Liquidation."
D. The amendment set forth in the foregoing Section B was duly approved and
adopted by the majority of all votes entitled to be cast by the Shareholders
of the Corporation at a meeting held on April 14, 1999, pursuant to the
provisions of the Florida Business Corporation Act. The number of votes cast
were sufficient for approval.
E. The amendment set forth in the foregoing Section C was duly adopted by
the Board of Directors without the requirement of shareholder action by
unanimous written consent as of June 16, 1999, pursuant to the provisions of
the Florida Business Corporation Act.
* * * * *
IN WITNESS WHEREOF, I-Link Incorporated has caused these Articles of
Amendment to the Amended and Restated Articles of Incorporation to be
executed by its President and attested to by its Secretary this ____ day of
June, 1999.
I-LINK INCORPORATED
By: ___________________________
John E. Edwards, President
ATTEST:
_________________________
David E. Hardy, Secretary
8
<PAGE>
EXHIBIT 5.1
DE MARTINO FINKELSTEIN ROSEN & VIRGA
A PARTNERSHIP CONSISTING OF PROFESSIONAL CORPORATIONS
1818 N STREET, N.W., SUITE 400
WASHINGTON, D.C. 20036-2492
---
TELEPHONE (202) 659-0494 * TELECOPIER (202) 659-1290
E-MAIL ADDRESS: [email protected]
PAULA A. ARGENTO NEW YORK OFFICE
NEIL R.E. CARR -----
RALPH V. DE MARTINO 90 BROAD STREET, SUITE 1700
STEVEN R. FINKELSTEIN* NEW YORK, NEW YORK 10004-2205
CAROLINE GEORGE TELEPHONE (212) 363-2500
B. HENRY PEREZ TELECOPIER (212) 363-2723
KEITH H. PETERSON*
JEFFREY S. ROSEN
GERARD A. VIRGA*
*NOT ADMITTED TO DISTRICT OF COLUMBIA BAR
June 24, 1999
Board of Directors
I-Link Incorporated
13751 S. Wadsworth Park Drive
Suite 200
Draper, Utah 84020
Re: REGISTRATION STATEMENT ON FORM S-2
Gentlemen:
We have acted as counsel to I-Link Incorporated, a Florida
corporation (the "Company"), in connection with the preparation and filing by
the Company of a registration statement on Form S-2, File No. 333-70645 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act") relating to (1) the issuance of rights ("Rights") to
purchase 20,000 shares of Series N Preferred Stock of the Company, par value
$10.00 per share ("Series N Preferred Stock), the reoffer or resale of Series
N Preferred Stock under the 4,340 Rights to be issued to Winter Harbor,
L.L.C., the offer, sale or resale of Series N Preferred Stock under the
15,560 Rights to be issued to the Company's other security holders as well as
the sale or resale of up to 16,000,000 shares of common stock, $.007 per
share (the "Common Stock") underlying the Series N Preferred Stock.
We have examined the Articles of Incorporation, as amended, and
Bylaws of the Company, the Articles of Amendment to Articles of Incorporation
providing for the terms of the Series N Preferred Stock (the "Designation of
Preferences"), the minutes of various meetings and consents of the Board of
Directors of the Company, forms of certificates representing the Rights and
the Series N Preferred Stock, originals or copies of all such records of the
Company, agreements, certificates of public officials, certificates of
officers and representatives of the Company and others, and such other
documents, certificates, records, authorizations, proceedings, statutes and
judicial decisions as we have deemed necessary to form the basis of the
opinion expressed herein. In such examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to
us as originals and the conformity to originals of all documents submitted to
us as copies thereof. As to various
<PAGE>
Board of Directors
I-Link Incorporated
June 24, 1999
Page 2
questions of fact material to such opinion, we have relied upon statements
and certificates of officers and representatives of the Company and others.
In connection with the preparation of this opinion, we have reviewed such
questions of law as we have deemed necessary.
Based upon the foregoing, we are of the opinion that the 20,000
Rights, 20,000 shares of Series N Preferred Stock and up to 16,000,000 shares
of Common Stock have been duly authorized and reserved for issuance and, when
such Rights are subscribed and such shares of Series N Preferred Stock are
issued therefore in accordance with the prospectus which is a part of the
Registration Statement, and when such shares of Series N Preferred Stock are
subsequently converted and such shares of Common Stock are issued in
accordance with the terms of the Designation of Preferences governing the
Series N Preferred Stock, such shares of Series N Preferred Stock and such
shares of Common Stock will be duly authorized, validly issued, fully paid
and nonassessable.
We hereby consent to be named in the Registration Statement and the
prospectus contained therein as attorneys who have passed upon legal matters
in connection with the offering of the securities described therein under the
caption "Legal Matters." We further consent to your filing a copy of this
opinion as an exhibit to the Registration Statement.
De Martino Finkelstein Rosen & Virga
By: /s/ Ralph V. De Martino
Ralph V. De Martino, a Principal
cc: David E. Hardy, Esquire
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-2 (File No. 333-70645) of our report dated April 15,
1999, relating to the consolidated financial statements of I-Link
Incorporated and Subsidiaries as of December 31, 1998 and 1997, and for each
of the three years in the period ended December 31, 1998, which appear in the
I-Link Incorporated Annual Report on Form 10-K. We also consent to the
reference to us under the caption "EXPERTS" in such Registration Statement.
/s/ PRICEWATERHOUSECOOPERS, LLP
Salt Lake City, Utah
June 24, 1999
<PAGE>
Exhibit 99.1
I-LINK INCORPORATED
SUBSCRIPTION CERTIFICATE FOR SERIES N PREFERRED SHARES
VOID IF NOT EXERCISED AT OR BEFORE 5:00 P.M.
(NEW YORK TIME) ON JULY 23, 1999, THE EXPIRATION DATE.
THIS SUBSCRIPTION CERTIFICATE IS NOT TRANSFERABLE.
CONTROL NUMBER SUBSCRIPTION CERTIFICATE
REPRESENTING _________ RIGHTS
EXPIRATION DATE: JULY 23, 1999
SUBSCRIPTION PRICE: $1,000.00 PER SHARE
THIS SUBSCRIPTION CERTIFICATE MAY BE USED TO SUBSCRIBE FOR SHARES. FULL
INSTRUCTIONS APPEAR ON THE BACK OF THIS SUBSCRIPTION CERTIFICATE.
REGISTERED OWNER:
The registered owner of this Subscription Certificate, named above, is
entitled to the number of Rights to subscribe for Series N Preferred Stock,
$10.00 par value per share, of I-Link Incorporated shown above, in the ratio
of one share of Series N Preferred Stock for each Right held, pursuant to the
Basic Subscription Right and upon the terms and conditions and at the price
for each share of Series N Preferred Stock specified in the Prospectus dated
[____________] relating thereto. If you subscribe for fewer than all the
shares represented by this Subscription Certificate, the Subscription Agent
will, upon request, issue a new Subscription Certificate representing the
balance of the unsubscribed Rights, provided that the Subscription Agent has
received your properly completed and executed Subscription Certificate and
payment prior to 5:00 p.m., New York City time, on July 23, 1999. No new
Subscription Certificate will be issued after that date.
DATE: _________________
IMPORTANT: COMPLETE APPROPRIATE FORM ON REVERSE.
I-LINK INCORPORATED
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY,
TRANSFER AGENT AND SUBSCRIPTION AGENT
(New York, N.Y.)
By: _________________________
Authorized Signature
<PAGE>
Expiration Date: July 23, 1999
PLEASE COMPLETE ALL APPLICABLE INFORMATION
<TABLE>
<CAPTION>
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
<S> <C> <C>
American Stock Transfer & Trust Company American Stock Transfer & Trust American Stock Transfer & Trust
40 Wall Street Company Company
New York, New York 10005 40 Wall Street, 46th Floor 40 Wall Street, 46th Floor
New York, New York 10005 New York, New York 10005
</TABLE>
TO SUBSCRIBE: I hereby irrevocably subscribe for the number of Shares
indicated upon the terms and conditions specified in the Prospectus related
hereto, receipt of which is acknowledged.
Please check /X/ below:
<TABLE>
<S> <C>
/ / A. Basic Subscription x $1,000.00 = $
--------------------- ----------------------- ---------------------
(Rights Exercised) (Subscription Price) (Amount Required)
/ / B. Oversubscription Privilege x $1,000.00 = $
--------------------- ----------------------- ---------------------
(Rights Exercised) (Subscription Price) (Amount Required)
Amount of Check or Money Order Enclosed (total of A + B) = $
---------------------
Make check payable to the order of "American Stock Transfer & Trust Company, as Subscription Agent"
/ / C. The following Broker-Dealer is hereby designated as having been
instrumental in the exercise of the Rights:
Account #
--------------------- ---------------------
Please provide your telephone number:
---------------------
Signature of Subscriber(s) Day (____) ___________________________
Evening (____) ___________________________
----------------------------------
Social Security or Taxpayer I.D. Number
</TABLE>
The signature(s) must correspond with the name(s) as written upon the face of
this Subscription Certificate, in every particular, without alteration.
SIGNATURE GUARANTEED BY:
- -----------------------------------------------------------------------------
PROCEEDS FROM THE SALE OF RIGHTS MAY BE SUBJECT TO WITHHOLDING OF U.S. TAXES
UNLESS THE HOLDER'S CERTIFIED U.S. TAXPAYER IDENTIFICATION NUMBER (OR
CERTIFICATION REGARDING FOREIGN STATUS) IS ON FILE WITH THE SUBSCRIPTION
AGENT AND THE HOLDER IS NOT OTHERWISE SUBJECT TO U.S. BACKUP WITHHOLDING.
/ / CHECK HERE IF RIGHTS ARE BEING EXERCISED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY DELIVERED TO THE SUBSCRIPTION AGENT PRIOR TO THE DATE HEREOF AND
COMPLETE THE FOLLOWING:
NAME(S) OF REGISTERED OWNER(S):
---------------------
WINDOW TICKET NUMBER (IF ANY):
---------------------
DATE OF EXECUTION OF NOTICE OF GUARANTEED DELIVERY:
---------------------
NAME OF INSTITUTION WHICH GUARANTEED DELIVERY:
---------------------
<PAGE>
Exhibit 99.2
INSTRUCTIONS AS TO USE OF
I-LINK INCORPORATED SUBSCRIPTION CERTIFICATES
CONSULT I-LINK INCORPORATED, THE SUBSCRIPTION
AGENT, YOUR BANK OR BROKER AS TO ANY QUESTIONS
The following instructions related to a rights offering (the "Rights
Offering") by I-Link Incorporated, a Florida corporation (the "Company"), to
the holders of its eligible outstanding securities ("Securities"), as
described in the Company's prospectus dated [_________], 1999, as such
prospectus may be amended and/or updated prior to the Expiration Date (as
defined below; such prospectus, as so amended and/or updated, being the
"Prospectus"). Holders of record of Securities at the close of business on
May 11, 1999 (the "Record Date"), are receiving one non-transferable
subscription right (individually, a "Right" and collectively, the "Rights")
for each 1,589 shares of Common Stock or Common Stock equivalents held by
them of record on the Record Date. An aggregate of 20,000 Rights exercisable
to purchase an aggregate of 20,000 shares of Series N Preferred Stock (the
"Underlying Shares") are being distributed in connection with the Rights
Offering. Each Right entitles its holder (a "Holder") to purchase one
Underlying Share (the "Basic Subscription Privilege") at one thousand dollars
($1,000.00) per share (the "Exercise Price").
In addition, subject to the allocation described below, each Right
entitles its Holder to subscribe at the Exercise Price for Underlying Shares
after satisfaction of all subscriptions made pursuant to the Basic
Subscription Privilege (the "Oversubscription Privilege," collectively, with
the Basic Subscription Privilege, the "Subscription Privileges"), provided
that all of the Rights of such Holder have been fully exercised with respect
to such Holder's Basic Subscription Privilege. The Company and American Stock
Transfer & Trust Company, as subscription agent (the "Subscription Agent"),
will endeavor to ensure that Holders fully exercise their Basic Subscription
Privileges before subscribing for and acquiring Underlying Shares pursuant to
their Oversubscription Privileges, but such compliance cannot be guaranteed.
Underlying Shares will be available for purchase pursuant to the
Oversubscription Privilege only to the extent that all the Underlying Shares
are not subscribed for through the exercise of the Basic Subscription
Privilege by the Expiration Date (the "Excess Shares"). If the Excess Shares
so available are not sufficient to satisfy all subscriptions pursuant to the
Oversubscription Privilege, the Excess Shares will be allocated pro-rata
among the Holders who exercise the Oversubscription Privilege in proportion,
NOT to the number of shares requested pursuant to the Oversubscription
Privilege, but to the number of shares they have subscribed for pursuant to
the Basic Subscription Privilege; provided, however, that if such pro-rata
allocation results in any Holder being allocated a greater number of Excess
Shares than such Holder subscribed for pursuant to the exercise of such
Holder's Oversubscription Privilege, then such Holder will be allocated only
such number of Excess Shares as such Holder subscribed for and the remaining
Excess Shares will be allocated among all other
<PAGE>
Holders exercising their Oversubscription Privileges. See "The Rights
Offering" in the Prospectus.
The Rights will expire at 5:00 p.m., New York time, on July 23, 1999
(the "Expiration Date").
The number of Rights to which you are entitled is printed on the
face of your subscription certificate (the "Subscription Certificate"). You
should indicate your wishes with regard to the exercise or sale of your
Rights by completing the appropriate form or forms on your Subscription
Certificate and returning the certificate to the Subscription Agent in the
envelope provided.
YOUR SUBSCRIPTION CERTIFICATE MUST BE RECEIVED BY THE SUBSCRIPTION
AGNET, OR GUARANTEED DELIVERY REQUIREMENTS WITH RESPECT TO YOUR SUBSCRIPTION
CERTIFICATES MUST BE COMPLIED WITH, AND PAYMENT OF THE EXERCISE PRICE
INCLUDING FINAL CLEARANCE OF ANY CHECKS, MUST BE RECEIVED BY THE SUBSCRIPTION
AGENT, ON OR BEFORE 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE
(EXCEPT IN THE CASE OF AN APPROVED PAYMENT METHOD). YOU MAY NOT REVOKE ANY
EXERCISE OF A RIGHT.
1. SUBSCRIPTION PRIVILEGES; EXERCISE.
To exercise Rights, complete the reverse side of your Subscription
Certificate and send your properly completed and executed Subscription
Certificate, together with payment in full of the Exercise Price for all
Underlying Shares subscribed for pursuant to the Subscription Privileges, to
the Subscription Agent. Payment of the Exercise Price must be made (a) in
U.S. dollars for the full number of Underlying Shares being subscribed for by
check or bank draft drawn upon a U.S. bank or postal money order payable to
American Stock Transfer and Trust Company, as Subscription Agent; (b) by wire
transfer of same day funds to the account maintained by the Subscription
Agent for such purpose at [_________________, Account No. ___________; ABA
No. _________]; or (c) in such other manner as the Company may approve in
writing in the case of persons acquiring Underlying Shares at an aggregate
Exercise Price of $500,000 or more; provided that, in the case of clause (c),
in any event, the full amount of such Exercise Price is received by the
Subscription Agent in currently available funds by no later than the third
(3rd) Nasdaq SmallCap Market trading day following the Expiration Date (the
payment method under (c) being an "Approved Payment Method"). Payment of the
Exercise Price will be deemed to have been received by the Subscription Agent
only upon the clearance of any uncertified check, the receipt by the
Subscription Agent of any certified check or bank draft drawn upon a U.S.
bank or any postal money order, the receipt of good funds in the Subscription
Agent's account designated above or receipt of funds by the Subscription
Agent through an Approved Payment Method. If paying by uncertified personal
check, please note that the funds paid thereby may take at least five (5)
business days to clear. Accordingly, Holders who wish to pay the Exercise
Price by means of uncertified personal check are urged to make payment
sufficiently in advance of the Expiration Date to ensure that
2
<PAGE>
such payment is received and cleared by such date and are urged to consider
payment by means of a certified or cashier's check, money order or wire
transfer of funds. You may make arrangements for the delivery of funds on
your behalf and request a bank or broker to exercise the Subscription
Certificate on your behalf. Alternatively, you may cause a written guarantee
substantially in the form attached to these instructions (the "Notice of
Guaranteed Delivery") from an "Eligible Institution" within the meaning of
Rule 17Ad-15 under the Securities Act of 1934, to be received by the
Subscription Agent at or prior to the Expiration Date together with payment
in full of the applicable Exercise Price. Such Notice of Guaranteed Delivery
must state your name, the number of Rights represented by your Subscription
Certificate, the number of Underlying Shares being subscribed for pursuant to
the Basic Subscription Privilege, the number of Underlying Shares, if any,
being subscribed for pursuant to the Oversubscription Privilege and will
guarantee the delivery to the Subscription Agent of your properly completed
and executed Subscription Certificates within three (3) Nasdaq SmallCap
Market trading days following the date of the Notice of Guaranteed Delivery.
If this procedure is followed, your Subscription Certificates must be
received by the Subscription Agent within three (3) Nasdaq SmallCap Market
trading days of the Notice of Guaranteed Delivery. Additional copies of the
Notice of Guaranteed Delivery may be obtained upon request from the
Subscription Agent at the address, or by calling the telephone number,
indicated below.
Bankers, brokers and other nominee holders of Rights who exercise
Rights on behalf of beneficial owners of Rights will be required to certify
to the Subscription Agent and the Company, as a condition of their exercise
of such Rights on behalf of such beneficial owners, as to: (1) the names of
the beneficial owners on whose behalf they are acting; (2) the nominee
holder's authority to so act; (3) the aggregate number of Rights to be
exercise on behalf of each beneficial owner; and (4) the number of Underlying
Shares that are being subscribed for pursuant to the Subscription Privileges
of each beneficial owner of Rights on whose behalf such nominee holder is
acting.
If more Underlying Shares are subscribed for pursuant to the
Oversubscription Privileges than are available for sale, Underlying Shares
will be allocated, as described above, among persons exercising the
Oversubscription Privilege in proportion to such persons' exercise of Rights
pursuant to the Basic Subscription Privilege.
The address, telephone and telecopier numbers of the Subscription
Agent are as follows:
American Stock Transfer & Trust Company
40 Wall Street
New York, NY 10005
Telephone: (718) 921-8200
Telecopier: (712) 234-5001
If you exercise less than all of the Rights evidenced by your
Subscription Certificate by so indicated in Section 1 of your Subscription
Certificate, the Subscription Agent will issue to you a new Subscription
Certificate evidencing the unexercised Rights. If you choose to have a
3
<PAGE>
new Subscription Certificate sent to you, however, you may not receive any
such new Subscription Certificate in sufficient time to permit you to
exercise the Rights evidenced thereby.
If the number of Underlying Shares being subscribed for pursuant to
the Basic Subscription Privilege is not specified, you will be deemed to have
exercised such Basic Subscription Privilege with respect to the maximum whole
number of Shares that may be acquired for the Exercise Price payment
delivered after allowances for the Exercise Price of any specified Underlying
Shares. If the number of Underlying Shares being subscribed for is not
specified, or full payment of the Exercise Price for the indicated number of
Rights that are being exercised is not forwarded or if the payment delivered
exceeds the required Exercise Price, the payment will be applied, until
depleted, to subscribe for Underlying Shares in the following order: (1) to
subscribe for the number of Underlying Shares indicated, if any, pursuant to
the Basic Subscription Privilege; (2) to subscribe for Underlying Shares
until the Basic Subscription Privilege has been fully exercised with respect
to all of the Rights represented by your Subscription Certificate; and (3) to
subscribe for additional Underlying Shares pursuant to the Oversubscription
Privilege (subject to any applicable proration).
2. DELIVERY OF STOCK CERTIFICATES, ETC.
The following deliveries and payments will be made to the address
shown on the face of your Subscription Certificate:
(A) BASIC SUBSCRIPTION PRIVILEGE. As soon as practical after the
Expiration Date, the Subscription Agent will mail to each
Holder who validly exercises the Basic Subscription Privilege
certificates representing shares of Series N Preferred Stock
purchased pursuant to the Basic Subscription Privilege.
(B) OVERSUBSCRIPTION PRIVILEGE. As soon as practical after the
Expiration Date, the Subscription Agent will mail to each
Holder who validly exercises the Oversubscription Privilege a
certificate representing the number of shares of Series N
Preferred Stock allocated to such Holder pursuant to the
Oversubscription Privilege.
(C) CASH PAYMENTS. As soon as practical after the Expiration Date,
the Subscription Agent will mail to each Holder who exercises
the Oversubscription Privilege, without interest, any excess
funds received in payment of the Exercise Price for Underlying
Shares that are subscribed for by such Holder but not
allocated to such Holder pursuant to the Oversubscription
Privilege.
3. EXECUTION.
4
<PAGE>
(A) EXECUTION BY REGISTERED HOLDER. The signature on the
Subscription Certificate must correspond with the name of the registered
Holder exactly as it appears on the face of the Subscription Certificate
without any alteration or change whatsoever. Persons who sign the
Subscription Certificate in a representative or other fiduciary capacity must
indicate their capacity when signing and, unless waived by the Subscription
Agent in its sole and absolute discretion, must certify to the Subscription
Agent and the Company as to their authority to so act.
(B) EXECUTION BY PERSON OTHER THAN REGISTERED HOLDER. If the
Subscription Certificate is executed by a person other than the Holder named
on the face of the Subscription Certificate, proper evidence of authority of
the person executing the Subscription Certificate must accompany the same
unless, for good cause, the Subscription Agent dispenses with proof of
authority.
4. METHOD OF DELIVERY.
The method of delivery of Subscription Certificates and payment of
the Exercise Price to the Subscription Agent will be at the election and risk
of the Holder, but, if sent by mail, it is recommended that they be sent by
registered mail, properly insured, with return receipt requested, and that a
sufficient number of days be allowed to ensure delivery to the Subscription
Agent and the clearance of any checks sent in payment of the Exercise Price
prior to 5:00 p.m., New York City time, on the Expiration Date.
5
<PAGE>
EXHIBIT 99.3
NOTICE OF GUARANTEED DELIVERY FOR
SUBSCRIPTION CERTIFICATES ISSUED BY
I-LINK INCORPORATED
This form, or one substantially equivalent hereto, must be used to
exercise Rights pursuant to the Rights Offering described in the Prospectus
dated [______], 1999 (the "Prospectus"), of I-Link Incorporated, a Florida
corporation (the "Company"), if a holder of Rights cannot deliver the
subscription certificate(s) evidencing the Rights (the "Subscription
Certificate(s)") to the Subscription Agent listed below (the "Subscription
Agent"), at or prior to 5:00 p.m. New York City time, on July 23, 1999 (the
"Expiration Date"). Such form must be delivered by hand or sent by facsimile
transmission or mail to the Subscription Agent, and must be received by the
Subscription Agent on or prior to the Expiration Date. See "Rights
Offering-Exercise of Rights" in the Prospectus. Payment of the Subscription
Price of $1,000.00 per share for each share of the Company's Series N
Preferred Stock subscribed for upon exercise of such Rights must be received
by the Subscription Agent in the manner specified in the Prospectus at or
prior to 5:00 p.m. New York City time, on the Expiration Date, even if the
Subscription Certificate evidencing such Rights is being delivered pursuant
to the procedure for guaranteed delivery thereof.
The Subscription Agent is:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Telecopier Number: (718) 234-5001
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
The undersigned hereby represents that he, she or it is the holder
of Subscription Certificate(s) representing [_________] Rights and that such
Subscription Certificate(s) cannot be delivered to the Subscription Agent at
or before 5:00 p.m., New York City time on the Expiration Date. Upon the
terms and subject to the conditions set forth in the Prospectus, receipt of
which is hereby acknowledged, the undersigned hereby elects to irrevocably
exercise one or more Rights evidenced by the Subscription Certificate to
subscribe for shares of Common Stock as indicated below:
<PAGE>
(a) Number of shares subscribed for pursuant to the BASIC SUBSCRIPTION
PRIVILEGE.
Number of Rights subscribed: _________ @ $1,000.00 per share = $_______
(b) Number of shares subscribed for pursuant to the OVERSUBSCRIPTION
PRIVILEGE.
Number of Underlying Shares subscribed: _______ @ $1,000.00 per share = $_______
(c) Total Exercise Price: $_______
The undersigned understands that payment in full of the Exercise
Price, as computed above, of $1,000.00 per share for each share of Series N
Preferred Stock subscribed for pursuant to the Subscription Privileges must
be received by the Subscription Agent at or before 5:00 p.m., New York City
time on the Expiration Date and represents that such payment either (check
the appropriate box):
/ / is being delivered to the Subscription Agent herewith
or
/ / has been delivered separately to the Subscription Agent, and is or was
delivered in the manner set forth below (check appropriate box and
complete information relating thereto):
/ / wire transfer of funds
name of transferor institution
--------------------------------------------
date of transfer
----------------------------------------------------------
confirmation number (if available)
----------------------------------------
/ / uncertified check (Payment of uncertified check will not be deemed to
have been received by the Subscription Agent until such check has
cleared. Holders paying by such means are urged to make payment
sufficiently in advance of the Expiration Date to ensure that such
payment clears by such date.)
/ / certified check
/ / bank draft (cashier's check)
/ / money order
name of maker
-------------------------------------------------------------
date of check, draft or money order
---------------------------------------
2
<PAGE>
check, draft or money order number
---------------------------------------
bank on which check is drawn or issuer of money order
---------------------
Signature(s) Address
---------------------- ----------------------------
- ---------------------------------- -----------------------------------
Name(s)
--------------------------- -----------------------------------
- ---------------------------------- Area Code and Tele. Nos.
Please type or print -----------
-----------------------------------
Subscription Certificate
No(s). (if available)
-----------------------------------------------------
GUARANTEE OF DELIVERY
The undersigned, an "Eligible Institution" within the meaning of
Rule 17Ad-15 under the Securities Exchange Act of 1934, guarantees that the
undersigned will deliver to the Subscription Agent the certificates
representing the Rights being exercised hereby, with any required signatures
and any other required documents, all within three (3) Nasdaq SmallCap Market
trading days after the date hereof.
Dated: , 1999
- ---------------------------------- -----------------------
- ---------------------------------- ------------------------------------
(Name of Firm)
- ----------------------------------
(Address)
- ---------------------------------- ------------------------------------
(Area Code and Telephone Number) (Authorized Signature)
The institution that completes this form must communicate the
guarantee to the Subscription Agent and must deliver the Subscription
Certificate(s) to the Subscription Agent within the time period shown herein.
Failure to do so could result in a financial loss to such institution.
3
<PAGE>
Exhibit 99.4
NOMINEE HOLDER CERTIFICATION
I-LINK INCORPORATED
NOMINEE HOLDER CERTIFICATION
The undersigned, a bank, broker, or other nominee holder of rights
("Rights"), in order to purchase shares of Series N Preferred Stock, $10.00
par value per share ("Preferred Stock") of I-Link Incorporated (the
"Company") pursuant to the rights offering described and provided for in the
Company's prospectus dated [__________], 1999 (the "Prospectus"), hereby
certifies to the Company and to American Stock Transfer and Trust
Corporation, as Subscription Agent for such rights offering, that the
undersigned has subscribed for, on behalf of the beneficial owners thereof
(which may include the undersigned), the number of shares specified below for
each of the Subscription Privileges (as defined in the Prospectus).
1. Number of shares subscribed
for pursuant to the Basic
Subscription Privilege __________
2. Number of shares subscribed
for pursuant to the
Oversubscription Privilege __________
------------------------------
Name of Nominee Holder
By:
---------------------------
Name:
Title:
Dated: ___________________, 1999
