SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
March 1, 2001
Date of Report (date of Earliest Event Reported)
I-LINK INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
FLORIDA 0-17973 59-2291344
(State or Other Jurisdiction of (Commission File No.) (I.R.S. Employer
Incorporation or Organization) Identification No.)
13571 South Wadsworth Park Drive, Suite 200, Draper, Utah 84020
(Address of principal executive offices and zip code)
(801) 576-5000
(Registrant's telephone number, including area code)
not applicable
(Former name or former address, if changed from last report)
Item 2. Acquisition or Disposition of Assets
Warrant Exchange Transaction
On March 1, 2001 I-Link Incorporated, a Florida corporation ("I-Link"
or the "Company") entered into a Warrant Exchange Agreement (the "Agreement")
with Winter Harbor, LLC, a Delaware limited liability company ("Winter Harbor").
Pursuant to the terms and provisions of this Agreement, Winter Harbor agreed to
assign, transfer, convey and deliver to I-Link warrants to acquire 33,540,000
shares of common stock of I-Link beneficially owned by Winter Harbor in exchange
for the issuance by I-Link to Winter Harbor of 5,000,000 shares of I-Link's
common stock, par value $.007 per share (the "Consideration").
As a result of this warrant exchange, Winter Harbor is no longer the
principal beneficial owner of the Company's outstanding capital stock as the
term "beneficial owner" is defined in Rule 13d-3(a) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
Senior Convertible Loan and Security Agreement
On March 1, 2001 I-Link entered into a certain Senior Convertible Loan
and Security Agreement (the "Loan Agreement") with Counsel Communications, LLC,
a Delaware limited liability company ("Counsel LLC") and a wholly-owned
subsidiary of Counsel Corporation, (U.S.) also a Delaware corporation
(collectively, "Counsel"). Pursuant to the terms and provisions of the Loan
Agreement, Counsel LLC agreed to make periodic loans to I-Link in the aggregate
principal amount not to exceed $10,000,000, $3,000,000 of which principal amount
was available to I-Link immediately upon the execution of the Loan Agreement. In
connection with the Loan Agreement, I-Link executed a Loan Note dated March 1,
2001, in the amount of the principal sum of $10,000,000 (the "Loan Note") at an
interest rate of nine
(9) per cent per annum, which interest rate payments will be calculated on a
360 day basis and compounded quarterly.
CONVERSION
The $10,000,000 capital investment by Counsel LLC is structured as a
3-year note convertible, at the option of Counsel LLC, into the shares of common
stock of I-Link at a conversion price of $0.56 per common share ("Conversion
Price"), representing 105% of the average closing transaction price of I-Link's
common shares over the consecutive five day trading period ending February 26,
2001, the date on which I-Link and Counsel LLC executed a binding term sheet.
The Conversion Price is subject to adjustment in accordance with the terms and
provisions of the Loan Agreement. In the event that at any time after 18 months
subsequent to the execution of the Loan Note, I-Link's common shares have closed
at a price per share equal to or greater than one dollar ($1) for twenty (20)
consecutive trading days, the outstanding debt amount owed by I-Link would be
converted automatically into I-Link's common shares. The Conversion Price
calculation in the event of an automatic conversion is subject to the same
calculation as the one for the optional conversion. The Loan Agreement provides
for traditional anti-dilution protection.
SECURITY INTEREST
I-Link granted Counsel LLC a first priority security interest in all of
I-Link's assets (as well as the assets of its subsidiaries) owned at the time of
the execution of the Loan Agreement or acquired subsequent to the execution,
including but not limited to I-Link's accounts, general intangibles, inventory,
equipment, books and records, and negotiable instruments held by the Company
(collectively, the "Collateral").
EVENTS OF DEFAULT AND ACCELERATION
In addition to the traditional default provisions set forth in the Loan
Agreement, the Loan Agreement provides that I-Link may be deemed in default of
its obligations thereunder in the event that: (i) I-Link is in default under any
funded indebtedness, including but not limited to indebtedness evidenced by
notes or capital leases of I-Link other than the amounts loaned pursuant to the
Loan Agreement; (ii) I-Link breaches any material terms of its covenants
respecting board representation and corporate governance (discussed below);
(iii) I-Link's business undergoes a material adverse change in Counsel LLC's
reasonable opinion; (iv) at the end of any month, cumulative negative cash flow
for such month as set forth in the base financial model made available to
Counsel LLC, exceeds 120% of the forecasted amount for such month, as revised
from time to time to reflect events outside of the ordinary course of business.
At the option of Counsel LLC, upon the occurrence of any of the
foregoing events, the entire amount of the unpaid principal and interest owed to
Counsel LLC under the Loan Note may become due and owing.
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The foregoing is a brief description of the terms of the Senior
Convertible Loan and Security Agreement, the Loan Note and the Security
Agreement by and between Counsel LLC and I-Link subsidiaries and by its nature
is incomplete. It is subject to more complete descriptions set forth in the
Senior Convertible Loan and Security Agreement, the Loan Note, and Security
Agreement, respectively, which agreements are attached hereto as Exhibits 4.15,
4.16 and 4.17, respectively.
I-Link's Commitments Pursuant to the Securities Support Agreement
In addition to the foregoing agreements, I-Link and Counsel LLC
executed a Securities Support Agreement, dated March 1, 2001 (the "Support
Agreement") for the purpose of providing certain representations and commitments
by I-Link to Counsel LLC. I-Link's commitments to Counsel LLC set forth in the
Support Agreement included, INTER ALIA, the following:
I. BOARD REPRESENTATION
In accordance with the terms and provisions of the Support
Agreement, I-Link agreed to appoint two (2) designees of Counsel, reasonably
acceptable to the Company, to the Board of Directors of I-Link. Subsequent to
the appointment of such designees, the Board of Directors will consist of six
(6) members. Immediately following the initial funding of the Loan Note, I-Link
will solicit the proxies of I-Link's shareholders to elect three (3) additional
nominees designated by Counsel, thus increasing the size of the Company's Board
of Directors to nine (9) members. Thereafter, I-Link's Compensation and Audit
Committees shall each include one Counsel director, respectively. The Support
Agreement does not contemplate any change to the current management of I-Link.
II. CORPORATE GOVERNANCE
The Support Agreement sets forth several provisions with respect to the
corporate governance of the Company. I-Link, may not, without the consent of a
majority of the Board of Directors: (i) redeem or repurchase any of its
outstanding securities; (ii) adopt or amend any employee stock plan or employee
benefit or compensation arrangement; (iii) enter into any transaction with
affiliated entities other than on an arm's length basis; (iv) enter into any
other line of business other than business substantially similar or related to
its existing business; (v) consummate any acquisitions; (vi) dispose of any
material assets of the Company; (vii) incur funded indebtedness; or (viii)
effect a merger or consolidation or sell substantially all of the Company's
assets. The Board of Directors must also approve the Company's: (i) auditors,
(ii) annual operating and capital budget, and (iii) major sales and marketing
programs.
III. CONVERSION
Subsequent to the execution of the Support Agreement, I-Link agreed to
take all necessary steps to allow Counsel to convert the Winter Harbor Parties'
equity interests acquired pursuant to the Securities Purchase Agreement
discussed in Item 5, OTHER ITEMS,
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below into 61,966,057 shares of I-Link's common stock, which conversion
occurred on March 7, 2001.
IV. REGISTRATION RIGHTS
Pursuant to the Support Agreement, Counsel was granted demand
registration rights with respect to the Company's registration of shares of its
common stock issuable upon conversion of the outstanding debt on the Loan Note
("Registrable Securities") having a minimum anticipated aggregate net offering
price of $10,000,000. Counsel may also request that its Registrable Securities
be included in any other registrations of the Company's common stock subject to
the right of the Company, upon advice of its underwriters, to reduce the number
of shares that are requested to be registered by Counsel.
V. INFORMATION RIGHTS
I-Link agreed to furnish Counsel with any information that it may
reasonably request, including but not limited to: (i) monthly financial
statements, including a comparison of actual results to budget, in the form
customarily prepared; (ii) notification of defaults under material agreements;
(iii) notification of and status reports regarding material litigation; and (iv)
copies of all filings made with the Securities and Exchange Commission.
The foregoing is a brief description of the terms of the Securities
Support Agreement and ancillary documents and by its nature is incomplete. It is
subject to the more complete description set forth in the Securities Support
Agreement, attached hereto as Exhibit 99.2.
Item 5. Other Events.
Thomas A. Keenan resigned his position as a Class I Director of the
Company on February 21, 2001 by letter to the CEO of the Company. Mr. Keenan
served on the Board of Directors as the designee of Winter Harbor. As of the
date of this Report, the Board of Directors of the Company consists of no Class
I Directors, two Class II Directors (Henry Y.L. Toh, Hal B. Heaton), and two
Class III Directors (John W. Edwards, David R. Bradford). On December 15, 2000,
Mr. Dror Nahumi resigned as President of the Company and terminated his
employment with I-Link effective as of January 8, 2001.
On March 1, 2001, Counsel LLC entered into a separate agreement with
Winter Harbor and First Media, L.P, a limited partnership and the parent company
of Winter Harbor (collectively, the "Winter Harbor Parties") (the "Securities
Purchase Agreement"). I-Link was not a party to the Securities Purchase
Agreement. In accordance with the terms and provisions of the Securities
Purchase Agreement, Counsel agreed to purchase from the Winter Harbor Parties
all of the debt and equity securities in I-Link, including shares of Series M
and Series N preferred stock of I-Link, beneficially owned by the Winter Harbor
Parties for an aggregate consideration of $5,000,000. Prior to the closing under
the Securities Purchase Agreement, Winter Harbor converted all of its debt in
I-Link (aggregating $10,305,072 as of February 28, 2001) into equity securities
of I-Link in accordance with the terms of the debt.
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Subsequent to the conversion of the above-referenced debt by Winter
Harbor and the conversion of all of the Series M and N Preferred Stock owned by
Counsel LLC, there will be 95,111,785 shares of Common Stock outstanding.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of business acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
4.15 Senior Convertible Loan and Security Agreement, dated
as of March 1, 2001, by and between Counsel
Communications, LLC, a Delaware limited liability
company and I-Link Incorporated, a Florida
corporation.
4.16 Loan Note, dated as of March 1, 2000, by and between
Counsel Communications, LLC, and I-Link Incorporated.
4.17 Security Agreement, dated as of March 1, 2001, by and
between I-Link Communications, Inc., a Utah
corporation, MiBridge, Inc., a Utah corporation, and
Counsel Communications, LLC, a Delaware limited
liability company.
99.1 Warrant Exchange Agreement, dated as of March 1,
2001, by and between Winter Harbor, LLC, a Delaware
limited liability company, and I-Link Incorporated, a
Florida corporation.
99.2 Securities Support Agreement, dated as of March 1,
2001, by and between Counsel Communications, LLC, a
Delaware limited liability company and I-Link
Incorporated, a Florida corporation.
99.3 Covenant Not to Sue, dated as of March 1, 2001, by
and between Winter Harbor, LLC, a Delaware limited
liability company, and I-Link Incorporated, a Florida
corporation.
99.4 Press Release reporting I-Link's transactions with
Counsel LLC and Winter Harbor to the marketplace,
issued on March 1, 2001.
[THE SIGNATURE PAGE FOLLOWS.]
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
I-LINK INCORPORATED
Date: March 16, 2001 By: /s/ John W. Edwards
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Chief Executive Officer
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