SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934, as amended.
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
EASYLINK SERVICES CORPORATION
(Name of Registrant as Specified In Its Certificate of Incorporation)
N/A
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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EASYLINK SERVICES CORPORATION
399 Thornall Street
Edison, NJ 08837
April [ ], 2001
Dear Stockholder:
On behalf of the Board of Directors, I cordially invite you to attend
our Annual Meeting of Stockholders to be held at 10:00 a.m. on Thursday, May 24,
2001 at the New York Information Technology Center, 55 Broad Street, New York,
New York.
We have enclosed with this letter a notice of meeting, a proxy
statement, a proxy card and a return envelope. We have also enclosed your 2000
Annual Report.
Your vote is important. Whether or not you plan to attend, please date
and sign the enclosed proxy card and return it in the envelope provided. If you
plan to attend the meeting, you may vote in person.
I look forward to your participation.
Sincerely,
GERALD GORMAN
Chairman
EASYLINK SERVICES CORPORATION
399 Thornall Street
Edison, NJ 08837
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on May 24, 2001
The Annual Meeting of Stockholders (the "Annual Meeting") of EasyLink
Services Corporation, a Delaware corporation (the "Company" or "EasyLink
Services"), will be held at the New York Information Technology Center, 55 Broad
Street, New York, New York on Thursday, May 24, 2001, at 10 a.m. local time for
the following purposes:
1. To elect eight directors of EasyLink Services to serve until the
2002 Annual Meeting of Stockholders or until their respective
successors are elected and qualified;
2. To approve the Company's 2001 Stock Option Plan;
3 To amend EasyLink Services' Amended and Restated Certificate of
Incorporation, as amended, to increase the number of authorized
shares of Class A Common Stock of the Company;
4. To ratify the appointment of KPMG LLP as the independent
accountants for the Company for the year ending December 31,
2001; and
5. To transact such other business as may properly come before the
Annual Meeting and any adjournment or postponement thereof.
The foregoing items of business, including the nominees for directors,
are more fully described in the Proxy Statement which is attached and made a
part of this Notice. The Board of Directors has fixed the close of business on
April [ ], 2001 as the record date for determining the stockholders entitled to
notice of and to vote at the Annual Meeting and any adjournment or postponement
thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, whether or not you plan to attend the Annual Meeting in person,
you are urged to mark, date, sign and return the enclosed proxy card as promptly
as possible in the postage-prepaid envelope provided to ensure your
representation and the presence of a quorum at the Annual Meeting. If you send
in your proxy card and then decide to attend the Annual Meeting to vote your
shares in person, you may still do so. Your proxy is revocable in accordance
with the procedures set forth in the Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
DAVID W. AMBROSIA
Executive Vice President, General Counsel
and Secretary
Edison, New Jersey
April [ ], 2001
EASYLINK SERVICES CORPORATION
399 Thornall Street
Edison, NJ 08837
PROXY STATEMENT
General
The enclosed proxy is solicited by the Board of Directors of EasyLink
Services Corporation, a Delaware corporation (the "Company" or "EasyLink"), for
use at the Annual Meeting of Stockholders of the Company (the "Annual Meeting")
to be held at the New York Information Technology Center, 55 Broad Street, New
York, New York, on Thursday, May 24, 2001, at 10 a.m., local time, and any
adjournment or postponement thereof.
The Company's principal offices are located at 399 Thornall Street,
Edison, NJ 08837. This Proxy Statement and the accompanying proxy card are being
mailed to the stockholders of the Company on or about April [ ], 2001.
Revocability Of Proxies
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Company
(Attention: David W. Ambrosia, Executive Vice President, General Counsel and
Secretary) a written notice of revocation or a duly executed proxy bearing a
later date, or by attending the Annual Meeting and voting in person.
Record Date; Voting Securities
The close of business on April [ ], 2001 has been fixed as the record
date (the "Record Date") for determining the holders of shares of common stock
of the Company entitled to notice of and to vote at the Annual Meeting. At the
close of business on the Record Date, the Company had approximately [ ] shares
of Class A common stock outstanding held of record by approximately [ ]
stockholders and 10,000,000 shares of Class B common stock held of record by one
stockholder.
Voting And Solicitation
Each outstanding share of Class A Common Stock on the Record Date is
entitled to one vote and each outstanding share of Class B Common Stock on the
Record Date is entitled to 10 votes on all matters, subject to the conditions
described below. The presence, in person or by proxy, of the holders of a
majority in voting power of the outstanding shares of Class A Common Stock and
Class B Common Stock, voting together as a single class, is necessary to
constitute a quorum. Abstentions and broker "non-votes" are counted as present
and entitled to vote for purposes of determining a quorum. A broker "non-vote"
occurs when a nominee holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have discretionary voting power
for that particular item and has not received instructions from the beneficial
owner.
The nominees for election as directors at the Annual Meeting will be
elected by a plurality of the votes of the shares of Class A Common Stock and
Class B Common Stock, voting together as a single class, present in person or
represented by proxy at the meeting. Abstentions and broker "non-votes" are not
counted for the purposes of the election of directors.
The amendment of the Amended and Restated Certificate of Incorporation,
as amended, must be approved by the affirmative vote of the holders of a
majority in voting power of the outstanding shares of Class A Common Stock and
Class B Common Stock, voting together as a single class. Abstentions and broker
"non-votes" will have the same effect as a vote "AGAINST" the amendment to the
Amended and Restated Certificate of Incorporation, as amended.
All other matters submitted to the stockholders will require the
affirmative vote of the holders of a majority of the votes of the shares of
Class A Common Stock and Class B Common Stock, voting together as a single
class, present in person or represented by proxy at the meeting. Abstentions
will be counted towards the tabulations of votes cast on proposals presented to
the stockholders and will have the same effect as a vote "AGAINST" such matters.
Broker "non-votes" will not be counted for purposes of determining whether such
matters have been approved.
If the enclosed proxy is properly executed and returned, it will be
voted in the manner directed by the stockholder. If no instructions are
specified with respect to the matter to be acted upon, proxies will be voted
"FOR" such matter.
The solicitation of proxies will be conducted by mail, and the Company
will bear all attendant costs. The Company may conduct further solicitation
personally, telephonically or by facsimile through its officers, directors and
employees, none of whom will receive additional compensation for assisting with
the solicitation.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Nominees
At the Annual Meeting, the stockholders will elect eight (8) directors
to serve until the next Annual Meeting of Stockholders or until their respective
successors are elected and qualified. In the event any nominee is unable or
unwilling to serve as a director at the time of the Annual Meeting, the proxies
may be voted for the balance of those nominees named and for any substitute
nominee designated by the present Board or the proxy holders to fill such
vacancy, or for the balance of the nominees named without nomination of a
substitute, or the size of the Board may be reduced in accordance with the
Bylaws of the Company. The Board has no reason to believe that any of the
persons named below will be unable or unwilling to serve as a nominee or as a
director if elected.
The names of the nominees, their ages as of February 28, 2001 and
certain other information about them are set forth below:
Name Age Position
---- --- --------
Gerald Gorman 45 Chairman, Director
Thomas Murawski 55 Chief Executive Officer, Director
Gary Millin 31 Chief Executive Officer, WORLD.com, Inc., Director
George Abi Zeid 48 President - International Operations, Director
William Donaldson 69 Director
Stephen Duff 37 Director
Stephen Ketchum 39 Director
Jack Kuehler 68 Director
There are no family relationships among any of the directors or
executive officers of the Company.
Gerald Gorman -- Chairman
Mr. Gorman has served as Chairman of EasyLink since founding the
Company in December 1995 and as its Chief Executive Officer from February 1997
to October 2000. Prior to founding EasyLink, Mr. Gorman spent 12 years in the
Investment Banking Division of Donaldson, Lufkin & Jenrette Securities
Corporation where he founded and managed the Satellite Financing Group. Mr.
Gorman also held positions at General Electric Capital Corporation from 1983 to
1985 and at Utah International from 1982 to 1983. Mr. Gorman received his
Bachelor of Mechanical Engineering degree from Melbourne University and his
M.B.A. from Columbia University.
Thomas Murawski --Chief Executive Officer, Director
Mr. Murawski has served as a member of the Board of Directors since
February 2000. Mr. Murawski has served as Chief Executive Officer of EasyLink
since October, 2000. He served as Chief Executive Officer of Mail.com Business
Messaging Services, Inc., a wholly-owned subsidiary of the Company from February
2000 to October, 2000. Before joining EasyLink, Mr. Murawski was employed by
NetMoves Corporation from November 1991 in the capacity of Chairman, President
and Director. Prior to joining NetMoves Corporation, Mr. Murawski served as
Executive Vice President of Western Union Corporation, a global
telecommunications and financial services company and President of its Network
Services Group. Prior to joining Western Union Corporation, Mr. Murawski served
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twenty-three years with ITT Corporation, a diversified manufacturing and
services company. He has held operating responsibilities in the areas of
subsidiary and product line management, engineering, sales and marketing for
both voice and data-oriented businesses. Mr. Murawski's last position with ITT
Corporation was President and General Manager of ITT World Communications Inc.,
an international telecommunications services company.
Gary Millin -- Chief Executive Officer of WORLD.com, Inc., Director
Mr. Millin has served as a member of the Board of Directors since
founding the Company in December 1995. Mr. Millin has served as Chief Executive
Officer of WORLD.com, Inc., a wholly-owned subsidiary of the Company since March
2000. He served as President of the Company from December 1995 to March 2000.
Prior to founding EasyLink, Mr. Millin spent three years at the venture capital
firm Consumer Venture Partners (CVP) from 1991 to 1994. Mr. Millin received his
B.S. in Economics from the Wharton School and his M.B.A. from Harvard Business
School, where he was a Baker Scholar.
George Abi Zeid -- President - International Operations, Director
Mr. Abi Zeid has served as a member of the Board of Directors and as
Vice President - International Operations since February 2001. Prior to joining
EasyLink he served as President of Swift Telecommunications, Inc. which he
founded in 1999. Prior to founding Swift Telecommunications, Inc., Mr. Abi Zeid
served as Executive Vice President of Xpedite Systems, Inc. from 1994 until
1998. Mr. Abi Zeid served as President and Chief Executive Officer of Swift
Global, Inc. from the time he founded the company in 1980 until 1994. Prior to
founding Swift Global, Inc., Mr. Abi Zeid founded Swift Telex Inc. in 1978.
William Donaldson -- Director
Mr. Donaldson has been a member of the Board of Directors since April
1998. He served as Chairman, President and Chief Executive Officer of Aetna,
Inc. from February 25, 2000 until December 13, 2000. He also served as Chairman,
President and Chief Executive Officer from May 30 until September 30, 2000 and
as Chairman of the new Aetna (formerly Aetna U.S. Healthcare) until his
retirement on April 1, 2001. From 1995 until 2000 he served as Senior Advisor to
Donaldson, Lufkin & Jenrette, Inc. He is Chairman of the Carnegie Endowment for
International Peace and is a director of Bright Horizons Family Solutions and
Aetna, Inc. From 1991 to 1995, he served as Chairman and Chief Executive Officer
of the New York Stock Exchange. In 1981, he founded the private investment firm,
Donaldson Enterprises, and served as its Chairman until 1990. In 1975, Mr.
Donaldson was named founding Dean and Professor of Management at the Yale
Management School. In 1973, he was appointed U.S. Undersecretary of State and
subsequently served as Counsel to Vice President Nelson Rockefeller. In 1959, he
co-founded Donaldson, Lufkin & Jenrette where he served as its Chief Executive
Officer until 1973. He received his B.A. from Yale University and his M.B.A.
with distinction from the Harvard Business School.
Stephen Duff -- Director
Mr. Duff has been a member of the Board of Directors since January,
2001. Mr. Duff is the Senior Investment Manager of The Clark Estates, Inc. Prior
to joining The Clark Estates in 1995, Mr. Duff was a Vice President of The
Portfolio Group, Inc., a subsidiary of The Chemical Banking Corporation, Inc.
from 1990. Mr. Duff is a 1985 graduate of Stonehill College. Mr. Duff serves on
the Boards of Employease, Inc. (Private), The Clara Welch Thanksgiving Home,
Inc. (Non-Profit) and Vertex Interactive, Inc.
Stephen Ketchum -- Director
Mr. Ketchum has been a member of the Board of Directors since May 1997.
Mr. Ketchum is Chief Executive Officer and a director of Onview.com, Inc., a
privately-held internet company based in New York. From 1990 until 2000, Mr.
Ketchum held various positions with Donaldson, Lufkin & Jenrette Securities
Corporation, including as a Managing Director of the Satellite Financing Group.
Prior to joining Donaldson, Lufkin & Jenrette Securities Corporation in 1990,
Mr. Ketchum was employed at Dean Witter Reynolds. Mr. Ketchum serves on the
board of Manufacturer's Services Limited, a contract manufacturing company based
in Boston, and on the board of ExperTelligence, Inc., a publicly traded internet
incubator based in Santa Barbara. Mr. Ketchum received his B.A. in Finance and
Marketing from New England College where he graduated summa cum laude and his
M.B.A. from the Harvard Business School.
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Jack Kuehler -- Director
Mr. Kuehler has been a member of the Board of Directors since April
1998. Mr. Kuehler retired in August 1993 as Vice Chairman and a director of
International Business Machines Corporation, having held various positions since
joining IBM in 1958. Prior to his appointment as Vice Chairman of IBM in January
1993, Mr. Kuehler served as President from 1989 to 1993 and as Executive Vice
President from 1987 to 1988. Mr. Kuehler is a director of Aetna, Inc., Arch
Chemicals Inc. and The Parsons Corporation. He is a member of the National
Academy of Engineering, a fellow of the Institute of Electrical and Electronics
Engineers, Inc. and a fellow of the American Academy of Arts and Sciences.
Meetings and Committees of the Board of Directors
During 2000, the Board met nine (9) times and acted three times by
unanimous written consent. No director attended fewer than 75% of the aggregate
number of meetings of the Board and meetings of the committees of the Board on
which he served. The Board has an Audit Committee and a Compensation Committee.
From time to time, the Board has created various ad hoc committees for special
purposes. No such ad hoc committee is currently functioning.
The Compensation Committee is currently composed of two outside
directors, William Donaldson and Stephen Ketchum, and held seven (7) meetings
and acted twice by unanimous written consent during 2000. The Compensation
Committee has the authority to determine salaries and bonuses, and to make
awards of options to purchase capital stock of the Company to the officers and
employees of the Company.
The Audit Committee is currently composed of three directors, William
Donaldson, Stephen Ketchum and Gary Millin and held four (4) meetings during
2000. The Company has adopted an Audit Committee charter, a copy of which is set
forth as Appendix A hereto. Each of the current Audit Committee members is an
"independent director" as defined in Rule 4200(a)(14) of the NASD listing
standards except for Mr. Millin. The Board of Directors intends to appoint a
third independent director to the Audit Committee on or before June 14, 2001 in
accordance with NASDAQ's rules for implementation of its audit committee
standards. The Audit Committee, among other things, provides assistance to the
corporate directors in fulfilling their responsibilities relating to corporate
accounting, reporting practices of the Company, and the quality and integrity of
the financial reports of the Company. In carrying out these responsibilities,
the Audit Committee, among other things, reviews and recommends to the directors
the independent auditors to be selected to audit the financial statements of the
Company and its divisions and subsidiaries; confirms the independence of the
independent auditors and the independent auditors' accountability to the Board
and the Audit Committee; meets with the independent auditors and financial
management of the Company to review the scope of the proposed audit for the
current year and the audit procedures to be utilized, and at the conclusion
thereof to review such audit, including any comments or recommendations of the
independent auditors; and reviews with the independent auditors and financial
and accounting personnel, the adequacy and effectiveness of the accounting and
financial controls of the Company.
Compensation Committee Interlocks and Insider Participation
EasyLink Services' Compensation Committee is comprised of two
non-management directors, William Donaldson and Stephen Ketchum. All decisions
relating to the compensation of EasyLink executive officers are made by the
Compensation Committee.
Compensation of Directors
Other than reimbursing directors for customary and reasonable expenses
of attending Board of Directors or committee meetings, EasyLink does not
currently compensate directors who are part of the management team. During 2000,
three outside, non-management directors were granted options as compensation for
their serving as board members. On May 18, 2000 Mr. Kuehler and Mr. Donaldson
were each granted options to purchase 20,000 shares of Class A Common Stock at
an exercise price of $7.00 per share, vesting on a monthly basis for one year
from May 2000 through May 2001 and Mr. Ketchum was granted options to purchase
10,000 shares of Class A Common Stock at $7.00 per share, vesting on a monthly
basis for one year from May 2000 through May 2001. On November 14, 2000, all
directors, officers and employees (other than Gerald Gorman) were given the
ability to reduce the exercise price of their outstanding options that had an
exercise price above $3.00 to $1.6875, the fair market value on the date of the
repricing. Pursuant to this repricing, 45,000 options were repriced for each of
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Messrs. Donaldson and Kuehler and 20,000 options were repriced for Mr. Ketchum.
On January 29, 2001, Stephen Duff, an outside, non-management director was
granted options to purchase 40,000 shares of Class A Common Stock at an exercise
price of $1.25 per share, vesting on a monthly basis for one year from January
2001 through January 2002.
Vote Required
A plurality of votes of the shares of Class A Common Stock and Class B
Common Stock, voting together as a single class, present in person or
represented by proxy at the meeting, is required for the election of directors.
Recommendation of the Board
The Board of Directors recommends that the stockholders vote "FOR"
election of each of the nominees listed above.
PROPOSAL NO. 2
APPROVAL OF THE EASYLINK SERVICES CORPORATION
2001 STOCK OPTION PLAN
General
The Board of Directors is proposing for stockholder approval the
EasyLink Services Corporation 2001 Stock Option Plan (the "2001 Option Plan").
The purpose of the 2001 Option Plan is to grant incentive stock options intended
to qualify under Section 422 of the Internal Revenue Code and nonqualified stock
options as a means to provide an incentive to our selected directors, officers,
employees and consultants to acquire a proprietary interest in EasyLink
Services, to continue in their positions with us and to increase their efforts
on our behalf.
The 2001 Option Plan was adopted by the Board on April 3, 2001, and, if
approved by the stockholders, will become effective on May 24, 2001. Appendix B
to this Proxy Statement contains the complete text of the 2001 Option Plan,
which is summarized below.
Description of the 2001 Option Plan
Administration. The 2001 Option Plan is administered by the Board of
Directors or a committee appointed by the Board. Under the 2001 Option Plan, the
plan administrator has the authority to, among other things: (i) select the
eligible persons to whom options will be granted, (ii) determine the size, type
and the terms of each option granted, (iii) adopt, amend and rescind rules and
regulations for the administration of the plan, and (iv) decide all questions
and settle all controversies and disputes of general applicability that may
arise in connection with the plan.
Available Shares. A maximum of 2,500,000 shares of Class A Common Stock
will be available for purchase under the 2001 Option Plan. The maximum number of
shares underlying options granted to any individual within a calendar year under
the 2001 Option Plan is 1,000,000. In the event of any changes in the number or
kind of outstanding shares of stock by reason of merger, consolidation,
recapitalization, reclassification, split, reverse split, combination of shares
or otherwise, the plan administrator may make equitable adjustments to the price
and other terms of any option previously granted or that may be granted under
the 2001 Option Plan.
Eligibility. The plan administrator will select those persons who are
to receive option grants. During the first year in which options are granted
under the 2001 Option Plan, eligible persons are expected to include
approximately 600 officers and other employees of EasyLink Services and its
subsidiaries, all four of the non-employee directors of EasyLink Services, and
certain consultants to EasyLink Services and its subsidiaries.
Option Agreement. Each option granted under the 2001 Option Plan will
be evidenced by an agreement that states the terms and conditions of the grant.
The exercise price of an incentive stock option granted under the 2001 Option
Plan will not be less than 100% of the fair market value of the stock at the
time of grant (110% in the case of an incentive stock option granted to any
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person who possesses more than 10% of the total combined voting power of all
classes of our capital stock). The fair market value of a share of Class A
Common Stock as of the Record Date was $[ ].
Each option granted under the 2001 Option Plan will be exercisable at
the times and in the amounts determined by the plan administrator at the time of
grant. In addition, the plan administrator, in its discretion, may accelerate
the exercisability of any option outstanding under the 2001 Option Plan. The
exercise price of an option is payable in cash unless otherwise approved by the
plan administrator.
Options granted under the 2001 Option Plan are not transferable except
by will or the laws of descent and distribution and are only exercisable by the
grantee during such grantee's lifetime. Each option shall terminate at the time
determined by the plan administrator provided that the term may not exceed ten
years from the date of grant (five years in the case of an incentive stock
option granted to a ten percent stockholder). However, the plan administrator
may, subject to the limitations of the 2001 Option Plan, modify, extend or renew
outstanding options granted under the 2001 Option Plan, or accept the surrender
of outstanding unexercised options and authorize the grant of substitute
options.
Amendment and Termination. The 2001 Option Plan will terminate on the
earliest of (a) May 24, 2011, (b) the date when all shares of stock reserved for
issuance under the 2001 Option Plan have been acquired through the exercise of
options granted under the plan or (c) any earlier date as may be determined by
the Board of Directors. Subject to certain limitations, the Board of Directors
may amend the 2001 Option Plan, and may correct any defect, supply any omission
or reconcile any inconsistency in the 2001 Option Plan. None of these
modifications may alter or adversely impair any rights or obligations under any
option previously granted under the 2001 Option Plan, except with the consent of
the grantee.
Federal Income Tax Consequences
The following discussion is generally a summary of the principal United
States federal income tax consequences under current federal income tax laws
relating to grants or awards to employees under the 2001 Option Plan. This
summary is not intended to be exhaustive and, among other things, does not
describe state, local or foreign income and other tax consequences.
A grantee will not recognize any taxable income upon the grant of a
nonqualified option and EasyLink Services will not be entitled to a tax
deduction with respect to such grant. Generally, upon exercise of a nonqualified
option, the excess of the fair market value of stock on the date of exercise
over the exercise price will be taxable as ordinary income to the grantee. If
EasyLink Services complies with applicable withholding requirements, we will be
entitled to a tax deduction in the same amount and at the same time as the
grantee recognizes ordinary income subject to any deduction limitation under
Section 162(m) of the Internal Revenue Code. The subsequent disposition of
shares acquired upon the exercise of a nonqualified stock option will ordinarily
result in capital gain or loss.
Subject to the discussion below, a grantee will not recognize taxable
income at the time of grant or exercise of an incentive stock option and we will
not be entitled to a tax deduction with respect to such grant or exercise.
However, the exercise of an incentive stock option may result in an alternative
minimum tax liability for the grantee.
Generally, if a grantee has held shares acquired upon the exercise of
an incentive stock option for at least one year after the date of exercise and
for at least two years after the date of grant of the incentive stock option,
upon disposition of the shares by the grantee, the difference, if any, between
the sales price of the shares and the exercise price will be treated as
long-term capital gain or loss to the grantee.
Generally, upon a sale or other disposition of shares acquired upon the
exercise of an incentive stock option within one year after the date of exercise
or within two years after the date of grant of the incentive stock option (a
"disqualifying disposition"), any excess of the fair market value of the shares
at the time of exercise of the option over the exercise price of such option
will constitute ordinary income to the grantee. Any excess of the amount
realized by the holder on the disqualifying disposition over the fair market
value of the shares on the date of exercise will generally be capital gain.
Subject to any deduction limitation under Section 162(m) of the Internal Revenue
Code, EasyLink Services will be entitled to a deduction equal to the amount of
such ordinary income recognized by the holder.
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If an option is exercised through the use of shares previously owned by
the holder, such exercise generally will not be considered a taxable disposition
of the previously owned shares and thus no gain or loss will be recognized with
respect to such shares upon such exercise. However, if the previously owned
shares were acquired on the exercise of an incentive stock option and the
holding period requirement for those shares is not satisfied at the time they
are used to exercise the option, such use will constitute a disqualifying
disposition of the previously owned shares resulting in the recognition of
ordinary income in the amount described above.
Approval Required:
The affirmative vote of the holders of a majority of the votes of
shares of Class A Common Stock and Class B Common Stock, voting together as a
single class, present in person or represented by proxy at the meeting is
required for the approval of this proposal.
Recommendation of the Board:
The Board of Directors recommends a vote "FOR" the approval of the
EasyLink Services Corporation 2001 Stock Option Plan.
PROPOSAL NO. 3
APPROVAL OF AMENDMENT TO THE COMPANY'S
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED
General
The Board of Directors has declared advisable an amendment to the
Company's Amended and Restated Certificate of Incorporation, as amended, to
increase the aggregate number of authorized shares of Class A Common Stock from
150,000,000 to 500,000,000 and the Board of Directors has directed that the
amendment be submitted to the stockholders at the Annual Meeting.
The Amended and Restated Certificate of Incorporation, as amended,
presently authorizes the issuance of 220,000,000 shares of which 150,000,000 are
shares of Class A Common Stock, par value $.01 per share, 10,000,000 are shares
of Class B Common Stock, par value $.01 per share and 60,000,000 are shares of
Preferred Stock, par value $.01 per share. The amendment would increase the
authorized number of shares of Class A Common Stock to 500,000,000.
Proposed Amendment
If the amendment is approved, the text of the first sentence of Article
V of the Amended and Restated Certificate of Incorporation, as amended, would
read in its entirety as follows:
The total number of shares of all classes of capital stock that
the Corporation is authorized to issue is five hundred seventy
million (570,000,000) of which five hundred million (500,000,000)
shall be shares of Class A Common Stock, par value one cent
($.01) per share, and ten million (10,000,000) shall be shares of
Class B Common Stock, par value one cent ($.01) per share, and
sixty million (60,000,000) shall be shares of Preferred Stock,
par value one cent ($.01) per share.
General Effect of the Proposed Amendment and Reasons for Approval
Of the Company's authorized shares, 70,851,123 shares of Class A Common
Stock, 10,000,000 shares of Class B Common Stock and no shares of Preferred
Stock were issued and outstanding as of February 28, 2001. At February 28, 2001,
after taking into account Class A Common Stock underlying the outstanding shares
of Class B Common Stock and all outstanding stock options and warrants and
convertible securities, but excluding shares issuable at the option of the
Company in payment of interest on outstanding senior convertible notes and an
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indeterminate amount of additional shares that may be issuable pursuant to the
exercise of outstanding exchange rights, approximately 19,500,000 shares of
Class A Common Stock authorized in the Amended and Restated Certificate of
Incorporation, as amended, remain available for issuance.
The Board of Directors believes the increase in the number of
authorized shares of Class A Common Stock is advisable in order to maintain the
Company's financing and capital-raising flexibility, for use as consideration in
acquisitions, to facilitate future stock-splits, to have shares available for
use in employee benefit plans and other corporate purposes, and to generally
maintain the Company's flexibility in today's competitive, fast-changing
environment. There are no present agreements, understandings or plans for the
issuance of any of the additional shares of Common Stock that would be
authorized by the amendment.
Adoption of the amendment would enable the Board from time to time to
issue additional shares of Class A Common Stock for such purposes and such
consideration as the Board may approve without further approval of the Company's
stockholders, except as may be required by the rules of any securities exchange
on which the shares of Class A Common Stock are at the time listed. As is true
for shares presently authorized, the issuance of the Class A Common Stock
authorized by the amendment may, among other things, have a dilutive effect on
earnings per share and on the equity and voting power of existing holders of
Class A Common Stock.
The overall effect of an issuance of additional shares of Class A
Common Stock may be to render more difficult the accomplishment of any attempted
merger, takeover or other change in control affecting the Company and/or the
removal of the Company's Board of Directors and management.
There are no preemptive rights with respect to the Class A Common
Stock. The additional authorized shares of Class A Common Stock would have the
identical powers, preferences and rights as the shares now authorized.
The Board of Directors of the Company believes that the proposed
increase in the number of authorized shares of Class A Common Stock will be
advantageous to the Company and its stockholders by making available such stock
for issuance for various corporate purposes.
Approval Required:
The affirmative vote of the holders of a majority of the votes of all
outstanding shares of Class A Common Stock and Class B Common Stock, voting
together as a single class, is required for the approval of this proposal.
Under Delaware law, stockholders will not have any dissenters' or
appraisal rights in connection with the amendment. If the amendment is approved
by the stockholders, it will become effective upon executing and acknowledging,
and filing with the Delaware Secretary of State, a Certificate of Amendment
required by the General Corporation Law of the State of Delaware. However, the
Board of Directors is authorized to abandon the amendment at any time prior to
its effectiveness, whether before or after obtaining stockholder approval,
without further action by stockholders.
Recommendation of the Board
The Board of Directors recommends a vote "FOR" adoption of the proposed
amendment of the Amended and Restated Certificate of Incorporation, as amended.
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
KPMG LLP has served as the Company's independent auditors since 1998
and has been appointed by the Board to continue as the Company's independent
auditors for the year 2001.
A representative of KPMG LLP is expected to be present at the Annual
Meeting. This representative will have an opportunity to make a statement and
will be available to respond to appropriate questions.
8
FEES BILLED TO COMPANY BY KPMG LLP DURING FISCAL 2000
Audit Fees
Audit fees billed to the Company by KPMG LLP for the audit of the
Company's annual financial statements included on Form 10-K for the year ended
December 31, 2000 and the review of the financial statements included in the
Company's quarterly reports on Form 10-Q for 2000 totaled approximately
$500,000.
Financial Information Systems Design And Implementation Fees
The Company did not engage KPMG LLP to provide advice to the Company
regarding financial information systems design and implementation during the
fiscal year ended December 31, 2000.
All Other Fees
Fees billed to the Company by KPMG LLP during the Company's 2000 fiscal
year for all other non-audit services rendered to the Company, including
accounting advice and tax services totaled approximately $420,000, including
those fees relating to the offering of our 7% convertible debentures as well as
our various acquisitions. The audit committee of the Board of Directors has
determined that the accounting advice and tax services provided by KPMG LLP are
compatible with maintaining KPMG LLP's independence.
Approval Required:
The affirmative vote of the holders of a majority of the votes of the
shares of Class A Common Stock and Class B Common Stock, voting together as a
single class, present in person or represented by proxy at the meeting is
required for the approval of this proposal.
Recommendation of the Board:
The Board of Directors recommends a vote "FOR" the ratification of the
appointment of KPMG LLP as the Company's independent auditors for the year 2001.
COMMON STOCK OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information with respect to the beneficial
ownership of EasyLink Services' common stock as of February 28, 2001 for:
o each person who EasyLink Services knows beneficially owns more
than 5% of its Class A Common Stock;
o each of EasyLink Services' directors, including its Chairman and
Chief Executive Officer;
o EasyLink Services' four most highly compensated executive
officers, other than its Chief Executive Officer, who were
serving as executive officers at the end of 2000, and two
additional executive officers; and
o all of EasyLink Services' executive officers and directors as a
group.
For purposes of this table, a person, entity or group is deemed to have
"beneficial ownership" of any shares of Class A common stock, including shares
subject to options, warrants or conversion rights, which the person, entity or
group has the right to acquire within 60 days of February 28, 2001. Unless
otherwise noted below, the persons and entities named in the table have sole
voting and sole investment power with respect to all shares beneficially owned,
subject to community property laws where applicable.
9
For purposes of calculating the percentage of outstanding shares or
voting power held by each person named below, any shares which that person has
the right to acquire within 60 days after February 28, 2001 are deemed to be
outstanding, but shares which may similarly be acquired by other persons are
deemed not to be outstanding.
The total number of shares of Class A Common Stock for purposes of
calculating the percentages of Class A Common Stock beneficially owned includes
10,000,000 shares of Class A Common Stock issuable upon conversion of the
10,000,000 outstanding shares of Class B Common Stock.
The total number of votes for purposes of calculating the percentage of
total voting power includes the voting power of 10,000,000 shares of Class B
Common Stock owned by Gerald Gorman. Each share of Class B Common Stock entitles
Mr. Gorman to ten votes.
Number of Percentage Percentage of
Shares of Class A of Class A Total
Name of Beneficial Owner Beneficially Owned Beneficially Owned Voting Power
------------------------ ------------------ ------------------ ------------
Gerald Gorman............................................. 12,245,717(1) 15.1% 59.8%
Thomas Murawski........................................... 300,917 * *
Gary Millin............................................... 1,772,534 2.2 *
George Abi Zeid........................................... 18,776,176 23.2 11.0
William Donaldson......................................... 281,666 * *
Stephen Duff.............................................. 25,100 * *
Stephen Ketchum........................................... 148,453 * *
Jack Kuehler.............................................. 282,366 * *
Debra McClister........................................... 284,044 * *
David Ambrosia............................................ 153,815 * *
Lon Otremba............................................... 227,378 * *
Samuel Kline.............................................. 150,500 * *
All directors and executive officers as a group (13 persons) 34,648,666 42.85 60.16
The Clark Estates, Inc.................................... 6,973,800(2) 8.63 4.08
* Represents beneficial ownership or voting power of less than 1%.
(1) Includes 10,000,000 shares of Class A Common Stock issuable upon
conversion, on a one for one basis, of Class B Common Stock.
(2) Includes 5,000,000 shares of Class A common stock issuable upon conversion
of senior convertible notes held by Federal Partners, L.P. The Clark
Estates, Inc. provides management and administrative services to Federal
Partners. Also, includes 1,943,800 shares held by accounts for which The
Clark Estates, Inc. provides management and administrative services. The
Clark Estates, Inc. disclaims beneficial ownership of the 5,000,000 shares
and the 1,943,800 shares described in the previous sentence.
The following table sets forth the number of shares of Class A Common
Stock included in the table above that are issuable upon the exercise of options
exercisable within 60 days of February 28, 2001.
Number of Shares of
Name of Beneficial Owner Class A Common Stock
------------------------ --------------------
Gerald Gorman........................................................ 544,897
Thomas Murawski...................................................... 277,675
Gary Millin.......................................................... 564,434
George Abi Zeid...................................................... 0
William Donaldson.................................................... 151,666
Stephen Duff......................................................... 10,000
Stephen Ketchum...................................................... 13,333
Jack Kuehler......................................................... 151,666
Debra McClister...................................................... 216,039
David Ambrosia....................................................... 149,340
Lon Otremba.......................................................... 72,378
Samuel Kline......................................................... 150,000
10
George Abi Zeid acquired the 18,776,176 shares included in the
ownership table above in connection with the acquisition of Swift
Telecommunications, Inc. ("STI") by EasyLink Services pursuant to an agreement
and plan of merger dated January 31, 2001. STI acquired AT&T Corp.'s EasyLink
services business on January 31, 2001. In connection with the acquisition of STI
by EasyLink Services pursuant to a Pledge Agreement dated January 31, 2001, Mr.
Abi Zeid pledged to AT&T Corp. all of the shares of EasyLink Services Class A
common stock that he was entitled to receive under the agreement and plan of
merger to secure a $35 million note issued to AT&T Corp. by STI and assumed by
EasyLink Services as part of the purchase price for the EasyLink Services
business. Upon the occurrence of an event of default under the terms of the $35
million note or the pledge agreement, AT&T Corp. may exercise all of its
available rights and remedies under the agreement and applicable law. The
exercise of these rights and remedies after an event of default may result in
the transfer of the shares pledged.
11
MANAGEMENT
Executive Officers
The following table identifies the current executive officers of
EasyLink Services and their ages as of February 28, 2001:
Name Age Position
---- --- --------
Gerald Gorman........................... 45 Chairman, Director
Thomas Murawski......................... 55 Chief Executive Officer, Director
Bradley Schrader........................ 49 President
Debra McClister......................... 46 Executive Vice President, Chief Financial Officer
David Ambrosia.......................... 44 Executive Vice President, General Counsel
Gary Millin............................. 31 Chief Executive Officer, World.com, Inc., Director
For biographical summaries of Gerald Gorman, Gary Millin and Thomas
Murawski, see "Election of Directors."
Bradley Schrader--President
Mr. Schrader was named President of EasyLink Services in October, 2000.
He served as President of Mail.com Business Messaging Services, Inc., a
wholly-owned subsidiary of the Company from August 2000 to October, 2000. Prior
to joining EasyLink Services, Mr. Schrader consulted to Clayton, Dubilier and
Rice and served as President - eCommerce at US Office Products, Inc. from 1999
to 2000. Before joining US Office Products, Inc., Mr. Schrader was General
Manager - New Ventures and General Manager - Optical Devices Business at
AlliedSignal from 1996 to 1999. Mr. Schrader also held senior management
positions at TRW, Inc. from 1990 to 1996, Corning, Inc. from 1986 to 1990 and
The Boston Consulting Group from 1980 to 1985. Mr. Schrader holds an M.B.A. from
Harvard Business School and several undergraduate and graduate degrees in
engineering from MIT.
Debra McClister--Executive Vice President and Chief Financial Officer
Ms. McClister has served as Executive Vice President and Chief
Financial Officer of EasyLink Services since July 1998. Prior to joining
EasyLink Services, Ms. McClister held a variety of executive positions at
Philips Media, and most recently served as Chief Operating Officer of Philips
Media Software from 1996 to 1997. She was the Senior Vice President and Chief
Financial Officer for Philips Media, North America from 1995 to 1996, Corporate
Vice President and Controller for Philips Electronics, North America from 1988
to 1995 and she held various positions at Philips Electronics from 1984 to 1988.
Ms. McClister also worked in financial management for Hitachi America from 1981
to 1984. Ms. McClister received her B.S. in Commerce from Rider University and
is a Certified Public Accountant.
David Ambrosia--Executive Vice President and General Counsel
Mr. Ambrosia joined EasyLink Services as Executive Vice President and
General Counsel in May 1999. Prior to joining EasyLink Services, Mr. Ambrosia
was engaged in the private practice of law in the field of corporate law with an
emphasis on securities offerings and mergers and acquisitions. From January 1990
through June 1999, he was a partner at Winthrop, Stimson, Putnam & Roberts. From
September 1982 until December 1989, he was an associate at Winthrop, Stimson,
Putnam & Roberts. Mr. Ambrosia received his B.S. from the School of Industrial
and Labor Relations at Cornell University, his M.B.A. from the Johnson Graduate
School of Management at Cornell University and his J.D. from the Cornell Law
School.
Executive Compensation
The following table presents certain summary information concerning the
compensation awarded to, earned by, or paid for services rendered to EasyLink
Services in all capacities during the fiscal year ended December 31, 2000, by
each person who served as Chief Executive Officer of EasyLink Services during
2000, each of the four other most highly compensated executive officers whose
salary and bonus exceeded $100,000 in 2000 and two additional executive officers
12
who would have been among such four most highly compensated executives but for
the fact that they were not executive officers at the end of 2000 (collectively,
the "Named Executive Officers"). No other executive who would otherwise have
been included in this table on the basis of salary and bonus earned for 2000 has
resigned or otherwise terminated employment during 2000.
Summary Compensation Table
Long-Term
Compensation
Awards
Securities Securities Securities
Underlying Underlying Underlying
Options to Options to Options to
purchase purchase purchase
EasyLink Asia.com, Inc. India.com, Inc.
Annual Compensation Services Class A Class A Class A
-------------------
Name and Principal Position Year Salary Bonus Common Stock (1) Common Stock Common Stock
--------------------------- ---- ------ ----- ---------------- ------------- ------------
Gerald Gorman...........................2000 $ 200,000 -- -- 100,000 100,000
Chairman(2) 1999 200,000 -- 5,360 -- --
1998 200,000 -- 23,720 -- --
Thomas Murawski.........................2000 236,378(3) -- 826,930 100,000 100,000
Chief Executive Officer(4) 1999 -- -- -- -- --
1998 -- -- -- -- --
Debra McClister.........................2000 185,792 -- 427,673 100,000 100,000
Executive Vice President and 1999 180,000 -- 10,000 -- --
Chief Financial Officer 1998 37,461(5) -- 340,573 -- --
David Ambrosia..........................2000 185,192 -- 362,060 100,000 100,000
Executive Vice President and 1999 90,000(6) -- 254,000 -- --
General Counsel 1998 -- -- -- -- --
Gary Millin.............................2000 144,806 -- 35,732 350,000 350,000
Chief Executive Officer 1999 132,000 11,500 1,725 -- --
World.com, Inc.(7) 1998 130,000 -- 29,267 -- --
Lon Otremba.............................2000 184,614 -- 5,110 100,000 100,000
Former Vice Chairman(8) 1999 200,000 -- 5,400 -- --
1998 180,000 -- 420,107 -- --
Samuel Kline............................2000 174,260 -- 1,500,000 50,000 50,000
Former Chief Operating 1999 -- -- -- -- --
Officer(9) 1998 -- -- -- -- --
(1) Includes (i) annual bonus compensation earned for the year ended December
31, 1999, and foregone at the election of the Named Executive officers and
instead paid in the form of stock options as follows: Mr. Gorman, 5,360
options; Ms. McClister, 8,000 options; Mr. Ambrosia, 4,000 options; Mr.
Millin, 1,725 options and Mr. Otremba, 5,400 options; (ii) annual bonus
compensation earned for the year ended December 31, 1998, and foregone at
the election of the Named Executive officers and instead paid in the form
of stock options as follows: Mr. Gorman, 19,920 options; Ms. McClister,
10,573 options; Mr. Millin, 20,267 options and Mr. Otremba, 15,932
options. The shares underlying options granted in 2000 include options
issued in one or more repricing transactions. In each repricing
transaction, an equal amount of outstanding options was cancelled. See
"Option Grants in Fiscal Year" below and related footnotes. Also excludes
options held by Mr. Murawski to purchase 269,008 shares existing prior to
the acquisition of NetMoves Corporation and assumed by EasyLink Services in
the acquisition.
(2) Also served as Chief Executive Officer until October 26, 2000.
(3) Salary did not commence until February 8, 2000.
(4) Served as Chief Executive Officer of Mail.com Business Messaging Services,
Inc. from February 8, 2000 until October 26, 2000.
(5) Salary did not commence until October 19, 1998.
(6) Salary did not commence until May 19, 1999.
(7) Served as President until March 28, 2000.
(8) Served as Chief Operating Officer until March 28, 2000, President from
March 28, 2000 until October 26, 2000 and Vice Chairman from October 26,
2000 until November 7, 2000. All of Mr. Otremba's options to purchase
shares of Class A common stock of Asia.com, Inc. and India.com, Inc. were
cancelled upon termination of his employment relationship with EasyLink
Services.
(9) Served as Chief Operating Officer from April 4, 2000 until October 26,
2000. All of Mr. Kline's options to purchase shares of Class A common stock
of Asia.com, Inc. and India.com, Inc. were cancelled upon termination of
his employment relationship with EasyLink Services.
13
Option Grants in Fiscal Year
The following table provides certain information regarding stock
options granted to the Named Executive Officers during the year ended December
31, 2000.
Individual Grants
Percent of
Total Potential Realizable
Number of Options Value at Assumed
Securities Granted to Annual Rates of Stock
Underlying Employees in Exercise Price Appreciation for
Options Fiscal Year Price per Expiration Option Terms(2)
Granted(#)(1) (%) Share Date 5% 10%
------------- --- ----- ---- -- ---
Gerald Gorman 5,360 0.04% $ 16.13 03/12/2010 $ 54,391.04 $ 137,848.44
100,000(4) 4.05 1.30 05/30/2010 81,784.61 207,274.58
100,000(5) 3.87 .59 05/30/2010 37,117.63 94,070.77
Thomas Murawski(3) 8,563 0.06 1.6875 04/18/2006 4,382.20 9,792.37
9,633 0.06 1.6875 05/19/2007 6,081.68 13,987.50
38,533 0.26 1.6875 12/09/2007 26,797.96 62,571.55
38,533 0.26 1.6875 11/09/2008 31,016.94 74,274.07
19,266 0.13 1.6875 12/05/2009 18,085.10 44,623.76
231,201 1.55 17.50 Cancelled Not applicable Not applicable
125,000 0.84 5.53 Cancelled Not applicable Not applicable
231,201 1.55 1.6875 02/07/2010 222,247.31 551,107.40
125,000 0.84 1.6875 05/30/2010 125,154.30 313,063.77
100,000(4) 4.05 1.30 05/30/2010 81,784.61 207,274.58
100,000(5) 3.87 .59 05/30/2010 37,117.63 94,070.77
Debra McClister(6) 40,000 0.27 1.6875 09/13/2008 31,440.90 74,965.16
270,000 1.81 1.6875 06/27/2008 205,297.60 486,623.88
10,573 0.07 1.6875 02/28/2009 8,904.68 21,504.15
2,000 0.01 1.6875 03/17/2009 1,695.93 4,100.86
40,000 0.27 5.53 Cancelled Not applicable Not applicable
8,550 0.06 14.63 Cancelled Not applicable Not applicable
8,000 0.05 16.13 Cancelled Not applicable Not applicable
40,000 0.27 1.6875 05/30/2010 40,049.38 100,180.41
8,550 0.06 1.6875 02/28/2010 8,282.56 20,571.82
8,000 0.05 1.6875 03/12/2010 7,783.88 19,351.28
100,000(4) 4.05 1.30 05/30/2010 81,784.61 207,274.58
100,000(5) 3.87 .59 05/30/2010 37,117.63 94,070.77
David Ambrosia(7) 250,000 1.68 1.6875 05/18/2009 217,267.65 527,862.18
50,000 0.34 5.53 Cancelled Not applicable Not applicable
4,030 0.03 14.63 Cancelled Not applicable Not applicable
4,000 0.03 16.13 Cancelled Not applicable Not applicable
50,000 0.34 1.6875 05/30/2010 50,061.72 125,225.51
4,030 0.03 1.6875 02/28/2010 3,903.94 9,696.43
4,000 0.03 1.6875 03/12/2010 3,891.94 9,675.64
100,000(4) 4.05 1.30 05/30/2010 81,784.61 207,274.58
100,000(5) 3.87 .59 05/30/2010 37,117.63 94,070.77
Gary Millin(8) 9,000 0.06 1.6875 01/31/2008 6,411.60 15,029.97
20,267 0.14 1.6875 02/28/2009 17,069.07 41,220.52
2,370 0.02 14.63 Cancelled Not applicable Not applicable
1,725 0.01 16.13 Cancelled Not applicable Not applicable
2,370 0.02 1.6875 02/28/2010 2,295.87 5,702.36
1,725 0.01 1.6875 03/12/2010 1,678.40 4,172.62
350,000(4) 14.08 1.30 05/30/2010 286,246.13 725,461.03
350,000(5) 13.54 .59 05/30/2010 129,911.71 329,247.70
Lon Otremba(9) 5,110 0.03 14.63 02/28/2010 1,896.71 4,807.02
5,400 0.04 16.13 03/12/2010 2,004.35 5,079.82
100,000(4) 4.05 1.30 Cancelled Not applicable Not applicable
100,000(5) 3.87 .59 Cancelled Not applicable Not applicable
Samuel Kline(10) 500,000 3.36 12.4375 Cancelled Not applicable Not applicable
500,000 3.36 5.53 Cancelled Not applicable Not applicable
500,000 3.36 1.6875 04/03/2010 497,027.25 1,241,335.99
100,000(4) 2.03 1.30 Cancelled Not applicable Not applicable
100,000(5) 1.93 .59 Cancelled Not applicable Not applicable
14
Unless otherwise noted all options vest quarterly over four years.
(1) Unless otherwise indicated by footnote to the number of shares, all share
numbers in this column represent the number of shares issuable upon
exercise of options to purchase shares of EasyLink Services Class A common
stock.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted based upon the
fair market value on the date of grant. These assumptions are not intended
to forecast future appreciation of EasyLink Services' stock price. The
amounts reflected in the table may not necessarily be achieved.
(3) Of the 826,930 options reflected for Mr. Murawski in the aggregate, 470,729
were issued in a repricing transaction and concurrently 470,729 options
were cancelled. Of the 470,729 options repriced, 356,201 were originally
granted in 2000. Excludes options 269,008 shares existing prior to the
acquisition of NetMoves Corporation and assumed by EasyLink Services in the
acquisition.
(4) Represents the number of shares issuable upon the exercise of options to
purchase shares of Asia.com, Inc. Class A common stock.
(5) Represents the number of shares issuable upon the exercise of options to
purchase shares of India.com, Inc. Class A common stock.
(6) Of the 435,673 options reflected for Ms. McClister in the aggregate,
379,123 were issued in a repricing transaction and concurrently 379,123
options were cancelled. Of the 379,123 options repriced, 56,550 were
originally granted in 2000.
(7) Of the 366,060 options reflected for Mr. Ambrosia in the aggregate, 308,030
were issued in a repricing transaction and concurrently 308,030 options
were cancelled. Of the 308,030 options repriced, 58,030 were originally
granted in 2000.
(8) Of the 37,457 options reflected for Mr. Millin in the aggregate, 33,362
were issued in a repricing transaction and concurrently 33,362 options were
cancelled. Of the 33,362 options repriced, 4,095 were originally granted in
2000.
(9) All of Mr. Otremba's options to purchase shares of Class A common stock of
Asia.com, Inc. and India.com, Inc. were cancelled upon termination of his
employment relationship with EasyLink Services.
(10) Mr. Kline's 500,000 options issued on May 30, 2000 and November 14, 2000
were issued in a repricing transaction and concurrently 500,000 options
were cancelled on each date. All of Mr. Kline's options to purchase shares
of Class A common stock of Asia.com, Inc. and India.com, Inc. were
cancelled upon termination of his employment relationship with EasyLink
Services.
Stock Option Exercises and December 31, 2000 Stock Option Value Table
The following table sets forth certain information concerning stock
options exercised during 2000 by the Named Executive Officers and the number and
value of specified options held by those persons at December 31,2000.The values
of unexercised in-the-money stock options at December 31,2000 shown below are
presented pursuant to SEC rules. There is no assurance that the values of
unexercised in-the-money stock options reflected in this table will be realized.
Number of
Securities Underlying Value of Unexercised
Shares Unexercised Options At In-the-Money Options at
Acquired on Value December 31, 2000(2) December 31, 2000(3)
Name Exercise(#) Realized ($)(1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- --------------- ----------- ------------- ----------- -------------
Gerald Gorman 0 $ 0 543,495 8,085 $ 263,950 $ 0
0 0 0 100,000(4) 0 0
0 0 0 100,000(5) 0 0
Thomas Murawski 0 0 210,310 414,899 0 0
0 0 0 100,000(4) 0 0
0 0 0 100,000(5) 0 0
Debra McClister 20,000 178,750 191,890 187,233 0 0
0 0 0 100,000(4) 0 0
0 0 0 100,000(5) 0 0
David Ambrosia 0 0 127,000 181,030 0 0
0 0 0 100,000(4) 0 0
0 0 0 100,000(5) 0 0
Gary Millin 0 0 562,634 9,728 176,340 0
0 0 0 350,000(4) 0 0
0 0 0 350,000(5) 0 0
Lon Otremba 0 0 816,704 0 0 0
Samuel Kline 0 0 0 500,000 0 0
15
(1) Amounts disclosed in this column were calculated based on the difference
between the fair market value of the Company's Class A Common Stock on the
date of exercise and the exercise price of the options in accordance with
regulations promulgated under the Securities Exchange Act of 1934, as
amended, and do not reflect amounts actually received by the Named
Executive Officers.
(2) Unless otherwise indicated by footnote to the number of shares, all share
numbers in this column represent the number of shares issuable upon
exercise of options to purchase shares of EasyLink Services Class A common
stock.
(3) Value is based on the difference between the option exercise price and the
fair market value at December 31, 2000, the fiscal year-end ($0.72 per
share in the case of options to purchase EasyLink Services Class A common
stock and otherwise below the exercise price in the case of options to
purchase price of Asia.com, Inc. and India.com Class A common stock),
multiplied by the number of shares underlying the option.
(4) Represents the number of shares issuable upon the exercise of options to
purchase shares of Asia.com, Inc. Class A common stock.
(5) Represents the number of shares issuable upon the exercise of options to
purchase shares of India.com, Inc. Class A common stock.
Ten Year Option Repricings
The following table sets forth certain information concerning the repricings of
options held by the Named Executive Officers of the Company over the past ten
years:
Length of
Number of original
securities Market price Exercise option term
underlying of stock at price at time remaining at
options/SARs time of of repricing New date of
repriced or repricing or or amendment exercise repricing or
Name Date amended (#) amendment ($) ($) price ($) amendment
---- ---- ----------- ------------- --- --------- ---------
Thomas Murawski................ 11/14/2000 8,563 $ 1.6875 $ 9.35 $ 1.6875 5.6 years
Chief Executive Officer 11/14/2000 9,633 1.6875 3.90 1.6875 6.5 years
11/14/2000 38,533 1.6875 6.49 1.6875 7.2 years
11/14/2000 38,533 1.6875 8.4400 1.6875 8.0 years
11/14/2000 19,266 1.6875 11.1900 1.6875 9.1 years
11/14/2000 231,201 1.6875 17.5000 1.6875 9.8 years
11/14/2000 125,000 1.6875 5.5300 1.6875 9.5 years
Debra McClister................ 11/14/2000 40,000 1.6875 3.5000 1.6875 7.2 years
Executive Vice President and 11/14/2000 270,000 1.6875 3.5000 1.6875 7.4 years
Chief Financial Officer 11/14/2000 10,573 1.6875 5.0000 1.6875 8.7 years
11/14/2000 2,000 1.6875 5.0000 1.6875 8.6 years
11/14/2000 40,000 1.6875 5.5300 1.6875 9.5 years
11/14/2000 8,550 1.6875 14.6300 1.6875 9.7 years
11/14/2000 8,000 1.6875 16.1300 1.6875 9.7 years
David Ambrosia................. 11/14/2000 250,000 1.6875 7.0000 1.6875 8.5 years
Executive Vice President and 11/14/2000 50,000 1.6875 5.5300 1.6875 9.5 years
General Counsel 11/14/2000 4,030 1.6875 14.6300 1.6875 9.7 years
11/14/2000 4,000 1.6875 16.1300 1.6875 9.7 years
Gary Millin.................. 11/14/2000 9,000 1.6875 3.5000 1.6875 7.8 years
Chief Executive Officer, 11/14/2000 20,267 1.6875 5.0000 1.6875 8.7 years
World.com, Inc. 11/14/2000 2,370 1.6875 14.6300 1.6875 9.7 years
11/14/2000 1,725 1.6875 16.1300 1.6875 9.7 years
Samuel Kline................. 05/31/2000 500,000(1) 5.53 12.4375 5.53 9.9 years
Former Chief Operating Officer 11/14/2000 500,000 1.6875 5.53 1.6875 9.5 years
(1) These options have been cancelled in connection with the repricing
transaction on November 14, 2001.
16
Employment, Severance and Other Arrangements
EasyLink Services' current employment agreement with Gerald Gorman is
dated April 1, 1999. The agreement provides that Mr. Gorman is to receive a base
salary of $200,000 per year. Mr. Gorman's base salary and bonus amount are
adjustable on an annual basis at the sole discretion of the Compensation
Committee. Additionally, the agreement provides that after Mr. Gorman leaves the
employ of EasyLink Services, he will not work for a competitor during the two
year period following his employment or disclose any of its confidential
information.
EasyLink Services' current employment agreement with Thomas Murawski
became effective upon the consummation of the acquisition of NetMoves
Corporation on February 8, 2000. Under the agreement, Mr. Murawski is entitled
to receive an annual base salary of $250,000. Under a management continuity
agreement assumed by EasyLink Services in the acquisition, Mr. Murawski is
entitled to a severance payment and continued health benefits if his employment
is terminated under specified circumstances within 18 months after February 8,
2000. The severance payment equals 18 months base salary from February 8, 2000
less the actual salary received for the period after February 8, 2000. Under a
severance agreement, if Mr. Murawski's employment is terminated under specified
circumstances within the 24 month period after February 8, 2000, he is entitled
to the acceleration of all of his options in existence before the consummation
of the acquisition on February 8, 2000 that vest within 2 years after the
termination. The management and continuity agreement and severance agreement
terminate 18 months and 24 months, respectively, after February 8, 2000. Mr.
Murawski is also subject to confidentiality and non-competition covenants
applicable to the other EasyLink Services executives.
EasyLink Services' current employment agreement with Debra McClister is
dated April 1, 1999. The agreement provides that Ms. McClister will receive an
annual base salary of $180,000 which will be reviewed each year, and an annual
bonus between 15%-45% of base annual salary. Ms. McClister's employment
agreement with EasyLink Services, dated June 29, 1998, provides that in the
event that EasyLink Services is sold to a third party, Ms. McClister's options
will be converted into options to acquire the third party's stock, with an
equivalent value and the same remaining vesting period as her EasyLink Services
options. In the event that Ms. McClister's position at EasyLink Services is
eliminated, replaced or taken over by the third party in connection with an
acquisition, merger or transfer of a majority interest, EasyLink Services will
attempt to offer Ms. McClister a comparable senior management position with the
same compensation, commuting and travel requirements. In the event that such a
position is not offered to Ms. McClister, she will be entitled to a severance
package comprised of (a) six months base salary, (b) annual bonus pro rated for
the portion of the year worked and (c) immediate vesting of 50% of her remaining
unvested options. Additionally, her current employment agreement provides that
after Ms. McClister leaves the employ of EasyLink Services, she will not work
for a competitor during the two year period following her employment or disclose
any confidential information.
EasyLink Services' employment agreement with David Ambrosia is dated
May 19, 1999. The agreement provides that Mr. Ambrosia will receive an annual
base salary of $180,000 which will be reviewed each year, and an annual bonus
between 15%-30% of base annual salary. If an acquisition, merger, consolidation
or transfer of control occurs, Mr. Ambrosia is entitled to severance and other
arrangements, including rights similar to those contained in Ms. McClister's
agreement. Additionally, Mr. Ambrosia's employment agreement provides that after
he leaves our employ, he will not work for a competitor during the two year
period following his employment or disclose any confidential information.
EasyLink Services' employment agreement with Gary Millin is dated April
1, 1999. Mr. Millin receives an annual base salary of $150,000. Mr. Millin's
base salary and bonus amount are adjustable in the sole discretion of the Chief
Executive Officer of EasyLink Services and the Compensation Committee.
Additionally, the agreement provides that after Mr. Millin leaves the employ of
EasyLink Services, he will not work for a competitor during the two year period
following his employment or disclose any of its confidential information.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
EasyLink Services' Compensation Committee is responsible for
administering the Company's executive compensation policies and administers the
Company's stock option plans.
17
Compensation Philosophy
Compensation to executive officers is designed to attract and retain
outstanding executive talent, to motivate and reward their performance in
support of our strategic, financial and operating objectives. The Company has
designed compensation programs to create a direct relationship between the level
of compensation paid to executives and the Company's current and long-term level
of performance. The components of these programs are base salary, short-term
compensation in annual bonuses and long-term incentive compensation in the form
of stock options.
Base Salaries
The base salaries for our executive officers are determined annually by
reviewing the competitive pay practices of companies engaged in businesses
similar to ours. The salaries were established to attract and retain the
leadership and skill necessary to build long-term shareholder value.
Short-Term Annual Bonuses
Annual bonuses for executive officers are intended to provide an
incentive for achieving short-term financial and performance objectives. Bonus
targets were established based on predetermined annual goals.
Long-Term Incentive Compensation
The EasyLink Services stock option plans provide long-term incentives
for executive officers and other key employees. The Compensation Committee
believes that a significant portion of executive compensation should create a
direct link between executive compensation and increases in stockholder value.
Stock options are granted at fair market value and vest in installments,
generally over four years. In selecting recipients for option grants, the
Committee considers the executive's current contribution to Company performance,
the anticipated contribution to meeting the Company's long-term strategic
performance goals, and industry practices and norms. Long term incentives
granted in prior years and existing levels of stock ownership are also taken
into consideration.
Chief Executive Officer Compensation
Mr. Murawski's base salary, annual incentive award and long-term
incentive compensation are determined by the Committee based upon the same
factors as those employed by the Committee for executive officers generally. Mr.
Murawski's current annual base salary is $250,000.
The Compensation Committee will evaluate the Company's compensation
policies on an ongoing basis to determine whether they enable the Company to
attract, retain and motivate key personnel. To meet these objectives, the
Company may from time to time increase salaries, award additional stock options
or provide other short-and long-term incentive compensation to executive
officers, including Mr. Gorman.
Under Section 162(m) of the Internal Revenue Code of 1986, compensation
payments in excess of $1 million to the Chief Executive Officer or the other
four most highly compensated executive officers are subject to a limitation on
deductibility for the Company. Certain performance-based compensation is not
subject to the limitation on deductibility. The Compensation Committee does not
expect cash compensation in 2001 to its Chief Executive Officer or any other
executive officer to be in excess of $1 million. The Company intends to maintain
qualification of its 1999 and 2000 Stock Option Plans for the performance-based
exception to the $1 million limitation on deductibility of compensation
payments.
Report on Repricing of Options
During the second quarter of 2000, there was a significant decrease in
the market price of the Company's Class A Common Stock. As a result of the
decline, a significant portion of the Company's stock options had exercise
prices substantially above the market price. To address this situation, the
Board of Directors decided to grant additional options to employees at the then
18
current market price. In lieu of granting additional options to Samuel Kline,
our Chief Operating Officer, the Board of Directors repriced his options to
current market price. On April 4, 2000, the date his initial employment with
EasyLink Services commenced, Mr. Kline received a grant of 500,000 options with
an exercise price equal to $14.4375 per share, the fair market value on the date
of grant. On May 31, 2000, after the market price declined, the exercise price
of Mr. Kline's options was repriced to $5.53, the fair market value on the date
of the repricing.
During the latter part of the third and early part of the fourth
quarters of 2000, the Company experienced another significant decrease in the
market price of its Class A Common Stock, which resulted in many of the
Company's outstanding options having exercise prices substantially in excess of
the market price. At the same time, the Company announced a strategy to focus
exclusively on outsourced messaging services for businesses and a restructuring
plan that resulted in significant headcount reductions. In order to motivate and
retain continuing employees, the Board of Directors decided to offer all
employees (other than Gerald Gorman) the ability to reprice all or a portion of
their options that had an exercise price above $3.00 to a price of $1.6875 per
share, the fair market value on the date of the repricing. Options to purchase
an aggregate of 6,327,986 shares (including the 500,000 options repriced on May
31) were repriced. The repriced options will vest at the same rate that they
would have vested under the original terms except that they cannot be exercised
prior to November 15, 2001. If an employee's services are terminated voluntarily
or for cause prior to November 15, 2001, the employee's repriced options will be
governed by their original terms and the employee will lose the benefit of the
repricing.
For additional information regarding repriced options held by executive
officers, see "Summary Compensation Table" and the footnotes thereto and "Ten
Year Option Repricings" above.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
William Donaldson
Stephen Ketchum
AUDIT COMMITTEE REPORT
The following is the report of the Audit Committee of the Board of
Directors. The Audit Committee has reviewed and discussed the audited financial
statements of the Company for the fiscal year ended December 31, 2000 with
management. In addition, the Audit Committee has discussed with KPMG LLP, the
Company's independent auditors, the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communications with Audit Committee).
The audit committee also has received the written disclosures and the letter
from KPMG LLP as required by the Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) and the Audit Committee has
discussed the independence of KPMG LLP with that firm.
Based on the Audit Committee's review of the matters noted above and
its discussions with the Company's independent auditors and the Company's
management, the Audit Committee recommended to the Board of Directors that the
financial statements be included in the Company's Annual Report on Form 10-K.
This report has been provided by William Donaldson, Stephen Ketchum and Gary
Millin, the members of the Audit Committee.
SUBMITTED BY THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
William Donaldson
Stephen Duff
Gary Millin
TRANSACTIONS WITH MANAGEMENT AND DIRECTORS
Loan to Mr. Murawski
In 1998, NetMoves Corporation, now named Mail.com Business Messaging
Services, Inc. and a wholly-owned subsidiary of EasyLink Services, granted a
19
loan to Thomas Murawski, its President and Chief Executive Officer, in the
amount of $199,999. The loan bears interest at the rate of 5% per annum and is
payable in November, 2003.
Federal Partners, L.P. Financing
On January 8, 2001, we issued $5,000,000 principal amount of 10% Senior
Convertible Notes due January 8, 2006 to Federal Partners, L.P. On March 20,
2001, we issued to Federal Partners, L.P. 3,000,000 shares of our Class A common
stock for a purchase price of $3,000,000, and we committed to issue to Federal
Partners an additional 1,000,000 shares of Class A common stock if the closing
price of our Class A common stock on the principal securities exchange on which
they are traded is not at or above $10 per share for 5 consecutive days on or
before December 31, 2001. In connection with the issuance of the senior
convertible notes on January 8, 2001, we granted to Federal Partners, L.P. the
right to designate one director to our Board of Directors so long as Federal
Partners, L.P. and other persons associated with it owns at least 3,000,000
shares of Class A common stock, including shares issuable upon conversion of or
in payment of interest on the senior convertible notes. Federal Partners, L.P.
designated Stephen Duff and he was appointed to our Board on January 8, 2001.
Mr. Duff is a Senior Investment Manager for The Clark Estates, Inc. and is
Treasurer and a limited partner of Federal Partners, L.P. The Clark Estates,
Inc. provides management and administrative services for Federal Partners, L.P.
Through his limited partnership interest in Federal Partners, L.P., Mr. Duff has
an indirect interest in $10,000 principal amount of the senior convertible notes
issued on January 8, 2001 and in 6,000 of the shares of Class A common stock
issued to Federal Partners, L.P. on March 20, 2001.
Acquisition of Swift Telecommunications, Inc.
We acquired Swift Telecommunications, Inc. on February 23, 2001. George
Abi Zeid was the sole shareholder of Swift Telecommunications, Inc. In
connection with the acquisition, Mr. Abi Zeid was elected to the Board of
Directors of the Company and was appointed President - International Operations.
EasyLink Services paid $835,294 in cash, issued 18,766,176 shares of Class A
common stock and issued a promissory note in the original principal amount of
approximately $9.2 million to Mr. Abi Zeid in payment of the purchase price for
the acquisition payable at the closing. EasyLink Services will also pay
additional contingent consideration to Mr. Abi Zeid equal to the amount of the
net proceeds, after satisfaction of certain liabilities of STI and its
subsidiaries, from the sale or liquidation of the assets of one of STI's
subsidiaries. The $9.2 million note will be payable in four equal semi-annual
installments over two years and may be prepaid in whole or in part at any time
and from time to time without payment of premium or penalty. The note will be
non-interest bearing unless EasyLink Services fails to make a required payment
within 30 days after the due date therefore. Thereafter, the note will bear
interest at the rate of 10% per annum. The note also contains certain customary
events of default.
In connection with the acquisition by STI on January 31, 2001of the
EasyLink services business from AT&T Corp., Mr. Abi Zeid pledged to AT&T Corp.
under a Pledge Agreement dated January 31, 2001 all of the shares of EasyLink
Services Class A common stock that he was entitled to receive pursuant to the
acquisition to secure a $35 million note issued to AT&T Corp. by STI and assumed
by EasyLink Services as part of the purchase price for the EasyLink Services
business.
As part of the transaction with STI, EasyLink Services also agreed to
acquire Telecom International, Inc. (which is an affiliate of STI and conducts
business under the name "AlphaTel") and the 25% minority interests in two STI
subsidiaries for $164,705 in cash, promissory notes in the aggregate principal
amount of approximately $1.8 million and 3.7 million shares of EasyLink Services
Class A common stock. These additional transactions are subject to receipt of
regulatory approvals and other customary conditions.
Fax-2 Acquisition
Under an Exclusivity and Royalty Agreement among Daniel Kuehler, Kurt
Winter and EasyLink Services dated May 30, 2000, EasyLink Services acquired from
Messrs. Kuehler and Winter the rights to develop, market and deploy the Fax-2
business concept. Fax-2 allows users to send faxes to any email address. Mr.
Kuehler is the son of Jack Kuehler, a director of EasyLink Services. Each of
Messrs. Kuehler and Winter received 10,000 shares of EasyLink Services Class A
common stock upon execution of the agreement and are entitled to a 10% royalty
20
up to $100,000 on all revenue generated by Fax-2 and thereafter a 1% royalty on
such revenue so long as specified performance and operating conditions are
maintained. Mr. Kuehler also entered into an employment agreement which entitled
him to receive full compensation and benefits through June 15, 2001 if his
employment is terminated for any reason other than cause before then. Mr.
Kuehler also received on June 15, 2000 a grant of 30,000 options at an exercise
equal to fair market value at the time of grant. These options vest over four
years.
STOCK PERFORMANCE GRAPH
Set forth below is a graph comparing the percentage change in the
cumulative stockholder return on our Class A Common Stock from June 18, 1999
(the date of the initial public offering) to the last day of our last completed
fiscal year. The cumulative stockholder return is measured by dividing:
o the sum of (A) the cumulative amount of dividends for the
measurement period, assuming dividend reinvestment, and (B) the
excess of our share price as of the end of the measurement period
over the price at the beginning of the measurement period, by
o the share price at the beginning of the measurement period.
The cumulative total return on our Class A Common Stock is compared with the
Nasdaq Stock Market (U.S.) Index and the Chase H&Q Internet Index.
CUMULATIVE TOTAL RETURN* FROM JUNE 18, 1999 TO DECEMBER 31, 2000
OF EASYLINK SERVICES CLASS A COMMON STOCK,
THE NASDAQ STOCK MARKET (U.S.) INDEX AND THE CHASE H&Q INTERNET INDEX
[STOCK PEFORMANCE GRAPH]
EasyLink Services Corporation NASDAQ Market Index Chase H&Q Internet Index
6/18/99 100 100 100
12/31/99 267.86 159.18 223.23
12/31/00 10.27 95.78 85.89
------------
* Assumes $100 invested on June 18, 1999 in stock or index, including
reinvestment of dividends. Fiscal year ending December 31, 2000.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of EasyLink Services which are intended to be
presented by such stockholders at EasyLink Services' 2001 Annual Meeting of
Stockholders must be received by EasyLink Services no later than November 30,
2001 to be included in the proxy statement and form of proxy relating to that
meeting. The deadline for submitting a stockholder's proposal that will not be
included in the proxy statement and form of proxy for EasyLink Services' 2002
Annual Meeting of Stockholders but nonetheless will be eligible for
consideration is March 25, 2002.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires EasyLink Services'
directors, executive officers and persons who own more than 10% of EasyLink
Services' Class A Common Stock (collectively, "Reporting Persons") to file with
the Securities and Exchange Commission ("SEC") initial reports of ownership and
changes in ownership of EasyLink Services' Class A Common Stock. Reporting
Persons are required by SEC regulations to furnish EasyLink Services with copies
of all Section 16(a) reports they file. To EasyLink Services' knowledge, based
solely on its review of the copies of such reports received or written
representations from certain Reporting Persons that no other reports were
required, EasyLink Services believes that during 2000 all Reporting Persons
21
complied with all applicable filing requirements except that one Form 4 relating
to a single grant of options was inadvertently filed late on behalf of Mr. Aaron
Fessler, former President of our subsidiary The Allegro Group, Inc. and one Form
4 relating to a single grant of options to Mr. Bradley Schrader was
inadvertently filed late on behalf of Mr. Schrader.
FORM 10-K
Shareholders entitled to vote at the Annual Meeting may obtain for no
charge a copy of the Company's Annual Report on Form 10-K, without exhibits, for
the year ended December 31, 2000, upon written request to Investor Relations,
EasyLink Services Corporation, 399 Thornall Street, Edison, NJ 08837.
OTHER MATTERS
The Board knows of no other business that will be presented to the
Annual Meeting. If any other business is properly brought before the Annual
Meeting, proxies in the enclosed form will be voted in respect thereof as the
proxy holders deem advisable.
It is important that the proxies be returned promptly and that your
shares be represented. Stockholders are urged to mark, date, execute and
promptly return the accompanying proxy card in the enclosed envelope.
By Order of the Board of Directors,
DAVID W. AMBROSIA
Executive Vice President, General
Counsel and Secretary
22
APPENDIX A
AUDIT COMMITTEE CHARTER
Organization
There shall be a committee of the board of directors to be known as the audit
committee. The audit committee shall be composed of directors who are
independent of the management of the corporation and are free of any
relationship that, in the opinion of the board of directors, would interfere
with their exercise of independent judgment as a committee member.
Statement of Policy
The audit committee shall provide assistance to the corporate directors in
fulfilling their responsibility to the shareholders, potential shareholders and
investment community relating to corporate accounting, reporting practices of
the corporation, and the quality and integrity of the financial reports of the
corporation. In so doing, it is the responsibility of the audit committee to
maintain free and open means of communication between the directors, the
independent auditors, the internal auditors, and the financial management of the
corporation.
Responsibilities
In carrying out its responsibilities, the audit committee believes its policies
and procedures should remain flexible, in order to best react to changing
conditions and to ensure to the directors and shareholders that the corporate
accounting and reporting practices of the corporation are in accordance with all
requirements and are of the highest quality.
In carrying out these responsibilities, the audit committee will:
o Review and recommend to the directors the independent auditors to be
selected to audit the financial statements of the corporation and its
divisions and subsidiaries
o Confirm and assure the independence of the independent auditors, including
a review of management consulting services and related fees provided by the
independent auditors, and the independent auditors' accountability to the
board and the audit committee.
o Meet with the independent auditors and financial management of the
corporation to review the scope of the proposed audit for the current year
and the audit procedures to be utilized, and at the conclusion thereof
review such audit, including any comments or recommendations of the
independent auditors.
o Review with the independent auditors, the company's internal auditor (when
the function is established), and financial and accounting personnel, the
adequacy and effectiveness of the accounting and financial controls of the
corporation, and elicit any recommendations for the improvement of such
internal control procedures or particular areas where new or more detailed
controls or procedures are desirable. Particular emphasis should be given
to the adequacy of such internal controls to expose any payments,
transactions, or procedures that might be deemed illegal or otherwise
improper. Further, the committee periodically should review company policy
statements to determine their adherence to the code of conduct.
o Review the financial statements contained in the annual report to
shareholders with management and the independent auditors to determine that
the independent auditors are satisfied with the disclosure and content of
the financial statements to be presented to the shareholders. Any changes
in accounting principles should be reviewed.
o Provide sufficient opportunity for the internal and independent auditors to
meet with the members of the audit committee without members of management
present. Among the items to be discussed in these meetings are the
independent auditors' evaluation of the corporation's financial,
accounting, and auditing personnel, and the cooperation that the
independent auditors received during the course of the audit.
o Submit the minutes of all meetings of the audit committee to, or discuss
the matters discussed at each committee meeting with, the board of
directors.
A-1
Investigate any matter brought to its attention within the scope of its duties,
with the power to retain outside counsel for this purpose if, in its judgment,
that is appropriate.
A-2
APPENDIX B
EASYLINK SERVICES CORPORATION
2001 STOCK OPTION PLAN
1. Purpose.
The purpose of the EasyLink Services Corporation 2001 Stock Option Plan
(the "Plan") is to provide for the grant of stock options as an incentive to
selected directors, officers, employees and consultants of EasyLink Services
Corporation (the "Company") and any Subsidiary of the Company, to acquire a
proprietary interest in the Company, to continue as directors, officers,
employees and consultants and to increase their efforts on behalf of the
Company.
2. Definitions.
As used in the Plan, the following terms shall have the meanings set
forth below:
(a) "Board " shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any regulations promulgated thereunder.
(c) "Committee" shall mean the committee described in Section 3.
(d) "Company" shall mean EasyLink Services Corporation, a
Delaware corporation, and any successor corporation.
(e) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(f) "Fair Market Value" means, as of any date, the value of Stock
or other property determined as follows:
(i) If the Stock is listed on any established stock exchange
or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing
sales price for such Stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for the last
market trading day prior to the time of determination, as
reported in The Wall Street Journal or such other source as the
Committee deems reliable;
(ii) If the Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked
prices for the Stock for the last market trading day prior to the
time of determination; or
(iii) In the absence of an established market for the Stock,
or if Fair Market Value is in reference to property other than
Stock, the Fair Market Value thereof shall be determined in good
faith by the Committee.
(g) "Grantee" shall mean an officer, director, employee or
consultant of the Company to whom an Option has been granted under the
terms of the Plan.
(h) "Incentive Stock Option" shall mean an option granted under
the Plan that is intended to meet the requirements of Section 422 of
the Code or any successor provision.
(i) "Nonemployee Director" shall mean a director of the Company
who is a "nonemployee director" within the meaning of Rule 16b-3.
B-1
(j) "Non-Qualified Stock Option" shall mean an option granted
under the Plan that is not intended to be an Incentive Stock Option.
(k) "Option" shall mean an Incentive Stock Option or a
Non-Qualified Stock Option.
(l) "Option Agreement" shall mean a written agreement between the
Company and a Grantee as described in Section 6.
(m) "Outside Director" shall mean a director of the Company who
is an "outside director" within the meaning of Section 162(m) of the
Code.
(n) "Plan" shall mean this EasyLink Services Corporation 2001
Stock Option Plan, as amended from time to time.
(o) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act
of 1934, as amended, or any successor rule or regulation.
(p) "Stock" shall mean shares of Class A Common Stock, $.01 par
value, of the Company or such other securities or property as may
become subject to Options pursuant to an adjustment made under Section
8.
(q) "Subsidiary" shall mean any corporation (other than the
Company) in an unbroken chain of corporations beginning with the
Company if each of the corporations other than the last corporation in
the unbroken chain owns more than 50% of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
3. Administration.
(a) The Plan shall be administered by a committee (the
"Committee") designated by the Board. The Committee shall consist of
at least two directors and may consist of the entire Board; provided,
however, that (i) if the Committee consists of less than the entire
Board, each member shall be a Nonemployee Director and (ii) to the
extent necessary for an Option intended to qualify as
performance-based compensation under Section 162(m) of the Code to so
qualify, each member of the Committee shall be an Outside Director.
(b) The Committee shall have plenary authority in its discretion,
subject only to the express provisions of the Plan and, in reference
to the Incentive Stock Options, to Code Section 422:
(i) to select the Grantees, the number of shares of Stock
subject to each Option and terms of the Option granted to each
Grantee (including without limitation the exercise price, the
period during which such Option can be exercised and any
restrictions on exercise), provided that, in making its
determination, the Committee shall consider the position and
responsibilities of the individual, the nature and value to the
Company of his or her services and accomplishments, the
individual's present and potential contribution to the success of
the Company and any other factors that the Committee may deem
relevant;
(ii) to determine the dates of the Option grants;
(iii) to prescribe the form of the Option Agreements;
(iv) to adopt, amend and rescind rules and regulations for
the administration of the Plan and for its own acts and
proceedings;
(v) to decide all questions and settle all controversies and
disputes of general applicability that may arise in connection
with the Plan; and
B-2
(vi) to modify or amend any outstanding Option as provided
in Section 7(h).
All decisions, determinations and interpretations with respect to the foregoing
matters shall be made by the Committee and shall be final and binding upon all
persons.
(c) Delegation. The Committee may delegate authority to an officer of
the Company to grant Options to Grantees who are not subject to the short-swing
profit rules of Section 16 of the Exchange Act and are not "covered employees"
whose compensation is subject to the deduction limit of Section 162(m) of the
Code, at the discretion of such appointed officer, provided, however, that the
appointed officer shall have no authority to grant Options in units greater than
80,000 without approval of the Committee.
(d) Exculpation. No member of the Board or Committee shall be
personally liable for monetary damages for any action taken or any failure to
take any action in connection with the administration of the Plan or the
granting of Options under it unless such action or failure to take action
constitutes self-dealing, willful misconduct or recklessness; provided, however,
that the provisions of this subsection shall not apply to the responsibility or
liability of a director pursuant to any criminal statute or to the liability of
a director for the payment of taxes pursuant to local, state or federal law.
(e) Indemnification. Each member of the Board or Committee shall be
entitled without further act on his part or her part to indemnity from the
Company to the fullest extent provided by applicable law and the Company's
Certificate of Incorporation or Bylaws in connection with or arising out of any
action, suit or proceeding with respect to the administration of the Plan or the
granting of Options under it in which he or she may be involved by reason of
being or having been a member of the Board or Committee at the time of the
action, suit or proceeding.
4. Effectiveness and Termination of the Plan.
The Plan shall become effective as of May 24, 2001, provided that the
Plan is approved by the stockholders of the Company within one year of its
adoption. Any Option outstanding at the time of termination of the Plan shall
remain in effect in accordance with its terms and conditions and those of the
Plan. The Plan shall terminate on the earliest of:
(a) May 24, 2011; or
(b) the date when all shares of Stock reserved for issuance under
Section 5 of the Plan shall have been acquired through exercise of
Options granted under the Plan; or
(c) such earlier date as the Board may determine.
5. The Stock.
The aggregate number of shares of Stock issuable under the Plan shall
be two million five hundred thousand shares (2,500,000) or the number and kinds
of shares of capital stock or other securities substituted for the Stock as
provided in Section 8. The aggregate number of shares of Stock issuable under
the Plan may be set aside out of the authorized but unissued shares of Stock not
reserved for any other purpose, or out of shares of Stock held in or acquired
for the treasury of the Company. All shares of Stock subject to an Option that
terminates unexercised for any reason may thereafter be subjected to a new
Option under the Plan.
B-3
6. Option Agreement.
Each Grantee shall enter into an Option Agreement with the Company
setting forth the terms and conditions of the Option issued to the Grantee,
consistent with the Plan. The form of Option Agreement may be established at any
time or from time to time by the Committee. No Grantee shall have rights in any
Option unless and until an Option Agreement is entered into with the Company.
7. Terms and Conditions of Options.
Options may be granted by the Committee at any time and from time to
time prior to the termination of the Plan. Except as hereinafter provided,
Options granted under the Plan shall be subject to the following terms and
conditions:
(a) Grantees. The Grantees shall be those employees of the
Company or its Subsidiaries (including officers and directors), and
those consultants to the Company or its Subsidiaries, selected by the
Committee. No Incentive Stock Options shall be granted to (i) any
person owning Stock or other capital stock in the Company possessing
more than 10% of the total combined voting power of all classes of
capital stock of the Company, unless such Incentive Stock Option meets
the requirements of 7(b) and 7(e); or (ii) any director who is not an
officer. The maximum number of shares of Stock which may be issued
pursuant to Options granted to a Grantee within a calendar year is
1,000,000.
(b) Price. The exercise price of each Option shall be
determined by the Committee at the time of grant, and in the case of
an Incentive Stock Option shall be no less than the Fair Market Value
of the Stock, without regard to any restriction, at the time the
Incentive Stock Option is granted. If a Grantee owns more than 10% of
the total combined voting power of all classes of stock of the Company
or any Subsidiary, the exercise price of any Incentive Stock Option
granted to such individual shall be 110% of the Fair Market Value of
the Stock.
(c) Payment for Stock. The exercise price of an Option shall be
paid in full at the time of the exercise (i) in cash, or (ii) by
certified check payable to the Company, or (iii) by other mode of
payment (e.g., stock) as the Committee may approve.
(d) Limitation. Notwithstanding any provision of the Plan to
the contrary, an Option shall not be treated as an Incentive Stock
Option to the extent the aggregate fair market value (determined as of
the time the Incentive Stock Option is granted) of Stock for which
Incentive Stock Options are exercisable for the first time by a
Grantee during any calendar year exceeds $100,000.
(e) Duration and Exercise of Options. Options may be exercised
for terms of up to but not exceeding ten years from the date of grant.
Subject to the foregoing, Options shall be exercisable at the times
and in the amounts (up to the full amount thereof) determined by the
Committee at the time of grant. If an Option granted under the Plan is
exercisable in installments the Committee shall determine what events,
if any, will make it subject to acceleration. The term of an Incentive
Stock Option granted to an employee who owns more than 10% of the
combined voting power of all classes of stock of the Company shall not
exceed 5 years.
(f) Termination of Services. Upon the termination of a
Grantee's services for the Company or its Subsidiaries for any reason,
Options held by the Grantee may only be exercised to the extent and
during the period, if any, set forth in the Option Agreement.
(g) Transferability of Option. No Option shall be transferable
except by will or the laws of descent and distribution. An Option
shall be exercisable during the Grantee's lifetime only by the
Grantee.
(h) Modification, Extension and Renewal of Options. Subject to
the terms and conditions and within the limitations of the Plan, the
Committee may modify, extend or renew outstanding Options granted
under the Plan, or accept the surrender of outstanding options (to the
extent not theretofore exercised) and authorize the granting of new
B-4
Options in substitution thereof. Notwithstanding the foregoing,
however, no modification of an Option shall, without the consent of
the Grantee, alter or impair any rights or obligations under any
Option theretofore granted under the Plan or adversely affect the
status of an Incentive Stock Option.
(i) Other Terms and Conditions. Option Agreements may contain any
other provision not inconsistent with the Plan that the Committee
deems appropriate.
8. Adjustment for Changes in the Stock.
(a) In the event the shares of Stock, as presently constituted, shall
be changed into or exchanged for a different number or kind of shares or other
securities of the Company (whether by reason of merger, consolidation,
recapitalization, reclassification, split, reverse split, combination of shares
or otherwise), then there shall be substituted for or added to each share of
Stock theretofore or thereafter subject to an Option the number and kind of
shares of capital stock or other securities into, which each outstanding share
of Stock shall be changed, or for which each such share shall be exchanged, or
to which each such share shall be entitled, as the case may be. The price and
other terms of outstanding Options shall also be appropriately amended to
reflect the foregoing events. In the event there shall be any other change in
the number or kind of outstanding shares of the Stock, or of any capital stock
or other securities into which the Stock shall have been changed or for which it
shall have been exchanged, if the Committee shall, in its sole discretion,
determine that the change equitably requires an adjustment in any Option
theretofore granted or which may be granted under the Plan, then adjustments
shall be made in accordance with its determination.
(b) Fractional shares resulting from any adjustment in Options pursuant
to this Section 8 may be settled in cash or otherwise as the Committee shall
determine. Notice of any adjustment shall be given by the Company to each holder
of an Option that shall have been so adjusted, and the adjustment (whether or
not notice is given) shall be effective and binding for all purposes of the
Plan.
(c) Notwithstanding Section 8(a), the Committee shall have the power,
in the event of the disposition of all or substantially all of the assets of the
Company, or the dissolution of the Company, or the merger or consolidation of
the Company, or the making of a tender offer to purchase all or a substantial
portion of outstanding Stock of the Company, to amend all outstanding Options
(upon such conditions as it shall deem fit) to (i) permit the exercise of
Options prior to the effective date of the transaction and to terminate all
unexercised Options as of that date, or (ii) require the forfeiture of all
Options, provided the Company pays to each Grantee the excess of the Fair Market
Value of the Stock subject to the Option over the exercise price of the Option,
or (iii) make any other provisions that the Committee deems equitable.
9. Amendment of the Plan.
The Board may amend the Plan and may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any Option in the
manner and to the extent deemed desirable to carry out the Plan without action
on the part of the stockholders of the Company; provided, however, that, except
as provided in Section 8 and this Section 9, unless the stockholders of the
Company shall have first approved thereof (i) the total number of shares of
Stock subject to the Plan shall not be increased, (ii) no Option shall be
exercisable more than ten years after the date it is granted, (iii) the
expiration date of the Plan shall not be extended and (iv) no amendment shall
(a) increase the number of shares of Stock to be received on exercise of an
Option, (b) materially increase the benefits accruing to a Grantee under an
Option or (c) modify the eligibility requirements for participation in the Plan.
10. Interpretation and Construction.
The interpretation and construction of any provision of the Plan by the
Committee shall be final, binding and conclusive for all purposes.
B-5
11. Application of Funds.
The proceeds received by the Company from the sale of Stock pursuant to
this Plan will be used for general corporate purposes.
12. No Obligation to Exercise Option.
The granting of an Option shall impose no obligation upon the Grantee
to exercise an Option.
13. Plan Not a Contract of Employment.
Neither the Plan nor any Option Agreement is a contract of employment,
and the terms of employment of any Grantee shall not be affected in any way by
the Plan or related instruments except as specifically provided therein. The
establishment of the Plan shall not be construed as conferring any legal rights
upon any Grantee for a continuance of employment; nor shall it interfere with
the right of the Company (or its Subsidiary, if applicable) to discharge the
Grantee.
14. Expense of the Plan.
All of the expenses of administering the Plan shall be paid by the
Company.
15. Compliance with Applicable Law.
Notwithstanding anything herein to the contrary, the Company shall not
be obligated to cause to be issued or delivered any certificates for shares of
Stock issuable upon exercise of an Option unless and until the Company is
advised by its counsel that the issuance and delivery of the certificates is in
compliance with all applicable laws, regulations of government authorities and
requirements of any exchange upon which shares of Stock are traded. The Company
shall in no event be obligated to register any securities pursuant to the
Securities Act of 1933 (as now in effect or as hereafter amended) or to take any
other action in order to cause the issuance and delivery of certificates to
comply with any of those laws, regulations or requirements. The Committee may
require, as a condition of the issuance and delivery of certificates and in
order to ensure compliance with those laws, regulations and requirements, that
the Grantee make such covenants, agreements and representations as the
Committee, in its sole discretion, deems necessary or desirable. Each Option
shall be subject to the further requirement that if at any time the Committee
shall determine in its discretion that the listing or qualification of the
shares of Stock subject to the Option, under any securities exchange
requirements or under any applicable law, or the consent or approval of any
regulatory body, is necessary in connection with the granting of the Option or
the issuance of Stock thereunder, the Option may not be exercised in whole or in
part unless the listing, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Committee.
16. Governing Law.
Except to the extent preempted by federal law, this Plan shall be
construed and enforced in accordance with, and governed by, the laws of the
State of Delaware.
B-6
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF EASYLINK SERVICES CORPORATION FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 24, 2001
The undersigned stockholder of EasyLink Services Corporation, a Delaware
corporation, (the "Company") hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement, each dated April [ ], 2001, and
hereby appoints Gerald Gorman and Debra McClister or either of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the Annual Meeting of
Stockholders of EasyLink Services Corporation to be held on Thursday, May 24,
2000 at 10:00 a.m., local time, at New York Information Technology Center, 55
Broad Street, New York, New York and at any adjournment or postponement thereof,
and to vote all shares of Class A Common Stock and Class B Common Stock which
the undersigned would be entitled to vote if then and there personally present,
on the matters set forth below:
1. ELECTION OF DIRECTORS:
___ FOR all nominees listed below (except as indicated).
___ WITHHOLD authority to vote for all nominees listed below.
If you wish to withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the list below:
Gerald Gorman
Thomas Murawski
Gary Millin
George Abi Zeid
William Donaldson
Stephen Duff
Stephen Ketchum
Jack Kuehler
2. PROPOSAL TO APPROVE THE COMPANY'S 2001 STOCK PLAN
____FOR ____AGAINST ____ABSTAIN
3. PROPOSAL TO AMEND THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION, AS AMENDED, TO INCREASE THE NUMBER OF AUTHORIZED SHARES
OF CLASS A COMMON STOCK OF THE COMPANY
____FOR ____AGAINST ____ABSTAIN
4. PROPPOSAL TO RATIFY THE APPOINTMENT OF KPMG LLP AS THE INDEPENDENT
ACCOUNTANTS FOR THE COMPANY FOR THE YEAR ENDING DECEMBER 31, 2001
____FOR ____AGAINST ____ABSTAIN
and, in their discretion, upon such other matter or matters that may properly
come before the meeting and any postponement(s) or adjournment(s) thereof.
PLEASE SIGN ON REVERSE SIDE AND RETURN IMMEDIATELY
ANY STOCKHOLDER COMPLETING THIS PROXY THAT FAILS TO MARK ONE OF THE BOXES FOR
THE PROPOSAL WILL BE DEEMED TO HAVE GIVEN THE PROXY HOLDERS COMPLETE DISCRETION
IN VOTING HIS, HER, OR ITS SHARES FOR SUCH PROPOSAL AT THE MEETING, OR, IN THE
CASE OF ELECTION OF DIRECTORS, FOR EACH OF THE LISTED NOMINEES. IF A BOX IS
CHECKED, YOUR SHARES SHALL BE VOTED IN ACCORDANCE WITH YOUR INSTRUCTIONS.
_______________________________________ Date:__________________________
Signature
_______________________________________ Date:__________________________
Signature
(This Proxy should be marked, dated, signed by the stockholder(s) exactly as his
or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.)