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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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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EASYLINK SERVICES CORPORATION
399 Thornall Street
Edison, NJ 08837
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be held on August 29, 2001
The Special Meeting of Stockholders of EasyLink Services Corporation, a Delaware
corporation, (the "Company" or "EasyLink") will be held at the Woodbridge Hilton
located at 120 Wood Avenue South, Iselin, New Jersey on Wednesday, August 29,
2001 at 9 a.m., local time, to consider and act upon the following matters:
1. To consider and vote upon one proposal to approve nine separate
amendments to the Amended and Restated Certificate of Incorporation, as
amended, of the Company to enable the Company to effect one or more
reverse stock splits, ranging from a one-for-two reverse stock split to
a one-for-10 reverse stock split of all the issued and outstanding
shares of the Company's Class A Common Stock and Class B Common Stock,
par value $0.01 per share, in order to seek to maintain the listing of
our common stock on the NASDAQ National Market and to facilitate the
Company's ability to raise additional equity capital. The Board of
Directors may abandon any one or more or all of the amendments or make
one or more or all of the amendments effective by filing such amendment
with the Secretary of State of the State of Delaware at such time or
times as the Board of Directors of the Company determines to be
necessary or appropriate in order to seek to maintain the listing of
our Class A Common Stock on the NASDAQ National Market. If after the
filing of one amendment with the Secretary of State of the State of
Delaware, the Company again fails to comply with NASDAQ National Market
Board listing requirements regarding share price, it may file one or
more or all of the other amendments as the Board of Directors of the
Company determines to be necessary or appropriate to seek to comply
with the NASDAQ National Market Board listing requirements; and
2. To transact such other business as may properly come before the meeting
or any postponement(s) adjournment(s) thereof.
Stockholders of record at the close of business on July 25, 2001, are
entitled to notice of, and to vote at, the meeting. A list of stockholders
eligible to vote at the special meeting will be available for examination by any
stockholder who is present at the special meeting and at the principal place of
business of the Company at 399 Thornall Street, Edison, New Jersey, during
ordinary business hours during the ten day period prior to the special meeting
for any purpose germane to the meeting. The stock transfer books of the Company
will remain open for the purchase and sale of the Company's common stock, par
value $.01 per share. All stockholders are cordially invited to attend the
meeting.
BY ORDER OF THE BOARD OF DIRECTORS
DAVID W. AMBROSIA
Executive Vice President, General Counsel
and Secretary
Edison, New Jersey
August , 2001
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY CARD AND PROMPTLY MAIL IT IN THE ENCLOSED ENVELOPE IN ORDER
TO ASSURE REPRESENTATION OF YOUR SHARES AT THE MEETING. NO POSTAGE NEED BE
AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES.
EASYLINK SERVICES CORPORATION
399 Thornall Street
Edison, NJ 08837
PROXY STATEMENT FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 29, 2001
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of EasyLink Services Corporation (the
"Company" or "EasyLink") for use at the Special Meeting of Stockholders to be
held on August 29, 2001 at 9 a.m., local time, at the Woodbridge Hilton located
at 120 Wood Avenue South, Iselin, New Jersey, and at any adjournment or
adjournments of that meeting (the "Special Meeting"). All proxies will be voted
in accordance with the instructions contained therein, and if no choice is
specified, the proxies will be voted in favor of the matters set forth in the
accompanying Notice of Meeting and in the discretion of the persons named
therein upon such other matters that may properly come before the meeting and
any postponements or adjournments thereof. However, if a proxy is marked against
the proposal to approve the amendments, the proxy will not be voted in favor of
a motion to adjourn or postpone the Special Meeting for the purpose of
soliciting further proxies in favor of the approval of the amendments. Any proxy
may be revoked by a stockholder at any time before it is voted by delivery of
written notice of revocation or a duly executed proxy bearing a later date, to
the Secretary of the Company, or by attending the Special Meeting and voting it
in person.
Voting Securities and Votes Required
The close of business on July 25, 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 Special 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.
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, 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.
All of the proposed amendments 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 proposed amendments.
COMMON STOCK OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information with respect to the beneficial
ownership of EasyLink's common stock as of June 30, 2001 for:
o each person who EasyLink knows beneficially owns more than 5% of its
Class A Common Stock;
o each of EasyLink's directors, including its Chairman and Chief Executive
Officer;
o EasyLink's 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's 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 June 30, 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.
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 June 30, 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................................................ 12,246,617(1) 13.6% 56.8%
Thomas Murawski.............................................. 368,132 * *
George Abi Zeid.............................................. 18,776,176 21.0 10.5
William Donaldson............................................ 295,000 * *
Stephen Duff................................................. 41,100(2) * *
Stephen Ketchum.............................................. 155,120 * *
Jack Kuehler................................................. 295,700 * *
Debra McClister.............................................. 324,354 * *
David Ambrosia............................................... 187,525 * *
Lon Otremba.................................................. 1,046,519 * *
Samuel Kline................................................. 150,500 1.2 *
All directors and executive officers as a group (10 persons). 32,739,724 36.5 68.2
The Clark Estates, Inc....................................... 10,873,800(3) 11.5 5.9
---------
* 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) Mr. Duff is a limited partner of Federal Partners, L.P. and through his
limited partnership interest holds an indirect interest in 6,000 shares ofs
Class A Common Stock and 10,000 shares of Class A common stock issuable upon
conversion of senior convertible notes. Excludes shares that may be issuable
in payment of interest on the notes.
(3) Includes 3,900,000 shares of Class A Common Stock and 5,000,000 shares of
Class A Common Stock issuable upon conversion of senior convertible notes
held by Federal Partners, L.P. Excludes shares that may be issuable in
payment of interest on the notes. 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 3,900,000 shares, the 5,000,000 shares and the
1,943,800 shares described in this footnote.
2
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 June 30, 2001.
Number of Shares of
Name of Beneficial Owner Class A Common Stock
------------------------ --------------------
Gerald Gorman.............................................. 545,797
Thomas Murawski............................................ 344,890
George Abi Zeid............................................ 0
William Donaldson.......................................... 165,000
Stephen Duff............................................... 20,000
Stephen Ketchum............................................ 20,000
Jack Kuehler............................................... 165,000
Debra McClister............................................ 256,349
David Ambrosia............................................. 183,050
Lon Otremba................................................ 891,519
Samuel Kline............................................... 150,000
PROPOSAL NO. 1
APPROVAL OF AMENDMENTS TO
AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION, AS AMENDED,
TO EFFECT REVERSE STOCK SPLITS
General
The persons named in the enclosed proxy will vote the shares represented by
a duly executed and delivered proxy to approve each of the nine separate charter
amendments to the Amended and Restated Certificate of Incorporation, as amended,
of the Company effecting a reverse split of all outstanding shares of the
Company's common stock, unless the proxy is marked otherwise. Accordingly, if a
stockholder returns a proxy without contrary instructions, the persons named as
proxies will vote to approve all of the following amendments to the Amended and
Restated Certificate of Incorporation, as amended.
The Board of Directors of the Company has unanimously approved and declared
advisable, each of the following amendments to Article V of the Company's
Amended and Restated Certificate of Incorporation, as amended. Each of the
separate amendments to the Amended and Restated Certificate of Incorporation, as
amended of the Company approved by the Board of Directors and for which the
Company is seeking your approval is set forth below. As reflected on the
enclosed proxy card relating to the Special Meeting, stockholders may approve
all or none of the proposed amendments.
(a) Effective at 4:30 p.m. Eastern Time on the date of filing of this
Certificate of Amendment with the Secretary of State of the State
of Delaware (the "Effective Time"), every two (2) outstanding
shares of Class A Common Stock will be reclassified into and
automatically become one (1) outstanding share of Class A Common
Stock, and every two (2) outstanding shares of Class B Common
Stock will be reclassified into and automatically become one (1)
outstanding share of Class B Common Stock. No fractional share
shall be issued in connection with the foregoing reverse stock
split; and all shares of Class A Common Stock and Class B Common
Stock so split that are held by a stockholder will be aggregated
by class subsequent to the foregoing reverse stock split and each
fractional share resulting from such aggregation of each class
held by such stockholder shall be rounded up to the nearest whole
share. Any stock certificate that represented shares of Class A
common stock or Class B common stock immediately before the
Effective Time shall, automatically and without the need to
surrender the same for exchange, represent the number of shares of
Class A common stock or Class B common stock immediately after the
Effective Time resulting from the reverse stock split; or
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(b) Effective at 4:30 p.m. Eastern Time on the date of filing of this
Certificate of Amendment with the Secretary of State of the State
of Delaware, every three (3) outstanding shares of Class A Common
Stock will be reclassified into and automatically become one (1)
outstanding share of Class A Common Stock, and every three (3)
outstanding shares of Class B Common Stock will be reclassified
into and automatically become one (1) outstanding share of Class B
Common Stock. No fractional share shall be issued in connection
with the foregoing reverse stock split; and all shares Class A
Common Stock and Class B Common Stock so split that are held by a
stockholder will be aggregated by class subsequent to the
foregoing reverse stock split and each fractional share resulting
from such aggregation of each class held by such stockholder shall
be rounded up to the nearest whole share. Any stock certificate
that represented shares of Class A common stock or Class B common
stock immediately before the Effective Time shall, automatically
and without the need to surrender the same for exchange, represent
the number of shares of Class A common stock or Class B common
stock immediately after the Effective Time resulting from the
reverse stock split; or
(c) Effective at 4:30 p.m. Eastern Time on the date of filing of this
Certificate of Amendment with the Secretary of State of the State
of Delaware, every four (4) outstanding shares of Class A Common
Stock will be reclassified into and automatically become one (1)
outstanding share of Class A Common Stock, and every four (4)
outstanding shares of Class B Common Stock will be reclassified
into and automatically become one (1) outstanding share of Class B
Common Stock. No fractional share shall be issued in connection
with the foregoing reverse stock split; and all shares Class A
Common Stock and Class B Common Stock so split that are held by a
stockholder will be aggregated by class subsequent to the
foregoing reverse stock split and each fractional share resulting
from such aggregation of each class held by such stockholder shall
be rounded up to the nearest whole share. Any stock certificate
that represented shares of Class A common stock or Class B common
stock immediately before the Effective Time shall, automatically
and without the need to surrender the same for exchange, represent
the number of shares of Class A common stock or Class B common
stock immediately after the Effective Time resulting from the
reverse stock split; or
(d) Effective at 4:30 p.m. Eastern Time on the date of filing of this
Certificate of Amendment with the Secretary of State of the State
of Delaware, every five (5) outstanding shares of Class A Common
Stock will be reclassified into and automatically become one (1)
outstanding share of Class A Common Stock, and every five (5)
outstanding shares of Class B Common Stock will be reclassified
into and automatically become one (1) outstanding share of Class B
Common Stock. No fractional share shall be issued in connection
with the foregoing reverse stock split; and all shares Class A
Common Stock and Class B Common Stock so split that are held by a
stockholder will be aggregated by class subsequent to the
foregoing reverse stock split and each fractional share resulting
from such aggregation of each class held by such stockholder shall
be rounded up to the nearest whole share. Any stock certificate
that represented shares of Class A common stock or Class B common
stock immediately before the Effective Time shall, automatically
and without the need to surrender the same for exchange, represent
the number of shares of Class A common stock or Class B common
stock immediately after the Effective Time resulting from the
reverse stock split; or
(e) Effective at 4:30 p.m. Eastern Time on the date of filing of this
Certificate of Amendment with the Secretary of State of the State
of Delaware, every six (6) outstanding shares of Class A Common
Stock will be reclassified into and automatically become one (1)
outstanding share of Class A Common Stock, and every six (6)
outstanding shares of Class B Common Stock will be reclassified
into and automatically become one (1) outstanding share of Class B
Common Stock. The authorized shares of the Corporation shall
remain as set forth in this Certificate of Incorporation. No
fractional share shall be issued in connection with the foregoing
reverse stock split; and all shares Class A Common Stock and Class
B Common Stock so split that are held by a stockholder will be
aggregated by class subsequent to the foregoing reverse stock
split and each fractional share resulting from such aggregation of
each class held by such stockholder shall be rounded up to the
nearest whole share. Any stock certificate that represented shares
of Class A common stock or Class B common stock immediately before
the Effective Time shall, automatically and without the need to
surrender the same for exchange, represent the number of shares of
Class A common stock or Class B common stock immediately after the
Effective Time resulting from the reverse stock split; or
(f) Effective at 4:30 p.m. Eastern Time on the date of filing of this
Certificate of Amendment with the Secretary of State of the State
of Delaware, every seven (7) outstanding shares of Class A Common
Stock will be reclassified into and automatically become one (1)
outstanding share of Class A Common Stock, and every seven (7)
outstanding shares of Class B Common Stock will be reclassified
into and automatically become one (1) outstanding share of Class B
Common Stock. No fractional share shall be issued in connection
with the foregoing reverse stock split; and all shares Class A
Common Stock and Class B Common Stock so split that are held by a
stockholder will be aggregated by class subsequent to the
foregoing reverse stock split and each fractional share resulting
from such aggregation of each class held by such stockholder shall
be rounded up to the nearest whole share. Any stock certificate
that represented shares of Class A common stock or Class B common
stock immediately before the Effective Time shall, automatically
and without the need to surrender the same
4
for exchange, represent the number of shares of Class A common
stock or Class B common stock immediately after the Effective
Time resulting from the reverse stock split; or
(g) Effective at 4:30 p.m. Eastern Time on the date of filing of this
Certificate of Amendment with the Secretary of State of the State
of Delaware, every eight (8) outstanding shares of Class A Common
Stock will be reclassified into and automatically become one (1)
outstanding share of Class A Common Stock, and every eight (8)
outstanding shares of Class B Common Stock will be reclassified
into and automatically become one (1) outstanding share of Class B
Common Stock. No fractional share shall be issued in connection
with the foregoing reverse stock split; and all shares Class A
Common Stock and Class B Common Stock so split that are held by a
stockholder will be aggregated by class subsequent to the
foregoing reverse stock split and each fractional share resulting
from such aggregation of each class held by such stockholder shall
be rounded up to the nearest whole share. Any stock certificate
that represented shares of Class A common stock or Class B common
stock immediately before the Effective Time shall, automatically
and without the need to surrender the same for exchange, represent
the number of shares of Class A common stock or Class B common
stock immediately after the Effective Time resulting from the
reverse stock split; or
(h) Effective at 4:30 p.m. Eastern Time on the date of filing of this
Certificate of Amendment with the Secretary of State of the State
of Delaware, every nine (9) outstanding shares of Class A Common
Stock will be reclassified into and automatically become one (1)
outstanding share of Class A Common Stock, and every nine (9)
outstanding shares of Class B Common Stock will be reclassified
into and automatically become one (1) outstanding share of Class B
Common Stock. No fractional share shall be issued in connection
with the foregoing reverse stock split; and all shares Class A
Common Stock and Class B Common Stock so split that are held by a
stockholder will be aggregated by class subsequent to the
foregoing reverse stock split and each fractional share resulting
from such aggregation of each class held by such stockholder shall
be rounded up to the nearest whole share. Any stock certificate
that represented shares of Class A common stock or Class B common
stock immediately before the Effective Time shall, automatically
and without the need to surrender the same for exchange, represent
the number of shares of Class A common stock or Class B common
stock immediately after the Effective Time resulting from the
reverse stock split; or
(i) Effective at 4:30 p.m. Eastern Time on the date of filing of this
Certificate of Amendment with the Secretary of State of the State
of Delaware, every ten (10) outstanding shares of Class A Common
Stock will be reclassified into and automatically become one (1)
outstanding share of Class A Common Stock, and every ten (10)
outstanding shares of Class B Common Stock will be reclassified
into and automatically become one (1) outstanding share of Class B
Common Stock. No fractional share shall be issued in connection
with the foregoing reverse stock split; and all shares Class A
Common Stock and Class B Common Stock so split that are held by a
stockholder will be aggregated by class subsequent to the
foregoing reverse stock split and each fractional share resulting
from such aggregation of each class held by such stockholder shall
be rounded up to the nearest whole share. Any
5
stock certificate that represented shares of Class A common stock
or Class B common stock immediately before the Effective Time
shall, automatically and without the need to surrender the same
for exchange, represent the number of shares of Class A common
stock or Class B common stock immediately after the Effective
Time resulting from the reverse stock split.
Approval of all of the amendments to Article V of the Company's Amended and
Restated Certificate of Incorporation, as amended, requires 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.
Purpose of Reverse Stock Splits
Each of the proposed amendments to the Company's Amended and Restated
Certificate of Incorporation, as amended, effecting a reverse stock split,
ranging from between a one-for-two reverse stock split and a one-for-ten reverse
stock split, has been approved and declared advisable by the Board of Directors
to reduce the number of shares of Class A Common Stock and Class B Common Stock
outstanding and to increase the trading price of our Class A Common Stock on the
Nasdaq National Market. The Board took this action because our Class A Common
Stock has failed, for more than 30 consecutive days, to maintain the $1.00
minimum bid price required by Nasdaq Marketplace Rule 4310(c)(4) (the "Rule")
and because we believe this action will facilitate our efforts to raise
additional capital. The proposed amendments are not the first step in a going
private transaction.
While there can be no assurance, the Board of Directors believes the
implementation of one or more or all of the proposed amendments effecting a
reverse stock split, if approved by our stockholders, will result in an increase
in the minimum bid price of our Class A Common Stock to above the $1.00 per
share minimum mandated by the Nasdaq National Market for continued listing and
enable our Class A Common Stock to continue to trade on the Nasdaq National
Market. However, while the Company believes that implementation of a reverse
stock split is a satisfactory mechanism to achieve compliance with Nasdaq's
maintenance requirements of the Nasdaq National Market, there can be no
assurance that, even if the bid price for our Class A Common Stock exceeds the
$1.00 minimum threshold for the mandated period as a result of one or more
reverse stock splits, the Nasdaq National Market will deem the Company to be in
compliance and will not delist our Class A Common Stock.
The Company has been formally notified of its failure to comply with the
Rule. Pursuant to Nasdaq Marketplace Rule 4310(c)(8)(b), the Nasdaq provided the
Company 90 calendar days, or until July 23, 2001, to regain compliance with the
Rule. In order to regain compliance, the closing price of the Company's Class A
Common Stock was required to be at least $1.00 for at least ten consecutive
trading days prior to July 23, 2001. The Company received a Nasdaq Staff
Determination on July 24, 2001 indicating that the Company failed to regain
compliance with the minimum bid price requirement for continued listing set
forth in Nasdaq Marketplace Rule 4450(a)(5) and that its securities are,
therefore, subject to delisting from the Nasdaq National Market. In accordance
with its rights under the Nasdaq Marketplace Rules, the Company requested a
hearing before a Nasdaq Listing Qualifications Panel to review the Staff
Determination, and a hearing has been scheduled for , 2001. The Company
intends to request at the hearing continued listing based upon, among other
factors, its completion of a reverse split stock contemplated hereby if
necessary. There can be no assurance the Panel will grant the Company's request
for continued listing.
If our Class A Common Stock is delisted from the Nasdaq National Market,
trading in our Class A Common Stock, if any, would have to be conducted on the
NASDAQ Small Cap Market, the OTC Bulletin Board or in the non-Nasdaq
over-the-counter market (also known as the pink sheet market). In such an event,
an investor could find it more difficult to dispose of, or to obtain accurate
quotations as to the market value of our Class A Common Stock.
In addition, if our Class A Common Stock were to become delisted from
trading on the Nasdaq National Market and the trading price were to remain below
$5.00 per share, trading in our Class A Common Stock may also be subject to the
requirements of certain rules promulgated under the Securities Exchange Act of
1934, which require additional disclosures by broker-dealers in connection with
any trades involving a stock defined as a "penny stock." Generally, a "penny
stock" is defined as any non-Nasdaq equity security that has a market price of
less than $5.00 per share, subject to certain exceptions. The additional burdens
imposed upon broker-dealers by these requirements could discourage
broker-dealers from facilitating trades in our Class A Common Stock, which could
severely limit the market liquidity of the stock and the ability of investors to
trade our Class A Common Stock.
6
The Board of Directors is asking that you approve each of the proposed
amendments to the Company's Amended and Restated Certificate of Incorporation,
as amended, effecting each of the reverse stock splits of all of the issued and
outstanding Class A Common Stock and Class B Common Stock of the Company.
Notwithstanding the authorization of each of the amendments by the stockholders
of the Company, the Board may abandon any one or more or all of the amendments
without further action by the Company's stockholders in accordance with Section
242(c) of the General Corporation Law of the State of Delaware. A vote in favor
of each of the amendments to the Amended and Restated Certificate of
Incorporation, as amended, will be a vote for approval of each of the proposed
reverse stock splits, one or more or all of which may be implemented and
effected and one or more or all of which may be abandoned at the discretion of
the Board, in either case, within the next eight months.
The Board of Directors has determined that each of the amendments effecting
a reverse stock split is advisable and in your best interests and unanimously
recommends that you vote "for" each of the amendments effecting a reverse stock
split. The Board of Directors will consider and evaluate from time to time the
following factors and criteria to determine which, if any, of the approved
amendments to implement: the capitalization of the Company (including the number
of shares of Class A Common Stock and Class B Common Stock issued and
outstanding), the prevailing trading price for our Class A Common Stock and the
volume level thereof, and the general economic and other related conditions
prevailing in our industry and in the marketplace generally. The Board of
Directors will determine as soon as practicable which proposed amendment(s) to
implement and will provide stockholders and other relevant persons with notice
of the record date for any of the proposed reverse stock splits.
Effects of Reverse Stock Splits
A reverse stock split is a reduction in the number of outstanding shares of
a class of a corporation's capital stock, which is accomplished by the Company,
in this case, reclassifying and converting all the outstanding shares of Class A
Common Stock and Class B Common Stock into a proportionately fewer number of
shares of Class A Common Stock and Class B Common Stock. For example, if our
Board of Directors implements a one-for-four reverse stock split of the Class A
Common Stock, then someone holding 400 shares of our Class A Common Stock before
the reverse stock split would hold 100 shares of our Class A Common Stock after
the reverse stock split. This will also result in an increase in the available
number of authorized but unissued shares of our Class A Common Stock and Class B
Common Stock. However, each stockholder's proportionate ownership of the issued
and outstanding shares of our Class A Common Stock and Class B Common Stock
would remain the same, except for minor changes which may result from the
provisions each of the amendments effecting a reverse stock split, as described
below, which require the rounding of any resulting fractional shares up to the
nearest whole share.
The primary purpose of the proposed reverse stock splits of our Class A
Common Stock and Class B Common Stock is to combine the issued and outstanding
shares of the Class A Common Stock and Class B Common Stock into a smaller
number of shares so that the shares of the Class A Common Stock will trade at a
higher price per share than their recent trading prices.
Finally, the reverse stock splits, if implemented, will affect the
outstanding options to purchase Class A Common Stock of the Company and certain
other presently outstanding convertible securities with respect to Class A
Common Stock, issued by the Company which contain anti-dilution provisions. The
agreements and other documents governing all of the Company's outstanding stock
options and warrants to purchase, and all outstanding securities convertible
into or exchangeable for, Class A Common Stock include provisions requiring
adjustments to the number of shares of Class A Common Stock issuable upon
exercise of such options or warrants or upon conversion or exchange of such
other securities and the number of shares subject to and the exercise,
conversion or exchange prices of, such options, warrants or convertible or
exchangeable securities, in the event of a reverse stock split. If any of the
reverse stock splits are implemented, because the Company will also effect a
proportional reverse stock split of the outstanding Class B Common Stock, the
Class B Common Stock will not also be entitled to anti-dilution adjustment upon
effectiveness of a reverse stock split of the Class A Common Stock. For example,
in a one-for-four reverse stock split, each of the outstanding options or
warrants to purchase Class A Common Stock or convertible or exchangeable shares
would thereafter evidence the right to purchase that number of shares of the
Class A Common Stock following the reverse stock split equal to 25% of the
shares of the Class A Common Stock previously covered by the options, warrants
or convertible or exchangeable securities (with fractional shares rounded up to
the nearest whole share) and the exercise, conversion or exchange price per
share would be four times the previous exercise price.
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No Fractional Shares
In order that the Company may avoid the expense and inconvenience of
issuing and transferring fractional shares of the Class A Common Stock and Class
B Common Stock as a result of any of the reverse stock splits, we will round any
fractional shares resulting from any of the reverse stocks split up to the
nearest whole share. This means that stockholders who would otherwise be
entitled to receive a fractional share of the Class A Common Stock and Class B
Common Stock following a reverse stock split will receive a whole share in lieu
thereof. For example, if any stockholder owns, in total, 99 shares, that
stockholder's shares would be converted into 25 shares if the proposed
one-for-four reverse stock split is implemented.
The rounding of fractional shares will not reduce the number of
stockholders or stockholders of record. The Company's periodic reporting
requirements under the Securities Exchange Act of 1934 will be unaffected by the
rounding of fractional shares and EasyLink believes it will, if the reverse
stock splits receive stockholder approval and one or more or all of the reverse
stock splits are implemented by the Board as intended and described herein, meet
all Nasdaq Stock Market listing requirements.
Implementation of Reverse Stock Splits
If the stockholders approve the reverse stock split amendments, the Board
may direct management of the Company to file an amendment to the Company's
Amended and Restated Certificate of Incorporation, as amended, incorporating one
of the amendments to the Company's Amended and Restated Certificate of
Incorporation, as amended, with the Secretary of State of the State of Delaware
effecting one of the reverse stock splits. The Board may, if the Company's Class
A Common Stock fails for more than 30 consecutive days after the first reverse
split amendment is filed, to maintain the $1.00 minimum bid price required, file
one or more or all of the other approved amendments.
Reasons for Reverse Stock Split: Advantages
The Board of Directors believes that a reverse stock split is desirable for
the following reasons:
(a) If shares of our Class A Common Stock continue to trade below
$1.00 per share, our Class A Common Stock will be delisted from
the Nasdaq National Market. Delisting could decrease the
marketability, liquidity and transparency of our Class A Common
Stock (which could, in turn, further depress our stock price). Our
Board believes that the anticipated increase in the market price
per share resulting from a reverse stock split will lift the price
of our Class A Common Stock above the $1.00 minimum bid threshold
that currently threatens our continued listing on Nasdaq.
(b) The anticipated increase in the per share market price of our
Class A Common Stock should also enhance the acceptability of our
Class A Common Stock by the financial community and the investing
public.
(c) Additionally, a variety of brokerage house policies and practices
tend to discourage individual brokers within those firms from
dealing with lower priced stocks. Some of the policies and
practices pertain to the payment of broker's commissions and to
time consuming procedures that function to make the handling of
lower priced stock economically unattractive to brokers and
therefore difficult for holders of our Class A Common Stock to
manage. The expected increase in the per share price of the our
Class A Common Stock may help alleviate some of such problems.
(d) In addition, the structure of trading commissions also tends to
have an adverse impact upon holders of lower priced stock because
the brokerage commission on a sale of lower priced stock generally
represents a higher percentage of the sales prices than the
commission on a relatively higher priced issue, which may
discourage trading in lower priced stock. A reverse stock split
could result in a price level for our Class A Common Stock that
may reduce, to some extent, the effect of these policies and
practices of brokerage firms and diminish the adverse impact of
trading commissions on the market for our Class A Common Stock.
8
(e) The increase in the portion of the Company's authorized shares of
Class A Common Stock and Class B Common Stock that would be
unissued after any of the reverse stock splits is effected could
be used for any proper corporate purpose approved by the Board of
Directors. The increased number of authorized but unissued shares
of Class A Common Stock and Class B Common Stock will provide the
Company with additional flexibility to issue additional shares in
connection with future financings or other transactions. The
anticipated increase in the per share market price of our Class A
Common Stock should also enhance the acceptability of our Class A
Common Stock by the financial community and the investing public.
However, the Board of Directors does not currently have any plans
to utilize the increase in the number of the authorized but
unissued shares of our Class A Common Stock and Class B Common
Stock that would result from approval and implementation of the
proposed reverse stock split.
Reasons Against Reverse Stock Splits: Disadvantages
Even though the Board of Directors believes that the potential advantages
of a reverse stock split outweigh any disadvantages that might result, the
following are the possible disadvantages of a reverse stock split:
(a) Despite the potential increase in liquidity discussed above, if we
file one or more of the amendments, the reduced number of shares
resulting from a reverse stock split could adversely affect the
liquidity of our Class A Common Stock and Class B Common Stock.
(b) A reverse stock split may leave certain stockholders with one or
more "odd lots" which are stock holdings in amounts of less than
100 shares of Class A Common Stock. These odd lots may be more
difficult to sell than shares in even multiples of 100.
Additionally, any reduction in brokerage commissions resulting a
the reverse stock split, as discussed above, may be offset, in
whole or in part, by increased brokerage commissions required to
be paid by stockholders selling odd lots created by the reverse
stock split.
(c) There is no assurance that our stock price will increase as a
result of any of the reverse stock splits. Indeed, if the trading
price of our Class A Common Stock does not proportionally increase
after the reverse stock split, our total market capitalization,
which is equal to the number of outstanding shares of Class A
Common Stock and Class B Common Stock multiplied by the market
price, will also decline. The decline in our stock price and the
resulting decline in market capitalization after a reverse stock
split could be greater than it would have been if the reverse
stock split had not occurred.
(d) Because a reverse stock split would result in an increased number
of authorized but unissued shares of our Class A Common Stock and
Class B Common Stock, it may be construed as having an
anti-takeover effect, although neither the Board of Directors nor
the Company's management views this proposal in that perspective.
However, the Board of Directors, subject to its fiduciary duties
and applicable law, could use this increased number of authorized
but unissued shares to frustrate persons seeking to take over or
otherwise gain control of the Company by, for example, privately
placing shares with purchasers who might side with the Board of
Directors in opposing a hostile takeover bid. Shares of our Class
A Common Stock or Class B Common Stock could also be issued to a
holder that would thereafter have sufficient voting power to
assure than any proposal to amend or repeal the Company's by-laws
or certain provisions of the Company's Amended and Restated
Certificate of Incorporation, as amended, would not receive the
requisite vote. Such uses of our Class A Common Stock or Class B
Common Stock could render more difficult, or discourage, an
attempt to acquire control of the Company if such transaction were
opposed by the Board of Directors.
9
(e) Further, subject to NASDAQ rules on stock issuances, the increased
number of authorized but unissued shares of our Class A Common
Stock and Class B Common Stock could be issued by the Board of
Directors without further stockholder approval, which could result
in further dilution to the holders of the Class A Common Stock and
Class B Common Stock.
Exchange of Stock Certificates
If any of the reverse stock splits is effected, the Company will not
require holders of Class A Common Stock and Class B Common Stock to surrender
their stock certificates. Instead, the Company will give notice to its transfer
agent of the reverse stock split and the effective date of the amendment to the
Amended and Restated Certificate of Incorporation, as amended, in order to
accurately reflect the number of issued and outstanding shares of capital stock
of the Company. Any fractional shares resulting from the reverse stock split
will be rounded up to the nearest whole share.
All holders of capital stock of the Company will continue to be entitled
to receive any dividends or other distributions that may be declared and payable
with respect to the Class A Common Stock and Class B Common Stock with a record
date after the effective time of the reverse stock split.
Federal Income Tax Consequences
The following summary of the federal income tax consequences of a reverse
stock split is based on current law, including the Internal Revenue Code of
1986, as amended, and is for general information only. The tax treatment of a
stockholder may vary depending upon the particular facts and circumstances of
such stockholder, and the discussion below may not address all the tax
consequences for a particular stockholder. For example, foreign, state and local
tax consequences are not discussed below. Accordingly, each stockholder should
consult his or her tax advisor to determine the particular tax consequences to
him or her of a reverse stock split, including the application and effect of
federal, state, local and/or foreign income tax and other laws.
Generally, a reverse stock split will not result in the recognition of gain
or loss for federal income tax purposes. The adjusted basis of the aggregate
number of new shares of Class A Common Stock and Class B Common Stock will be
the same as the adjusted basis of the aggregate number of shares of Class A
Common Stock and Class B Common Stock held by such holder immediately prior to
the reverse stock split. The holding period of the new, post-split shares of the
Class A Common Stock and Class B Common Stock resulting from implementation of
the reverse stock split will include the stockholder's respective holding
periods for the pre-split shares of the Class A Common Stock and Class B Common
Stock held by such holder immediately prior to the reverse stock split. This
treatment should also apply with respect to additional shares received for
fractional shares.
No Appraisal Rights
The holders of shares of the Class A Common Stock and Class B Common Stock
have no appraisal rights under Delaware law, the Company's Amended and Restated
Certificate of Incorporation, as amended, or the Company's by-laws with respect
to the proposed amendments to the Company's Amended and Restated Certificate of
Incorporation, as amended, effecting a reverse stock split. If the amendments
are approved by the stockholders, any such amendment will become effective at
4:30 p.m., Eastern Time, on the day a Certificate of Amendment required by the
General Corporation Law of the State of Delaware is filed with the Secretary of
State of the State of Delaware. However, the Board of Directors is authorized to
abandon any or all of the amendments at any time prior to effectiveness, whether
before or after obtaining stockholder approval, without further action by
stockholders.
OTHER MATTERS
The Board knows of no other business that will be presented at the Special
Meeting. If any other business is properly brought before the Special Meeting,
shares represented by duly executed and delivered proxies in the enclosed form
will be voted in respect thereof as the proxy holders deem advisable. However,
if a proxy is marked against the proposal to approve the amendments, the proxy
will not be voted in favor of a motion to adjourn or postpone the Special
Meeting for the purpose of soliciting further proxies in favor of the approval
of the amendments.
10
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph, facsimile and personal interviews. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the owners
of stock held in their names, and the Company will reimburse them for their
reasonable out-of-pocket expenses incurred in connection with the distribution
of proxy materials.
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
11
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF EASYLINK SERVICES CORPORATION FOR THE
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD AUGUST 29, 2001
The undersigned stockholder of EasyLink Services Corporation, a Delaware
corporation (the "Company"), hereby acknowledges receipt of the Notice of
Special Meeting of Stockholders and Proxy Statement, each dated August , 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 Special Meeting
of Stockholders of EasyLink Services Corporation to be held on Wednesday, August
29, 2001 at 9:00 a.m., local time, at the Woodbridge Hilton located at 120 Wood
Avenue South, Iselin, New Jersey 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 and in the manner set forth below:
1. APPROVAL OF PROPOSED AMENDMENTS TO THE AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION, AS AMENDED, OF THE COMPANY TO ENABLE THE COMPANY TO
EFFECT ONE OR MORE REVERSE STOCK SPLITS.
____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 BELOW AND RETURN IMMEDIATELY
This proxy is solicited on behalf of the board of directors of the Company. This
proxy, when properly executed, will be voted in a manner directed herein by the
undersigned stockholder. If no direction is made, the proxy will be voted FOR
proposal 1 and in the judgement of the persons named herein on any other matter
which may properly come before the meeting or any adjournment(s) or
postponement(s) thereof; provided, however, that if this proxy is marked AGAINST
proposal 1, the proxy will not be voted in favor of a motion to adjourn or
postpone the Special Meeting for the purpose of soliciting further proxies in
favor of proposal 1.
_______________________________________ 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.)