Registration No. 333-76578
As filed with the Securities and Exchange Commission on February 20, 2002
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
EasyLink Services Corporation
(Exact name of registrant as specified in its charter)
DELAWARE 13-3787073
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
399 Thornall Street
Edison, NJ 08837
(732) 906-2000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
David W. Ambrosia, Esq.
Executive Vice President and General Counsel
EasyLink Services Corporation
399 Thornall Street
Edison, NJ 08837
(732) 906-2000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies
to:
Ronald A. Fleming, Jr., Esq.
Pillsbury Winthrop LLP
One Battery Park Plaza
New York, New York 10004
(212) 858-1143
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Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [x]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
-----------------
Pursuant to Rule 429(a) of the Securities Act of 1933, as amended, a combined
prospectus is being used in this registration statement, and pursuant to Rule
429(b) of the Securities Act of 1933, as amended, the earlier registration
statements to which the combined prospectus relates are the Company's Form S-3
Registration Statement filed on July 11, 2000, as amended on August 2, 2000
(Registration File No. 333-41156), Form S-3 Registration Statement filed on
August 4, 2000 (Registration File No. 333-43060) and Form S-3 Registration
Statement filed on April 27, 2001, as amended on May 22, 2001 (Registration File
No. 333-59776).
CALCULATION OF REGISTRATION FEE
========================= ================= ====================== ======================= ==================
Title of each class of Amount to be Proposed maximum Proposed maximum Amount of
securities to be registered(1)(2) offering price per aggregate offering registration
registered unit(3) price(3) fee(3)
Class A Common Stock,
par value $0.01 per 10,401,464 $3.70 $38,485,416 $ (3)(4)
share
========================= ================= ====================== ======================= ==================
(1) Includes 3,955,312 shares issuable upon conversion of outstanding
senior convertible notes or issuable in payment of a portion of the
interest on such notes or issuable upon exercise of outstanding
warrants. The notes are convertible into, and the warrants are
exercisable for, shares of Class A common stock, $0.01 par value per
share, of EasyLink Services Corporation at various conversion or
exercise prices, each of which is subject to adjustment under certain
circumstances. This registration statement includes such additional
shares of Class A common stock as may be issuable pursuant to such
adjustments.
(2) Pursuant to Rule 429 of the General Rules and Regulations under the
Securities Act of 1933, as amended, the prospectus which constitutes
part of this registration statement also relates to the remaining
4,307,839 shares of common stock registered on Form S-3 (File No.
333-59776), Form S-3 (File No. 333-43060) and Form S-3 (File No.
333-41156), which registration statements are still effective. Filing
fees of $6,913.11, $240.58 and $1,165.73, respectively, were previously
paid for the registration of those 4,307,839 shares.
(3) Estimated in accordance with Rule 457(c) under the Securities Act
solely for the purpose of computing the registration fee based upon the
average of the high and low prices of the Class A common stock on
February 19, 2002, as quoted on the Nasdaq National Market.
(4) On January 11, 2002, an aggregate of 10,401,383 shares was registered
at a proposed maximum offering price per unit estimated pursuant to
Rule 457(c) under the Securities Act of 1933 for which EasyLink
Services paid a registration fee of $13,921. This Amendment No. 1
registers an additional 81 shares at a proposed maximum offering price
per unit of $3.70, estimated as described in footnote 3 above and
requiring an additional registration fee of $.07.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
ii
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL A REGISTRATION STATEMENT RELATING TO THESE
SECURITIES FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES, AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
Subject to Completion, Dated February 20, 2002
PROSPECTUS
14,709,303 Shares
EasyLink Services Corporation
Class A common stock
This prospectus relates to the offering of our Class A common stock held by
selling stockholders or issuable upon conversion of or in payment of a portion
of the interest on our outstanding senior convertible notes held by selling
stockholders or issuable upon exercise of warrants held by selling stockholders.
The selling stockholders may sell the shares from time to time. We will pay
certain of the expenses of this offering; however, except with respect to 18,569
of the shares covered by this prospectus, EasyLink Services is not responsible
for the cost of brokerage commissions and discounts. We will not receive any
proceeds from the sale of shares by the selling stockholders.
The selling stockholders may offer and sell all of the shares in the
over-the-counter market or on one or more exchanges. The selling stockholders
may sell the shares at the then prevailing market price for the shares or in
negotiated transactions.
Our Class A common stock is listed on the Nasdaq National Market under the
symbol "EASY." On February 19, 2002, the closing price of our Class A common
stock on the Nasdaq National Market was $3.70 per share.
This investment involves risk. You should purchase only if you can
afford a complete loss. See "Risk Factors" beginning on page 7.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is February , 2002
TABLE OF CONTENTS
Page
Incorporation of Documents By ............................................. 2
Reference
Where You Can Get More .................................................... 3
Information
Cautionary Statements Regarding Forward-Looking Statements ................ 3
Prospectus ................................................................ 4
Summary
Risk ...................................................................... 7
Factors
Use of .................................................................... 22
Proceeds
Description of Capital Stock .............................................. 22
Selling Stockholders ...................................................... 25
Plan of Distribution ...................................................... 31
Legal Matters ............................................................. 32
Experts ................................................................... 32
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. The selling stockholders are offering to sell, and
seeking offers to buy, the Class A common stock only in jurisdictions where
offers and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or the date of any sale of the Class A common stock.
---------------------------------------
Information contained on our Web sites will not be deemed to
be part of this prospectus.
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INCORPORATION OF DOCUMENTS BY REFERENCE
We furnish our stockholders with annual reports containing audited financial
statements and other appropriate reports. We also file annual, quarterly and
current reports, proxy statements and other information with the Securities and
Exchange Commission. Instead of repeating in this prospectus information that we
have already filed with the Securities and Exchange Commission, rules of the
Securities and Exchange Commission permit us to "incorporate by reference" the
information we file with them. These rules mean that we can disclose important
information to you by referring you to those documents that we have previously
filed with the Securities and Exchange Commission. These documents are
considered to be part of this prospectus. Any documents that we file with the
Securities and Exchange Commission in the future will also be considered to be
part of this prospectus and will automatically update and supersede the
information in this prospectus. We incorporate by reference the documents listed
below and any future filings we make with the Securities and Exchange Commission
under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934
until the selling stockholders sell all of the Class A common stock offered by
this prospectus.
o Our Annual Report on Form 10-K for the fiscal year ended December 31,
2000, filed with the Commission on April 2, 2001;
o Our Quarterly Reports on Form 10-Q for the fiscal quarters ended March
31, 2001, June 30, 2001 and September 30, 2001;
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o Our Current Reports on Form 8-K and all amendments thereto on Form
8-K/A filed with the Commission on August 23, 1999, November 3, 1999,
February 11, 2000, March 28, 2000, April 24, 2000, May 26, 2000,
January 10, 2001, January 17, 2001, February 7, 2001, February 8, 2001,
February 13, 2001, February 26, 2001, March 9, 2001, March 26, 2001,
May 9, 2001, May 18, 2001, June 1, 2001, July 24, 2001, October 1,
2001, October 2, 2001, November 30, 2001, January 15, 2002 and January
22, 2002.
o Our Definitive Proxy Statement filed on April 27, 2001.
WHERE YOU CAN GET MORE INFORMATION
We have filed a registration statement with the Securities and Exchange
Commission to register the Class A common stock that the selling stockholders
are offering to you. This prospectus is part of that registration statement. As
allowed by the Securities and Exchange Commission's rules, we have not included
in this prospectus all of the information that is included in the registration
statement. At your oral or written request, we will provide to you, without
charge, a copy of the registration statement or any of the exhibits to the
registration statement or any or all of the other information that has been
incorporated by reference in this prospectus but not delivered with this
prospectus. If you want more information, write or call us at:
EasyLink Services Corporation
399 Thornall Street
Edison, NJ 08837
Telephone: (732) 906-2000
Attention: Investor Relations
You may also obtain a copy of any filing we have made with the Securities
and Exchange Commission directly from the Securities and Exchange Commission.
You may either:
o read and copy reports, proxy and information statements or other
information we have filed with the Securities and Exchange Commission
at the Securities and Exchange Commission's public reference room at
450 Fifth Street N.W., Washington, D.C. 20549 or
o obtain copies of reports, proxy and information statements and other
information that we have filed with the Securities and Exchange
Commission on the Securities and Exchange Commission's Internet web
site at http://www.sec.gov.
You can get more information about the Securities and Exchange Commission's
public reference room by calling the Securities and Exchange Commission at
1-800-SEC-0330.
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
We make forward-looking statements within the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995 throughout this prospectus.
These statements relate to our future plans, objectives, expectations and
intentions. These statements may be identified by the use of words such as
"expects," "anticipates," "intends," "believes," "estimates," "plans" and
similar expressions. Our actual results could differ materially from those
discussed in these statements. Factors that could contribute to such differences
include, but are not limited to, those discussed in the "Risk Factors" section
of this prospectus.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere or incorporated by
reference in this prospectus. This is not intended to be a complete description
of the matters covered in this prospectus and is subject to and qualified in its
entirety by reference to the more detailed information and financial statements,
including the notes thereto, appearing elsewhere or incorporated by reference in
this prospectus. All share information set forth herein is adjusted to reflect a
one-for-ten reverse stock split effected by EasyLink Services Corporation on
January 23, 2002.
Our Company
EasyLink Services Corporation is a leading provider of services that
power the electronic exchange of information between enterprises, their trading
communities and their customers. Every business day we handle over 800,000
transactions that are integral to the movement of money, materials, products and
people in the global economy such as insurance claims, trade and travel
confirmations, purchase orders, invoices, shipping notices and funds transfers,
among many others.
We offer our services to thousands of business customers worldwide
including the majority of the Fortune 500. Our strategy is to expand our
position in the transaction delivery segment of the electronic commerce market
and to begin to offer to our large customer base related transaction management
services that automate more components of our customers' business processes.
We believe that growth of the transaction delivery and related
transaction management services segment will result from continued strong
investment in e-commerce systems. These systems generate transactions requiring
delivery of information to or management of information among a wide range of
partners and customers. The resulting exchanges of information will occur across
an increasingly complex array of disparate networks, marketplaces, systems,
technologies and locations. We believe that third party providers of transaction
delivery and transaction management services can substantially reduce the
complexity and cost of operating in this environment. Transaction delivery and
transaction management services will provide substantial benefits to businesses
by migrating people-intensive and paper-based processes to electronic
transaction delivery and management services. We expect that businesses will
achieve these benefits by improving inventory turnover, accelerating
receivables' collections, automating manual processes, optimizing purchasing
practices and reducing waste and overhead costs.
Enterprises use EasyLink's transaction delivery services to reduce the
complexity, cost and time associated with deploying and managing networks to
conduct business electronically within all or a part of their trading and
customer communities. For example, we help automate the collection and
processing of claims information for several of the world's largest insurance
companies. Also, thousands of companies of all sizes use our services to
streamline the routing and delivery of purchase orders to and from members of
their trading communities. Our customers take advantage of our ability to accept
a transaction in just about any form and from virtually any environment in which
enterprise transactions originate, and deliver it in just about any form to
virtually any other environment, replacing slow, costly, people- and
paper-intensive methods that are in wide use today. We also currently host and
operate e-mail systems and provide virus protection, unsolicited e-mail or spam
control and content filtering services that protect a customer's e-mail system
from messages before they enter or leave the corporate network. We derive
revenue from license fees, monthly per-user fees, per-message charges,
per-minute charges and consulting fees.
Typically, our services extend the capabilities and geographic reach of
a customer's e-commerce system. Using our services, a customer can exchange
information in a reliable and secure manner and with the flexibility to adapt to
the diversity of e-commerce systems and applications in use. Our transaction
delivery services provide a broad range of strong capabilities to enterprises,
including the ability to:
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o gain access to and use our services through a variety of commonly used
enterprise e-commerce application interfaces: SAP, Oracle, PeopleSoft,
Web sites, electronic data interchange or EDI systems and others,
running on computer systems from mainframe to desktop PC to handheld
computer systems;
o send and receive information using alternative message types: e-mail,
EDI, fax, telex, hard copy;
o connect to our network through the methods in common use today:
Internet, dedicated or leased lines, frame relay, virtual private
network or VPN and secure dial-up across a phone line;
o deliver information securely using a variety of security protocols:
IP-SEC; SSL, HTTPS, RSA, S/MIME, PGP and non-repudiation/delivery
confirmation capabilities. EasyLink plays the role of a trusted
third-party in control of a message from transmission to delivery;
o exchange information with other computer networks using a broad range
of communication protocols that computer networks use to exchange
information: HTTP, SMTP, TCP/IP, FTP, UNIX/UUCP, Telnet, X.400, IBM
proprietary; and
o exchange information in over 200 document types or formats, including
EDI, HTML, XML, PDF, TIFF.
We plan to launch a series of new transaction delivery and transaction
management capabilities building upon the substantial customer base, technology
and servicing assets we brought together during 2001. We are building these
capabilities to increase the accessibility, security, data translation and
document transformation capabilities of our network. Specifically, we plan to:
o increase the accessibility of our transaction delivery services through
the introduction of Web-based EDI. This service will enable
transactions between large enterprises and small- to mid-sized
companies in their trading and customer communities, increasing the
number of companies they conduct business with electronically;
o increase the security of Internet-based EDI through the introduction of
HTTPS and PKI support. Increased security will expand EasyLink's role
as a trusted third-party transaction delivery network;
o work closely with our customers to develop and introduce XML-based data
translation services. We believe that these services will enable
EasyLink to become an integral part of automating our customers' key
business processes linked to transaction delivery and transaction
management and will increase the Company's revenue per transaction;
o develop e-business solutions for paper- and forms-intensive industries
to enable them to automate more of their business processes; and
o implement a Six Sigma quality program to increase customer satisfaction
and profitability.
5
Other operations
We previously operated an advertising network business. On October 26,
2000, we announced our intention to sell this business to focus exclusively on
our established outsourced messaging business. On March 30, 2001, we completed
the sale of the advertising network business to Net2Phone, Inc. Included in the
sale were our rights to provide e-mail-based advertising and permission
marketing solutions to advertisers, as well as our rights to provide e-mail
services directly to consumers at the www.mail.com Web site and in partnership
with other Web sites.
In March 2000, we formed WORLD.com, Inc. to develop the Company's
portfolio of domain names into independent Web properties, and subsequently
acquired or formed its subsidiaries Asia.com, Inc. and India.com, Inc. in which
WORLD.com was the majority owner. In November 2000, the Company announced its
intention to sell all assets not related to its core outsourced messaging
business, including Asia.com, Inc., India.com, Inc. and its portfolio of domain
names. On May 3, 2001, our majority-owned subsidiary Asia.com, Inc. completed
the sale of its business to an investor group. In October 2001, we sold a
subsidiary of India.com, Inc. and entered into an agreement to sell the portal
operations of India.com, Inc. We subsequently terminated the agreement to sell
the portal operations of India.com, Inc. and have ceased conducting its portal
business.
We are a Delaware corporation. Our principal executive offices are
located at 399 Thornall Street, Edison, NJ 08837. Our phone number is (732)
906-2000.
6
RISK FACTORS
Before you invest in our Class A common stock, you should carefully
consider the risks described below and the other information included or
incorporated by reference in this prospectus.
We have only a limited operating history and we are involved in a new and
unproven industry.
We have only a limited operating history upon which you can evaluate our
business and our prospects. We have offered a commercial email service since
November 1996 under the name iName. We changed our company name to Mail.com,
Inc. in January 1999. In February 2000, we acquired NetMoves Corporation, a
provider of a variety of Internet message or transaction delivery services to
businesses. In March 2000, we formed WORLD.com to develop and operate our domain
name properties as independent Web sites. In the fourth quarter of 2000, we
announced our intention to focus exclusively on the business market and to sell
all assets not related to this business. In February 2001, we acquired Swift
Telecommunications, Inc. which had contemporaneously acquired the EasyLink
Services business from AT&T Corp. The EasyLink Services business is a provider
of outsourced e-mail services and of transaction delivery services such as
electronic data interchange or EDI, fax services and telex services. Swift is a
provider of telex services. On March 30, 2001, we announced that we had sold our
advertising network business to Net2Phone, Inc. and on May 3, 2001 our Asia.com,
Inc. subsidiary completed the sale of its business. In October 2001, we sold a
subsidiary of India.com, Inc. and have since ceased the conduct of the portal
operations of India.com, Inc. In January 2002, we announced our strategy to
expand our position in the transaction delivery segment of the electronic
commerce market and to begin to offer to our large customer base related
transaction management services that automate more components of our customers'
business processes. Our success will depend in part upon our ability to maintain
or expand our sales of transaction delivery services such as EDI and other
document delivery services to enterprises, our ability to successfully develop
transaction management services, the development of a viable market for
fee-based transaction delivery and transaction management services on an
outsourced basis and our ability to compete successfully in those markets. For
the reasons discussed in more detail below, there are substantial obstacles to
our achieving and sustaining profitability.
We have incurred losses since inception.
We have not achieved profitability in any period, and we may not be able to
achieve or sustain profitability. We incurred a net loss of $143.5 million for
the first nine months of 2001 and $229.5 million for the year ended December 31,
2000. We had an accumulated deficit of $450.7 million as of September 30, 2001.
We intend to expand our sales and marketing operations, upgrade and enhance our
technology, continue our international expansion, and improve and expand our
management information and other internal systems. We intend to continue to make
strategic acquisitions and investments, which may result in significant
amortization of intangibles and other expenses or a later impairment charge
arising out of the write-off of goodwill booked as a result of such acquisitions
or investments. We are making these expenditures in anticipation of higher
revenues, but there will be a delay in realizing higher revenues even if we are
successful. If we do not succeed in substantially increasing our revenues or
integrating the EasyLink Services and Swift businesses with our historical
business, our losses may continue.
If we are unable to raise necessary capital in the future, we may be unable to
invest in the growth of our business or fund necessary expenditures.
We may need to raise additional capital in the future. See Part I. Item 2 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources - contained in our Quarterly Report
on Form 10-Q for the fiscal quarter ended September 30, 2000 and subsequent
reports filed with the Securities and Exchange Commission. At September 30,
2001, we had $11.1 million of cash and cash equivalents and $20,000 of
marketable securities. Our principal commitments consist of subordinated
convertible notes, senior convertible notes, notes payable, obligations under
capital leases, domain asset purchase obligations, accounts payable and other
current obligations and commitments for capital expenditures. For the year ended
December 31, 2000, we received a report from our independent accountants
containing an explanatory paragraph stating that we suffered recurring losses
from operations since inception and have a working capital deficiency that raise
substantial doubt about our ability to continue as a going concern. We may need
additional financing to invest in the growth of our business and to pay other
obligations, and the availability of such financing when needed, on terms
acceptable to us, or if at all, is uncertain. See "Risk Factors - We May Be
Unable to Pay Debt Service on Our Indebtedness for Money Borrowed and Other
Obligations." If we are unable to raise additional financing or generate
sufficient cash flow, we may be unable to continue as a going concern.
7
If we raise additional funds by issuing equity securities or debt
convertible into equity securities, stockholders may experience dilution of
their ownership interest. The amount of dilution resulting from issuance of
additional shares of Class A common stock and securities convertible into Class
A common stock and the potential dilution that may result from future issuances
has significantly increased in light of the decline in our stock price.
Moreover, we could issue preferred stock that has rights senior to those of the
Class A common stock. Some of our stockholders have registration rights that
could interfere with our ability to raise needed capital. If we raise funds by
issuing debt, our lenders may place limitations on our operations, including our
ability to pay dividends.
We intend to continue to acquire, or make strategic investments in, other
businesses and acquire or license technology and other assets and we may have
difficulty integrating these businesses or generating an acceptable return.
We have completed a number of acquisitions and strategic investments since
our initial public offering. For example, we acquired NetMoves Corporation, a
provider of a variety of transaction delivery services to businesses, and The
Allegro Group, Inc., a provider of email and email related services, such as
virus blocking and content screening, to businesses. We also acquired Swift
Telecommunications, Inc. and the EasyLink Services business that it had
contemporaneously acquired from AT&T Corp. We will continue our efforts to
acquire or make strategic investments in businesses and to acquire or license
technology and other assets, and any of these acquisitions may be material to
us. We cannot assure you that acquisition or licensing opportunities will
continue to be available on terms acceptable to us or at all. Such acquisitions
involve risks, including:
o inability to raise the required capital;
o difficulty in assimilating the acquired operations and personnel;
o inability to retain any acquired member or customer accounts;
o disruption of our ongoing business;
o the need for additional capital to fund losses of acquired businesses;
o inability to successfully incorporate acquired technology into our
service offerings and maintain uniform standards, controls, procedures
and policies; and
o lack of the necessary experience to enter new markets.
8
We may not successfully overcome problems encountered in connection with
potential acquisitions. In addition, an acquisition could materially impair our
operating results by diluting our stockholders' equity, causing us to incur
additional debt or requiring us to amortize acquisition expenses and acquired
assets or to incur impairment charges as a result of the write-off of goodwill
booked as a result of such acquisition.
We may be unable to successfully complete the integration of the EasyLink
Services Business acquired from AT&T.
On February 23, 2001, we completed the acquisition of Swift
Telecommunications, Inc. which had contemporaneously acquired the EasyLink
Services business of AT&T Corp. The EasyLink Services business acquired from
AT&T provides a variety of electronic messaging and transaction delivery
services. This business was a division of AT&T and was not a separate
independent operating entity. We hired only a portion of the employees of the
business.
Under a Transition Services Agreement entered into in connection with the
acquisition, AT&T agreed to provide us with a variety of services to enable us
to continue to operate the business pending the transition to EasyLink. See
"Part I. Item 1. Business - Transition Services Agreement and Master Carrier
Agreement with AT&T Corp." in our Form 10-K for the year ended December 31, 2000
filed on April 2, 2001. We have transitioned many of these services provided by
AT&T under the Transition Services Agreement to ourselves, including customer
service, network operations center, telex switching equipment and services and
office space in a variety of locations. However, the network for the portion of
this business relating to EDI, fax and email services continues to reside on
AT&T's managed network and is being operated and maintained for EasyLink by AT&T
pursuant to the Transition Services Agreement. We plan to migrate off the AT&T
network to the EasyLink network over the next two years.
We cannot assure you that we will be able to successfully transition the
remaining EasyLink Services network and other operations from AT&T to us, or
successfully integrate them into our operations, in a timely manner or without
incurring substantial unforeseen expense. Even if successfully transitioned and
integrated, we may be unable to operate the business at expense levels that are
ultimately profitable for us. We cannot assure you that we will be able to
retain all of the customers of the EasyLink Services business. Our inability to
successfully transition, integrate or operate the network and operations, or to
retain customers, of the EasyLink Services business will result in a material
adverse effect on our business, results of operations and financial condition.
We have incurred significant indebtedness for money borrowed.
As of September 30, 2001, we had approximately $134.6 million principal
amount of outstanding indebtedness for borrowed money and capital leases. On a
pro forma basis after giving effect to our debt restructuring completed on
November 27, 2001, as of September 30, 2001, we had approximately $97 million
principal amount of such outstanding indebtedness and capital leases. We may
incur substantial additional indebtedness in the future. The level of our
indebtedness, among other things, could (1) make it difficult for us to make
payments on our indebtedness, (2) make it difficult to obtain any necessary
financing in the future for working capital, capital expenditures, debt service
requirements or other purposes, (3) limit our flexibility in planning for, or
reacting to changes in, our business, and (4) make us more vulnerable in the
event of a downturn in our business.
We may be unable to pay debt service on our indebtedness for money borrowed and
other obligations.
9
We had an operating loss and negative cash flow during the first nine months
of 2001 and for the year ended December 31, 2000. In addition, we have a
substantial amount of outstanding accounts payable and other obligations.
Accordingly, cash generated by our operations would have been insufficient to
pay the amount of interest payable annually on our outstanding indebtedness or
to pay our other obligations. We cannot assure you that we will be able to pay
interest and other amounts due on our outstanding indebtedness, or our other
obligations, on the scheduled dates or at all. If our cash flow and cash
balances are inadequate to meet our obligations, we could face substantial
liquidity problems. If we are unable to generate sufficient cash flow or
otherwise obtain funds necessary to make required payments, or if we otherwise
fail to comply with any covenants in our indebtedness, we would be in default
under these obligations, which would permit these lenders to accelerate the
maturity of the obligations and could cause defaults under our indebtedness. Any
such default could have a material adverse effect on our business, results of
operations and financial condition. We cannot assure you that we would be able
to repay amounts due on our indebtedness if payment of the indebtedness were
accelerated following the occurrence of an event of default under, or certain
other events specified in, the agreements governing our outstanding indebtedness
and capital leases, including any deemed sale of all or substantially all of our
assets.
Outsourcing of transaction delivery and transaction management services may not
prove to be viable businesses.
An important part of our business strategy is to leverage our existing
global customer base and global network by continuing to provide our existing
transaction delivery services and by offering these customers additional
transaction delivery and new transaction management services in the future. The
market for transaction management services is only beginning to develop. Our
success will depend on the continued expansion of the market for outsourced
transaction delivery services such as EDI and fax services and the development
of viable markets for the outsourcing of additional transaction delivery
services and new transaction management services. Each of these developments is
somewhat speculative.
There are significant obstacles to the development of a sizable market for
the outsourcing of transaction delivery and transaction management services.
Outsourcing is one of the principal methods by which we will attempt to reach
the size we believe is necessary to be successful. Security and the reliability
of the Internet, however, are likely to be of concern to enterprises and service
providers deciding whether to outsource their transaction delivery and
transaction management or to continue to provide it themselves. These concerns
are likely to be particularly strong at larger businesses and service providers,
which are better able to afford the costs of maintaining their own systems.
While we intend to focus exclusively on our outsourced transaction delivery and
transaction management services, we cannot be sure that we will be able to
maintain or expand our business customer base. In addition, the sales cycle for
many of these services is lengthy and could delay our ability to generate
revenues in this market.
Our strategy of developing and offering to existing customers additional
transaction delivery and transaction management services may be unsuccessful.
As part of our recently announced business strategy, we plan to develop and
offer to existing customers additional transaction delivery and transaction
management services that will automate more of our customers business processes.
We cannot assure you that we will be able to successfully develop these
additional services in a timely manner or at all or, if developed, that our
customers will purchase these services or will purchase them at prices that we
wish to charge. Standards for pricing in the market for new transaction delivery
and transaction management services are not yet well defined and some businesses
and service providers may not be willing to pay the fees we wish to charge. We
cannot assure you that the fees we intend to charge will be sufficient to offset
the related costs of providing these services.
10
We may fail to meet market expectations because of fluctuations in our quarterly
operating results, which would cause our stock price to decline.
We may experience significant fluctuations in our quarterly results. It is
likely that our operating results in some quarters will be below market
expectations. In this event, the price of our Class A common stock is likely to
decline.
The following are among the factors that could cause significant fluctuations in
our operating results:
o incurrence of other cash and non-cash accounting charges, including
charges resulting from acquisitions or dispositions of assets,
including from the disposition of our remaining non-core assets, and
write-downs of impaired assets;
o non-cash charges associated with repriced stock options;
o system outages, delays in obtaining new equipment or problems with
planned upgrades;
o disruption or impairment of the Internet;
o demand for outsourced transaction delivery and transaction management
services;
o attracting and retaining customers and maintaining customer
satisfaction;
o introduction of new or enhanced services by us or our competitors;
o changes in our pricing policy or that of our competitors;
o changes in governmental regulation of the Internet and transaction
delivery and transaction management services in particular; and
o general economic and market conditions.
Other such factors in our non-core assets include:
o incurrence of additional expenditures without receipt of offsetting
revenues pending the sale of these assets.
We may incur significant stock based compensation charges related to repriced
options.
In light of the decline in our stock price and in an effort to retain our
employee base, on November 14, 2000, the Company offered to certain of its
employees, officers and directors, other than Gerald Gorman, the right to
reprice certain outstanding stock options to an exercise price equal to $16.90
per share, the closing price of the Company's Class A common stock on NASDAQ on
November 14, 2000. Options to purchase 632,790 shares were repriced. The
repriced options vest at the same rate that they would have vested under their
original terms. In March 2000, Financial Accounting Standards Board ("FASB")
issued FASB Interpretation No. 44, "Accounting for Certain Transactions
Involving Stock Compensation, an interpretation of APB Opinion No. 25"
("Interpretation"). Among other issues, this Interpretation clarifies (a) the
definition of employee for purposes of applying Opinion 25, (b) the criteria for
determining whether a plan qualifies as a noncompensatory plan, (c) the
accounting consequence of various modifications to the terms of a previously
fixed stock option or award, and (d) the accounting for an exchange of stock
compensation awards in a business combination. As a result, under the
Interpretation, stock options repriced after December 15, 1998 are subject to
variable plan accounting treatment. This guidance requires the Company to
re-measure compensation cost for outstanding repriced options each reporting
period based on changes in the market value of the underlying common stock. If
our stock price rises above the $16.90 exercise price of the repriced options,
this accounting treatment may result in significant non-cash compensation
charges in future periods.
11
Several of our competitors have substantially greater resources, longer
operating histories, larger customer bases and broader product offerings.
Our business is, and we believe will continue to be, intensely competitive.
See "Part I Item 1 - Business - Competition" in our Form 10-K for the year ended
December 31, 2000 filed on April 2, 2001 and subsequent reports filed with the
Securities and Exchange Commission.
Many of our competitors have greater market presence, engineering and
marketing capabilities, and financial, technological and personnel resources
than those available to us. As a result, they may be able to develop and expand
their communications and network infrastructures more quickly, adapt more
swiftly to new or emerging technologies and changes in customer requirements,
take advantage of acquisition and other opportunities more readily, and devote
greater resources to the marketing and sale of their products and services. In
addition, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase the
ability of their services to address the needs of our current and prospective
customers. Accordingly, it is possible that new competitors or alliances among
competitors may emerge and rapidly acquire significant market share. In addition
to direct competitors, many of our larger potential customers may seek to
internally fulfill their messaging needs through the deployment of their own on
premises messaging systems.
Some of our competitors provide a variety of business services and products
such as Internet access and other telecommunications services, browser software,
homepage design, Web site hosting and software and hardware solutions in
addition to messaging services. The ability of these competitors to offer a
broader suite of complementary services may give them a considerable advantage
over us.
The level of competition is likely to increase as current competitors
increase the sophistication of their offerings and as new participants enter the
market. In the future, as we expand our service offerings, we expect to
encounter increased competition in the development and delivery of these
services. We may not be able to compete successfully against our current or
future competitors.
Our rapid expansion is straining our existing resources, and if we are not able
to manage our growth effectively, our business and operating results will
suffer.
We have aggressively expanded our operations in anticipation of continued
growth in our business and as a result of our acquisitions. We have also
developed the technology and infrastructure to offer a range of services in our
target market. This expansion has placed, and we expect it to continue to place,
a significant strain on our managerial, operational and financial resources. If
we cannot manage our growth effectively, our business, operating results and
financial condition will suffer.
It is difficult to retain key personnel and attract additional qualified
employees in our business and the loss of key personnel and the burden of
attracting additional qualified employees may impede the operation and growth of
our business and cause our revenues to decline.
Our future success depends to a significant extent on the continued service
of our key technical, sales and senior management personnel, but they have no
contractual obligation to remain with us. In particular, our success depends on
the continued service of Gerald Gorman, our Chairman, Thomas Murawski, our Chief
Executive Officer, Brad Schrader, our President, George Abi Zeid, our
President-International Operations, and Debra McClister, our Executive Vice
President and Chief Financial Officer. The loss of the services of Messrs.
Gorman, Murawski, Schrader or Abi Zeid or of Ms. McClister, or several other key
employees, would impede the operation and growth of our business.
12
To manage our existing business and handle any future growth, we will have
to attract, retain and motivate additional highly skilled employees. In
particular, we will need to hire and retain qualified sales people if we are to
meet our sales goals. We will also need to hire and retain additional
experienced and skilled technical personnel in order to meet the increasing
technical demands of our expanding business. Competition for employees in
messaging-related businesses is intense. We have in the past experienced, and
expect to continue to experience, difficulty in hiring and retaining employees
with appropriate qualifications. If we are unable to do so, our management may
not be able to effectively manage our business, exploit opportunities and
respond to competitive challenges.
Our business is heavily dependent on technology, including technology that has
not yet been proven reliable at high traffic levels and technology that we do
not control.
The performance of our computer systems is critical to the quality of
service we are able to provide to our customers. If our services are unavailable
or fail to perform to their satisfaction, they may cease using our service. In
addition, our agreements with several of our customers establish minimum
performance standards. If we fail to meet these standards, our customers could
terminate their relationships with us and assert claims for monetary damages.
We may need to upgrade our computer systems to accommodate increases in traffic
and to accommodate increases in the usage of our services, but we may not be
able to do so while maintaining our current level of service, or at all.
We must continue to expand and adapt our computer systems as the number of
customers and the amount of information they wish to transmit increases and as
their requirements change, and as we further develop our services. Because we
have only been providing some of our services for a limited time, and because
our computer systems for these services have not been tested at greater
capacities, we cannot guarantee the ability of our computer systems to connect
and manage a substantially larger number of customers or meet the needs of
business customers at high transmission speeds. If we cannot provide the
necessary service while maintaining expected performance, our business would
suffer and our ability to generate revenues through our services would be
impaired.
The expansion and adaptation of our computer systems will require
substantial financial, operational and managerial resources. We may not be able
to accurately project the timing of increases in traffic or other customer
requirements. In addition, the very process of upgrading our computer systems
could cause service disruptions. For example, we may need to take various
elements of the network out of service in order to install some upgrades.
Our computer systems may fail and interrupt our service.
Our customers have in the past experienced interruptions in our services. We
believe that these interruptions will continue to occur from time to time. These
interruptions are due to hardware failures, failures in telecommunications and
other services provided to us by third parties and other computer system
failures. These failures have resulted and may continue to result in significant
disruptions to our service. Some of our operations have redundant switch-over
capability. Although we plan to install backup computers and implement
procedures on other parts of our operations to reduce the impact of future
malfunctions in these systems, the presence of single points of failure in our
network increases the risk of service interruptions. Some aspects of our
computer systems are not redundant. These include our database system and our
email storage system, which stores emails and other data. In addition,
substantially all of our computer and communications systems relating to our
services other than the systems located and operated by AT&T Corp. under our
Transition Services Agreement with them are currently located in Manhattan,
Jersey City, New Jersey, Edison, New Jersey, Washington, DC and Dayton, Ohio. We
currently do not have alternate sites from which we could conduct these
operations in the event of a disaster. Our computer and communications hardware
is vulnerable to damage or interruption from fire, flood, earthquake, power
loss, telecommunications failure and similar events. Our services would be
suspended for a significant period of time if any of our primary data centers
was severely damaged or destroyed. We might also lose stored emails and other
customer files, causing significant customer dissatisfaction and possibly giving
rise to claims for monetary damages.
13
Our services will become less desirable or obsolete if we are unable to keep up
with the rapid changes characteristic of our business.
Our success will depend on our ability to enhance our existing services and
to introduce new services in order to adapt to rapidly changing technologies,
industry standards and customer demands. To compete successfully, we will have
to accurately anticipate changes in business and consumer demand and add new
features to our services very rapidly. We may not be able to integrate the
necessary technology into our computer systems on a timely basis or without
degrading the performance of our existing services. We cannot be sure that, once
integrated, new technology will function as expected. Delays in introducing
effective new services could cause existing and potential customers to forego
use of our services and to use instead those of our competitors.
Our business will suffer if we are unable to provide adequate security for our
service, or if our service is impaired by security measures imposed by third
parties.
Security is a critical issue for any outsourced transaction delivery or
transaction management service, and presents a number of challenges for us.
If we are unable to maintain the security of our service, our reputation and
our ability to attract and retain customers may suffer, and we may be exposed to
liability. Third parties may attempt to breach our security or that of our
customers whose networks we may maintain or for whom we provide services. If
they are successful, they could obtain information that is sensitive or
confidential to a customer or otherwise disrupt a customer's operations or
obtain confidential information, including our customer's profiles, passwords,
financial account information, credit card numbers, stored email or other
personal or business information. Our customers or their employees may assert
claims for money damages for any breach in our security and any breach could
harm our reputation.
Our computers are vulnerable to computer viruses, physical or electronic
break-ins and similar incursions, which could lead to interruptions, delays or
loss of data. We expect to expend significant capital and other resources to
license or create encryption and other technologies to protect against security
breaches or to alleviate problems caused by any breach. Nevertheless, these
measures may prove ineffective. Our failure to prevent security breaches may
expose us to liability and may adversely affect our ability to attract and
retain customers and develop our business market.
Security measures taken by others may interfere with the efficient operation
of our service, which may harm our reputation, adversely impact our ability to
attract and retain customers. "Firewalls" and similar network security software
employed by third parties can interfere with the operation of our services.
We are dependent on licensed technology.
We license a significant amount of technology from third parties, including
technology related to our managed e-mail and groupware services, virus
protection, spam control and content filtering services, Internet fax services,
billing processes and database. We anticipate that we will need to license
additional technology to remain competitive. We may not be able to license these
technologies on commercially reasonable terms or at all. Third-party licenses
expose us to increased risks, including risks relating to the integration of new
technology, the diversion of resources from the development of our own
proprietary technology, a greater need to generate revenues sufficient to offset
associated license costs, and the possible termination of or failure to renew an
important license by the third-party licensor.
14
If the Internet and other third-party networks on which we depend to deliver our
services become ineffective as a means of transmitting data, the benefits of our
service may be severely undermined.
Our business depends on the effectiveness of the Internet as a means of
transmitting data. The recent growth in the use of the Internet has caused
frequent interruptions and delays in accessing and transmitting data over the
Internet. Any deterioration in the performance of the Internet as a whole could
undermine the benefits of our services. Therefore, our success depends on
improvements being made to the entire Internet infrastructure to alleviate
overloading and congestion. We also depend on telecommunications network
suppliers such as AT&T Corp. and Worldcom for a variety of telecommunications
and Internet services. Pending the transition of the network and operations for
the EasyLink Services business acquired from AT&T, we are dependent on the
services being provided to us under our Transition Services Agreement with AT&T.
See "Risk Factors - We May Be Unable to Successfully Integrate the EasyLink
Services Business Acquired From AT&T" above, "Item 1. Business - Technology" in
our Form 10-K for the year ended December 31, 2000 filed on April 2, 2001 and
subsequent filings with the Securities and Exchange Commission.
Gerald Gorman and George Abi Zeid collectively held as of December 31, 2001 a
majority of the total outstanding voting power of EasyLink and will be able to
prevent a change of control.
Gerald Gorman, our Chairman, held as of December 31, 2001 Class A and Class
B common stock representing approximately 41.3% of the voting power of our
outstanding common stock. Each share of Class B common stock entitles the holder
to 10 votes on any matter submitted to the stockholders. George Abi Zeid, our
President-International Operations and Director, beneficially owned as of
December 31, 2001 Class A common stock representing approximately 9.5% of the
voting power of our outstanding common stock and, after giving effect to the
issuance of shares issuable upon conversion or exercise of convertible
securities and warrants held by Mr. Abi Zeid, approximately 10.8% of such voting
power. Based on their voting power as of December 31, 2001, Mr. Gorman and Mr.
Abi Zeid will be able to determine the outcome of all matters requiring
stockholder approval, including the election of directors, amendment of our
charter and approval of significant corporate transactions. Mr. Gorman and Mr.
Abi Zeid will be in a position to prevent a change in control of EasyLink even
if the other stockholders were in favor of the transaction.
We have agreed to permit Federal Partners, L.P., a holder of our senior
convertible notes and Class A common stock, to designate one member of our board
of directors. In addition, in connection with the acquisition of Swift
Telecommunications, Inc., we agreed to appoint George Abi Zeid, the former sole
shareholder of Swift, as a director and as our President of International
Operations.
Our charter contains provisions that could deter or make more expensive a
takeover of EasyLink. These provisions include the ability to issue "blank
check" preferred stock without stockholder approval.
Our goal of building brand identity is likely to be difficult and expensive.
15
We announced on April 2, 2001 that we have changed our corporate name to
EasyLink Services Corporation to more accurately reflect the strengths,
relationships and solutions that we offer. We believe that a quality brand
identity will be essential if we are to develop our business services market. If
our marketing efforts cost more than anticipated or if we cannot increase our
brand awareness, our losses will increase and our ability to succeed will be
seriously impeded.
Our expansion into international markets is subject to significant risks and our
losses may increase and our operating results may suffer if our revenues from
international operations do not exceed the costs of those operations.
We intend to continue to expand into international markets and to expend
significant financial and managerial resources to do so. We have limited
experience in international operations and may not be able to compete
effectively in international markets. If our revenues from international
operations do not exceed the expense of establishing and maintaining these
operations, our losses will increase and our operating results will suffer. We
face significant risks inherent in conducting business internationally, such as:
o uncertain demand in foreign markets for transaction delivery and
transaction management services;
o difficulties and costs of staffing and managing international
operations;
o differing technology standards;
o difficulties in collecting accounts receivable and longer collection
periods;
o economic instability and fluctuations in currency exchange rates and
imposition of currency exchange controls;
o potentially adverse tax consequences;
o regulatory limitations on the activities in which we can engage and
foreign ownership limitations on our ability to hold an interest in
entities through which we wish to conduct business;
o political instability, unexpected changes in regulatory requirements,
and reduced protection for intellectual property rights in some
countries;
o export restrictions, and
o difficulties in enforcing contracts and potentially adverse
consequences.
Regulation of transaction delivery and transaction management services and
Internet use is evolving and may adversely impact our business.
There are currently few laws or regulations that specifically regulate
activity on the Internet. However, laws and regulations may be adopted in the
future that address issues such as user privacy, pricing, and the
characteristics and quality of products and services. For example, the
Telecommunications Act of 1996 restricts the types of information and content
transmitted over the Internet. Several telecommunications companies have
petitioned the FCC to regulate ISPs and online service providers in a manner
similar to long distance telephone carriers and to impose access fees on these
companies. This could increase the cost of transmitting data over the Internet.
Any new laws or regulations relating to the Internet could adversely affect our
business.
16
Moreover, the extent to which existing laws relating to issues such as
property ownership, pornography, libel and personal privacy are applicable to
the Internet is uncertain. We could face liability for defamation, copyright,
patent or trademark infringement and other claims based on the content of
messages transmitted over our system. We may also face liability for unsolicited
commercial and other email and fax messages sent by users of our services. We do
not and cannot screen all the content generated and received by users of our
services. Some foreign governments, such as Germany, have enforced laws and
regulations related to content distributed over the Internet that are more
strict than those currently in place in the United States. We may be subject to
legal proceedings and damage claims if we are found to have violated laws
relating to email content.
A majority of our services are currently classified by the FCC as
"information services," and therefore are exempt from public utility regulation.
To the extent that we are permitted to offer all of our services as a single
"bundle of interrelated products," then the whole bundle is currently exempt
from regulation as a "hybrid service." If considered independent of the bundle,
however, our fax-to-fax services, when conducted over circuit-switched network
lines, and our telex services, qualify as "telecommunications services," and
would thus be subject to federal regulation. Moreover, while the FCC has until
now exercised forbearance in regulating IP communications, it has indicated that
it might regulate certain IP communications as "telecommunications services" in
the future. There can be no assurance that the FCC will not change its
regulatory classification system and thereby subject us to unexpected and
burdensome additional regulation. In addition, a variety of states regulate
certain of our services when provided on an intrastate basis.
We obtained authorizations from the FCC to provide such telecommunications
services in conjunction with our acquisition of these telecommunications
services from NetMoves, and are classified as a "non-dominant interexchange
carrier." While the FCC has generally chosen not to exercise its statutory power
to closely regulate the charges or practices of non-dominant carriers, it will
act upon complaints against such carriers for failure to comply with statutory
obligations or with the FCC's rules, regulations and policies - to the extent
that such services are, in the FCC's view, subject to regulation.
Continued changes in telecommunications regulations may significantly reduce
the cost of domestic and international calls. To the extent that the cost of
domestic and international calls decreases, we will face increased competition
for our fax services which may have a material adverse effect on our business,
financial condition or results in operations.
In connection with the deployment of Internet-capable nodes in countries
throughout the world, we are required to satisfy a variety of foreign regulatory
requirements. We intend to explore and seek to comply with these requirements on
a country-by-country basis as the deployment of Internet-capable fax nodes
continues. There can be no assurance that we will be able to satisfy the
regulatory requirements in each of the countries currently targeted for node
deployment, and the failure to satisfy such requirements may prevent us from
installing Internet-capable fax nodes in such countries. The failure to deploy a
number of such nodes could have a material adverse effect on our business,
operating results and financial condition.
Our fax nodes and our faxLauncher service utilize encryption technology in
connection with the routing of customer documents through the Internet. The
export of such encryption technology is regulated by the United States
government. We have authority for the export of such encryption technology other
than to Cuba, Iran, Iraq, Libya, North Korea, and Rwanda. Nevertheless, there
can be no assurance that such authority will not be revoked or modified at any
time for any particular jurisdiction or in general. In addition, there can be no
assurance that such export controls, either in their current form or as may be
subsequently enacted, will not limit our ability to distribute our services
outside of the United States or electronically. While we take precautions
against unlawful exportation of our software, the global nature of the Internet
makes it virtually impossible to effectively control the distribution of our
services. Moreover, future Federal or state legislation or regulation may
further limit levels of encryption or authentication technology. Any such export
restrictions, the unlawful exportation of our services, or new legislation or
regulation could have a material adverse effect on our business, financial
condition and results of operations.
17
The legal structure and scope of operations of our subsidiaries in some
foreign countries may be subject to restrictions which could result in severe
limits to our ability to conduct business in these countries and this could have
a material adverse effect on our financial position, results of operations and
cash flows. To the extent that we develop or offer messaging services in foreign
countries, we will be subject to the laws and regulations of these countries.
The laws and regulations relating to the Internet in many countries are evolving
and in many cases are unclear as to their application. For example, in India,
the PRC and other countries we may be subject to licensing requirements with
respect to the activities in which we propose to engage and we may also be
subject to foreign ownership limitations or other approval requirements that
preclude our ownership interests or limit our ownership interests to up to 49%
of the entities through which we propose to conduct any regulated activities. If
these limitations apply to our activities, including our activities conducted
through our subsidiaries, our opportunities to generate revenue will be reduced,
our ability to compete successfully in these markets will be adversely affected,
our ability to raise capital in the private and public markets may be adversely
affected and the value of our investments and acquisitions in these markets may
decline. Moreover, to the extent we are limited in our ability to engage in
certain activities or are required to contract for these services from a
licensed or authorized third party, our costs of providing our services will
increase and our ability to generate profits may be adversely affected.
Our intellectual property rights are critical to our success, but may be
difficult to protect.
We regard our copyrights, service marks, trademarks, trade secrets, domain
names and similar intellectual property as critical to our success. We rely on
trademark and copyright law, trade secret protection and confidentiality and/or
license agreements with our employees, customers, strategic partners and others
to protect our proprietary rights. Despite our precautions, unauthorized third
parties may improperly obtain and use information that we regard as proprietary.
Third parties may submit false registration data attempting to transfer key
domain names to their control. Our failure to pay annual registration fees for
domain names may result in the loss of these domains to third parties. Third
parties have challenged our rights to use some of our domain names, and we
expect that they will continue to do so, which may affect the value that we can
derive from the planned disposition of the domain names included among our
non-core assets.
The status of United States patent protection for software products is not
well defined and will evolve as additional patents are granted. If we apply for
a patent in the future, we do not know if our application will be issued with
the scope of the claims we seek, if at all. The laws of some foreign countries
do not protect proprietary rights to the same extent as do the laws of the
United States. Our means of protecting our proprietary rights in the United
States or abroad may not be adequate and competitors may independently develop
similar technology.
Third parties may infringe or misappropriate our copyrights, trademarks and
similar proprietary rights. In addition, other parties have asserted and may in
the future assert infringement claims against us. We cannot be certain that our
services do not infringe issued patents. Because patent applications in the
United States are not publicly disclosed until the patent is issued,
applications may have been filed which relate to our services.
18
We have been and may continue to be subject to legal proceedings and claims
from time to time in the ordinary course of our business, including claims
related to the use of our domain names and claims of alleged infringement of the
trademarks and other intellectual property rights of third parties. Third
parties have challenged our rights to register and use some of our domain names
based on trademark principles and on the Anticybersquatting Consumer Protection
Act. If domain names become more valuable to businesses and other persons, we
expect that third parties will continue to challenge some of our domain names
and that the number of these challenges may increase. In addition, the existing
or future laws of some countries, in particular countries in Europe, may limit
or prohibit the use in those countries or elsewhere of some of our geographic
names that contain the names of a city in those countries or the name of those
countries. Intellectual property litigation is expensive and time-consuming and
could divert management's attention away from running our business. These claims
and the potential for such claims may reduce the value that we can expect to
receive from the disposition of our domain names.
A substantial amount of our common stock may come onto the market in the future,
which could depress our stock price.
Sales of a substantial number of shares of our common stock in the public
market could cause the market price of our Class A common stock to decline. As
of December 31, 2001, we had an aggregate of 15,680,211 shares of Class A and
Class B common stock outstanding. As of December 31, 2001 we had options to
purchase approximately 1.86 million shares of Class A common stock outstanding.
As of December 31, 2001, we had warrants to purchase 1,843,942 shares of Class A
common stock outstanding. As of December 31, 2001, we had approximately
4,397,914 shares of Class A common stock issuable upon conversion of outstanding
senior convertible notes and an indeterminate number of additional shares of
Class A common stock issuable over five years in payment of interest on such
senior notes. In addition, we had 127,151 shares of Class A common stock
issuable upon conversion of our remaining outstanding 7% Convertible
Subordinated Notes due 2005 at an exercise price of $189.50 per share.
As of December 31, 2001, approximately 7,599,562 shares of Class A common
stock and Class B common stock were freely tradable, in some cases subject to
the volume and manner of sale limitations contained in Rule 144. As of such
date, approximately 8,080,649 shares of Class A common stock will become
available for sale at various later dates upon the expiration of one-year
holding periods or upon the expiration of any other applicable restrictions on
resale. We are likely to issue large amounts of additional Class A common stock,
which may also be sold and which could adversely affect the price of our stock.
As of December 31, 2001, the holders of approximately 9,315,099 shares of
outstanding Class A common stock, the holders of 1,796,255 shares of Class A
common stock issuable upon exercise of our outstanding warrants and the holders
of approximately 6,037,519 shares of Class A common stock issuable upon
conversion of our outstanding senior or subordinated convertible notes and
issuable in payment of interest over the first 18 months after the date of
issuance on our senior convertible notes, had the right, subject to various
conditions, to require us to file registration statements covering their shares,
or to include their shares in registration statements that we may file for
ourselves or for other stockholders. By exercising their registration rights and
selling a large number of shares, these holders could cause the price of the
Class A common stock to fall. An undetermined number of these shares have been
sold publicly pursuant to Rule 144.
Our Class A common stock may be subject to delisting from the Nasdaq National
Market.
19
Our Class A common stock faces potential delisting from the Nasdaq National
Market which could hurt the liquidity of our Class A common stock. We may be
unable to comply with the alternative standards for continued listing on the
Nasdaq National Market. These standards require, among other things, that our
Class A common stock have a minimum bid price of either $1 or $3 and state that
a deficiency shall exist if such minimum bid price remains below $1 or $3, as
applicable, for a period of thirty consecutive business days. In addition, the
standards require that we maintain compliance with various other standards,
including market capitalization or total assets and total revenue, number of
publicly held shares, which are shares held by persons who are not officers,
directors or beneficial owners of 10% of our outstanding shares, and market
value of shares publicly held. If we do not comply with the $3 minimum bid
price, but we do comply with the $1 minimum bid price, then we must comply with
certain other standards, including a $10 million minimum stockholders' equity
requirement. The minimum bid price of our stock was below $1 during various
periods in the fourth quarter of 2000 and the first quarter of 2001 and was
below $1 during the period from March 14, 2001 through January 22, 2002.
On July 27, 2001, the Company received a Nasdaq Staff Determination
indicating that it had failed to regain compliance with the $1.00 minimum bid
price requirement for continued listing. Nasdaq has since notified the Company
that EasyLink now complies with all requirements for continued listing on The
Nasdaq National Market due to the Nasdaq moratorium on the minimum bid price
requirement. Under the moratorium, the minimum bid price requirement was
suspended until January 2, 2002, at which time the 30- and 90-day periods
provided by Nasdaq marketplace Rule 4310(c)(8)(B) started anew. Specifically, an
issuer will be considered non-compliant with the minimum bid price requirement
only if it fails to satisfy the applicable requirement for any 30 consecutive
trading day period following January 1, 2002. It would then be afforded a 90
calendar day grace period in which to regain compliance.
On January 23, 2002, we effected a ten-for-one reverse stock split. Although
our stock price has exceeded the minimum bid price requirements since January
23, 2002 through the date of this prospectus, no assurance can be given that our
stock price will remain above the minimum levels required or that we will
maintain compliance with all of the other applicable listing standards in the
future.
If our common stock were to be delisted from trading on the Nasdaq National
Market and were neither re-listed thereon nor listed for trading on the Nasdaq
Small Cap Market or other recognized securities exchange, trading, if any, in
the Class A common stock may continue to be conducted on the OTC Bulletin Board
or in the non-Nasdaq over-the-counter market. Delisting would result in limited
release of the market price of the Class A common stock and limited news
coverage of EasyLink and could restrict investors' interest in our Class A
common stock and materially adversely affect the trading market and prices for
our Class A common stock and our ability to issue additional securities or to
secure additional financing.
Our stock price has been volatile and we expect that it will continue to be
volatile.
Our stock price has been volatile since our initial public offering and we
expect that it will continue to be volatile. As discussed above, our financial
results are difficult to predict and could fluctuate significantly. In addition,
the market prices of securities of electronic services companies have been
highly volatile. A stock's price is often influenced by rapidly changing
perceptions about the future of electronic services or the results of other
Internet or technology companies, rather than specific developments relating to
the issuer of that particular stock. As a result of volatility in our stock
price, a securities class action may be brought against us. Class-action
litigation could result in substantial costs and divert our management's
attention and resources.
We intend to sell all of the remaining assets not related to our core outsourced
transaction delivery business but may experience difficulty completing any or
all of such sales on favorable terms or at all.
20
In the fourth quarter of 2000, we announced our intention to sell all of our
non-core assets, including our advertising network business, our Asia.com, Inc.
and India.com, Inc. subsidiaries and our portfolio of Internet domain names. On
March 30, 2001, we completed the sale of our advertising network business to
Net2Phone. On May 3, 2001, our Asia.com, Inc. subsidiary completed the sale of
its business. In October 2001, we sold a subsidiary of India.com, Inc. and have
since ceased conducting the portal business of India.com, Inc. We cannot assure
you that we will be able to sell all or any of our remaining non-core assets on
favorable terms or at all. We also cannot assure you as to the timing or the
terms and conditions of the sale of any of these assets or the form or amount of
consideration (if any) that may be received. The realizable value of these
assets may ultimately prove to be less than the carrying value currently
reflected in our consolidated financial statements. Moreover, if the sales are
not successfully completed, the market price of our common stock may decline to
the extent that the current market price reflects a market assumption that such
sales will be successfully completed. To the extent that we receive non-cash
consideration in any of these sales, we may not be able to liquidate this
consideration or otherwise turn it into cash for a period of time after we
receive it or at all.
We have continuing obligations in connection with the sale of our advertising
network business.
On March 30, 2001, we completed the sale of our advertising network business
to Net2Phone, Inc. Included in the sale were our rights to provide e-mail-based
advertising and permission marketing solutions to advertisers, as well as our
rights to provide e-mail services directly to consumers at the www.mail.com Web
site and in partnership with other Web sites. In connection with the sale, we
entered into a hosting agreement under which we agreed to host or arrange to
host the consumer e-mailboxes for Net2Phone for a minimum of one year. During
the second quarter of 2001, we completed the migration of the hosting of these
consumer mailboxes to a third party provider whom we paid for this service. On
November 14, 2001, we entered into an agreement with Net2Phone which terminated
the hosting agreement as of September 30, 2001.
Notwithstanding the migration of the consumer mailboxes to the third party
provider, the termination of the hosting agreement with Net2Phone and the
assignment to Net2Phone of our Web site contracts with third parties, we may
nonetheless remain liable for obligations under such third party Web site
contracts. Accordingly, we may have liability if there is a breach on the part
of the third party to which we have migrated the hosting or on the part of
Net2Phone under the third party Web site agreements that are assigned to them.
21
USE OF PROCEEDS
The selling stockholders will receive all of the proceeds from the sale of
our Class A common stock under this prospectus. We will not receive any proceeds
from these sales.
DESCRIPTION OF CAPITAL STOCK
The following descriptions of our capital stock and the relevant provisions
of our amended and restated certificate of incorporation, as amended, and bylaws
are summaries and are qualified by reference to our amended and restated
certificate of incorporation, as amended, and our bylaws.
We are authorized to issue up to 500,000,000 shares of Class A common
stock, par value $.01 per share, 10,000,000 shares of Class B common stock, par
value $.01 per share, and 60,000,000 shares of preferred stock, par value $.01
per share.
Common stock
As of December 31, 2001, we had approximately 14,680,211 shares of Class A
common stock outstanding held of record by approximately 630 stockholders and
1,000,000 shares of Class B common stock outstanding held entirely by Gerald
Gorman, our Chairman. At a special meeting of stockholders held on August 29,
2001, our stockholders approved nine separate amendments to our Amended and
Restated Certificate of Incorporation, as amended, to enable us to effect one or
more reverse stock splits, ranging from a one-for-two reverse stock split to a
one-for-ten reverse stock split of all of our issued and outstanding shares of
Class A and Class B common stock. Our Board of Directors may elect to implement
or abandon one or more of the reverse stock splits through April 2002. On
January 23, 2002, we effected a ten-for-one reverse stock split in which each
ten outstanding shares of Class A common stock was changed into one outstanding
share of Class A common stock and each ten shares of Class B common stock was
changed into one outstanding shares of Class B common stock.
All of the issued and outstanding shares of our Class A common stock are
fully paid and nonassessable. Except as described below, the issued and
outstanding shares of our Class A common stock and Class B common stock
generally have identical rights. In addition, under our amended and restated
certificate of incorporation, as amended, holders of Class A common stock have
no preemptive or other subscription rights to purchase shares of our stock, nor
are they entitled to the benefits of any redemption or sinking fund provisions.
Voting rights
The holders of our Class A common stock are entitled to one vote per share
on all matters to be voted on by stockholders generally, including the election
of directors. The holder of our Class B common stock is entitled to ten votes
per share on all matters to be voted on by stockholders generally, including the
election of directors. In addition to any class vote that may be required under
law or our amended and restated certificate of incorporation, as amended, all
classes of capital stock entitled to vote generally on any matter vote together
as a single class. There are no cumulative voting rights. Accordingly, holders
of a majority of the total votes entitled to vote in an election of directors
will be able to elect all of the directors standing for election.
Please see "Risk Factors - Gerald Gorman and George Abi Zeid collectively
held as of December 31, 2001 a majority of the total outstanding voting power of
EasyLink and will be able to prevent a change of control."
22
Liquidation preferences
If we are liquidated, dissolved or wound up, the holders of our Class A
common stock and Class B common stock will be entitled to receive distributions
only after satisfaction of all liabilities and the prior rights of any
outstanding class of preferred stock. If we are liquidated, dissolved or wound
up, our assets legally available after satisfaction of all of our liabilities
shall be distributed to the holders of our Class A common stock and Class B
common stock pro rata based on the respective numbers of shares of Class A
common stock held by these holders or issuable to them upon conversion of Class
B common stock.
Conversion rights/mandatory conversion
Holders of our Class A common stock have no conversion rights. Holders of
our Class B common stock may convert each share into one share of Class A common
stock. In addition, the holder of Class B common stock has contractually agreed
with the former holders of Class C preferred stock and Class E preferred stock
and some former holders of Class A preferred stock that he will not transfer his
shares of Class B common stock in the form of Class B common stock unless such
holders have had the opportunity within specified time periods to dispose of
their shares of Class A common stock issuable upon conversion of their preferred
stock at specified prices. As a result, until this condition has been satisfied
or the former holders of a majority in interest of each class of preferred stock
otherwise consent in writing, the holder of Class B common stock must convert
shares of Class B common stock into shares of Class A common stock prior to
transfer.
Dividends
The holders of both classes of our common stock are entitled to receive
equal non-cumulative dividends when and as declared from time to time by the
board of directors, subject to any preferential dividend rights of any
outstanding preferred stock.
Preferred stock
Under our amended and restated certificate of incorporation, as amended,
the board of directors is authorized, without further stockholder approval, to
issue up to 60,000,000 shares of preferred stock in one or more classes or
series. The board also has the authority to fix or alter the designations,
preferences, rights and any qualifications, limitations or restrictions of the
shares of each such class or series, including dividend rights, conversion
rights, voting rights, terms of redemption and liquidation preferences.
Preferred stock could thus be issued quickly with terms that could delay or
prevent a change of control of EasyLink or make removal of management more
difficult. Additionally, the issuance of preferred stock may decrease the market
price of our Class A common stock and may adversely affect the voting and other
rights of the holders of our Class A common stock. Currently, we do not have any
preferred stock outstanding and have no plans to create or issue any shares of
any new class or series of preferred stock.
Anti-takeover effects of certain provisions of Delaware law and our amended and
restated certificate of incorporation, as amended, and bylaws
We are subject to the provisions of Section 203 of the General Corporation
Law of the State of Delaware. Generally, Section 203 prohibits a publicly-held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the time of the
transaction in which the person became an interested stockholder, unless the
interested stockholder attained that status with the approval of the board of
directors or unless the business combination is approved in a prescribed manner.
A "business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Generally, an
"interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, 15% or more of a corporation's
voting stock. This statute could prohibit or delay the accomplishment of mergers
or other takeovers or changes in control with respect to EasyLink and,
accordingly, may discourage attempts to acquire EasyLink.
23
In addition, provisions of the amended and restated certificate, as
amended, and bylaws, which provisions are summarized in the following
paragraphs, may be deemed to have an anti-takeover effect. These provisions may
delay, defer or prevent a tender offer or takeover attempt that a stockholder
might consider to be in its best interests, including those attempts that might
result in a premium over the market price for the shares held by stockholders.
Board of Directors vacancies. Our bylaws authorize the board of directors
to fill vacant directorships or increase the size of the board of directors.
This may prevent a stockholder from removing incumbent directors and
simultaneously gaining control of the board of directors by filling the
resulting vacancies created by such removal with its own nominees.
Special meetings of stockholders. Our bylaws provide that special meetings
of stockholders of EasyLink may be called at any time by the Chairman of the
board, the Vice Chairman of the board, if any, the President, if any, or the
board of directors. Written notice of the meeting must be given not less than 10
nor more than 60 days before the date of the meeting.
Authorized but unissued shares. The authorized but unissued shares of our
common stock and preferred stock are available for future issuance without
stockholder approval, subject to the limitations imposed by The Nasdaq National
Market. These additional shares may be utilized for a variety of corporate
purposes, including future public offerings to raise additional capital,
corporate acquisitions and employee benefit plans. The existence of authorized
but unissued and unreserved common stock and preferred stock could render more
difficult or discourage an attempt to obtain control of EasyLink by means of a
proxy contest, tender offer, merger or otherwise.
The General Corporation Law of the State of Delaware provides generally
that, in addition to the approval of the board of directors, the affirmative
vote of a majority of the shares entitled to vote on any matter is required to
amend a corporation's certificate of incorporation unless a corporation's
certificate of incorporation requires a greater percentage.
Transfer agent and registrar
The transfer agent and registrar for our Class A common stock is American
Stock Transfer and Trust Company.
24
SELLING STOCKHOLDERS
The table below sets forth information with respect to the beneficial
ownership of our Class A common stock by the selling stockholders immediately
prior to this offering and as adjusted to reflect the sale of shares of our
Class A common stock in the offering. All information with respect to the
beneficial ownership has been furnished by the respective selling stockholders.
Percentages are based on the 15,680,211 shares of Class A common stock and Class
B common stock outstanding on December 31, 2001.
Holders of Senior Convertible Notes
Number of Number of Shares Number of Percentage of
Shares Offered Shares to be Shares to be
Beneficially by this Held After Held After
Selling Stockholder Owned(1) Prospectus(1)(2) Offering Offering(3)
------------------- -------- ---------------- -------- -----------
Federal Partners, L.P. (4) 1,446,632 (5) 1,446,632 0 *
Public Employee Retirement System of Idaho 391,955 391,955 0 *
City of Milford Pension & Retirement Fund 112,596 112,596 0 *
Morgan Trust Co. of the Bahamas Ltd. as Trustee 74,144 74,144 0 *
U/A/D 11/30/93
Wells Family LLC 74,314 74,314 0 *
Albert L. Zesiger 66,046 66,046 0 *
Roanoke College 56,188 56,188 0 *
Domenic J. Mizio 56,188 56,188 0 *
NFIB Corporate Account 45,541 45,541 0 *
City of Stamford Firemen's Pension Fund 46,220 46,220 0 *
Barrie Ramsay Zesiger 46,220 46,220 0 *
Wolfson Investment Partners LP 38,232 38,232 0 *
Dean Witter Foundation 38,232 38,232 0 *
National Federation of Independent Business 23,352 23,352 0 *
Employee Pension Trust
The Jenifer Altman Foundation 33,248 33,248 0 *
Theeuwes Family Trust, Felix Theeuwes Trustee 28,094 28,094 0 *
Susan Uris Halpern 28,094 28,094 0 *
Andrew Heiskell 28,264 28,264 0 *
Meehan Foundation 16,426 16,426 0 *
The Meehan Investment Partnership I, L.P. 17,956 17,956 0 *
Murray Capital, LLC 17,956 17,956 0 *
Mary C. Anderson Revocable Trust UDT dated July 6, 1999,
Mary C. Anderson, Trustee 11,506 11,506 0 *
Butler Family LLC 18,556 18,556 0 *
William B. Lazar 15,122 15,122 0 *
Psychology Associates 12,972 12,972 0 *
Peter Looram 13,832 13,832 0 *
Nicola Zesiger Mullen 13,832 13,832 0 *
Lazar Foundation 14,262 14,262 0 *
Jeanne L. Morency 15,122 15,122 0 *
Helen Hunt 15,122 15,122 0 *
HBL Charitable Unitrust 12,972 12,972 0 *
David Zesiger 13,832 13,832 0 *
Asphalt Green, Inc. 12,972 12,972 0 *
Alexa Zesiger Carver 13,832 13,832 0 *
A. Carey Zesiger 13,832 13,832 0 *
Leonard Kingsley 9,969 9,969 0 *
Donald and Dan-Thanh Devivo 2,919 2,919 0 *
John J. & Catherine H. Kayola 2,810 2,810 0 *
25
Mary I. Estabil 1,779 1,779 0 *
James F. Cleary 1,994 1,994 0 *
Frederick Landman 183,487 183,487 0 *
The Waterproof Partnership, L.P. 30,754 30,754 0 *
Sapient Corporation 5,763 5,763 0 *
Tumbleweed Communications Corp. 53,750 53,750 0 *
Francois deMenil 21,500 21,500 0 *
Peoples Benefit Life Insurance Co. (Teamsters Separate Account) 23,878 23,878 0 *
Peoples Benefit Life Insurance Company 26,531 26,531 0 *
Retail Clerks Pension Trust #2 79,593 79,593 0 *
St. Albans Partners Ltd. 79,593 79,593 0 *
Yield Strategies Fund I, L.P. 53,062 53,062 0 *
Bank Of America Pension Plan 84,899 84,899 0 *
Circlet (IMA) Limited 79,195 79,195 0 *
General Motors Welfare Benefit Trust (ST-VEBA) 16,715 16,715 0 *
Newberg Family Trust 13,266 13,266 0 *
Woodmont Investments Limited 13,266 13,266 0 *
JMG Capital Partners, L.P. 212,460 212,460 0 *
JMG Triton Offshore Fund Limited 351,721 351,721 0 *
Deutsche Banc Alex. Brown Inc. 20,263 20,263 0 *
Deutsche Bank AG, London Branch 65,854 65,854 0 *
The Common Fund F/A/O Absolute Return Fund 7,802 7,802 0 *
Helix Convertible Opportunities Fund, Ltd. 27,558 27,558 0 *
Helix Convertible Opportunities, L.P. 35,561 35,561 0 *
BNP Cooper Neff Convertible Strategies Fund, L.P. 99,288 99,288 0 *
J. N. Industries Inc. 8,661 (6) 8,383 278 *
Merced Partners Limited Partnership 50,657 50,657 0 *
Fir Tree Institutional Value Fund, L.P. 165,462 165,462 0 *
Fir Tree Recovery Master Fund, L.P. 30,417 30,417 0 *
Fir Tree Value Fund, L.P. 418,330 418,330 0 *
Fir Tree Value Partners, LDC. 35,957 35,957 0 *
Number of Shares Percentage of
Other Holders Number of Shares to be Shares to
Number of Shares Offered by Held After be Held After
Selling Stockholder Beneficially Owned this Prospectus(2) Offering Offering
------------------- ------------------ ------------------ -------- --------
Bantu, Inc. (8) 44,575 44,575 0 *
3Cube, Inc. (9) 14,464 6,455 8,009 *
STD, Inc. (10) 18,569 18,569 0 *
Edd Helms Group, Inc. (11) 1,375 1,375 0 *
Madison Avenue Technology Group, Inc.(12) 10,222 10,222 0 *
SG Cowen Securities Corporation(13) 31,746 31,746 0 *
Aligned Investments Limited(14) 78,164 21,105 57,059 *
K. Digvijay Sing(15) 7,590 (16) 7,590 0 *
Arvindra Kanwal(17) 3,000 (16) 3,000 0 *
Sandeep Dalal(18) 3,813 (16) 3,813 0 *
James Ting(19) 137,247 (16) 113,459 23,788 *
Robert Tsang(19) 61,820 (16) 48,625 13,195 *
Prasad Investment (20) 26,134 (21) 26,134 0 *
26
Allan Kwan (22) 58,264 4,786 53,478 *
Po Ling Shiu(23) 1,404 883 521 *
Wai Ming Chu(23) 1,004 1,004 0 *
Tyson Li(23) 3,097 3,097 0 *
Sing Keung Lam(23) 5,643 4,275 1,368 *
Yin Nei Kwok(23) 305 305 0 *
Ming Fat Lam(23) 441 441 0 *
Alexandra Rehak(23) 1,649 1,649 0 *
Dee Han "Lanna" Ng(23) 750 750 0 *
Chi Feng Sze(23) 1,059 1,059 0 *
Albert Lam(23) 6,369 6,369 0 *
David Yen(24) 43,008 1,987 41,021 *
Brent Lee(23) 1,539 1,539 0 *
Li Wang(23) 993 993 0 *
Frank Meng(23) 3,839 3,839 0 *
Hua "Cao(23) 1,625 1,625 0 *
Michael Hiu(23) 105 105 0 *
Donald Ee(23) 2,452 2,452 0 *
Kee Hong Lu(23) 97 97 0 *
Lawrence Chai(23) 4,582 3,214 1,368 *
Shu-Hui Liu(23) 496 496 0 *
Tiffany Chang(23) 753 753 0 *
Chun-Yuan Yeh(23) 1,126 293 833 *
Po-Yu Liu (23) 680 194 486 *
Tsung Hsi Lee(23) 351 176 175 *
Yi-Nan Tsai(23) 391 339 52 *
Yu-Chun Hsiao(23) 178 178 0 *
Chia-Yung Chou (23) 248 196 52 *
Yueh Fong Hsieh (23) 234 149 85 *
Kuo-Hsiang Chang (23) 198 198 0 *
Pao Lung Chang(23) 3 3 0 *
Pei-Chen Teresa Lin(23) 162 162 0 *
Yi-Hsuan Lin(23) 175 175 0 *
Ya-Ling Yeh(23) 326 326 0 *
Yu-Chien Jeng(23) 116 116 0 *
Ching-Yi Chen(23) 189 189 0 *
Yi-Yi Tsung(23) 149 149 0 *
Hsin-Ying Chen(23) 112 112 0 *
I-Hung Lin(23) 244 244 0 *
Ren-Rung Iau(23) 13 13 0 *
Chih-Hao Chen(23) 37 37 0 *
Pei Chun Lin(23) 128 128 0 *
Wu-Chuan Chen(23) 431 431 0 *
Hsiu Ru Ko (23) 164 164 0 *
Chen-Ching Wang(23) 385 385 0 *
Yuan Shun Sun(23) 311 311 0 *
Li-Fang Lin(23) 143 143 0 *
Tsan Hsien Yang(23) 161 161 0 *
Yu-Shyan Chiu(23) 112 112 0 *
Vigers Design Limited(25) 520 520 0 *
Ching Yuen So(25) 512 512 0 *
27
Chia-Chin Charles Chu(25) 490 490 0 *
Seconom Limited(25) 111 111 0 *
Chi-Hung Lin(25) 304 304 0 *
Vignette Asia Pte Ltd. (26) 1,689 1,689 0 *
GameSpy Industries, Inc. (27) 60,423 60,423 0 *
AT&T Corp. 2,783,980 (28) 2,783,980 0 *
George Abi Zeid(29) 2,669,094 (30) 791,476 1,877,618 11.97%
CitiCapital Commercial Leasing Corporation 163,333 (31) 163,333 0 *
Fleet Business Credit, LLC 222,823 (32) 222,823 0 *
Forsythe/McArthur Associates, Inc. 426,218 (33) 426,218 0 *
GATX Financial Corporation 982,000 (34) 982,000 0 *
Leasing Technologies International, Inc. 66,977 (35) 66,977 0 *
MicroTech Leasing Corporation 109,836 (36) 109,836 0 *
Pentech Financial Services, Inc. 174,375 (37) 174,375 0 *
Phoenix Leasing Incorporated 199,481 (38) 199,481 0 *
TBCC Funding Trust II, a Delaware business Trust 176,748 (39) 176,748 0 *
AsiaStar IT Fund, L.P. (40) 395,500 395,500 0 *
Primus Capital Fund V Limited Partnership(40) 292,650 292,650 0 *
Primus Executive Fund V Limited Partnership(40) 7,350 7,350 0 *
The Kaufmann Fund, Inc(40) 300,000 300,000 0 *
Lawrence Auriana(40) 100,000 100,000 0 *
Susan Lerner and Peter Lerner, JTROS(40) 10,400 10,400 0 *
EMC Investment Corporation(40) 300,000 300,000 0 *
Joseph Zappala(40) 5,000 5,000 0 *
Bartholomew Lawson(40) 5,000 5,000 0 *
John W. Taylor(40) 2,000 2,000 0 *
Kilin To(40) 1,000 1,000 0 *
Michael Horgan(40) 500 500 0 *
Elaine Graham, Agent, Keith Grahm, Beneficiary
FCC Custodian(41) 18,750 18,750 0 *
Peter Chih-Yuan Horng(41) 12,500 12,500 0 *
Vincenzo Iannucci(41) 25,000 25,000 0 *
Lillian S. Loewenbaum(41) 75,000 75,000 0 *
Bob Miller(41) 25,000 25,000 0 *
Gary Millin(41) (42) 134,839 15,000 119,839 1.12%
Stephen J. Morris(41) 12,500 12,500 0 *
Eugene Sukonick(41) 50,000 50,000 0 *
St. Denis J. Villere(41) 52,500 52,500 0 *
Christopher D. Villere(41) 6,250 6,250 0 *
Lamar G. Villere(41) 6,250 6,250 0 *
George G. Villere(41) 18,750 18,750 0 *
Frances G. Villere(41) 18,750 18,750 0 *
St. Denis J. Villere III(41) 10,000 10,000 0 *
St. Denis J. Villere & Margaret H. Villere, Usufruct(41) 12,500 12,500 0 *
Michael R. Nicolais(41) 25,000 25,000 0 *
Michael A. Nicolais IRA Rollover(41) 80,000 62,500 17,500 *
Howard Hammond(41) 125,000 125,000 0 *
Daniel O'Sullivan(41) 8,000 7,500 500 *
Envios R.D. Corp. (41) 175,000 175,000 0 *
Joseph Wofchuck(41) 50,000 50,000 0 *
McFenix Partners, Ltd. (41) 12,500 12,500 0 *
28
Olivhan Investments, L.P. (41) 150,000 150,000 0 *
John R. Whitman (41) 10,043 6,250 3,793 *
Seth L. Pierrepont (41) 3,750 3,750 0 *
Eric Lin (41) 3,750 3,750 0 *
Richard M. Chong(40) (41) 2,250 2,250 0 *
Telecom International, Inc. (43) 300,000 300,000 0 *
RCG Information Technology, Inc. (44) 62,500 62,500 0 *
Abdullah (Alan) Abdullahi(45) 31,351 31,351 0 *
Hassan Abdullahi(45) 31,351 31,351 0 *
Bruce Coleman 7,500 7,500 0 *
Kenneth Goodwin 7,500 7,500 0 *
Stephen Finnerty(46) 32,000 32,000 0 *
Elong, Inc. (47) 36,232 36,232 0 *
MyIndia.com, Inc. (48) 56,075 56,075 0 *
----------
* Less than one percent
(1) Except as otherwise disclosed in other footnotes below, the number of
shares beneficially owned by the holders of senior convertible notes
represents shares issuable upon conversion of our Senior Convertible Notes
or mandatorily issuable in payment of a portion of the interest on our
Senior Convertible Notes. The conversion price is subject to adjustment
and, as a result, the number of shares may increase.
(2) This prospectus also covers any additional shares of Class A common stock
that become issuable as a result of a stock split, stock dividend or
similar transaction that results in an increase in the number of our
outstanding shares of common stock.
(3) In accordance with the rules of the SEC, the percentage of Class A common
stock outstanding owned by each selling stockholder is calculated as
follows: (a) the numerator is the number of shares of Class A common stock
held by that selling stockholder upon conversion of all Senior Convertible
Notes owned by that selling stockholder and (b) the denominator includes
the number of shares of Class A common stock and Class B common stock
outstanding and the number of shares of Class A common stock held by that
selling securityholder upon conversion of all notes owned by that selling
securityholder.
(4) Stephen Duff, a director of EasyLink, is Treasurer and a limited partner of
Federal Partners, L.P. Mr. Duff is also the Senior Investment Manager of
The Clark Estates, Inc. The Clark Estates, Inc. provides management and
administrative services to Federal Partners.
(5) Includes 825,000 shares of our Class A common stock. Excludes 194,380
shares of Class A common stock not being sold pursuant to this prospectus
that are held by accounts for which The Clark Estates, Inc. provides
management and administrative services.
(6) Includes 62,500 shares of our Class A common stock held by Frederick
Landman.
(7) Includes 278 shares of our Class A common stock held by J.N. Industries.
(8) Concurrently with our investment in Bantu, we purchased source code and
entered into a related development agreement
(9) We have received a technology license from 3Cube, Inc. that allows us to
offer Web-based and email to fax services across our network of Web sites
and ISP partners and our business customers.
(10) Doing business as Software Tool and Die. Barry Shein, President of STD, is
an advisor to our board of directors and we have entered into an
indemnification agreement with him to indemnify him from liabilities
arising out of his capacity as an advisor.
(11) In 2000, we purchased phone number from Edd Helms Group, Inc.
(12) In July 2000, we entered into a preferred list hosting agreement with
Madison Avenue Technology Group that appointed us as a preferred reseller
of CheetahMail's list host management services.
(13) SG Cowen Securities Corporation acted as an underwriter in connection with
our initial public offering in June 1999, as an initial purchaser in
connection with the issuance of our 7% convertible subordinated debentures
in January 2000 and as our financial advisor in connection with the sale of
our advertising network business completed in March 2001.
(14) Aligned Investments was a principal stockholder of Huelink Corporation
Limited, which was acquired by our majority-owned subsidiary Asia.com, Inc.
on June 1, 2000. Allen Huie, the principal stockholder of Aligned
Investments became a director of Asia.com, Inc. upon the acquisition of
Huelink Corporation Limited.
(15) Former director and chief executive officer of India.com, Inc., a
majority-owned subsidiary of EasyLink.
(16) Excludes shares issuable upon the exercise of employee stock options.
(17) Former President - Content of India.com, Inc., a majority-owned subsidiary
of EasyLink.
(18) Former President - U.S. Operations and Alliances and Acquisitions of
India.com, Inc., a majority-owned subsidiary of EasyLink.
(19) Former shareholder of TCom, Inc. EasyLink acquired TCom on October 18, 1999
in a merger. Since the merger, this selling stockholder has been employed
by EasyLink in various capacities.
(20) Prasad Investment sold MyIndia.com Inc. to our majority-owned subsidiary
India.com, Inc. in February 2001.
29
(21) Includes 6,534 potentially issuable as contingent payments in connection
with the acquisition described in footnote 19 above.
(22) Chief executive officer and director of our majority-owned subsidiary
Asia.com, Inc. Mr. Kwan was an indirect principal stockholder of Huelink
Corporation Limited, which was acquired by our majority-owned subsidiary
Asia.com, Inc. on June 1, 2000.
(23) Former employee of a subsidiary of Asia.com, Inc., a majority-owned
subsidiary of EasyLink.
(24) Former employee of a subsidiary of Asia.com, Inc., a majority-owned
subsidiary of EasyLink. Mr. Yen was an indirect principal stockholder of
Huelink Corporation Limited, which was acquired by our majority-owned
subsidiary Asia.com, Inc. on June 1, 2000.
(25) Former vendor of a subsidiary of Asia.com, Inc., a majority-owned
subsidiary of EasyLink.
(26) Former vendor of India.com, Inc. a majority-owned subsidiary of EasyLink.
(27) Former vendor of EasyLink.
(28) Includes 1,000,000 shares issuable upon exercise of warrants and up to
360,000 shares issuable in payment of interest under a promissory note
issued upon consummation of the Company's debt restructuring completed on
November 27, 2001.
(29) Mr. Abi Zeid is President - International Operations and a director of
EasyLink.
(30) Issued upon consummation of the Company's debt restructuring completed on
November 27, 2001. Includes 268,296 shares issuable upon exercise of
warrants, 268,296 shares issuable upon conversion of a convertible
promissory note and up to 96,586 shares issuable in payment of interest
under the convertible promissory note. Excludes 300,000 shares held by
Telecom International, Inc. which are also covered under this prospectus.
See Telecom International, Inc. and footnote no. 43 of this Selling
Stockholders table.
(31) Issued upon consummation of the Company's debt restructuring completed on
November 27, 2001. Includes 48,610 shares issuable upon exercise of
warrants, 48,610 shares issuable upon conversion of a convertible
promissory note and up to 17,499 shares issuable in payment of interest
under the convertible promissory note.
(32) Issued upon consummation of the Company's debt restructuring completed on
November 27, 2001. Includes 66,316 shares issuable upon exercise of
warrants, 66,316 shares issuable upon conversion of a convertible
promissory note and up to 23,873 shares issuable in payment of interest
under the convertible promissory note.
(33) Issued upon consummation of the Company's debt restructuring completed on
November 27, 2001. Includes 64,350 shares issuable upon exercise of
warrants, 64,350 shares issuable upon conversion of a convertible
promissory note and up to 23,166 shares issuable in payment of interest
under the convertible promissory note.
(34) Issued upon consummation of the Company's debt restructuring completed on
November 27, 2001. Includes 262,500 shares issuable upon exercise of
warrants, 262,500 shares issuable upon conversion of a convertible
promissory note and up to 94,500 shares issuable in payment of interest
under the convertible promissory note.
(35) Issued upon consummation of the Company's debt restructuring completed on
November 27, 2001. Includes 23,418 shares issuable upon conversion of a
convertible promissory note and up to 8,430 shares issuable in payment of
interest under the convertible promissory note.
(36) Issued upon consummation of the Company's debt restructuring completed on
November 27, 2001. Includes 30,323 shares issuable upon conversion of a
convertible promissory note and up to 10,916 shares issuable in payment of
interest under the convertible promissory note.
(37) Issued upon consummation of the Company's debt restructuring completed on
November 27, 2001. Includes 51,895 shares issuable upon exercise of
warrants, 51,895 shares issuable upon conversion of a convertible
promissory note and up to 18,684 shares issuable in payment of interest
under the convertible promissory note.
(38) Issued upon consummation of the Company's debt restructuring completed on
November 27, 2001. Includes 34,288 shares issuable upon exercise of
warrants, 34,288 shares issuable upon conversion of a convertible
promissory note and up to 12,343 shares issuable in payment of interest
under the convertible promissory note.
(39) Issued upon consummation of the Company's debt restructuring completed on
November 27, 2001. Includes 61,800 shares issuable upon conversion of a
convertible promissory note and up to 22,248 shares issuable in payment of
interest under the convertible promissory note.
(40) Former shareholder of the Company's India.com, Inc. subsidiary.
(41) Issued pursuant to the Company's equity financing which was completed on
November 27, 2001.
(42) Former director of EasyLink.
(43) Issued pursuant to settlement of obligations under letter agreement between
EasyLink Services Corporation and George Abi Zeid relating to the proposed
acquisition of Telecom International, Inc.
(44) Former vendor of EasyLink.
(45) Former shareholder of LanSoft, Inc. EasyLink acquired LanSoft on December
30, 1999 in a merger.
(46) Issued pursuant to an employment agreement with the Company.
(47) Issued pursuant to the disposition of Elong, Inc. by the Company's
Asia.com, Inc. subsidiary.
(48) Issued pursuant to the disposition of MyIndia.com, Inc. by the Company's
India.com, Inc. subsidiary.
30
PLAN OF DISTRIBUTION
The selling stockholders may offer and sell the Class A common stock
covered by this prospectus from time to time. The selling stockholders'
pledgees, donees, transferees or other successors in interest that receive such
Class A common stock as a gift, partnership distribution or other non-sale
related transfer may likewise offer and sell Class A common stock from time to
time. The selling stockholders will act independently of us in making decisions
with respect to the timing, manner and size of each sale. The selling
stockholders may sell the Class A common stock on one or more exchanges,
including the Nasdaq National Market, or in the over-the-counter market or
otherwise, at prices and at terms then prevailing or at prices related to the
then current market prices or in negotiated transactions. The selling
stockholders may be deemed to be "underwriters" under the Securities Act of
1933. We have agreed to indemnify the selling stockholders against certain
liabilities arising under the Securities Act.
The selling stockholders may sell the Class A common stock by one or more
of the following means of distribution:
o a block trade in which the broker-dealer so engaged will attempt to
sell the shares as agent, but may purchase and resell a portion of the
block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by such
broker-dealer for its own account pursuant to this prospectus; and
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers.
We may amend this prospectus from time to time to describe a specific plan
of distribution. In connection with distributions of the Class A common stock or
otherwise, the selling stockholders may enter into hedging transactions with
broker-dealers or other financial institutions. In connection with such
transactions, broker-dealers or other financial institutions may engage in short
sales of our Class A common stock in the course of hedging the positions they
assume with the selling stockholders. The selling stockholders may also sell our
Class A common stock short and redeliver the shares covered by this prospectus
to close out such short positions. The selling stockholders may also enter into
option or other transactions with broker-dealers or other financial institutions
which require the delivery to such broker-dealer or other financial institution
of the Class A common stock offered under this prospectus, which Class A common
stock such broker-dealer or other financial institution may resell pursuant to
this prospectus (as supplemented or amended to reflect such transaction). The
selling stockholders may also pledge the shares of Class A common stock
registered hereunder to a broker-dealer or other financial institution and, upon
a default, such broker-dealer or other financial institution may effect sales of
the pledged Class A common stock pursuant to this prospectus (as supplemented or
amended to reflect such transaction). In addition, the selling stockholders may
also sell the Class A common stock under Rule 144 rather than pursuant to this
prospectus if the shares so qualify for resale under Rule 144.
In effecting sales, brokers, dealers or agents engaged by the selling
stockholders may arrange for other brokers or dealers to participate. Brokers,
dealers or agents may receive commissions, discounts or concessions from the
selling stockholders in amounts to be negotiated prior to the sale. Such brokers
or dealers and any other participating brokers, dealers or market makers may be
deemed to be "underwriters" within the meaning of the Securities Act in
connection with such sales, and any such commission, discount or concession may
be deemed to be underwriting discounts or commissions under the Securities Act.
We will pay all expenses incident to the offering and sale of the Class A common
stock covered by this prospectus to the public other than any commissions and
discounts of underwriters, dealers or agents and any transfer taxes. In the case
of sales by STD, Inc., we will pay any commissions and discounts of
underwriters, dealers or agents if the average sales price of the shares sold by
STD, Inc. is below $16.00 per share.
31
In order to comply with the securities laws of certain states, if
applicable, the Class A common stock will be sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
states the Class A common stock may not be sold unless they have been registered
or qualified for sale in the applicable state or an exemption from the
registration or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the shares may not simultaneously engage in
market-making activities with respect to our common stock for the applicable
period under Regulation M of the Exchange Act prior to the commencement of such
distribution. In addition and without limiting the foregoing, the selling
stockholders will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Regulation
M, which provisions may limit the timing of purchases and sales of the shares by
the selling stockholders. All of the foregoing may affect the marketability of
the shares.
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained or incorporated by reference
in this prospectus. You must not rely on any unauthorized information or
representations. This prospectus is an offer to sell only the shares offered by
this prospectus, but only under the circumstances and in jurisdictions where it
is lawful to do so. The information contained in this prospectus is current only
as of its date.
LEGAL MATTERS
The validity of the Class A common stock offered in this prospectus has
been passed upon by David Ambrosia, our General Counsel. As of the date hereof,
Mr. Ambrosia owned 448 shares of our Class A common stock and held options to
purchase 61,630 shares of our Class A common stock.
EXPERTS
Our consolidated financial statements appearing in our Annual Report on
Form 10-K for the year ended December 31, 2000, have been audited by KPMG LLP,
independent accountants, as set forth in their report thereon, incorporated
herein by reference. Such consolidated financial statements are incorporated by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing. The report of KPMG LLP covering the December
31, 2000 financial statements, dated February 15, 2001, contains an explanatory
paragraph that states that the Company has suffered recurring losses from
operations since inception and has a working capital deficiency that raise
substantial doubt about the entity's ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of that uncertainty.
The consolidated financial statements of The Allegro Group, Inc. appearing
in our Amendment to Current Report on Form 8-K/A, dated November 3, 1999, have
been audited by KPMG LLP, independent accountants, as set forth in their report
thereon, incorporated herein by reference. Such consolidated financial
statements are incorporated by reference in reliance upon such report given on
the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Asia.com, Inc. (formerly
eLong.com, Inc.) (a development stage enterprise) appearing in our Amendment to
Current Report on Form 8-K/A, dated May 26, 2000, have been audited by KPMG,
independent accountants, as set forth in their report thereon, incorporated
herein by reference. Such consolidated financial statements are incorporated by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing. Our report dated May 24, 2000, contains an
emphasis paragraph that states the group's operations are subject to extensive
regulation and supervision by the People's Republic of China ("PRC") government.
The laws and regulations pertaining to Internet content provider businesses in
the PRC are evolving and may be subject to change.
32
The financial statements of NetMoves Corporation (formerly FaxSav
Incorporated) incorporated in this prospectus by reference to our Amendment to
Current Report on Form 8-K/A, filed on April 24, 2000, have been so incorporated
in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The combined financial statements of Swift Telecommunications, Inc. and
Swift Comtext Ltd appearing in our Amendment to Current Report on Form 8-K/A,
dated May 9, 2001, have been audited by KPMG LLP, independent accountants, as
set forth in their report thereon, incorporated herein by reference. Such
combined financial statements are incorporated by reference in reliance upon
such report given on the authority of such firm as experts in accounting and
auditing.
The combined audited historical financial statements of AT&T EasyLink
Services, a fully integrated business of AT&T, incorporated in this prospectus
by reference to our Amendment to Current Report on Form 8-K/A, filed on May 9,
2001, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
33
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Registration fee $13,921
Accounting fees and expenses 14,000
Legal fees and expenses 0
Miscellaneous expenses 1,100
-------
Total: $29,021
Item 15. Indemnification of Directors and Officers.
Section 145 of Delaware General Corporation Law empowers the Company to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit, or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe that such person's conduct was
unlawful. The termination of any cause of action, suit or proceeding by
judgment, order, settlement, conviction, or upon plea of nolo contendre or its
equivalent, does not, of itself, create a presumption that such person did not
act in good faith and in a manner that such person reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that such
person's conduct was unlawful.
As permitted by Section 145 of the Delaware General Corporation Law,
the registrant's amended and restated certificate of incorporation, as amended
provides that a director of the Company will not be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director, except for any breach of the director's duty of loyalty to the
Company or its stockholders; for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law; for the unlawful
payment of dividends or unlawful stock repurchases under Section 174 of the
Delaware General Corporation Law; or for any transaction from which the director
derived an improper personal benefit.
The bylaws of the Company provide that the Company shall indemnify
directors, officers and employees for such liabilities in such manner, under
such circumstances and to such extent as permitted by Section 145 of the
Delaware General Corporation Law, as now enacted or hereafter amended and that
the Company shall advance all reasonable costs and expenses (including
attorney's fees) incurred in defending any action, suit or proceeding to all
persons entitled to such indemnification, all in the manner, under the
circumstances and to the extent permitted by Section 145 of the Delaware General
Corporation Law, as now enacted or hereafter amended.
The Company has entered into indemnity agreements with each of its
directors and executive officers to give them additional contractual assurances
regarding the scope of the indemnification described above and to provide
additional procedural protections. In addition, the Company has obtained
directors' and officers' insurance providing indemnification for directors,
officers and key employees for various liabilities.
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At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the certificate of incorporation. The registrant is
not aware of any threatened litigation or proceeding that may result in a claim
for such indemnification.
Item 16. Exhibits.
Exhibit No. Description
----------- -----------
5 Opinion of David W. Ambrosia.
10 Employment Agreement between EasyLink Services Corporation
and Thomas Murawski dated February 1, 2002.
23.1 Consent of KPMG LLP.
23.2 Consent of KPMG.
23.3 Consent of KPMG.
23.4 Consent of PricewaterhouseCoopers LLP.
23.5 Consent of David W. Ambrosia (included in Exhibit 5).
24 Power of Attorney.*
---------
*Previously filed.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made of the securities registered hereby, a post-effective
amendment to this registration statement;
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in this registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in this registration statement; and
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(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in this registration statement or any material change to such
information in this registration statement;
provided, however, that the undertakings set forth in paragraphs (i)
and (ii) above do not apply if the information required to be included
in a post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this
registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this Registration Statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this Registration
Statement as of the time it was effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be initial bona fide
offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Edison, State of New
Jersey, on February 20, 2002.
EasyLink Services Corporation
By /s/ Thomas Murawski
------------------------
Thomas Murawski
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
NAME TITLE DATE
---- ----- ----
* Chief Executive Officer and Director February 20, 2002
--------------------------------- (principal executive officer)
(Thomas Murawski)
* Chairman and Director February 20, 2002
------------------------------------
(Gerald Gorman)
* Executive Vice President and Chief February 20, 2002
------------------------------------ Financial Officer (principal
(Debra McClister) accounting and financial officer)
* Director February 20, 2002
------------------------------------
(George Abi Zeid)
* Director February 20, 2002
------------------------------------
(William Donaldson)
* Director February 20, 2002
------------------------------------
(Stephen Duff)
* Director February 20, 2002
------------------------------------
(Stephen Ketchum)
* Director February 20, 2002
------------------------------------
(Jack Kuehler)
*By: /s/ Thomas Murawski
-------------------
Thomas Murawski
ATTORNEY-IN-FACT
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EXHIBIT INDEX
Exhibit No. Description
----------- -----------
5 Opinion of David W. Ambrosia.
10 Employment Agreement between EasyLink Services Corporation
and Thomas Murawski dated February 1, 2002.
23.1 Consent of KPMG LLP.
23.2 Consent of KPMG.
23.3 Consent of KPMG.
23.4 Consent of PricewaterhouseCoopers LLP.
23.5 Consent of David W. Ambrosia (included in Exhibit 5).
24 Power of Attorney.*
---------
*Previously filed.
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