SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934, as amended.
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|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
EASYLINK SERVICES CORPORATION
(Name of Registrant as Specified In Its Certificate of Incorporation)
N/A
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
_______________________________________________________________
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_______________________________________________________________
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
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Rule 0-11(a)(2) and identify the filing for which the offsetting fee
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statement number, or the Form or Schedule and the date of its filing.
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EASYLINK SERVICES CORPORATION
399 Thornall Street
Edison, NJ 08837
April 23, 2002
Dear Stockholder:
On behalf of the Board of Directors, I cordially invite you to attend our
Annual Meeting of Stockholders to be held at 10:00 a.m. on Thursday, May 23,
2002 at the Woodbridge Hilton located at 120 Wood Avenue South, Iselin, New
Jersey.
We have enclosed with this letter a notice of meeting, a proxy statement, a
proxy card and a return envelope. We have also enclosed your 2001 Annual
Report.
Your vote is important. Whether or not you plan to attend, please date and
sign the enclosed proxy card and return it in the envelope provided. If you
plan to attend the meeting, you may vote in person.
I look forward to your participation.
Sincerely,
/s/ Gerald Gorman
------------------------------
GERALD GORMAN
Chairman
EASYLINK SERVICES CORPORATION
399 Thornall Street
Edison, NJ 08837
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on May 23, 2002
The Annual Meeting of Stockholders (the "Annual Meeting") of EasyLink
Services Corporation, a Delaware corporation (the "Company" or "EasyLink"),
will be held at the Woodbridge Hilton located at 120 Wood Avenue South,
Iselin, New Jersey on Thursday, May 23, 2002, at 10:00 a.m. local time for the
following purposes:
1. To elect seven directors of EasyLink to serve until the 2003 Annual
Meeting of Stockholders or until their respective successors are elected and
qualified;
2. To approve the Company's 2002 Stock Option Plan; and
3. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
The foregoing items of business, including the nominees for directors, are
more fully described in the Proxy Statement which is attached and made a part
of this Notice. The Board of Directors has fixed the close of business on
April 10, 2002 as the record date for determining the stockholders entitled to
notice of and to vote at the Annual Meeting and any adjournment or
postponement thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, whether or not you plan to attend the Annual Meeting in
person, you are urged to mark, date, sign and return the enclosed proxy card
as promptly as possible in the postage-prepaid envelope provided to ensure
your representation and the presence of a quorum at the Annual Meeting. If you
send in your proxy card and then decide to attend the Annual Meeting to vote
your shares in person, you may still do so. Your proxy is revocable in
accordance with the procedures set forth in the Proxy Statement.
By Order of the Board of Directors
/s/ David W. Ambrosia
------------------------------
DAVID W. AMBROSIA
Executive Vice President, General Counsel
and Secretary
Edison, New Jersey
April 23, 2002
EASYLINK SERVICES CORPORATION
399 Thornall Street
Edison, NJ 08837
--------------------
PROXY STATEMENT
--------------------
General
The enclosed proxy is solicited by the Board of Directors of EasyLink
Services Corporation, a Delaware corporation (the "Company" or "EasyLink"),
for use at the Annual Meeting of Stockholders of the Company (the "Annual
Meeting") to be held at the Woodbridge Hilton located at 120 Wood Avenue
South, Iselin, New Jersey, on Thursday, May 23, 2002, at 10:00 a.m., local
time, and any adjournment or postponement thereof.
The Company's principal offices are located at 399 Thornall Street, Edison,
NJ 08837. This Proxy Statement and the accompanying proxy card are being
mailed to the stockholders of the Company on or about April 23, 2002.
Revocability Of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company (Attention:
David W. Ambrosia, Executive Vice President, General Counsel and Secretary) a
written notice of revocation or a duly executed proxy bearing a later date, or
by attending the Annual Meeting and voting in person.
Record Date; Voting Securities
The close of business on April 10, 2002 has been fixed as the record date
(the "Record Date") for determining the holders of shares of common stock of
the Company entitled to notice of and to vote at the Annual Meeting. At the
close of business on the Record Date, the Company had approximately 15,256,187
shares of Class A Common Stock outstanding held of record by approximately 738
stockholders and 1,000,000 shares of Class B Common Stock held of record by
one stockholder.
Voting And Solicitation
Each outstanding share of Class A Common Stock on the Record Date is
entitled to one vote and each outstanding share of Class B Common Stock on the
Record Date is entitled to 10 votes on all matters, subject to the conditions
described below. The presence, in person or by proxy, of the holders of a
majority in voting power of the outstanding shares of Class A Common Stock and
Class B Common Stock, voting together as a single class, is necessary to
constitute a quorum. Abstentions and broker "non-votes" are counted as present
and entitled to vote for purposes of determining a quorum. A broker "non-vote"
occurs when a nominee holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have discretionary voting
power for that particular item and has not received instructions from the
beneficial owner.
The nominees for election as directors at the Annual Meeting will be elected
by a plurality of the votes of the shares of Class A Common Stock and Class B
Common Stock, voting together as a single class, present in person or
represented by proxy at the meeting. Abstentions and broker "non-votes" are
not counted for the purposes of the election of directors.
All other matters submitted to the stockholders will require the affirmative
vote of the holders of a majority of the votes of the shares of Class A Common
Stock and Class B Common Stock, voting together as a single class, present in
person or represented by proxy at the meeting. Abstentions will be counted
towards the tabulations of votes cast on proposals presented to the
stockholders and will have the same effect as a vote "AGAINST" such matters.
Broker "non-votes" will not be counted for purposes of determining whether
such matters have been approved.
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If the enclosed proxy is properly executed and returned, it will be voted in
the manner directed by the stockholder. If no instructions are specified with
respect to the matter to be acted upon, proxies will be voted "FOR" such
matter.
The solicitation of proxies will be conducted by mail, and the Company will
bear all attendant costs. The Company may conduct further solicitation
personally, telephonically or by facsimile through its officers, directors and
employees, none of whom will receive additional compensation for assisting
with the solicitation.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Nominees
At the Annual Meeting, the stockholders will elect seven (7) directors to
serve until the next Annual Meeting of Stockholders or until their respective
successors are elected and qualified. In the event any nominee is unable or
unwilling to serve as a director at the time of the Annual Meeting, the
proxies may be voted for the balance of those nominees named and for any
substitute nominee designated by the present Board or the proxy holders to
fill such vacancy, or for the balance of the nominees named without nomination
of a substitute, or the size of the Board may be reduced in accordance with
the Bylaws of the Company. The Board has no reason to believe that any of the
persons named below will be unable or unwilling to serve as a nominee or as a
director if elected.
The names of the nominees, their ages as of February 28, 2002 and certain
other information about them are set forth below:
Name Age Position
---- --- --------
Gerald Gorman ..................... 46 Chairman, Director
Thomas Murawski ................... 56 Chief Executive Officer, Director
George Abi Zeid ................... 49 President -- International Operations, Director
William Donaldson ................. 70 Director
Stephen Duff ...................... 38 Director
Stephen Ketchum ................... 40 Director
Jack Kuehler ...................... 69 Director
There are no family relationships among any of the directors or executive
officers of the Company.
Gerald Gorman -- Chairman
Mr. Gorman has served as Chairman of EasyLink since founding the Company in
December 1995 and as its Chief Executive Officer from February 1997 to October
2000. Prior to founding EasyLink, Mr. Gorman spent 12 years in the Investment
Banking Division of Donaldson, Lufkin & Jenrette Securities Corporation where
he founded and managed the Satellite Financing Group. Mr. Gorman also held
positions at General Electric Capital Corporation from 1983 to 1985 and at
Utah International from 1982 to 1983. Mr. Gorman received his Bachelor of
Mechanical Engineering degree from Melbourne University and his M.B.A. from
Columbia University.
Thomas Murawski -- Chief Executive Officer, Director
Mr. Murawski has served as a member of the Board of Directors since February
2000. Mr. Murawski has served as Chief Executive Officer of EasyLink since
October, 2000. He served as Chief Executive Officer of Mail.com Business
Messaging Services, Inc., a wholly-owned subsidiary of the Company from
February 2000 to October 2000. Before joining EasyLink, Mr. Murawski was
employed by NetMoves Corporation from November 1991 in the capacity of
Chairman, President, CEO and Director. Prior to joining NetMoves Corporation,
Mr. Murawski served as Executive Vice President of Western Union Corporation,
a global telecommunications and financial services company and President of
its Network Services Group. Prior to joining Western Union Corporation,
Mr. Murawski served twenty-three years with ITT Corporation, a diversified
manufacturing and services company. He has held operating responsibilities in
the areas of subsidiary and product line management, engineering, sales and
marketing for both voice and data-oriented businesses. Mr. Murawski's last
position with
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ITT Corporation was President and General Manager of ITT World Communications
Inc., an international telecommunications services company.
George Abi Zeid -- President -- International Operations, Director
Mr. Abi Zeid has served as a member of the Board of Directors and as
President -- International Operations since February 2001. Prior to joining
EasyLink he served as President of Swift Telecommunications, Inc. which he
founded in 1999. Prior to founding Swift Telecommunications, Inc., Mr. Abi
Zeid served as Executive Vice President of Xpedite Systems, Inc, and President
of Xpedite International, a wholly owned subsidiary of Xpedite Systems Inc.
(PTEK), from 1994 until 1998. Mr. Abi Zeid served as President and Chief
Executive Officer of Swift Global, Inc. from the time he founded the company
in 1980 until 1994. Prior to founding Swift Global, Inc., Mr. Abi Zeid founded
Swift Telex Inc. in 1978.
William Donaldson -- Director
Mr. Donaldson has been a member of the Board of Directors since April 1998.
He served as Chairman, President and Chief Executive Officer of Aetna, Inc.
from February 2000 until December 2000 and Chairman of the new Aetna (formerly
Aetna U.S. Healthcare) until his retirement in April 2001. From 1995 until
2000 he served as Senior Advisor to Donaldson, Lufkin & Jenrette, Inc. He is
Chairman of the Carnegie Endowment for International Peace and is a director
of Bright Horizons Family Solutions and Aetna, Inc. From 1991 to 1995, he
served as Chairman and Chief Executive Officer of the New York Stock Exchange.
In 1981, he founded the private investment firm, Donaldson Enterprises, and
served as its Chairman until 1990. In 1975, Mr. Donaldson was named founding
Dean and Professor of Management at the Yale Management School serving until
1980. In 1973, he was appointed U.S. Undersecretary of State and subsequently
served as Counsel to Vice President Nelson Rockefeller. In 1959, he co-founded
Donaldson, Lufkin & Jenrette where he served as its Chief Executive Officer
until 1973. He received his B.A. from Yale University and his M.B.A. with
distinction from the Harvard Business School.
Stephen Duff -- Director
Mr. Duff has been a member of the Board of Directors since January, 2001.
Mr. Duff is the Senior Investment Manager of The Clark Estates, Inc. Prior to
joining The Clark Estates in 1995, Mr. Duff was a Vice President of The
Portfolio Group, Inc., a subsidiary of The Chemical Banking Corporation, Inc.
from 1990. Mr. Duff is a 1985 graduate of Stonehill College. Mr. Duff serves
on the Board of The Clara Welch Thanksgiving Home, Inc. (Non-Profit).
Stephen Ketchum -- Director
Mr. Ketchum has been a member of the Board of Directors since May 1997.
Since April 23, 2001, Mr. Ketchum has been a Managing Director of UBS Warburg,
a global provider of financial services. Mr. Ketchum is also a director of
Onview.com, Inc., a privately-held internet company based in New York. From
2000 until April 25, 2001, Mr. Ketchum was chief executive officer and a
director of Onview.com. From 1990 until 2000, Mr. Ketchum held various
positions with Donaldson, Lufkin & Jenrette Securities Corporation, including
as a Managing Director of the Satellite Financing Group. Prior to joining
Donaldson, Lufkin & Jenrette Securities Corporation in 1990, Mr. Ketchum was
employed at Dean Witter Reynolds. Mr. Ketchum serves on the board of
ExperTelligence, Inc., a publicly traded internet incubator based in Santa
Barbara. Mr. Ketchum received his B.A. in Finance and Marketing from New
England College where he graduated summa cum laude and his M.B.A. from the
Harvard Business School.
Jack Kuehler -- Director
Mr. Kuehler has been a member of the Board of Directors since April 1998.
Mr. Kuehler retired in August 1993 as Vice Chairman and a director of
International Business Machines Corporation, having held various positions
since joining IBM in 1958. Prior to his appointment as Vice Chairman of IBM in
January 1993, Mr. Kuehler served as President from 1989 to 1993 and as
Executive Vice President from 1987 to 1988. Mr. Kuehler is a director of
Aetna, Inc., Arch Chemicals Inc. and The Parsons Corporation. He is a member
of the
3
National Academy of Engineering, a fellow of the Institute of Electrical and
Electronics Engineers, Inc. and a fellow of the American Academy of Arts and
Sciences.
Meetings and Committees of the Board of Directors
During 2001, the Board met eight times and acted two times by unanimous
written consent. All of our directors attended 75 percent or more of the
regularly scheduled and special meetings of the Board and Board committees on
which they served in 2001. The Board has an Audit Committee and a Compensation
Committee. From time to time, the Board has created various ad hoc committees
for special purposes. No such ad hoc committee is currently functioning.
The Compensation Committee is currently composed of three outside directors,
William Donaldson, Stephen Duff and Stephen Ketchum. The Compensation
Committee held three meetings and acted once by unanimous written consent
during 2001. The Compensation Committee has the authority to determine
salaries and bonuses, and to make awards of options to purchase capital stock
of the Company to the officers and employees of the Company.
The Audit Committee is currently composed of three directors, William
Donaldson, Stephen Duff and Stephen Ketchum. The Audit Committee held six
meetings during 2001. Each of the current Audit Committee members is an
"independent director" as defined in Rule 4200(a)(14) of the NASD listing
standards. The Audit Committee, among other things, provides assistance to the
corporate directors in fulfilling their responsibilities relating to corporate
accounting, reporting practices of the Company, and the quality and integrity
of the financial reports of the Company. In carrying out these
responsibilities, the Audit Committee, among other things, reviews and
recommends to the directors the independent auditors to be selected to audit
the financial statements of the Company and its divisions and subsidiaries;
confirms the independence of the independent auditors and the independent
auditors' accountability to the Board and the Audit Committee; meets with the
independent auditors and financial management of the Company to review the
scope of the proposed audit for the current year and the audit procedures to
be utilized, and at the conclusion thereof to review such audit, including any
comments or recommendations of the independent auditors; and reviews with the
independent auditors and financial and accounting personnel, the adequacy and
effectiveness of the accounting and financial controls of the Company.
Compensation Committee Interlocks and Insider Participation
EasyLink's Compensation Committee is comprised of three non-management
directors, William Donaldson, Stephen Duff and Stephen Ketchum. All decisions
relating to the compensation of EasyLink executive officers are made by the
Compensation Committee.
Compensation of Directors
Other than reimbursing directors for customary and reasonable expenses of
attending Board of Directors or committee meetings, EasyLink does not
currently compensate directors who are part of the management team. During
2001, four outside, non-management directors were granted options as
compensation for their serving as board members. On January 29, 2001 Mr. Duff
was granted options to purchase 4,000 shares of Class A Common Stock at an
exercise price of $12.50 per share, vesting on a monthly basis for one year
from January 2001 through January 2002. On September 10, 2001 Mr. Kuehler and
Mr. Donaldson were each granted options to purchase 16,500 shares of Class A
Common Stock at an exercise price of $2.20 per share, vesting on September 10,
2002, Mr. Duff was granted options to purchase 4,000 shares of Class A Common
Stock at $2.20 per share, vesting on September 10, 2002 and Mr. Ketchum was
granted options to purchase 2,000 shares of Class A Common Stock at $2.20 per
share, vesting on September 10, 2002.
Vote Required
A plurality of votes of the shares of Class A Common Stock and Class B
Common Stock, voting together as a single class, present in person or
represented by proxy at the meeting, is required for the election of
directors.
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Recommendation of the Board
The Board of Directors recommends that the stockholders vote "FOR" election
of each of the nominees listed above.
PROPOSAL NO. 2
APPROVAL OF THE EASYLINK SERVICES CORPORATION
2002 STOCK OPTION PLAN
General
The Board of Directors is proposing for stockholder approval the EasyLink
Services Corporation 2002 Stock Option Plan (the "2002 Option Plan"). The
purpose of the 2002 Option Plan is to grant incentive stock options intended
to qualify under Section 422 of the Internal Revenue Code and nonqualified
stock options as a means to provide an incentive to our selected directors,
officers, employees and consultants to acquire a proprietary interest in
EasyLink, to continue in their positions with us and to increase their efforts
on our behalf.
The 2002 Option Plan was adopted by the Board at a meeting held on
February 20, 2002, by written consent dated April 15, 2002, and, if approved
by the stockholders, will become effective on May 23, 2002. Appendix A to this
Proxy Statement contains the complete text of the 2002 Option Plan, which is
summarized below.
Description of the 2002 Option Plan
Administration. The 2002 Option Plan is administered by the Board of
Directors or a committee appointed by the Board. Under the 2002 Option Plan,
the plan administrator has the authority to, among other things: (i) select
the eligible persons to whom options will be granted, (ii) determine the size,
type and the terms of each option granted, (iii) adopt, amend and rescind
rules and regulations for the administration of the plan, and (iv) decide all
questions and settle all controversies and disputes of general applicability
that may arise in connection with the plan.
Available Shares. A maximum of 1.5 million shares of Class A Common Stock
will be available for purchase under the 2002 Option Plan. The maximum number
of shares underlying options granted to any individual within a calendar year
under the 2002 Option Plan is 1 million. In the event of any changes in the
number or kind of outstanding shares of stock by reason of merger,
consolidation, recapitalization, reclassification, split, reverse split,
combination of shares or otherwise, the plan administrator may make equitable
adjustments to the price and other terms of any option previously granted or
that may be granted under the 2002 Option Plan.
Eligibility. The plan administrator will select those persons who are to
receive option grants. During the first year in which options are granted
under the 2002 Option Plan, eligible persons are expected to include
approximately 600 officers and other employees of EasyLink and its
subsidiaries, all four of the non-employee directors of EasyLink, and certain
consultants to EasyLink and its subsidiaries.
Option Agreement. Each option granted under the 2002 Option Plan will be
evidenced by an agreement that states the terms and conditions of the grant.
The exercise price of an incentive stock option granted under the 2002 Option
Plan will not be less than 100% of the fair market value of the stock at the
time of grant (110% in the case of an incentive stock option granted to any
person who possesses more than 10% of the total combined voting power of all
classes of our capital stock). The fair market value of a share of Class A
Common Stock as of the Record Date was $2.15.
Each option granted under the 2002 Option Plan will be exercisable at the
times and in the amounts determined by the plan administrator at the time of
grant. In addition, the plan administrator, in its discretion, may accelerate
the exercisability of any option outstanding under the 2002 Option Plan. The
exercise price of an option is payable in cash unless otherwise approved by
the plan administrator.
Options granted under the 2002 Option Plan are not transferable except by
will or the laws of descent and distribution and are only exercisable by the
grantee during such grantee's lifetime. Each option shall terminate at the
time determined by the plan administrator provided that the term may not
exceed ten years from the date of
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grant (five years in the case of an incentive stock option granted to a ten
percent stockholder). However, the plan administrator may, subject to the
limitations of the 2002 Option Plan, modify, extend or renew outstanding
options granted under the 2002 Option Plan, or accept the surrender of
outstanding unexercised options and authorize the grant of substitute options.
Amendment and Termination. The 2002 Option Plan will terminate on the
earliest of (a) May 23, 2012, (b) the date when all shares of stock reserved
for issuance under the 2002 Option Plan have been acquired through the
exercise of options granted under the plan or (c) any earlier date as may be
determined by the Board of Directors. Subject to certain limitations, the
Board of Directors may amend the 2002 Option Plan, and may correct any defect,
supply any omission or reconcile any inconsistency in the 2002 Option Plan.
None of these modifications may alter or adversely impair any rights or
obligations under any option previously granted under the 2002 Option Plan,
except with the consent of the grantee.
Federal Income Tax Consequences
The following discussion is generally a summary of the principal United
States federal income tax consequences under current federal income tax laws
relating to grants or awards to employees under the 2002 Option Plan. This
summary is not intended to be exhaustive and, among other things, does not
describe state, local or foreign income and other tax consequences.
A grantee will not recognize any taxable income upon the grant of a
nonqualified option and EasyLink will not be entitled to a tax deduction with
respect to such grant. Generally, upon exercise of a nonqualified option, the
excess of the fair market value of stock on the date of exercise over the
exercise price will be taxable as ordinary income to the grantee. If EasyLink
complies with applicable withholding requirements, we will be entitled to a
tax deduction in the same amount and at the same time as the grantee
recognizes ordinary income subject to any deduction limitation under
Section 162(m) of the Internal Revenue Code. The subsequent disposition of
shares acquired upon the exercise of a nonqualified stock option will
ordinarily result in capital gain or loss.
Subject to the discussion below, a grantee will not recognize taxable income
at the time of grant or exercise of an incentive stock option and we will not
be entitled to a tax deduction with respect to such grant or exercise.
However, the exercise of an incentive stock option may result in an
alternative minimum tax liability for the grantee.
Generally, if a grantee has held shares acquired upon the exercise of an
incentive stock option for at least one year after the date of exercise and
for at least two years after the date of grant of the incentive stock option,
upon disposition of the shares by the grantee, the difference, if any, between
the sales price of the shares and the exercise price will be treated as long-
term capital gain or loss to the grantee.
Generally, upon a sale or other disposition of shares acquired upon the
exercise of an incentive stock option within one year after the date of
exercise or within two years after the date of grant of the incentive stock
option (a "disqualifying disposition"), any excess of the fair market value of
the shares at the time of exercise of the option over the exercise price of
such option will constitute ordinary income to the grantee. Any excess of the
amount realized by the holder on the disqualifying disposition over the fair
market value of the shares on the date of exercise will generally be capital
gain. Subject to any deduction limitation under Section 162(m) of the Internal
Revenue Code, EasyLink will be entitled to a deduction equal to the amount of
such ordinary income recognized by the holder.
If an option is exercised through the use of shares previously owned by the
holder, such exercise generally will not be considered a taxable disposition
of the previously owned shares and thus no gain or loss will be recognized
with respect to such shares upon such exercise. However, if the previously
owned shares were acquired on the exercise of an incentive stock option and
the holding period requirement for those shares is not satisfied at the time
they are used to exercise the option, such use will constitute a disqualifying
disposition of the previously owned shares resulting in the recognition of
ordinary income in the amount described above.
Existing Stock Option Plans
As of December 31, 2001, there were 1,059,303 shares of Class A common stock
issuable upon exercise of stock options outstanding under shareholder approved
stock option plans at a weighted average exercise price of
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$15.09 per share and there were 272,522 shares available for grant of options
under these plans. As of December 31, 2001, there were 794,781 shares of Class
A common stock issuable upon exercise of stock options outstanding under non-
shareholder approved stock option plans or agreements at a weighted average
exercise price of $11.39 per share and there were 88,847 shares of Class A
common stock available for grant of options under these plans.
Approval Required
The affirmative vote of the holders of a majority of the votes of shares of
Class A Common Stock and Class B Common Stock, voting together as a single
class, present in person or represented by proxy at the meeting is required
for the approval of this proposal.
Recommendation of the Board
The Board of Directors recommends a vote "FOR" the approval of the EasyLink
Services Corporation 2002 Stock Option Plan.
COMMON STOCK OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information with respect to the beneficial
ownership of EasyLink's common stock as of February 28, 2002 for:
o each person who EasyLink knows beneficially owns more than 5% of its
Class A Common Stock;
o each of EasyLink's directors, including its Chief Executive Officer;
o EasyLink's four most highly compensated executive officers, other than
its Chief Executive Officer, who were serving as executive officers at
the end of 2002, and
o all of EasyLink's executive officers and directors as a group.
For purposes of this table, a person, entity or group is deemed to have
"beneficial ownership" of any shares of Class A Common Stock, including shares
subject to options, warrants or conversion rights, which the person, entity or
group has the right to acquire within 60 days of February 28, 2002. Unless
otherwise noted below, the persons and entities named in the table have sole
voting and sole investment power with respect to all shares beneficially
owned, subject to community property laws where applicable.
For purposes of calculating the percentage of outstanding shares or voting
power held by each person named below, any shares which that person has the
right to acquire within 60 days after February 28, 2002 are deemed to be
outstanding, but shares which may similarly be acquired by other persons are
deemed not to be outstanding.
The total number of shares of Class A Common Stock for purposes of
calculating the percentages of Class A Common Stock beneficially owned
includes 1,000,000 shares of Class A Common Stock issuable upon conversion of
the 1,000,000 outstanding shares of Class B Common Stock.
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The total number of votes for purposes of calculating the percentage of
total voting power includes the voting power of 1,000,000 shares of Class B
Common Stock owned by Gerald Gorman. Each share of Class B Common Stock
entitles Mr. Gorman to ten votes.
Number of Percentage Percentage of
Name of Beneficial Owner Shares of Class A of Class A Total
-------------------------- Beneficially Owned Beneficially Owned Voting Power
------------------ ------------------ -------------
Gerald Gorman.......................................................... 1,223,708(1) 7.59% 40.68%
Thomas Murawski........................................................ 111,170 * *
George Abi Zeid........................................................ 2,950,065(2) 17.76 11.52
William Donaldson...................................................... 34,500 * *
Stephen Duff........................................................... 7,403(3) * *
Stephen Ketchum........................................................ 16,762 * *
Jack Kuehler........................................................... 34,570 * *
Bradley Schrader....................................................... 15,000 * *
Debra McClister........................................................ 58,659 * *
David Ambrosia......................................................... 36,669 * *
All directors and executive officers as a group (10 persons)........... 4,488,506 27.30 53.46
The Clark Estates, Inc................................................. 1,640,943(4) 9.90 6.42
AT&T Corp.............................................................. 2,423,980(5) 14.20 9.30
---------------
* Represents beneficial ownership or voting power of less than 1%.
(1) Includes 1,000,000 shares of Class A Common Stock issuable upon conversion,
on a one for one basis, of Class B Common Stock.
(2) Includes 268,296 shares issuable upon exercise of warrants and 268,296
shares issuable upon conversion of a convertible promissory note. Excludes
shares that may be issuable in payment of interest on the notes. Also
includes 300,000 shares held by Telecom International, Inc. Mr. Abi Zeid
owns indirectly a majority of the capital stock of Telecom International,
Inc.
(3) Mr. Duff is a limited partner of Federal Partners, L.P. and through his
limited partnership interest holds an indirect interest in 1,893 shares of
Class A Common Stock and 1,000 shares of Class A Common Stock issuable upon
conversion of senior convertible notes. Excludes shares that may be
issuable in payment of interest on the notes.
(4) Includes 946,563 shares of Class A Common Stock and 500,000 shares of Class
A Common Stock issuable upon conversion of senior convertible notes held by
Federal Partners, L.P. Excludes shares that may be issuable in payment of
interest on the notes. The Clark Estates, Inc. provides management and
administrative services to Federal Partners. Also includes 194,380 shares
held by accounts for which The Clark Estates, Inc. provides management and
administrative services. The Clark Estates, Inc. disclaims beneficial
ownership of 1,621,977 of the 1,640,943 shares described in this footnote.
(5) Includes 1,000,000 shares of Class A Common Stock issuable upon conversion
of warrants.
8
The following table sets forth the number of shares of Class A Common Stock
included in the table above that are issuable upon the exercise of options
exercisable within 60 days of February 28, 2002.
Name of Beneficial Owner Number of Shares of
------------------------ Class A Common Stock
--------------------
Gerald Gorman........................................... 54,826
Thomas Murawski......................................... 109,892
George Abi Zeid......................................... 0
William Donaldson....................................... 21,500
Stephen Duff............................................ 4,000
Stephen Ketchum......................................... 3,250
Jack Kuehler............................................ 21,500
Bradley Schrader........................................ 15,000
Debra McClister......................................... 51,858
David Ambrosia.......................................... 36,221
George Abi Zeid acquired 1,877,618 shares included in the ownership table
above in connection with the acquisition of Swift Telecommunications, Inc.
("STI") by EasyLink pursuant to an agreement and plan of merger dated
January 31, 2001. STI acquired AT&T Corp.'s EasyLink Services business on
January 31, 2001. In connection with the acquisition of STI by EasyLink,
pursuant to a Pledge Agreement dated January 31, 2001 Mr. Abi Zeid pledged to
AT&T Corp. all of the shares of EasyLink Class A Common Stock that he was
entitled to receive under the agreement and plan of merger to secure a
$35 million note issued to AT&T Corp. by STI and assumed by EasyLink as part
of the purchase price for the EasyLink Services business. As a result of the
debt restructuring completed on November 27, 2001, these shares now secure the
$10 million principal amount of restructure notes issued to AT&T Corp. in
exchange for the $35 million note held by it. Upon the occurrence of an event
of default under the terms of the $10 million note or the pledge agreement,
AT&T Corp. may exercise all of its available rights and remedies under the
agreement and applicable law. The exercise of these rights and remedies after
an event of default may result in the transfer of the shares pledged.
9
MANAGEMENT
Executive Officers
The following table identifies the current executive officers of EasyLink
and their ages as of February 28, 2002:
Name Age Position
---- --- --------
Gerald Gorman ...................... 46 Chairman, Director
Thomas Murawski .................... 56 Chief Executive Officer, Director
Bradley Schrader ................... 50 President
George Abi Zeid .................... 49 President -- International Operations
Debra McClister .................... 47 Executive Vice President and Chief Financial Officer
David Ambrosia ..................... 45 Executive Vice President and General Counsel
For biographical summaries of Gerald Gorman, Thomas Murawski and George Abi
Zeid, see "Election of Directors."
Bradley Schrader -- President
Mr. Schrader was named President of EasyLink in October 2000. He served as
President of Mail.com Business Messaging Services, Inc., a wholly-owned
subsidiary of the Company from August 2000 to October 2000. Prior to joining
EasyLink, Mr. Schrader consulted to Clayton, Dubilier and Rice and served as
President -- eCommerce at US Office Products, Inc. from 1999 to 2000. Before
joining US Office Products, Inc., Mr. Schrader was General Manager -- New
Ventures and General Manager -- Optical Devices Business at AlliedSignal from
1996 to 1999. Mr. Schrader also held senior management positions at TRW, Inc.
from 1990 to 1996, Corning, Inc. from 1986 to 1990 and The Boston Consulting
Group from 1980 to 1985. Mr. Schrader holds an M.B.A. from Harvard Business
School and several undergraduate and graduate degrees in engineering from MIT.
Debra McClister -- Executive Vice President and Chief Financial Officer
Ms. McClister has served as Executive Vice President and Chief Financial
Officer of EasyLink since July 1998. Prior to joining EasyLink, Ms. McClister
held a variety of executive positions at Philips Media, and most recently
served as Chief Operating Officer of Philips Media Software from 1996 to 1997.
She was the Senior Vice President and Chief Financial Officer for Philips
Media, North America from 1995 to 1996, Corporate Vice President and
Controller for Philips Electronics, North America from 1988 to 1995 and she
held various positions at Philips Electronics from 1984 to 1988. Ms. McClister
also worked in financial management for Hitachi America from 1981 to 1984.
Ms. McClister received her B.S. in Commerce from Rider University and is a
Certified Public Accountant.
David Ambrosia -- Executive Vice President and General Counsel
Mr. Ambrosia joined EasyLink as Executive Vice President and General Counsel
in May 1999. Prior to joining EasyLink, Mr. Ambrosia was engaged in the
private practice of law in the field of corporate law with an emphasis on
securities offerings and mergers and acquisitions. From January 1990 through
June 1999, he was a partner at Winthrop, Stimson, Putnam & Roberts. From
September 1982 until December 1989, he was an associate at Winthrop, Stimson,
Putnam & Roberts. Mr. Ambrosia received his B.S. from the School of Industrial
and Labor Relations at Cornell University, his M.B.A. from the Johnson
Graduate School of Management at Cornell University and his J.D. from the
Cornell Law School.
Executive Compensation
The following table presents certain summary information concerning the
compensation awarded to, earned by, or paid for services rendered to EasyLink
in all capacities during the fiscal year ended December 31, 2001, by the Chief
Executive Officer of EasyLink during 2001 and each of the four other most
highly compensated executive officers whose salary and bonus exceeded $100,000
in 2001 (collectively, the "Named Executive
10
Officers"). No other executive who would otherwise have been included in this
table on the basis of salary and bonus earned for 2001 has resigned or
otherwise terminated employment during 2001.
SUMMARY COMPENSATION TABLE
Long-Term Compensation Awards
-----------------------------------------------------------
Securities Securities Securities
Underlying Underlying Underlying Options
Options to Options to to purchase
Annual Compensation Purchase EasyLink Puchase Asia.com India.com, Inc.
------------------- Class A Inc. Class A Class A
Name and Principal Position Year Salary Bonus Common Stock(1)(2) Common Stock(3) Common Stock(3)
--------------------------- ---- -------- -------- ------------------ ---------------- ------------------
Gerald Gorman ........................ 2001 $215,732 $ -- 55,152 -- --
Chairman(4) 2000 200,000 -- -- 100,000 100,000
1999 200,000 -- 536 -- --
Thomas Murawski ...................... 2001 301,180 -- 402,539 -- --
Chief Executive Officer(5) 2000 236,378(6) -- 82,693 100,000 100,000
1999 -- -- -- -- --
Bradley Schrader ..................... 2001 224,139 25,000 80,001 -- --
President 2000 75,620(7) 120,000 60,002 50,000 50,000
1999 -- -- -- -- --
Debra McClister ...................... 2001 189,589 -- 40,005 -- --
Executive Vice President 2000 185,792 -- 42,767 100,000 100,000
and Chief Financial Officer 1999 180,000 -- 1,000 -- --
David Ambrosia ....................... 2001 192,715 -- 30,812 -- --
Executive Vice President 2000 185,192 -- 36,206 100,000 100,000
and General Counsel 1999 90,000(8) -- 25,400 -- --
---------------
(1) Includes annual bonus compensation earned for the year ended December 31,
1999, and foregone at the election of the Named Executive officers and
instead paid in the form of stock options as follows: Mr. Gorman, 536
options; Ms. McClister, 800 options and Mr. Ambrosia, 400 options. The
shares underlying options granted in 2000 include options issued in one or
more repricing transactions. In each repricing transaction, an equal amount
of outstanding options was cancelled. Also excludes options held by
Mr. Murawski to purchase 26,901 shares existing prior to the acquisition of
NetMoves on February 8, 2000 and assumed by EasyLink in the acquisition.
(2) All numbers give effect to the one-for-ten reverse stock split of the
Company's Class A and Class B Common Stock effective January 23, 2002.
(3) All of these stock options were cancelled in 2001.
(4) Also served as Chief Executive Officer until October 26, 2000.
(5) Served as Chief Executive Officer of Mail.com Business Messaging Services,
Inc. from February 8, 2000 until October 26, 2000.
(6) Salary did not commence until February 8, 2000.
(7) Salary did not commence until July 10, 2000.
(8) Salary did not commence until July 1, 1999.
11
OPTION GRANTS IN FISCAL YEAR
The following table provides certain information regarding stock options
granted to the Named Executive Officers during the year ended December 31,
2001.
Individual Grants
-------------------------------------------------------
Potential Realizable
Percent of Value at Assumed
Number of Total Options Annual Rates of Stock
Securities Granted to Price Appreciation for
Underlying Employees in Exercise Option Terms(2)
Options Fiscal Year Price per Expiration -----------------------------
Name Granted(#)(1) (%) Share(1) Date 5% 10%
----- ------------- ------------- --------- ---------- ------------- -------------
Gerald Gorman ......................... 55,152(3) 5.67% $ 2.20 09/10/2011 $ 73,421.72 $ 184,464.76
Thomas Murawski ....................... 170,000(4) 17.47 12.80 01/25/2011 1,211,895.53 2,991,196.56
232,539(5) 23.90 2.20 09/10/2011 309,570.17 777,764.20
Bradley Schrader ...................... 20,000(6) 2.06 4.80 06/19/2011 56,391.25 140,761.45
60,001(7) 6.17 2.20 09/10/2011 79,877.01 200,683.02
Debra McClister ....................... 40,005(8) 4.11 2.20 09/10/2011 53,257.11 133,803.18
David Ambrosia ........................ 30,812(9) 3.17 2.20 09/10/2011 41,018.82 103,055.70
---------------
(1) All numbers give effect to the one-for-ten reverse stock split of the
Company's Class A and Class B Common Stock effective January 23, 2002.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted based upon the
fair market value on the date of grant. These assumptions are not intended
to forecast future appreciation of EasyLink's stock price. The amounts
reflected in the table may not necessarily be achieved.
(3) These options may not be exercised on or before September 10, 2002. Upon
that date 54,939 shares wil1 be exercisable, with the remainder vesting
quarterly over the three years thereafter.
(4) These options became exercisable for 25% of the total shares on October 26,
2001 with the remainder vesting quarterly thereafter over three years. 50%
of the unvested options vest upon a change of control and, to the extent
not otherwise vested on the first anniversary and second anniversaries of
the change of control date, 25% of such unvested options vest on the first
anniversary of the change of control and 25% on the second anniversary.
(5) These options may not be exercised on or before September 10, 2002. Upon
that date 120,795 shares wil1 be exercisable, with the remainder vesting
quarterly over the three years thereafter. 170,000 of these options are
subject to accelerated vesting as follows: 50% of the unvested portion of
these 170,000 options vest upon a change of control and, to the extent not
otherwise vested on the first and second anniversaries of the change of
control date, 25% of the unvested portion of these 170,000 options vest on
the first anniversary of the change of control and 25% of this unvested
portion vest on the second anniversary.
(6) These options become exercisable for 50% of the total shares on June 20,
2001, with the remainder vesting quarterly over the next year. 50% of the
unvested options vest upon a change of control and the remaining unvested
options, to the extent not otherwise vested on the first anniversary of the
change of control date, vest on the first anniversary of the change of
control.
(7) These options may not be exercised on or before September 10, 2002. Upon
that date 31,249 shares wil1 be exercisable, with the remainder vesting
quarterly over the three years thereafter. 20,000 of these options are
subject to accelerated vesting as follows: 50% of the unvested portion of
these 20,000 options vest upon a change of control and, to the extent not
otherwise vested on such first anniversary date, the remaining unvested
portion of these 20,000 options vest on the first anniversary of the change
of control.
(8) These options may not be exercised on or before September 10, 2002. Upon
that date 37,658 shares wil1 be exercisable, with the remainder vesting
quarterly over the three years thereafter.
(9) These options may not be exercised on or before September 10, 2002. Upon
that date 28,277 shares wil1 be exercisable, with the remainder vesting
quarterly over the three years thereafter.
12
STOCK OPTION EXERCISES AND DECEMBER 31, 2001 STOCK OPTION VALUE TABLE
The following table sets forth certain information concerning stock options
exercised during 2001 by the Named Executive Officers and the number and value
of specified options held by those persons at December 31, 2001. The values of
unexercised in-the-money stock options at December 31,2001 shown below are
presented pursuant to SEC rules. There is no assurance that the values of
unexercised in-the-money stock options reflected in this table will be
realized.
Number of
Securities Underlying Value of Unexercised
Shares Unexercised Options At In-the-Money Options at
Acquired December 31, 2001 December 31, 2001(2)
on Value ----------------------------- ---------------------------
Name Exercise(#) Realized($)(1) Exerciseable Unexercisable Exercisable Unexercisable
---- ----------- -------------- ------------ ------------- ----------- -------------
Gerald Gorman ...................... 0 $0 54,758 55,550 $156,000 $148,910
Thomas Murawski .................... 0 0 78,778 384,360 0 627,855
Bradley Schrader ................... 0 0 11,249 108,752 0 174,802
Debra McClister .................... 0 0 30,204 47,717 0 108,013
David Ambrosia ..................... 0 0 23,169 38,444 0 83,192
---------------
(1) Amounts disclosed in this column were calculated based on the difference
between the fair market value of the Company's Class A Common Stock on the
date of exercise and the exercise price of the options in accordance with
regulations promulgated under the Securities Exchange Act of 1934, as
amended, and do not reflect amounts actually received by the Named
Executive Officers.
(2) All amounts reflected were determined using a December 31, 2001 price of
$4.90 per share.
Employment, Severance and Other Arrangements
EasyLink's current employment agreement with Gerald Gorman is dated April 1,
1999. The agreement provides that Mr. Gorman is to receive a base salary of
$250,000 per year. Mr. Gorman's base salary and bonus amount are adjustable on
an annual basis at the sole discretion of the Compensation Committee.
Additionally, the agreement provides that after Mr. Gorman leaves the employ
of EasyLink, he will not work for a competitor during the two year period
following his employment or disclose any of its confidential information.
EasyLink's current employment agreement with Thomas Murawski is dated
February 1, 2002. Under the agreement, Mr. Murawski is entitled to receive an
annual base salary of $350,000. Mr. Murawski may also receive an annual bonus
payment if determined to be payable by the board of directors based on the
performance of EasyLink and Mr. Murawski. If EasyLink terminates Mr. Murawski's
employment without cause at any time within 3 months before and in
contemplation of, or at any time after, the occurrence of a change of control
or he terminates his employment as a result of certain changes in his
employment by EasyLink during the same period, he will be entitled to receive
at his option either (i) continuation of his base salary and participation in
EasyLink's standard health insurance and 401(k) plans for 12 months after the
change of control or (ii) a lump sum equal to 12 months base salary. A "change
of control" shall occur if any person, other than Gerald Gorman, acquires
fifty percent or more of the total voting power of EasyLink's then outstanding
voting securities or a sale of EasyLink occurs. A "sale" of EasyLink for this
purpose means a merger, consolidation or sale of EasyLink's assets in which
the holders of voting securities of EasyLink immediately prior thereto hold
less than 50% of the total voting power represented by the voting securities
of the surviving or transferee entity outstanding immediately after the
merger, consolidation or sale. If a sale of EasyLink occurs before the
termination of Mr. Murawski's employment without cause or within 3 months
after a termination of his employment without cause or within 3 months after
Mr. Murawski terminates his employment as a result of certain changes made in
his employment by EasyLink, he is entitled to receive upon the consummation of
the sale a cash payment equal to 2.5% of the fair market value of the
consideration received by the holders of EasyLink's common stock pursuant to
the sale. If any of the payments to Mr. Murawski would be subject to change of
control excise tax payments, Mr. Murawski
13
is entitled to receive gross-up payments which would entitle him to retain,
after payment of all additional taxes on the gross-up payments, an amount
equal to the amount of the excise tax. A portion of Mr. Murawski's options are
also subject to acceleration of vesting upon a change of control. See
footnotes 4 and 5 to the table under "Option Grants in Fiscal Year" above. In
addition, if Mr. Murawski remains employed with EasyLink through May 29, 2002,
EasyLink will forgive principal and accrued interest on an outstanding loan
having a principal balance of $200,000. Mr. Murawski is also subject to
confidentiality and non-competition covenants applicable to the other EasyLink
executives.
EasyLink's employment agreement with Brad Schrader was entered into on
July 10, 2000. Under the agreement, as amended, Mr. Schrader is entitled to
receive an annual base salary equal to $250,000. Mr. Schrader may also receive
a discretionary annual bonus based on the performance of EasyLink and
Mr. Schrader. In the event of a change of control, a portion of Mr. Schrader's
unvested options will be subject to accelerated vesting.
EasyLink's current employment agreement with Debra McClister is dated
April 1, 1999. Under the agreement, as amended, Ms. McClister receives an
annual base salary of $200,800 which will be reviewed each year, and an annual
bonus between 15%-45% of base annual salary. Ms. McClister's employment
agreement with EasyLink, dated June 29, 1998, provides that in the event that
EasyLink is sold to a third party, Ms. McClister's options will be converted
into options to acquire the third party's stock, with an equivalent value and
the same remaining vesting period as her EasyLink options. In the event that
Ms. McClister's position at EasyLink is eliminated, replaced or taken over by
the third party in connection with an acquisition, merger or transfer of a
majority interest, EasyLink will attempt to offer Ms. McClister a comparable
senior management position with the same compensation, commuting and travel
requirements. In the event that such a position is not offered to
Ms. McClister, she will be entitled to a severance package comprised of (a)
six months base salary, (b) annual bonus pro rated for the portion of the year
worked and (c) immediate vesting of 50% of her remaining unvested options.
Additionally, her current employment agreement provides that after
Ms. McClister leaves the employ of EasyLink, she will not work for a
competitor during the two year period following her employment or disclose any
confidential information.
EasyLink's employment agreement with David Ambrosia is dated May 19, 1999.
Under the agreement, as amended, Mr. Ambrosia receives an annual base salary
of $225,800 which will be reviewed each year, and an annual bonus between 15%-
30% of base annual salary. If an acquisition, merger, consolidation or
transfer of control occurs, Mr. Ambrosia is entitled to severance and other
arrangements, including rights similar to those contained in Ms. McClister's
agreement. Additionally, Mr. Ambrosia's employment agreement provides that
after he leaves our employ, he will not work for a competitor during the two
year period following his employment or disclose any confidential information.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
EasyLink's Compensation Committee is responsible for administering
EasyLink's executive compensation policies and administers the Company's stock
option plans.
Compensation Philosophy
Compensation to executive officers is designed to attract and retain
outstanding executive talent, to motivate and reward their performance in
support of our strategic, financial and operating objectives. EasyLink has
designed compensation programs to create a direct relationship between the
level of compensation paid to executives and EasyLink's current and long-term
level of performance. The components of these programs are base salary, short-
term compensation in annual bonuses and long-term incentive compensation in
the form of stock options.
Base Salaries
The base salaries for our executive officers are determined annually by
reviewing the competitive pay practices of companies engaged in businesses
similar to ours. The salaries were established to attract and retain the
leadership and skill necessary to build long-term shareholder value.
14
Short-Term Annual Bonuses
Annual bonuses for executive officers are intended to provide an incentive
for achieving short-term financial and performance objectives. Bonus targets
are established based on predetermined annual goals.
Long-Term Incentive Compensation
The EasyLink stock option plans provide long-term incentives for executive
officers and other key employees. The Compensation Committee believes that a
significant portion of executive compensation should create a direct link
between executive compensation and increases in stockholder value. Stock
options are granted at fair market value and vest in installments, generally
over four years. In selecting recipients for option grants, the Committee
considers the executive's current contribution to Company performance, the
anticipated contribution to meeting EasyLink's long-term strategic performance
goals, and industry practices and norms. Long term incentives granted in prior
years and existing levels of stock ownership are also taken into
consideration.
Chief Executive Officer Compensation
Mr. Murawski's base salary, annual incentive award and long-term incentive
compensation are determined by the Committee based upon the same factors as
those employed by the Committee for executive officers generally.
Mr. Murawski's current annual base salary is $350,000.
The Compensation Committee will evaluate EasyLink's compensation policies on
an ongoing basis to determine whether they enable it to attract, retain and
motivate key personnel. To meet these objectives, EasyLink may from time to
time increase salaries, award additional stock options or provide other short-
and long-term incentive compensation to executive officers, including
Mr. Murawski.
Under Section 162(m) of the Internal Revenue Code of 1986, compensation
payments in excess of $1 million to the Chief Executive Officer or the other
four most highly compensated executive officers are subject to a limitation on
deductibility for EasyLink. Certain performance-based compensation is not
subject to the limitation on deductibility. The Compensation Committee does
not expect cash compensation in 2002 to its Chief Executive Officer or any
other executive officer to be in excess of $1 million. The Company intends to
maintain qualification of its 1999, 2000, 2001 and 2002 Stock Option Plans for
the performance-based exception to the $1 million limitation on deductibility
of compensation payments.
Submitted by the Compensation Committee
of the Board of Directors
William Donaldson
Stephen Duff
Stephen Ketchum
15
AUDIT COMMITTEE REPORT
The following is the report of the Audit Committee of the Board of
Directors. The Audit Committee has reviewed and discussed the audited
financial statements of the Company for the fiscal year ended December 31,
2001 with management. In addition, the Audit Committee has discussed with KPMG
LLP, the Company's independent auditors, the matters required to be discussed
by Statement on Auditing Standards No. 61 (Communications with Audit
Committee). The audit committee also has received the written disclosures and
the letter from KPMG LLP as required by the Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees) and the Audit
Committee has discussed the independence of KPMG LLP with that firm.
Based on the Audit Committee's review of the matters noted above and its
discussions with the Company's independent auditors and the Company's
management, the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2001. This report has been provided
by William Donaldson, Stephen Duff and Stephen Ketchum, the members of the
Audit Committee.
Submitted by the Compensation Committee
of the Board of Directors
William Donaldson
Stephen Duff
Stephen Ketchum
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG LLP served as the independent auditors for the Company and its
subsidiary corporations for the fiscal year ending December 31, 2001.
Representatives of KPMG LLP are expected to attend the meeting and will have
an opportunity to make a statement and/or respond to appropriate questions
from stockholders. The Company will select an independent auditor for the
current fiscal year after the annual meeting.
Fees Billed To Company By KPMG LLP During Fiscal 2001
Audit Fees
Audit fees billed to the Company by KPMG LLP for the audit of the Company's
annual financial statements included on Form 10-K for the year ended
December 31, 2001 and the review of the financial statements included in the
Company's quarterly reports on Form 10-Q for 2001 totaled approximately
$763,000.
Financial Information Systems Design And Implementation Fees
The Company did not engage KPMG LLP to provide advice to the Company
regarding financial information systems design and implementation during the
fiscal year ended December 31, 2001.
All Other Fees
Fees billed to the Company by KPMG LLP for all other non-audit services
rendered to the Company, including accounting advice and tax services, for the
year ended December 31, 2001 totaled approximately $262,000. The audit
committee of the Board of Directors has determined that the accounting advice
and tax services provided by KPMG LLP are compatible with maintaining KPMG
LLP's independence.
16
TRANSACTIONS WITH MANAGEMENT AND DIRECTORS
Federal Partners, L.P. Financings
On January 8, 2001, we issued $5,000,000 principal amount of 10% Senior
Convertible Notes due January 8, 2006 to Federal Partners, L.P. The Clark
Estates, Inc. provides management and administrative services to Federal
Partners. Federal Partners and accounts for which The Clark Estates, Inc.
provides management and administrative services are beneficial holders of 9.9%
of the Company's common stock, including shares issuable upon conversion of
senior convertible notes held by Federal Partners but excluding shares
issuable upon the conversion or exercise of other notes, warrants or options.
On March 20, 2001, we issued to Federal Partners, L.P. 300,000 shares of our
Class A Common Stock for a purchase price of $3,000,000, and we committed to
issue to Federal Partners an additional 100,000 shares of Class A Common Stock
if the closing price of our Class A Common Stock on the principal securities
exchange on which they are traded was not at or above $100 per share for 5
consecutive days. The additional shares were issued in 2002. As part of the
financing completed on November 27, 2001 in connection with our debt
restructuring, we issued to Federal Partners an aggregate of 250,369 shares of
Class A common stock for a purchase price of $1,700,000, and we committed to
issue to Federal Partners an additional 173,632 shares of Class A Common Stock
if the average of the closing prices of our Class A Common Stock on Nasdaq was
not at or above $16.00 per share for the 10 consecutive trading days through
year end 2001.
In connection with the issuance of thesenior convertible notes on January 8,
2001, we granted to Federal Partners, L.P. the right to designate one director
to our Board of Directors so long as Federal Partners, L.P. and other persons
associated with it owns at least 300,000 shares of Class A Common Stock,
including shares issuable upon conversion of or in payment of interest on the
senior convertible notes. Federal Partners, L.P. designated Stephen Duff and
he was appointed to our Board on January 8, 2001. Mr. Duff is a Senior
Investment Manager for The Clark Estates, Inc. and is Treasurer and a limited
partner of Federal Partners, L.P. The Clark Estates, Inc. provides management
and administrative services for Federal Partners, L.P. Through his limited
partnership interest in Federal Partners, L.P., Mr. Duff has an indirect
interest in $10,000 principal amount of the senior convertible notes issued on
January 8, 2001, in 600 of the shares of Class A Common Stock issued to
Federal Partners, L.P. on March 20, 2001 and in 850 of the shares of Class A
Common Stock issued to Federal Partners, L.P. in connection with the
November 27, 2001 financing.
Acquisition of Swift Telecommunications, Inc.
We acquired Swift Telecommunications, Inc. on February 23, 2001. George Abi
Zeid was the sole shareholder of Swift Telecommunications, Inc ("STI"). In
connection with the acquisition, Mr. Abi Zeid was elected to the Board of
Directors of the Company and was appointed President -- International
Operations. EasyLink paid $835,294 in cash, issued 1,876,618 shares of Class A
Common Stock and issued a promissory note in the original principal amount of
approximately $9.2 million to Mr. Abi Zeid in payment of the purchase price
for the acquisition payable at the closing. Under the merger agreement,
EasyLink also agreed to pay additional contingent consideration to Mr. Abi
Zeid equal to the amount of the net proceeds, after satisfaction of certain
liabilities of STI and its subsidiaries, from the sale or liquidation of the
assets of one of STI's subsidiaries. The $9.2 million note was payable in four
equal semi-annual installments over two years. The note was non-interest
bearing except in certain circumstances. Pursuant to the debt restructuring
completed on November 27, 2001, EasyLink issued $2,682,964 principal amount of
restructure notes, 268,295 shares of Class A common stock and warrants to
purchase 268,295 shares of Class A common stock in exchange for Mr. Abi Zeid's
$9.2 million note.
In connection with the acquisition by STI on January 31, 2001 of the
EasyLink Services business from AT&T Corp., Mr. Abi Zeid pledged to AT&T Corp.
under a Pledge Agreement dated January 31, 2001 all of the shares of EasyLink
Class A Common Stock that he was entitled to receive pursuant to the
acquisition to secure a $35 million note issued to AT&T Corp. by STI and
assumed by EasyLink as part of the purchase price for the EasyLink Services
business. As a result of the debt restructuring completed on November 27,
2001, these shares now secure the $10 million principal amount of restructure
notes issued to AT&T Corp. in exchange for the $35 million note held by it.
17
In connection with the acquisition of STI on February 23, 2001, the Company
also entered into a conditional commitment to acquire Telecom International,
Inc. ("TII"). TII was an affiliate of STI prior to the acquisition of STI by
the Company. George Abi Zeid is a principal beneficial shareholder of TII. The
purchase price for TII was originally agreed to be US$117,646 in cash, a
promissory note in the aggregate principal amount of approximately $1,294,118
and 267,059 shares of the Company's Class A common stock. In order to
facilitate the debt restructuring and to reduce the Company's debt obligations
and cash commitments, the parties agreed to modify the Company's commitments
in respect of TII. In lieu of acquiring TII, the Company purchased certain
assets owned by TII for six monthly payments of $10,000 commencing May 27,
2002 and one payment of $190,000 on November 27, 2002. The Company also agreed
to reimburse TII for up to 50% of TII's payments on certain accounts payable
up to a maximum reimbursement of $200,000, to cancel a $236,490 payable owed
by STI to the Company and to issue up to 20,000 shares of Class A common stock
to TII. In addition, the Company issued 300,000 shares of Class A common stock
to TII.
As part of the transaction with STI, EasyLink also entered into a
conditional commitment to acquire the 25% minority interests in two STI
subsidiaries for $47,059 in cash, promissory notes in the aggregate principal
amount of approximately $517,647 and 106,826 shares of Class A Common Stock.
This transaction is subject to certain conditions, including satisfactory
completion of due diligence, receipt of regulatory approvals and other
customary conditions.
Mr. Abi Zeid also agreed to contribute up to approximately 1.2 million
shares of Class A common stock issuable to him in connection with the debt
restructuring in order to permit the grant of shares or options to employees.
Fax-2 Acquisition and Divestiture
Under an Exclusivity and Royalty Agreement among Daniel Kuehler, Kurt Winter
and EasyLink dated May 30, 2000, EasyLink acquired from Messrs. Kuehler and
Winter the rights to develop, market and deploy the Fax-2 business concept.
Fax-2 allows users to send faxes to any email address. Mr. Kuehler is the son
of Jack Kuehler, a director of EasyLink. Each of Messrs. Kuehler and Winter
received 1,000 shares of EasyLink Class A Common Stock upon execution of the
agreement and were entitled to a 10% royalty up to $100,000 on all revenue
generated by Fax-2 and thereafter a 1% royalty on such revenue so long as
specified performance and operating conditions were maintained. Mr. Kuehler
also entered into an employment agreement which entitled him to receive full
compensation and benefits through June 15, 2001 if his employment is
terminated for any reason other than cause before then. Mr. Kuehler also
received on June 15, 2000 a grant of 3,000 options at an exercise price equal
to fair market value at the time of grant. These options were to vest over
four years. The Fax-2 service was re-named the FaxMail Service while owned by
the Company.
On October 4, 2001, the Company and Messrs. Kuehler and Winter entered into
a Divestiture Agreement which superceded the Exclusivity and Royalty
Agreement. Under the Divestiture Agreement, the Company transferred to an
entity formed by Messrs. Kuehler and Winter and to be named FaxMail exclusive
permanent rights to develop, market and deploy the FaxMail Service. Under the
Divestiture Agreement, the Company would own 10% of FaxMail. Under the
arrangement, the parties agreed that the Company would also be entitled to
receive a royalty on all business referred by it to FaxMail equal to 20% of
the gross revenues of the business referred. The parties also agreed that each
party would have independent ownership of certain technology underlying the
FaxMail Service as of the date of the Divestiture Agreement and the Company
would have the right to license future modifications, enhancements or
replacements to the FaxMail Service developed by FaxMail.
Transactions with AT&T
As a result of our acquisition of Swift Telecommunications, Inc. on
February 23, 2001 and the completion of our debt restructuring on November 27,
2001, AT&T Corp. beneficially owns approximately 14.2% of our outstanding
common stock and 9.2% of our total voting securities. These percentages
include 1 million shares issuable upon the exercise of warrants held by AT&T.
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Transition Services Agreement
On February 23, 2001, we completed the acquisition of Swift
Telecommunications, Inc. and the EasyLink Services business that Swift had
just acquired from AT&T Corp. 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. The messaging network for this business resides on
AT&T's managed network and is being operated and maintained for EasyLink
Services by AT&T pursuant to a Transition Services Agreement. In addition,
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. 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 and production messaging 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.
Under the Transition Services Agreement, we continue to purchase the
following services from AT&T:
o Personnel services under which AT&T personnel continue to perform various
services for us, including:
o Network care/network operations, including 7x24 maintenance of the
computer network
o Management support relating to transition of business to us
o Other non-personnel based services, including:
o Space, facilities, network connectivity and administrative services at
AT&T work locations
o Network hosting services under which AT&T will continue to host
equipment used in the business where currently located at AT&T data
centers
Master Carrier Agreement
In connection with the acquisition of the EasyLink Services business from
AT&T Corp., we entered into a Master Carrier Agreement with AT&T. Under this
agreement, AT&T will provide us with a variety of telecommunications services
that are required in connection with the provision of our services. The term
of the agreement for network connection services is 36 months commencing after
an initial ramp-up period of 6 months and the term of the agreement for
private line and satellite services is 36 months commencing with the first
full month in which any of these services are provided. Under the agreement,
we have a minimum purchase commitment for network connection services equal to
$3 million for each of the three years of the contract. In addition, we have a
minimum purchase commitment for private line and satellite services equal to
$280,000 per month during the three-year term. If we terminate the network
connection services or the private line and satellite services prior to the
term or AT&T terminates the services for our breach, we must pay to AT&T a
termination charge equal to 50% of the unsatisfied minimum purchase commitment
for these services for the period in which termination occurs plus 50% of the
minimum purchase commitment for each remaining commitment period in the term.
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STOCK PERFORMANCE GRAPH
Set forth below is a graph comparing the percentage change in the cumulative
stockholder return on our Class A Common Stock from June 18, 1999 (the date of
the initial public offering) to the last day of our last completed fiscal
year. The cumulative stockholder return is measured by dividing:
o the sum of (A) the cumulative amount of dividends for the measurement
period, assuming dividend reinvestment, and (B) the excess of our share
price as of the end of the measurement period over the price at the
beginning of the measurement period, by
o the share price at the beginning of the measurement period.
The cumulative total return on our Class A Common Stock is compared with the
Nasdaq Stock Market (U.S.) Index and the JP Morgan H&Q Internet Index.
CUMULATIVE TOTAL RETURN* FROM JUNE 18, 1999
TO DECEMBER 31, 2001 OF EASYLINK
CLASS A COMMON STOCK, THE NASDAQ STOCK MARKET
(U.S.) INDEX AND THE JP MORGAN H&Q INTERNET STOCK
[PERFORMANCE GRAPH]
6/19/99 12/31/99 12/31/00 12/31/01
EasyLink Services Corporation 100 267.86 10.27 7
NASDAQ Market Index 100 159.19 95.75 75.97
Chase H&Q Internet Index 100 223.23 85.89 55.27
*ASSUMES $100 INVESTED ON JUNE 18, 1999 IN STOCK OR INDEX, INCLUDING
REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31, 2000.
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DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of EasyLink which are intended to be presented by
such stockholders at EasyLink's 2003 Annual Meeting of Stockholders must be
received by EasyLink no later than December 23, 2002 to be included in the
proxy statement and form of proxy relating to that meeting. The deadline for
submitting a stockholder's proposal that will not be included in the proxy
statement and form of proxy for EasyLink's 2003 Annual Meeting of Stockholders
but nonetheless will be eligible for consideration is March 9, 2003.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires EasyLink's directors, executive
officers and persons who own more than 10% of EasyLink's Class A Common Stock
(collectively, "Reporting Persons") to file with the Securities and Exchange
Commission ("SEC") initial reports of ownership and changes in ownership of
EasyLink's Class A Common Stock. Reporting Persons are required by SEC
regulations to furnish EasyLink with copies of all Section 16(a) reports they
file. To EasyLink's knowledge, based solely on its review of the copies of
such reports received or written representations from certain Reporting
Persons that no other reports were required, EasyLink believes that during
2001 all Reporting Persons complied with all applicable filing requirements.
FORM 10-K
Shareholders entitled to vote at the Annual Meeting may obtain for no charge
a copy of the Company's Annual Report on Form 10-K, without exhibits, for the
year ended December 31, 2001, upon written request to Investor Relations,
EasyLink Services Corporation, 399 Thornall Street, Edison, NJ 08837.
OTHER MATTERS
The Board knows of no other business that will be presented to the Annual
Meeting. If any other business is properly brought before the Annual Meeting,
proxies in the enclosed form will be voted in respect thereof as the proxy
holders deem advisable.
It is important that the proxies be returned promptly and that your shares
be represented. Stockholders are urged to mark, date, execute and promptly
return the accompanying proxy card in the enclosed envelope.
By Order of the Board of Directors,
/s/ David W. Ambrosia
------------------------------------------
David W. Ambrosia
Executive Vice President, General
Counsel and Secretary
21
APPENDIX A
EASYLINK SERVICES CORPORATION
2002 STOCK OPTION PLAN
1. Purpose
The purpose of the EasyLink Services Corporation 2002 Stock Option Plan (the
"Plan") is to provide for the grant of stock options as an incentive to
selected directors, officers, employees and consultants of EasyLink Services
Corporation (the "Company") and any Subsidiary of the Company, to acquire a
proprietary interest in the Company, to continue as directors, officers,
employees and consultants and to increase their efforts on behalf of the
Company.
2. Definitions
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any regulations promulgated thereunder.
(c) "Committee" shall mean the committee described in Section 3.
(d) "Company" shall mean EasyLink Services Corporation, a Delaware
corporation, and any successor corporation.
(e) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(f) "Fair Market Value" means, as of any date, the value of Stock or
other property determined as follows:
(i) If the Stock is listed on any established stock exchange or a
national market system, including without limitation the Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair
Market Value shall be the closing sales price for such Stock (or the
closing bid, if no sales were reported) as quoted on such exchange or
system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other
source as the Committee deems reliable;
(ii) If the Stock is regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall
be the mean between the high bid and low asked prices for the Stock for
the last market trading day prior to the time of determination; or
(iii) In the absence of an established market for the Stock, or if
Fair Market Value is in reference to property other than Stock, the Fair
Market Value thereof shall be determined in good faith by the Committee.
(g) "Grantee" shall mean an officer, director, employee or consultant of
the Company to whom an Option has been granted under the terms of the Plan.
(h) "Incentive Stock Option" shall mean an option granted under the Plan
that is intended to meet the requirements of Section 422 of the Code or any
successor provision.
(i) "Nonemployee Director" shall mean a director of the Company who is a
"nonemployee director" within the meaning of Rule 16b-3.
(j) "Non-Qualified Stock Option" shall mean an option granted under the
Plan that is not intended to be an Incentive Stock Option.
(k) "Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option.
(l) "Option Agreement" shall mean a written agreement between the Company
and a Grantee as described in Section 6.
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(m) "Outside Director" shall mean a director of the Company who is an
"outside director" within the meaning of Section 162(m) of the Code.
(n) "Plan" shall mean this EasyLink Services Corporation 2002 Stock
Option Plan, as amended from time to time.
(o) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended,
or any successor rule or regulation.
(p) "Stock" shall mean shares of Class A Common Stock, $.01 par value, of
the Company or such other securities or property as may become subject to
Options pursuant to an adjustment made under Section 8.
(q) "Subsidiary" shall mean any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns more
than 50% of the total combined voting power of all classes of stock in one
of the other corporations in such chain.
3. Administration
(a) The Plan shall be administered by a committee (the "Committee")
designated by the Board. The Committee shall consist of at least two directors
and may consist of the entire Board; provided, however, that (i) if the
Committee consists of less than the entire Board, each member shall be a
Nonemployee Director and (ii) to the extent necessary for an Option intended
to qualify as performance-based compensation under Section 162(m) of the Code
to so qualify, each member of the Committee shall be an Outside Director.
(b) The Committee shall have plenary authority in its discretion, subject
only to the express provisions of the Plan and, in reference to the Incentive
Stock Options, to Code Section 422:
(i) to select the Grantees, the number of shares of Stock subject to each
Option and terms of the Option granted to each Grantee (including without
limitation the exercise price, the period during which such Option can be
exercised and any restrictions on exercise), provided that, in making its
determination, the Committee shall consider the position and
responsibilities of the individual, the nature and value to the Company of
his or her services and accomplishments, the individual's present and
potential contribution to the success of the Company and any other factors
that the Committee may deem relevant;
(ii) to determine the dates of the Option grants;
(iii) to prescribe the form of the Option Agreements;
(iv) to adopt, amend and rescind rules and regulations for the
administration of the Plan and for its own acts and proceedings;
(v) to decide all questions and settle all controversies and disputes of
general applicability that may arise in connection with the Plan; and
(vi) to modify or amend any outstanding Option as provided in
Section 7(h).
All decisions, determinations and interpretations with respect to the
foregoing matters shall be made by the Committee and shall be final and
binding upon all persons.
(c) Delegation. The Committee may delegate authority to an officer of the
Company to grant Options to Grantees who are not subject to the short-swing
profit rules of Section 16 of the Exchange Act and are not "covered employees"
whose compensation is subject to the deduction limit of Section 162(m) of the
Code, at the discretion of such appointed officer, provided, however, that the
appointed officer shall have no authority to grant Options in units greater
than 80,000 without approval of the Committee.
(d) Exculpation. No member of the Board or Committee shall be personally
liable for monetary damages for any action taken or any failure to take any
action in connection with the administration of the Plan or the granting of
Options under it unless such action or failure to take action constitutes
self-dealing, willful misconduct or recklessness; provided, however, that the
provisions of this subsection shall not apply to the
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responsibility or liability of a director pursuant to any criminal statute or
to the liability of a director for the payment of taxes pursuant to local,
state or federal law.
(e) Indemnification. Each member of the Board or Committee shall be
entitled without further act on his part or her part to indemnity from the
Company to the fullest extent provided by applicable law and the Company's
Certificate of Incorporation or Bylaws in connection with or arising out of
any action, suit or proceeding with respect to the administration of the Plan
or the granting of Options under it in which he or she may be involved by
reason of being or having been a member of the Board or Committee at the time
of the action, suit or proceeding.
4. Effectiveness and Termination of the Plan
The Plan shall become effective as of May 23, 2002, provided that the Plan
is approved by the stockholders of the Company within one year of its
adoption. Any Option outstanding at the time of termination of the Plan shall
remain in effect in accordance with its terms and conditions and those of the
Plan. The Plan shall terminate on the earliest of:
(a) May 23, 2011; or
(b) the date when all shares of Stock reserved for issuance under
Section 5 of the Plan shall have been acquired through exercise of Options
granted under the Plan; or
(c) such earlier date as the Board may determine.
5. The Stock
The aggregate number of shares of Stock issuable under the Plan shall be
one million five hundred thousand shares (1,500,000) or the number and kinds
of shares of capital stock or other securities substituted for the Stock as
provided in Section 8. The aggregate number of shares of Stock issuable under
the Plan may be set aside out of the authorized but unissued shares of Stock
not reserved for any other purpose, or out of shares of Stock held in or
acquired for the treasury of the Company. All shares of Stock subject to an
Option that terminates unexercised for any reason may thereafter be subjected
to a new Option under the Plan.
6. Option Agreement
Each Grantee shall enter into an Option Agreement with the Company setting
forth the terms and conditions of the Option issued to the Grantee, consistent
with the Plan. The form of Option Agreement may be established at any time or
from time to time by the Committee. No Grantee shall have rights in any Option
unless and until an Option Agreement is entered into with the Company.
7. Terms and Conditions of Options
Options may be granted by the Committee at any time and from time to time
prior to the termination of the Plan. Except as hereinafter provided, Options
granted under the Plan shall be subject to the following terms and conditions:
(a) Grantees. The Grantees shall be those employees of the Company or
its Subsidiaries (including officers and directors), and those consultants
to the Company or its Subsidiaries, selected by the Committee. No Incentive
Stock Options shall be granted to (i) any person owning Stock or other
capital stock in the Company possessing more than 10% of the total combined
voting power of all classes of capital stock of the Company, unless such
Incentive Stock Option meets the requirements of 7(b) and 7(e); or (ii) any
director who is not an officer. The maximum number of shares of Stock which
may be issued pursuant to Options granted to a Grantee within a calendar
year is 1,000,000.
(b) Price. The exercise price of each Option shall be determined by the
Committee at the time of grant, and in the case of an Incentive Stock Option
shall be no less than the Fair Market Value of the Stock, without regard to
any restriction, at the time the Incentive Stock Option is granted. If a
Grantee owns more than 10% of the total combined voting power of all classes
of stock of the Company or any Subsidiary, the
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exercise price of any Incentive Stock Option granted to such individual
shall be 110% of the Fair Market Value of the Stock.
(c) Payment for Stock. The exercise price of an Option shall be paid in
full at the time of the exercise (i) in cash, or (ii) by certified check
payable to the Company, or (iii) by other mode of payment (e.g., stock) as
the Committee may approve.
(d) Limitation. Notwithstanding any provision of the Plan to the
contrary, an Option shall not be treated as an Incentive Stock Option to the
extent the aggregate fair market value (determined as of the time the
Incentive Stock Option is granted) of Stock for which Incentive Stock
Options are exercisable for the first time by a Grantee during any calendar
year exceeds $100,000.
(e) Duration and Exercise of Options. Options may be exercised for terms
of up to but not exceeding ten years from the date of grant. Subject to the
foregoing, Options shall be exercisable at the times and in the amounts (up
to the full amount thereof) determined by the Committee at the time of
grant. If an Option granted under the Plan is exercisable in installments
the Committee shall determine what events, if any, will make it subject to
acceleration. The term of an Incentive Stock Option granted to an employee
who owns more than 10% of the combined voting power of all classes of stock
of the Company shall not exceed 5 years.
(f) Termination of Services. Upon the termination of a Grantee's
services for the Company or its Subsidiaries for any reason, Options held by
the Grantee may only be exercised to the extent and during the period, if
any, set forth in the Option Agreement.
(g) Transferability of Option. No Option shall be transferable except by
will or the laws of descent and distribution. An Option shall be exercisable
during the Grantee's lifetime only by the Grantee.
(h) Modification, Extension and Renewal of Options. Subject to the terms
and conditions and within the limitations of the Plan, the Committee may
modify, extend or renew outstanding Options granted under the Plan, or
accept the surrender of outstanding options (to the extent not theretofore
exercised) and authorize the granting of new Options in substitution
thereof. Notwithstanding the foregoing, however, no modification of an
Option shall, without the consent of the Grantee, alter or impair any rights
or obligations under any Option theretofore granted under the Plan or
adversely affect the status of an Incentive Stock Option.
(i) Other Terms and Conditions. Option Agreements may contain any other
provision not inconsistent with the Plan that the Committee deems
appropriate.
8. Adjustment for Changes in the Stock
(a) In the event the shares of Stock, as presently constituted, shall be
changed into or exchanged for a different number or kind of shares or other
securities of the Company (whether by reason of merger, consolidation,
recapitalization, reclassification, split, reverse split, combination of
shares or otherwise), then there shall be substituted for or added to each
share of Stock theretofore or thereafter subject to an Option the number and
kind of shares of capital stock or other securities into, which each
outstanding share of Stock shall be changed, or for which each such share
shall be exchanged, or to which each such share shall be entitled, as the case
may be. The price and other terms of outstanding Options shall also be
appropriately amended to reflect the foregoing events. In the event there
shall be any other change in the number or kind of outstanding shares of the
Stock, or of any capital stock or other securities into which the Stock shall
have been changed or for which it shall have been exchanged, if the Committee
shall, in its sole discretion, determine that the change equitably requires an
adjustment in any Option theretofore granted or which may be granted under the
Plan, then adjustments shall be made in accordance with its determination.
(b) Fractional shares resulting from any adjustment in Options pursuant to
this Section 8 may be settled in cash or otherwise as the Committee shall
determine. Notice of any adjustment shall be given by the Company to each
holder of an Option that shall have been so adjusted, and the adjustment
(whether or not notice is given) shall be effective and binding for all
purposes of the Plan.
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(c) Notwithstanding Section 8(a), the Committee shall have the power, in the
event of the disposition of all or substantially all of the assets of the
Company, or the dissolution of the Company, or the merger or consolidation of
the Company, or the making of a tender offer to purchase all or a substantial
portion of outstanding Stock of the Company, to amend all outstanding Options
(upon such conditions as it shall deem fit) to (i) permit the exercise of
Options prior to the effective date of the transaction and to terminate all
unexercised Options as of that date, or (ii) require the forfeiture of all
Options, provided the Company pays to each Grantee the excess of the Fair
Market Value of the Stock subject to the Option over the exercise price of the
Option, or (iii) make any other provisions that the Committee deems equitable.
9. Amendment of the Plan
The Board may amend the Plan and may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any Option in the
manner and to the extent deemed desirable to carry out the Plan without action
on the part of the stockholders of the Company; provided, however, that,
except as provided in Section 8 and this Section 9, unless the stockholders of
the Company shall have first approved thereof (i) the total number of shares
of Stock subject to the Plan shall not be increased, (ii) no Option shall be
exercisable more than ten years after the date it is granted, (iii) the
expiration date of the Plan shall not be extended and (iv) no amendment shall
(a) increase the number of shares of Stock to be received on exercise of an
Option, (b) materially increase the benefits accruing to a Grantee under an
Option or (c) modify the eligibility requirements for participation in the
Plan.
10. Interpretation and Construction
The interpretation and construction of any provision of the Plan by the
Committee shall be final, binding and conclusive for all purposes.
11. Application of Funds
The proceeds received by the Company from the sale of Stock pursuant to this
Plan will be used for general corporate purposes.
12. No Obligation to Exercise Option
The granting of an Option shall impose no obligation upon the Grantee to
exercise an Option.
13. Plan Not a Contract of Employment
Neither the Plan nor any Option Agreement is a contract of employment, and
the terms of employment of any Grantee shall not be affected in any way by the
Plan or related instruments except as specifically provided therein. The
establishment of the Plan shall not be construed as conferring any legal
rights upon any Grantee for a continuance of employment; nor shall it
interfere with the right of the Company (or its Subsidiary, if applicable) to
discharge the Grantee.
14. Expense of the Plan
All of the expenses of administering the Plan shall be paid by the Company.
15. Compliance with Applicable Law
Notwithstanding anything herein to the contrary, the Company shall not be
obligated to cause to be issued or delivered any certificates for shares of
Stock issuable upon exercise of an Option unless and until the Company is
advised by its counsel that the issuance and delivery of the certificates is
in compliance with all applicable laws, regulations of government authorities
and requirements of any exchange upon which shares of Stock are traded. The
Company shall in no event be obligated to register any securities pursuant to
the Securities Act of 1933 (as now in effect or as hereafter amended) or to
take any other action in order to cause the issuance and delivery of
certificates to comply with any of those laws, regulations or requirements.
The Committee may require, as a condition of the issuance and delivery of
certificates and in order to ensure compliance with those laws,
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regulations and requirements, that the Grantee make such covenants, agreements
and representations as the Committee, in its sole discretion, deems necessary
or desirable. Each Option shall be subject to the further requirement that if
at any time the Committee shall determine in its discretion that the listing
or qualification of the shares of Stock subject to the Option, under any
securities exchange requirements or under any applicable law, or the consent
or approval of any regulatory body, is necessary in connection with the
granting of the Option or the issuance of Stock thereunder, the Option may not
be exercised in whole or in part unless the listing, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Committee.
16. Governing Law
Except to the extent preempted by federal law, this Plan shall be construed
and enforced in accordance with, and governed by, the laws of the State of
Delaware.
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF EASYLINK SERVICES CORPORATION FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 23, 2002
The undersigned stockholder of EasyLink Services Corporation, a Delaware
corporation, (the "Company") hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement, each dated April 23, 2002, and
hereby appoints Gerald Gorman and Debra McClister or either of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the Annual Meeting of
Stockholders of EasyLink Services Corporation to be held on Thursday, May 23,
2002 at 10:00 a.m., local time, at the Woodbridge Hilton located at 120 Wood
Avenue South, Iselin, New Jersey and at any adjournment or postponement thereof,
and to vote all shares of Class A Common Stock and Class B Common Stock which
the undersigned would be entitled to vote if then and there personally present,
on the matters set forth below:
1. ELECTION OF DIRECTORS:
___ FOR all nominees listed below (except as indicated).
___ WITHHOLD authority to vote for all nominees listed below.
If you wish to withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the list below:
Gerald Gorman
Thomas Murawski
George Abi Zeid
William Donaldson
Stephen Duff
Stephen Ketchum
Jack Kuehler
2. PROPOSAL TO APPROVE THE COMPANY'S 2002 STOCK OPTION PLAN
____FOR ____AGAINST ____ABSTAIN
and, in their discretion, upon such other matter or matters that may properly
come before the meeting and any postponement(s) or adjournment(s) thereof.
PLEASE SIGN BELOW AND RETURN IMMEDIATELY
ANY STOCKHOLDER COMPLETING THIS PROXY THAT FAILS TO MARK ONE OF THE BOXES FOR
THE PROPOSAL WILL BE DEEMED TO HAVE GIVEN THE PROXY HOLDERS COMPLETE DISCRETION
IN VOTING HIS, HER, OR ITS SHARES FOR SUCH PROPOSAL AT THE MEETING, OR, IN THE
CASE OF ELECTION OF DIRECTORS, FOR EACH OF THE LISTED NOMINEES. IF A BOX IS
CHECKED, YOUR SHARES SHALL BE VOTED IN ACCORDANCE WITH YOUR INSTRUCTIONS.
_______________________________________ Date:__________________________
Signature
_______________________________________ Date:__________________________
Signature
(This Proxy should be marked, dated, signed by the stockholder(s) exactly as his
or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.)