SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
April 13, 2006
EASYLINK SERVICES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 000-26371 13-3787073
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
33 Knightsbridge Road
Piscataway, NJ 08854
(Address of principal executive offices)
Registrant's telephone number, including area code: (732) 652-3500
N/A
Former Name or Former Address, if Changed Since Last Report
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement
Common Stock Financing
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On April 13, 2006, EasyLink Services Corporation ("EasyLink" or the "Company)
entered into a definitive common stock purchase agreement and a registration
rights agreement with existing stockholders of the Company (including Federal
Partners, L.P., Lawrence Auriana and accounts managed by Burnham Securities
Inc.), other individual investors and members of EasyLink's board of directors
and management.
Pursuant to the common stock purchase agreement, the Company raised an aggregate
of approximately $5.4 million in exchange for the issuance of approximately 9
million shares of its Class A common stock. Of the total $5.4 million,
approximately $4.9 million was raised from non-management investors and
approximately $0.5 million from EasyLink Board members and key members of
EasyLink senior management. Purchases by non-management investors were at $0.60
per share, while purchases by the EasyLink Board members and senior management
were at $0.62, which is equal to the most recent closing bid price prior to the
execution and delivery of the agreement. The common stock purchase agreement
contained a condition to closing that members of the Company's board of
directors and management commit to purchase at least $500,000 of Class A common
stock under the agreement at a price not less than the most recent closing bid
price.
The proceeds from the financing will be used to repay $3 million of the
Company's outstanding term loan in satisfaction of obligations under the Wells
Fargo Foothill credit agreement. The remaining $2.4 million will be used to fund
working capital requirements. The Company had previously announced its agreement
with Wells Fargo Foothill to obtain more favorable covenants in exchange for a
$4 million loan pay down, $1 million of which was made in February 2006.
Under the Registration Rights Agreement, the Company has agreed to prepare and
file on or before December 31, 2006 a registration statement covering the resale
of the shares of Class A common stock issued in the financing.
Federal Partners, LP purchased approximately 4.1 million shares in the
financing, raising its ownership to approximately 9.5 million shares or 17.5% of
the Company's total shares outstanding. Lawrence Auriana purchased 2.5 million
shares, raising his ownership to approximately 9.2% of the Company's total
shares outstanding.
Members of EasyLink's board of directors, named executive officers and other
members of management purchased shares in the financing as described in the
table below:
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NAME TITLE PURCHASE PRICE NUMBER OF SHARES
Robert Casale Director $20,000 32,258
Peter Holzer Director $100,000 161,290
George Knapp Director $25,000 40,323
John Petrillo Director $50,000 80,645
Eric Zahler Director $62,000 100,000
Thomas Murawski Chairman, President and Chief
Executive Officer; Director $100,000 161,290
Michael Doyle Vice President and Chief
Financial Officer $32,500 52,419
David Ambrosia Executive Vice President and
General Counsel $15,000 24,194
Gary MacPhee Executive Vice President and
General Manger, TMS $10,000 16,129
Richard Gooding Executive Vice President and
General Manger, TMS $5,000 8,065
Other management
members $105,000 169,355
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Total $524,500.00 845,968
On April 13, 2006, upon the closing of the common stock financing described
above, the Board of Directors appointed Stephen Duff, a designee of Federal
Partners, as a member of the Company's board of directors. Federal Partners
designated Mr. Duff pursuant to a pre-existing contractual board designation
right held by it.
In connection with Mr. Duff's appointment as a director, on April 13, 2006 the
Board of Directors granted Mr. Duff options to purchase 30,000 shares of the
Company's Class A common stock, par value $0.01 per share. The exercise price of
the options is $0.66 per share, the closing price of the Company's Class A
common stock on the Nasdaq stock market on the date of the grant. The options
vest 25% on the first anniversary of the date of grant and then 1/12th (8.33%)
quarterly thereafter. If a change of control occurs and Mr. Duff does not
continue to serve as a director of the surviving corporation or its parent
entity, then the portion of the options that would have vested in that vesting
year (25%) will vest immediately upon the change of control.
As a director of the Company, Mr. Duff will also be entitled to receive an
annual retainer fee in the amount of $15,000 and $1,000 for each regular board
meeting that he attends, $1,000 for each committee meeting, if applicable, that
he attends and $500 for each telephonic board or committee meeting in which he
participates. If Mr. Duff serves as the Chair of a committee, he would also be
entitled to receive a $3,000 annual fee. He will also be entitled to an annual
grant of options to purchase 10,000 shares of the Company's Class A common stock
awarded pursuant to the terms of the Company's stock option plans.
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Mr. Duff is also entitled to the benefits of the Company's standard form of
indemnification agreement for directors and officers. Under this agreement, the
Company has agreed to indemnify Mr. Duff for expenses, judgments, fines and
amounts paid in settlement in connection with third party proceedings and
proceedings by or in the right of the Company.
Item 3.02 Unregistered Sales of Equity Securities.
On April 13, 2006, the Company entered into a definitive common stock purchase
agreement obligating it to issue an aggregate of approximately 9 million shares
of its Class A common stock for an aggregate purchase price of approximately
$5.4 million. The shares are being issued in a private placement to accredited
investors under Section 4(2) of the Securities Act of 1933, as amended, and Rule
506 of Regulation D promulgated thereunder.
Item 5.02 Election of Directors
On April 13, 2006, upon the closing of the common stock financing described in
Item 1.01 above, the Board of Directors appointed Stephen Duff, a designee of
Federal Partners, as a member of the Company's board of directors. Federal
Partners designated Mr. Duff pursuant to a pre-existing contractual board
designation right granted to it in connection with a financing completed in
January 2001.
At the time of this disclosure, the board of directors has made no determination
as to whether Mr. Duff will be named to a committee of the board of directors.
Mr. Duff is Chief Investment Officer of The Clark Estates, Inc., which is an
affiliate of Federal Partners, L.P. Mr. Duff is also Treasurer of the general
partner of, and a limited partner of, Federal Partners, L.P. Through his limited
partnership interest in Federal Partners, Mr. Duff has an indirect interest in
19,031 shares of Class A common stock held by Federal Partners. Federal Partners
has the contractual right to designate one director to the Board of Directors of
EasyLink. Except for these relationships and the transactions in connection with
the common stock financing disclosed herein, there is no transaction, or series
of similar transactions, since the beginning of the Company's last fiscal year,
or any currently proposed transaction, or series of similar transactions, to
which the Company or any of its subsidiaries was or is to be a party, in which
the amount involved exceeds $60,000 and in which Mr. Duff had, or will have, a
direct or indirect material interest.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: April 19, 2006
EASYLINK SERVICES CORPORATION
By: /s/ Thomas Murawski
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Thomas Murawski, Chairman, President and Chief Executive Officer
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