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SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934, as amended.
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, For Use of the Commission Only (as permitted by
Rule14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
EASYLINK SERVICES CORPORATION
(Name of Registrant as Specified In Its Certificate of Incorporation)
N/A
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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EASYLINK SERVICES CORPORATION
33 KNIGHTSBRIDGE ROAD
PISCATAWAY, NJ 08854
May 8, 2006
Dear Stockholder:
On behalf of the Board of Directors, I cordially invite you to attend
our Annual Meeting of Stockholders to be held at 9 a.m. on Tuesday, June 20,
2006 at Radisson Hotel Piscataway, 21 Kingsbridge Road, Piscataway, NJ 08854.
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 2005
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/Thomas Murawski
---------------------------------------
THOMAS MURAWSKI
Chairman, President and
Chief Executive Officer
EASYLINK SERVICES CORPORATION
33 KNIGHTSBRIDGE ROAD
PISCATAWAY, NJ 08854
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 20, 2006
The Annual Meeting of Stockholders (the "Annual Meeting") of EasyLink
Services Corporation, a Delaware corporation (the "Company" or "EasyLink"), will
be held at 9 a.m. local time on Tuesday, June 20, 2006 at Radisson Hotel
Piscataway, 21 Kingsbridge Road, Piscataway, NJ 08854 for the following
purposes:
1. To elect eight directors of EasyLink to serve until the 2007 Annual
Meeting of Stockholders or until their respective successors are elected and
qualified;
2. To approve the Company's 2006 Employee Stock Purchase Plan;
3. To approve an amendment to the Company's 2005 Stock and Incentive
Plan to increase the number of shares that are available for grant or award
under the plan from 1,000,000 to 3,000,000;
4. To ratify the appointment of Grant Thornton LLP as the independent
registered public accounting firm for the Company for the year ending December
31, 2006; and
5. To transact such other business as may properly come before the
Annual Meeting and any adjournment or postponement thereof.
The foregoing items of business, including the nominees for directors,
are more fully described in the Proxy Statement which is attached and made a
part of this Notice. The Board of Directors has fixed the close of business on
April 25, 2006 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 Ambrosia
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DAVID W. AMBROSIA
Executive Vice President, General Counsel
and Secretary
Piscataway, New Jersey
May 8, 2006
EASYLINK SERVICES CORPORATION
33 KNIGHTSBRIDGE ROAD
PISCATAWAY, NJ 08854
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PROXY STATEMENT
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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 9 a.m. local time on Tuesday, June 20, 2006 at Radisson Hotel
Piscataway, 21 Kingsbridge Road, Piscataway, NJ 08854, and any adjournment or
postponement thereof.
The Company's principal offices are located at 33 Knightsbridge Road,
Piscataway, New Jersey 08854. This Proxy Statement and the accompanying proxy
card are being mailed to the stockholders of the Company on or about May 8, 2006
or as soon as practicable thereafter.
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 25, 2006 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 54,342,436
shares of Class A common stock outstanding held of record by approximately 716
stockholders.
VOTING AND SOLICITATION
Each outstanding share of Class A common stock on the Record Date is
entitled to one vote 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 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 authority to
vote on that proposal 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
present in person or represented by proxy at the meeting and entitled to vote
thereon. Abstentions and broker "non-votes" are not counted for the purposes of
the election of directors.
Approval of the EasyLink Services Corporation 2006 Employee Stock
Purchase Plan and the amendment to the EasyLink Services Corporation 2005 Stock
and Incentive Plan will require the affirmative vote of the holders of a
majority of the votes of the shares of Class A common stock present in person or
represented by proxy at the meeting and entitled to vote thereon. Abstentions
will be counted towards the tabulations of votes cast on this proposal and will
have the same effect as a vote "AGAINST" such matters. Broker "non-votes" will
not be counted for purposes of determining whether this proposal has been
approved.
If the enclosed proxy is properly executed and returned, it will be
voted in the manner directed by the stockholder. If no instructions are
specified with respect to a matter to be acted upon, proxies will be voted "FOR"
the election of the nominees for directors listed in this Proxy Statement, "FOR"
the approval of the Company's 2006 Employee Stock Purchase Plan , "FOR" the
approval of the amendment to the Company's 2005 Stock and Incentive Plan, "FOR"
the ratification of the appointment of Grant Thornton LLP as the independent
registered public accounting firm for the Company for the year ending December
31, 2006 and in the discretion of the proxy holders on any other matters that
may properly come before the meeting, as applicable.
1
The solicitation of proxies will be conducted by mail, and the Company
will bear all attendant costs. The Company may conduct further solicitation
personally, telephonically or by facsimile through its officers, directors and
employees, none of whom will receive additional compensation for assisting with
the solicitation.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
At the Annual Meeting, the stockholders will elect eight (8) directors
to serve until the next Annual Meeting of Stockholders or until their respective
successors are elected and qualified. In the event any nominee is unable or
unwilling to serve as a director at the time of the Annual Meeting, the proxies
may be voted for the balance of those nominees named and for any substitute
nominee designated by the present Board or the proxy holders to fill such
vacancy, or for the balance of the nominees named without nomination of a
substitute, or the size of the Board may be reduced in accordance with the
Bylaws of the Company. The Board has no reason to believe that any of the
persons named below will be unable or unwilling to serve as a nominee or as a
director if elected.
The names of the nominees, their ages as of the date of this Proxy
Statement and certain other information about them are set forth below:
NAME AGE POSITION
---- ----- ----------
Thomas Murawski 61 Chairman, President, Chief Executive Officer,
Director
Robert Casale 67 Director
Stephen Duff 42 Director
Peter Holzer 60 Director
George Knapp 74 Director
John Petrillo 57 Director
Dennis Raney 63 Director
Eric Zahler 55 Director
There are no family relationships among any of the directors or
executive officers of the Company.
THOMAS MURAWSKI -- CHAIRMAN, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR
Mr. Murawski has served as a member of the Board of Directors since
February 2000. Mr. Murawski has served as Chairman of EasyLink since April 25,
2005, as Chief Executive Officer since October, 2000 and as President since June
2002. 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 served as Chairman,
President, CEO and Director of NetMoves Corporation from November 1991. 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 ITT Corporation was President and General
Manager of ITT World Communications Inc., an international telecommunications
services company.
ROBERT CASALE -- DIRECTOR
Mr. Casale has served as a member of the Board of Directors since May 8, 2003.
Mr. Casale has been a Senior Advisor, Financial Services, to Welsh, Carson,
Anderson & Stowe, a large private equity firm, from 2002 to the present and a
consultant to ADP from 1998 to the present. From 1988 to 1998, Mr. Casale was
Group President, Brokerage Information Services, of ADP. From 1986 to 1988, Mr.
Casale was a Managing Director, Co-Head Technology Mergers & Acquisitions
Practice, Kidder Peabody & Company. From 1975 to 1986, Mr. Casale held various
management positions with AT&T Corp., including President, Special Markets Group
from 1985 to 1986. From 1970 to 1975, Mr. Casale held management positions for
Telex Corporation. From 1965 to 1969, Mr. Casale held sales positions for Xerox
Corporation and Honeywell Corporation. Mr. Casale currently serves as the
chairman of the board of directors and as chairman of the compensation committee
of BISYS Group. Mr. Casale also currently serves on the board of directors of
privately held Northeast Securities. Mr. Casale is also a director of the not
for profit New York Pops. He has previously served on the boards of ADP,
Provident Mutual Life Insurance Company and Quantum Corporation.
2
STEPHEN DUFF -- DIRECTOR
Mr. Duff has been a member of the Board of Directors since April 13, 2006 and
was previously a director from January, 2001 through November, 2004. Mr. Duff is
the Chief Investment Officer of The Clark Estates, Inc. Prior to joining The
Clark Estates in 1995, Mr. Duff was an analyst and portfolio manager at The
Portfolio Group, Inc., a subsidiary of The Chemical Banking Corporation, Inc.
from 1990 through 1995. Mr. Duff is a 1985 graduate of Stonehill College.
Currently, Mr. Duff serves on the board of directors of TRC Companies, Inc.,
Viewpoint Corporation, Opto-Generic Devices Incorporated, Advanced Financial
Applications and The Clara Welch Thanksgiving Home, Inc. (a non-profit elderly
care facility). Federal Partners, L.P. holds a contractual right to designate
one director of the Company's board of directors and has named Mr. Duff as its
designee. See "Certain Relationships And Related Transactions."
PETER HOLZER -- DIRECTOR
Mr. Holzer has served as a member of the Board of Directors since
February 8, 2005. From 1990 to 1996, Mr. Holzer served as Executive Vice
President and Director - Strategic Planning and Development for The Chase
Manhattan Corporation (now JPMorganChase), where he also held a number of other
executive assignments around the world during his 28 year career. Mr. Holzer
currently serves as chairman of the board of directors and chairman of the audit
committee of Embrex, Inc., an international agricultural biotechnology firm. He
served as the chairman of the compensation committee of Embrex from 2000 to
2002. He serves as a director, chairman of the audit committee and member of the
compensation committee of CAS Holdings, Inc., a privately owned operator of
environmental testing laboratories. Mr. Holzer formerly served as an advisor to
Taddingstone Consulting Group, Inc. a strategy consulting firm serving the
financial services industry. Mr. Holzer also serves as a trustee of Big
Brothers/Big Sisters of New York City and The High Desert Museum of Bend,
Oregon. Mr. Holzer previously served on the board of directors of Crown Central
Petroleum Corp., Swiss-American Chamber of Commerce and as an Advisory Director
to AMT Capital Advisors, LLC, a mergers, acquisitions and strategy advisory firm
serving the financial services industry.
GEORGE KNAPP -- DIRECTOR
Mr. Knapp has served as a member of the Board of Directors since May 8, 2003.
Mr. Knapp has been a Special Limited Partner and Consultant to MidMark Partners,
a Chatham, NJ based venture capital firm, from 1993 to the present. From 1988 to
1996, Mr. Knapp was an Associate of MBW Management, a Morristown, NJ based
venture capital firm, and a Principal of Communications Investment Group, a
Morristown, NJ investment banking and telecommunications consulting firm. From
1982 to 1987, Mr. Knapp served as Corporate Vice President of ITT and Director,
Telecommunications/Marketing for ITT Europe based in Brussels. From 1975 to
1982, Mr. Knapp served as Corporate Vice President of ITT and Group Executive
and Chief Executive Officer for U.S. domestic and international
telecommunications network operations of ITT based in New York. From 1968 to
1974, Mr. Knapp served as President and Chief Executive Officer of the Puerto
Rico Telephone Co. in San Juan, Puerto Rico. From 1966 to 1968, Mr. Knapp served
as Director of Operations for the Chilean Telephone Company in Santiago, Chile.
From 1956 to 1965, Mr. Knapp served in various capacities at AT&T Corp., New
York Telephone and Bell Laboratories. Mr. Knapp is currently serving as a member
of the Board of Trustees of Manhattan College, New York as a Trustee Emeritus.
He has served on the boards of a variety of companies and other organizations,
including the Intermedia Communications, Inc., Digex Inc., the Boy Scouts of
America, Greater New York, and the Greater New York United Fund.
JOHN PETRILLO -- DIRECTOR
Mr. Petrillo has served as a member of the Board of Directors since
January 14, 2005. He has over 30 years of experience with AT&T, retiring in 2003
as AT&T's most senior executive responsible for global corporate strategy and
business development. His experiences in the global communications industry
include: successful large line operational P&L assignments in the global
business communications services market, domestic and international public and
private board positions, and sophisticated technical, business strategy
development, investment and partnership negotiation experiences in the wireless,
cable, Internet and global business communications sectors. Mr. Petrillo
currently serves as the Chief Executive Officer and Chairman of the Board of IDT
Spectrum, a private company. Mr. Petrillo also currently serves on the board of
directors of Narad Networks, as an advisory board member at BridgePort Networks,
and as a Trustee of the Sweden-based Tallberg Foundation, an organization
devoted to the development of global public/private sector collaboration.
DENNIS RANEY -- DIRECTOR
Mr. Raney has served as a member of the Board of Directors since May 8,
2003. Mr. Raney was Chief Financial Officer of eOne Global, LP from July 2001 to
May 2003. From March 1998 to July 2001, Mr. Raney was Executive Vice President
and Chief Financial Officer of Novell, Inc. From 1996 to 1997, Mr. Raney served
as Chief Financial Officer of QAD Inc. From 1995 to 1996, Mr. Raney was Chief
Financial Officer of California Microwave and during 1995 of General Magic. From
1993 to 1995, Mr. Raney was Chief Financial Officer, Pharmaceutical Group, of
Bristol-Myers Squibb. From 1970 to 1993, Mr. Raney held various management
positions with Hewlett Packard. Mr. Raney currently serves as a director and
audit committee member of Viewpoint Corporation and Ultratech, Inc. Mr. Raney
also currently serves as a Principal of Liberty-Greenfield California. Mr. Raney
served as a director and audit committee member of Equinix, Inc. from April 2003
to May 2005, ProBusiness Services during portions of 2002 and 2003, Redleaf
Group, Inc. from 2001 to June 2003, W.R. Hambrecht & Company from November 1998
to June 2001 and ADAC Laboratories from March 1999 to March 2001.
3
ERIC ZAHLER -- DIRECTOR
Mr. Zahler has served as a member of the Board of Directors since
February 8, 2005. Mr. Zahler is President and Chief Operating Officer of Loral
Space & Communications, Inc. where he is responsible for overseeing the
company's two businesses: Loral Skynet, a global satellite services provider,
and Space Systems/Loral, a leading manufacturer of commercial satellites. Mr.
Zahler also serves on the board of directors of Satelites Mexicanos, S.A. de
C.V. Loral Space & Communications and certain subsidiaries filed for protection
under Chapter 11 of the United States Bankruptcy Code on July 15, 2003 and
emerged from such proceedings on November 21, 2005. Prior to joining Loral, Mr.
Zahler was engaged in the private practice of law as a partner at the firm of
Fried, Frank, Harris, Shriver & Jacobson.
CORPORATE GOVERNANCE
EasyLink's Board of Directors has adopted a Code of Business Conduct
and Ethics, resolutions for Director Nominations Procedures, an Audit Committee
Charter, a Compensation Committee Charter and a Stockholders Communications with
the Board of Directors Policy which are posted on the Corporate Governance page
of our Website. The Corporate Governance page can be accessed in the Investor
Relations section of our Website at www.easylink.com.
CODE OF BUSINESS CONDUCT AND ETHICS
EasyLink's Code of Business Conduct and Ethics applies to all
employees, officers and members of the Board of Directors, including the
principal executive officer, principal financial officer, principal accounting
officer and controller. The provisions of this Code are designed to promote
honest and ethical conduct, including the ethical handling of actual or apparent
conflicts of interest between personal and professional relationships. The code
is posted on the Corporate Governance page of our Website, which can be accessed
in the Investor Relations section of our Website at www.easylink.com.
DIRECTOR NOMINATIONS PROCEDURES
The Board of Directors does not have a standing nominating committee.
The Board of Directors has, however, adopted Director Nominations Procedures.
The Director Nominations Procedures provide, among other things, that:
o The Independent Directors of the Company (as determined in
accordance with Rule 4200(a)(15) under the rules of the NASDAQ)
will (a) assist the Board in identifying individuals qualified to
become Board members and Board committee members, (b) recommend
director nominees for the Board's selection for each annual
meeting of stockholders and upon any Board vacancy and (c) take
such other actions within the scope of the Director Nominations
Procedures as the Independent Directors deem necessary or
appropriate.
o The Independent Directors shall have authority to:
o Evaluate the size and composition of the Board, develop
criteria for Board membership and evaluate the independence
of existing and prospective directors.
o Seek, evaluate and recommend that the Board select qualified
individuals to become directors.
o Approve procedures to be followed by security holders in
submitting recommendations of director candidates and the
consideration of such director candidates in accordance with
any applicable notice provisions and procedures set forth in
the Company's Bylaws.
o Assist the Company in making the periodic disclosures related
to the nominating procedures required by rules issued or
enforced by the Securities and Exchange Commission.
o Take such other actions as may be requested or required by
the Board from time to time.
o The Independent Directors shall have authority to decide whether
to retain a search firm and/or legal counsel and other consultants
to assist the Independent Directors in identifying, screening and
attracting director candidates and in fulfilling their role under
these procedures. The fees of such firm, counsel or consultant
shall be paid by the Company.
The Board of Directors will consider candidates recommended by
stockholders when the nominations are properly submitted. The deadlines and
procedures for stockholder submissions of director nominees are described below
under "Deadline for Receipt of Stockholder Proposals." Following verification of
the stockholder status of persons proposing candidates, the Independent
Directors, acting pursuant to the Director Nominations Procedures described
above, will make an initial analysis of the qualifications of any candidate
recommended by stockholders to determine whether the candidate is qualified for
service on the Company's Board before deciding to undertake a complete
evaluation of the candidate. Other than the verification of compliance with
procedures and stockholder status, and the initial analysis performed by the
Independent Directors, a potential candidate nominated by a stockholder is
considered in the same manner as any other potential candidate during the review
process by the Board.
4
Director Nominations Procedures are posted on the Corporate Governance
page of our Website, which can be accessed in the Investor Relations section of
our Website at www.easylink.com.
COMMUNICATIONS WITH THE BOARD
The Board of Directors of Easylink Services Corporation believes it is
in the best interest of the Company and its stockholders to maintain a policy of
open communications between the Company's stockholders and the Board.
Accordingly, the Board has adopted the following procedures for stockholders who
wish to communicate with the Board.
o Stockholders who wish to communicate with the Board or with
specified directors should do so by forwarding such communication,
in writing, to The Board of Directors, c/o Investor Relations,
Easylink Services Corporation, 33 Knightsbridge Road, Piscataway,
NJ 08854.
o Any such communication must state the number of shares
beneficially owned by the stockholder making the communication.
The Investor Relations department will forward such communication
to the full Board or to any individual director or directors to
whom the communication is directed, unless the communication is
unduly hostile, threatening, illegal or similarly inappropriate,
in which case the Investor Relations department (after
consultation with the Company's legal department, if appropriate)
shall have the authority to discard the communication or take
appropriate legal action regarding the communication. A good faith
determination made by the Investor Relations department to forward
a communication or not to forward a communication to the full
Board or to any individual director or directors shall be final
and conclusive and deemed in full compliance with these
procedures.
DIRECTOR INDEPENDENCE
Our Board of Directors has determined that Robert Casale, Peter Holzer,
George Knapp, John Petrillo, Dennis Raney and Eric Zahler are independent
directors as defined in Rule 4200(a)(15) of the NASD listing standards.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 2005, the Board had eleven meetings and acted four times by
unanimous written consent. All of our directors attended 75 percent or more of
the aggregate number of regularly scheduled and special meetings of the Board
and Board committees on which they served and which were held during their
tenure in 2005.
AUDIT COMMITTEE
The Audit Committee is currently comprised of four directors: George
Knapp, John Petrillo, Dennis Raney and Eric Zahler. Mr. Raney is the Chairman of
the Audit Committee. Mr. Petrillo and Mr. Zahler were appointed to the Board on
January 14, 2005 and February 5, 2005, respectively, and were appointed to the
Audit Committee on February 8, 2005. Robert Casale served on the Audit Committee
until February 8, 2005. The Audit Committee held sixteen meetings during 2005.
Each of the current Audit Committee members is an "independent director" as
defined in Rule 4200(a)(15) of the NASD listing standards and is otherwise
eligible to serve on the Audit Committee in accordance with the other NASD
listing standards. The Board has determined that Mr. Raney is an "audit
committee financial expert" as that term is defined in the applicable SEC rules.
The Audit Committee oversees the accounting and financial reporting processes of
the Company and the audits of the financial statements of EasyLink. The Audit
Committee also coordinates the Board of Director's oversight of the Company's
internal control over financial reporting, the Company's disclosure controls and
procedures and the Company's Code of Business Conduct and Ethics. The Audit
Committee is also responsible for reviewing all transactions between the Company
and related parties. See the "Audit Committee Report".
The Board of Directors has adopted a written charter for the Audit
Committee. The charter is posted on the Corporate Governance page of our
Website, which can be accessed in the Investor Relations section of our Website
at www.easylink.com.
5
COMPENSATION COMMITTEE
The Compensation Committee is currently comprised of three
non-management independent directors, George Knapp, Robert Casale and Peter
Holzer. Mr. Knapp is the Chairman of the Committee. Mr. Holzer joined the Board
and was appointed to the Compensation Committee on February 8, 2005. The
Compensation Committee held four meetings during 2005 and acted twice by
unanimous written consent. The Compensation Committee has the authority to
determine salaries and bonuses and to make awards of capital stock or options to
purchase capital stock of the Company to the officers and employees of the
Company. All decisions relating to the compensation of EasyLink executive
officers are either made or recommended to the Board of Directors by the
Compensation Committee. See the "Compensation Committee Report on Executive
Compensation".
The Board of Directors has adopted a written charter for the
Compensation Committee. The charter is posted on the Corporate Governance page
of our Website, which can be accessed in the Investor Relations section of our
Website at www.easylink.com.
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 2005,
upon their initial appointments to the Board of Directors, Peter Holzer, John
Petrillo and Eric Zahler each received a grant of options to purchase 20,000
shares at an exercise price of $1.33, in the case of Mr. Petrillo, and $1.23, in
the case of Mr. Holzer and Mr. Zahler. On June 21, 2005, Robert Casale, Peter
Holzer, George Knapp, John Petrillo, Dennis Raney and Eric Zahler were granted
options to purchase 20,000 shares of Class A common stock at an exercise price
of $1.00 per share as part of their annual compensation for serving as board
members and reflecting an increase in the initial stock option grant for
directors. Upon his initial appointment to the Board of Directors on April 13,
2006, Stephen Duff received a grant of options to purchase 30,000 shares at an
exercise price of $0.66. The forgoing options vest in accordance with the
schedule described beneath the table below.
During 2005, the directors received fees for attendance at Board and
committee meetings as follows: Robert Casale ($31,250), Peter Holzer ($26,583),
George Knapp ($42,500), Dennis Raney ($38,250), John Petrillo ($36,250) and Eric
Zahler ($29,083).
The annual compensation arrangements for non-management directors is set forth
in table below:
FEE OR BENEFIT
---------------
Annual Retainer Fee $15,000
Regular Board Meeting Fees (six $1,000 per meeting
Meetings per year)
Committee Chair Annual Fee $4,000
Regular Committee Meeting Fees $1,000 per meeting
(four meetings per year)
Telephonic Board & Committee $500 per meeting
Meeting Fees (Per Meeting)
Initial Stock Option Grant 30,000*
Annual Stock Option Grant 10,000*
* The exercise price of the options is fixed at the closing price of the
Company's Class A common stock on the Nasdaq stock market on the date of grant.
The options vest in an amount equal to 25% on the first anniversary of the date
of grant and 1/12th (8.33%) of the remaining amount quarterly over the three
year period after the first anniversary, subject to continued service on the
vesting date. If a change of control occurs and the director does not continue
to serve as a director of the surviving corporation or its parent entity, then
the portion of his options that would have vested in that vesting year (25%)
will vest immediately upon the change of control.
ANNUAL MEETING
The Company has no policy with regard to attendance by members of the
Board of Directors at annual meetings of stockholders. All members of the Board
of Directors attended the annual meeting of stockholders held on June 21, 2005.
The Company expects that all directors who attend the regular meeting of the
Board of Directors scheduled for June 20, 2006 will attend the 2006 annual
meeting of stockholders to be held on the same date.
VOTE REQUIRED
A plurality of votes of the shares of Class A common stock, present in
person or represented by proxy at the meeting and entitled to vote thereon, is
required for the election of directors. Abstentions and broker "non-votes" are
not counted for the purposes of the election of directors.
6
RECOMMENDATION OF THE BOARD
The Board of Directors recommends that the stockholders vote "FOR"
election of each of the nominees listed above.
7
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO THE EASYLINK SERVICES CORPORATION 2005
STOCK AND INCENTIVE PLAN
GENERAL
The Board of Directors is proposing for stockholder approval an
amendment to the EasyLink Services Corporation 2005 Stock and Incentive Plan
(the "2005 Plan"). The amendment would increase the maximum number of shares of
our Class A common stock that can be issued under the 2005 Plan from 1,000,000
shares to 3,000,000 shares.
The purpose of the 2005 Plan is to grant stock options and stock-based
awards 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 2005 Plan provides for awards of stock options and other awards, such as
restricted stock, restricted stock units, and deferred stock units, that consist
of, or are denominated in, payable in, valued in whole or in part by reference
to or otherwise related to our Class A common stock. In addition, the
Compensation Committee and the Board have determined that a percentage of the
bonus payable to an executive under the annual Executive Incentive Plan should
be paid in stock in lieu of cash in order to increase the level of stock
ownership in the Company for all corporate executives and certain other members
of senior management.
The 2005 Plan was adopted by the Board on April 25, 2005, and became
effective upon being approved by the stockholders at our Annual Meeting on June
21, 2005. The following is a summary of the material terms of the 2005 Plan, as
proposed to be amended.
DESCRIPTION OF THE 2005 PLAN
Administration. The 2005 Plan is administered by the Compensation
Committee of the Board of Directors. Under the 2005 Plan, the Compensation
Committee has the authority to, among other things: (i) select the eligible
persons to whom awards will be granted, (ii) determine the size, type and the
terms of each award 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. All awards under the 2005 Plan by the
Compensation Committee are subject to approval by the Board of Directors.
Available Shares. Currently, a maximum of 1,000,000 shares of our Class
A common stock is available under the 2005 Plan. As of December 31, 2005,
1,000,000 of these shares remained available for future awards. If the
stockholders approve the amendment, the maximum number of shares available under
the Plan will increase from 1,000,000 to 3,000,000 shares.
The 2005 Plan is in addition to the following existing stock option
plans: EasyLink Services Corporation 2003 Stock Option Plan, the EasyLink
Services Corporation 2002 Stock Option Plan, the EasyLink Services Corporation
2001 Stock Option Plan, the Mail.com, Inc. 2001 Stock Option Plan, the Mail.com,
Inc. 2000 Stock Option Plan, the Mail.com, Inc. 1999 Stock Option Plan, the
Mail.com, Inc. 1998 Stock Option Plan, the Mail.com, Inc. 1997 Stock Option Plan
and the Mail.com, Inc. 1996 Stock Option Plan, each of which was previously
approved by stockholders. As of December 31, 2005, an aggregate of 417,284
shares was available for future option grants under these existing plans. See
"Equity Compensation Plan Information" below. The Board of Directors has
resolved that no future grants will be made under these existing stock option
plans without the approval of the Board of Directors.
Each award of a stock option under the 2005 Plan, and each award of
restricted stock, restricted stock units, deferred stock units or other
stock-based compensation, reduces the number of shares available for future
issuance under options, restricted stock, restricted stock units, deferred stock
units and other stock-based compensation granted under the 2005 Plan by one
share for every share subject to a new option or for every share of restricted
stock, restricted stock unit, deferred stock or other stock-based unit awarded.
The share reserve under the 2005 Plan will not be reduced for any awards payable
in cash, and will be increased to the extent awards payable in shares are
forfeited or terminated or the shares subject to awards are returned to EasyLink
(for example, in payment of an option exercise price or withholding taxes).
The maximum number of shares underlying options, restricted stock,
restricted stock units, deferred stock units or other stock-based compensation
that can be granted to any individual within a calendar year under the 2005 Plan
is 750,000 shares in the case of options and 450,000 in the case of restricted
stock, restricted stock units, deferred stock units or other stock-based
compensation.
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 Compensation
Committee may make equitable adjustments to the number of shares available for
future issuance under the 2005 Plan, to the maximum number of shares underlying
options or other awards that can be granted to any individual within a calendar
year, and to the price and other terms of any award previously granted or that
may be granted under the 2005 Plan.
8
Eligibility. The Compensation Committee selects those persons who are
to receive award grants. During 2005, eligible persons included approximately 50
officers and other employees of Easylink and its subsidiaries, all six of the
non-management directors of EasyLink, and certain consultants to Easylink and
its subsidiaries.
Types of Awards. Each award granted under the 2005 Plan is evidenced by
an agreement that states the terms and conditions of the grant.
Options. Stock options give the holder the right to purchase shares of
our Class A common stock at a specified exercise price. Both incentive stock
options and non-qualified stock options may be granted under the 2005 Plan. The
exercise price of an option granted under the 2005 Plan generally 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 our Class A common stock as of April
28, 2006 was $0.80.
Each option granted under the 2005 Plan is exercisable at the times and
in the amounts determined by the Compensation Committee at the time of grant. In
addition, the Compensation Committee, in its discretion, may accelerate the
exercisability of any option outstanding under the 2005 Plan. The exercise price
of an option is payable in cash unless otherwise approved by the Compensation
Committee.
Options granted under the 2005 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 Compensation Committee provided that the term may not exceed
ten years from the date of grant (five years in the case of an incentive stock
option granted to a ten percent stockholder).
The Compensation Committee may, subject to the limitations of the 2005
Plan, modify, extend or renew outstanding options granted under the 2005 Plan,
or accept the surrender of outstanding unexercised options and authorize the
grant of substitute options. This would include the authority to reprice
outstanding option awards.
Restricted Stock, Restricted Stock Units and Deferred Stock Units.
Shares of Restricted stock are actual shares of our Class A common stock that
are subject to vesting requirements and transfer restrictions. A restricted
stock unit represents the right to receive one share of our Class A common stock
or the cash equivalent at a future date. A deferred stock unit represents the
right to receive one share of our Class A common stock at the grantee's
termination of employment with EasyLink and its subsidiaries. Restricted stock
units and deferred stock units may be subject to vesting requirements, and may
require or permit the grantee to defer receipt of actual shares to a date
subsequent to the date the units vest. Awards of restricted stock, restricted
stock units or deferred stock units generally do not require the grantee to pay
for the shares.
Restricted stock, restricted stock units and deferred stock units
generally vest over such period of time as determined by the Compensation
Committee. Holders of restricted stock have the same voting and dividend rights
as other holders of our Class A common stock, except that the holder may be
required to reinvest any cash dividends in additional shares of restricted
stock. While holders of restricted stock units and deferred stock units have no
voting and no dividend rights, as they do not hold actual shares of Class A
common stock, awards of restricted stock units or deferred stock units may
provide for dividend equivalents, which can be paid immediately or deferred.
Performance-Based Awards. The Compensation Committee may, in its
discretion, condition the granting, vesting or settlement of any award under the
2005 Plan on the attainment of one or more corporate performance goals over a
specified period. The Compensation Committee would set performance goals over
periods that it selects in advance, and after the end of each period the
Compensation Committee would certify the extent to which those goals are
attained. The performance goals would be based on the attainment by EasyLink, or
by one or more of its business units or subsidiaries, of specified levels of
business criteria, which may include one or more of the following:
o Pre-tax income;
o Earnings per share;
o Income from operations;
o Earnings before interest expense and provision for income taxes
(EBIT);
o Earnings before interest expense, provision for income taxes,
depreciation and amortization expenses (EBITDA);
9
o Net income;
o Revenue;
o Economic value added (EVA);
o Return on net or total assets;
o Free cash flow from operations;
o Free cash flow per share;
o Return on invested capital;
o Return on stockholders' equity;
o Expense reduction;
o Working capital;
o Total stockholder return; and
o Performance of the Company's stock price.
The Compensation Committee would determine whether to measure
performance under these criteria in absolute terms or in comparison to the
performance of other corporations. In applying these criteria to a particular
period, the Compensation Committee may, in its discretion, exclude the impact of
the following: unusual or infrequently occurring charges; the amount of all
charges and expenses incurred or income earned in connection with any
refinancing, restructuring, rationalization, recapitalization or reorganization;
the cumulative effect of accounting changes; discontinued operations; and any
business units, divisions, subsidiaries or other entities sold or acquired.
Amendment and Termination. The 2005 Plan will terminate on the earliest
of (a) June 21, 2015, (b) the date when all shares of stock reserved for
issuance have been acquired or (c) any earlier date as may be determined by the
Board of Directors. No awards may be granted under the 2005 Plan after it is
terminated, but any previously granted awards will remain in effect until they
expire in accordance with the terms of the plan and the applicable award
agreement. Subject to certain limitations, the Board of Directors may amend the
2005 Plan, and may correct any defect, supply any omission or reconcile any
inconsistency in the 2005 Plan. None of these modifications may alter or
adversely impair any rights or obligations under any option previously granted
under the 2005 Plan, except with the consent of the grantee.
FEDERAL INCOME TAX CONSEQUENCES OF AWARDS
The following discussion is a brief summary of the principal United
States federal income tax consequences under current federal income tax laws
relating to grants or awards of options, restricted stock, restricted stock
units or deferred stock units under the 2005 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 does not generally recognize any taxable income upon the
grant of a nonqualified option and EasyLink is not entitled to a tax deduction
with respect to such grant. Generally, upon exercise of a non-qualified option,
the excess of the fair market value of stock on the date of exercise over the
exercise price is 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 non-qualified stock option ordinarily results in capital gain or
loss.
Subject to the discussion below, a grantee does not recognize taxable
income at the time of grant or exercise of an incentive stock option and we are
not 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 is treated as long-term
capital gain or loss to the grantee.
10
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
on the date of exercise of the option over the exercise price of such option
constitutes 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 generally is 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 is not considered a taxable disposition of
the previously owned shares and thus no gain or loss is 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.
A grantee does not recognize any income at the time shares of
restricted stock are granted, nor is EasyLink be entitled to a deduction at that
time. In the year in which the restrictions on the restricted shares lapse and
the shares become vested, the grantee recognizes ordinary income in an amount
equal to the excess of the fair market value of the shares on the date of
vesting over the amount, if any, that the grantee paid for the shares. A grantee
may, however, elect within 30 days after receiving restricted shares to
recognize ordinary income in the year of receipt instead of the year of vesting.
If this election is made, the amount of income recognized by the grantee will be
equal to the excess of the fair market value of the shares on the date of
receipt over the amount, if any, the grantee paid for the shares. Payroll taxes
are required to be withheld on the income recognized by grantees who are
employees of EasyLink or one of its subsidiaries. EasyLink is entitled to a tax
deduction at the same time and in the same amount as the grantee recognizes
income.
A grantee does not recognize any income at the time a restricted stock
unit or deferred stock unit is granted, nor is EasyLink be entitled to a
deduction at that time. When payment on a stock unit is made, the grantee
recognizes ordinary income in an amount equal to the amount of cash or the fair
market value of the shares of our Class A common stock received. Payroll taxes
are required to be withheld on the income recognized by the grantees who are
employees of EasyLink or one of its subsidiaries. EasyLink is entitled to a tax
deduction at the same time and in the same amount as the grantee recognizes
income.
EasyLink's tax deduction for awards under the 2005 Plan is subject to
the limitation of Section 162(m) of the Internal Revenue Code. Section 162(m)
limits the tax deduction for compensation paid in a calendar year to any
"covered employee" (generally, an officer listed in the Summary Compensation
Table in our proxy statement) to $1 million. Section 162(m) provides an
exception to this limit for "performance-based" compensation. We believe that
all stock options awarded in accordance with the 2005 Plan will result in
performance-based compensation that is exempt from the deduction limit. Awards
of restricted stock, restricted stock units and deferred stock units could be
exempt from the deduction limit only if they are specifically conditioned on the
attainment of performance goals in accordance with the 2005 Plan.
Certain awards under the 2005 Plan may involve a deferral of
compensation income that is subject to Section 409A of the Internal Revenue
Code. Such awards could include nonqualified options with an exercise price less
than the fair market value of the underlying stock at the time of grant, and
awards of restricted stock units and deferred stock units in which the delivery
of shares of our Class A common stock is deferred to a taxable year later than
the year in which the award vests. Section 409A can subject the award recipient
to immediate taxation upon vesting and to an excise tax and interest penalty if
the award does not comply with Section 409A's requirements for deferral
elections and distributions. We intend to administer any awards that are subject
to Section 409A in a manner that complies with Section 409A's requirements.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2005 with respect to
shares of our common stock that may be issued under our existing equity
compensation plans.
11
YEAR ENDED DECEMBER 31, 2005
--------------------------------------------------------------------------------
REMAINING
NUMBER OF AVAILABLE FOR
SECURITIES TO BE FUTURE ISSUANCE
ISSUED UPON EXERCISE WEIGHTED AVERAGE UNDER EQUITY
OF OUTSTANDING EXERCISE PRICE OF COMPENSATION PLANS
OPTIONS, WARRANTS OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (A))
PLAN CATEGORY (A) (B) (C)
---------------------- ----------------------- -----------------------
Equity compensation plans
approved by security holders 4,561,597 $ 2.46 1,417,284
Equity compensation plans not
approved by security holders (1) 590,538 $ 10.77 --
---------------------- ----------------------- -----------------------
Total: 5,152,135 $ 3.42 1,417,284
====================== ======================= =======================
(1) Includes options to purchase 47,102 shares of Class A common stock at a
weighted average exercise price of $13.95 per share under the Netmoves 1996
Stock Option Plan which were assumed in connection with the acquisition of
Netmoves Corporation by the Company in 2000.
NON-SECURITY HOLDER-APPROVED EQUITY COMPENSATION PLANS
Each of the stock option plans listed in the table below under the sub-heading
"Plans Adopted in Acquisitions" were adopted or assumed in connection with the
acquisition by the Company of the entities after which the plan is named. Except
for the 1996 Netmoves Stock Option Plan, the plan terms and conditions are
substantially the same as the terms of the Company's plans for which shareholder
approval was obtained, except that incentive stock options were not issuable
under such plans. Options under each plan were initially granted to employees of
the acquired entity who became employees of the Company after the acquisition
or, in the case of the 1996 Netmoves Stock Option Plan, were assumed by the
Company. The plans are administered by the Compensation Committee of the Board
of Directors. The Plans may be amended by the Board of Directors. The number of
shares underlying outstanding options, the weighted average exercise price and
the number of shares underlying options available for future grant under each
plan are specified in the table below.
12
The Mail.com 1999 Supplemental Stock Option Plan and the Mail.com 2000
Supplemental Stock Option Plan provide for the grant of options to the Company's
directors, employees and consultants and contain terms and conditions that are
substantially the same as the terms of the Company's plans for which shareholder
approval was obtained, except that incentive stock options are not issuable
under such plans. The plans are administered by the Compensation Committee of
the Board of Directors. The Plans may be amended by the Board of Directors.
Under the plans, options that expire unexercised may be re-granted by the
Company to other employees. The number of shares underlying outstanding options,
the weighted average exercise price and the number of shares underlying options
available for future grant under each of these plans are specified in the table
below.
YEAR ENDED DECEMBER 31, 2005
----------------------------------------------------------------------------
NUMBER OF SECURITIES
REMAINING AVAILABLE
FOR FUTURE ISSUANCE
NUMBER OF SECURITES UNDER EQUITY
TO BE ISSUED UPON WEIGHTED AVERAGE COMPENSATION PLANS
EXERCISE OF EXERCISE PRICE OF (EXCLUDING SECURITIES
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, REFLECTED IN COLUMN
WARRANTS AND RIGHTS WARRANTS AND RIGHTS (A))
PLAN (A) (B) (C)
------------------------- -------------------- -----------------------
Plans Adopted in Acquisitions:
The Allegro Group Stock Option
Plan....................................... 1,045 $7.03 --
Lansoft Stock Option Plan.................. 150 $16.88 --
Netmoves 2000 Stock Option Plan............ 44,310 $16.69 --
Netmoves 1996 Stock Option Plan............ 47,102 $13.95 --
Other Plans:
Mail.com 1999 Supplemental Stock
Option Plan................................ 72,368 $7.91 --
Mail.com 2000 Supplemental Stock
Option Plan................................ 94,585 $5.28 --
The Company granted non-qualified options under individual stock option
agreements to the persons and on the terms indicated in the following table:
NAME GRANT DATE EXPIRATION DATE SHARES EXERCISE PRICE
--------------- --------------- --------------- ---------------
Gerald Gorman 6/1/96 6/1/06 40,000 $ 1.0000
Gerald Gorman 12/31/96 12/31/06 7,250 5.0000
Gerald Gorman 2/1/97 2/1/07 2,000 10.0000
Frank Graziano 11/14/00 1/31/09 4 16.8750
Frank Graziano 11/14/00 3/31/09 165 16.8750
Frank Graziano 11/14/00 2/28/09 338 16.8750
Dave Milligan 6/1/96 6/1/06 25,000 1.0000
Gary Millin 6/1/96 6 /1/06 25,000 1.0000
Gary Millin 12/31/96 12/31/06 9,700 5.0000
Gary Millin 2/1/97 2/1/07 2,000 10.0000
Gary Millin 2/1/97 2/1/07 10,000 10.0000
Thomas Murawski 1/26/01 1/26/11 170,000 12.8125
Charles Walden 2/16/98 2/16/08 39,520 35.0000
--------------- -------------- --------------- ---------------
TOTAL 330,978
===============
13
APPROVAL REQUIRED:
The affirmative vote of the holders of a majority of the shares of
Class A common stock, present in person or by proxy at the meeting and entitled
to vote thereon is required to approve the amendment to the 2005 Plan.
Abstentions will be counted towards the tabulations of votes cast on this
proposal and will have the same effect as a vote "AGAINST" such matters. Broker
"non-votes" will not be counted for purposes of determining whether this
proposal has been approved.
RECOMMENDATION OF THE BOARD:
The Board of Directors recommends a vote "FOR" approval of the
amendment to the EasyLink Services Corporation 2005 Stock and Incentive Plan.
14
PROPOSAL NO. 3
APPROVAL OF THE EASYLINK SERVICES CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
GENERAL
The Board of Directors is proposing for stockholder approval the
EasyLink Services Corporation Employee Stock Purchase Plan (the "Stock Purchase
Plan"). The purpose of the Stock Purchase Plan is to provide an incentive to a
broad-based group of our employees to acquire a proprietary interest in
EasyLink, to continue their positions with us and to increase their efforts on
our behalf. The Stock Purchase Plan is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code.
The Stock Purchase Plan was adopted by the Board on April 25, 2006,
and, if approved by the stockholders, will become effective on July 1, 2006.
Appendix A to this Proxy Statement contains the complete text of the Stock
Purchase Plan, which is summarized below.
DESCRIPTION OF THE STOCK PURCHASE PLAN
Administration. The Stock Purchase Plan will be administered by the
Compensation Committee or another committee designated by the Board. Under the
Stock Purchase Plan, the plan administrator has the authority to, among other
things: (i) adopt, amend and rescind rules and regulations for the
administration of the plan, and (ii) decide all questions and settle all
controversies and disputes of general applicability that may arise in connection
with the plan.
Available Shares. A maximum of 2,000,000 (two million) shares of our
Class A common stock will be available for purchase under the Stock Purchase
Plan. 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 or shares or otherwise, the plan administrator
may make equitable adjustments to the maximum number of available shares and the
price and other terms of any right to purchase shares under the Stock Purchase
Plan.
Eligibility. The Stock Purchase Plan is available to all employees of
EasyLink meeting certain eligibility requirements. The Board of Directors or the
Compensation Committee can also designate subsidiaries of EasyLink whose
employees can participate. To be eligible, an employee must (i) have been
continuously employed by EasyLink or a designated subsidiary for at least three
months, and (ii) be customarily employed by EasyLink or a designated subsidiary
for more than 20 hours per week and for more than five months per calendar year.
No employee can purchase shares under the Stock Purchase Plan if such
employee, immediately after the grant of the option, would own stock (including
shares then purchasable under the Stock Purchase Plan) possessing five percent
or more of the total combined voting power or value of all classes of issued and
outstanding stock of EasyLink or any of its subsidiaries. In addition, an
employee has to cease purchases under the Stock Purchase Plan during a calendar
year when the fair market value of the shares purchased by the employee under
the Stock Purchase Plan and all other employee stock purchase plans of EasyLink
and its subsidiaries for that year would exceed $25,000. For this purpose, the
fair market value of the shares purchased is determined as of the end of the
purchase period during which such shares are purchased. Purchases of shares
under EasyLink's stock option plans are not counted towards the $25,000 limit.
During the first year purchases are permitted under the Stock Purchase
Plan, eligible persons are expected to include up to approximately 400 officers
and other employees of EasyLink and its subsidiaries.
Stock Purchases. Purchases of shares under the Stock Purchase Plan will
take place the first day of January (January 1) and the first day of July (July
1), or such other purchase period as may be specified by the plan administrator.
For each purchase period, eligible employees can authorize payroll deduction
contributions that will be used to purchase shares at the end of the period.
Assuming the stockholders approve the Stock Purchase Plan, the first purchase
period will begin on July 1, 2006 and a new purchase period will begin on the
first day of January and the first day of July thereafter. Prior to the
beginning of a purchase period for which an employee is eligible to participate,
the employee can enroll in the Stock Purchase Plan by filing an election
specifying his or her chosen rate of payroll deduction contributions. The
employee will be permitted to authorize payroll deductions of not more than ten
percent of the employee's base wages or salary, or such other limit as may be
set by the plan administrator.
EasyLink or an agent will separately account for all payroll deduction
contributions made by a participant during a purchase period. The amount of such
contributions will be applied on the last day of the purchase period to purchase
a number of shares of Class A common stock from EasyLink equal to the amount of
such contributions divided by the purchase price for the shares as set by the
plan administrator for that period. It is expected that most purchases of shares
under the Stock Purchase Plan will be at a discount to the fair market value of
the shares at the time of purchase. In no event, however, can the plan
administrator set the purchase price below the lesser of 85% of the fair market
value of a share of our Class A common stock as of the first day of the purchase
period and 85% of the fair market value of a share of Common Stock as of the
last day of such period. As a result of EasyLink's adoption of Statement of
Financial Accounting Standards No. 123 (revised 2004) as of January 1, 2006, we
will be required to report an expense on our financial statements if the
purchase price is set below 95% of the fair market value of our Class A common
stock as of the last day of the purchase period. The fair market value of a
share of our Class A common stock as of April 28, 2006 was $0.80.
15
Employees can terminate their participation in the Stock Purchase Plan
at any time. Participation in the Stock Purchase Plan terminates automatically
if the employee dies or terminates employment with EasyLink or its applicable
subsidiary. If notice is received of the employee's withdrawal, death or
termination of employment prior to the end of a purchase period, any payroll
deduction contributions accumulated on the employee's behalf will be refunded;
otherwise, the contributions will be used to purchase shares at the end of the
period. Following the termination of participation, the employee or his or her
legal representative will receive share certificates for any shares of Class A
common stock previously purchased and held on the employee's behalf under the
Stock Purchase Plan, and cash in lieu of any fractional shares. No interest is
payable on payroll deduction contributions.
Amendment and Termination. Subject to certain limitations, the Board of
Directors can amend the Stock Purchase Plan at any time, and can correct any
defect, supply any omission or reconcile any inconsistency in the Stock Purchase
Plan. None of these modifications may materially adversely affect any purchase
rights outstanding under the Stock Purchase Plan during the purchase period in
which the amendment would become effective, or decrease the purchase price for
shares of Stock below the minimum price described below.
The Board of Directors can terminate the Stock Purchase Plan at any
time. Absent earlier action by the Board, the Stock Purchase Plan will terminate
upon the earlier of July 1, 2016 or the purchase by participants of all shares
that may be issued under the Stock Purchase Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a brief summary of the principal United
States federal income tax consequences relating to purchases made under the
Stock Purchase 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.
The Stock Purchase Plan is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code. Under Section
423, the participant does not recognize any taxable income at the time shares
are purchased under the Stock Purchase Plan.
If a participant disposes of shares acquired under the Stock Purchase
Plan within two years after the first day of the purchase period in which such
shares were purchased (a "disqualifying disposition"), the participant will
recognize taxable ordinary income equal to the excess of the fair market value
of the shares at the end of the purchase period over the purchase price. The
participant's cost basis in the shares will be increased by the amount of such
ordinary income. If the amount realized upon the disposition exceeds the
participant's cost basis in the shares (as so increased), the participant will
recognize capital gain equal to the difference between the amount realized and
such adjusted cost basis. If the amount realized is less than the participant's
cost basis in the shares (as so increased), the participant will recognize
capital loss equal to the difference between the adjusted cost basis and the
amount realized.
If a participant disposes of shares acquired under the Stock Purchase
Plan two years or more after the first day of the purchase period in which such
shares were purchased (a "qualifying disposition"), the tax treatment will be
different. If the shares were purchased at a price less than the fair market
value of the shares at the beginning of the purchase period, the participant
will recognize taxable ordinary income equal to the lesser of (i) the excess of
the fair market value of the shares at the beginning of the purchase period over
the purchase price, and (ii) the excess of the amount realized from the
disposition over the purchase price. The participant's cost basis in the shares
will be increased by the amount of such ordinary income. In addition, the
participant will recognize capital gain equal to the difference (if any) between
the amount realized upon the disposition and the cost basis in the shares (as so
increased). If the amount realized is less than the purchase price, the
participant will recognize capital loss equal to the difference between the
purchase price and the amount realized.
If the shares were purchased under the Stock Purchase Plan at a price
in excess of the fair market value of the shares at the beginning of the
purchase period, and the shares are held long enough for a qualifying
disposition to occur, then all of the difference between the amount realized
upon disposition and the purchase price will be recognized as capital gain or
loss, as the case may be.
EasyLink will not be entitled to a deduction with respect to its sale
of shares under the Stock Purchase Plan, except to the extent the participant
recognizes ordinary income upon a disqualifying or qualifying disposition.
16
APPROVAL REQUIRED:
The affirmative vote of the holders of a majority of the shares of
Class A common stock, present in person or by proxy at the meeting and entitled
to vote thereon is required to approve the Stock Purchase Plan. Abstentions will
be counted towards the tabulations of votes cast on this proposal and will have
the same effect as a vote "AGAINST" such matters. Broker "non-votes" will not be
counted for purposes of determining whether this proposal has been approved.
RECOMMENDATION OF THE BOARD:
The Board of Directors recommends a vote "FOR" approval of the EasyLink
Services Corporation Employee Stock Purchase Plan.
17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table provides information with respect to the beneficial
ownership of EasyLink's common stock as of February 28, 2006 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 2005 and one additional officer who served
as an executive officer during 2005 but who was not an executive
officer at the end of 2005, and
o all of EasyLink's executive officers and directors as of February
28, 2006 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, that the person, entity or
group has the right to acquire within 60 days of February 28, 2006. 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 held
by each person named below, any shares which that person has the right to
acquire within 60 days after February 28, 2006 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 outstanding shares of Class A Common Stock used for
purposes of calculating the percentages of Class A Common Stock beneficially
owned is 45,311,915.
NUMBER OF PERCENTAGE
CLASS A SHARES OF CLASS A SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED
------------------------- ------------------- ------------------
Thomas Murawski 1,924,981(1) 4.08%
George Abi Zeid 3,264,039(2) 7.15%
262 Glen Head Road, Glen Head, NY
Robert Casale 15,937 *
George Knapp 15,937 *
Dennis Raney 15,937 *
John C. Petrillo 5,000 *
Peter J. Holzer 5,000 *
Eric J. Zahler 5,000 *
Richard Gooding 247,314(3) *
Gary MacPhee 326,570(4) *
Michael Doyle 205,770(5) *
David Ambrosia 260,727(6) *
All directors and executive officers as a group (11 persons) 3,028,173(7) 6.50%
The Clark Estates, Inc. 5,589,020(8) 12.33%
One Rockefeller Center, New York, NY
Kinderhook Partners, L.P. 2,388,685 5.27%
Lawrence Auriana 2,500,000 5.52%
----------
* Represents beneficial ownership of less than 1%.
(1) Includes 26,086 shares held by the Company 401(k) Savings Plan for Mr.
Murawksi's account pursuant to the employer matching contribution
feature of the plan. Mr. Murawski does not have the power to divest
these shares while they are held by the 401(k) Savings Plan.
(2) Includes 268,296 shares issuable upon exercise of warrants. Includes
15,379 shares held by the Company 401(k) Savings Plan for Mr. Abi
Zeid's account pursuant to the employer matching contribution feature
of the plan. Mr. Abi Zeid does not have the power to divest these
shares while they are held by the 401(k) Savings Plan. Also includes
320,000 shares beneficially owned by Telecom International, Inc. Mr.
Abi Zeid beneficially owns a majority of the capital stock of Telecom
International, Inc. See "Certain Relationships and Related
Transactions."
18
(3) Includes 21,114 shares held by the Company 401(k) Savings Plan for Mr.
Gooding's account pursuant to the employer matching contribution
feature of the plan. Mr. Gooding does not have the power to divest
these shares while they are held by the 401(k) Savings Plan. Also
includes 700 shares held by Mr. Gooding's wife. Mr. Gooding disclaims
beneficial ownership of the shares held by his wife.
(4) Includes 21,570 shares held by the Company 401(k) Savings Plan for Mr.
MacPhee's account pursuant to the employer matching contribution
feature of the plan. Mr. MacPhee does not have the power to divest
these shares while they are held by the 401(k) Savings Plan.
(5) Includes 10,770 shares held by the Company 401(k) Savings Plan for Mr.
Doyle's account pursuant to the employer matching contribution feature
of the plan. Mr. Doyle does not have the power to divest these shares
while they are held by the 401(k) Savings Plan.
(6) Includes 21,663 shares held by the Company 401(k) Savings Plan for Mr.
Ambrosia's account pursuant to the employer matching contribution
feature of the plan. Mr. Ambrosia does not have the power to divest
these shares while they are held by the 401(k) Savings Plan.
(7) Includes 11 persons who were directors and executive officers as of
February 28, 2006. Excludes shares beneficially owned by George Abi
Zeid who was not a director or executive officer as of such date.
(8) Includes 5,394,640 shares of Class A Common Stock held by 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 5,394,640 and
the 194,380 shares described in this footnote. The Clark Estates, Inc.
provides management and administrative services to Federal Partners.
See "Certain Relationships and Related Transactions."
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, 2006.
NUMBER OF SHARES OF
NAME OF BENEFICIAL OWNER CLASS A COMMON STOCK
------------------------ --------------------
Thomas Murawski 1,897,617
George Abi Zeid 72,000
Robert Casale 15,937
Peter Holzer 5,000
George Knapp 15,937
John Petrillo 5,000
Dennis Raney 15,937
Eric Zahler 5,000
Richard Gooding 225,500
Gary MacPhee 305,000
Michael Doyle 180,000
David Ambrosia 238,616
Directors and Executive Officers as a Group
(excludes Mr. Abi Zeid) 2,909,544
Pursuant to the separation agreement between EasyLink and George Abi Zeid, Mr.
Abi Zeid is subject to various standstill provisions until February 4, 2007,
including restrictions on soliciting proxies or consents from other
shareholders, granting proxies to third parties or consents, acquiring
additional shares of stock and making merger, acquisition or similar proposals
involving EasyLink stock. Mr. Abi Zeid has agreed that, until February 4, 2007,
at all meetings of stockholders of EasyLink, he will vote, or grant a proxy to
any one or more persons designated by the Company to vote, all of the shares of
EasyLink common stock beneficially owned by him proportionately in accordance
with the votes cast as votes for, as votes against or as votes withheld, or as
abstentions, as the case may be, by stockholders other than Mr. Abi Zeid on all
matters submitted to the stockholders of the Company.
The standstill and voting covenants contained in Mr. Abi Zeid's separation
agreement will expire if any of the following conditions exists: the closing
price of the Company's common stock shall be less than $1.75 per share for any
ten consecutive days after 18 months after February 4, 2005; a majority of
EasyLink's board consists of persons who are not existing directors or persons
appointed by existing directors; or Mr. Abi Zeid's share interest is below 5% of
the Company's outstanding shares. If the Company fails to make any required
payment under the separation agreement within 15 days after receipt of written
notice from Mr. Abi Zeid or fails to make a required payment within two business
days after the due date for the payment on at least 3 occasions, the
restrictions on the sale of Mr. Abi Zeid's shares and the standstill and voting
covenants will terminate.
19
MANAGEMENT
EXECUTIVE OFFICERS
The following table identifies the current executive officers of
EasyLink and their ages as of the date of this Proxy Statement:
NAME AGE POSITION
---- --- --------
Thomas Murawski 61 Chairman, President, Chief Executive Officer, Director
Michael Doyle 50 Vice President and Chief Financial Officer
Richard Gooding 56 Executive Vice President and General Manager
Gary MacPhee 44 Executive Vice President and General Manager
David Ambrosia 49 Executive Vice President and General Counsel
For the biographical summary of Thomas Murawski, see "Election of
Directors."
MICHAEL DOYLE -- VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Mr. Doyle has served as Vice President and Chief Financial Officer of
EasyLink since March 2004. Prior to joining EasyLink, Mr. Doyle was Chief
Financial Officer of D&B North America, a division of D&B, Inc. (Dun &
Bradstreet) from 2002 to September 2003. Mr. Doyle held various positions at
Cendant, Inc. from 1997 to 2002, including Vice President Audit, Vice President
Relationship Marketing and Management and Senior Vice President Relationship
Marketing & Management. Mr. Doyle served as Chief Financial Officer of the
Flourine Products Division of Allied Signal Corporation from 1995 to 1997. Mr.
Doyle held various finance, accounting and management positions at Pepsico, Inc.
from 1986 to 1995 and at Continental Can Company, Inc. from 1978 to 1986. Mr.
Doyle received his B.B.A from University of Notre Dame and his M.B.A. from New
York University.
RICHARD GOODING -- EXECUTIVE VICE PRESIDENT AND GENERAL MANAGER
Mr. Gooding joined EasyLink in 2001 to oversee the business and
technical transition from AT&T. During his tenure at EasyLink he served as Vice
President, Operations from 2002 until assuming his new role as Executive Vice
President and General Manager of the Transaction Delivery Services business
unit. Prior to joining EasyLink, Mr. Gooding was involved in "b2b" Internet
startups and consulting services from 1997 to 2001. From 1994 to 1996 he was
President, Western Union Data Services Company. From 1991 to 1994 he held
general management positions at MAI Systems Corporation. Between 1971 and 1991
Mr. Gooding held various positions of increasing responsibilities at Western
Union Corporation. He received a B.S. in Mathematics and Computer Science from
Clemson University in 1971.
GARY MACPHEE -- EXECUTIVE VICE PRESIDENT AND GENERAL MANAGER
Mr. MacPhee was appointed Executive Vice President and General Manager
Transaction Management Services in January 2005. He also served as Vice
President Technology at Easylink from September 2002 to December 2004. Prior to
joining Easylink, Mr. MacPhee was Vice President Business Systems at Merant,
Inc. from 1999 to August 2002. Mr. MacPhee held various positions at GE
Information Services, a division of the General Electric Company, from 1983 to
1999 including Vice President Global Product Engineering, Director of R&D
Internet Services and Director of R&D Consumer Online Services. Mr. MacPhee
received his B.S. in Computer Science from Ohio State University and his M.S. in
Computer Science from Virginia Polytechnic Institute and State University.
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 and footnotes 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, 2005, by
the Chief Executive Officer of EasyLink and each of the four other most highly
compensated executive officers whose salary and bonus exceeded $100,000 in 2005
(collectively, the "Named Executive Officers") plus one other executive who
would have been included but for the fact that he was not an executive officer
on December 31, 2005.
20
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION AWARDS
-----------------------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING
OPTIONS TO
PURCHASE
EASYLINK
CLASS A ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMMON STOCK COMPENSATION
--------------------------- ---- ------ ----- ------------ ------------
Thomas Murawski 2005 473,656 172,934(1) -- 7,000(2)
Chairman, President and 2004 457,038 258,386 45,000 $ 6,500(2)
Chief Executive Officer 2003 450,000 148,000 1,103,000 6,000(2)
George Abi Zeid (3) 2005 71,371 -- -- 930,434(4)
Former President ---International 2004 302,345 76,214 30,000(5) 5,617(2)
Operations 2003 257,981 26,000 47,000 5,157(2)
Michael Doyle 2005 230,585 31,493(6) 25,000 6,009(2)
Vice President and Chief Financial 2004 168,750(7) -- 155,000 4,933(2)
Officer 2003 -- -- -- --
David Ambrosia 2005 247,524 43,137(8) 6,033(4)
Executive Vice President and 2004 237,693 62,834 30,000 5,626(4)
General Counsel 2003 233,000 11,900 97,000 5,179(4)
Gary MacPhee 2005 210,283 35,504(9) 100,000 7,000(2)
Executive Vice President and 2004 194,691 51,238 30,000 6,731(2)
General Manager 2003 190,000 15,000 95,000 63,550(10)
Richard Gooding 2005 195,166 32,841(11) 50,000 6,012(2)
Executive Vice President and 2004 178,631 46,654 20,000 5,800(2)
General Manager 2003 173,000 8,800 110,000 5,355(2)
----------
(1) Mr. Murawski's bonus payment of $172,934 in 2005 was made under the
terms of the Company's 2004 Executive Incentive Plan. No bonus was
payable in 2006 under the terms of the Company's 2005 Executive
Incentive Plan.
(2) Represents the dollar value of the contribution to the named executive
officer's account pursuant to the employer match feature of the
Company's 401(k) Savings Plan. The contribution was made in shares of
the Company's Class A Common Stock valued at the market price at the
time of contribution.
(3) Mr. Abi Zeid's employment terminated on February 4, 2005.
(4) Includes $929,167 paid under the terms of Mr. Abi Zeid's separation
agreement. Also includes $1,267, which represents the dollar value of
the contribution to Mr. Abi Zeid's account pursuant to the employer
match feature of the Company's 401(k) Savings Plan. The contribution
was made in shares of the Company's Class A Common Stock valued at the
market price at the time of contribution.
(5) All of these options were unvested, and therefor were cancelled, on the
date of Mr. Abi Zeid's resignation.
(6) Mr. Doyle's bonus payment of $31,493 in 2005 was made under the terms
of the Company's 2004 Executive Incentive Plan. No bonus was payable in
2006 under the terms of the Company's 2005 Executive Incentive Plan.
(7) Employment commenced on March 22, 2004.
(8) Mr. Ambrosia's bonus payment of $43,137 in 2005 was made under the
terms of the Company's 2004 Executive Incentive Plan. No bonus was
payable in 2006 under the terms of the Company's 2005 Executive
Incentive Plan.
(9) Mr. MacPhee's bonus payment of $35,504 in 2005 was made under the terms
of the Company's 2004 Executive Incentive Plan. No bonus was payable in
2006 under the terms of the Company's 2005 Executive Incentive Plan.
(10) Includes $57,550 of reimbursed relocation expenses in connection with
Mr. MacPhee's start of employment. Also includes $6,0000, which
represents the dollar value of the contribution to Mr. MacPhee's
account pursuant to the employer match feature of the Company's 401(k)
Savings Plan. The contribution was made in shares of the Company's
Class A Common Stock valued at the market price at the time of
contribution.
(11) Mr. Gooding's bonus payment of $35,504 in 2005 was made under the terms
of the Company's 2004 Executive Incentive Plan. No bonus was payable in
2006 under the terms of the Company's 2005 Executive Incentive Plan.
21
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, 2005.
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(1)
OPTIONS FISCAL YEAR PRICE PER EXPIRATION -------------
GRANTED(#) (%) SHARE DATE 5% 10%
---------- ------------- ---------- ----------- ---- ----
Michael Doyle 25,000(2) 3.22%(3) 1.15 03/22/2015 $ 18,081 $ 45,820
Gary MacPhee 100,000(2) 12.87%(3) 1.06 04/25/2015 $ 66,663 $ 168,937
Richard Gooding 50,000(2) 6.44%(3) 1.06 04/25/2015 $ 33,331 $ 84,468
----------
(1) 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.
(2) These options will vest and become exercisable 25% on the first
anniversary of the date of grant and in equal amounts quarterly
thereafter over the next three years.
(3) The percentages calculations exclude 180,000 options granted to
directors.
STOCK OPTION EXERCISES AND
DECEMBER 31, 2005 STOCK OPTION VALUE TABLE
The following table sets forth certain information concerning stock
options exercised during 2005 by the Named Executive Officers and the number and
value of specified options held by those persons at December 31, 2005. The
values of unexercised in-the-money stock options at December 31, 2005 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 VALUE OF UNEXERCISED
SHARES SECURITIES UNDERLYING IN-THE-MONEY OPTIONS AT
ACQUIRED DECEMBER 31, 2005 DECEMBER 31, 2005(2)
ON VALUE ----------------------- ------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ --------------- ------------ ------------- ------------ -------------
Thomas Murawski 0 -- 1,897,617 -- 37,080 --
George Abi Zeid 47,000 $29,140 -- -- -- --
Michael Doyle 0 -- 180,000 -- -- --
David Ambrosia 0 -- 238,616 -- 7,920 --
Gary MacPhee 0 -- 305,000 -- 3,600 --
Richard Gooding 0 -- 225,500 -- 5,400 --
(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 the closing price on
December 30, 2005 which was $0.89 per share.
EMPLOYMENT, SEVERANCE AND OTHER ARRANGEMENTS
Under Mr. Murawski's current employment agreement, he is entitled to
receive an annual base salary of $483,600. Mr. Murawski may also receive an
annual bonus payment in 2007 under the Company's 2006 executive incentive plan
described below. Under the plan, Mr. Murawski may receive a bonus of between 0%
and 150% of his base salary, with a target bonus of 75% of base salary based
upon achievement of 100% of both the revenue and EBITDA performance targets
established pursuant to the plan. If EasyLink terminates Mr. Murawski's
employment without cause at any time, he will be entitled to receive at his
option either (i) continuation of his base salary plus his target bonus for the
year in which the termination has occurred (assuming performance at the 100%
level for all applicable measures) and participation in the Company's standard
health insurance and 401(k) plans for 12 months after the date of termination or
(ii) a lump sum equal to 12 months base salary plus his target bonus for the
year in which the termination has occurred (assuming performance at the 100%
level for all applicable measures). 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 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. 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. Additionally,
the agreement provides that after Mr. Murawski leaves the employ of EasyLink, he
will not solicit certain customers of EasyLink with respect to products or
services that are the same or similar to those offered to such customers by
EasyLink or solicit or induce any employee of EasyLink to leave the employ of
EasyLink during the one year period following his employment or disclose any of
its confidential information.
22
George Abi Zeid's employment with the Company terminated on February 4,
2005. Under his separation agreement, the Company agreed to pay Mr. Abi Zeid
$240,000 as a severance payment upon the effective date of his resignation, an
aggregate of $1,960,000 in installments over three years in consideration of the
non-compete and other covenants contained in the separation agreement and
$75,000 of Mr. Abi Zeid's legal expenses. Late payments will bear interest at
the rate of 8% per annum until paid. Mr. Abi Zeid has agreed to restrictions on
the sale of his stock during the two years after his date of resignation,
including a prohibition on the sale of stock to one of the Company's competitors
and on sales in excess of 1 million shares during each of the first and second
12 month periods following the resignation date plus in the second 12 month
period any shares not sold in the first 12 month period. Mr. Abi Zeid has
reaffirmed the obligations under the non-compete covenant in his employment
agreement and the applicable non-compete period has been extended from one year
to two years after the date of his resignation. Mr. Abi Zeid is subject to
various standstill provisions for two years after the resignation date. See
"Security Ownership of Certain Beneficial Holders and Management and Related
Stockholder Matters."
Under Mr. Doyle's current employment agreement, he is entitled to
receive annual base salary of $237,000. Mr. Doyle may also receive an annual
bonus payment in 2007 under the Company's 2006 executive incentive plan
described below. Under the plan, Mr. Doyle may receive a bonus of between 0% and
60% of his base salary, with a target bonus of 30% of base salary based upon
achievement of 100% of both the revenue and EBITDA performance targets
established pursuant to the plan. If EasyLink or its successor terminates Mr.
Doyle's employment without cause as a result of a sale of EasyLink (whether by
merger, consolidation or sale of all or substantially all of its assets), Mr.
Doyle will be eligible to receive a severance payment equal to six (6) months
salary. Mr. Doyle's employment agreement also contains confidentiality,
intellectual property and non-competition covenants.
Under Mr. Ambrosia's current employment agreement, he receives an
annual base salary of $252,720 which will be reviewed each year. Mr. Ambrosia
may also receive an annual bonus payment in 2007 under the Company's 2006
executive incentive plan described below. Under the plan, Mr. Ambrosia may
receive a bonus of between 0% and 60% of his base salary, with a target bonus of
30% of base salary based upon achievement of 100% of both the revenue and EBITDA
performance targets established pursuant to the plan. In the event that Mr.
Ambrosia'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 in EasyLink, Mr. Ambrosia 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 his remaining
unvested options. 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.
Under Mr. MacPhee's current employment agreement, he is entitled to
receive annual base salary of $213,500. Mr. MacPhee may also receive an annual
bonus payment in 2007 under the Company's 2006 executive incentive plan
described below. Under the plan, Mr. MacPhee may receive a bonus of between 0%
and 100% of his base salary, with a target bonus of 50% of base salary based
upon achievement of 100% of both the revenue and EBITDA performance targets
established pursuant to the plan. If EasyLink or its successor terminates Mr.
MacPhee's employment without cause as a result of a sale of EasyLink (whether by
merger, consolidation or sale of all or substantially all of its assets), Mr.
MacPhee will be eligible to receive a severance payment equal to six (6) months
salary. Mr. MacPhee's employment agreement also contains confidentiality,
intellectual property and non-competition covenants. Additionally, Mr. MacPhee'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.
Under Mr. Gooding's current employment agreement, he is entitled to
receive annual base salary of $198,250. Mr. Gooding may also receive an annual
bonus payment in 2007 under the Company's 2006 executive incentive plan
described below. Under the plan, Mr. Gooding may receive a bonus of between 0%
and 100% of his base salary, with a target bonus of 50% of base salary based
upon achievement of 100% of both the revenue and EBITDA performance targets
established pursuant to the plan. Additionally, Mr. Gooding'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.
23
2006 EXECUTIVE INCENTIVE PLAN
The Company's 2006 executive incentive compensation is based on
achieving specified revenue and EBITDA objectives. Officers and key management
employees are eligible to participate upon the recommendation of the Chief
Executive Officer and the approval of the Compensation Committee of the Board of
Directors. Under the plan, a target award based on percentage of base salary has
been established for each participant, which varies from 10% to 75% of base
salary for the participant. The total pool for all executives at target is
approximately $1.4 million for 2006. The participant may receive a bonus from 0%
to 200% of the target award based upon the actual level of under-achievement
and/or over-achievement of the revenue and EBITDA performance objectives.
Bonus payments under the plan will be paid first using shares of the
Company's Class A common stock available under the Company's 2005 Stock and
Incentive Plan (the "2005 Stock and Incentive Plan"). The bonus pool will be
funded with up to 800,000 shares from the 2005 Stock and Incentive Plan. If the
value of the shares as determined in accordance with the plan is not adequate to
satisfy the bonus in full, then cash may be used to make up the remaining
portion of the bonus payment to the extent that EBITDA does not fall below a
specified amount as a result of the payment in cash of the remaining portion.
Any remaining balance will be forfeited. All bonus payments will be paid net of
applicable withholding taxes which will be withheld first from the cash portion
of the bonus and second from the stock portion of the bonus. The value of the
shares issued in payment of the bonus (including the amount of any cash used to
pay withholding taxes in respect of a bonus paid in stock) is not treated as an
expense item in the EBITDA calculation for this purpose.
The Compensation Committee retains full authority to approve final
amounts, which may be higher or lower than plan results. The Compensation
Committee may also approve the use of individual objectives as part of a
participant's performance criteria under the Plan. For 2006, the Compensation
Committee has determined that the absence of a going concern qualification in
the report of the Company's independent registered public accounting firm on the
Company's 2006 annual financial statements is an individual objective for
certain executives and is a consideration in the determination of their 2006
bonus.
If there occurs a significant beneficial or adverse change in economic
conditions, the indications of growth or recession in the Company's business
segments, the nature of the operations of the Company, or applicable laws,
regulations or accounting practices, or other unanticipated matters which, in
the Company's judgment, have a substantial positive or negative effect on the
performance of the Company, the Compensation Committee may modify or revise the
performance objectives. These significant changes might, for example, result
from acquisitions or dispositions of assets or mergers.
Employees terminating prior to the payout date are not eligible for
payment of an award unless termination is due to retirement or economic
reduction in force.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of EasyLink is responsible for administering
its executive compensation policies and equity compensation 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 or other stock-based awards.
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 and the responsibilities of each executive officer. The salaries
were established to attract and retain the leadership and skill necessary to
build long-term shareholder value. During 2005, base salary increases were
awarded based on an analysis of regional salary data.
SHORT-TERM ANNUAL BONUSES
Annual bonuses for executive officers are intended to provide an
incentive for achieving short-term financial and certain performance objectives.
These goals and objectives are established after review of the annual budget and
an evaluation of the critical factors related to the performance of the
management team. Bonuses under the 2006 executive incentive plan will be paid in
shares of the Company's Class A common stock and, subject to specified
limitations, cash. The bonus is also conditioned on not having been terminated
for cause and not having resigned prior to the date of payment. Executives
received a bonus payment in 2005 based upon achieving certain specified revenue
and/or net income goals under the Company's 2004 Executive Incentive Plan. No
bonus was paid in 2006 under the 2005 Executive Incentive Plan because the
minimum revenue and EBITDA goals were not achieved.
24
LONG-TERM INCENTIVE COMPENSATION
The EasyLink stock and 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 a
period of up to 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. During 2005, three executives were awarded options to
purchase an aggregate of 175,000 shares of Class A common stock at an exercise
price equal to the fair market value on the date of grant. See "Option Grants in
Fiscal Year" for options granted to the named executive officers.
CHIEF EXECUTIVE OFFICER COMPENSATION
During 2005, Mr. Murawski received total base salary of $473,656 and a
bonus of $172,934. Mr. Murawski's current base salary is $483,600 representing a
$18,600 increase over his prior base salary. Mr. Murawski will not receive a
bonus during 2006 for 2005 performance.
Mr. Murawski's 2005 bonus was based on achieving budgeted 2004 revenue
and net income goals and was conditioned on not being terminated for cause or
having resigned prior to the date of payment in 2005. The Company exceeded its
2004 net income goals, but failed to achieve its 2004 revenue goals.
Accordingly, the bonus paid in 2005 for 2004 performance did not include a
revenue component.
In addition to evaluating Mr. Murawski's base and incentive
compensation by the same factors applied to EasyLink's other executives, the
Compensation Committee takes into consideration other aspects of the Company's
health and development. Critical among these for the past several years has been
the elimination of large amounts of debt from the Company's balance sheet. By
2004, Mr. Murawski had overseen the successful elimination of substantially all
of the Company's outstanding debt and in the fourth quarter of 2004 the
negotiation of a new $15 million credit facility. Further, Mr. Murawski has
successfully carried out the Company's strategy of divesting various components
of its business, including the MailWatch service line in July 2004 and the
Company's portfolio of Internet domain names. During 2005, Mr. Murawski oversaw
the acquisition of Quickstream Software, Inc. and the reorganization of the
Company's Transaction Management and Transaction Delivery service lines and the
Company's International operations.
The Compensation Committee has reviewed the various components of Mr.
Murawski's compensation package as set forth in his employment agreement, the
executive incentive plan and the Company's benefit plans, including base salary,
bonus, stock options, severance, change in control, 401(k) savings plan, and
health and other benefits. The Committee determined that Mr. Murawski's
compensation was reasonable and not excessive. Furthermore, the Committee
compared the compensation package of Mr. Murawski with the compensation package
of the Company's other executives and determined the relative differences to be
within an appropriate range.
The Compensation Committee expects that Mr. Murawski's future
performance will be judged not only by the specific goals and objectives of an
annual Executive Incentive Plan but also by the general progress of the
Company's business and its ability to grow and prosper in an intensely
competitive market.
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 other
stock-based compensation or provide other short-and long-term incentive
compensation to executive officers, including Mr. Murawski.
Submitted by the Compensation Committee of the
Board of Directors
George Knapp
Robert Casale
Peter Holzer
25
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, 2005 with
management. In addition, the Audit Committee has discussed with Grant Thornton
LLP, the Company's independent registered public accounting firm, 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 Grant Thornton 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 Grant
Thornton LLP with that firm.
Based on the Audit Committee's review of the matters noted above and
its discussions with the Company's independent registered public accounting firm
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, 2005.
Submitted by the Audit Committee of the
Board of Directors
George Knapp
John Petrillo
Dennis Raney
Eric Zahler
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Grant Thornton LLP served as the independent registered public
accounting firm for the Company and its subsidiary corporations for the fiscal
year ending December 31, 2005 and has been appointed by the Board to continue as
the Company's independent registered public accounting firm for the year ending
December 31, 2006. Representatives of Grant Thornton LLP are expected to attend
the meeting and will have an opportunity to make a statement and/or respond to
appropriate questions from stockholders.
CHANGE IN PRINCIPAL ACCOUNTANT DURING 2005
KPMG LLP was previously the principal independent registered public
accounting firm for the Company. On June 8, 2005, that firm resigned. The
Company's Audit Committee selected Grant Thornton LLP as its new principal
independent registered public accounting firm to replace KPMG LLP.
During the Company's two fiscal years ended December 31, 2004, and the
subsequent interim period through June 8, 2005, (i) there were no disagreements
with KPMG LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures, which disagreements if
not resolved to KPMG's satisfaction would have caused it to make reference to
the subject matter of the disagreement in connection with its report and (ii)
there were no "reportable events" as described in Item 304(a)(1)(v) of
Regulation S-K.
The audit reports of KPMG LLP on the consolidated financial statements
of the Company and its subsidiaries as of and for the years ended December 31,
2004 and 2003, did not contain any adverse opinion or disclaimer of opinion, nor
were they qualified or modified as to uncertainty, audit scope, or accounting
principles, except that KPMG LLP's report on the consolidated financial
statements of the Company and its subsidiaries as of and for the years ended
December 31, 2004 and 2003 contained a separate paragraph stating that "the
Company has a working capital deficiency and an accumulated deficit that raises
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1(b). The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty."
On August 2, 2005, the Company engaged Grant Thornton LLP as EasyLink's
independent registered public accounting firm for the year ending December 31,
2005. The decision to engage Grant Thornton was made by EasyLink's Audit
Committee. During the past two years and the subsequent interim period, EasyLink
has not (and no one on its behalf has) consulted with Grant Thornton on the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Registrant's financial statements, or any matter that was either the subject
of a disagreement as defined in paragraph 304(a)(1)(iv) of Regulation S-K or
reportable event as described in paragraph (a)(1)(v) of Item 304 of Regulation
S-K.
26
FEES PAID TO THE INDEPENDENT AUDITOR
Set forth below is an analysis of the fees billed for professional
services rendered by the Company's principal independent registered public
accounting firm, KPMG LLP and Grant Thornton, LLP, for the fiscal years ending
December 31, 2004 and December 31, 2005, respectively.
Audit Fees
Audit Fees are those fees billed in connection with the audit and
review of our financial statements, including services related thereto such as
comfort letters, statutory audits, attest services, consents and assistance with
and review of documents filed with the SEC. The aggregate amount of Audit Fees
for each of the last two fiscal years were $1,119,000 in 2005 and $863,000 in
2004. The 2005 amount includes $857,000 paid to Grant Thornton and $262,000 paid
to KPMG. All of the fees for 2004 were paid to KPMG.
In addition, Grant Thornton has advised the Company that it will submit
an additional invoice for fees relating to its audit of the Company's 2005
financial statements.
The KPMG fees were for (i) their review of the Company's financial
statements for the quarter ended March 31, 2005; (ii) their audit/review of the
Company's restatement of its financial statements for the year ended December
31, 2004, for each quarter of 2004 and for the quarter ended March 31, 2005; and
(iii) their procedures to consent to the inclusion of their report on the
Company's 2003 and 2004 financial statements in the Company's annual report on
Form 10-K for 2005.
Audit Related Fees
Audit-related fees are assurance and related services that are
reasonably related to the performance of the audit of our financial statements.
More specifically, these services would include, among others: employee benefit
plan audits, due diligence related to mergers and acquisitions, accounting
consultations and audits in connection with acquisitions, internal control
reviews, attest services that are not required by statute or regulation and
consultation concerning financial accounting and reporting standards. During
2005 and 2004, neither KPMG LLP nor Grant Thornton LLP provided the Company with
any assurance and related services.
Tax Fees
The aggregate fees billed for professional services rendered for tax
compliance, tax advice and tax planning services for each of the last two fiscal
years were $199,000 paid to Grant Thornton LLP and $30,000 paid to KPMG in 2005
and $220,000 paid to KPMG in 2004.
All Other Fees
No other fees were billed for professional services rendered by KPMG
LLP or Grant Thornton LLP during the last two fiscal years, except as described
below.
Prior to the appointment of Grant Thornton LLP, Grant Thornton
International member firms performed bookkeeping and payroll services for
EasyLink's entities in France, Germany and Korea. These member firms are
considered affiliates of Grant Thornton LLP. Grant Thornton provided no audit,
audit-related or non-audit services to EasyLink or any of its subsidiaries or
other affiliates prior to its appointment. The fees paid to these member firms
for these services were de minimus. The Company terminated the services of the
Grant Thornton International member firms effective July 26, 2005. Prior to the
appointment of Grant Thornton as its independent registered public accounting
firm, EasyLink consulted with the staff of the SEC's Office of the Chief
Accountant concerning these services and the auditor selection process. After
such consultation, EasyLink's Audit Committee and its management have concluded
that Grant Thornton LLP's independence is not impaired by the involvement of its
affiliates with these services.
The Audit Committee has not adopted pre-approval policies and
procedures for the engagement of the independent registered public accounting
firm for audit and non-audit services. All of the fees described above for
tax-related services were in connection with engagements approved by the Audit
Committee.
APPROVAL REQUIRED
The affirmative vote of the holders of a majority of the votes of
the shares of Class A Common Stock and Class B Common Stock, voting together as
a single class, present in person or represented by proxy at the meeting and
entitled to vote thereon is required for the approval of this proposal.
RECOMMENDATION OF THE BOARD
The Board of Directors recommends a vote "FOR" the ratification of
the appointment of Grant Thornton LLP as the Company's independent registered
public accounting firm for the year 2006.
27
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
COMMON STOCK FINANCING
On April 13, 2006, the Company entered into a common stock purchase
agreement and a registration rights agreement with existing stockholders of the
Company (including Federal Partners, L.P., Lawrence Auriana, other individual
investors and members of EasyLink's board of directors and management. Under 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.
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 also purchased 2.5 million shares under the common
stock purchase agreement, raising his ownership to approximately 9.4% of the
Company's total shares outstanding.
28
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:
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
Chairman, President and Chief
Thomas Murawski Executive Officer; Director $ 100,000 161,290
Vice President and Chief
Michael Doyle Financial Officer $ 32,500 52,419
Executive Vice President and
David Ambrosia General Counsel $ 15,000 24,194
Executive Vice President and
Gary MacPhee General Manager, TMS $ 10,000 16,129
Executive Vice President and
Richard Gooding General Manager, TMS $ 5,000 8,065
Other management
members $ 105,000 169,355
---------- --------
Total $524,00.00 845,968
========== ========
Stephen Duff was appointed as a director of the Company on April 13,
2006. Mr. Duff is Chief Investment Officer of The Clark Estates, Inc. and is
Treasurer of the general partner of, and a limited partner of, Federal Partners,
L.P. Federal Partners and accounts for which The Clark Estates, Inc. provides
management and administrative services are the beneficial holders as of shares
of Class A common stock of the Company. In connection with a senior convertible
notes financing completed on January 8, 2001, we granted to Federal Partners the
right to designate one director to our Board of Directors so long as Federal
Partners and other persons associated with it owns at least 300,000 shares of
Class A common stock. Federal Partners designated Stephen Duff in connection
with the common stock financing described above and he was appointed to our
Board on April 13, 2006. Through his limited partnership interest in Federal
Partners, Mr. Duff has an indirect interest in 15,326 of the shares of Class A
common stock held by Federal Partners.
SWIFT TELECOMMUNICATIONS, INC.
The Company 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.
George Abi Zeid's employment with the Company terminated on February 4,
2005. Under his separation agreement, the Company agreed to pay Mr. Abi Zeid
$240,000 as a severance payment upon the effective date of his resignation, an
aggregate of $1,960,000 in installments over three years in consideration of the
non-compete and other covenants contained in the separation agreement and
$75,000 of Mr. Abi Zeid's legal expenses. Late payments will bear interest at
the rate of 8% per annum until paid. Mr. Abi Zeid has agreed to restrictions on
the sale of his stock during the two years after his date of resignation,
including a prohibition on the sale of stock to one of the Company's competitors
and on sales in excess of 1 million shares during each of the first and second
12 month periods following the resignation date plus in the second 12 month
period any shares not sold in the first 12 month period. Mr. Abi Zeid has
reaffirmed the obligations under the non-compete covenant in his employment
agreement and the applicable non-compete period has been extended from one year
to two years after the date of his resignation. Mr. Abi Zeid is subject to
various standstill provisions for two years after the resignation date. See
"Security Ownership of Certain Beneficial Holders and Management and Related
Stockholder Matters."
Mr. Abi Zeid had previously agreed to contribute to the Company shares
of Class A common stock issuable to him in connection with the acquisition of
STI in 2001 and the November 2001 debt restructuring in order to permit the
grant of shares to employees or consultants. Subsequent to the 2001 debt
restructuring, an aggregate of 205,425 shares of Class A common stock were
issued to former employees and consultants in settlement of commitments made by
Mr. Abi Zeid. In connection with the acquisition of STI in 2001, we had entered
into a conditional commitment to acquire Telecom International, Inc. ("TII").
TII was an affiliate of STI prior to the acquisition of STI by us. Mr. Abi Zeid
was a principal beneficial shareholder of TII. In November 2001, the parties
agreed to terminate the TII commitment. In consideration of the termination of
the commitment, EasyLink purchased certain assets of TII and agreed, among other
things, to issue up to 20,000 shares of Class A common stock to TII. EasyLink
settled the foregoing mutual share commitments in 2005 by reducing the amount of
shares issuable to Mr. Abi Zeid in satisfaction of commitments made to him
pursuant to the STI acquisition and the 2001 debt restructuring by 205,425
shares and by issuing 20,000 shares to TII.
29
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 December 31, 2000
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
difference between our share price as of the end of the
measurement period and 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 a self-determined peer group (the
"Peer Group").
CUMULATIVE TOTAL RETURN* FROM DECEMBER 31, 2000 TO DECEMBER 31, 2005
OF EASYLINK CLASS A COMMON STOCK,
THE NASDAQ STOCK MARKET (U.S.) INDEX AND PEER GROUP
[LINE CHART]
EASYLINK SERVICES
DATE CORPORATION PEER GROUP NASDAQ MARKET INDEX
---- ----------- ---------- -------------------
12/31/00 100.00 100.00 100.00
12/31/01 68.15 32.89 78.95
12/31/02 8.90 18.92 54.06
12/31/03 20.72 43.95 81.09
12/31/04 20.03 51.86 88.06
12/31/05 12.38 61.48 89.27
The Peer Group included the following companies: Descartes Systems
Group, Internet Commerce Corporation, J2 Global Communications, Captiva Software
Corporation (through December 31, 2004), Premiere Global Services, Inc., and
Tumbleweed Communications.
*ASSUMES $100 INVESTED ON DECEMBER 30, 2000 IN STOCK OR INDEX,
INCLUDING REINVESTMENT OF DIVIDENDS.
30
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of EasyLink which are intended to be
presented by such stockholders at EasyLink's 2006 Annual Meeting of Stockholders
must be received by EasyLink no later than January 7, 2007 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 2007 Annual Meeting of Stockholders
but nonetheless will be eligible for consideration is not earlier than 120 days
and not later than 90 days prior to June 20, 2007. If the date of the 2007
annual meeting is more than thirty (30) days before or more than seventy (70)
days after June 20, 2007, notice by the stockholder must be delivered not
earlier than 120 days prior to the actual date of the annual meeting and not
later than 90 days prior to such date or 10 days following the day on which
public announcement of 2006 annual meeting date is first made by the
Corporation. Notice of a stockholder's intent to nominate candidates for
election as directors must be submitted within the deadline for submission of
stockholder proposals. Stockholder proposals or notices of intent to nominate
candidates for election as directors should be submitted to EasyLink Services
Corporation, 33 Knightsbridge Road, Piscataway, NJ 08854, Attention: General
Counsel and Corporate Secretary.
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 and except as set forth below, 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 2005 all Reporting Persons complied with all applicable
filing requirements. Douglas Myers, former Vice President - Sales of the
Company, exercised options and sold the underlying shares in a series of
transactions during the period from March 21, 2005 through March 24, 2005, but
failed to file the required reports of such transactions on Form 4 until April
1, 2005.
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, as amended and
without exhibits, for the year ended December 31, 2005, upon written request to
Investor Relations, EasyLink Services Corporation, 33 Knightsbridge Road,
Piscataway, NJ 08854.
OTHER MATTERS
The Board knows of no other business that will be presented to the
Annual Meeting. If any other business is properly brought before the Annual
Meeting, proxies in the enclosed form will be voted in respect thereof as the
proxy holders deem advisable.
It is important that the proxies be returned promptly and that your
shares be represented. Stockholders are urged to mark, date, execute and
promptly return the accompanying proxy card in the enclosed envelope.
By Order of the Board of Directors,
DAVID W. AMBROSIA
Executive Vice President,
General Counsel and Secretary
31
APPENDIX A
EASYLINK SERVICES CORPORATION EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE
The purpose of the EasyLink Services Corporation Employee Stock
Purchase Plan (the "Plan") is to promote the interests of EasyLink Services
Corporation (the "Company") by providing eligible employees with the opportunity
to acquire a proprietary interest in the Company through participation in a
payroll deduction-based employee stock purchase plan designed to qualify under
Section 423 of the Internal Revenue Code of 1986, as amended.
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
14.
(d) "Company" shall mean EasyLink Services Corporation, a
Delaware corporation, and any successor corporation.
(e) "Eligible Employee" shall mean an individual meeting the
eligibility requirements of Section 4.
(f) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(g) "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 on the last market trading day prior to the day 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.
(h) "Participant" shall mean an Eligible Employee who has
enrolled and is participating in the Plan in accordance with Section 7.
(i) "Plan" shall mean this EasyLink Services Corporation
Employee Stock Purchase Plan, as amended from time to time.
(j) "Purchase Account" shall mean the recordkeeping account
used to account for a Participant's authorized payroll deductions during a
Purchase Period, as described in Section 7(A).
(k) "Purchase Period" shall have the meaning given such term
in Section 6.
(l) "Purchase Price" shall have the meaning given such term in
Section 7(B).
(m) "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 purchase under this Plan pursuant to an adjustment made under Section
13.
A-1
(n) "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. EFFECTIVE DATE AND TERM OF THE PLAN
The Plan shall become effective as of July 1, 2006, provided that the
Plan is approved by the stockholders of the Company within one year before or
after its adoption by the Board. The Plan shall terminate on the earliest of:
(A) July 1, 2016; or
(B) the date when all shares of Stock reserved for issuance
under Section 5 of the Plan shall have been acquired by purchase under the Plan;
or
(C) such earlier date as the Board may determine.
Such termination shall not impair any rights that under the Plan have
vested on or prior to the date of such termination. If, at any time, the number
of shares remaining available for purchase under the Plan are not sufficient to
satisfy all then-outstanding purchase rights, the Board may determine an
equitable basis of apportioning available shares among all Participants.
4. ELIGIBILITY
Participation in the Plan shall be open to each employee of the Company
or of any Subsidiary authorized by the Board or the Compensation Committee to
participate in this Plan (i) who has been continuously employed by the Company
or applicable subsidiary for at least 3 months, (ii) whose customary employment
by the Company or applicable Subsidiary is greater than 20 hours per week and
(iii) whose customary employment by the Company or applicable Subsidiary is more
than 5 months per calendar year (each an "Eligible Employee"). Individuals who
are not Eligible Employees as of the first day of a Purchase Period (as defined
in Section 6) shall not accrue rights under the Plan to purchase Class A Common
Stock during such Purchase Period.
Notwithstanding anything contained in the Plan to the contrary, no
Eligible Employee shall acquire a right to purchase Stock hereunder (i) if,
immediately after receiving such right, such employee would own 5% or more of
the total combined voting power or value of all classes of stock of the Company
or any Subsidiary (including any stock attributable to such employee under
Section 424(d) of the Code), or (ii) if, for a given calendar year, such right
would permit such employee's aggregate rights to purchase stock under all
employee stock purchase plans of the Company and its Subsidiaries that first
become exercisable during such calendar year to accrue at a rate that exceeds
$25,000 of Fair Market Value of such stock, all determined in the manner
provided by Section 423(b) of the Code.
5. STOCK SUBJECT TO THE PLAN
The aggregate number of shares of Stock issuable under the Plan shall
be two million (2,000,000) or the number and kinds of shares of capital stock or
other securities substituted for such shares of the Stock as provided in Section
13. 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. Any increase in the number of shares of Stock issuable under the
Plan shall be subject to approval by a vote of the stockholders of the Company.
6. PURCHASE PERIODS
The Committee shall specify the commencement and duration of the
periods during which the Participant's payroll deductions shall be accumulated
and applied towards the purchase of shares of Stock (the "Purchase Periods"). In
the absence of a contrary designation by the Committee, each Purchase Period
shall be a period of six calendar months beginning on the first day of January
(January 1) and the first day of July (July 1) commencing on the effective date
of the Plan.
7. BASIS OF PARTICIPATION
(A) PAYROLL DEDUCTIONS. Each Eligible Employee shall be entitled to
enroll in the Plan as of the first day of any Purchase Period that begins after
such employee has become an Eligible Employee.
An Eligible Employee may enroll in the Plan by submitting a payroll
deduction authorization (the "Authorization") in the manner prescribed by the
Committee to the Company or its designated agent. The Authorization shall become
effective on the first day of the Purchase Period following the submission of
such Authorization, with respect to payroll periods beginning on or after such
date. Each Authorization shall direct that payroll deductions be made by the
Company or applicable Subsidiary for each payroll period during which the
employee is a Participant in the Plan. The amount of payroll deduction specified
in an Authorization shall be a whole percentage (or a whole dollar amount, if
permitted by the Committee), of the Participant's current base salary or wages
before withholding or other deductions. The Committee may impose such
restrictions on the amount of such payroll deductions as it deems appropriate.
In the absence of a contrary designation by the Committee, a Participant's
payroll deductions for this Plan shall not exceed 10% of his base salary or
wages.
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After a Purchase Period has commenced, a Participant may decrease the
rate of his payroll deductions by submitting to Company or its designated agent
a change of status notice in the manner prescribed by the Committee (the "Change
of Status Notice"). The decrease in rate shall be effective with the first full
payroll period commencing ten (10) business days after the receipt of the Change
of Status Notice by the Company or its designated agent (unless the Company or
its agent, as applicable, elects to process a given change in participation rate
more quickly). A Participant may not increase the rate of his payroll deductions
for a Purchase Period after such Purchase Period has commenced.
A Participant may increase or decrease the rate of his payroll
deductions for a future Purchase Period by submitting to the Company or its
designated agent a Change of Status Notice within ten (10) business days (unless
the Company or its agent, as applicable, elects to process a given change in
participation rate more quickly) before the commencement of such Purchase
Period.
A Participant may not make any contributions to the Plan other than
through payroll deductions. The Company or its designated agent shall separately
account for the payroll deductions made on behalf of each Participant during
each Purchase Period, crediting each Participant's payroll deductions to a
separate bookkeeping account (the "Purchase Account"). At the end of each
Purchase Period, the amount in each Participant's Purchase Account shall be
applied to the purchase from the Company of the number of shares of Stock
determined by dividing the amount in the Purchase Account by the Purchase Price
(as defined in Section 7(B)) for such Purchase Period. No interest shall accrue
at any time for any amount credited to the Purchase Account of a Participant.
(B) PURCHASE PRICE. The purchase price (the "Purchase Price") per share
of Stock for any Purchase Period shall be the price set by the Committee, but in
no event shall be less than the lesser of 85% of the Fair Market Value of a
share of Stock as of the first day of such Purchase Period and 85% of the Fair
Market Value of a share of Stock as of the last day of such Purchase Period.
8. TERMINATION OF PARTICIPATION
A Participant may elect at any time to terminate his participation in
the Plan by submitting a Change of Status Notice to the Company or its
designated agent. In order for such election to be effective prior to the
purchase of shares for which the Participant has previously authorized payroll
deductions, the Change in Status Notice must be received by the Company or its
designated agent prior to the last business day of the Purchase Period for which
such termination is to be effective. Upon any such termination, the Company
shall promptly deliver to such Participant cash in an amount equal to the
balance to his credit in his Purchase Account on the date of such termination,
one or more certificates for the number of any full shares of Stock previously
purchased and held for his benefit, and the cash equivalent for any fractional
share so held. Such cash equivalent shall be determined by multiplying the
fractional share by the Fair Market Value of a share of Stock as of the last day
of the Purchase Period immediately preceding such termination.
If the Participant dies, terminates his employment with the Company or
applicable Subsidiary for any reason, or otherwise ceases to be an Eligible
Employee, his participation in the Plan shall immediately terminate. Upon such
terminating event, cash in an amount equal to the balance to his credit in his
Purchase Account on the date of such termination, one or more certificates for
the number of any full shares of Stock previously purchased and held for his
benefit, and the cash equivalent for any fractional share so held, determined as
provided in this Section 8, shall be delivered promptly to such Participant or
his legal representative, as the case may be.
9. STOCKHOLDER RIGHTS
A Participant shall have no stockholder rights with respect to the
shares subject to his outstanding purchase right until the shares are purchased
on the Participant's behalf in accordance with the provisions of the Plan and
the Participant has become a holder of record of the purchased shares.
10. NON-TRANSFERABILITY
Rights acquired under the Plan are not transferable and may be
exercised only by a Participant.
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11. ISSUANCE OF SHARES
The shares of Stock purchased by each Participant shall be considered
to be issued and outstanding to his credit as of the close of business on the
last day of each Purchase Period. The total number of shares of Stock purchased
by all Participants during each Purchase Period shall be issued, as of the last
day in such Purchase Period, to a nominee or agent for the benefit of the
Participants. A Participant shall be issued a certificate for his shares when
his participation in the Plan is terminated, the Plan is terminated or upon
request, but in the last case only in denominations of at least 25 shares.
12. DISPOSITION OF STOCK
A Participant may not sell, contract to sell, grant any option to
purchase, transfer the economic risk of ownership in, make any short sale of,
pledge or otherwise transfer or dispose of any interest in the shares of Stock
acquired under this Plan during the 180-day period following the close of the
Purchase Period during which such Stock was purchased by the Participant unless
approved by the Committee.
13. ADJUSTMENT FOR CHANGES IN THE STOCK
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 or any other person (whether by reason of merger,
consolidation, recapitalization, reclassification, split, reverse split,
combination of shares or otherwise), then, effective with the record date for
such change, the maximum number of shares of Stock or other securities that
thereafter may be purchased under the Plan and the maximum number of shares of
Stock or other securities that thereafter may be purchased during any Purchase
Period shall be (i) the maximum number of shares of Stock which, immediately
prior to such record date, remained available for purchase under the Plan and
the Purchase Period, proportionately increased in the case of such stock
dividend or split-up, or proportionately decreased in case of such combination
of shares or (ii) appropriately adjusted as determined by the Committee. The
Committee can also make any equitable adjustments it deems appropriate to the
Purchase Price and any other terms of outstanding rights to purchase shares
under the Plan as of the time of such change.
14. ADMINISTRATION
(A) The Plan shall be administered by the Compensation Committee or
such other committee as may be designated by the Board (the "Committee"). The
Committee shall consist of at least two directors and may consist of the entire
Board. The Committee shall have full authority to (i) adopt, amend and rescind
rules and regulations for the administration of the Plan and for its own acts
and proceedings, and (ii) to decide all questions and settle all controversies
and disputes of general applicability that may arise in connection with the
Plan. All decisions, determinations and interpretations made by the Committee
shall be final and binding upon all persons.
(B) 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 unless such action or failure to
take action constitutes self-dealing, willful misconduct or recklessness;
provided, however, that the provisions of this subsection shall not apply to the
responsibility or liability of a director pursuant to any criminal statute or to
the liability of a director for the payment of taxes pursuant to local, state or
federal law.
(C) Each member of the Board or Committee shall be entitled without
further act on his 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 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.
15. AMENDMENT OF THE PLAN
The Board may amend the Plan at any time and may correct any defect or
supply any omission or reconcile any inconsistency in the Plan 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, except as provided in
Section 13 and this Section 15, stockholder approval shall be required for any
amendment that increases the number of shares of Stock available for issuance
under the Plan. Notwithstanding the foregoing, no amendment shall (i) materially
adversely affect any purchase rights outstanding under the Plan during the
Purchase Period in which such amendment is to be effected, or (ii) decrease the
Purchase Price of the shares of Stock for any Purchase Period below the lesser
of 85% of the Fair Market Value thereof as of the first day of such Purchase
Period and 85% of such Fair Market Value as of the last day of such Purchase
Period.
16. 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.
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17. PLAN NOT A CONTRACT OF EMPLOYMENT
This Plan is not a contract of employment, and the terms of employment
of any individual 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 individual
for a continuance of employment, nor shall it interfere with the right of the
Company (or its Subsidiary, if applicable) to discharge the individual.
18. EXPENSE OF THE PLAN
All of the expenses of administering the Plan shall be paid by the
Company.
19. 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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[FORM OF PROXY]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF EASYLINK SERVICES CORPORATION FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 20, 2006
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 May 8, 2006, and hereby
appoints Thomas Murawski and Michael Doyle or any 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 June 20, 2006, 9
a.m., local time, at Radisson Hotel Piscataway, 21 Kingsbridge Road, Piscataway,
NJ 08854, and at any adjournment or postponement thereof, and to vote all shares
of Class A 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:
01) Robert Casale
02) Stephen Duff
03) Peter Holzer
04) George Knapp
05) Thomas Murawski
06) John Petrillo
07) Dennis Raney
08) Eric Zahler
---- FOR all
---- WITHHOLD all
---- For all except
If you wish to withhold authority to vote for any individual nominee, mark "For
all except" and write the nominee's name on the line below:
--------------------------------------------------------------------------------
2. PROPOSAL TO APPROVE THE COMPANY'S 2006 EMPLOYEE STOCK PURCHASE 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.
--------------------------------------------------------------------------------
3. PROPOSAL TO APPROVE THE AMENDMENT TO THE COMPANY'S 2005 STOCK AND INCENTIVE
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.
--------------------------------------------------------------------------------
B-1
4. PROPOSAL TO RATIFY GRANT THORNTON LLP AS THE COMPANY'S INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR 2006
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.
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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.)
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