UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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INFORMATION REQUIRED IN PROXY STATEMENT
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PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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EASYLINK SERVICES CORPORATION
(Name of Registrant as Specified in Its Charter)
N/A
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EASYLINK SERVICES CORPORATION
33 Knightsbridge Road
Piscataway, NJ 08854
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be held on August 24, 2006
The Special Meeting of Stockholders of EasyLink Services Corporation, a Delaware
corporation (the "Company"), will be held at 9:00 a.m. local time on Thursday,
August 24, 2006 at Radisson Hotel Piscataway, 21 Kingsbridge Road, Piscataway,
NJ 08854, to consider and act upon the following matters:
1. To consider and vote upon one proposal to approve three separate
amendments to the Amended and Restated Certificate of Incorporation, as
amended, of the Company to enable the Company to effect one or more
reverse stock splits, ranging from a one-for-three reverse stock split
to a one-for-seven reverse stock split of all the issued and
outstanding shares of the Company's Class A Common Stock, par value
$0.01 per share, in order to seek to maintain the listing of the
Company's Class A Common Stock on The Nasdaq Capital Market and to
facilitate the Company's ability to raise additional equity capital.
The Board of Directors of the Company may abandon any one or more or
all of the amendments or make one or more or all of the approved
amendments effective by filing such amendment or amendments with the
Secretary of State of the State of Delaware at such time or times as
the Board of Directors of the Company determines to be necessary or
appropriate in order to seek to maintain the listing of the Company's
Class A Common Stock on The Nasdaq Capital Market. If, after the filing
of one or more approved amendments with the Secretary of State of the
State of Delaware, the Company again fails to comply with the listing
requirements of The Nasdaq Capital Market regarding share price, the
Company may file one or more or all of the other approved amendments as
the Board of Directors of the Company determines to be necessary or
appropriate to seek to comply with the listing requirements of The
Nasdaq Capital Market. The Board of Directors of the Company will
determine to implement one or more of the approved amendments to
maintain the listing of the Company's Class A Common Stock on The
Nasdaq Capital Market and to facilitate the Company's ability to raise
additional equity capital. The Board of Directors of the Company may
determine to file more than one of the approved amendments if the
Company's stock price declines after the filing of any approved
amendment and as a result the Company fails to maintain compliance with
the listing standards of The Nasdaq Capital Market. The Board of
Directors of the Company may also determine to file more than one of
the approved amendments in order to facilitate the Company's ability to
raise additional equity capital. In making its determination whether to
file one or more of the approved amendments, the Board of Directors of
the Company will consider and evaluate from time to time the following
factors and criteria to determine which, if any, of the approved
amendments to implement: the capitalization of the Company (including
the number of shares of Class A Common Stock issued and outstanding);
the prevailing trading price for the Company's Class A Common Stock and
the volume level thereof; and the general economic and other related
conditions prevailing in the Company's industry and in the marketplace
generally. In making this determination, the Board of Directors of the
Company will not necessarily select the amendment with the lowest ratio
that will likely cause the trading price of the Company's Class A
Common Stock to exceed the minimum bid price necessary in order to
maintain the Company's Class A Common Stock listing on The Nasdaq
Capital Market;
2. To adjourn the Special Meeting, if necessary, to solicit additional
proxies in the event that there are not sufficient votes in favor of
the amendments effecting a reverse stock split at the time of the
Special Meeting; and
3. To transact such other business as may properly come before the meeting
or any postponement(s) or adjournment(s) thereof.
Stockholders of record at the close of business on July 25, 2006 are entitled to
notice of, and to vote at, the meeting. A list of stockholders eligible to vote
at the special meeting will be available for examination by any stockholder who
is present at the special meeting and at the principal place of business of the
Company at 33 Knightsbridge Road, Piscataway, New Jersey, during ordinary
business hours during the ten day period prior to the special meeting for any
purpose germane to the meeting. The stock transfer books of the Company will
remain open for the purchase and sale of the Company's Class A Common Stock, par
value $0.01 per share. All stockholders are cordially invited to attend the
meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Thomas F. Murawski
-----------------------------------------------
THOMAS F. MURAWSKI
Chairman, President and Chief Executive Officer
Piscataway, New Jersey
August [__], 2006
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY CARD AND PROMPTLY MAIL IT IN THE ENCLOSED ENVELOPE IN ORDER
TO ASSURE REPRESENTATION OF YOUR SHARES AT THE MEETING. NO POSTAGE NEED BE
AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES.
EASYLINK SERVICES CORPORATION
33 Knightsbridge Road
Piscataway, NJ 08854
PROXY STATEMENT FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 24, 2006
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of EasyLink Services Corporation (the "Company") for
use at the Special Meeting of Stockholders to be held on August 24, 2006 at 9:00
a.m. local time at Radisson Hotel Piscataway, 21 Kingsbridge Road, Piscataway,
NJ 08854, and at any adjournment or adjournments of that meeting (the "Special
Meeting"). All proxies will be voted in accordance with the instructions
contained therein, and, if no choice is specified, the proxies will be voted in
favor of the matters set forth in the accompanying Notice of Special Meeting and
in the discretion of the persons named therein upon such other matters that may
properly come before the meeting and any postponements or adjournments thereof.
Any proxy may be revoked by a stockholder at any time before it is voted by
delivery of written notice of revocation or a duly executed proxy bearing a
later date, to the Secretary of the Company, or by attending the Special Meeting
and voting it in person. This proxy statement and accompanying form of proxy are
intended to be sent or given to security holders beginning August 1, 2006.
VOTING SECURITIES AND VOTES REQUIRED
The close of business on July 25, 2006 has been fixed as the record date (the
"Record Date") for determining the holders of shares of Class A Common Stock of
the Company entitled to notice of and to vote at the Special Meeting. At the
close of business on the Record Date, the Company had approximately [________]
shares of Class A Common Stock outstanding held of record by approximately [___]
stockholders.
Each outstanding share of Class A Common Stock on the Record Date is entitled to
one vote, 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 voting power for that particular item and
has not received instructions from the beneficial owner.
Each of the proposed amendments to the Amended and Restated Certificate of
Incorporation, as amended, of the Company must be approved by the affirmative
vote of the holders of a majority in voting power of the outstanding shares of
Class A Common Stock. Abstentions and broker "non-votes" will have the same
effect as a vote "AGAINST" the proposed amendments. The proposal to adjourn the
Special Meeting, if necessary, to solicit additional proxies in the event that
there are not sufficient votes in favor of the amendments effecting a reverse
stock split at the time of the Special Meeting must be approved by the
affirmative vote of the majority of votes present in person or represented by
proxy at the Special Meeting and entitled to vote on the subject matter. As a
result, broker "non-votes" will have no impact on the outcome of the vote with
respect to the adjournment proposal, while abstentions will have the same effect
as a vote "AGAINST" the adjournment proposal.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
The following table provides information with respect to the beneficial
ownership of the Company's Class A Common Stock as of June 30, 2006 for:
o each person who the Company knows beneficially owns more than 5% of its
Class A Common Stock;
o each of the Company's directors, including its Chief Executive Officer;
1
o the Company'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 the Company's executive officers and directors as a group.
For purposes of the following 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 June 30, 2006. Unless otherwise
noted below, the persons and entities named in the following table have sole
voting and 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, entity or group named below, any shares that such person, entity or
group has the right to acquire within 60 days after June 30, 2006 are deemed to
be outstanding, but shares that may similarly be acquired by other persons,
entities or groups 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
54,501,867.
Unless otherwise specified, the address of each of the persons set forth below
is in care of EasyLink Services Corporation, 33 Knightsbridge Road, Piscataway,
New Jersey 08854.
NUMBER OF PERCENTAGE OF
CLASS A SHARES CLASS A SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED
Thomas F. Murawski(1) 2,091,578 3.84%
George Abi Zeid(2) 2,580,731 4.74%
262 Glen Head Road
Glen Head, New York 11545
David W. Ambrosia(3) 288,856 *
Robert Casale 56,007 *
Michael Doyle(4) 261,891 *
Stephen Duff(5) 15,326 *
Richard Gooding(6) 258,563 *
Peter J. Holzer 173,790 *
George Knapp 64,072 *
Gary MacPhee(7) 346,198 *
John C. Petrillo 90,645 *
Dennis Raney 67,249 *
Eric J. Zahler 110,000 *
All directors and executive officers as a group 3,824,175 7.02%
(12 persons, excluding Mr. Abi Zeid)(8)
Lawrence Auriana 5,120,000 9.39%
The Clark Estates, Inc.(9) 9,709,853 17.82%
One Rockefeller Center
New York, New York 10020
2
--------------------
* Less than 1%
(1) Includes 32,250 shares held by the Company's 401(k) Savings Plan for
Mr. Murawski'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 plan.
(2) Includes 268,296 shares issuable upon exercise of warrants. Also
includes 15,379 shares held by the Company's 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 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.
(3) Includes 25,598 shares held by the Company's 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 plan. Mr. Ambrosia resigned as
an officer of the Company effective July 18, 2006.
(4) Includes 14,472 shares held by the Company's 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 plan.
(5) Includes 15,326 shares in which Mr. Duff has an indirect interest
through his interest in Federal Partners, L.P.
(6) Includes 24,298 shares held by the Company's 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 plan. Also includes 700 shares
held by Mr. Gooding's wife. Mr. Gooding disclaims beneficial ownership
of the shares held by his wife.
(7) Includes 25,069 shares held by the Company's 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 plan.
(8) Includes 12 persons who were directors and executive officers as of
June 30, 2006.
(9) Includes 5,394,640 shares held by Federal Partners, L.P. The Clark
Estates, Inc. provides management and administrative services to
Federal Partners, L.P. 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 the 5,394,640 and 194,380 shares described in this
footnote.
3
The following table sets forth the number of shares of Class A Common Stock
included in the table above that are issuable upon the exercise of options
exercisable within 60 days of June 30, 2006.
NUMBER OF SHARES OF
NAME CLASS A COMMON STOCK
Thomas F. Murawski 1,896,760
George Abi Zeid 72,000
262 Glen Head Road
Glen Head, New York 11545
David W. Ambrosia 238,616
Robert Casale 23,749
Michael Doyle 180,000
Stephen Duff 0
Richard Gooding 225,500
Peter J. Holzer 12,500
George Knapp 23,749
Gary MacPhee 305,000
John C. Petrillo 10,000
Dennis Raney 23,749
Eric J. Zahler 10,000
All directors and executive officers as a group 2,949,623
(12 persons, excluding Mr. Abi Zeid)
PROPOSAL NO. 1
APPROVAL OF AMENDMENTS TO AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION, AS AMENDED, TO EFFECT REVERSE STOCK SPLITS
GENERAL
The persons named in the enclosed proxy will vote the shares represented by a
duly executed and delivered proxy to approve each of the three separate
amendments to the Amended and Restated Certificate of Incorporation, as amended,
of the Company effecting a reverse stock split of all outstanding shares of the
Company's Class A Common Stock, unless the proxy is marked otherwise.
Accordingly, if a stockholder returns a proxy without contrary instructions, the
persons named as proxies will vote to approve all of the following amendments to
the Amended and Restated Certificate of Incorporation, as amended.
The Board of Directors will determine to implement one or more of the approved
amendments to maintain the listing of the Company's Class A Common Stock on The
Nasdaq Capital Market and to facilitate the Company's ability to raise
additional equity capital. The Board of Directors may determine to file more
than one of the approved amendments if the Company's stock price declines after
the filing of any approved amendment and as a result the Company fails to
maintain compliance with the listing standards of The Nasdaq Capital Market. The
Board of Directors may also determine to file more than one of the approved
amendments in order to facilitate the Company's ability to raise additional
equity capital. In making its determination whether to file one or more of the
approved amendments, the Board of Directors will consider and evaluate from time
to time the following factors and criteria to determine which, if any, of the
approved amendments to implement: the capitalization of the Company (including
the number of shares of Class A Common Stock issued and outstanding); the
prevailing trading price for the Company's Class A Common Stock and the volume
level thereof; and the general economic and other related conditions prevailing
in the Company's industry and in the marketplace generally. In making this
determination, the Board of Directors will not necessarily select the amendment
with the lowest ratio that will likely cause the trading price of the Company's
Class A Common Stock to exceed the minimum bid price necessary in order to
maintain the Company's Class A Common Stock listing on The Nasdaq Capital
Market.
4
The Board of Directors has unanimously approved and declared advisable each of
the following amendments to Article V of the Company's Amended and Restated
Certificate of Incorporation, as amended. The form of Certificate of Amendment
to the Company's Amended and Restated Certificate of Incorporation, as amended,
is attached to this proxy statement as Exhibit A. Each of the separate
amendments to the Amended and Restated Certificate of Incorporation, as amended,
of the Company approved by the Board of Directors and for which the Company is
seeking your approval is set forth below. As reflected on the enclosed proxy
card relating to the Special Meeting, stockholders may approve all, some or none
of the proposed amendments.
(a) Effective at 9:30 a.m. Eastern Time on the business day following the
date that the Certificate of Amendment required by the General
Corporation Law of the State of Delaware is filed with the Secretary of
State of the State of Delaware (the "Effective Time"), every three (3)
outstanding shares of Class A Common Stock will be reclassified into
and automatically become one (1) outstanding share of Class A Common
Stock (as well as the right to receive cash in lieu of any fractional
shares of Class A Common Stock upon the surrender of the stock
certificates of the relevant holder of record). No fractional share
shall be issued in connection with the foregoing reverse stock split.
In lieu thereof, upon the surrender of the stock certificates of the
relevant holder of record, such holder shall be paid an amount in cash
equal to the product of (i) the number of fractional shares of Class A
Common Stock that otherwise would have been issued to such holder
multiplied by (ii) the product of (A) the average closing bid prices of
the Class A Common Stock on The Nasdaq Capital Market for a period of
ten trading days immediately preceding the date of the Effective Time
multiplied by (B) three (3). Any stock certificate that represented
shares of Class A Common Stock immediately before the Effective Time
shall, automatically and without the need to surrender the same for
exchange, represent the number of shares of Class A Common Stock
immediately after the Effective Time resulting from the reverse stock
split (as well as the right to receive cash in lieu of any fractional
shares of Class A Common Stock upon the surrender of the stock
certificates of the relevant holder of record); or
(b) Effective at 9:30 a.m. Eastern Time on the business day following the
date that the Certificate of Amendment required by the General
Corporation Law of the State of Delaware is filed with the Secretary of
State of the State of Delaware (the "Effective Time"), every five (5)
outstanding shares of Class A Common Stock will be reclassified into
and automatically become one (1) outstanding share of Class A Common
Stock (as well as the right to receive cash in lieu of any fractional
shares of Class A Common Stock upon the surrender of the stock
certificates of the relevant holder of record). No fractional share
shall be issued in connection with the foregoing reverse stock split.
In lieu thereof, upon the surrender of the stock certificates of the
relevant holder of record, such holder shall be paid an amount in cash
equal to the product of (i) the number of fractional shares of Class A
Common Stock that otherwise would have been issued to such holder
multiplied by (ii) the product of (A) the average closing bid prices of
the Class A Common Stock on The Nasdaq Capital Market for a period of
ten trading days immediately preceding the date of the Effective Time
multiplied by (B) five (5). Any stock certificate that represented
shares of Class A Common Stock immediately before the Effective Time
shall, automatically and without the need to surrender the same for
exchange, represent the number of shares of Class A Common Stock
immediately after the Effective Time resulting from the reverse stock
split (as well as the right to receive cash in lieu of any fractional
shares of Class A Common Stock upon the surrender of the stock
certificates of the relevant holder of record); or
5
(c) Effective at 9:30 a.m. Eastern Time on the business day following the
date that the Certificate of Amendment required by the General
Corporation Law of the State of Delaware is filed with the Secretary of
State of the State of Delaware (the "Effective Time"), every seven (7)
outstanding shares of Class A Common Stock will be reclassified into
and automatically become one (1) outstanding share of Class A Common
Stock (as well as the right to receive cash in lieu of any fractional
shares of Class A Common Stock upon the surrender of the stock
certificates of the relevant holder of record). No fractional share
shall be issued in connection with the foregoing reverse stock split.
In lieu thereof, upon the surrender of the stock certificates of the
relevant holder of record, such holder shall be paid an amount in cash
equal to the product of (i) the number of fractional shares of Class A
Common Stock that otherwise would have been issued to such holder
multiplied by (ii) the product of (A) the average closing bid prices of
the Class A Common Stock on The Nasdaq Capital Market for a period of
ten trading days immediately preceding the date of the Effective Time
multiplied by (B) seven (7). Any stock certificate that represented
shares of Class A Common Stock immediately before the Effective Time
shall, automatically and without the need to surrender the same for
exchange, represent the number of shares of Class A Common Stock
immediately after the Effective Time resulting from the reverse stock
split (as well as the right to receive cash in lieu of any fractional
shares of Class A Common Stock upon the surrender of the stock
certificates of the relevant holder of record).
Approval of each of the amendments to Article V of the Company's Amended and
Restated Certificate of Incorporation, as amended, requires the affirmative vote
of the holders of a majority in voting power of the outstanding shares of Class
A Common Stock.
PURPOSE OF REVERSE STOCK SPLITS
Each of the proposed amendments to the Company's Amended and Restated
Certificate of Incorporation, as amended, effecting a reverse stock split,
ranging from between a one-for-three reverse stock split and a one-for-seven
reverse stock split, has been approved and declared advisable by the Board of
Directors to reduce the number of shares of Class A Common Stock outstanding and
to increase the trading price of the Company's Class A Common Stock on The
Nasdaq Capital Market. The Board of Directors took this action because the
Company's Class A Common Stock has failed, for more than 30 consecutive days, to
maintain, and has failed to regain during the applicable grace periods, the
$1.00 minimum bid price required by Nasdaq Marketplace Rule 4310(c)(4) (the
"Rule") and because the Company believes that this action will facilitate its
efforts to raise additional equity capital. The proposed amendments are not the
first step in a going private transaction.
While there can be no assurance, the Board of Directors believes that the
implementation of one or more or all of the proposed amendments effecting a
reverse stock split, if approved by the Company's stockholders, will result in
an increase in the minimum bid price of the Company's Class A Common Stock to
above the $1.00 minimum bid price mandated by The Nasdaq Capital Market for
continued listing and enable the Company's Class A Common Stock to continue to
trade on The Nasdaq Capital Market. However, while the Company believes that
implementation of a reverse stock split is a satisfactory mechanism to achieve
compliance with the maintenance requirements of The Nasdaq Capital Market, there
can be no assurance that, even if the bid price for the Company's Class A Common
Stock exceeds the $1.00 minimum bid price for the mandated period as a result of
one or more reverse stock splits, The Nasdaq Capital Market will deem the
Company to be in compliance and will not delist the Company's Class A Common
Stock.
On August 23, 2005, the Company received notice from The Nasdaq Stock Market,
Inc. Listing Qualifications Staff that for 30 consecutive trading days the bid
price of the Company's Class A Common Stock closed below the $1.00 minimum bid
price required for continued inclusion under Nasdaq Marketplace Rule 4450(a)(5).
The August 23, 2005 letter from Nasdaq indicates that, in accordance with Nasdaq
Marketplace Rule 4450(e)(2), the Company had until February 21, 2006 (180
calendar days from the date of the letter) to regain compliance with the Rule.
Because the Company believed that it would be unable to regain compliance with
the Rule by the expiration of the original 180 day grace period, or February 21,
2006, the Company applied to transfer the listing of its Class A Common Stock
from The Nasdaq National Market (now The Nasdaq Global Market) to The Nasdaq
Capital Market. The Nasdaq staff notified the Company that its application to
transfer its listing to The Nasdaq Capital Market was approved on February 16,
2006. On February 22, 2006, the Company received notice from Nasdaq that it had
determined that the Company was entitled to an additional 180 day grace period
to regain compliance with Nasdaq's $1.00 minimum bid price requirement. As a
result of that determination, the Company has until August 21, 2006 to comply
with the Rule. The Company would be able to regain compliance with the Rule if,
at any time before August 21, 2006, the bid price of its Class A Common Stock
closes at $1.00 per share or more for a minimum of ten consecutive trading days.
The Nasdaq staff may, in its discretion, require the Company to maintain a bid
price of at least $1.00 per share for a period in excess of ten consecutive
business days (but generally no more than 20 consecutive business days) before
determining that the Company has demonstrated the ability to maintain long-term
compliance. The Company does not expect to regain compliance with the Rule on or
before August 21, 2006 and expects to be formally notified of its failure
promptly after August 21, 2006.
6
If the Company's Class A Common Stock is delisted from The Nasdaq Capital
Market, the Company would seek to find one or more market makers to apply to
make a market in its Class A Common Stock on the OTC Bulletin Board and/or in
the pink sheets market. In such an event, an investor could find it more
difficult to dispose of, or to obtain accurate quotations as to the market value
of, the Company's Class A Common Stock.
In addition, if the Company's Class A Common Stock were to become delisted from
trading on The Nasdaq Capital Market and the trading price were to remain below
$5.00 per share, trading in the Company's Class A Common Stock may also be
subject to the requirements of certain rules promulgated under the Securities
Exchange Act of 1934, which require additional disclosures by broker-dealers in
connection with any trades involving a stock defined as a "penny stock".
Generally, a "penny stock" is defined as any non-Nasdaq equity security that has
a market price of less than $5.00 per share, subject to certain exceptions. The
additional burdens imposed upon broker-dealers by these requirements could
discourage broker-dealers from facilitating trades in the Company's Class A
Common Stock, which could severely limit the market liquidity of the Company's
Class A Common Stock and the ability of investors to trade the Company's Class A
Common Stock.
The Board of Directors is asking that you approve each of the proposed
amendments to the Company's Amended and Restated Certificate of Incorporation,
as amended, effecting each of the reverse stock splits of all of the issued and
outstanding Class A Common Stock of the Company. Notwithstanding the
authorization of each of the amendments by the stockholders of the Company, the
Board of Directors may abandon any one or more or all of the amendments without
further action by the Company's stockholders in accordance with Section 242(c)
of the General Corporation Law of the State of Delaware. A vote in favor of each
of the amendments to the Amended and Restated Certificate of Incorporation, as
amended, will be a vote for approval of each of the proposed reverse stock
splits, one or more or all of which may be implemented and effected and one or
more or all of which may be abandoned at the discretion of the Board of
Directors, in either case, within the next 12 months.
The Board of Directors has determined that each of the amendments effecting a
reverse stock split is advisable and in your best interests and unanimously
recommends that you vote "FOR" each of the amendments effecting a reverse stock
split and "FOR" the approval of any proposal to adjourn the Special Meeting, if
necessary, to solicit additional proxies in the event that there are not
sufficient votes in favor of the amendments effecting a reverse stock split at
the time of the Special Meeting. The Board of Directors will determine to
implement one or more of the approved amendments to maintain the listing of the
Company's Class A Common Stock on The Nasdaq Capital Market and to facilitate
the Company's ability to raise additional equity capital. The Board of Directors
may determine to file more than one of the approved amendments if the Company's
stock price declines after the filing of any amendment and as a result the
Company fails to maintain compliance with the listing standards of The Nasdaq
Capital Market. The Board of Directors may also determine to file more than one
of the approved amendments in order to facilitate the Company's ability to raise
additional equity capital. In making its determination whether to file one or
more of the approved amendments, the Board of Directors will consider and
evaluate from time to time the following factors and criteria to determine
which, if any, of the approved amendments to implement: the capitalization of
the Company (including the number of shares of Class A Common Stock issued and
outstanding); the prevailing trading price for the Company's Class A Common
Stock and the volume level thereof; and the general economic and other related
conditions prevailing in the Company's industry and in the marketplace
generally. In making this determination, the Board of Directors will not
necessarily select the amendment with the lowest ratio that will likely cause
the trading price of the Company's Class A Common Stock to exceed the minimum
bid price necessary in order to maintain the Company's Class A Common Stock
listing on The Nasdaq Capital Market. The Board of Directors will determine as
soon as practicable which proposed amendment(s) to implement and will provide
stockholders and other relevant persons with notice of the record date for any
of the proposed reverse stock splits.
7
EFFECTS OF REVERSE STOCK SPLITS
A reverse stock split is a reduction in the number of outstanding shares of a
class of a corporation's capital stock, which is accomplished by the Company, in
this case, reclassifying and converting all the outstanding shares of Class A
Common Stock into a proportionately fewer number of shares of Class A Common
Stock. For example, if the Board of Directors implements a one-for-three reverse
stock split of the Class A Common Stock, then someone holding 300 shares of the
Company's Class A Common Stock before the reverse stock split would hold 100
shares of the Company's Class A Common Stock after the reverse stock split. This
will also result in an increase in the available number of authorized but
unissued shares of the Company's Class A Common Stock. However, each
stockholder's proportionate ownership of the issued and outstanding shares of
the Company's Class A Common Stock would remain the same, except for minor
changes that may result from the provisions of each of the amendments effecting
a reverse stock split, as described below, which require the payment of cash in
lieu of fractional shares upon the surrender of the stock certificates of the
relevant holder of record.
The primary purpose of the proposed reverse stock splits of the Company's Class
A Common Stock is to combine the issued and outstanding shares of the Class A
Common Stock into a smaller number of shares so that the shares of the Class A
Common Stock will trade at a higher price per share than their recent trading
prices.
Finally, the reverse stock splits, if implemented, will affect the outstanding
options to purchase Class A Common Stock of the Company and certain other
presently outstanding convertible securities with respect to Class A Common
Stock issued by the Company that contain anti-dilution provisions. The
agreements and other documents governing all of the Company's outstanding stock
options and warrants to purchase, and all outstanding securities convertible
into or exchangeable for, Class A Common Stock include provisions requiring
adjustments to the number of shares of Class A Common Stock issuable upon
exercise of such options or warrants or upon conversion or exchange of such
other securities and the number of shares subject to, and the exercise,
conversion or exchange prices of, such options, warrants or convertible or
exchangeable securities, in the event of a reverse stock split.
NO FRACTIONAL SHARES
No fractional shares of Class A Common Stock shall be issued to the holders of
record of Class A Common Stock as a result of any of the reverse stock splits.
In lieu thereof, the Company shall pay in cash upon the surrender of the stock
certificates of the relevant holder of record the fair value of such fractional
interest determined by reference to the average closing bid prices of the Class
A Common Stock on The Nasdaq Capital Market for a period of ten trading days
immediately preceding the effective date of the reverse stock split (after
giving effect to the relevant reverse stock split ratio).
IMPLEMENTATION OF REVERSE STOCK SPLITS
If the stockholders approve the reverse stock split amendments, the Board of
Directors may direct management of the Company to file an amendment to the
Company's Amended and Restated Certificate of Incorporation, as amended,
incorporating one of the amendments to the Company's Amended and Restated
Certificate of Incorporation, as amended, with the Secretary of State of the
State of Delaware effecting one of the reverse stock splits. The Board of
Directors may, if the Company's Class A Common Stock fails for more than 30
consecutive days after the first reverse stock split amendment is filed, to
maintain the $1.00 minimum bid price required, file one or both of the other
approved amendments.
REASONS FOR REVERSE STOCK SPLIT: ADVANTAGES
The Board of Directors believes that a reverse stock split is desirable for the
following reasons:
(a) If shares of the Company's Class A Common Stock continue to trade below
$1.00 per share, the Company's Class A Common Stock could be delisted
from The Nasdaq Capital Market. Delisting could decrease the
marketability, liquidity and transparency of the Company's Class A
Common Stock (which could, in turn, further depress the Company's stock
price). The Board of Directors believes that the anticipated increase
in the market price per share resulting from a reverse stock split will
lift the price of the Company's Class A Common Stock above the $1.00
minimum bid price that currently threatens the Company's continued
listing on The Nasdaq Capital Market.
(b) The anticipated increase in the per share market price of the Company's
Class A Common Stock should also enhance the acceptability of the
Company's Class A Common Stock by the financial community and the
investing public.
8
(c) A variety of brokerage house policies and practices tend to discourage
individual brokers within those firms from dealing with lower priced
stocks. Some of the policies and practices pertain to the payment of
broker's commissions and to time-consuming procedures that function to
make the handling of lower priced stock economically unattractive to
brokers and therefore difficult for holders of the Company's Class A
Common Stock to manage. The expected increase in the per share price of
the Company's Class A Common Stock may help alleviate some of these
problems.
(d) The structure of trading commissions tends to have an adverse impact
upon holders of lower priced stock because the brokerage commission on
a sale of lower priced stock generally represents a higher percentage
of the sales prices than the commission on a relatively higher priced
issue, which may discourage trading in lower priced stock. A reverse
stock split could result in a price level for the Company's Class A
Common Stock that may reduce, to some extent, the effect of these
policies and practices of brokerage firms and diminish the adverse
impact of trading commissions on the market for the Company's Class A
Common Stock.
(e) The increase in the portion of the Company's authorized shares of Class
A Common Stock that would be unissued after any of the reverse stock
splits is effected could be used for any proper corporate purpose
approved by the Board of Directors. The increased number of authorized
but unissued shares of Class A Common Stock will provide the Company
with additional flexibility to issue additional shares in connection
with future financings or other transactions. The anticipated increase
in the per share market price of the Company's Class A Common Stock
should also enhance the acceptability of the Company's Class A Common
Stock by the financial community and the investing public. However, the
Board of Directors does not currently have any plans to utilize the
increase in the number of the authorized but unissued shares of the
Company's Class A Common Stock that would result from approval and
implementation of the proposed reverse stock split.
REASONS AGAINST REVERSE STOCK SPLITS: DISADVANTAGES
Even though the Board of Directors believes that the potential advantages of a
reverse stock split outweigh any disadvantages that might result, the following
are possible disadvantages of a reverse stock split:
(a) Despite the potential increase in liquidity discussed above, if the
Company files one or more of the approved amendments, the reduced
number of shares resulting from a reverse stock split could adversely
affect the liquidity of the Company's Class A Common Stock.
(b) A reverse stock split may leave certain stockholders with one or more
"odd lots", which are stock holdings in amounts of less than 100 shares
of Class A Common Stock. These odd lots may be more difficult to sell
than shares in even multiples of 100. Additionally, any reduction in
brokerage commissions resulting from a reverse stock split, as
discussed above, may be offset, in whole or in part, by increased
brokerage commissions required to be paid by stockholders selling odd
lots created by the reverse stock split.
(c) There is no assurance that the Company's stock price will increase as a
result of any of the reverse stock splits. Indeed, if the trading price
of the Company's Class A Common Stock does not proportionally increase
after the reverse stock split, the Company's total market
capitalization, which is equal to the number of outstanding shares of
Class A Common Stock multiplied by the market price, will also decline.
A decline in the Company's stock price and a resulting decline in
market capitalization after a reverse stock split could be greater than
it would have been if the reverse stock split had not occurred.
(d) Because a reverse stock split would result in an increased number of
authorized but unissued shares of the Company's Class A Common Stock,
it may be construed as having an anti-takeover effect, although neither
the Board of Directors nor the Company's management views this proposal
in that perspective. However, the Board of Directors, subject to its
fiduciary duties and applicable law, could use this increased number of
authorized but unissued shares to frustrate persons seeking to take
over or otherwise gain control of the Company by, for example,
privately placing shares with purchasers who might side with the Board
of Directors in opposing a hostile takeover bid. Shares of the
Company's Class A Common Stock could also be issued to a holder that
would thereafter have sufficient voting power to assure than any
proposal to amend or repeal the Company's by-laws or certain provisions
of the Company's Amended and Restated Certificate of Incorporation, as
amended, would not receive the requisite vote. Such uses of the
Company's Class A Common Stock could render more difficult, or
discourage, an attempt to acquire control of the Company if such
transaction were opposed by the Board of Directors.
9
(e) Subject to Nasdaq rules on stock issuances, an increased number of
authorized but unissued shares of the Company's Class A Common Stock
could be issued by the Board of Directors without further stockholder
approval, which could result in further dilution to the holders of the
Class A Common Stock.
EXCHANGE OF STOCK CERTIFICATES
If any of the reverse stock splits is effected, the Company will not require
holders of Class A Common Stock to surrender their stock certificates. Instead,
the Company will give notice to its transfer agent of the reverse stock split
and the effective date of the amendment to the Amended and Restated Certificate
of Incorporation, as amended, in order to accurately reflect the number of
issued and outstanding shares of capital stock of the Company. The Company shall
pay cash in lieu of any fractional shares resulting from the reverse stock split
upon the surrender of the stock certificates of the relevant holder of record.
All holders of capital stock of the Company will continue to be entitled to
receive any dividends or other distributions that may be declared and payable
with respect to the Class A Common Stock with a record date after the effective
time of the reverse stock split.
FEDERAL INCOME TAX CONSEQUENCES
The following summary of the federal income tax consequences of a reverse stock
split is based on current law, including the Internal Revenue Code of 1986, as
amended, and is for general information only. The tax treatment of a stockholder
may vary depending upon the particular facts and circumstances of such
stockholder, and the discussion below may not address all of the tax
consequences for a particular stockholder. For example, foreign, state and local
tax consequences are not discussed below. Accordingly, each stockholder should
consult his or her tax advisor to determine the particular tax consequences to
him or her of a reverse stock split, including the application and effect of
federal, state, local and/or foreign income tax and other laws.
Generally, a reverse stock split will not result in the recognition of gain or
loss for federal income tax purposes. The adjusted basis of the aggregate number
of new shares of Class A Common Stock will be the same as the adjusted basis of
the aggregate number of shares of Class A Common Stock held by such holder
immediately prior to the reverse stock split. The holding period of the new,
post-split shares of the Class A Common Stock resulting from implementation of
the reverse stock split will include the stockholder's respective holding
periods for the pre-split shares of the Class A Common Stock held by such holder
immediately prior to the reverse stock split.
The receipt of cash in lieu of a fractional share of Class A Common Stock by a
holder of Class A Common Stock generally will result in a taxable gain or loss
to such holder for federal income tax purposes based upon the difference between
the amount of cash received by such holder and the adjusted tax basis in the
fractional shares as set forth above. The gain or loss will constitute a capital
gain or loss and will constitute long-term capital gain or loss if the holder's
holding period is greater than one year as of the effective date. The
deductibility of capital losses is subject to limitation.
NO APPRAISAL RIGHTS
The holders of shares of the Class A Common Stock have no appraisal rights under
Delaware law, the Company's Amended and Restated Certificate of Incorporation,
as amended, or the Company's by-laws with respect to the proposed amendments to
the Company's Amended and Restated Certificate of Incorporation, as amended,
effecting a reverse stock split. If the amendments are approved by the
stockholders, any such amendment will become effective at 9:30 a.m., Eastern
Time, on the business day following the date that the Certificate of Amendment
required by the General Corporation Law of the State of Delaware is filed with
the Secretary of State of the State of Delaware. However, the Board of Directors
is authorized to abandon any or all of the amendments at any time prior to
effectiveness, whether before or after obtaining stockholder approval, without
further action by stockholders.
10
PROPOSAL NO. 2
APPROVAL OF ADJOURNMENT OF THE SPECIAL MEETING
The Company is submitting a proposal for consideration at the Special Meeting to
authorize the named proxies to approve one or more adjournments of the Special
Meeting to solicit additional proxies in the event that there are not sufficient
votes in favor of the amendments effecting a reverse stock split at the time of
the Special Meeting. Even though a quorum may be present at the Special Meeting,
it is possible that the Company may not have received sufficient votes to
approve the amendments effecting a reverse stock split by the time of the
Special Meeting. In that event, the Company would need to adjourn or postpone
the Special Meeting in order to solicit additional proxies. The adjournment
proposal relates only to an adjournment of the Special Meeting for purposes of
soliciting additional proxies to obtain the requisite stockholder approval to
approve the amendments effecting a reverse stock split. Any other adjournment or
postponement of the Special Meeting (e.g., an adjournment required because of
the absence of a quorum) would be voted upon pursuant to the discretionary
authority granted by the proxy. The Board of Directors retains full authority to
adjourn the Special Meeting for any other purpose, including the absence of a
quorum, or to postpone the Special Meeting before it is convened, without the
consent of any of the Company's stockholders.
The persons named in the enclosed proxy will vote the shares represented by a
duly executed and delivered proxy to approve any such adjournment, unless the
proxy is marked otherwise. Accordingly, if a stockholder returns a proxy without
contrary instructions, the persons named as proxies will vote to approve any
such adjournment. Approval of any such adjournment requires the affirmative vote
of the holders of a majority in voting power of the outstanding Class A Common
Stock present in person at the Special Meeting or represented by proxy at the
Special Meeting and entitled to vote thereon.
The Board of Directors recommends that you vote "FOR" the adjournment proposal
so that proxies may be used for that purpose, should it become necessary.
Properly executed proxies will be voted "FOR" the adjournment proposal, unless
otherwise noted on the proxies. If the Special Meeting is adjourned or
postponed, the Company is not required to give notice of the time and place of
the adjourned or postponed meeting unless the Board of Directors fixes a new
record date for the Special Meeting or if the adjournment is for more than 30
days.
SHAREHOLDER PROPOSALS
The deadline for submitting shareholder proposals for inclusion in the Company's
proxy statement and form of proxy for the Company's next annual meeting is
January 7, 2007. The deadline for submitting a shareholder proposal that will
not be included in the Company's proxy statement and form of proxy for the next
annual meeting 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 next annual meeting is more than 30 days before or more than 70 days after
June 20, 2007, notice by the shareholder 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
the next annual meeting date is first made by the Company.
OTHER MATTERS
The Board of Directors knows of no other business that will be presented at the
Special Meeting. If any other business is properly brought before the Special
Meeting, shares represented by duly executed and delivered proxies in the
enclosed form will be voted in respect thereof as the proxy holders deem
advisable.
All costs of solicitation of proxies will be borne by the Company. In addition
to solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph, facsimile, email and personal interviews. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the owners
of stock held in their names, and the Company will reimburse them for their
reasonable out-of-pocket expenses incurred in connection with the distribution
of proxy materials.
It is important that the proxies be returned promptly and that your shares be
represented. Stockholders are urged to mark, date, execute and promptly return
the accompanying proxy card in the enclosed envelope.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Thomas F. Murawski
-----------------------------------------------
THOMAS F. MURAWSKI
Chairman, President and Chief Executive Officer
Piscataway, New Jersey
August [__], 2006
11
Exhibit A
CERTIFICATE OF AMENDMENT OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION,
AS AMENDED, OF EASYLINK SERVICES CORPORATION
EASYLINK SERVICES CORPORATION, a Delaware corporation (the
"Corporation"), hereby certifies as follows:
FIRST: The name of the Corporation is EasyLink Services Corporation.
The original Certificate of Incorporation of the Corporation was filed on August
1, 1994. An Amended and Restated Certificate of Incorporation of the Corporation
was filed on March 10, 1999. A Certificate of Merger with respect thereto was
filed on December 30, 1999, a Certificate of Amendment with respect thereto was
filed on June 7, 2000, a Certificate of Merger with respect thereto was filed on
August 28, 2000, a Certificate of Merger with respect thereto was filed on
October 2, 2000, a Certificate of Ownership and Merger with respect thereto was
filed on March 30, 2001, a Certificate of Amendment with respect thereto was
filed on June 5, 2001, a Certificate of Amendment with respect thereto was filed
on January 22, 2002 and a Certificate of Change of Registered Agent with respect
thereto was filed on September 22, 2005. The name under which the Corporation
was originally incorporated is "GlobeComm, Inc."
SECOND: Pursuant to Section 242(b) of the General Corporation Law of
the State of Delaware (the "DGCL"), the Board of Directors of the Corporation
has duly adopted, and a majority in voting power of the outstanding shares of
Class A Common Stock, par value $0.01 per share, has approved, the amendments to
the Amended and Restated Certificate of Incorporation of the Corporation set
forth in this Certificate of Amendment.
THIRD: Pursuant to Section 242 of the DGCL, the Amended and Restated
Certificate of Incorporation of the Corporation is hereby amended to add the
following paragraph to Article V thereof:
Effective at 9:30 a.m. Eastern Time on [__________], 200[_] (the
"Effective Time"), every [____] ([__]) outstanding shares of Class A
Common Stock will be reclassified into and automatically become one (1)
outstanding share of Class A Common Stock (as well as the right to
receive cash in lieu of any fractional shares of Class A Common Stock
upon the surrender of the stock certificates of the relevant holder of
record). No fractional share shall be issued in connection with the
foregoing reverse stock split. In lieu thereof, upon the surrender of
the stock certificates of the relevant holder of record, such holder
shall be paid an amount in cash equal to the product of (i) the number
of fractional shares of Class A Common Stock that otherwise would have
been issued to such holder multiplied by (ii) the product of (A) the
average closing bid prices of the Class A Common Stock on The Nasdaq
Capital Market for a period of ten trading days immediately preceding
the date of the Effective Time multiplied by (B) [_____] ([__]). Any
stock certificate that represented shares of Class A Common Stock
immediately before the Effective Time shall, automatically and without
the need to surrender the same for exchange, represent the number of
shares of Class A Common Stock immediately after the Effective Time
resulting from the reverse stock split (as well as the right to receive
cash in lieu of any fractional shares of Class A Common Stock upon the
surrender of the stock certificates of the relevant holder of record).
FOURTH: This Certificate of Amendment shall become effective at the
Effective Time.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by its duly authorized officer on this [____] day of
[__________], 200[_].
EASYLINK SERVICES CORPORATION
By:
--------------------------------------------------------
Name: Thomas F. Murawski
Title: Chairman, President and Chief Executive Officer
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF EASYLINK SERVICES CORPORATION FOR THE
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD AUGUST 24, 2006
The undersigned stockholder of EasyLink Services Corporation, a Delaware
corporation (the "Company"), hereby acknowledges receipt of the Notice of
Special Meeting of Stockholders and Proxy Statement, each dated August [__],
2006, and hereby appoints Thomas F. Murawski and Michael Doyle, or either of
them, proxies and attorneys-in-fact, with full power to each of substitution, on
behalf and in the name of the undersigned, to represent the undersigned at the
Special Meeting of Stockholders of EasyLink Services Corporation to be held on
Thursday, August 24, 2006 at 9:00 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 that the
undersigned would be entitled to vote if then and there personally present, on
the matters and in the manner set forth below:
1. APPROVAL OF PROPOSED AMENDMENTS TO THE AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION, AS AMENDED, OF THE COMPANY TO ENABLE THE COMPANY TO
EFFECT ONE OR MORE REVERSE STOCK SPLITS, AS SET OUT BELOW. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR EACH OF ITEM 1(A), ITEM 1(B) AND ITEM
1(C).
(a) 1 for 3 (check one box) For Against Abstain
---------- ------ -------
(b) 1 for 5 (check one box) For Against Abstain
---------- ------ -------
(c) 1 for 7 (check one box) For Against Abstain
---------- ------ -------
2. APPROVAL OF ADJOURNMENT OF THE SPECIAL MEETING TO SOLICIT ADDITIONAL
PROXIES IN RESPECT OF PROPOSAL NO. 1. THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR ITEM 2.
For Against Abstain
---------- ------ ------
and, in their discretion, upon such other matter or matters that may properly
come before the meeting and any postponement(s) or adjournment(s) thereof.
PLEASE SIGN BELOW AND RETURN IMMEDIATELY
This proxy is solicited on behalf of the Board of Directors of the Company. This
proxy, when properly executed, will be voted in a manner directed herein by the
undersigned stockholder. If no direction is made, the proxy will be voted FOR
each of the reverse stock split amendments in proposal 1 and in the judgment of
the persons named herein on any other matter that may properly come before the
meeting or any adjournment(s) or postponement(s) thereof.
-------------------------------- ------------------
Signature Date
-------------------------------- ------------------
Signature Date
(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.)