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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 19, 1999
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REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
APPLIEDTHEORY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
16-1491253
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
DELAWARE
(STATE OR OTHER JURISDICTION
OF INCORPORATION OR ORGANIZATION)
40 CUTTER MILL ROAD, SUITE 405
GREAT NECK, NEW YORK 11021
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
1996 INCENTIVE STOCK OPTION PLAN
1999 STOCK OPTION PLAN
1999 EMPLOYEE STOCK PURCHASE PLAN
(FULL TITLES OF THE PLANS)
RICHARD MANDELBAUM
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
APPLIEDTHEORY CORPORATION
40 CUTTER MILL ROAD, SUITE 405
GREAT NECK, NEW YORK 11021
(NAME AND ADDRESS OF AGENT FOR SERVICE)
(516) 466-8422
(TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE PRICE FEE
--------------------------- ---------- --------- ----- ---
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per share
in respect of:
1996 Incentive Stock Option Plan 3,089,275 $ 2.01(1) $ 6,209,443(1) $ 1,726.23
1999 Stock Option Plan 2,400,000 $15.594(2) $37,425,600(2) $10,404.32
1999 Employee Stock Purchase Plan 2,250,000 $15.594(2) $35,086,500(2) $ 9,754.05
Re-offer Prospectus for shares
under 1996 Incentive Stock
Option Plan 4,516,638 $15.594(2) $70,432,452(2) $19,580.22
</TABLE>
(1) Pursuant to Rule 457(h), these prices are estimated solely for the purpose
of calculating the registration fee and are based upon the weighted average
exercise price for the shares under the 1996 Incentive Stock Option Plan.
(2) Pursuant to Rule 457(h), these prices are estimated solely for the purpose
of calculating the registration fee and are based upon the average of the
high and low sales prices of the Registrant's common stock on the Nasdaq
National Market on July 13, 1999.
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STATEMENT
We are filing this Form S-8 Registration Statement with the
Securities and Exchange Commission in order to register 12,255,913 shares of
our common stock, par value $.01 per share, (i) 3,089,275 of which are issuable
upon exercise of options granted under our 1996 Incentive Stock Option Plan,
(ii) 2,400,000 of which are issuable upon exercise of options granted or to be
granted under our 1999 Stock Option Plan and (iii) 2,250,000 of which are
issuable upon exercise of options granted or to be granted under our 1999
Employee Stock Purchase Plan.
Under cover of this Form S-8 is a re-offer prospectus prepared
in accordance with Part I of Form S-3 under the Securities Act of 1933, as
amended. The re-offer prospectus may be used for re-offerings and resales of up
to 4,516,638 shares of our common stock acquired by selling stockholders through
participation in our 1996 Incentive Stock Option Plan.
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
ITEM 1. PLAN INFORMATION.
Not filed as part of this registration statement pursuant to
Note to Part I of Form S-8.
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION.
Not filed as part of this registration statement pursuant to
Note to Part I of Form S-8.
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RE-OFFER PROSPECTUS
APPLIEDTHEORY CORPORATION
40 Cutter Mill Road, Suite 405
Great Neck, NY 11021
(516) 466-8422
1996 Incentive Stock Option Plan
4,516,638 SHARES OF COMMON STOCK
(par value $.01 per share)
The selling stockholders identified in this re-offer
prospectus may periodically offer and sell the shares of our common stock they
acquired upon the exercise of options granted under our 1996 Incentive Stock
Option Plan. In addition, certain unnamed stockholders who are not affiliates
of us and who hold less than 1,000 shares of the common stock issued under our
1996 option plan may use this re-offer prospectus to sell those shares.
However, the sale of shares in reliance upon this re-offer prospectus is
subject to the volume limitations described in Rule 144(e) under the Securities
Act of 1933, which are restrictions on the amount of securities that may be
sold in any three month period.
We will not receive any of the proceeds from the sale of these
shares. We do not know when the proposed sale of the shares by the selling
stockholders will occur. The sales may occur in transactions in the national
over-the-counter market, in negotiated transactions or otherwise at prices
prevailing at the time of sale. We have paid the expenses incurred in
registering the shares covered by this re-offer prospectus. See "Use of
Proceeds" and "Selling Stockholders" on page I-17 and "Plan of Distribution"
on page I-19.
The shares issued before the filing of this re-offer
prospectus pursuant to exercises of options granted under our 1996 option plan
remain "restricted securities" under the Securities Act of 1933 until they are
sold pursuant to this re-offer prospectus. This re-offer prospectus has been
prepared to register those restricted securities under the Securities Act and
allow for future sales by the selling stockholders to the public without
restriction, except for the volume limitations imposed under Rule 144(e). To
our knowledge, the selling stockholders have made no arrangement with any
brokerage firm for the sale of the shares registered pursuant to this re-offer
prospectus. The selling stockholders may be deemed to be "underwriters" within
the meaning of the Securities Act. Any commissions received by a broker or
dealer in connection with resales of the shares may be deemed to the
underwriting commissions or discounts under the Securities Act.
Our common stock is traded in the over-the-counter market and
quoted on the Nasdaq National market under the symbol "ATHY". The high and low
prices for our common stock on July 13, 1999, as reported on the Nasdaq National
Market were $16.688 and $14.50 per share, respectively. You are urged to obtain
current market data before you purchase our stock.
You should rely only on the information contained or referred
to in this re-offer prospectus. We have not authorized anyone to provide you
with information that is different. This re-offer prospectus is not an offer to
sell our shares and is not soliciting an offer to buy our shares in any state
where the offer or sale is not permitted. You should not assume that the
information in this re-offer prospectus or any of its supplements is accurate as
of any date other than the date on the front of these documents.
THE COMMON STOCK OFFERED HEREBY IS HIGHLY SPECULATIVE AND
INVOLVES A HIGH DEGREE OF RISK. PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE 2 TO
READ ABOUT RISKS YOU SHOULD CONSIDER BEFORE ACQUIRING SHARES OF OUR COMMON
STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER
REGULATORY BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is July 19-, 1999
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RISK FACTORS
You should read and consider the discussion in this re-offer
prospectus in conjunction with the discussion in our quarterly reports and
annual reports filed with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, and our audited financial statements and notes
thereto and the "Management's Discussion and Analysis of Financial Condition and
Results of Operations" as of and for the year ended December 31, 1998 which are
included in the registration statement on Form S-1 (File No. 333-72133), as
filed with the Securities and Exchange Commission in connection with our initial
public offering of common stock.
Unless the context otherwise requires, references in this
re-offer prospectus to "AppliedTheory," the "Company," "we," "our" and "us"
refer to AppliedTheory Corporation.
From time to time, in both written and in oral statements by
our senior management, we express expectations and other statements regarding
future performance. These forward-looking statements are inherently uncertain
and you must recognize that events could turn out to be different than such
expectations and statements. We discuss key factors impacting current and
future performance in the registration statement for our initial public
offering on Form S-1 (Commission File No. 333-72133) filed with the Securities
and Exchange Commission on April 30, 1999 and in the other filings and reports
described above. In addition, you should consider the following risk factors.
ANY INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
WE HAVE A LIMITED OPERATING HISTORY AND MAY SUCCESSFULLY IMPLEMENT OUR BUSINESS
PLAN.
We have a limited operating history, and our business model is
still in development. We were incorporated in 1995 and commenced operations in
late 1996. As an early stage Internet company we are subject to expenses and
difficulties associated with implementing our business plan that are not
typically encountered by more mature companies. The risks associated with
implementing our business plan relate to:
- building out our operations infrastructure;
- expanding our sales structure and marketing programs;
- increasing awareness of our brand;
- providing services to our customers that are reliable and
cost-effective;
- responding to technological development
or service offerings by competitors; and
- attracting and retaining qualified personnel.
If we are not successful in implementing our business plan,
our business or future financial or operating results could suffer.
WE HAVE A HISTORY OF SIGNIFICANT LOSSES AND EXPECT THESE LOSSES TO INCREASE IN
THE FORESEEABLE FUTURE.
We have incurred significant net losses and negative cash
flows in each quarterly and annual period since inception and expect to continue
to do so for the foreseeable future. At
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March 31, 1999, we had an accumulated deficit of approximately $17.4 million. We
incurred net losses of $1.7 million and $.79 million in the three months ended
March 31, 1999 and 1998, respectively. In connection with our expansion plans,
we anticipate making significant investments in sales and marketing, new
distributed data centers, customer support and personnel. As a result of our
expansion plans, we expect our net losses and negative cash flows from
operations on a quarterly and annual basis to increase in the foreseeable
future. Our ability to achieve profitability is dependent in large part upon the
successful completion of the Gemini2000 Network over which we have no control,
and the successful implementation of our nationwide expansion strategy. The
Gemini2000 Network is the first coast-to-coast, next generation Internet
backbone network which is designed to carry both research and commercial
traffic. We are deploying this network together with IXC Communications, Inc.,
an affiliate of one of our significant stockholders. We cannot assure you that
we will achieve or sustain revenue growth or profitability on either a quarterly
or annual basis.
TO DATE, MOST OF OUR REVENUES HAVE BEEN DERIVED FROM CUSTOMERS LOCATED IN NEW
YORK STATE AND WE MAY NOT SUCCESSFULLY EXECUTE OUR NATIONWIDE GROWTH STRATEGY.
To date, most of our revenues have been derived from customers
located in New York State. Our business strategy is to become a leading national
provider of advanced Internet technology solutions to the business mid-market
and select public sector organizations. The risks we may encounter in executing
our nationwide growth strategy include the possibility that:
- our products and services are not accepted beyond our
current market;
- there are significant delays in the roll-out of the
Gemini2000 Network or our new data centers;
- the technology upon which the Gemini2000 Network is based
is overtaken;
- we fail to successfully implement our sales and marketing
strategy on a national scale;
- we fail in our efforts to build a national sales force;
and/or
- we fail to develop a nationally recognized brand.
OUR RAPID GROWTH STRATEGY IS LIKELY TO PLACE A SIGNIFICANT STRAIN ON OUR
RESOURCES.
Our future success depends in large part on our ability to
manage any achieved growth in our business. For our nationwide growth strategy
to succeed, we will need:
- to expand our business with new and current customers;
- to develop and offer successful new products and services;
- to retain key employees and hire new employees; and
- to ensure that any future business we may develop or
acquire will perform in a satisfactory manner.
These activities are expected to place a significant strain on
our resources. Also, we cannot guarantee that any of these will occur or that we
will succeed in managing the results of any success in our nationwide growth
strategy.
OUR ANNUAL AND QUARTERLY OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT
FLUCTUATIONS. AS A RESULT, PERIOD-TO-PERIOD COMPARISONS OF OUR RESULTS OF
OPERATIONS ARE NOT NECESSARILY MEANINGFUL AND SHOULD NOT BE RELIED UPON AS
INDICATIONS OF FUTURE PERFORMANCE.
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We have experienced significant fluctuations in our results of
operations on a quarterly and annual basis. We expect to continue to experience
significant fluctuations in our future quarterly and annual results of
operations due to a variety of factors, many of which are outside of our
control, including:
- demand for and market acceptance of our services;
- customer retention;
- the timing and success of our marketing efforts;
- the timing and magnitude of capital expenditures,
including costs relating to the expansion of operations;
- the timely expansion of existing facilities and completion
of new facilities;
- the ability to increase bandwidth as necessary;
- fluctuations in bandwidth used by customers;
- introductions of new services or enhancements by us and
our competitors;
- increased competition in our markets;
- growth of Internet use and establishment of Internet
operations by mainstream enterprises; and
- changes in our and our competitors' pricing policies.
A RELATIVELY LARGE PORTION OF OUR EXPENSES ARE FIXED IN THE SHORT-TERM. AS A
RESULT, OUR RESULTS OF OPERATIONS WILL BE PARTICULARLY SENSITIVE TO FLUCTUATIONS
IN REVENUE.
A relatively large portion of our expenses are fixed in the
short-term, particularly in respect of data and telecommunications costs,
depreciation, real estate interest expense and personnel. Because we will be
required to incur these fixed expenses, irrespective of our revenue, our future
results of operations are particularly sensitive to fluctuations in revenue.
THE EXPECTED CONTINUED GROWTH IN THE MARKET FOR OUR PRODUCTS AND SERVICES MAY
NOT MATERIALIZE OR MAY MATERIALIZE IN A MANNER WE HAVE NOT ANTICIPATED.
Our market is new and rapidly evolving. Whether, and the
manner in which, the market for our products and services will continue to grow
is uncertain. The market for our products and services may be inhibited for a
number of reasons, including:
- the reluctance of businesses to outsource their Internet
integration, enterprise portal development, Web hosting
and Internet connectivity needs;
- our failure to successfully market our products and
services to new customers; and
- the inability to maintain and strengthen our brand
awareness.
OUR SUCCESS DEPENDS IN LARGE PART ON THE CONTINUED GROWTH OF THE INTERNET
MARKET.
Our business would be hurt if Internet usage does not continue
to grow. Internet usage may be inhibited for a number of reasons, including:
- access costs;
- inadequate network infrastructure;
- security concerns;
- uncertainty of legal and regulatory issues concerning use
of the Internet;
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- inconsistent quality of service; and
- lack of availability of cost-effective, high-speed
service.
If Internet usage grows, the Internet infrastructure may not
be able to support the demands placed on it or the Internet's performance and
reliability may decline. Similarly, Web sites have experienced interruptions in
their service as a result of outages and other delays occurring throughout the
Internet network infrastructure. If these outages or delays occur frequently,
use of the Internet as a commercial or business medium could, in the future,
grow more slowly or decline. This could hurt our business.
WE OPERATE IN AN EXTREMELY COMPETITIVE MARKET AND MAY NOT BE ABLE TO COMPETE
EFFECTIVELY.
The Internet-based services market is extremely competitive
and many of our competitors are more established and have greater financial
resources than us. In addition, there are no substantial barriers to entry in
this market. We also expect that competition will intensify in the future. Many
of our competitors have greater market presence, engineering and marketing
capabilities and financial, technological and personnel resources than we do. As
a result, as compared to us our competitors may:
- develop and expand their network infrastructures and
service offerings more efficiently or more quickly;
- adapt more swiftly to new or emerging technologies and
changes in customer requirements;
- take advantage of acquisitions and other opportunities
more effectively; and
- more effectively leverage existing relationships with
customers or exploit a more recognized brand name to
market and sell their services.
Our current and prospective competitors, both in New York
State and nationally, generally may be divided into the following three groups:
- Internet service providers including Concentric Network
Corp., Exodus Communications, Inc., Globix Corporation,
AboveNet Communications, Inc., PSINet Inc., UUNET
Technologies, Inc., Frontier Global Center, GTE
Internetworking, Digex, Inc., Verio Inc. and other
national and regional providers;
- telecommunications companies, such as AT&T Corp., Cable &
Wireless plc, Sprint Corporation, MCI WorldCom, Inc.,
Qwest Communications International Inc., regional
telecommunications companies and various cable companies;
and
- network and system integrators, including IBM Corporation,
Oracle Corporation, the Big 5 accounting firms, EDS
Corporation and similar entities.
We believe that we may also face competition from other large
computer hardware and software companies and other media, technology and
telecommunications companies.
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The number of businesses providing Internet-related services
is rapidly growing. We are aware of other companies, in addition to those named
above, that have entered into or are forming joint ventures or consortia to
provide services similar to those provided by us. Others may acquire the
capabilities necessary to compete with us through acquisitions.
WE COULD ENCOUNTER SIGNIFICANT PRICING PRESSURE AS A RESULT OF INCREASED
COMPETITION AND INDUSTRY CONSOLIDATION.
As a result of increased competition and consolidation in the
industry, we could encounter significant pricing pressure, which in turn could
result in significant reductions in the average selling price of our services.
We may not be able to offset such price reductions even if we obtain an increase
in the number of our customers, derive higher revenue from enhanced services or
manage to reduce our costs. Increased price or other competition could erode our
market share and could significantly hurt our business. We cannot assure you
that we will have the financial resources, technical expertise or marketing and
support capabilities to continue to compete successfully in that environment.
OUR REVENUES ARE HEAVILY DEPENDENT ON TWO CUSTOMERS. IF WE LOSE EITHER OF THESE
CUSTOMERS, IF EITHER OF THEM REDUCE THE AMOUNT OF WORK THEY DO WITH US, OR IF WE
FAIL TO DIVERSIFY OUR CUSTOMER BASE, OUR BUSINESS WILL SUFFER.
We currently derive a substantial portion of our total revenue
from two customers - NYSERNet.org, Inc., a not-for-profit corporation that is
also affiliated with one of our major stockholders, and the New York State
Department of Labor. The loss of either of these customers could significantly
hurt our business. For the three months ended March 31, 1999 and 1998, revenue
from NYSERNet.org, Inc. represented approximately 30% and 40%, respectively, of
our total revenue. For the three months ended March 31, 1999 and 1998, revenue
under the agreement with the New York State Department of Labor represented 34%
and 27%, respectively, of our total revenue.
We have an agreement with NYSERNet to provide NYSERNet and its
customers with services. This agreement has an initial term of three years,
ending October 1, 2001, and is automatically renewable for successive one-year
terms. While the agreement only allows termination by either party under special
circumstances, it is still possible that NYSERNet could terminate the agreement
or cease working with us. On June 21, 1999 we concluded a contract with NYSERNet
to enhance, operate and maintain NYSERNet's next generation Internet backbone
network. Our contract with the New York State Department of Labor is for the
development and maintenance of the America's Job Bank Web site. This agreement
is subject to cancellation by the New York State Department of Labor upon 15
days notice.
We cannot assure you that revenue from these two customers or
from other customers that have accounted for significant revenue in past
periods, individually or as a group, will continue, or if continued, will reach
or exceed historical levels in any future period. In addition we may not succeed
in diversifying our customer base in future periods.
OUR BUSINESS MODEL ASSUMES THAT WE WILL USE THE GEMINI2000 NETWORK FOR THE
DELIVERY OF OUR SERVICES. IF IXC DOES NOT COMPLETE THIS NETWORK, OUR BUSINESS
COULD SUFFER.
Our business model assumes that we will use IXC's Gemini2000
Network for the delivery of our services. While we believe that we could
transfer our business to another network supplier if this network was not
available, we may not find an alternate network which
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would provide comparable technology at a competitive cost. At this time, IXC has
not completed construction of the network. In addition, on February 4, 1999, IXC
announced that it had hired an investment bank to advise it on strategic
alternatives. We are unable to predict the result of this process or the impact
it may have on us. Any failure by IXC to complete construction of, or deploy and
maintain, the Gemini2000 Network could hurt our business. While IXC has publicly
announced its intention to complete construction of the Gemini2000 Network, we
do not have a written agreement with them which requires them to do so.
OUR BUSINESS AND EXPANSION MODELS ASSUME THAT WE WILL BE ABLE TO EASILY SCALE
THE NETWORK INFRASTRUCTURE WE USE TO ACCOMMODATE INCREASING NUMBERS OF CUSTOMERS
AND INCREASED TRAFFIC. HOWEVER, THE SCALABILITY OF THE GEMINI2000 NETWORK IS
UNPROVEN.
Due to its limited deployment, the ability of the Gemini2000
Network to connect and manage a large number of customers or a large quantity
of traffic at high transmission speeds is unproven. This network's ability to
be scaled up to meet our expected customer usage levels while maintaining
superior performance is also unproven. As the number of our customers grows or
as network usage increases, we many need to make additional investments to
expand and adapt our network infrastructure and maintain adequate data
transmission speeds. Any future expansion and adaptation of our
telecommunications and hosting facility infrastructure could require
substantial financial, operational, technical and management resources.
Furthermore, additional network capacity many not be available from IXC or
other third-party suppliers as it is needed by us, and, as a result, our
network may not be able to achieve or maintain a sufficiently high capacity for
data transmission. Any failure on our part to achieve or maintain high data
transmission capacity could significantly reduce customer demand for our
services and hurt our business. If we are required to expand our network
significantly and rapidly due to increased usage, additional stress will be
placed upon our network hardware, traffic management systems and hosting
facilities.
WE COULD EXPERIENCE SYSTEM FAILURES AND CAPACITY CONSTRAINTS, WHICH WOULD AFFECT
OUR ABILITY TO COMPETE.
Interruptions in service to our customers could hurt our
business. To succeed, we must be able to operate our network management
infrastructure 24 hours per day, seven days per week, without interruption. Our
operations depend upon our ability to protect our network infrastructure, our
equipment and customer data against damage from human error or "acts of God."
Even if we take precautions, the occurrence of a natural disaster or other
unanticipated problems could result in interruptions in the services we provide
to our customers.
At this time, we do not have a formal disaster recovery plan.
Although we have attempted to build redundancy into our network and hosting
facilities, our network is currently subject to various single points of
failure. For example, a problem with one of our routers or switches could cause
an interruption in the services we provide to some of our customers. Any
interruptions in service could:
- cause end users to seek damages for losses incurred;
- require us to spend more money replacing existing
equipment, expanding facilities or adding redundant
facilities;
- cause us to spend money on existing or new equipment and
infrastructure earlier than we plan;
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- damage our reputation for reliable service;
- cause existing end-users and resellers to cancel our
contracts; or
- make it more difficult for us to attract new end-users and
partners.
Any of these results could hurt our business.
Failure of the national telecommunications network and
Internet infrastructure to continue to grow in an orderly manner could result in
service interruptions. While the national telecommunications network and
Internet infrastructure have historically developed in an orderly manner, there
is no guarantee that this will continue as the network expands and more
services, users and equipment connect to the network. Failure by our
telecommunications providers to provide us with the data communications capacity
we require could cause service interruptions, which could hurt our business.
WE ARE DEPENDENT ON NETWORKS BUILT AND OPERATED BY OTHERS. IF WE DO NOT HAVE
CONTINUED ACCESS TO A RELIABLE NETWORK, OUR BUSINESS WILL SUFFER.
In delivering our services, we rely on networks, which are
built and operated by others. We do not have control over these networks, nor
can we guarantee that we will continue to have access on terms that fit our
business needs.
Our use of the infrastructure of other communications carriers
presents risks. Our success partly depends upon the capacity, scalability,
reliability and security of the network infrastructure provided to us by
telecommunications network suppliers, including IXC, Bell Atlantic Corp. and
Sprint Corporation. Our nationwide expansion plans require rapid expansion of
network capacity, which we expect will be satisfied through the completion of
the Gemini2000 Network. Without this expanded capacity, our ability to execute
our business strategy could be hurt. In addition, future expansion and
adaptation of our network infrastructure may require substantial financial,
operational and management resources. We may not be able to expand or adapt our
network infrastructure on a timely basis and at a commercially reasonable cost
to meet additional demand, changing customer requirements or evolving industry
standards. In addition, if demand for usage of our network were to increase
faster than projected or were to exceed our current forecasts, the network could
experience capacity constraints which would hurt its performance.
We also depend on our telecommunications suppliers to provide
uninterrupted and error-free service through their telecommunications networks.
If these suppliers greatly increased the prices for their services or if the
telecommunications capacity available to us was insufficient for our business
purposes, and we were unable to use alternative networks or pass along any
increased costs to our customers, it could hurt our business.
OUR NETWORK AND SOFTWARE ARE VULNERABLE TO SECURITY BREACHES AND SIMILAR THREATS
WHICH COULD RESULT IN OUR LIABILITY FOR DAMAGES AND HARM OUR REPUTATION.
Despite the implementation of network security measures, the
core of our network infrastructure is vulnerable to computer viruses, break-ins
and similar disruptive problems caused by Internet users. This could result in
our liability for damages, and our reputation could suffer, thereby deterring
potential customers from working with us. Security problems caused by third
parties could lead to interruptions and delays or to the cessation of service to
our customers.
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Furthermore, inappropriate use of the network by third parties could also
jeopardize the security of confidential information stored in our computer
systems and in those of our customers.
We rely upon encryption and authentication technology listed
from third parties to provide the security and authentication necessary to
effect secure transmission of confidential information. Although we intend to
continue to implement industry-standard security measures, in the past some of
these standards have occasionally been circumvented by third parties. Therefore,
we cannot assure you that the measures we implement will not be circumvented.
The costs and resources required to eliminate computer viruses and alleviate
other security problems may result in interruptions, delays or cessation of
service to our customers, which could hurt our business.
OUR BRAND IS NOT WELL KNOWN, AND FAILURE TO DEVELOP BRAND RECOGNITION COULD HURT
OUR BUSINESS.
To successfully execute our strategy, we must strengthen our
brand awareness. While many of our competitors have well-established brands in
Internet services, to date, our market presence has been limited principally to
New York State. We have generated our existing revenue primarily through a small
sales force and word of mouth. In order to build our brand awareness, our
marketing efforts must succeed, and we must provide high quality services. We
expect to increase our marketing budget substantially as part of our brand
building efforts. We cannot assure you that these investments will succeed as
planned. If we do not build our brand awareness, our ability to realize our
strategic and financial objectives could be hurt.
IF WE DO NOT RESPOND EFFECTIVELY AND ON A TIMELY BASIS TO RAPID TECHNOLOGICAL
CHANGE, OUR BUSINESS COULD SUFFER.
If we do not successfully use or develop new technologies,
introduce new services or enhance our existing services on a timely basis, or
new technologies or enhancements used or developed by us do not gain market
acceptance, our business could be hurt. The Internet industry is characterized
by rapidly changing technology, industry standards, customer needs and
competition, as well as by frequent new product and service introductions. Our
future success will depend, in part, on our ability to accomplish all of the
following in a timely and cost-effective manner, all while continuing to develop
our business model and rolling-out our services on a national level:
- effectively use and integrate leading technologies;
- continue to develop our technical expertise;
- enhance our products and current networking services;
- develop new products and services that meet changing
customer needs;
- have the market accept our services;
- advertise and market our products and services; and
- influence and respond to emerging industry standards and
other changes.
We cannot assure you that we will successfully use or develop
new technologies, introduce new services or enhance our existing services on a
timely basis, or that new technologies or enhancements used or developed by us
will achieve market acceptance. Our pursuit of necessary technological advances
may require substantial time and expense. In
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addition, we cannot assure you that, if required, we will successfully adapt our
network and services to alternate access devices and conduits.
If our services do not continue to be compatible and
interoperable with products and architectures offered by other industry members,
our ability to compete could be impaired. Our ability to compete successfully is
dependent, in part, upon the continued compatibility and interoperability of our
services with products and architectures offered by various other members of the
industry. Although we intend to support emerging standards in the market for
Internet access, we cannot assure you that we will be able to conform to new
standards in a timely fashion and maintain a competitive position in the market.
Our services rely on the continued widespread commercial use of Transmission
Control Protocol/Internetwork Protocol, commonly known as TCP/IP, which is an
industry standard to facilitate the transfer of data. Alternative open protocol
and proprietary protocol standards could emerge and become widely adopted. A
resulting reduction in the use of TCP/IP could render our services obsolete and
unmarketable. Our failure to anticipate the prevailing standard or the failure
of a common standard to emerge could hurt our business.
WE DERIVE SIGNIFICANT REVENUE FROM CONTRACTS WITH GOVERNMENT AGENCIES. THESE
CONTRACTS OFTEN ARE SUBJECT TO A COMPLEX PROCUREMENT PROCESS, REQUIRE COMPLIANCE
WITH VARIOUS GOVERNMENT REGULATIONS AND POLICIES AND MAY BE SUBJECT TO
UNILATERAL TERMINATION OR MODIFICATION BY THE GOVERNMENT. IN ADDITION, CHANGES
IN GOVERNMENT FUNDING AND OTHER POLICY DECISIONS COULD JEOPARDIZE OUR CONTRACTS
WITH GOVERNMENT AGENCIES.
Contracts with various government agencies accounted for
approximately 50% of our revenues in the quarter ended March 31, 1999.
Government contracts are often subject to a competitive bidding process, which
is governed by applicable federal and state statutes and regulations. The
procurement process for government contracts is complex and can be very time
consuming.
Because of our contracts with governmental agencies, we are
required to comply with various government regulations and policies. For
instance, we are required to maintain employment policies relating to equal
opportunity, and we are subject to audit by the government to confirm our
compliance with these policies. If we fail to comply with regulations which
apply to government contractors, we may face sanctions, including substantial
fines and disqualification from being awarded government contracts in the
future.
Contracts with governmental agencies are subject to the risk
of unilateral termination by the government for its convenience and reductions
in services, or modifications in contractual terms, due to changes in the
government's requirements or to budgetary restraints.
In addition, the government may not continue to fund the
projects and programs with which we work. Even if funding continues, we may not
obtain this funding. We cannot assure you that we will be able to procure
additional government contracts, that we will be able to retain our existing
government contracts or, if retained, that these contracts will be fully funded.
WE MAY BE EXPOSED TO RISKS ASSOCIATED WITH ACQUISITIONS, INCLUDING INTEGRATION
RISKS AND RISKS ASSOCIATED WITH METHODS OF FINANCING AND THE IMPACT OF
ACCOUNTING TREATMENT. COMPLETED ACQUISITIONS MAY NOT ENHANCE OUR BUSINESS.
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<PAGE> 13
A component of our strategy is to acquire network assets,
Internet-related technologies and businesses complementary to our operations.
Any future acquisitions would be accompanied by the risks commonly encountered
in acquisitions, including:
- the difficulty of assimilating the operations and
personnel of acquired companies;
- the potential disruption of our business;
- the inability of our management to maximize our financial
and strategic position by the incorporation of an acquired
technology or business into our service offerings;
- the difficulty of maintaining uniform standards, controls,
procedures and policies; and
- the potential loss of key employees of acquired
businesses, and the impairment of relationships with
employees and customers as a result of changes in
management.
We cannot assure you that any completed acquisition will
enhance our business. If we proceed with one or more significant acquisitions in
which the consideration consists of cash, a substantial portion of our available
cash, including proceeds of this offering, could be used to consummate the
acquisitions. If we were to consummate one or more acquisitions in which the
consideration consisted of stock, our stockholders could suffer significant
dilution of their interest in us. In addition, we could incur or assume
significant amounts of indebtedness in connection with acquisitions.
Acquisitions required to be accounted for under the purchase method could result
in significant goodwill and/or amortization charges for acquired technology.
WE ARE DEPENDENT ON OUR HARDWARE AND SOFTWARE SUPPLIERS TO PROVIDE US WITH THE
PRODUCTS AND SERVICES WE NEED TO SERVE OUR CUSTOMERS.
We rely on outside vendors to supply us with computer
hardware, software and networking equipment. These products are available from
only a few sources. We purchase virtually all of these products from Sun
Microsystems, Inc., Compaq Computer Corporation and Cisco Systems, Inc. We
cannot assure you that we will be able to obtain the products and services that
we need on a timely basis and at affordable prices.
We have in the past experienced delays in receiving shipments
of equipment purchased for resale. To date, these delays have not adversely
affected us, but we cannot guarantee that we will not be adversely affected by
delays in the future. We may not be able to obtain computer equipment on the
scale and at the times required by us at an affordable cost. Our suppliers may
enter into exclusive arrangements with our competitors or stop selling us their
products or services at commercially reasonable prices. If our sole or limited
source suppliers do not provide us with products or services, our business,
financial condition and results of operations may be significantly hurt.
WE OPERATE IN AN UNCERTAIN REGULATORY AND LEGAL ENVIRONMENT. NEW LAWS AND
REGULATIONS COULD HARM OUR BUSINESS.
We are not currently subject to direct regulation by the
Federal Communications Commission or any other governmental agency, other than
regulations applicable to businesses in general. However, in the future, we may
become subject to regulation by the FCC or another
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<PAGE> 14
regulatory agency. Our business could suffer depending on the extent to which
our activities are regulated or proposed to be regulated.
While there are currently few laws or regulations which
specifically regulate Internet communications, laws and regulations directly
applicable to online commerce or Internet communications are becoming more
prevalent. There is much uncertainty regarding the market-place impact of these
laws. In addition, various jurisdictions already have enacted laws covering
intellectual property, privacy, libel and taxation that could affect our
business by virtue of their impact on online commerce. Further, the growth of
the Internet, coupled with publicity regarding Internet fraud, may lead to the
enactment of more stringent consumer protection laws. If we become subject to
claims that we have violated any laws, even if we successfully defend against
these claims, our business could suffer. Moreover, new laws that impose
restrictions on our ability to follow current business practices or increase our
costs of doing business could hurt our business.
WE MAY BE SUBJECT TO LEGAL LIABILITY FOR DISTRIBUTING OR PUBLISHING CONTENT OVER
THE INTERNET, WHICH COULD BE COSTLY FOR US TO DEFEND.
It is possible that claims will be made against online
services companies and Internet access providers in connection with the nature
and content of the materials disseminated through their networks. Several
private lawsuits are pending which seek to impose liability upon online services
companies and Internet access providers as a result of the nature and content of
materials disseminated over the Internet. If any of these actions succeed, we
might be required to respond by investing substantial resources in connection
with this increased liability or by discontinuing some of our service or product
offerings. Also, any increased attention focused upon liability issues relating
to the Internet could also have a negative impact on the growth of Internet use.
Although we carry general liability insurance, it may not be adequate to
compensate us or it may not cover us in the event we become liable for
information carried on or disseminated through our networks. Any costs not
covered by insurance that we incur as a result of liability or asserted
liability for information carried on or disseminated through our networks could
hurt our business.
OUR COMPUTER SYSTEMS AND THOSE OF OUR BUSINESS PARTNERS MAY NOT BE YEAR 2000
COMPLIANT, WHICH MAY CAUSE SYSTEM FAILURES AND DISRUPTIONS OF OPERATIONS.
The risks posed by the Year 2000 issue could hurt our business
in a number of significant ways. Many currently installed computer systems and
software products accept only two digit entries in the date code field and will
not distinguish 21st century dates from 20th century dates. This may result in
system failures or miscalculations causing disruptions of operations, including
a temporary inability to process transactions, send invoices or engage in
similar normal business activities.
We are currently conducting a Year 2000 readiness review
including assessment, implementation, testing and contingency planning. After
evaluating our internally developed software, we believe that this software is
Year 2000 compliant. However, we utilize software and hardware developed by
third parties both for our network and for our internal information systems.
Therefore, we are still in the process of seeking assurances from our vendors
that their products are Year 2000 compliant. To date, we have not received any
responses from our vendors that lead us to believe that we will be unprepared
for the year 2000.
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<PAGE> 15
We expect to continue assessing and testing our internal
information technology systems during this year. However, we may experience
material unanticipated problems and costs caused by undetected errors or defects
in our systems.
In addition, Year 2000 issues may also impact other entities
with which we do business, including those responsible for maintaining telephone
and Internet communications. If these entities fail to take preventative or
corrective actions in a timely manner, the Year 2000 issue could hurt our
business in ways which are not now quantifiable.
We do not have any information regarding the Year 2000 status
of our customers, most of whom are private companies. If our customers
experience Year 2000 problems which result in business interruptions or
otherwise impact their operations, we could experience a decrease in the demand
for our services, which could hurt our business.
To date, we have not incurred and do not foresee any
significant expenses associated with our Year 2000 plan. Apart from the risk
that we may not achieve Year 2000 compliance, we believe that a loss of
revenues, which could be significant, would arise if our major customers or
providers fail to achieve Year 2000 readiness.
WE MAY NEED ADDITIONAL FUNDS WHICH, IF AVAILABLE, COULD RESULT IN DILUTION OF
YOUR SHAREHOLDINGS OR AN INCREASE IN OUR INTEREST EXPENSE. IF THESE FUNDS ARE
NOT AVAILABLE, OUR BUSINESS COULD BE HURT.
We intend to use the proceeds from our recently completed
initial public offering to fund the expansion of our sales and marketing
efforts, build our new data centers, expand our customer support services and
for working capital and general corporate purposes. While we believe that the
proceeds from this offering will be sufficient for these purposes, we may need
to raise additional funds through public or private debt or equity financings in
order to:
- take advantage of anticipated opportunities or
acquisitions of complementary assets, technologies or
businesses;
- develop new products; or
- respond to unanticipated competitive pressures.
If additional funds become necessary, additional financing may
not be available on terms favorable to us or available at all. If adequate funds
are not available or are not available on acceptable terms when needed, our
business could be hurt.
If additional funds are raised through the issuance of equity
securities, the percentage ownership of our then current stockholders may be
reduced, and the new equity securities may have rights, preferences or
privileges senior to those of the holders of our common stock. If additional
funds are raised through the issuance of debt securities, these securities would
have some rights, preferences and privileges senior to those of the holders of
our common stock, and the terms of this debt could impose restrictions on our
operations and result in significant interest expense to us.
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<PAGE> 16
SIGNIFICANT STOCKHOLDERS AND CURRENT MANAGEMENT CONTROL APPROXIMATELY 74% OF OUR
COMMON STOCK, AND THESE PARTIES MAY HAVE CONFLICTS OF INTEREST.
As of July 19, 1999, IXC Internet Services, Inc.,
NYSERNet.net, Inc. and Grumman Hill Investments, L.P. own approximately 28.0%,
23.1% and 14.0%, respectively, of our outstanding common stock. In addition, our
executive officers and directors may be deemed to beneficially own in the
aggregate approximately 74% of our outstanding common stock, including shares of
our common stock owned by IXC, NYSERNet.net and Grumman Hill that may be deemed
to be owned by some of our officers and directors as a result of their
relationships with these entities. Accordingly, IXC, NYSERNet.net, Grumman Hill
and our officers and directors, whether acting alone or together, are able to
exert considerable influence over any stockholder vote, including any vote on
the election or removal of directors and any merger, consolidation or sale of
all or substantially all of our assets, and control our management and affairs.
Such control could discourage others from initiating potential merger, takeover
or other change in control transactions. As a consequence, our business could be
hurt. IXC, Grumman Hill and NYSERNet.net each have one representative on our
board of directors. In addition, three of our directors and/or executive
officers are also directors of NYSERNet.net and NYSERNet.org, Inc., a
not-for-profit corporation that is also affiliated with NYSERNet.net. Two of our
executive officers are executive officers of NYSERNet.net and/or NYSERNet.org.
Grumman Hill has a significant equity interest in IXC. NYSERNet.net,
NYSERNet.org, IXC, Grumman Hill and our officers and directors may have
conflicts of interest among themselves, and their interests could conflict with
the interests of our other stockholders.
WE ARE DEPENDENT ON KEY PERSONNEL AND OPERATE IN AN INDUSTRY WHERE IT IS
DIFFICULT TO ATTRACT AND RETAIN QUALIFIED PERSONNEL.
We expect that we will need to hire additional personnel in
all areas of our business. The competition for personnel throughout our industry
is intense. At times, we have experienced difficulty in attracting qualified new
personnel. If we do not succeed in attracting new, qualified personnel or
retaining and motivating our current personnel, our business could suffer. We
are also dependent on the continued services of our key personnel, including our
senior management. We have entered into employment agreements with Richard
Mandelbaum, Lawrence B. Helft, James D. Luckett, Denis J. Martin, Mark A. Oros
and David A. Buckel. We have also secured key man insurance policies on the
lives of Messrs. Mandelbaum, Oros and Martin.
OUR STOCK PRICE MAY BE VOLATILE.
Pursuant to our initial public offering, we began offering our
common stock to the public on April 30, 1999, and the public market for our
common stock is not well-established. We cannot assure you that an active
trading market will develop or be sustained, nor can we provide you with any
guarantees as to how liquid that market might become. Further, we cannot
guarantee that the price of our common stock will not decline. Stock prices of
technology companies, especially Internet-related companies, have been highly
volatile. The current trading price of our common stock may not be indicative of
prices that will prevail in the trading market. Various factors could cause the
market price of our common stock to fluctuate substantially.
These factors may include:
- variations in our revenue, earnings and cash flow;
I-14
<PAGE> 17
- announcements of new service offerings, technological
innovations or price reductions by us, our competitors or
providers of alternative services; and
- changes in analysts' recommendations or projections and
general economic and market conditions.
In the past, following periods of volatility in the market
price of a company's securities, securities class action litigation has often
been instituted against the company in question. If we become subject to
securities litigation, we could incur substantial costs and experience a
diversion of management's attention and resources.
Also, a substantial number of shares of common stock issuable
upon exercise of outstanding stock options will also become available for resale
in the public market at prescribed times. In connection with the registration of
this re-offer prospectus, we registered under the Securities Act the shares of
common stock reserved for issuance under our stock option plans.
OUR STOCK PRICE MAY BE AFFECTED BY THE AVAILABILITY OF SHARES FOR FUTURE SALE.
THE FUTURE SALE OF LARGE AMOUNT OF OUR STOCK, OR THE PERCEPTION THAT THESE SALES
COULD OCCUR, COULD NEGATIVELY AFFECT OUR STOCK PRICE.
The market price of our common stock could drop as a result of
future sales of a large number of shares of common stock in the market after the
offering.
As a result of this re-offer prospectus, approximately 21.3%
of the shares of our outstanding common stock no longer qualify as "restricted
securities" under Rule 144 of the Securities Act and, under the Securities Act,
these shares may be freely offered and sold. However, stockholders who sell
shares of our common stock under this re-offer prospectus must comply with the
volume of sale limitations imposed under Rule 144(e) of the Securities Act. In
addition, holders of 94% of the shares covered by this re-offer prospectus are
parties to lock-up agreements which are further discussed in the registration
statement for our initial public offering and under which the holders of these
shares have agreed not to sell or otherwise dispose of any of their shares
during the 180-day lock-up period.
Upon effectiveness of this re-offer prospectus, 54.2% of the
shares of our common stock continue to be restricted securities. The holders of
these shares are also parties to the lock-up agreements described above and in
the registration statement for our initial public offering. The holders of these
restricted shares have registration rights with respected to these restricted
shares and with respect to any after-acquired shares and these registration
rights could be exercised after expiration of the 180-day lock-up period. Also,
under Rule 144 these share become freely tradable in the future.
Therefore, through this re-offer prospectus, as a result of
registration rights and under Rule 144, large amounts of the shares of our
common stock may become freely tradable and affect the market for our stock.
I-15
<PAGE> 18
THE COMPANY
Certain statements in this re-offer prospectus constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements, or those of the industry in which we
operate, to be materially different from any expected future results,
performance or achievements expressed or implied by these forward-looking
statements. Factors that could cause or contribute to such differences include,
but are not limited to, those discussed below, as well as those discussed in our
reports under the Securities Exchange Act of 1934 and in the registration
statement of our initial public offering of common stock.
We are a leading provider of one-stop Internet solutions to
the business mid-market and public sector, offering an extensive array of high
performance, reliable and scalable Internet technology products and services.
Our products and services can be tailored to meet our customers' requirements.
We provide the following products and services, either individually or as part
of a one-stop package:
- Internet integration and enterprise portal development,
including custom software application development, Web
site design and development and upgrading of legacy
systems;
- Web hosting, consisting of custom hosting solutions and
outsourcing, shared server, dedicated server and
co-location hosting solutions; and
- Internet connectivity, including virtual private network
solutions, network and security consulting and dedicated
Internet access.
We market our products and services to the business mid-market
and public sector institutions. We believe these businesses and institutions are
increasingly demanding one-stop solutions for Internet services due to the
difficulty and expense of managing and integrating the products and services of
multiple vendors. Our comprehensive suite of products and services enables our
customers to capitalize on the wide variety of critical data communication
opportunities made possible by the Internet.
Historically, we have generated our revenues using a small
sales force and have expanded our customer base primarily through word of mouth.
We are rapidly building our sales and marketing efforts nationally to more
aggressively pursue customers. We have targeted 20-30 metropolitan areas
throughout the United States which have high concentrations of businesses and
intend to grow our direct sales force by more than 100 over the next two years.
These targeted markets, where we plan to have a physical local presence,
coincide with the planned points of presence, or POPs, of our strategic partner,
IXC Internet Services, Inc.
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<PAGE> 19
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the
shares registered through this re-offer prospectus.
SELLING STOCKHOLDERS
The shares of our common stock to which this re-offer
prospectus relates are being registered for re-offers and resales by selling
stockholders who have acquired the relevant shares pursuant to the exercise of
options granted under our 1996 Incentive Stock Option Plan. The selling
stockholders named below may resell all, a portion or none of the relevant
shares at any time. In addition, certain unnamed stockholders who are not
affiliates of us and who hold less than 1,000 shares of our common stock issued
under our 1996 option plan may use this re-offer prospectus to sell those
shares. However, a stockholder who sells shares pursuant to this re-offer
prospectus must comply with Rule 144(e) under the Securities Act, which limits
the number of shares that may be sold by any stockholder during any three month
period.
The table below sets forth, with respect to each selling
stockholder and based upon the information available to us as of July 15, 1999,
the selling stockholders' relationship, if any, with us within the past three
years and the number of shares owned by each selling stockholder which may be
sold pursuant to this re-offer prospectus. In addition to the shares of our
common stock which are made available for resale pursuant to this re-offer
prospectus, various selling stockholders hold options to purchase additional
common stock from us. We cannot assure you that any of the selling stockholders
will sell any or all of the shares of common stock to which this re-offer
prospectus relates. In the event that any selling stockholder sell the shares
set forth below without exercising more options for shares of our common stock
or otherwise acquiring shares of our common stock, that selling stockholder will
no longer hold shares of our common stock.
<TABLE>
<CAPTION>
Number of
AppliedTheory common
stock beneficially
Relationship with owned that may be
Name AppliedTheory sold hereunder (1)
- -------------------------------- ---------------------------------------- -----------------------
<S> <C> <C>
Marc Bortniker Former employee, Director of Sales 37,500
Charles Brauch Former member of Board of Directors 49,688
David A. Buckel Chief Financial Officer, Vice 180,000
President, Assistant Secretary and
Treasurer
Linda D. Carl Manager, Internet Publishing 1,407
Jeffrey J. Condon Former employee, Director of Web 38,391
Enabling Solutions
Barbara T. DeMong Project Engineer 1,875
Patricia Foster Human Resources Manager 3,095
Angelo Gencarelli Senior Director of Accounting and 17, 438
Controller
</TABLE>
I-17
<PAGE> 20
<TABLE>
<CAPTION>
Number of
AppliedTheory common
stock beneficially
Relationship with owned that may be
Name AppliedTheory sold hereunder (1)
- -------------------------------- ---------------------------------------- -----------------------
<S> <C> <C>
David Grimes Lead Developer 15,285
Shelley A. Harrison (2) Member of Board of Directors, 187,500
Consultant
Stephen Kankus Manager, Member Service 6,000
Therese M. Kennett Contracts Specialist 1,032
James D. Luckett Senior Vice President, Business 600,000
Development
Richard Mandelbaum (3) Chairman and Chief Executive Officer 2,331,563
Denis J. Martin Senior Vice President, Software 420,188
Development
Pat McManus Lead Developer 7,500
Anne Murphy Assistant Controller 3,095
Mark A. Oros Vice President and Chief Technical 416,813
Officer
William C. Owens (4) Manager, Advanced Network Technology 1,875
John J. Pendray Member of Board of Directors 48,278
Jeffrey Renk Project Manager 4,032
Robert G. Riley Director, Network Solutions 2,348
George Sadowsky Member of Board of Directors 51,090
Edward Siciliano Vice President, Eastern US Sales 19,407
Vicki Stottlar Implementation Specialist 1,548
Paul M. White Upstate Sales Manager 2,111
John A. Wingert Vice President, Operations 10,032
Mary Fran Yafchak Network Applications Implementation 1,031
Manager
Yechiam Yemini Former Member of Board of Directors 51,090
</TABLE>
(1) This number reflects only the number of shares of common
stock owned by each selling stockholder which is available for resale hereunder.
It does not reflect options granted to, and held by selling stockholders which
may be exercised to acquire additional shares of our common stock,
(2) Includes 187,500 shares of our common stock which are held
by Harrison Enterprises, Inc. and owned by Shelley Harrison and Susanne
Harrison.
(3) Includes 750,000 shares held by Paulette Mandelbaum as
trustee for the Mandelbaum Descendants' Trust.
(4) Does not include 188 shares of our common stock held by
Jacqueline A. Owens.
I-18
<PAGE> 21
PLAN OF DISTRIBUTION
In selling their shares in reliance upon this re-offer
prospectus, the selling stockholders will be acting as principals for their own
account. We will not receive any proceeds from sales of any of those shares.
The shares to be offered through this re-offer prospectus may
be sold or transferred for value by the selling stockholders, or by pledgees,
donees, transferees or other successors in interest to the selling stockholders,
in one or more transactions on NASDAQ, in a negotiated transaction or in a
combination of these methods of sale. The sale of shares pursuant to this
re-offer prospectus shall be at market prices prevailing at the time of sale, at
prices related to the prevailing market prices or at prices otherwise
negotiated. The selling stockholders may sell the shares to or through
broker-dealers, and broker-dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the selling stockholders
and/or the purchasers of the shares for whom the broker-dealers may act as agent
and the compensation received by broker-dealers may be less than, or in excess
of, customary commissions.
The selling stockholders and any broker-dealers participating
in the distribution of the shares may be deemed to be "underwriters" within the
meaning of the Securities Act, and any commissions received by them and any
profit on the resale of the shares sold by them may be deemed to be underwriting
discounts and commissions under the Securities Act. All selling and other
expenses incurred by individual selling stockholders will be borne by them.
In addition to the shares sold hereunder, a selling
stockholder may, at the same time, sell any shares of common stock, including
the shares to be offered through this re-offer prospectus, owned by him or her
in compliance with all of the requirements of Rule 144 under the 1933 Act,
regardless of whether such shares are covered by this re-offer prospectus.
There is no assurance that any of the selling stockholders
will sell all or any portion of the shares offered hereby.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed
upon for us by Dewey Ballantine LLP, 1301 Avenue of the Americas, New York
NY 10019.
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<PAGE> 22
WHERE YOU CAN FIND MORE INFORMATION ABOUT APPLIEDTHEORY
We file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission") which relate to our business, financial condition and other
matters. You nay read and copy these reports, proxy statements and other
information at the Public Reference Room of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the Commission
located at 7 World Trade Center, Suite 1300, New York, New York 10048 and at 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. You may obtain
information on the operation of the Commission's Public Reference Room in
Washington, D.C. by calling the Commission at 1-800-SEC-0330. Copies may be
obtained from the Commission upon payment of prescribed fees. The Commission
maintains an Internet Web site that contains reports, proxy statements and other
information regarding us and other registrants that file electronically with the
Commission. The address of this Web site is http://www.sec.gov. Our reports,
proxy statements and other information may also be read and copied at the
offices of the AppliedTheory at 40 Cutter Mill Road, Suite 405, Great Neck, NY
11021. We invite you to visit our Web site at http://www.appliedtheory.com to
learn more about us.
The Commission allows us to "incorporate by reference" in this
re-offer prospectus the information contained in other documents that we file
with them, which means that we can disclose important information to you by
referring to those filed documents. The information incorporated by reference is
considered to be a part of this re-offer prospectus, and information that we
file later with the Commission will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings we make with the Commission under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended, until the selling
stockholders sell all the shares offered by this re-offer prospectus or until we
decide to terminate this offering before all shares offered by this prospectus
are sold.
a) Our prospectus, filed pursuant to Rule 424(b) of the
Securities Act, and the registration statement on Form
S-1 dated April 30, 1999 (No. 333-72133), which
includes audited financial statements for our latest
fiscal year;
b) Our quarterly report on Form 10-Q for the quarter ended
March 31, 1999 which was filed on June 11, 1999;
c) Our current report on Form 8-K filed on July 7, 1999;
and
d) The description of our common stock contained in our
registration statement on Form 8-A, filed under Section
12(g) of the Securities Exchange Act of 1934 on April
13, 1999, as amended, including any amendment or report
filed for the purpose of updating that description.
Any statement contained in this re-offer prospectus or in a
document incorporated, or deemed to be incorporated, by reference herein shall
be deemed to be modified or superseded for purposes of this registration
statement to the extent that a statement contained in this re-offer prospectus
or in any other subsequently filed document, which also is, or is deemed to be,
incorporated into this re-offer prospectus by reference modifies or supersedes
such
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<PAGE> 23
earlier statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this into
this re-offer prospectus.
We will provide without charge to each person to whom this
re-offer prospectus is delivered, upon written or oral request, a copy of any or
all of the documents incorporated by reference in this re-offer prospectus
(excluding exhibits to those documents unless the exhibits are specifically
incorporated by reference into those documents). Written or telephonic requests
should be directed to David A. Buckel, Vice President and Chief Financial
Officer, AppliedTheory Corporation, 40 Cutter Mill Road, Suite 405, Great Neck,
NY 11021, telephone (516) 466-8422.
This re-offer prospectus is a part of a registration statement
on Form S-8 that we filed with the Commission. This re-offer prospectus does not
contain all of the information set forth in the registration statement and its
exhibits. Copies of the registration statement and its exhibits may be obtained
from the Commission as indicated above upon payment of prescribed fees.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Subsection (a) of Section 145 of the General Corporation Law
of the State of Delaware (the "DGCL") empowers a corporation to indemnify any
person who was or is a party or who is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by the person in connection with
such action, suit or proceeding if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the person's conduct was
unlawful.
Subsection (b) of Section 145 of the DGCL empowers a
corporation to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of the
fact that the person acted in any of the capacities set forth above, against
expenses (including attorney's fees) actually and reasonably incurred by the
person in connection with the defense or settlement of such action or suit if
the person acted in good faith and in a manner the person reasonably believed to
be in or not opposed to the best interests of the corporation, and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
I-21
<PAGE> 24
Section 145 further provides that to the extent a present or
former director or officer of a corporation has been successful on the merits or
otherwise in the defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith; that indemnification provided for by Section 145 shall not be deemed
exclusive of any other rights to which the indemnified party may be entitled;
the indemnification provided for by Section 145 shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person; and empowers the
corporation to purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against such person and incurred by
such person in any such capacity, or arising out of such person's status as
such, whether or not the corporation would have the power to indemnify such
person against such liabilities under Section 145.
The Company provides liability insurance for its directors
and officers which provides for coverage against loss from claims made against
directors and officers in their capacity as such, including liabilities under
Securities Act of 1933. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Section 102(b)(7) of the DGCL provides that a certificate of
incorporation may contain a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such provision
shall not eliminate or limit the liability of a director (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any
transaction from which the director derived an improper personal benefit. The
Company's certificate of incorporation contains such a provision.
The Company's certificate of incorporation and bylaws provide
that the Company shall indemnify officers and directors and, to the extent
permitted by the board of directors, employees and agents of the Company, to the
full extent permitted by and in the manner permissible under the laws of the
State of Delaware. In addition, the bylaws permit the board of directors to
authorize the Company to purchase and maintain insurance against any liability
I-22
<PAGE> 25
asserted against any director, officer, employee or agent of the Company arising
out of his capacity as such.
The Company has offered to enter into an indemnification
agreement with each of its directors. The indemnification agreements provide
that the Company will indemnify the directors to the full extent permitted by,
and in the manner permissible under, the laws of the State of Delaware and by
the certificate of incorporation and the bylaws.
The employment agreements of the Company's executive officers
provide that the Company shall indemnify the officers to the fullest extent
permitted by law and by the certificate of incorporation and bylaws.
I-23
<PAGE> 26
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Risk Factors........................................................I-2
The Company........................................................I-16
Use of Proceeds....................................................I-17
Selling Stockholders...............................................I-17
Plan of Distribution...............................................I-19
Legal Matters......................................................I-19
Where you can Find More Information about AppliedTheory............I-20
Indemnification for Securities Act Liabilities.....................I-21
Available Information..............................................I-24
</TABLE>
AVAILABLE INFORMATION
We are subject to the informational requirements of the
Securities Exchange Act of 1934 and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange Commission.
Reports, proxy statements and other information which we file with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Commission's regional offices at Seven
World Trade Center, 13th Floor, New York, New York 10048 and at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can also be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the
Commission maintains a Web site, located at http:\\www.sec.gov, that contains
reports, proxy and information statements and other information regarding
issuers, including the Company, that file electronically. The Common Stock of
the Company is traded in the over-the-counter market and quoted on the Nasdaq
National Market. Reports, proxy and information statements and such other
information concerning the Company can be inspected at such offices.
I-24
<PAGE> 27
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed with the Commission are hereby
incorporated by reference:
a) Our prospectus, filed pursuant to Rule 424(b) of the
Securities Act, and the registration statement on Form S-1
dated April 30, 1999 (No. 333-72133), which includes
audited financial statements for our latest fiscal year;
b) Our quarterly report on Form 10-Q for the quarter ended
March 31, 1999 which was filed on June 11, 1999;
c) Our current report on Form 8-K filed on July 7, 1999; and
d) The description of our common stock contained in our
registration statement on Form 8-A, filed under Section
12(g) of the Securities Exchange Act of 1934 on April 13,
1999, as amended, including any amendment or report filed
for the purpose of updating that description.
All other documents subsequently filed by us pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of
a post-effective amendment which indicates that all securities offered hereunder
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference in this registration statement and to
be a part hereof from the date of filing of those documents.
Any statement contained herein or in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this registration statement to the extent that a
statement contained herein or in any other subsequently filed document, which
also is, or is deemed to be, incorporated by reference herein modifies or
supersedes such earlier statement. Any statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
registration statement.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
2
<PAGE> 28
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Subsection (a) of Section 145 of the General Corporation Law
of the State of Delaware (the "DGCL") empowers a corporation to indemnify any
person who was or is a party or who is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by the person in connection with
such action, suit or proceeding if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the person's conduct was
unlawful.
Subsection (b) of Section 145 of the DGCL empowers a
corporation to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of the
fact that the person acted in any of the capacities set forth above, against
expenses (including attorney's fees) actually and reasonably incurred by the
person in connection with the defense or settlement of such action or suit if
the person acted in good faith and in a manner the person reasonably believed to
be in or not opposed to the best interests of the corporation, and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
Section 145 further provides that to the extent a present or
former director or officer of a corporation has been successful on the merits or
otherwise in the defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith; that indemnification provided for by Section 145 shall not be deemed
exclusive of any other rights to which the indemnified party may be entitled;
the indemnification provided for by Section 145 shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person; and empowers the
corporation to purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against such person and incurred by
such person in any such capacity, or arising out of such person's status as
such, whether or not the corporation would have the power to indemnify such
person against such liabilities under Section 145.
The Company provides liability insurance for its directors and
officers which provides for coverage against loss from claims made against
directors and officers in their capacity as such, including liabilities under
Securities Act of 1933, as amended.
3
<PAGE> 29
Section 102(b)(7) of the DGCL provides that a certificate of
incorporation may contain a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such provision
shall not eliminate or limit the liability of a director (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any
transaction from which the director derived an improper personal benefit. The
Company's certificate of incorporation contains such a provision.
The Company's certificate of incorporation and bylaws provide
that the Company shall indemnify officers and directors and, to the extent
permitted by the board of directors, employees and agents of the Company, to the
full extent permitted by and in the manner permissible under the laws of the
State of Delaware. In addition, the bylaws permit the board of directors to
authorize the Company to purchase and maintain insurance against any liability
asserted against any director, officer, employee or agent of the Company arising
out of his capacity as such.
The Company and each of its directors have entered into an
indemnification agreement. The indemnification agreements provide that the
Company will indemnify the directors to the full extent permitted by, and in the
manner permissible under, the laws of the State of Delaware and by the
certificate of incorporation and the bylaws.
The employment agreements of the Company's executive officers
provide that the Company shall indemnify the officers to the fullest extent
permitted by law and by the certificate of incorporation and bylaws.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
The restricted securities to be re-offered or re-sold through
this registration statement are exempt pursuant to Section 4(2) under the
Securities Act. These restricted securities were issued as a non-public
offering of securities, pursuant to exercises of stock options issued to
employees and directors under our 1996 Incentive Stock Option Plan.
ITEM 8. EXHIBITS.
The following documents are filed as Exhibits hereto:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
4.1 1996 Incentive Stock Option Plan (incorporated by reference to
Exhibit 10.02 to the registration statement on Form S-1
(Commission File No. 333-72133) which was filed on April 12,
1999).
4.2 1999 Stock Option Plan (incorporated by reference to Exhibit
10.22 to Registration Statement on Form S-1 for AppliedTheory
Corporation (Commission File No. 333-72133) which was filed on
April 12, 1999).
</TABLE>
4
<PAGE> 30
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
4.3 1999 Employee Stock Purchase Plan (incorporated by reference
to Exhibit 10.21 to the registration statement on Form S-1 for
AppliedTheory Corporation (Commission File No. 333-72133)
which was filed on April 12, 1999).
5.1 Opinion and Consent of Dewey Ballantine LLP with respect to
the legality of the securities being registered
23.1 Consent of Dewey Ballantine LLP (contained in their opinion
filed herewith as Exhibit 5.1)
23.2 Consent of Grant Thornton, L.L.P.
24.1 Power of Attorney of directors and certain officers of the
Company (included on Signature Page)
</TABLE>
ITEM 9. UNDERTAKINGS.
a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would
not exceed that which was registered) and any deviation
from the low or high and of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
5
<PAGE> 31
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
6
<PAGE> 32
SIGNATURES
The Registrant. Pursuant to the requirements of the Securities
Act of 1933, the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-8 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Great Neck, State of New York, as of
the 19th day of July, 1999.
APPLIEDTHEORY CORPORATION
By: /s/ Richard Mandelbaum
Richard Mandelbaum
Chairman and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each of the persons
whose name appears below constitutes and appoints Richard Mandelbaum and David
A. Buckel, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to execute any and all amendments to
this registration statement, and to file the same, together with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, and such other agencies, offices and persons as may be
required by applicable law, granting unto said attorney-in-fact and agent, full
power and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each said attorney-in-fact and agent may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
Chairman of the Board, Chief Executive Officer and
/s/ Richard Mandelbaum Director July 19, 1999
- ---------------------------------- (Principal Executive Officer)
Richard Mandelbaum
/s/ David A. Buckel Vice President and Chief Financial Officer July 19, 1999
- ---------------------------------- (Principal Financial and Accounting Officer)
David A. Buckel
/s/ James Guthrie Director July 19, 1999
- ----------------------------------
James Guthrie
/s/ Shelley A. Harrison Director July 19, 1999
- ----------------------------------
Shelley A. Harrison
/s/ James T. Kelsey Director July 19, 1999
- ----------------------------------
James T. Kelsey
/s/ John J. Pendray Director July 19, 1999
- ----------------------------------
John J. Pendray
/s/ George Sadowsky Director July 19, 1999
- ----------------------------------
George Sadowsky
</TABLE>
7
<PAGE> 33
APPLIEDTHEORY CORPORATION
-----------------
EXHIBITS
for
REGISTRATION STATEMENT
ON
FORM S-8
-----------------
<PAGE> 1
Exhibit 5.1
July 19, 1999
AppliedTheory Corporation
40 Cutter Mill Road
Great Neck, NY 11021
Gentlemen:
We have acted as counsel to AppliedTheory Corporation, a
Delaware corporation (the "Company"), in connection with the preparation and
filing by the Company of a Registration Statement on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended, for the registration
of 12,255,913 shares of the Company's common stock, $.01 par value per share
(the "Shares"), that have been issued under the Company's 1996 Incentive Stock
Option Plan (the "1996 Plan") and that may be issued upon exercise of stock
options pursuant to the Company's 1999 Stock Option Plan, 1999 Employee Stock
Purchase Plan and 1996 Incentive Stock Option Plan (collectively, the "Plans").
We have examined and are familiar with originals or copies,
certified or otherwise identified to our satisfaction, of such documents,
corporate records, certificates of public officials and officers of the Company
and such other instruments as we have deemed necessary or appropriate as a basis
for the opinions expressed below.
Based on the foregoing, we are of the opinion that:
1. the issuance of the Shares upon exercise of options granted
under the Plans has been lawfully and duly authorized;
2. the Shares that have been issued and delivered under the
1996 Plan are legally issued, fully paid and nonassessable; and
3. the Shares that may be issued and delivered in accordance
with the terms of the Plans against payment therefor of the applicable exercise
price will be legally issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1
to the Registration Statement. In giving such consent, we do not thereby admit
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
DEWEY BALLANTINE LLP
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated January 29, 1999, except for Note L as to which
the date is April 12, 1999, accompanying the financial statements of
AppliedTheory Corporation appearing in the Registration Statement on Form S-1
dated April 30, 1999 which is incorporated by reference in this Registration
Statement. We consent to the incorporation by reference in this Registration
Statement of the aforementioned report.
/s/ Grant Thornton LLP
New York, New York
July 16, 1999
