Earthlink 2000 Annual Report Download - page 62

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EARTHLINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. OTHER RELATED PARTY TRANSACTIONS (CONTINUED) In connection with its multi-year partnership with Apple, EarthLink paid
Apple approximately nil, $3.6 million and $34.3 million during 1998, 1999 and 2000. The amount due to Apple under the multi-year
partnership was $3.5 million at December 31, 2000.
Under the network services agreement that was implemented in connection with the Sprint alliance, EarthLink paid Sprint approximately $3.2
million, $29.8 million and $53.6 million during 1998, 1999 and 2000, respectively. The aggregate amount due to Sprint under the network
services agreement was $5.0 million at December 31, 2000.
16. SUBSEQUENT EVENTS (UNAUDITED)
In February of 2001, the Company renegotiated its commercial and governance arrangements with Sprint Corporation. The Company continues
to provide dial-up Internet, web hosting and other Internet services to Sprint for resell to their customers. However, the Company's exclusive
marketing and co-branding arrangements with Sprint have been terminated. Accordingly, management plans on taking a non-cash charge of
approximately $11.3 million to write off unamortized assets related to the marketing and co-branding agreements with Sprint. Sprint is free to
pursue relationships with other Internet providers and EarthLink is free to enter into commercial arrangements with other telecommunications
services providers. EarthLink released Sprint from its minimum commitment to provide EarthLink with 150,000 new subscribers per year and
Sprint's absolute right to acquire EarthLink commencing in September of 2001 has been terminated. Sprint may maintain its percentage of
EarthLink's voting equity by purchasing shares on the market or from third parties in the event that we dilute Sprint's interest by issuing voting
securities in a financing, in a transaction or by the exercise of options or warrants or the conversion of convertible equities into voting stock.
However, Sprint will have no other rights to acquire EarthLink securities. Sprint will retain the ability to make a counteroffer to buy all, but not
less than all, of the Company's equity in the event that the Company proceeds forward for a third-party to acquire controlling interest in
EarthLink. In that case, EarthLink's Board is not contractually obligated to accept Sprint's counter offer, but will analyze and weigh it in
exercising their fiduciary duties to stockholders.
Sprint has relinquished its right to appoint two members to the EarthLink Board of Directors. Messrs. Esrey and Lauer, Sprint's prior
representatives on our board, have resigned from their positions on our board. This new governance arrangement terminates in the event that
EarthLink consummates a change in control transaction with a third party, that Sprint acquires all of the equity of EarthLink pursuant to a
counter offer that our board of directors accepts, or Sprint's ownership of our voting equity falls below 10% of our total voting equity.
17. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table sets forth certain unaudited quarterly consolidated financial data for the eight quarters ended December 31, 2000. In the
opinion of the Company's management, this unaudited information has been prepared on the same basis as the audited consolidated financial
statements contained herein and includes all adjustments (consisting of normal recurring adjustments) necessary to present fairly the
information set forth therein when read in conjunction with the consolidated financial
F
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