Earthlink 2001 Annual Report Download - page 47

F-20
7. Debt
Convertible Notes
In March 1999, MindSpring filed a universal shelf registration statement with the Securities and Exchange Commission for the public
offering from time to time of up to $800 million of debt and equity securities. In April 1999, MindSpring sold $180.0 million aggregate
principal amount of 5% Convertible Subordinated Notes due 2006, raising net proceeds of approximately $174.1 million. The notes were
convertible into shares of the common stock of MindSpring at any time prior to their maturity or their redemption by the Company at a rate of
16 shares per each $1,000 principal amount of notes, or $62.50 per share, subject to adjustment in certain circumstances.
Upon completion of the merger of EarthLink Network and MindSpring, EarthLink adopted the indentures and the notes became
convertible into shares of EarthLink common stock. Completion of the merger constituted a "change in control" of MindSpring under the
indentures. Thus, each holder of notes had the right to demand payment equal to 100% of the principal amount of the notes, plus accrued
interest. Accordingly, in February 2000, the Company offered to purchase for cash all of its 5% Convertible Subordinated Notes. On March 31,
2000, approximately $179.1 million of the $180.0 million aggregate principal amount of the notes outstanding were tendered to the Company
for repurchase. The total payment of $183.4 million including interest was paid in April 2001. The untendered notes will continue to be subject
to the Indenture Agreement. The repurchase resulted in an extraordinary loss of $5.3 million, which was recorded as merger related costs.
8. Common Stock Issued
Follow
-on Offerings
In January 1999, EarthLink Network completed a follow on public offering of 3.9 million shares of its common stock at $45.59 per share.
The offering consisted of 3.7 million shares and an underwriter's over-allotment of 160,000 shares exercised in February 1999. Net proceeds to
EarthLink Network were approximately $170 million.
In April 1999, MindSpring completed a follow on public offering of $5.5 million shares of its common stock. Net proceeds were
approximately $263.5 million.
Shares sold Under Preemptive Rights Agreements
In conjunction with the January 1999 offering by EarthLink Network, Sprint exercised its top-up rights to maintain its existing ownership
level in EarthLink Network of approximately 27%, of which 10% is voting common stock. Accordingly, Sprint purchased approximately
1.2 million shares of which 310,000 were common stock and 932,000 were Series B convertible preferred stock. Proceeds from the sale of
shares to Sprint were $54.1 million.
In February 1999, Sprint exercised its top-up rights to maintain its ownership in EarthLink Network after the exercise of the underwriter's
over-
allotment granted in connection with the aforementioned follow on public offering. Accordingly, Sprint purchased 62,000 shares of which
15,000 were common stock and 47,000 were Series B convertible preferred stock. Series B convertible preferred stock has the same rights and
privileges as Series A convertible preferred stock, as described in note 9, except that each share is convertible into one share of EarthLink
Network common stock. Proceeds from the sale of stock to Sprint were $2.7 million.
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In February 2000, Sprint exercised its top-up rights to maintain its ownership in the Company after the purchase of shares by Apple
Computer Inc. Accordingly, Sprint purchased approximately 2.7 million shares of which 682,000 were common stock and 2.0 million were
Series B convertible preferred stock. Proceeds from the sale of common and preferred stock to Sprint were approximately $76.9 million.
In May 2000, Sprint exercised its top-up rights to maintain its level of ownership in the Company after the merger of EarthLink Network
and MindSpring. Accordingly, Sprint purchased approximately 26.0 million shares consisting of approximately 6.0 million shares of common
Accrued severance
4,443
2,043
Liabilities under non
-
cancelable leases
—
2,000
Accrued property tax
7,109
1,313
Other
16,972
19,963
$
136,150
$
166,528