Earthlink 2003 Annual Report Download - page 57

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9. Common Stock
Shareholder Rights Plan
On August 6, 2002, the Board of Directors adopted a shareholder rights plan (the "Rights Plan"). On August 6, 2002, in connection with
the Rights Plan, the Board of Directors also declared a dividend of one right for each outstanding share of EarthLink's common stock for
stockholders of record at the close of business on August 5, 2002.
Each right entitles the holder to purchase one one-thousandth (
1
/
1000
) of a share (a "Unit") of EarthLink's Series D Junior Preferred
Stock at a price of $60.00 per Unit upon certain events. Generally, in the event a person or entity acquires, or initiates a tender offer to acquire,
at least 15% of EarthLink's then outstanding common stock, the rights will become exercisable for common stock having a value equal to two
times the exercise price of the right, or effectively at one-half of EarthLink's then-current stock price. The rights are redeemable under certain
circumstances at $0.01 per right and will expire, unless earlier redeemed, on August 6, 2012.
Common Stock Issuances for Other Than Cash
In March 2001, EarthLink agreed to issue 250,000 shares of its common stock to acquire software licenses and development services from
certain individuals over a period of nine months. Under the agreement, the shares were issued as certain milestones were met. During the years
ended December 31, 2001 and 2002, the Company issued 140,000 shares and 110,000 shares of its common stock, respectively, valued at
$1.9 million and $1.3 million, respectively, based on the fair value of EarthLink's common stock on the dates of issuance.
Share Repurchases
On August 6, 2002, the Board of Directors approved a share repurchase program (the "Repurchase Program") and authorized an initial
repurchase of up to $25.0 million of the Company's common stock. During the year ended December 31, 2003, the Board of Directors
increased the amount authorized to repurchase the Company's common stock by $125.0 million to a total of $150.0 million. The Company may
repurchase its common stock from time to time in compliance with the Securities and Exchange Commission's ("SEC") regulations and other
legal requirements, and subject to market conditions and other factors. The Repurchase Program does not require the Company to acquire any
specific number of shares and may be terminated at any time. During the years ended December 31, 2002 and 2003, the Company repurchased
2.6 million and 5.8 million shares, respectively, of its common stock for an aggregate purchase price of $14.2 million and $37.1 million,
respectively, pursuant to the Repurchase Program, which have been recorded as treasury stock in the accompanying Consolidated Balance
Sheets as of December 31, 2002 and 2003.
In April 2003, the Company repurchased 9.0 million shares of its common stock from Sprint Corporation ("Sprint") for $53.1 million,
which was executed pursuant to a separate authorization by the Board of Directors.
In October 2003, the Company filed a registration statement with the SEC with respect to a rescission offer for approximately 0.2 million
unregistered shares of EarthLink common stock in the EarthLink, Inc. 401(k) Plan. The estimated maximum amount the Company would be
subject to pay is approximately $2.8 million. The rescission offer commenced subsequent to December 31, 2003 and is expected to close
during the second quarter of 2004. Amounts paid pursuant to the rescission offer will be recorded as
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treasury stock based on the fair value of common stock acquired on the date the rescission offer expires and as expense to the extent that
amounts paid exceed amounts recorded as treasury stock.
10. Convertible Preferred Stock
All issued and outstanding shares of Series A and Series B convertible preferred stock were held by Sprint. Each share of Series A and
Accrued outsourced customer support
5,844
7,780
Subscriber base and fixed asset purchases
13,443
4,902
Other
23,480
23,795
$
162,537
$
115,484