Earthlink 2007 Annual Report Download - page 188

HELIO, INC. and HELIO LLC
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
10. Capitalization (Continued)
In November 2007, the Partners entered into the Second Amended and Restated Limited Liability Company Agreement, whereby SKT
agreed to convert certain secured promissory notes (see Note 9) in the aggregate of $70.0 million plus $0.5 million of accrued interest in
exchange for 23,492,592 Preferred Membership Units at price of $3.00 per unit (the "SKT Required Contribution"); and, SKT may also
contribute up to an additional $200.0 million prior to December 31, 2009 (the "SKT Contribution Right"). The SKT Contribution Right is
subject to certain terms, including but not limited to (i) the cancellation of certain Preferred Membership Units held by EarthLink, whereby the
payment of the SKT Required Contribution and a written commitment made by SKT to the Operating Company and EarthLink on or before
December 31, 2007 to contribute an additional $80.0 million (of the $200.0 million SKT Contribution Right) by June 30, 2008 will result in the
cancellation of 9,090,909 Preferred Membership Units outstanding and issued to EarthLink (the "Trigger Event"), and (ii) the Operating
Company may not issue Preferred Membership Units at a price per share less than $3.00 per unit, unless SKT and EarthLink agree in writing, or
an independent valuation of the Operating Company determines the fair value of the Preferred Membership Units is less than $3.00 per unit (as
defined), or an unaffiliated third party, together with SKT, invests 50% or more of the aggregate SKT contribution. In December 2007, SKT
contributed an additional $30.0 million in cash in exchange for 10,000,000 Preferred Membership Units at $3.00 per unit, and provided written
notice to the Company and EarthLink, effectuating the Trigger Event. As a result of the Trigger Event, EarthLink cancelled and forfeited
9,090,909 of its Preferred Membership Units (book value of $40.0 million).
As of December 31, 2007, the following Membership Units were issued and outstanding by the Operating Company (in thousands, except
for Membership Units):
During the period ended December 31, 2006 and 2007, HELIO, Inc. reinvested approximately $9.1 million and $0.4 million, respectively,
into the Operating Company for an additional 5,337,900 and 223,372, respectively, of Convertible Common Membership Units, of which
approximately $1.4 million or 794,375 convertible common units issuance pertained to certain non-
cash services by SKT exchanged for stock by
Helio, Inc. (see Note 17).
Upon any equity investment made into the Company, such equity investment is immediately reinvested into the Operating Company. The
2006 Company investments were immediately reinvested into the Operating Company and as such, an additional 4,680,400 shares of
Convertible Common Membership Units were issued by the Operating Company for an aggregate amount of $8.0 million. $0.1 million was
invested in the Company during 2007, which was immediately reinvested into the Operating Company and as such, an additional 78,997 shares
of Convertible Common Membership
24
Member
Cash Contributions
Conversion of
Secured
Promissory
Notes and
Accrued
Interest
Non
-
cash
Contribution (including
EarthLink Cancelled
Shares as a result of the
Trigger Event)
Membership
Units Issued and
Outstanding
(including
EarthLink
Cancelled Shares
as a result of the
Trigger Event)
Membership Units
SKT
$
250,000
$
70,478
$
—
83,492,592
Convertible Preferred
Units
EarthLink
180,000
— —
40,909,091
Convertible Preferred
Units
HELIO, Inc.
8,152
—
1,374
5,561,274
Convertible Common
Units
Total
$
438,152
$
70,478
$
1,374
129,962,957