Earthlink 2007 Annual Report Download - page 92

EARTHLINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED—(Continued)
consecutive business days immediately after any five consecutive trading day period in which the average trading price per $1,000 principal
amount of Notes was equal to or less than 98% of the average conversion value of the Notes during the note measurement period; (3) upon the
occurrence of specified corporate transactions; (4) if the Company has called the Notes for redemption; and (5) at any time from, and including,
October 15, 2011 to, and including, November 15, 2011 and at any time on or after November 15, 2024. The Company has the option to redeem
the Notes, in whole or in part, for cash, on or after November 15, 2011, provided that the Company has made at least ten semi-annual interest
payments. In addition, the holders may require the Company to purchase all or a portion of their Notes on each of November 15, 2011,
November 15, 2016 and November 15, 2021.
As of December 31, 2006 and 2007, the fair value of the Notes was approximately $277.3 million and $262.0 million, respectively, based
on quoted market prices.
In connection with the issuance of the Notes, the Company entered into separate convertible note hedge transactions and separate warrant
transactions with respect to the Company's common stock to reduce the potential dilution upon conversion of the Notes (collectively referred to
as the "Call Spread Transactions"). The Company purchased call options to cover approximately 28.4 million shares of the Company's common
stock, subject to adjustment in certain circumstances, which is the number of shares underlying the Notes. In addition, the Company sold
warrants permitting the purchasers to acquire up to approximately 28.4 million shares of the Company's common stock, subject to adjustment in
certain circumstances. See Note 11, "Shareholders' Equity," for more information on the Call Spread Transactions.
11. Shareholders' Equity
Shareholder Rights Plan
During 2002, the Board of Directors adopted a shareholder rights plan (the "Rights Plan"). 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.
Share Repurchases
Since the inception of the Company's share repurchase program, the Board of Directors has authorized a total of $750.0 million for the
repurchase of EarthLink's common stock, including $200.0 million that was authorized in August 2007. As of December 31, 2007, the Company
had $201.0 million available under the current authorizations. The Company may repurchase its common stock from time to time in compliance
with the SEC regulations and other legal requirements, including through the use of derivative transactions, and subject to market conditions and
other factors. The share
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