Earthlink 2010 Annual Report Download - page 42

Table of Contents
dividend to $0.05 per share. There can be no assurance that we will not further decrease or discontinue quarterly cash dividends, and if we do,
our stock price could be negatively impacted.
Our stock price may be volatile.
The trading price of our common stock may be subject to fluctuations in response to certain events and factors, such as our entry into
business combinations or other major transactions; quarterly variations in results of operations; changes in financial estimates; unstable
economic conditions; changes in recommendations or reduced coverage by securities analysts; the operating and stock price performance of
other companies that investors may deem comparable to us; and news reports relating to trends in the markets in which we operate or general
economic conditions.
In addition, the stock market in general and the market prices for Internet and communications companies have experienced volatility that
often has been unrelated to the operating performance of such companies. These broad market and industry fluctuations may adversely affect the
price of our stock, regardless of our operating performance. Additionally, volatility or a lack of positive performance in our stock price may
adversely affect our ability to retain key employees, many of whom have been granted stock incentive awards.
Our indebtedness could adversely affect our financial health and limit our ability to react to changes in our industry.
As of December 31, 2010, we had $255.8 million outstanding principal amount of EarthLink Notes. In addition, in connection with our
acquisition of ITC^DeltaCom, we assumed $325.0 million outstanding principal amount of 10.5% senior secured notes due 2016 (the
"ITC^DeltaCom Notes"). Our indebtedness could have important consequences to us. For example, it could:
•
require us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing
the availability of our cash flow to fund our business activities;
•
limit our ability to secure additional financing, if necessary;
• increase our vulnerability to general adverse economic and industry conditions; and
• limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate.
Holders of the EarthLink Notes have the right to require us to repurchase the EarthLink Notes on November 15, 2011, November 15, 2016
and November 15, 2021 or upon the occurrence of a fundamental change prior to maturity. In addition, under the terms of the indenture
governing the EarthLink Notes, our payment of cash dividends requires an adjustment to the conversion rate for the EarthLink Notes, and as a
result of the adjustment, the EarthLink Notes may be surrendered for conversion for a period of time between the declaration date and the record
date, as defined in the indenture, for the consideration provided for in the indenture. In January 2010, $3.0 million of EarthLink Notes were
surrendered for conversion. The number of holders who require us to repurchase the Notes could increase as we continue to declare dividends.
Upon conversion of the EarthLink Notes, we are required to deliver cash equal to the lesser of the aggregate principal amount of the EarthLink
Notes to be converted and the total conversion obligation. We may use cash, shares of common stock or a combination thereof, at our option, for
the remainder, if any, of the conversion obligation. We may not have sufficient funds to make the required cash payment upon conversion or to
purchase or repurchase the EarthLink Notes in cash at such time or the ability to arrange necessary financing on acceptable terms. In addition,
the requirement to pay the fundamental change repurchase price, including the related make whole premium, may discourage a change in control
of our company.
In addition, the indenture that governs the ITC^DeltaCom Notes imposes operating and financial restrictions that limit our discretion on
some business matters involving ITC^DeltaCom and its
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