<PAGE> 1
PROSPECTUS
2,000,000 SHARES
[MINDSPRING LOGO]
COMMON STOCK
------------------------
MindSpring Enterprises, Inc. is a leading national Internet service
provider focused on serving individuals and small businesses. We are also a
leading provider of Web hosting services, a complement to our Internet access
business and one of the fastest growing segments of the Internet marketplace.
We are offering and selling 2,000,000 shares of common stock with this
prospectus. The Company's shares are listed for trading on The Nasdaq Stock
Market's National Market under the symbol "MSPG." On December 14, 1998, the last
reported sale price of our common stock on the Nasdaq National Market was
$58.875.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT YOU SHOULD CONSIDER BEFORE YOU INVEST IN THE COMMON STOCK BEING SOLD WITH
THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
PER SHARE TOTAL
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Public Price................................................ $57.000 $114,000,000
Underwriting Discounts...................................... $ 2.565 $ 5,130,000
Proceeds to the Company..................................... $54.435 $108,870,000
- ----------------------------------------------------------------------------------------
</TABLE>
The underwriters may purchase up to an additional 300,000 shares of common
stock from the Company at the public price less underwriting discounts solely to
cover over-allotments.
The underwriters are severally underwriting the shares being offered. The
underwriters are offering the shares when, as and if delivered to and accepted
by them, subject to various prior conditions, including their right to reject
orders in whole or in part. The underwriters expect to deliver the shares
against payment in New York, New York on December 17, 1998.
ING BARING FURMAN SELZ LLC
DONALDSON, LUFKIN & JENRETTE
J.C. BRADFORD & CO.
WHEAT FIRST UNION
JEFFERIES & COMPANY, INC.
------------------------
THIS PROSPECTUS IS DATED DECEMBER 14, 1998.
<PAGE> 2
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 (the "Exchange Act"). You may read and copy any of the
information we file with the SEC at the SEC's public reference rooms at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at 7 World Trade Center,
13th Floor, New York, New York 10048 and at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. You can also obtain copies of filed
documents by mail from the Public Reference Section of the SEC at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. You may call the
SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms.
We file information electronically with the SEC. Our SEC filings also are
available from the SEC's Internet site at http://www.sec.gov, which contains
reports, proxy and information statements, and other information regarding
issuers that file electronically.
Our common stock is quoted on the Nasdaq National Market under the symbol
"MSPG," and reports, proxy statements and other information concerning
MindSpring can also be inspected at the offices of Nasdaq Operations, 1735 K
Street, N.W., Washington, D.C. 20006.
CERTAIN INFORMATION ABOUT THIS PROSPECTUS
We have filed a Registration Statement on Form S-3 with the SEC under the
Securities Act of 1933 (the "Securities Act") covering the common stock being
offered by means of this prospectus. As permitted by SEC rules, this prospectus
omits certain information that is included in the Registration Statement. For
further information about us and our common stock, you should refer to the
Registration Statement and its exhibits. Since the prospectus may not contain
all the information that you may find important, you should review the full text
of these documents. If we have filed a contract, agreement or other document as
an exhibit to the Registration Statement, you should read the exhibit for a more
complete understanding of the document or matter involved. Each statement in
this prospectus (including statements incorporated by reference as discussed
below) regarding a contract, agreement or other document is qualified in its
entirety by reference to the actual document.
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to another document we have filed separately with the SEC. The
information incorporated by reference is deemed to be part of this prospectus,
except for any information superseded by information contained directly in the
prospectus. This prospectus incorporates by reference the documents set forth
below that we have previously filed with the SEC under the Exchange Act, and any
future filings we make with the SEC under Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act, until the offering of securities covered by this prospectus is
completed. These documents contain important information about us and our
financial condition.
- Our Annual Report on Form 10-K for our fiscal year ended December 31,
1997, filed with the SEC on March 30, 1998.
- Our amendments to our Annual Report on Form 10-K/A, filed with the SEC on
April 30, 1998 and May 15, 1998.
- Our Current Reports on Form 8-K, filed with the SEC on June 25, 1998,
September 15, 1998, November 13, 1998 and December 7, 1998.
- Our amendments on Form 8-K/A, filed with the SEC on December 11, 1998, to
our Current Reports on Form 8-K filed with the SEC on November 13, 1998
and December 7, 1998.
- Our Quarterly Reports on Form 10-Q for the quarterly periods ended March
31, 1998, June 30, 1998 and September 30, 1998, filed with the SEC on May
1, 1998, August 13, 1998 and November 16, 1998, respectively.
- Our amendment to our Quarterly Report on Form 10-Q/A for the quarterly
period ended June 30, 1998, filed with the SEC on December 7, 1998.
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- The description of our common stock contained in our registration
statement on Form 8-A filed with the SEC under Section 12 of the Exchange
Act on March 1, 1996, including any amendments or reports filed for the
purpose of updating the description.
We will provide a copy of the information we incorporate by reference, at
no cost, to each person, including any beneficial owner of our common stock, to
whom this prospectus is delivered. To request a copy of any or all of this
information, you should contact us at the following address and telephone
number:
Investor Relations
MindSpring Enterprises, Inc.
1430 West Peachtree Street, Suite 400
Atlanta, Georgia 30309
(telephone: (404) 815-0770)
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the information incorporated by reference in it, as
well as any prospectus supplement that accompanies it, include "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. We intend the forward-looking statements to be covered
by the safe harbor provisions for forward-looking statements in these sections.
All statements regarding our expected financial position and operating results,
our business strategy and our financing plans are forward-looking statements.
These statements can sometimes be identified by our use of forward-looking words
such as "may," "will," "anticipate," "estimate," "expect," or "intend." We
cannot promise that our expectations in such forward-looking statements will
turn out to be correct. Our actual results could be materially different from
and worse than our expectations. Important factors that could cause our actual
results to be materially different from our expectations include those discussed
in this prospectus under the caption "Risk Factors."
3
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PROSPECTUS SUMMARY
This summary highlights certain information contained elsewhere in this
prospectus. This summary is not complete and does not contain all of the
information that you should consider before investing in our common stock. You
should read the entire prospectus carefully, especially the risks of investing
in our common stock discussed under "Risk Factors." Unless otherwise stated in
this prospectus, all of the information in this prospectus assumes that the
underwriters' over-allotment option is not exercised. All share data in this
prospectus reflect a 3-for-1 stock split of our common stock effected on July
24, 1998.
THE COMPANY
OUR BUSINESS
MindSpring is a leading national Internet service provider, or ISP. We
focus on serving individuals and small businesses. Our subscribers use their
MindSpring accounts to, among other things, communicate, retrieve information,
and publish information on the Internet. Our primary service offerings are
dial-up Internet access and Web hosting, both of which we offer in various price
and usage plans designed to meet the needs of our subscribers. Web hosting
complements our Internet access business and is one of the fastest growing
segments of the Internet marketplace. In addition to dial-up Internet access and
Web hosting, we offer other value-added services, such as Web page design.
We offer our subscribers:
- user-friendly software, containing a complete set of the most popular
Internet applications including electronic mail, World Wide Web access,
Network News, File Transfer Protocol and Internet Relay Chat;
- highly responsive customer service and technical support, which is
available 24 hours a day, seven days a week; and
- a reliable network that enables subscribers in 45 U.S. states and the
District of Columbia to access the Internet via a local telephone call.
Our nationwide network consists of Company-owned points of presence
("POPs") and POPs that are owned by other companies with which we have service
agreements. Through these service agreements, we have the flexibility to offer
Internet access in a particular market through a Company-owned POP, a third-
party network provider's POP or a combination of the two. As part of our efforts
to control quality and cost, we typically seek to increase the number of
Company-owned POPs in markets where we have higher numbers of subscribers.
Our principal executive offices are located at 1430 West Peachtree Street,
Suite 400, Atlanta, Georgia 30309, and our telephone number at that address is
(404) 815-0770. We also maintain an Internet site on the World Wide Web at
www.mindspring.com. Information contained at our website is not, and should not
be deemed to be, a part of this prospectus.
OUR GROWTH HISTORY AND PROFITABILITY
MindSpring has grown rapidly by:
- providing superior customer service and technical support;
- expanding marketing and distribution activities;
- making strategic acquisitions; and
- creating additional revenue streams by offering value-added services such
as Web hosting that build on our basic operating capabilities and
services.
We have increased our subscriber base from approximately 12,000 subscribers
at December 31, 1995 to approximately 455,000 subscribers at September 30, 1998.
This number does not include subscriber
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accounts acquired from Spry, Inc. in October 1998. For a description of our
acquisition of certain assets of Spry, Inc., see "-- Certain Recent
Developments -- Sprynet Acquisition." As of September 30, 1998, approximately
18,000 of these subscribers were Web hosting subscribers. In addition, we have
rapidly increased revenues and have achieved profitability ahead of other
national ISPs. We believe that providing superior service and support to our
subscribers has contributed to our achieving significant market penetration in a
number of our target markets. We also believe that high geographic
concentrations of satisfied subscribers in a particular market reduces the costs
of adding new subscribers in that market relative to revenues. This tends to
result in higher margins and greater profitability in these markets. In the
first three quarters of 1998, we had revenues of approximately $75 million, net
income of approximately $6.9 million and earnings per share of $0.27.
OUR TARGET SUBSCRIBER GROUP AND MARKET DEMAND
The demand for Internet access and value-added services is increasing
rapidly. According to International Data Corporation ("IDC"), total United
States ISP revenues are projected to grow from approximately $4.6 billion in
1997 to approximately $18.3 billion in 2000. In addition, IDC estimates that the
number of Internet users in the United States who access the World Wide Web
reached approximately 29.2 million in 1997, and estimates this number will grow
to approximately 72.1 million in 2000.
Trends contributing to this growth in demand include:
- heightened consumer awareness of the Internet;
- the increasing number of people who have computers with modems; and
- the expanding diversity of information, entertainment and commercial
offerings available on the Internet and the World Wide Web.
Despite the Internet's rapid growth, use of the Internet by individuals and
small businesses remains low and is expected to grow substantially from current
levels. In addition, small businesses increasingly rely on full service ISPs to
maintain and manage their Web presence. IDC estimates that total United States
Web hosting revenues will grow from approximately $247 million in 1997 to
approximately $3.6 billion by 2000. Consequently, we believe that there is a
growing and unsatisfied demand among individuals and small businesses for
high-quality Internet access and Web hosting services.
OUR STRATEGY
Our objective is to strengthen MindSpring's position as a leading national
provider of high quality Internet access, Web hosting and other value-added
services to individuals and small businesses. We believe that to achieve this
objective we need to:
- Continue to provide superior customer service and technical support.
Because the Internet is an evolving and growing medium, the number of
potential problems subscribers may face is enormous. We believe that, as new
applications designed for the Internet proliferate, even sophisticated
subscribers periodically encounter problems. We focus on providing high levels
of customer service and technical support in an effort to achieve maximum levels
of customer satisfaction even as Internet applications become more varied and
complex. As a result, we have low churn rates, and customer referrals continue
to contribute significantly to the growth of our subscriber base. In addition,
we have received numerous customer service awards, including being named ISP
with the best customer support by PC World magazine in December 1997. In July
1998, PC World magazine presented us with its "World Class Award for Best ISP."
We also won the 1998 Most Valuable Product Award as the Best National Internet
Service Provider as awarded by PC Computing magazine in November 1998.
To ensure a high level of customer service and technical support, one of
our priorities is to maintain a sufficient number of qualified service and
support personnel. Over half of our employees are engaged in
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this capacity. Our technical support staff is highly trained in the use of our
starter-kit software and the Internet. Technical support is available to
customers 24 hours a day, seven days a week.
- Efficiently expand our national network.
We intend to continue our efforts to efficiently increase the capacity and
geographic reach of our network. This will allow us to support increasing
numbers of subscribers and usage by subscribers and enter new markets. Our
network strategy combines owning POPs in mature markets where we can cost-
effectively deliver high quality access services and leasing POPs and capacity
from third-party network service providers in new or developing markets. We
continuously evaluate the economic and strategic benefits of building our own
POPs versus leasing POPs from third parties in each of our markets. This hybrid
strategy allows us the flexibility to modify our network cost structure on a
market-by-market basis. As of November 30, 1998, after taking into account our
acquisition of subscribers from Spry, Inc., approximately 63% of our subscribers
access our network through a Company-owned POP.
- Expand targeted marketing and distribution activities.
We plan to continue to expand our targeted marketing and distribution
efforts in markets where there is the opportunity for substantial market
penetration. We believe that high geographic concentrations of subscribers
reduce subscriber acquisition costs, which in turn contributes to higher
margins. We intend to continue to encourage our existing subscribers to refer
new customers to us. We also plan to increase our print publication, radio and
direct mail advertising in certain targeted metropolitan areas throughout the
United States. In addition, we will continue to pursue nationwide strategic
alliances and retail opportunities to broaden our distribution channels. We
currently have such relationships with, among others, Microsoft Corporation, The
3Com Corporation and Ziff-Davis, Inc.
- Increase revenues from value-added services.
We intend to continue to take advantage of our current sales, marketing and
network capabilities to create additional revenue opportunities from value-added
services such as Web hosting and Web page design.
Value-added services are among the fastest growing segments of the Internet
marketplace and are projected to grow in the United States from approximately
$352 million in 1997 to approximately $7 billion by the year 2000. We began
offering Web hosting in 1995. As of September 30, 1998, we had approximately
18,000 Web hosting customers. Business Services revenues, which consist
predominantly of Web hosting, represent approximately 14% of our revenues. We
intend to continue to aggressively market value-added services in order to
increase our participation in these higher end and faster growing segments of
the Internet marketplace.
- Engage in selected acquisitions.
Since early 1996, we have supplemented our expansion efforts through
selected acquisitions of businesses and subscriber accounts. As we continue to
expand, we may acquire additional subscriber accounts and complementary
businesses. According to industry sources, the ISP market is undergoing
consolidation as performance, reliability, and support expectations prevent
smaller ISPs from increasing the scope of their operations to remain competitive
on a national or regional basis. We intend to evaluate acquisition opportunities
as they become available.
CERTAIN RECENT DEVELOPMENTS
- Sprynet Acquisition
In October 1998, we purchased substantially all of Spry, Inc.'s subscriber
accounts and certain other assets used in connection with Spry's consumer
dial-up Internet access business. Spry is a wholly owned subsidiary of America
Online, Inc. ("AOL"). We acquired Spry's subscriber base of individual Internet
access customers in the United States and Canada, as well as various assets used
in serving those customers, including a customer support facility and a network
operations facility in Seattle, Washington
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and all rights to the "Sprynet" name. We expect the final purchase price to be
between $35 million and $45 million. The final price, which will be determined
in the first quarter of 1999, is primarily a function of the number of acquired
subscribers that remain MindSpring customers for a specified period of time. To
date, we have paid AOL approximately $25 million for these assets.
- Changes in our Management
In October 1998, Michael G. Misikoff, our Executive Vice President and
Chief Financial Officer, announced he will be resigning, effective as of a date
in the first quarter of 1999 to be determined. Mr. Misikoff also serves as
Treasurer and is a director of MindSpring. He is currently participating in the
search for his replacement.
In late November 1998, we hired Samuel R. DeSimone, Jr., to serve as
General Counsel, Executive Vice President and Secretary of MindSpring. Mr.
DeSimone is a graduate of New York University School of Law and a Phi Beta Kappa
graduate of Amherst College. He was recently Vice President of Corporate
Development with Merix Corporation of Forest Grove, Oregon.
In early December 1998, we hired Dave Baker as our Vice President for Legal
and Regulatory Affairs. Mr. Baker joins MindSpring from the Georgia Public
Service Commission, where he was Chairman in 1996 and most recently was a
Commissioner.
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THE OFFERING
Securities offered......... 2,000,000 shares of our common stock
Over-allotment option...... Up to 300,000 shares. If the over-allotment
option is exercised in full by the underwriters
at a public price per share of $57.00, the total
public price, underwriting discounts, and
proceeds to the Company will be $131.1 million,
$5.9 million and $125.2 million, respectively.
Shares to be outstanding
after the offering......... 27,974,103 shares, based on the number of shares
of common stock outstanding on December 3, 1998.
This does not include an aggregate of 1,855,262
shares issuable pursuant to stock options granted
as of December 3, 1998. This figure also assumes
that the underwriters do not exercise their
over-allotment option.
Use of proceeds............ For use in expansion of our business, as
additional working capital for general corporate
purposes and for possible strategic acquisitions
of subscriber accounts and complementary
businesses or technologies.
Nasdaq National Market
Symbol..................... MSPG
RISK FACTORS............... YOU SHOULD READ THE "RISK FACTORS" SECTION,
BEGINNING ON PAGE 10, AS WELL AS THE OTHER
CAUTIONARY STATEMENTS THROUGHOUT THE ENTIRE
PROSPECTUS, TO ENSURE YOU UNDERSTAND THE RISKS
ASSOCIATED WITH AN INVESTMENT IN OUR COMMON
STOCK.
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SUMMARY FINANCIAL AND OPERATING DATA
You should read the following summary historical financial and operating
data together with the section entitled "Use of Proceeds" included elsewhere in
this prospectus and our financial statements and notes thereto and other
financial and operating data incorporated by reference into this prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
FISCAL YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
---------------------------------------- -------------------
INCEPTION
PERIOD (1) 1995 1996 1997 1997 1998 (2)
---------- ---- ---- ---- ---- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Access................................... $ 70 $ 1,455 $13,420 $40,925 $27,267 $61,516
Business services........................ -- 260 2,286 7,711 5,249 10,344
Subscriber start-up fees................. 33 512 2,426 3,920 2,832 3,279
----- ------- ------- ------- ------- -------
Total revenues....................... 103 2,227 18,132 52,556 35,348 75,139
Cost and expenses:
Cost of revenues -- recurring............ 37 627 6,332 15,203 10,642 20,333
Cost of subscriber start-up fees......... 15 339 1,876 1,619 1,100 1,834
Selling, general and administrative...... 121 2,230 14,161 30,784 21,836 37,240
Depreciation and amortization............ 5 265 3,285 8,695 6,161 9,244
----- ------- ------- ------- ------- -------
Total operating expenses............. 178 3,461 25,654 56,301 39,739 68,651
----- ------- ------- ------- ------- -------
Operating gain (loss)........................ (75) (1,234) (7,522) (3,745) (4,391) 6,488
Interest income (expense), net............... -- (725) (90) (338) (190) 590
----- ------- ------- ------- ------- -------
Income before income taxes................... (75) (1,959) (7,612) (4,083) (4,581) 7,078
Income tax provision......................... -- -- -- -- -- (212)
----- ------- ------- ------- ------- -------
Net income (loss)............................ $(75) $(1,959) $(7,612) $(4,083) $(4,581) $ 6,866
===== ======= ======= ======= ======= =======
Diluted earnings (loss) per share............ $ (0.20) $ (0.48) $ (0.18) $ (0.20) $ 0.27
Pro forma diluted earnings per share (3)..... 0.24
Diluted weighted average common shares
outstanding................................ 9,930 15,759 22,542 22,525 25,446
OTHER OPERATING DATA:
Approximate number of subscribers at end of
period..................................... 1,000 12,000 122,000 278,000 224,000 455,000
Approximate number of employees at end of
period..................................... 8 95 321 502 465 732
Cash flow (used in) from operations.......... (33) (70) (2,005) 11,354 4,235 18,318
EBITDA (4)................................... $(70) $ (969) $(4,237) $ 4,950 $ 1,170 $15,732
EBITDA margin (4)............................ (68)% (44)% (23)% 9% 5% 21%
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
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HISTORICAL AS ADJUSTED (5)
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BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 62,498 $170,868
Working capital......................................... 46,895 155,265
Total assets............................................ 100,015 208,385
Total debt, including current maturities................ 6,385 6,385
Total stockholders' equity.............................. 78,363 186,733
</TABLE>
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(1) The Inception Period is the period from February 24, 1994 (inception) to
December 31, 1994.
(2) Does not take into account our acquisition of certain assets of Spry, Inc.
in October 1998.
(3) Adjusted to reflect the sale by the Company of (i) 3,000,000 shares of
common stock on June 3, 1998 at a price to the public of $17.67 per share
and (ii) 2,000,000 shares of common stock offered with this prospectus at a
price to the public of $57.00 per share, as if all of these shares were
outstanding for the entire nine-month period ended September 30, 1998. This
number does not take into account our acquisition of certain assets of Spry,
Inc. in October 1998.
(4) EBITDA represents operating gain (loss) plus depreciation and amortization.
EBITDA is provided because it is a measure commonly used by investors to
analyze and compare companies on the basis of operating performance. EBITDA
is not a measurement of financial performance under generally accepted
accounting principles and should not be construed as a substitute for
operating income, net income or cash flows from operating activities for
purposes of analyzing the Company's operating performance, financial
position and cash flows. EBITDA is not necessarily comparable with similarly
titled measures for other companies.
(5) Adjusted to reflect the sale of 2,000,000 shares of common stock offered
with this prospectus at a price to the public of $57.00 per share. Assumes
an increase to working capital equal to the aggregate estimated net proceeds
of this offering. See "Use of Proceeds" for a description of our plans for
application of the net proceeds of this offering. The as adjusted data do
not take into account our acquisition of certain assets of Spry, Inc., which
would decrease cash and cash equivalents and working capital by
approximately $25 million.
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RISK FACTORS
In addition to the other information contained in this prospectus, you
should carefully consider the following risk factors relating to MindSpring
before purchasing our common stock.
WE HAVE A LIMITED OPERATING HISTORY DURING WHICH WE HAVE INCURRED
SIGNIFICANT ANNUAL OPERATING LOSSES
We started our business on February 24, 1994 and began offering Internet
access in June 1994. Our limited historical operating data and rapid growth may
make it more difficult for you to evaluate our performance. We have incurred
annual operating losses since we started our business, although we had positive
cash flows from operations during 1997 and have been profitable in each quarter
since the fourth quarter of 1997. Since 1995, our annual net losses and
accumulated deficit (as of September 30, 1998) have been as follows:
<TABLE>
<S> <C>
1995............................................ $1,959,000
1996............................................ $7,612,000
1997............................................ $4,083,000
Accumulated Deficit (as of September 30,
1998)......................................... $6,863,000
</TABLE>
Our ability to maintain profitability and positive cash flow depends upon a
number of factors, including our ability to increase revenue while maintaining
or reducing per subscriber costs by achieving economies of scale. We may not
succeed in increasing or maintaining revenue or achieving or sustaining
economies of scale and positive cash flow in the future, and our failure to do
so could have a material adverse effect on our business, financial condition and
results of operations.
VARIOUS FACTORS OUTSIDE OF OUR CONTROL MAY AFFECT OUR OPERATING RESULTS AND
CAUSE POTENTIAL FLUCTUATIONS IN OUR QUARTERLY RESULTS
Our future success depends on a number of factors, many of which are beyond
our control. These factors include, among others:
- how quickly we are able to acquire new subscribers;
- how expensive it will be to acquire new subscribers;
- whether we are able to keep the subscribers we have;
- how much money we have to spend to improve our business and expand our
operations;
- how quickly we are able to develop new products and services that our
subscribers require;
- how our prices compare to those of our competitors;
- whether customers accept our new and enhanced products and services;
- how much our operating expenses increase;
- the nature of changes in our strategy;
- whether we lose key employees;
- whether our business is subject to disruptions resulting from third
parties encountering "Year 2000" computer problems;
- whether and how quickly alternative technologies introduced by our
competitors gain market acceptance;
- whether our arrangements with third-party network providers under various
services agreements prove to be viable;
- changes in laws and regulations which affect our business;
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- the extent to which we experience increased competition in our markets;
and
- other general economic factors.
Our operating results, cash flows, and liquidity may fluctuate
significantly in the future. Our revenue depends on our ability to attract and
keep subscribers who buy access or other services on a month-to-month basis. We
usually offer our new subscribers a 30-day money-back satisfaction guarantee,
and subscribers may discontinue their service at the end of any month for any
reason. We incur certain expenses based on our expectations of future revenue.
If revenue is less than we expect, we may not be able to reduce expenses
proportionately. If we do not do so, our operating results, cash flows, and
liquidity will likely be adversely affected. Due to all of the foregoing
factors, it is likely that in some future periods, our operating results and/or
growth rate will be below what public market analysts and investors expect. If
that happens, the market price of our common stock could decline materially.
WE CANNOT ASSURE YOU THAT WE WILL EFFECTIVELY MANAGE OUR GROWTH
Our rapid growth has in the past placed, and may in the future place, a
significant strain on our business resources. In order to effectively manage our
operations, we must continue to implement and improve our operational,
financial, and management information systems and identify, attract, train,
integrate, and retain qualified personnel. These demands will require us to add
new management personnel and develop additional expertise. In particular, in
order for us to successfully integrate newly acquired assets and continue to
implement a nationwide strategy and network, we must:
- closely monitor service quality (particularly through third-party POPs);
- identify and acquire physical sites;
- acquire and install necessary equipment and telecommunications
facilities;
- implement marketing efforts in new and existing markets;
- employ qualified personnel to provide technical and marketing support for
new sites; and
- continue to expand our managerial, operational, and financial resources
to support development.
The demands on our customer service and technical support resources have
grown rapidly due to our rapidly expanding subscriber base. Our customer service
and technical support or other resources may not be sufficient to manage any
future growth in our business. We also may not be able to implement all or part
of our expansion program.
OUR BUSINESS IS SUBJECT TO RISKS OF TECHNOLOGY TRENDS AND EVOLVING INDUSTRY
STANDARDS
The market for Internet access and Web hosting is characterized by rapidly
changing technology, evolving industry standards, changes in subscriber needs,
and frequent new service and product introductions. Our future success will
depend, in part, on our ability to use leading technologies effectively, to
continue to develop our technical expertise, and to enhance our existing
services and develop new services to meet changing subscriber needs on a timely
and cost-effective basis. We may not be successful in achieving these goals.
We believe that our ability to compete successfully will also depend upon
the continued compatibility and interoperability of our services with products
and architectures offered by various vendors. Although we intend to support
emerging standards in the market for Internet access, industry standards may not
be established or, if they are established, we may not be able to conform to
these new standards in a timely fashion and maintain a competitive position in
the market. In addition, others may develop services or technologies that will
render our services or technology noncompetitive or obsolete.
We are also at risk to fundamental changes in the way customers access the
Internet. Currently, customers access Internet services primarily through
computers connected by telephone lines. Several companies, however, have
developed cable television modems that transmit data at substantially faster
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speeds than the modems that we and our subscribers currently use. As the
Internet becomes accessible through these cable television modems and by
screen-based telephones, wireless products, televisions, and other consumer
electronic devices, or as subscriber requirements change the way Internet access
is provided, we must develop new technology or modify our existing technology to
accommodate these developments. We may also have to modify the means by which we
deliver our services. Our pursuit of these technological advances may require
substantial time and expense, and we may not succeed in adapting our Internet
access business to alternate access devices and conduits.
WE MAY NEED ADDITIONAL CAPITAL TO FINANCE OUR GROWTH AND CAPITAL
REQUIREMENTS
We must continue to enhance and develop our network in order to maintain
our competitive position and continue to meet the increasing demands for service
quality, availability, and competitive pricing. Despite the availability of
additional network capacity from third-party network providers, we intend to
maintain the flexibility to expand or open MindSpring POPs or make other capital
investments as dictated by subscriber demand or strategic considerations. To
open new MindSpring POPs, we must spend significant amounts of money for new
equipment as well as for leased telecommunications facilities and advertising.
In addition, to expand our subscriber base nationwide, we will probably have to
spend significant amounts of money on additional equipment to maintain the high
speed and reliability of our Internet access services. We may also need to spend
significant amounts of cash to: (1) fund growth, operating losses and increases
in expenses; (2) take advantage of unanticipated opportunities, such as major
strategic alliances or other special marketing opportunities, acquisitions of
complementary businesses or assets, or the development of new products; or (3)
otherwise respond to unanticipated developments or competitive pressures. If we
do not have enough cash from this offering, cash on hand, and cash generated
from our operations to meet these cash requirements, we will need to seek
alternative sources of financing to carry out our growth and operating plans. We
may not be able to raise any such cash on terms acceptable to us or at all.
Financings may be on terms that are dilutive or potentially dilutive to our
stockholders. If alternative sources of financing are required, but are
insufficient or unavailable, we will be required to modify our growth and
operating plans in accordance with the extent of available funding and attempt
to attain profitability in our existing operations.
WE ARE DEPENDENT ON OUR NETWORK INFRASTRUCTURE, OUR ABILITY TO OBTAIN
SUFFICIENT NETWORK CAPACITY AND THIRD-PARTY NETWORK PROVIDERS
The future success of our business will depend on the capacity,
reliability, and security of our network infrastructure, including the
third-party POPs. We will need to use substantial financial, operational, and
management resources to expand and adapt our network infrastructure to meet the
needs of an increasing number of subscribers and to accommodate the expanding
amount and type of information they wish to transfer. We may not be able to
expand or adapt our network infrastructure to meet additional demand or changing
subscriber requirements on a timely basis and at a commercially reasonable cost,
or at all.
In the past we have experienced shortages in bandwidth capacity, both at
the level of particular POPs (affecting only subscribers attempting to use the
particular POP) and in connection with systemwide services (such as e-mail and
news group services). If we do not maintain sufficient bandwidth capacity in our
network connections, subscribers will perceive a general slowdown of all
services on the Internet. In order to protect the service levels for current
subscribers, we will sometimes temporarily delay adding new subscribers in
cities experiencing significant capacity constraints until such capacity
constraints can be alleviated. Similar problems can occur if we are unable to
expand the capacity of our information servers (for e-mail, news, and the World
Wide Web) fast enough to keep up with demand from our rapidly expanding
subscriber base. If the capacity of such servers is exceeded, subscribers will
experience delays when trying to use a particular service. While our objective
is to maintain excess capacity, our failure to expand or enhance our network
infrastructure on a timely basis or to adapt it to an expanding subscriber base,
changing subscriber requirements, or evolving industry standards could
materially adversely affect our business, financial condition, and results of
operations.
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In addition, we provide Internet access exclusively through third-party
POPs in a significant number of markets. Our ability to provide Internet access
to our subscribers will be limited if third-parties are unable or unwilling to
provide POP access to our subscribers, if we are unable to secure alternative
POP arrangements upon partial or complete termination of third-party network
provider agreements or if there is a loss of access to third-party POPs for
other reasons. These events could also limit our ability to further expand
nationally, which could, in turn, have a material adverse effect on our
business. If we lose access to third-party POPs, we may not be able to make
alternative arrangements on terms acceptable to us, or at all. We do not
currently have any plans or commitments with respect to such alternative POP
arrangements. Moreover, while our contracts with the third-party providers
require them to provide commercially reliable service to MindSpring's
subscribers with a significant assurance of accessibility to the Internet, such
services or Internet access may not meet our requirements, which could
materially adversely affect our business, financial condition and results of
operations.
Our operations and services depend on the extent to which our computer
equipment and the computer equipment of our third-party network providers is
protected against damage from fire, earthquakes, power loss, telecommunications
failures, and similar events. A significant portion of our computer equipment,
including critical equipment dedicated to our Internet access services, is
located at a single facility in Atlanta, Georgia. Despite precautions taken by
us and our third-party network providers (over which we have no control), a
natural disaster or other unanticipated problems at our headquarters, network
hub, or a MindSpring or third-party network provider POP could cause
interruptions in the services that we provide. If such disruptions occur, we may
have no means of replacing these network elements on a timely basis or at all.
We do not currently maintain fully redundant or back-up Internet services or
backbone facilities or other fully redundant computing and telecommunications
facilities. Any accident, incident, system failure, or discontinuance of
operations involving our network or a third-party network that causes
interruptions in our operations could have a material adverse effect on our
ability to provide Internet services to our subscribers and, in turn, on our
business, financial condition, and results of operations.
WE ARE DEPENDENT ON TELECOMMUNICATIONS CARRIERS AND OTHER SUPPLIERS
We rely on local telephone companies and other companies to provide data
communications capacity via local telecommunications lines and leased
long-distance lines. We are subject to potential disruptions or capacity
constraints in these telecommunications services, and we may have no means of
replacing these services, on a timely basis or at all, if such disruption or
capacity constraints occur. In addition, local phone service is sometimes
available only from the local monopoly telephone company in each of the markets
we serve. We believe that the federal Telecommunications Act of 1996 generally
will lead to increased competition in the provision of local telephone service,
but we cannot predict the timing or extent of any such developments or the
effect of increased competition on pricing or supply.
We depend on certain third-party suppliers of hardware components. We
acquire certain components we use to provide our networking services currently
from only one source, including modems and terminal servers manufactured by
3Com, Inc. and high-performance routers manufactured by Cisco Systems, Inc. The
expansion of our network infrastructure and the expansion of Internet services
in general is placing, and will continue to place, a significant demand on our
suppliers, some of which have limited resources and production capacity. From
time to time, we have experienced delayed delivery from suppliers of new
telephone lines, modems, terminal servers, and other equipment. If delays of
this nature are severe, all incoming modem lines may become full during peak
times, resulting in busy signals for subscribers who are trying to connect to
MindSpring. If our suppliers cannot adjust to meet increasing demand, the higher
demand levels may prevent them from continuing to supply components and products
in the quantities, at the quality levels and at the times we require, or at all.
If we are unable to develop alternative sources of supply, if required, we could
experience delays and increased costs in expanding our network infrastructure.
Our suppliers and telecommunications carriers also sell or lease products
and services to our competitors and may be, or in the future may become,
competitors themselves. Our suppliers and
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telecommunications carriers may enter into exclusive arrangements with our
competitors or stop selling or leasing their products or services to us at
commercially reasonable prices, or at all.
OUR NETWORK IS SUBJECT TO SECURITY RISKS
The future success of our business will depend on the security of our
network and, in part, on the security of the network infrastructures of our
third-party providers (over which we have no control). Despite the
implementation of security measures, our infrastructure and the infrastructures
of our network providers are vulnerable to computer viruses or similar
disruptive problems caused by our or their subscribers or other Internet users.
Computer viruses or problems caused by third parties (such as the sending of
excessive volumes of unsolicited bulk e-mail) could lead to interruptions,
delays, or cessation in service to our subscribers. Third parties could also
potentially jeopardize the security of confidential information stored in our
computer systems or our subscribers' computer systems by their inappropriate use
of the Internet, which could cause losses to us or our subscribers or deter
certain persons from subscribing to our services. Inappropriate use of the
Internet includes attempting to gain unauthorized access to information or
systems, commonly known as "cracking" or "hacking." Although we intend to
continue to implement security measures to prevent this, "hackers" have
circumvented such measures in the past, and others may be able to circumvent our
security measures or the security measures of our third-party network providers
in the future. To alleviate problems caused by computer viruses or other
inappropriate uses or security breaches, we may have to interrupt, delay, or
cease service to our subscribers, which could have a material adverse effect on
our business, financial condition, and results of operations. In addition, we
expect that our subscribers will increasingly use the Internet for commercial
transactions in the future. Any network malfunction or security breach could
cause these transactions to be delayed, not completed at all, or completed with
compromised security. Subscribers or others may assert claims of liability
against us as a result of any such failure. Further, until more comprehensive
security technologies are developed, the security and privacy concerns of
existing and potential subscribers may inhibit the growth of the Internet
service industry in general and our subscriber base and revenue in particular.
THE INTERNET ACCESS AND WEB HOSTING MARKETS ARE VERY COMPETITIVE
The markets for the provision of Internet access and Web hosting services
to individuals and small businesses are extremely competitive and highly
fragmented. There are no substantial barriers to entry, and we expect that
competition will continue to intensify. We believe that the primary competitive
factors determining success in these markets are a reputation for reliability
and service, effective customer support, pricing, easy-to-use software, and
geographic coverage. Other important factors include the timing of introductions
of new products and services and industry and general economic trends. We may
not be able to compete successfully against current or future competitors, and
the competitive pressures that we face may materially adversely affect our
business, financial condition and results of operations.
Our current and prospective competitors include many large companies that
have substantially greater market presence and financial, technical, marketing,
and other resources. In addition, every local market that we have entered or
intend to enter is served by multiple local Internet service providers. We
currently compete or expect to compete with the following types of companies:
- established on-line commercial information service providers, such as
AOL;
- national long-distance carriers, such as AT&T Corp. and MCI WorldCom,
Inc.;
- national commercial Internet service providers, such as EarthLink
Network, Inc.;
- computer hardware and software and other technology companies, such as
International Business Machines Corporation and Microsoft Corporation;
- numerous regional and local commercial Internet service providers which
vary widely in quality, service offerings, and pricing;
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- national and regional Web hosting companies that focus primarily on
providing Web hosting services;
- cable operators;
- regional telephone companies; and
- nonprofit or educational Internet service providers.
We believe that new competitors, including large computer hardware and
software, media, and telecommunications companies, will continue to enter the
Internet access and Web hosting markets. In addition, as consumer awareness of
the Internet grows, existing competitors are likely to further increase their
emphasis on their Internet access and Web hosting services, resulting in even
greater competition for us. In addition, telecommunications companies may be
able to offer customers reduced communications costs in connection with such
services, reducing the overall cost of their Internet access and Web hosting
solutions and significantly increasing pricing pressures on us. The ability of
our competitors to enter into strategic alliances or joint ventures or to bundle
services and products with Internet access or Web hosting could also put us at a
significant competitive disadvantage. Competition could result in increased
selling and marketing expenses, related subscriber acquisition costs, and
increased subscriber attrition, all of which could adversely affect our
business, financial condition and results of operations. We may not be able to
offset the effects of any such increased costs through an increase in the number
of our subscribers or higher revenue from enhanced services and we may not have
the resources to continue to compete successfully.
We also face competition from companies that provide broadband connections
to consumers' homes, including local and long-distance telephone companies,
cable television companies, electric utility companies, and wireless
communications companies. For example, competitors have developed technologies
that enable cable television operators to offer high-speed Internet access
through their cable facilities. These broadband technologies promise
significantly faster access rates than existing modem speeds. These companies
may include Internet access or Web hosting in their basic bundle of services or
may offer such access for a nominal additional charge and could prevent us from
delivering Internet access through the wire and cable connections that these
companies own. Any such developments could materially adversely affect our
business, financial condition and results of operations.
We do not currently compete internationally. If the ability to provide
Internet access internationally becomes a competitive advantage in the Internet
access industry, we may be at a competitive disadvantage relative to our
competitors.
WE MAY NOT BE SUCCESSFUL IN PROTECTING OUR PROPRIETARY RIGHTS OR AVOIDING
CLAIMS THAT WE INFRINGE THE PROPRIETARY RIGHTS OF OTHERS
Our success depends in part upon our software and related documentation. We
principally rely upon copyright, trade secret, and contract laws to protect our
proprietary technology. We cannot be certain that we have taken adequate steps
to prevent misappropriation of our technology or that our competitors will not
independently develop technologies that are substantially equivalent or superior
to our technology.
We have permission and, in certain cases, licenses from each manufacturer
of the software that we bundle in our front-end software product for
subscribers. Although we do not believe that the software or the trademarks we
use or any of the other elements of our business infringe on the proprietary
rights of any third parties, third parties may assert such claims against us in
the future and such claims may be successful. We could incur substantial costs
and diversion of management resources in the defense of any claims relating to
proprietary rights, which could materially adversely affect our business,
financial condition, and results of operations. Parties making such claims could
secure a judgment awarding substantial damages as well as injunctive or other
equitable relief that could effectively block our ability to license our
products in the United States or abroad. Such a judgment could have a material
adverse effect on our business, financial condition and results of operations.
If a third party asserts a claim relating to proprietary technology or
information against us, we may seek licenses to the intellectual property from
the
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third party. We cannot be certain, however, that third parties will extend
licenses to us on commercially reasonable terms, or at all. If we fail to obtain
the necessary licenses or other rights, such failure could materially adversely
affect our business, financial condition and results of operations.
WE ARE SUBJECT TO RISKS ASSOCIATED WITH OUR ACQUISITIONS AND PURCHASES OF
SUBSCRIBER ACCOUNTS
As part of our business strategy, we will continue to evaluate strategic
acquisitions of businesses and subscriber accounts principally relating to our
current operations. These transactions commonly involve certain risks,
including, among others, that:
- we may experience difficulty in assimilating the acquired operations and
personnel;
- the acquisition may disrupt our ongoing business;
- we may not be able to successfully incorporate acquired technology and
rights into our service offerings and maintain uniform standards,
controls, procedures, and policies;
- we may lack the necessary experience to enter new markets; and
- an acquisition may impair our relationships with employees and
subscribers as a result of changes in management.
We may not be successful in overcoming these risks or any other problems
encountered in connection with future transactions. In addition, a transaction
could materially adversely affect our operating results if we (1) dilute our
shareholders by issuing additional equity securities, (2) incur additional debt,
or (3) amortize acquisition or debt-related expenses for goodwill and other
intangible assets.
OUR SUCCESS DEPENDS ON OUR ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL
Our success depends upon the continued efforts of our senior management
team and our technical, marketing, and sales personnel. These employees may
voluntarily terminate their employment with us at any time. In this respect,
Michael G. Misikoff, our Executive Vice President and Chief Financial Officer,
recently announced he will be resigning effective as of a date in the first
quarter of 1999 to be determined. Our success also depends on our ability to
attract and retain additional highly qualified management, technical, marketing,
and sales personnel. The process of hiring employees with the combination of
skills and attributes required to carry out our strategy can be extremely
competitive and time-consuming. We may not be able to successfully retain or
integrate existing personnel or identify and hire additional personnel. If we
lose the services of key personnel or are unable to attract additional qualified
personnel, our business, financial condition and results of operations could be
materially and adversely affected.
CERTAIN PRINCIPAL STOCKHOLDERS AND MANAGEMENT CAN EXERCISE SIGNIFICANT
INFLUENCE OVER MINDSPRING
ITC Holding Company, Inc. ("ITC Holding") indirectly owns approximately
20.3% of our common stock as of December 3, 1998. The Company's executive
officers and directors own an aggregate of approximately 11.3% of our common
stock as of the same date. As a result, if ITC Holding and management act
together, they would be able to exercise significant influence over most matters
requiring stockholder approval, including the election of directors and the
approval of significant corporate matters, such as certain change-of-control
transactions. The common stock of MindSpring owned by ITC Holding is pledged to
certain lenders in connection with a credit facility. If ITC Holding's
subsidiaries default under the credit facility, ITC Holding could lose ownership
of all of its stock in the Company and someone unknown to us would become a
significant stockholder of the Company.
CERTAIN DIRECTORS HAVE CONFLICTS OF INTEREST INVOLVING ITC HOLDING
ITC Holding, as a significant stockholder of the Company, and Campbell B.
Lanier, III, William H. Scott, III, and O. Gene Gabbard, who are directors,
stockholders, and officers of ITC Holding and
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directors of the Company, are in positions involving the possibility of
conflicts of interest with respect to certain transactions concerning the
Company. Certain decisions concerning our operations or financial structure may
present conflicts of interest between us and ITC Holding and/or its affiliates.
For example, if we are required to raise additional capital from public or
private sources in order to finance our anticipated growth and contemplated
capital expenditures, our interests might conflict with those of ITC Holding
and/or its affiliates with respect to the particular type of financing sought.
In addition, we may have an interest in pursuing acquisitions, divestitures,
financings, or other transactions that, in our judgment, could be beneficial to
us, even though the transactions might conflict with the interests of ITC
Holding and/or its affiliates. If such conflicts do occur, ITC Holding and its
affiliates may exercise their influence in their own best interests.
We currently engage and expect in the future to engage in transactions with
ITC Holding and/or its affiliates. In addition, we provide Internet access to
various companies controlled by ITC Holding, although the revenue we derive from
these sources is not substantial. We have a policy that requires any material
transaction with our officers, directors, or principal stockholders, or their
affiliates, to be on terms no less favorable to the Company than we reasonably
could have obtained in arm's-length transactions with independent third parties.
We believe that each current transaction in which we are engaged with an
affiliate complies with this policy.
THE ABILITY OF STOCKHOLDERS TO EFFECT CHANGES IN CONTROL OF MINDSPRING IS
LIMITED
There are provisions in our Amended and Restated Certificate of
Incorporation, as amended (the "Restated Certificate"), our Amended and Restated
Bylaws (the "Bylaws"), and the Delaware General Corporation Law (the "Delaware
Corporation Law") that could delay or impede the removal of incumbent directors
and could make more difficult a merger, tender offer, or proxy contest involving
the Company or could discourage a third-party from attempting to acquire control
of the Company, even if such events would be beneficial to the interests of the
stockholders. In particular, our Board of Directors could delay a change in
control of the Company. In addition, the Restated Certificate authorizes the
Board of Directors to provide for the issuance of shares of preferred stock of
the Company, in one or more series, which the Board of Directors could issue
without further stockholder approval and with terms and conditions and rights,
privileges, and preferences determined by the Board of Directors. We have no
current plans to issue any such preferred stock. We are also subject to Section
203 of the Delaware Corporation Law. In general, Section 203 prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless
certain conditions are met. These factors could have the effect of delaying,
deferring, dissuading, or preventing a change of control of the Company.
WE MAY BECOME SUBJECT TO GOVERNMENT REGULATION
We provide Internet access, in part, through transmissions over public
telephone lines. These transmissions are governed by regulatory policies
establishing charges and terms for communications. As an Internet service
provider, we are not currently subject to direct regulation by the Federal
Communications Commission (the "FCC") or any other agency, other than
regulations applicable to businesses generally. In a report to Congress adopted
on April 10, 1998, the FCC reaffirmed that Internet service providers should be
classified as unregulated "information service providers" rather than regulated
"telecommunications providers" under the terms of the Telecommunications Act of
1996.
This finding is important because it means that we are not subject to
regulations that apply to telephone companies and similar carriers. We also are
not required to contribute a percentage of our gross revenues to support
"universal service" subsidies for local telephone services and other public
policy objectives, such as enhanced communications systems for schools,
libraries, and certain health care providers. The FCC action is also likely to
discourage states from regulating Internet service providers as
telecommunications carriers or imposing similar subsidy obligations.
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Nevertheless, Internet-related regulatory policies are continuing to
develop, and it is possible that we could be exposed to regulation in the
future. For example, in the same report to Congress, the FCC stated its
intention to consider whether to regulate voice and fax telephony services
provided over the Internet as "telecommunications" even though Internet access
itself would not be regulated. The FCC is also considering whether such
Internet-based telephone services should be subject to the universal service
support obligations discussed above, or pay carrier access charges on the same
basis as traditional telecommunications companies. Local telephone companies
assess access charges to long distance companies for the use of the local
telephone network to originate and terminate long distance calls, generally on a
per-minute basis. Access charges have been a matter of continuing dispute, with
long distance companies complaining that the rates are substantially in excess
of cost, and local telephone companies arguing that access rates are justified
to subsidize lower local rates for end users and other purposes. Both local and
long distance companies, however, contend that Internet-based telephony should
be subject to these charges. We have no current plans to install gateway
equipment and offer telephony, and so we do not believe we would be directly
affected by these developments. However, we cannot predict whether these debates
will cause the FCC to reconsider its current policy of not regulating Internet
service providers.
The law relating to the liability of Internet service providers and on-line
services companies for information carried on, stored on, or disseminated
through their network is unsettled, even with the recent enactment of the
Digital Millennium Copyright Act. While no one has ever filed a claim against us
relating to information carried on, stored on, or disseminated through our
network, someone may file a claim of that type in the future and may be
successful in imposing liability on us. If that happens, we may have to spend
significant amounts of money to defend ourselves against these claims and, if we
are not successful in our defense, the amount of damages that we will have to
pay may be significant. Any costs that we incur as a result of defending these
claims or the amount of liability that we may suffer if our defense is not
successful could materially adversely affect our business, financial condition
and results of operations.
If, as the law in this area develops, we become liable for information
carried on, stored on, or disseminated through our network, we may decide to
spend significant amounts of money to reduce our exposure to this type of
liability. This may require us to spend significant amounts of money for new
equipment and may also require us to discontinue offering certain of our
products or services.
Due to the increasing popularity and use of the Internet, it is possible
that additional laws and regulations may be adopted with respect to the
Internet, covering issues such as content, privacy, access to certain content by
minors, pricing, bulk e-mail ("spam"), encryption standards, consumer
protection, electronic commerce, taxation, copyright infringement, and other
intellectual property issues. We cannot predict the impact, if any, that any
future regulatory changes or developments may have on our business, financial
condition, and results of operations. Changes in the regulatory environment
relating to the Internet access industry, including regulatory changes that
directly or indirectly affect telecommunication costs or increase the likelihood
or scope of competition from regional telephone companies or others, could have
a material adverse effect on our business, financial condition and results of
operations.
FAILURE TO OBTAIN YEAR 2000 COMPLIANCE MAY HAVE ADVERSE EFFECTS ON
MINDSPRING
The term "Year 2000 issue" is a general term used to describe the various
problems that may result from the improper processing of dates and
date-sensitive calculations by computers and other machinery as the year 2000 is
approached and reached. These problems generally arise from the fact that most
of the world's computer hardware and software have historically used only two
digits to identify the year in a date, often meaning that the computer will fail
to distinguish dates in the "2000's" from dates in the "1900's." These problems
may also arise from other sources as well, such as the use of special codes and
conventions in software that make use of the date field. Our failure to correct
a material Year 2000 problem could result in an interruption in, or a failure
of, certain of our normal business activities or operations. Presently, however,
we believe that our most reasonably likely worst case scenario related to the
Year 2000 is associated with potential concerns with third-party services or
products. Specifically, we are heavily dependent on a significant number of
third-party vendors to provide both network services and
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equipment. A significant Year 2000-related disruption of the network services or
equipment that third-party vendors provide to us could cause our customers to
consider seeking alternate providers or cause an unmanageable burden on our
customer service and technical support, which in turn could materially and
adversely affect our business, financial condition and results of operations.
We have recently established a Year 2000 compliance program to coordinate
appropriate activity and report to our Board of Directors on a continuing basis
with regard to the Year 2000 issue. As of September 30, 1998, we had incurred
approximately $20,000 in connection with the implementation of the program. We
expect to incur an additional $200,000 to $250,000 of expenses to implement the
remainder of the year 2000 compliance program. These expected additional costs
are based on our best estimates, and we believe these costs will not have a
material affect on our business. However, if the actual costs resulting from the
implementation of the Year 2000 compliance program significantly exceed our
estimates, they may have a material adverse effect on our business, financial
condition and results of operations.
OUR STOCK PRICE WILL FLUCTUATE, AND COULD FLUCTUATE SIGNIFICANTLY
Since our common stock has been publicly traded, the market price of our
common stock has fluctuated over a wide range and may continue to do so in the
future. See "Price Range of Common Stock and Dividend Policy" for information
about high and low sales prices of our common stock. The market price of our
common stock could be subject to significant fluctuations in response to various
factors and events, including, among other things:
- the depth and liquidity of the trading market for our common stock;
- quarterly variations in actual or anticipated operating results;
- growth rates;
- changes in estimates by analysts;
- market conditions in the industry (including demand for Internet access);
- announcements by competitors;
- regulatory actions; and
- general economic conditions.
In addition, the stock market has from time to time experienced significant
price and volume fluctuations, which have particularly affected the market
prices of the stocks of high-technology companies and which may be unrelated to
the operating performance of particular companies. Furthermore, our operating
results and prospects from time to time may be below the expectations of public
market analysts and investors. Any such event could result in a material decline
in the price of our common stock.
WE DO NOT ANTICIPATE THAT WE WILL PAY CASH DIVIDENDS
We have never declared or paid any cash dividends on our capital stock and
do not anticipate paying cash dividends in the foreseeable future. See "Price
Range of Common Stock and Dividend Policy" for a description of our dividend
policy.
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USE OF PROCEEDS
We estimate that we will receive net proceeds from the sale of our common
stock offered with this prospectus of approximately $108.4 million
(approximately $124.7 million if the underwriters' over-allotment option is
exercised in full). This estimate is after deducting estimated underwriting
discounts and commissions and other fees and expenses payable by us of
approximately $500,000. We intend to use the net proceeds from this offering to
fund expansion of our business, including for additional working capital and
general corporate purposes. In addition, we may apply a portion of the net
proceeds of this offering to acquire complementary businesses, subscriber
accounts, products or technologies. Moreover, depending on the nature of any
such acquisitions, we could apply all or substantially all of the net proceeds
of this offering to such acquisitions. As part of our ongoing corporate
development activities, we expect that we will continue to consider acquisition
opportunities. In this regard, we are currently evaluating certain acquisition
opportunities. We cannot assure, however, that we will identify suitable
acquisition candidates or that we will consummate any acquisition.
We currently intend to allocate substantial proceeds to each of the
foregoing categories. However, the precise allocation of funds among these uses
will depend on future technological, regulatory, and other developments in or
affecting our business, the competitive climate in which we operate and the
emergence of future opportunities. Pending such uses, we intend to invest the
net proceeds of this offering in short-term, interest-bearing securities.
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PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
We completed our initial public offering of common stock on March 14, 1996.
Since that date, our common stock has traded on the Nasdaq National Market under
the symbol "MSPG." The following table sets forth for the periods indicated the
high and low sales prices per share of our common stock as reported by the
Nasdaq National Market (as adjusted for our 3-for-1 stock split effected on July
24, 1998).
<TABLE>
<CAPTION>
1996 HIGH LOW
---- ------ ------
<S> <C> <C>
First Quarter (from March 14, 1996)......................... $ 2.96 $ 2.63
Second Quarter.............................................. 4.33 2.63
Third Quarter............................................... 4.25 2.79
Fourth Quarter.............................................. 3.92 1.75
1997 HIGH LOW
---- ------ ------
First Quarter............................................... $ 3.42 $ 1.92
Second Quarter.............................................. 3.79 2.21
Third Quarter............................................... 8.21 3.54
Fourth Quarter.............................................. 11.54 6.08
1998 HIGH LOW
---- ------ ------
First Quarter............................................... $23.00 $ 9.20
Second Quarter.............................................. 34.75 16.17
Third Quarter............................................... 52.38 25.31
Fourth Quarter (through December 14, 1998).................. 79.00 23.13
</TABLE>
On December 14, 1998, the last reported sale price of the common stock on
the Nasdaq National Market was $58.875 per share. At December 11, 1998, there
were approximately 620 holders of record of our common stock.
We have never declared or paid any cash dividends on our capital stock and
do not anticipate paying cash dividends on our common stock in the foreseeable
future. It is the current policy of the Board of Directors to retain earnings to
finance the expansion of our operations. The Board of Directors will determine
future declaration and payment of dividends, if any, in light of the
then-current conditions, including our earnings, operations, capital
requirements, financial condition, restrictions in financing agreements, and
other factors they deem relevant.
21
<PAGE> 22
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 1998
(1) on an actual basis and (2) as adjusted to reflect the sale of shares of
common stock offered hereby (at a price to the public of $57.00 per share). You
should read this table together with the section entitled "Use of Proceeds"
included elsewhere in this prospectus and our financial statements and notes
thereto and other financial and operating data included elsewhere in this
prospectus or incorporated into this prospectus by reference.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash or cash equivalents(1)............................. $62,498 $170,868
======= ========
Indebtedness(2):
Capital leases..................................... 5,792 5,792
Debt............................................... 593 593
------- --------
Total indebtedness............................ 6,385 6,385
------- --------
Stockholders' equity:
Preferred Stock, $0.01 par value, 1,000,000 shares
authorized; 0 shares issued and outstanding...... -- --
Common Stock, $.01 par value, 60,000,000 shares
authorized; 25,852,993 shares issued and
outstanding; 27,852,993 shares issued and
outstanding as adjusted(3)....................... 259 279
Additional paid-in capital(3)........................... 84,967 193,317
Accumulated deficit..................................... (6,863) (6,863)
------- --------
Total stockholders' equity.................... 78,363 186,733
------- --------
Total capitalization.................................... $84,748 $193,118
======= ========
</TABLE>
- ---------------
(1) Does not give effect to our acquisition of certain assets of Spry, Inc. in
October 1998 which would decrease cash and cash equivalents by approximately
$25 million. We expect a further reduction of cash and cash equivalents of
between approximately $10 million and $20 million depending on the final
purchase price for this acquisition, which will be determined in early 1999.
(2) Includes current portion of related indebtedness.
(3) Excludes 1,961,747 shares of common stock reserved for issuance pursuant to
stock options granted as of September 30, 1998.
22
<PAGE> 23
DILUTION
The historical net tangible book value of the Company at September 30, 1998
was approximately $78,363,000, or $3.03 per share of common stock. Net tangible
book value per share represents the amount of total tangible assets of the
Company reduced by the amount of its total liabilities, divided by the total
number of shares of common stock outstanding. After giving effect to the sale by
the Company of the 2,000,000 shares of common stock offered hereby and the
application of the estimated net proceeds therefrom as set forth under "Use of
Proceeds," the pro forma net tangible book value of the Company as of September
30, 1998 would have been approximately $186,733,000, or $6.70 per share of
common stock. This represents an immediate increase in pro forma net tangible
book value of $3.67 per share to existing stockholders and an immediate dilution
of $50.30 per share to new investors. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Public offering price....................................... $57.00
Historical net tangible book value prior to this
offering............................................. 3.03
Increase attributable to new investors................. 3.67
----
Pro forma net tangible book value after this offering....... 6.70
------
Dilution to new investors................................... $50.30
======
</TABLE>
23
<PAGE> 24
DESCRIPTION OF CAPITAL STOCK
The following summary description of our capital stock does not purport to
be complete and is subject to the provisions of our Restated Certificate, our
Bylaws and applicable law.
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
Pursuant to the Restated Certificate, the Company has authority to issue
60,000,000 shares of common stock, par value $0.01 per share. In addition, under
the Restated Certificate, the Board of Directors of the Company has authority
(without action by the stockholders) to issue 1,000,000 shares of preferred
stock, par value $0.01 per share, in one or more classes or series and, within
certain limitations, to determine the voting rights (including the right to vote
as a series on particular matters), preferences as to dividends and in
liquidation, and conversion and other rights of each such series. As of December
3, 1998, there were 25,974,103 shares of common stock outstanding and no shares
of preferred stock outstanding.
The rights of the holders of common stock discussed below are subject to
such rights as the Board of Directors may hereafter confer on the holders of
preferred stock; accordingly, rights conferred on holders of preferred stock
that may be issued in the future under the Restated Certificate may adversely
affect the rights of holders of common stock.
COMMON STOCK
Voting Rights. Each holder of shares of common stock shall be entitled to
attend all special and annual meetings of the stockholders of the Company. In
addition, each holder shall be entitled, share-for-share and without regard to
class, together with the holders of all other classes of stock entitled to
attend such meetings and to vote (except any class or series of stock having
special voting rights), to cast one vote for each outstanding share of common
stock so held upon any matter or thing (including, without limitation, the
election of one or more directors) properly considered and acted upon by the
stockholders.
Liquidation Rights. In the event of any dissolution, liquidation, or
winding up of the Company, whether voluntary or involuntary, the holders of the
common stock and holders of any class or series of stock entitled to participate
therewith, as to the distribution of assets in such event, shall become entitled
to participate in the distribution of any assets of the Company remaining after
the Company shall have paid, or provided for payment of, all debts and
liabilities of the Company and after the Company shall have paid, or set aside
for payment, to the holders of any class of stock having preference over the
common stock in the event of dissolution, liquidation or winding up the full
preferential amounts (if any) to which they are entitled.
Dividends. Dividends may be paid on the common stock and on any class or
series of stock entitled to participate therewith as to dividends but only when
and as declared by the Board of Directors.
PREFERRED STOCK
The Restated Certificate authorizes the Board of Directors, from time to
time and without further stockholder action, to provide for the issuance of up
to 1,000,000 shares of preferred stock, par value $.01 per share, in one or more
series, and to fix the relative rights and preferences of the shares, including
voting powers, dividend rights, liquidation preferences, redemption rights and
conversion privileges. As of the date hereof, the Board of Directors has not
provided for the issuance of any series of such preferred stock, and there are
no agreements or understandings for the issuance of any such preferred stock.
Because of its broad discretion with respect to the creation and issuance of
preferred stock without stockholder approval, the Board of Directors could
adversely affect the voting power of the holders of common stock and, by issuing
shares of preferred stock with certain voting, conversion and/or redemption
rights, could discourage any attempt to obtain control of the Company.
CERTAIN CHARTER AND STATUTORY PROVISIONS
The Restated Certificate provides for the division of the Board of
Directors into three classes of directors, serving staggered three year terms.
The Restated Certificate further provides that the approval of
24
<PAGE> 25
the holders of at least two-thirds of the shares entitled to vote thereon and
the approval of a majority of the entire Board of Directors are necessary for
the alteration, amendment or repeal of certain sections of the Restated
Certificate relating to the election and classification of the Board of
Directors, indemnification and the vote requirements for such amendments to the
Restated Certificate. These provisions may have the effect of deterring hostile
takeovers or delaying changes in control or management of the Company.
The Company is subject to the provisions of Section 203 of the Delaware
Corporation Law. In general, the statute prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless (1) prior to such
date, the board approved either the business combination or the transaction that
resulted in the stockholder becoming an interested stockholder, (2) upon
consummation of the transaction that resulted in such person becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding, for purposes of determining the number of shares
outstanding, shares owned by certain directors or certain employee stock plans),
or (3) on or after the date the stockholder became an interested stockholder,
the business combination is approved by the board of directors and authorized by
the affirmative vote (and not by written consent) of at least two-thirds of the
outstanding voting stock excluding that stock owned by the interested
stockholder. A "business combination" includes a merger, asset sale, or other
transaction resulting in a financial benefit to the interested stockholder. An
"interested stockholder" is a person who (other than the corporation and any
direct or indirect majority-owned subsidiary of the corporation), together with
affiliates and associates, owns (or, as an affiliate or associate, within three
years prior, did own) 15% or more of the corporation's outstanding voting stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is American Stock
Transfer & Trust Company.
25
<PAGE> 26
UNDERWRITING
Subject to the terms and conditions contained in an underwriting agreement,
dated December 14, 1998, the underwriters named below have severally agreed to
purchase from the Company the number of shares of common stock set forth
opposite their names below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
ING Baring Furman Selz LLC.................................. 500,000
Donaldson, Lufkin & Jenrette Securities Corporation......... 500,000
J.C. Bradford & Co. ........................................ 400,000
Wheat First Securities, Inc. ............................... 400,000
Jefferies & Company, Inc. .................................. 200,000
---------
Total............................................. 2,000,000
=========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares of common stock
offered hereby are subject to approval by their counsel of certain legal matters
and to certain other conditions. The underwriters are obligated to purchase and
accept delivery of all the shares of common stock (other than those shares
covered by the over-allotment option described below) if any are purchased.
The underwriters propose initially to offer the shares of common stock in
part directly to the public at the initial public offering price set forth on
the cover page of this prospectus and in part to certain dealers (including the
underwriters) at such price less a concession not in excess of $1.54 per share.
The underwriters may allow, and such dealers may re-allow, to certain other
dealers, a concession not in excess of $0.10 per share. After the initial
offering of the shares of common stock, the public offering price and other
selling terms may be changed by the underwriters at any time without notice.
The following table shows the underwriting fees to be paid to the
underwriters by the Company in connection with this offering. These amounts are
shown assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares of common stock.
<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
------------ -------------
<S> <C> <C>
Per share........................................ $ 2.565 $ 2.565
Total............................................ $ 5,130,000 $ 5,899,500
</TABLE>
Other expenses of this offering (including the registration fees and the
fees of financial printers, counsel and accountants) payable by the Company are
expected to be approximately $500,000.
The Company has granted to the underwriters an option, exercisable within
30 days after the date of this prospectus, to purchase, from time to time, in
whole or in part, up to an aggregate of 300,000 additional shares of common
stock at the public offering price less the underwriting discounts and
commissions. The underwriters may exercise such option solely to cover
over-allotments, if any, made in connection with this offering. To the extent
that the underwriters exercise such option, each underwriter will become
obligated, subject to certain conditions, to purchase its pro rata portion of
such additional shares based on such underwriter's percentage underwriting
commitment as indicated in the table above.
The Company has agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments that the underwriters may be required to make in respect
of any of those liabilities.
Each of the Company, its executive officers and directors and certain
stockholders of the Company has agreed, subject to certain exceptions, not to:
(1) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of, directly or indirectly,
any shares of common stock or any securities convertible into or exercisable or
exchangeable for common stock; or (2) enter into any swap or other
26
<PAGE> 27
arrangement that transfers all or a portion of the economic consequences
associated with the ownership of any common stock (regardless of whether any of
the transactions described in clause (1) or (2) is to be settled by the delivery
of common stock, or such other securities, in cash or otherwise) for a period of
90 days after the date of this prospectus without the prior written consent of
ING Baring Furman Selz LLC. In addition, during such period, the Company has
also agreed not to file any registration statement with respect to, and each of
its executive officers, directors and certain stockholders of the Company has
agreed not to make any demand for, or exercise any right with respect to, the
registration of any shares of common stock or any securities convertible into or
exercisable or exchangeable for common stock without the prior written consent
of ING Baring Furman Selz LLC.
In June 1998, the Company issued and sold 3,000,000 shares of its common
stock in a public offering underwritten by Donaldson, Lufkin & Jenrette
Securities Corporation, J.C. Bradford & Co., Furman Selz LLC (now known as ING
Baring Furman Selz LLC) and Wheat First Securities, Inc. for which such
underwriters received customary compensation. In addition, the Company has
retained ING Baring Furman Selz LLC to advise the Company regarding potential
acquisitions and has verbally agreed to pay ING Baring Furman Selz LLC customary
compensation if an acquisition is consummated. If an acquisition is not
consummated, the Company will pay only the out-of-pocket expenses of ING Baring
Furman Selz LLC incurred in connection therewith.
Other than in the United States, no action has been taken by the Company or
the underwriters that would permit a public offering of the shares of common
stock offered hereby in any jurisdiction where action for that purpose is
required. The shares of common stock offered hereby may not be offered or sold,
directly or indirectly, nor may this prospectus or any other offering material
or advertisements in connection with the offer and sale of any such shares of
common stock be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of such jurisdiction. Persons into whose possession this prospectus
comes are advised to inform themselves about, and to observe, any restrictions
relating to the offering of the common stock and the distribution of this
prospectus. This prospectus is not an offer to sell or a solicitation of an
offer to buy any shares of common stock offered hereby in any jurisdiction in
which such an offer or solicitation is unlawful.
In the event the common stock does not constitute an excepted security
under the provisions of Regulation M promulgated by the SEC, the underwriters
and dealers may engage in passive market making transactions in accordance with
Rule 103 under Regulation M. In general, a passive market maker may not bid for
or purchase shares of common stock at a price that exceeds the highest
independent bid. In addition, the net daily purchases made by any passive market
maker generally may not exceed 30% of its average daily trading volume in the
common stock during a specified two-month prior period, or 200 shares, whichever
is greater. A passive market maker must identify passive market making bids as
such on the Nasdaq electronic inter-dealer reporting system. Passive market
making may stabilize or maintain the market price of the common stock above
independent market levels. Underwriters and dealers are not required to engage
in passive market making and may end passive market making activities at any
time.
In connection with this offering, the underwriters may engage in
transactions on the Nasdaq National Market or the over-the-counter market or
otherwise that stabilize, maintain or otherwise affect the price of the common
stock. Specifically, the underwriters may overallot this offering, creating a
syndicate short position. In addition, the underwriters may bid for and purchase
shares of common stock in the open market to cover syndicate short positions or
to stabilize the price of the common stock. These activities may stabilize or
maintain the market price of the common stock above independent market levels.
The underwriters are not required to engage in these activities and may end any
of these activities at any time.
27
<PAGE> 28
LEGAL MATTERS
The validity of the common stock offered hereby is being passed upon for
the Company by Hogan & Hartson L.L.P., Washington, D.C., counsel for the
Company. Hogan & Hartson L.L.P. provides legal services to ITC Holding, its
affiliated companies and Campbell B. Lanier, III, Chairman and Chief Executive
Officer of ITC Holding. With the consent of the Company, Hogan & Hartson L.L.P.
has represented ITC Holding in certain transactions with the Company. Anthony S.
Harrington, a partner of Hogan & Hartson L.L.P., beneficially owns 115,568
shares of ITC Holding common stock. Certain legal matters are being passed upon
for the underwriters by Alston & Bird LLP, Atlanta, Georgia. Alston & Bird LLP
also provides legal services to ITC Holding and certain of its affiliated
companies, including the Company.
EXPERTS
The financial statements and financial statement schedules of the Company
as of December 31, 1996 and 1997 and for the periods ended December 31, 1995,
1996 and 1997 and the financial statements of Spry, Inc. as of April 30, 1997
and January 31, 1998 and for the years ended April 30, 1996 and 1997 and the
nine months ended January 31, 1998 incorporated by reference in this prospectus
and elsewhere in the Registration Statement have been audited by Arthur Andersen
LLP, independent certified public accountants, as indicated in their reports
with respect thereto, and are included herein in reliance upon the authority of
said firm as experts in giving said reports.
28
<PAGE> 29
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<PAGE> 30
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<PAGE> 31
------------------------------------------------------
------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST
NOT RELY ON ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS IS
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ONLY THE SHARES OFFERED
HEREBY, BUT ONLY UNDER CIRCUMSTANCES AND IN JURISDICTIONS WHERE IT IS LAWFUL TO
DO SO. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CURRENT ONLY AS OF ITS
DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Where You Can Find More
Information........................ 2
Certain Information About This
Prospectus......................... 2
Cautionary Note Regarding Forward-
Looking Statements................. 3
Prospectus Summary................... 4
Risk Factors......................... 10
Use of Proceeds...................... 20
Price Range of Common Stock and
Dividend Policy.................... 21
Capitalization....................... 22
Dilution............................. 23
Description of Capital Stock......... 24
Underwriting......................... 26
Legal Matters........................ 28
Experts.............................. 28
</TABLE>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
2,000,000 SHARES
[MINDSPRING LOGO]
COMMON STOCK
--------------------
PROSPECTUS
--------------------
ING BARING FURMAN SELZ LLC
DONALDSON, LUFKIN & JENRETTE
J.C. BRADFORD & CO.
WHEAT FIRST UNION
JEFFERIES & COMPANY, INC.
DECEMBER 14, 1998
------------------------------------------------------
------------------------------------------------------
