MINDSPRING ENTERPRISES INC, S-3/A, 1999-04-07

MINDSPRING ENTERPRISES INC
S-3/A, 1999-04-07
PREPACKAGED SOFTWARE

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 7, 1999

REGISTRATION NO. 333-74151
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------

Amendment No. 2

To
FORM S-3
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
------------------------------------
MINDSPRING ENTERPRISES, INC.
(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 58-2113290
(State of Organization) (I.R.S. Employer Identification Number)
</TABLE>

------------------------------------

1430 WEST PEACHTREE STREET, SUITE 400 ATLANTA, GA 30309 (404) 815-0770
(Address and telephone number of principal executive offices)
------------------------------------

CHARLES M. BREWER
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
MINDSPRING ENTERPRISES, INC.
1430 WEST PEACHTREE STREET, SUITE 400
ATLANTA, GA 30309
(404) 815-0770
(Name, address and telephone number of agent for service)
------------------------------------
COPIES TO:
NANCY J. KELLNER, ESQ.
HOGAN & HARTSON L.L.P.
555 THIRTEENTH STREET, N.W.
WASHINGTON, D.C. 20004-1109
(202) 637-5600
------------------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after this registration statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ].
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------------------
CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM PRICE MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED (1) REGISTERED (2) PER SECURITY OFFERING PRICE (2)(3) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt Securities.............................. (4) (4) (4)
Preferred Stock, par value $0.01 per share... (4) (4) (4)
Depositary Shares, representing Preferred
Stock....................................... (4) (4) (4)
Common Stock, par value $0.01 per share...... (4) (4) (4)
Warrants (5)................................. (4) (4) (4)
Stock Purchase Contracts and Stock Purchase
Units (6)................................... (4) (4) (4)
Subscription Rights (7)...................... (4) (4) (4)
- ---------------------------------------------------------------------------------------------------------------------------------
Total....................................... $800,000,000 (7) (4) $800,000,000 (8) $222,400 (9)(10)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) The securities covered by this registration statement may be sold or
otherwise distributed separately, together or as units with other securities
covered by this registration statement. This registration statement covers
offers, sales and other distributions of the securities listed in this table
from time to time at prices to be determined, as well as debt securities
issuable upon the exercise of debt warrants so offered or sold, shares of
preferred stock distributable upon the termination of a deposit arrangement for
depositary shares so offered or sold, and shares of common stock issuable upon
the exchange or conversion of debt securities or shares of preferred stock so
offered or sold that are exchangeable for or convertible into shares of common
stock or upon the exercise of common stock warrants or rights so offered, sold
or distributed. This registration statement also covers debt securities, shares
of preferred stock, depositary shares, shares of common stock, warrants and
rights that may be offered or sold under delayed delivery contracts pursuant to
which the counterparty may be required to purchase such securities, as well as
such contracts themselves. Such contracts would be issued with the debt
securities, shares of preferred stock, depositary shares, shares of common
stock, warrants and/or rights.
(2) In U.S. dollars or the equivalent thereof for any security denominated in
one or more, or units of two or more, foreign currencies or composite currencies
based on the exchange rate at the time of sale. Debt securities may be issued
with original issue discount such that the aggregate initial public offering
price will not exceed $800,000,000, together with the other securities issued
hereunder.
(3) Estimated solely for purposes of calculating the registration fee under
Rule 457.
(4) Omitted pursuant to General Instruction II.D of Form S-3 under the
Securities Act of 1933, as amended.
(5) The warrants covered by this registration statement may be debt warrants,
preferred stock warrants, depositary share warrants or common stock warrants.
(6) Stock purchase contracts and stock purchase units with respect to common
stock or preferred stock.
(7) Subscription rights evidencing the right to purchase debt securities,
common stock, preferred stock, depositary shares or warrants.
(8) The aggregate maximum offering price of all securities issued under this
registration statement will not exceed $800,000,000. No separate consideration
will be received for shares of preferred stock or common stock that are issued
upon conversion or exchange of debt securities, shares of preferred stock or
depositary shares registered hereunder or for shares of preferred stock
distributed upon termination of a deposit arrangement for depositary shares.
(9) Calculated under Rule 457(o) of the rules and regulations under the
Securities Act of 1933, as amended.
(10) Previously paid.
------------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

The information in this preliminary prospectus supplement is not complete
and may be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective.
This preliminary prospectus supplement is not an offer to sell these
securities and it is not soliciting an offer to buy these securities in any
jurisdiction where the offer or sale is not permitted.

Subject to Completion. Dated April 7, 1999.

Prospectus Supplement to Prospectus Dated April , 1999.

2,000,000 Shares
[MINDSPRING LOGO]

Common Stock

------------------------

MindSpring Enterprises, Inc. is offering to sell 2,000,000 shares of its
common stock in the offering. MindSpring's common stock is traded on the Nasdaq
National Market under the symbol "MSPG." On April 6, 1999, the last reported
sale price for the common stock on the Nasdaq National Market was $105.38 per
share.

Concurrently with this common stock offering and by a separate prospectus
supplement, MindSpring is offering $155,000,000 principal amount of convertible
subordinated notes due 2006, plus up to an additional $23,250,000 principal
amount of notes to cover over-allotments by the underwriters for that offering.
The completion of the notes offering and the common stock offering are not
dependent on one another.

See "Risk Factors" beginning on page S-11 of this prospectus supplement to
read about important factors you should consider before buying shares of the
common stock.

------------------------

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

------------------------

<TABLE>
<CAPTION>
Per Share Total
--------- --------
<S> <C> <C>
Initial public offering price............................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to MindSpring.................... $ $
</TABLE>

The underwriters may, under certain circumstances, purchase up to an
additional 300,000 shares from MindSpring at the initial public offering price
less the underwriting discount.

------------------------

The underwriters expect to deliver the shares against payment in New York,
New York on , 1999.

GOLDMAN, SACHS & CO.
ING BARING FURMAN SELZ LLC
J.C. BRADFORD & CO.
DONALDSON, LUFKIN & JENRETTE
FIRST UNION CAPITAL MARKETS CORP.
JEFFERIES & COMPANY, INC.
------------------------
Prospectus Supplement dated , 1999.
<PAGE> 3

THIS PROSPECTUS SUPPLEMENT INCLUDES PRODUCT NAMES AND TRADEMARKS OF
MINDSPRING ENTERPRISES, INC. AND OF OTHER ORGANIZATIONS.
------------------------

There are restrictions on the offer and sale of the common stock in the
United Kingdom. All applicable provisions of the Financial Services Act 1986 and
the Public Offers of Securities Regulations 1995 with respect to anything done
by any person in relation to the common stock in, from or otherwise involving
the United Kingdom must be complied with. See "Underwriting".

------------------------

IN CONNECTION WITH THIS ISSUE GOLDMAN, SACHS & CO. AND ITS AFFILIATES MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE
OF THE COMMON STOCK AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKETS
OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

S-2
<PAGE> 4

SUMMARY

This summary highlights more detailed information contained elsewhere in
this prospectus supplement. 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 supplement and the accompanying
prospectus carefully, especially the risks of investing in our common stock
discussed under "Risk Factors." Unless otherwise stated, all of the information
in this prospectus supplement assumes that the underwriters' over-allotment
option is not exercised. All share data in this prospectus supplement reflect a
3-for-1 stock split of our common stock effected on July 24, 1998.

ABOUT MINDSPRING

OUR BUSINESS

MindSpring is a leading national Internet service provider, or ISP. We
focus on serving individuals and small businesses. Our primary service offerings
are dial-up Internet access and business services, which we offer in various
price and usage plans designed to meet the needs of our subscribers. Our
business services include Web hosting, which entails maintaining a customer's
Internet Web site; high-speed, dedicated Internet access; Web page design;
domain name registration and customer Web server co-location. Web hosting, our
principal business service, complements our Internet access business and is one
of the fastest growing segments of the Internet marketplace.

We offer our subscribers complete Internet access and Web hosting
solutions, emphasizing:

- user-friendly and easy to install 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 nationwide network that enables subscribers in the 48
contiguous U.S. states and the District of Columbia to access the
Internet via a local telephone call.

OUR GROWTH HISTORY AND PROFITABILITY

Over the past three years, we have rapidly increased our subscriber base
and revenues by:

- providing superior customer service and technical support;

- expanding our 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.

Our subscriber base has grown from approximately 12,000 subscribers at
December 31, 1995, to over 693,000 subscribers at December 31, 1998, including
over 21,000 Web hosting customers. In February 1999, we completed the NETCOM
acquisition, which increased our subscriber base to approximately 1.1 million
subscribers, including approximately 45,000
S-3
<PAGE> 5

Web hosting subscribers. As a result, MindSpring is currently the fourth largest
ISP in the U.S. in terms of the number of subscribers.

By providing superior service and support to our subscribers, making good
build-versus-buy network decisions and achieving significant market penetration
in a number of our target markets, we have achieved profitability ahead of many
other national ISPs. In the last quarter of 1998, we had revenues of $39.5
million, EBITDA of $7.3 million and net income of $3.7 million. At that time,
our EBITDA margin, meaning EBITDA as a percentage of revenues, was 18% and our
earnings per share were $0.13.

Our executive offices are located at 1430 West Peachtree St., 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.net. Information contained at our Web site is not, and should not
be deemed to be, a part of this prospectus supplement.

OUR TARGET SUBSCRIBER GROUP AND MARKET DEMAND

The demand for Internet access and business services by MindSpring's target
subscriber group of individuals and small businesses is increasing rapidly.
Trends contributing to this growth in demand include:

- heightened consumer awareness of the Internet;

- the increasing number of people who have computers with modems due in
part to lower prices; and

- the expanding diversity of information, entertainment and commercial
offerings available on the Internet and the World Wide Web.

According to International Data Corporation, total United States ISP
revenues are projected to grow from approximately $10.7 billion in 1997 to
approximately $37.4 billion in 2003. In addition, International Data Corporation
estimates that the number of users accessing the World Wide Web will increase
from approximately 97 million at the end of 1998 to approximately 320 million in
2002.

In addition to Internet access services, an increasing number of Internet
users are taking advantage of value-added services such as Web hosting and Web
page design. We believe that value-added services, such as those included in
MindSpring's business service offerings, are among the fastest growing segments
of the ISP marketplace. International Data Corporation estimates that revenues
attributable to value-added services are projected to increase in the United
States at a compounded annual growth rate of approximately 34%, from $3 billion
in 1998, to $12.9 billion in 2003. MindSpring believes that there is a growing
and unsatisfied demand among individuals and small businesses for high-quality
Internet access, Web hosting and other value-added Internet services such as Web
page design and e-commerce services.

MINDSPRING STRATEGY

MindSpring's objective is to strengthen our position as a leading national
provider of high quality Internet access, Web hosting and other value-added
services to individuals and
S-4
<PAGE> 6

small businesses, as measured by customer satisfaction, subscriber growth and
financial performance. Key elements of our business strategy include:

Continuing to Provide Superior Customer Service and Technical Support

MindSpring believes that, over time, individual consumers seeking broader
access to the Internet will face increasing and significant technological
challenges, in part because the Internet is an evolving and growing medium. In
addition, as new and more complex applications designed for the Internet
proliferate, we believe that even sophisticated users, including those that have
been MindSpring subscribers for years, will periodically encounter problems.
Consequently, we intend to continue to focus on providing high levels of
customer service and technical support in an effort to achieve maximum levels of
customer satisfaction. Historically, this strategic focus has resulted in low
churn rates, significant subscriber growth from customer referrals and industry
recognition. We have received numerous customer service awards, including PC
Computing's 1998 MVP Award for Best National ISP. Currently, over half of our
employees are engaged in a customer service or technical support function and
are available 24 hours a day, seven days a week, except for major holidays.

Efficiently Expanding Our National Network

MindSpring intends to continue to efficiently increase the capacity and
geographic reach of our network in order to support subscriber growth, enter new
markets and accommodate increased customer usage. We pursue a hybrid network
strategy of (1) owning POPs in mature markets where we can efficiently deliver
high quality access services and (2) leasing POPs and capacity from third-party
network service providers in new or developing markets. This strategy allows us
the flexibility to modify our network cost structure on a market-by-market
basis. As of December 31, 1998, approximately 61% of MindSpring's subscribers
accessed the Internet through a MindSpring-owned POP. As a result of the NETCOM
acquisition, this percentage has decreased significantly because most of the
approximately 400,000 subscribers we acquired from NETCOM access the Internet
using third-party POPs to which we have access under our network services
agreement with ICG PST, Inc., formerly known as NETCOM.

Expanding Our Targeted Marketing and Distribution Activities

We plan 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 improve network
economics and reduce subscriber acquisition costs, thereby resulting in higher
margins. While continuing to encourage referrals from existing subscribers, we
plan to increase our print publication, radio, television and direct mail
advertising in certain targeted metropolitan areas throughout the U.S. In
addition, we will continue to pursue nationwide strategic alliances and retail
opportunities to broaden our distribution. We currently have such relationships
with, among others, Microsoft, 3Com(R) Corporation, Compaq and IBM.

Increasing Our Revenues from Value-Added Services

We intend to continue to build on our current sales, marketing and network
capabilities to create additional revenue opportunities from value-added
services such as Web hosting, Web page design and co-location services. We
believe that value-added services are among the fastest growing segments of the
Internet marketplace. We began offering Web hosting services in 1995 and
currently have approximately 45,000 Web hosting subscribers, including
S-5
<PAGE> 7

approximately 22,000 Web hosting accounts acquired from NETCOM in February 1999.
Web hosting represents approximately 13% of our revenues and is an area of
strategic growth for MindSpring.

Engaging in Selected Acquisitions

Since early 1996, we have supplemented our internal expansion efforts
through selected acquisitions of complementary businesses and subscriber
accounts. As MindSpring continues to expand, we may continue to pursue this
strategy. We believe that as the ISP market evolves, customers will place ever
greater emphasis on ISP performance, network coverage, reliability, and support.
As a result, smaller ISPs may be unable to remain competitive on a national or
regional basis, unless they significantly expand the scope of their operations.
These trends could lead to greater industry consolidation and, consequently,
acquisition opportunities. We intend to continue to evaluate acquisition
opportunities as they become available.

RECENT DEVELOPMENTS

- Acquisitions

We recently completed two substantial acquisitions:

Spry Acquisition. In October 1998, we purchased substantially all of
Spry, Inc.'s subscriber base of individual dial-up Internet access
customers in the United States and Canada, including approximately 130,000
individual access accounts. We also acquired various assets used in serving
those customers, including a leased customer support facility and a leased
network operations facility in Seattle, Washington and all rights to the
"Sprynet" name. Spry is a wholly owned subsidiary of America Online, Inc.
The purchase price for these assets was approximately $32 million.

NETCOM Acquisition. In February 1999, we purchased substantially all
of NETCOM On-Line Communication Services, Inc.'s subscriber accounts in the
U.S., including approximately 371,000 individual access accounts,
approximately 3,000 dedicated Internet access accounts and approximately
22,000 Web hosting accounts. NETCOM, now known as ICG PST, Inc., is a
wholly owned subsidiary of ICG Communications, Inc. MindSpring also
acquired assets used in serving those customers, including leased
operations facilities in San Jose, California and Dallas, Texas and ICG
PST's rights to the "NETCOM" name (except in Canada, the United Kingdom and
Brazil). ICG PST retained all of its assets used in connection with its
network operations. Under a separate network services agreement with ICG
PST, we purchase access to ICG PST's network. We paid $245 million for the
NETCOM assets, consisting of $215 million in cash and $30 million in
MindSpring common stock.

- Credit Facility

On February 17, 1999, we entered into a credit agreement with First Union
National Bank and certain other lenders. The credit agreement provides for a
$100 million revolving credit facility that may be increased at our option to
$200 million with the approval of First Union National Bank and the other
lenders under the credit agreement. The credit facility will mature on February
17, 2002. The credit facility is to be used to fund working capital and for
general corporate purposes including permitted acquisitions. On February 17,
1999, we borrowed approximately $80 million under the credit facility to finance
the NETCOM acquisition, which we intend to repay in full with a portion of the
proceeds from this offering. Our obligations under the credit facility are
secured by substantially all of our assets. See "Description of Secured Credit
Facility" and "Use of Proceeds."
S-6
<PAGE> 8

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
assuming a public price per share of $105, the
total public price, underwriting discounts, and
proceeds to MindSpring will be $241.5 million,
$10.3 million and $231.2 million, respectively.

Shares to be outstanding after
the offering................ 30,918,264 shares, based on the number of
shares of common stock outstanding on March 31,
1999. This does not include an aggregate of
2,486,974 shares issuable upon exercise of
stock options granted as of March 31, 1999.
This figure also assumes that the underwriters
do not exercise their over-allotment option.

Use of proceeds............... - to repay all amounts outstanding under our
secured credit facility

- for use in expansion of our business

- as additional working capital for general
corporate purposes

- for possible strategic acquisitions of
subscriber accounts and complementary
businesses

Nasdaq National Market
Symbol........................ MSPG

RISK FACTORS.................. YOU SHOULD READ THE "RISK FACTORS" SECTION,
BEGINNING ON PAGE S-11 OF THIS PROSPECTUS
SUPPLEMENT, AS WELL AS THE OTHER CAUTIONARY
STATEMENTS THROUGHOUT THE ENTIRE PROSPECTUS, TO
ENSURE THAT YOU UNDERSTAND THE RISKS ASSOCIATED
WITH AN INVESTMENT IN OUR COMMON STOCK.

CONCURRENT NOTES OFFERING..... CONCURRENTLY WITH THIS COMMON STOCK OFFERING
AND BY A SEPARATE PROSPECTUS SUPPLEMENT,
MINDSPRING IS OFFERING $155,000,000 PRINCIPAL
AMOUNT OF CONVERTIBLE SUBORDINATED NOTES DUE
2006, PLUS UP TO AN ADDITIONAL $23,250,000
PRINCIPAL AMOUNT OF NOTES TO COVER
OVER-ALLOTMENTS BY THE UNDERWRITERS FOR THAT
OFFERING. THE COMPLETION OF THE NOTES OFFERING
AND THIS COMMON STOCK OFFERING ARE NOT
DEPENDENT ON ONE ANOTHER.

S-7
<PAGE> 9

SUMMARY FINANCIAL AND OPERATING DATA

You should read the following summary historical financial and operating
data along with the sections entitled "Use of Proceeds," "Selected Financial and
Operating Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and MindSpring's financial statements and notes
thereto and other financial and operating data included elsewhere in this
prospectus supplement and the accompanying prospectus or incorporated into this
prospectus supplement and the accompanying prospectus by reference.

The inception period referred to in the table below is the period from
February 24, 1994, MindSpring's inception, to December 31, 1994.

The pro forma diluted earnings per share information and the balance sheet
data presented below exclude the effects of the NETCOM acquisition and
borrowings under our secured credit facility, both of which occurred on February
17, 1999. See note 10 to MindSpring's audited Financial Statements for the
fiscal year ended December 31, 1998 included in this prospectus supplement at
page F-18 for certain pro forma and other information concerning these and other
events. Also see our Current Report on Form 8-K filed with the SEC on February
25, 1999 for more detailed pro forma information.

The pro forma diluted earnings per share information and the adjusted
balance sheet data contained in the following table give effect to the sale of
2,000,000 shares of common stock offered by MindSpring by this prospectus
supplement and the accompanying prospectus assuming a price to the public of
$105 per share. This assumes an increase to cash and cash equivalents and
working capital of $200.6 million upon completion of this offering, which amount
equals the aggregate estimated net proceeds of the offering. See the section
entitled "Use of Proceeds" in this prospectus supplement for a description of
MindSpring's specific plans for the application of the net proceeds from this
offering.

The "as further adjusted" balance sheet data reflects the concurrent sale
by MindSpring of $155,000,000 principal amount of notes, net of $4.9 million
which consists of the assumed underwriting discount and MindSpring's estimated
offering expenses, and the application of the proceeds from that offering. See
"Use of Proceeds."

The total debt information included in the balance sheet data presented
below contains the current portion of related indebtedness and the stockholders'
equity information included in the balance sheet data presented below excludes
approximately 2,123,000 shares of common stock reserved for issuance upon
exercise of stock options granted as of December 31, 1998.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
INCEPTION -------------------------------------
PERIOD 1995 1996 1997 1998
--------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Access................................... $ 70 $ 1,455 $13,420 $40,925 $95,852
Business services........................ -- 260 2,286 7,711 14,735
Subscribers start-up fees................ 33 512 2,426 3,920 4,086
----- ------- ------- ------- -------
Total revenues...................... 103 2,227 18,132 52,556 114,673
Cost and expenses:
Cost of revenues -- recurring............ 37 627 6,332 15,203 31,724
</TABLE>

S-8
<PAGE> 10

<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
INCEPTION -------------------------------------
PERIOD 1995 1996 1997 1998
--------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Cost of subscriber start-up fees......... 15 339 1,876 1,619 2,612
Selling, general and administrative...... 121 2,230 14,161 30,784 57,324
Depreciation and amortization............ 5 265 3,285 8,695 15,227
----- ------- ------- ------- -------
Total operating expenses............ 178 3,461 25,654 56,301 106,887
----- ------- ------- ------- -------
Operating gain (loss)...................... (75) (1,234) (7,522) (3,745) 7,786
Interest income (expense), net............. -- (725) (90) (338) 1,214
----- ------- ------- ------- -------
Income before income taxes................. (75) (1,959) (7,612) (4,083) 9,000
Income tax provision....................... -- -- -- -- 1,544
----- ------- ------- ------- -------
Net income (loss).......................... $ (75) $(1,959) $(7,612) $(4,083) $10,544
===== ======= ======= ======= =======
Diluted earnings (loss)
per share................................ $ (0.20) $ (0.48) $ (0.18) $ 0.41
Pro forma diluted earnings per share(1).... $ 0.38
Diluted weighted average common shares
outstanding.............................. 9,930 15,758 22,542 25,431
OTHER OPERATING DATA:
Approximate number of subscribers at end of
period................................... 1,000 12,000 122,000 278,000 693,000
Approximate number of employees at end of
period................................... 8 95 321 502 977
EBITDA(2).................................. $ (70) $ (969) $(4,237) $ 4,950 $23,013
EBITDA margin(2)........................... (68)% (44)% (23)% 9% 20%
CASH FLOW DATA:
Operations............................... (33) (70) (2,005) 11,354 35,501
Investing................................ (127) (3,724) (21,336) (9,002) (47,647)
Financing................................ 745 3,634 32,569 (2,619) 170,503
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------------------------------
HISTORICAL AS ADJUSTED AS FURTHER ADJUSTED
---------- ----------- -------------------
<S> <C> <C> <C>
BALANCE SHEET DATA:(1)
Cash and cash equivalents....................... $167,743 $368,317 $518,417
Working capital................................. 137,106 337,680 487,870
Total assets.................................... 247,599 448,173 603,173
Total debt, including current maturities........ 5,119 5,119 160,119
Total stockholders' equity...................... 207,081 407,655 407,655
</TABLE>

- ---------------
(1) The pro forma diluted earnings per share information and the balance sheet
data exclude the effects of the NETCOM acquisition and borrowings under our
secured credit facility, both of which occurred on February 17, 1999. These
transactions would (1) reduce cash and cash equivalents by $135 million, (2)
increase total debt by $80 million and (3) increase stockholders' equity by
$30 million on a historical basis. On an "adjusted basis" and on an "as
further adjusted basis," cash and cash equivalents would decrease by
approximately $215 million and stockholders' equity would increase by $30
million. See note 10 to MindSpring's audited Financial Statements for the
fiscal year ended December 31, 1998 included in this prospectus supplement
at page F-18 for certain pro forma and other information concerning these
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and other events. Also see our Current Report on Form 8-K filed with the SEC
on February 25, 1999 for more detailed pro forma information.

(2) 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 MindSpring's operating performance, financial position
and cash flows. EBITDA is not necessarily comparable with similarly titled
measures for other companies.
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RISK FACTORS

In addition to the other information contained in this prospectus
supplement and the prospectus which it accompanies, 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. Before 1998, we had
incurred annual operating losses in each year since we started our business. Our
annual net losses since 1995 and our accumulated deficit as of December 31, 1998
are as follows:

<TABLE>
<CAPTION>
ANNUAL ACCUMULATED DEFICIT
NET LOSS AS OF DECEMBER 31, 1998
---------- -----------------------
<S> <C> <C>
1995................................ $1,959,000
1996................................ $7,612,000
1997................................ $4,083,000
1998................................ N/A $3,185,000
</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. We may not succeed in increasing revenue while
maintaining or reducing per subscriber costs or achieving or sustaining 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.

THERE ARE RISKS ASSOCIATED WITH OUR ACQUISITIONS OF SUBSCRIBER ACCOUNTS,
INCLUDING THE SPRY AND NETCOM ACQUISITIONS.

As part of our business strategy, we have acquired subscriber accounts and
related assets from other companies. In October 1998, we acquired approximately
130,000 subscribers and related assets of Spry, Inc. from America Online, Inc.
In February 1999, we completed the acquisition of approximately 400,000
subscribers from NETCOM On-Line Communication Services, Inc., now known as ICG
PST, Inc., a wholly owned subsidiary of ICG Communications, Inc. We will
continue to evaluate strategic acquisitions of businesses and subscriber
accounts principally relating to our current operations. These transactions
commonly involve risks. These risks include, among others, that:

- we may experience difficulty in assimilating the acquired operations and
personnel;

- the acquisition may disrupt our ongoing business;

- the acquisition may divert management's attention from our ongoing
business;

- we may not be able to successfully incorporate acquired assets and
technology into our service offerings;

- we may not be able to maintain uniform standards, controls, procedures,
and policies;

- we may lack the necessary experience to enter new markets and add new
services; and

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- 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 the Spry and NETCOM acquisitions or any future
transactions. In addition, these transactions and any future transaction could
require us to (1) issue additional equity securities, which would dilute our
stockholders, (2) incur additional debt, or (3) amortize acquisition or
debt-related expenses for goodwill and other intangible assets. We were required
to take each of these actions to complete the NETCOM acquisition. Any of these
actions could have a material adverse effect on our business, operating results
and financial condition.

WE CANNOT ASSURE YOU THAT WE WILL EFFECTIVELY MANAGE OUR GROWTH.

We may not be successful in effectively managing our growth. Our rapid
growth has in the past placed, and may in the future place, a significant strain
on our business and financial resources. The rapid expansion of our subscriber
base, including through the Spry and NETCOM acquisitions, has placed increasing
demands on our customer service and technical support resources. Failure to
manage our recent and anticipated growth could have a material adverse effect on
our business, results of operations and financial condition.

For us to effectively (1) manage our rapidly growing operations, (2)
successfully integrate newly acquired assets, including those acquired in the
Spry and NETCOM acquisitions, and (3) continue to implement a nationwide
strategy and network, we must:

- continue to implement and improve our operational, financial, and
management information systems;

- closely monitor service quality, particularly through third-party
points-of-presence, or "POPs";

- integrate leased physical sites;

- acquire and install necessary equipment and telecommunications
facilities;

- implement marketing efforts in new and existing markets, which may
involve expanding our marketing strategy to include telemarketing and
other methods;

- add new services and provide related customer and technical support;

- employ qualified personnel to provide technical and marketing support for
new sites;

- identify, attract, train, integrate, and retain other qualified
personnel, including new management personnel;

- develop additional expertise; and

- continue to expand our operational and financial resources.

WE HAVE SIGNIFICANT DEBT AND WE MAY BE UNABLE TO SERVICE THAT DEBT.

On February 17, 1999, we entered into a credit agreement with First Union
National Bank and other lenders establishing a $100 million secured revolving
credit facility. Also on February 17, 1999, we borrowed approximately $80
million under the credit facility to finance the NETCOM acquisition. At December
31, 1998, giving effect to the Spry acquisition, the

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NETCOM acquisition and the borrowings under the credit facility as if they had
occurred on January 1, 1998:

- we would have had $85.1 million of indebtedness;

- stockholders' equity would have been $237.1 million; and

- our earnings would have been insufficient to cover our fixed charges for
the year ended December 31, 1998 by $96.2 million.

Even if we repay all amounts outstanding under our credit facility, we will
have significant additional debt upon completion of the notes offering we are
undertaking concurrently with this offering. We cannot assure you that we will
be able to improve our earnings before fixed charges or that we will be able to
meet our debt service obligations under our credit facility or the notes. We
will be in default under the terms of our credit facility if (1) we are unable
to generate sufficient cash flow or otherwise obtain funds necessary to make
required payments, or (2) we otherwise fail to comply with the various covenants
in our debt obligations. A default would permit the holders of the indebtedness
to accelerate its maturity. This, in turn, would have a material adverse effect
on our business, financial condition and results of operations. In addition, we
are required under the terms of the credit facility to obtain, by May 19, 1999,
landlord consents under some of our operating leases. If we do not obtain these
consents by the required date, the lenders' commitment under the credit facility
could be reduced to $20 million, which could have a material adverse effect on
our business, financial condition and results of operations.

Even if we are able to meet our debt service obligations, the amount of
debt we have could adversely affect us in a number of ways, including by:

- limiting our ability to obtain any necessary financing in the future for
working capital, capital expenditures, debt service requirements or other
purposes;

- limiting our flexibility in planning for, or reacting to, changes in our
business;

- placing us at a competitive disadvantage to those of our competitors
having lower levels of debt;

- making us more vulnerable to a downturn in our business or the economy
generally; and

- requiring us to use a substantial portion of our cash flow from
operations to pay principal and interest on our debt, instead of
contributing those funds to other purposes, such as working capital and
capital expenditures.

To be able to meet our obligations under our credit facility, we must
successfully implement our business strategy, which includes:

- expanding our network;

- attracting or acquiring and retaining a significant number of
subscribers; and

- achieving significant and sustained growth in our cash flow.

We cannot assure you that we will successfully implement our business
strategy or that we will be able to generate sufficient cash flow from operating
activities to meet our debt service obligations and working capital
requirements. Our ability to meet our obligations will be dependent upon our
future performance, which will in turn depend upon prevailing economic
conditions and financial, business and other factors.

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If the implementation of our business strategy is delayed or unsuccessful,
or if we do not generate sufficient cash flow to meet our debt service and
working capital requirements, we may need to seek additional financing. If we
are unable to obtain necessary financing on terms that are acceptable to us, we
could be forced to dispose of assets to make up for any shortfall in the
payments due on our indebtedness under circumstances that might not be favorable
to realizing the highest price for those assets. A substantial portion of our
assets consist of intangible assets, the value of which will depend upon a
variety of factors, including the success of our business. As a result, we
cannot assure you that our assets could be sold quickly enough, or for amounts
sufficient, to meet our obligations.

If we are unable to amend our credit facility, it will terminate when we
complete the notes offering.

Under the current terms of the credit facility, even if no borrowings are
outstanding, the total commitment under the credit facility is reduced by the
total net cash proceeds from debt issuances, including the notes offering.
Therefore, if we complete the notes offering, and even if the underwriters do
not exercise their over-allotment option, the credit facility will effectively
terminate when we complete the notes offering, unless we are able to negotiate
amendments to the credit agreement on terms that are acceptable to us. We are in
negotiations with First Union National Bank, one of the lenders and
administrative agent for the other lenders, regarding amendments that would
permit us to issue the notes and maintain some or all of the commitment under
the credit facility. However, we cannot assure you that the amendments will be
completed on a timely basis or at all.

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. In particular, our revenue depends on our ability to attract and
keep subscribers. We normally offer our new subscribers a 30-day money-back
satisfaction guarantee. In addition, our subscribers, including the recently
acquired Spry and NETCOM subscribers, may discontinue their service at the end
of any month for any reason. We incur some 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.

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Our operating results, cash flows and liquidity may also fluctuate
significantly in the future due to other factors beyond our control which
include:

- how quickly we are able to acquire new subscribers;

- how expensive it will be to acquire new subscribers;

- the impact of increased depreciation and amortization from acquisitions;

- 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 we experience business 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;

- the extent to which we experience increased competition in our markets;
and

- other general economic factors.

Due to all of the foregoing factors, it is likely that in some future
periods, our operating results and/or our 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.

Technology and industry standards relating to our business are constantly
evolving and our success depends on our ability to keep pace with these
developments.

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.

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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
speeds than the modems that we and most of 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 will have to continue to modify and expand the means by which we deliver
our services. As discussed below, our ability to offer cable wire access to our
subscribers may depend on our ability to negotiate agreements with cable
companies and, therefore, may be very limited. Our pursuit of technological
advances, such as a new technology called Digital Subscriber Lines, or "DSL,"
that uses telephone lines for high-speed data transfers, may require substantial
time and expense. 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 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 further 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:

- fund growth, operating losses and increases in expenses;

- 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

- otherwise respond to unanticipated developments or competitive pressures.

If we do not have enough cash on hand, cash generated from our operations,
or cash available under our credit facility 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 needed 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 to the extent of available funding and attempt to attain
profitability in our existing operations.

OUR BUSINESS DEPENDS ON OUR NETWORK INFRASTRUCTURE, INCLUDING OUR ABILITY TO
OBTAIN SUFFICIENT NETWORK CAPACITY.

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

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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, which affects only subscribers attempting to use
the particular POP, and in connection with system-wide 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. We will sometimes temporarily delay adding new
subscribers in cities experiencing significant capacity constraints until the
capacity constraints can be alleviated. This is done to protect the service
levels for current subscribers. 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 our 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.

WE ARE DEPENDENT ON THIRD-PARTY NETWORK PROVIDERS.

In a significant number of markets, we provide Internet access exclusively
through third-party POPs. Our ability to provide Internet access to our
subscribers will be limited if (1) third-parties are unable or unwilling to
provide POP access to our subscribers, (2) we are unable to secure alternative
POP arrangements upon partial or complete termination of third-party network
provider agreements or (3) 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 under our current arrangements,
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
alternative POP arrangements, although there are some geographic overlaps among
our current 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, the
performance of third-party providers may not meet our requirements, which could
materially adversely affect our business, financial condition and results of
operations.

In connection with the NETCOM acquisition, we entered into a network
services agreement with NETCOM, which has changed its name to ICG PST, Inc. We
expect to provide service to the majority of subscribers we acquired from NETCOM
under this agreement which, at least for the first year of the agreement, will
be at favorable rates. However, ICG PST is just beginning to offer network
services as a third-party provider for companies like MindSpring. We cannot be
sure that this network agreement will be adequate to provide the level of
service we require for our subscribers, and there may be operating
inefficiencies, network reliability issues or technical support difficulties
that are outside of our control.

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OUR OPERATIONS AND SERVICES ARE VULNERABLE TO NATURAL DISASTERS.

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 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 may experience disruptions or capacity constraints in
these telecommunications services. If disruptions or capacity constraints occur,
we may have no means of replacing these services, on a timely basis or at all.
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
when or to what extent this will occur or the effect of increased competition on
pricing or supply.

We depend on a few third-party suppliers of hardware components. Currently,
we acquire some components we use to provide our networking services from only
one source, including modems and terminal servers manufactured by 3Com(R)
Corporation 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 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.

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OUR NETWORK IS VULNERABLE TO SECURITY BREACHES AND INAPPROPRIATE USE BY INTERNET
USERS WHICH COULD DISRUPT OUR SERVICE.

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 or "spam," 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 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 security 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 failure by us to prevent these network malfunctions and security
breaches. 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 business 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 may not be able to compete
successfully against current or future competitors, many of whom may have
financial resources greater than ours. Increased competition could cause us to
increase our selling and marketing expenses and related subscriber acquisition
costs and could also result in increased subscriber attrition. We may not be
able to offset the effects of these 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. These developments
could adversely affect our business, financial condition and results of
operations.

COMPETITIVE FACTORS. We believe that the primary competitive factors
determining success in the Internet access and business services 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. Our current and prospective competitors include many
large companies that have substantially greater market presence and financial,

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technical, marketing, and other resources. In addition, every local market that
we have entered or intend to enter is served by multiple local ISPs.

OUR COMPETITORS. 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 ISPs, such as EarthLink Network, Inc.;

- computer hardware and software and other technology companies, such as
IBM Corp. and Microsoft Corporation;

- numerous regional and local commercial ISPs which vary widely in quality,
service offerings, and pricing;

- national and regional Web hosting companies that focus primarily on
providing Web hosting services;

- cable operators and on-line cable services;

- local telephone companies and regional Bell operating companies; and

- nonprofit or educational ISPs.

We believe that new competitors, including large computer hardware and
software, media, and telecommunications companies, will continue to enter the
Internet access and business services markets. As consumer awareness of the
Internet grows, existing competitors are likely to further increase their
emphasis on their Internet access and business services, resulting in even
greater competition for us. In addition, telecommunications companies may be
able to offer customers reduced communications costs in connection with these
services, reducing the overall cost of their Internet access and business
services solutions and significantly increasing pricing pressures on us. The
ability of our competitors to acquire other ISPs, to enter into strategic
alliances or joint ventures or to bundle other services and products with
Internet access or business services could also put us at a significant
competitive disadvantage.

BROADBAND TECHNOLOGIES. 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. These companies may use
broadband technologies to include Internet access or business services such as
Web hosting in their basic bundle of services or may offer Internet access or
business services for a nominal additional charge. Broadband technologies enable
consumers to transmit and receive print, video, voice and data in digital form
at significantly faster access speeds than existing dial-up modems.

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be successful in establishing their authority to do so. Similarly, the FCC is
considering proposals that could limit the right of ISPs to connect with their
customers over broadband local telephone lines. In addition to competing
directly in the ISP market, both cable and telephone facilities operators are
also aligning themselves with certain ISPs who would receive preferential or
exclusive use of broadband local connections to end users. If high-speed,
broadband facilities increasingly become the preferred mode by which customers
access the Internet and we are unable to gain access to these facilities on
reasonable terms, our business, financial condition and results of operations
could be materially adversely affected.

NO INTERNATIONAL OPERATIONS. We do not currently compete internationally,
except that we have a small number of Canadian subscribers obtained in the Spry
acquisition. 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 some cases, licenses from each manufacturer of
the software that we bundle in MindSpring's 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 claims against us for
infringement of their proprietary rights and these claims may be successful. We
might also face third party claims as a result of our acquisition of software,
trademarks and other proprietary technology from Spry and NETCOM.

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 these 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 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, it could materially
adversely affect our business, financial condition and results of operations.

OUR SUCCESS DEPENDS UPON OUR ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL.

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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.

ITC HOLDING COMPANY, INC., ONE OF OUR PRINCIPAL STOCKHOLDERS, AND OUR
MANAGEMENT CAN EXERCISE SIGNIFICANT INFLUENCE OVER MINDSPRING.

ITC Holding Company, Inc. indirectly owns approximately 18.5% of our common
stock as of February 28, 1999. MindSpring's executive officers and directors own
an aggregate of approximately 9.6% 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 some types of change-of-control transactions. The common stock
of MindSpring owned by ITC Holding is pledged to ITC Holding's 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
MindSpring and someone unknown to us would become a significant stockholder of
MindSpring.

SOME OF OUR DIRECTORS HAVE CONFLICTS OF INTEREST INVOLVING ITC HOLDING.

ITC Holding, as a significant stockholder of MindSpring, and Campbell B.
Lanier, III, William H. Scott, III, and O. Gene Gabbard, who are directors of
MindSpring and directors, stockholders, and, in the case of Messrs. Lanier and
Scott, officers of ITC Holding, are in positions involving the possibility of
conflicts of interest with respect to transactions concerning MindSpring. Some
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 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 these 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 MindSpring 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 OUR STOCKHOLDERS TO EFFECT CHANGES IN CONTROL OF MINDSPRING IS
LIMITED.

party from attempting to acquire control of MindSpring, even if these events
would be beneficial to the interests of the stockholders. In particular, our
board of directors could delay a change in control of MindSpring. In addition,
our Amended and Restated Certificate of Incorporation authorizes the board of
directors to provide for the issuance of shares of preferred stock of
MindSpring, 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 shares of preferred stock. We are also governed by
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
specified conditions are met. These factors could have the effect of delaying,
deferring, or preventing a change of control of MindSpring.

WE MAY BECOME REGULATED BY THE FEDERAL COMMUNICATIONS COMMISSION OR OTHER
GOVERNMENT AGENCIES.

As an Internet service provider, we are not currently directly regulated by
the Federal Communications Commission 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 regulations that apply to
telephone companies and similar carriers do not apply to us. 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
some 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.

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. We cannot predict whether in the future the FCC
will modify its current policies against regulation of ISPs.

MindSpring also could be affected by any change in the ability of customers
to reach our network through a dial-up telephone call without any additional
charges. This practice has allowed ISPs to offer flat-rate, non-usage-sensitive
pricing, and has been an important reason for the growth in Internet use.
Recently, the FCC ruled that connections linking end users to their ISPs are
jurisdictionally interstate rather than local, but the FCC did not subject such
calling to the access charges that apply to 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. MindSpring could be
adversely affected by any regulatory change that would result in application of
access charges to Internet service because this would substantially increase the
cost of using the Internet. However, the FCC Chairman has stated that he opposes
Internet-related access charges, and we believe that this development is
unlikely, with one possible exception that is not currently relevant to our

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<PAGE> 25

business. Specifically, there is substantial debate as to whether carrier access
charges, or the universal support obligations discussed above, should apply to
Internet-based telephone services that substitute for conventional telephony. 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 were they
to occur.

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
take actions 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 some 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 some types of
content by minors, pricing, bulk e-mail or "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 ACHIEVE YEAR 2000 COMPLIANCE MAY HAVE ADVERSE EFFECTS ON MINDSPRING.

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 21st century from dates in the 20th
century. As a result, various problems may arise from the improper processing of
dates and date-sensitive calculations by computers and other machinery as the
Year 2000 is approached and reached.

Our failure, or the failure of third parties on which we rely, to
adequately address Year 2000 readiness issues could result in an interruption,
or a failure, of some normal business activities or operations. Presently, we
believe that the primary risks that we face with regard to the Year 2000 are
those arising from third party services or products.

In particular, MindSpring depends heavily on a significant number of third
party vendors to provide both network services and equipment. A significant Year
2000-related disruption of these network services or equipment could cause our
customers to consider seeking alternate providers or cause an unmanageable
burden on customer service and technical

S-24
<PAGE> 26

support. This in turn could materially and adversely affect MindSpring's results
of operations, liquidity and financial condition.

Furthermore, our business depends on the continued operation of, and
widespread access to, the Internet. To the extent that the normal operation of
the Internet is disrupted by the Year 2000 issue, or if a large portion of our
customers are unable to access the Internet due to Year-2000 related issues in
connection with their own systems, MindSpring's results of operations, liquidity
and financial condition could be materially and adversely affected.

We also face Year 2000 risks related to the acquisitions we make. If we
fail to identify and address Year 2000 issues in connection with our
acquisitions, our results of operations, liquidity and financial condition could
be materially and adversely affected.

We have established a Year 2000 readiness program to coordinate appropriate
activity to be taken to address the Year 2000 issue. As of December 31, 1998, we
had incurred approximately $75,000 in connection with the implementation of the
program. We expect to incur an additional $250,000 to $300,000 of expenses to
implement the remainder of the Year 2000 readiness program. These estimates do
not include additional costs which may be incurred in connection with expanding
the program to include the systems and products acquired in the Spry and NETCOM
transactions. These are our best estimates, and we do not believe that the total
costs will have a material affect on our business. However, if the actual costs
resulting from implementation of the Year 2000 readiness program significantly
exceed our estimates, they may have a material adverse effect on our results of
operations, liquidity and financial condition.

OUR CREDIT FACILITY CONTAINS RESTRICTIVE COVENANTS.

Our credit facility contains restrictions on MindSpring and any of our
future subsidiaries that affect, and in some cases prohibit or significantly
limit, our ability and the ability of our future subsidiaries, if any, to:

- incur additional indebtedness, excluding the notes from the notes
offering;

- create liens;

- make investments;

- declare and pay cash dividends;

- issue some types of convertible and redeemable stock; and

- sell assets.

Our credit facility also requires us to maintain specified financial ratios
and satisfy financial condition tests. Our ability to meet those financial
ratios and tests can be affected by events beyond our control. We can offer no
assurance that we will meet those tests. In addition, these restrictive
covenants may adversely affect our ability to finance our future operations or
capital needs, or to engage in other business activities that may be in our
interest. A breach of any of these covenants could result in a default under the
credit facility. Upon the occurrence of an event of default under the credit
facility, our lenders could elect to declare all amounts outstanding under the
credit facility, together with any accrued interest, to be immediately due and
payable. If we were unable to repay those amounts, our lenders could proceed
against the collateral granted to them to secure that indebtedness.
Substantially all of our assets are pledged as collateral under the credit
facility. If the credit facility were to be accelerated, we can offer no
assurance that our assets would be sufficient to repay in full that
indebtedness. An event of default or acceleration of the credit facility

S-25
<PAGE> 27

could 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. Significant fluctuations in the market price of our common stock may
occur 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. The occurrence of any of these events 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. In addition,
our credit facility contains limits on our ability to declare and pay cash
dividends.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus supplement, the accompanying prospectus and the information
incorporated by reference 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." Known and
unknown risks, uncertainties and other factors could cause the actual results to
differ materially from those contemplated by the statements. The forward-looking
information is based on various factors and was derived using numerous
assumptions.

S-26
<PAGE> 28

expectations. Important risks and factors that could cause our actual results to
be materially different from our expectations include, without limitation:

- that MindSpring will not retain or grow its subscriber base,

- that MindSpring will not be able to successfully integrate new
subscribers and/or assets obtained through acquisitions,

- that MindSpring will fail to be competitive with existing and new
competitors,

- that MindSpring will not be able to sustain its current growth,

- that MindSpring will not adequately respond to technological developments
affecting the Internet, and

- that financing will not be available to MindSpring if and as needed.

This list is intended to identify some of the principal factors that could
cause actual results to differ materially from those described in the
forward-looking statements included elsewhere in this report. These factors are
not intended to represent a complete list of all risks and uncertainties
inherent in MindSpring's business, and should be read in conjunction with the
more detailed cautionary statements included in this prospectus supplement under
the caption "Risk Factors."

S-27
<PAGE> 29

USE OF PROCEEDS

We estimate that we will receive net proceeds from the sale of our common
stock offered with this prospectus supplement and accompanying prospectus of
approximately $200.6 million, or approximately $230.7 million if the
underwriters' over-allotment option is exercised in full. This estimate includes
the deduction of the estimated underwriting discounts and commissions and other
fees and expenses payable by us of approximately $500,000.

We intend to use a portion of the net proceeds from this offering to repay
all amounts outstanding under our secured credit facility of approximately $80.8
million, which includes approximately $800,000 of interest as of April 7, 1999.
This indebtedness bears interest, at our option, at either (a) a base rate equal
to the greater of First Union National Bank's prime lending rate or the
overnight federal funds rate plus 0.50% or (b) the reserve adjusted LIBOR rate,
plus an applicable margin. The applicable margin is an annual rate which
fluctuates based on our ratio of total debt to EBITDA and which is between 0.25%
and 1.00% for base rate borrowings and between 1.25% and 2.00% for LIBOR rate
borrowings. We incurred this indebtedness to fund a portion of the NETCOM
acquisition. Our credit facility under which this amount is outstanding expires
on February 17, 2002.

Concurrently with this offering and by means of a separate prospectus
supplement, we are offering $155 million principal amount of convertible
subordinated notes, plus up to an additional $23.25 million principal amount of
notes to cover over-allotments by the underwriters for that offering. The notes
are convertible, at the option of the holder, into shares of MindSpring common
stock at a conversion rate of shares per $1,000 principal amount of
the notes, or a conversion price of $ per $1,000 principal amount of the
notes, subject to customary anti-dilution adjustments. The notes rank junior in
payment to substantially all indebtedness of MindSpring in existence at the time
of the issuance of the notes, or incurred by MindSpring in the future. The
completion of the notes offering and this common stock offering are not
dependent on one another.

We intend to use the remaining 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 remaining net
proceeds from this offering to acquire complementary businesses, subscriber
accounts, products or technologies. Depending on the nature of any such
acquisitions, we could apply all or substantially all of the remaining net
proceeds from this offering to those acquisitions. As part of our ongoing
corporate development activities, we expect that we will continue to consider
acquisition opportunities. We are not currently evaluating any acquisition
opportunities. We cannot assure you,

S-28
<PAGE> 30

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 uses. However, except for the amounts intended to repay borrowings
under our credit facility, 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 these uses, we intend to invest the
net proceeds of this offering in short-term, interest-bearing securities.

S-29
<PAGE> 31

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

Our common stock is traded on the Nasdaq National Market under the symbol
"MSPG." The following table shows 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>
1997 HIGH LOW
---- --------- ------
<S> <C> <C>
First Quarter........................................ $ 3.42 $ 1.92
Second Quarter....................................... 3.79 2.21
Third Quarter........................................ 8.21 3.54
Fourth Quarter....................................... 11.54 6.08
</TABLE>

<TABLE>
<CAPTION>
1998 HIGH LOW
---- --------- ------
<S> <C> <C>
First Quarter........................................ $ 23.00 $ 9.20
Second Quarter....................................... 34.75 16.17
Third Quarter........................................ 52.38 25.31
Fourth Quarter....................................... 79.00 23.13
</TABLE>

<TABLE>
<CAPTION>
1999 HIGH LOW
---- --------- ------
<S> <C> <C>
First Quarter (through April 6, 1999)................ $125.00 $62.50
</TABLE>

On April 6, 1999, the last reported sale price of the common stock on the
Nasdaq National Market was $105.38 per share. At April 5, 1999, there were
approximately 718 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. The current policy of our board of directors is to retain earnings to
finance the expansion of our operations. Our 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 that they deem are relevant. In addition, our ability to pay
dividends is limited by the terms of our credit facility.

S-30
<PAGE> 32

CAPITALIZATION

The following table sets forth our capitalization as of December 31, 1998
(1) on a historical basis, (2) as adjusted to reflect the sale of shares of
common stock offered hereby at an assumed price to the public of $105 per share;
and (3) as further adjusted to reflect the sale of $155,000,000 principal amount
of notes and the application of the proceeds therefrom, in each case net of
MindSpring's estimated offering expenses and the underwriting discount. You
should read this table together with the section entitled "Use of Proceeds" and
our financial statements and notes thereto and other financial and operating
data included elsewhere in this prospectus supplement and the accompanying
prospectus or incorporated into this prospectus supplement and the accompanying
prospectus by reference.

<TABLE>
<CAPTION>
DECEMBER 31, 1998
--------------------------------------------
AS FURTHER
HISTORICAL(1) AS ADJUSTED(1) ADJUSTED(1)
------------- -------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash or cash equivalents....................... $167,743 $368,317 $518,417
======== ======== ========
Indebtedness(2):
Capital leases............................... 5,119 5,119 5,119
Debt......................................... 0 0 155,000
-------- -------- --------
Total indebtedness................... 5,119 5,119 160,119
-------- -------- --------
Stockholders' equity:
Preferred Stock, $0.01 par value, 1,000
shares authorized; 0 shares issued and
outstanding............................... -- -- --
Common Stock, $.01 par value, 60,000 shares
authorized; 28,284 shares issued and
outstanding; 30,284 shares issued and
outstanding as adjusted(3)................ 283 303 303
Additional paid-in capital(3).................. 209,983 410,537 410,537
Accumulated deficit............................ (3,185) (3,185) (3,185)
-------- -------- --------
Total stockholders' equity........... 207,081 407,655 407,655
-------- -------- --------
Total capitalization........................... $212,200 $412,774 $567,774
======== ======== ========
</TABLE>

- ---------------
(1) Excludes the effects of the NETCOM acquisition and related borrowings under
our secured credit facility in February 1999 which would decrease cash and
cash equivalents by approximately $135 million, increase indebtedness by $80
million and increase stockholders' equity by $30 million on a historical
basis. On an "adjusted basis" and on an "as further adjusted basis," cash
and cash equivalents would decrease by approximately $215 million and
stockholders' equity would increase by $30 million. See note 10 to
MindSpring's audited financial statements for the fiscal year ended December
31, 1998 included in this prospectus supplement at page F-18 for certain pro
forma and other information concerning these and other events. Also see our
Current Report on Form 8-K filed with the SEC on February 25, 1999 for more
detailed pro forma information.

(2) Includes current portion of related indebtedness.

(3) Excludes approximately 2,123,000 shares of common stock reserved for
issuance upon exercise of stock options granted as of December 31, 1998.
There were 2,486,974 shares of common stock reserved for issuance upon
exercise of stock options granted as of March 31, 1999.

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<PAGE> 33

SELECTED FINANCIAL AND OPERATING DATA

The following table contains selected financial and operating data for
MindSpring. The selected historical statements of operations data for the period
from February 24, 1994, MindSpring's inception, to December 31, 1994 and the
years ended December 31, 1995, 1996, 1997 and 1998 and the selected historical
balance sheet data as of December 31, 1994, 1995, 1996, 1997 and 1998 have been
derived from financial statements of MindSpring, which have been audited by
Arthur Andersen LLP, independent public accountants, whose report with respect
to these financial statements is included elsewhere in this prospectus
supplement or the accompanying prospectus. The inception period referred to in
the table below is the period from February 24, 1994, MindSpring's inception, to
December 31, 1994.

The information presented in the table excludes the effects of the NETCOM
acquisition and borrowings under our secured credit facility, which occurred on
February 17, 1999. See note 10 to MindSpring's audited Financial Statements for
the fiscal year ended December 31, 1998 included in this prospectus supplement
at page F-18 for certain pro forma and other information concerning these and
other events. Also see our Current Report on Form 8-K filed with the SEC on
February 25, 1999 for more detailed pro forma information.

You should read the following selected historical financial and operating
data with the sections entitled "Summary Financial and Operating Data," "Use of
Proceeds" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and MindSpring's financial statements and notes thereto
and other financial and operating data included elsewhere in this prospectus
supplement and the accompanying prospectus or incorporated into this prospectus
supplement and the accompanying prospectus by reference.

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<PAGE> 34

<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
INCEPTION ------------------------------------------------
PERIOD 1995 1996 1997 1998
--------- --------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Access.................................... $ 70 $ 1,455 $ 13,420 $ 40,925 $ 95,852
Business services......................... -- 260 2,286 7,711 14,735
Subscribers start-up fees................. 33 512 2,426 3,920 4,086
------ ------- -------- -------- --------
Total revenues....................... 103 2,227 18,132 52,556 114,673
Cost and expenses:
Cost of revenues -- recurring............. 37 627 6,332 15,203 31,724
Cost of subscriber start-up fees.......... 15 339 1,876 1,619 2,612
Selling, general and administrative....... 121 2,230 14,161 30,784 57,324
Depreciation and amortization............. 5 265 3,285 8,695 15,227
------ ------- -------- -------- --------
Total operating expenses............. 178 3,461 25,654 56,301 106,887
------ ------- -------- -------- --------
Operating gain (loss)....................... (75) (1,234) (7,522) (3,745) 7,786
Interest income (expense), net.............. -- (725) (90) (338) 1,214
------ ------- -------- -------- --------
Income (loss) before taxes.................. (75) (1,959) (7,612) (4,083) 9,000
Income tax provision........................ -- -- -- -- 1,544
------ ------- -------- -------- --------
Net income (loss)........................... $ (75) $(1,959) $ (7,612) $ (4,083) $ 10,544
====== ======= ======== ======== ========
PER SHARE DATA:
Basic earnings (loss) per share............. $ (0.23) $ (0.48) $ (0.18) $ 0.43
Diluted earnings (loss) per share........... $ (0.20) $ (0.48) $ (0.18) $ 0.41
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic....................................... 8,664 15,758 22,542 24,611
Diluted..................................... 9,930 15,758 22,542 25,431
OTHER OPERATING DATA:
Approximate number of subscribers at end of
period.................................... 1,000 12,000 122,000 278,000 693,000
Approximate number of employees at end of
period.................................... 8 95 321 502 977
EBITDA (1).................................. $ (70) $ (969) $ (4,237) $ 4,950 $ 23,013
EBITDA margin (1)........................... (68)% (44)% (23)% 9% 20%
CASH FLOW DATA:
Operations.................................. (33) (70) (2,005) 11,354 35,501
Investing................................... (127) (3,724) (21,336) (9,002) (47,647)
Financing................................... 745 3,634 32,569 (2,619) 170,503
</TABLE>

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<PAGE> 35

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------
INCEPTION
PERIOD 1995 1996 1997 1998
--------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................... $585 $ 425 $ 9,653 $ 9,386 $167,743
Working capital............................... 547 (3,100) 5,027 (5,353) 137,106
Total assets.................................. 722 4,845 35,232 44,286 247,599
Total debt, including current maturities...... -- 2,500 4,005 9,740 5,119
Total stockholders' equity.................... 670 482 25,407 21,413 207,081
</TABLE>

- ---------------
(1) 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 MindSpring's operating performance, financial position
and cash flows. EBITDA is not necessarily comparable with similarly titled
measures for other companies.

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<PAGE> 36

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

All common stock numbers and per share amounts in this report give effect
to a 3-for-1 stock split effected by MindSpring in June 1998.

OVERVIEW

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 business services, which we offer in various price
and usage plans designed to meet the needs of our subscribers. Our business
services include Web hosting, which entails maintaining a customer's Web site;
high-speed, dedicated Internet access; Web page design; domain name registration
and customer Web server co-location. Web hosting, our principal business
service, complements our Internet access business and is one of the fastest
growing segments of the Internet marketplace.

We offer our subscribers:

- highly responsive customer service, and technical support which is
available 24 hours a day, seven days a week; and

- a reliable nationwide network that enables subscribers in the 48
contiguous United States and the District of Columbia to access the
Internet via a local telephone call.

Our nationwide network consists of MindSpring-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 MindSpring-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
MindSpring-owned POPs in markets where we have higher numbers of subscribers.

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 693,000 subscribers at December 31, 1998,
including over 21,000 Web hosting customers. In February 1999, we completed the
NETCOM acquisition, which increased our subscriber base to approximately 1.1
million subscribers, including approximately 45,000 Web hosting subscribers.
This acquisition is described below.

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<PAGE> 37

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.

From our inception in February 1994 through 1997, we experienced annual net
operating losses, as a result of efforts to build our network infrastructure and
internal staffing, develop our systems, and expand into new markets. During
1997, we generated positive cash flows from operations, with EBITDA of
approximately $5 million. We had our first year of profitability in 1998. For
the year ended December 31, 1998, we had revenues of approximately $115 million,
EBITDA of approximately $23 million, net income of approximately $8.8 million
and earnings per share of $0.35, in each case excluding a one-time tax benefit
of approximately $1.7 million. Including the one-time tax benefit, our net
income for 1998 was approximately $10.5 million and our earnings per share were
$0.41.

We expect to continue to focus on increasing our subscriber base. Increases
in our subscriber base will cause our revenues to increase, but will also cause
our costs of revenue, selling, general and administrative expenses, capital
expenditures, and depreciation and amortization to increase. Our purchases of
subscriber bases such as the Spry and NETCOM acquisitions cause an immediate
increase in our amortization expense. We generally amortize subscriber
acquisitions over a three-year period in approximately equal amounts each year.
As more fully described below, we anticipate that, while we will continue to
generate positive cash flows from operations and EBITDA during 1999 and 2000, we
expect to incur net losses into 2000, principally as a result of amortization
expenses related to the Spry and NETCOM acquisitions. If our assumptions are
incorrect, our business plans change and/or we undertake additional acquisitions
of subscriber bases in the near future, we could continue to incur net losses
for a longer period of time. We do not currently have any agreements to do
additional acquisitions. There can be no assurance that we will be able to
sustain growth in our subscriber base, revenues, cash flows or EBITDA. Also,
there can be no assurance that we will be able to achieve or sustain net income
in the future.

Spry Acquisition. On September 10, 1998, we entered into an Asset Purchase
Agreement with AOL and Spry, a wholly owned subsidiary of AOL, to purchase
assets used in connection with the consumer dial-up Internet access business
operated by Spry. In that transaction, we acquired Spry's subscriber base of
approximately 130,000 individual Internet access customers in the United States
and Canada as well as various assets used in serving those customers. These
assets included a leased customer support facility and a leased network
operations facility in Seattle, Washington. MindSpring also acquired all rights
held by Spry to the "Sprynet" name. On October 15, 1998, we completed the Spry
acquisition and made an initial cash payment to AOL of $25 million. In March
1999, we made an additional and final payment to AOL of approximately $7
million. The total purchase price of approximately $32 million for the Spry
subscribers and assets was primarily a function of the number of acquired
subscribers who remained active with MindSpring as continuing users in good
standing after two billing cycles, measured as of December 31, 1998.

NETCOM Acquisition. On January 5, 1999, we entered into an Asset Purchase
Agreement with NETCOM, which has changed its name to ICG PST, Inc., a wholly
owned subsidiary of ICG Communications, Inc., to purchase assets used in
connection with the

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<PAGE> 38

United States Internet access and Web hosting business operated by NETCOM. In
that transaction, we acquired NETCOM's subscriber base of approximately 371,000
individual Internet access accounts, 22,000 Web hosting accounts, and 3,000
dedicated Internet access accounts in the United States. The acquisition closed
on February 17, 1999. We paid NETCOM approximately $245 million, consisting of
$215 million in cash and $30 million in MindSpring common stock (376,116 shares,
at a price per share of $79.76). In addition to the NETCOM subscriber base,
MindSpring also acquired various assets used in serving those subscribers,
including leased operations facilities in San Jose, California and Dallas, Texas
and all of NETCOM's rights to the "NETCOM" name (except in Canada, the United
Kingdom and Brazil). ICG PST has retained the network assets used to serve those
subscribers. We purchase access to that network under a network services
agreement with ICG PST at rates that are generally comparable to the costs of
using MindSpring POPs. This network agreement has a term of one year with an
option for a second year on potentially different terms to be agreed upon by the
parties. During the first year under this network agreement, we are obligated to
pay at least $27 million for network services, as long as the services provided
meet specified performance levels.

Credit Facility. On February 17, 1999, we entered into a credit agreement
with First Union National Bank and several other lenders. The credit agreement
provides for a $100 million revolving credit facility that may be increased at
our option to $200 million with the approval of First Union and the other
lenders under the credit agreement. The credit facility will mature on February
17, 2002. The credit facility is to be used to fund working capital and for
general corporate purposes, including permitted acquisitions. On February 17,
1999, we borrowed approximately $80 million under the credit facility to finance
the NETCOM acquisition. Our obligations under the credit facility are secured by
substantially all of MindSpring's assets. We intend to repay all amounts
outstanding under the credit facility with a portion of the net proceeds from
this offering of common stock. If we do not complete this common stock offering,
we intend to use a portion of the proceeds from the notes offering to repay
those amounts. See "Use of Proceeds."

Anticipated Effects of the Spry and NETCOM Acquisitions. The Spry and
NETCOM acquisitions represent significant growth opportunities and challenges
for MindSpring. Both acquisitions were of large customer bases and related
assets which, as previously operated stand-alone entities, were historically
unprofitable. We expect to incur net losses into 2000, primarily as a result of
the amortization expense associated with the Spry and NETCOM acquisitions. We
expect that annual amortization expense attributable to these transactions will
be between approximately $85 million and $90 million per year for the next three
years. In addition, we face the significant challenge of integrating the
acquired customers and assets into MindSpring's operations. The integration
process is most time and resource intensive during the sixty- to ninety-day
period immediately after completion of an acquisition, and involves, among other
things:

- communication with and increased technical and customer support to
acquired subscribers;

- network supervision, provisioning and maintenance, including of
third-party networks;

- increased management time and resources related to hiring and integration
of new employees to support acquired subscribers;

- integration of acquired subscribers into MindSpring's billing systems;
and

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<PAGE> 39

- attempting to bring the cost structures associated with the acquired
subscribers and assets into alignment with MindSpring's historical cost
structure.

The Spry subscribers and assets were substantially integrated into
MindSpring's operations as of December 31, 1998. Net income for the fourth
quarter of 1998 was $1.9 million, excluding a one-time tax benefit of $1.8
million, compared to approximately $4.0 million for the third quarter of 1998.
This decrease resulted primarily from $2.3 million in amortization costs during
the fourth quarter attributable to the Spry acquisition.

The NETCOM acquisition has significantly increased MindSpring's customer
base from approximately 693,000 to approximately 1,100,000. Principally as a
result of the NETCOM acquisition, we expect that we will incur net losses into
2000. Even though we expect to incur net losses, we expect to continue to
generate increased revenues and EBITDA as we continue to increase our subscriber
base. We believe that reducing the historical costs associated with the acquired
NETCOM subscribers to levels that approximate MindSpring's historical costs of
providing Internet access to its subscribers will contribute to our ability to
reduce net losses in the future. We expect that these cost reductions will be
achieved in part as a function of:

- the ICG PST network agreement, through which MindSpring expects initially
to provide service to the majority of the acquired NETCOM subscribers and
which MindSpring expects will be at a lower cost than that reported by
NETCOM; and

- economies of scale in selling, general and administrative costs,
particularly in the areas of numbers of employees and salaries, operating
leases, and marketing expenses.

By "economies of scale" we mean that, as the number of subscribers we serve
increases, the costs and expenses per subscriber decrease. There can be no
assurance that we will achieve these anticipated cost reductions in a timely
manner or at all. If the cost reductions are lower than anticipated, other costs
increase, and/or revenues decline, our EBITDA and net income would also decline,
which would have a material adverse effect on our business, results of
operations and financial condition, including our liquidity and capital
resources.

Revenues. MindSpring derives revenue primarily from monthly subscriptions
from individuals for dial-up access to the Internet. Monthly subscription fees
vary by billing plan. Under MindSpring's current pricing plans, customers have a
choice of two "flat rate" plans (The Works and Unlimited Access) and two
"usage-sensitive" plans (Standard and Light). MindSpring also has a prepayment
plan available to all dial-up subscribers which allows subscribers to prepay
their access fees for either one or two years at a discounted rate. For the
years ended December 31, 1998 and 1997, the average monthly recurring revenue
per dial-up subscriber was approximately $20. Average monthly recurring revenue
is calculated by dividing monthly recurring revenue plus usage charges for
non-"flat rate" subscribers by the total number of subscribers. Start-up fees
for new subscribers vary depending upon the promotional method by which the
subscriber is acquired, ranging from $0 up to a maximum of $25. Aggregate
subscriber start-up fees are sufficient to cover the aggregate costs of direct
materials, mailing expenses, and licensing fees associated with new subscribers.
A majority of MindSpring's individual subscribers pay their MindSpring fees
automatically by pre-authorized monthly charges to the subscriber's credit card.

In addition, MindSpring earns revenue by providing Web-hosting, full-time
dedicated access connections to the Internet, other value-added services such as
Web page design, domain name registration and Web-server co-location.
MindSpring's Web-hosting services

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<PAGE> 40

allow a business or individual to post information on the World Wide Web so that
the information is available to anyone who has access to the Internet.
MindSpring currently offers three price plans for Web hosting subscribers
ranging from $19.95 to $99.95 per month. MindSpring had approximately 21,000
Web-hosting subscribers as of December 31, 1998, not including approximately
22,000 Web-hosting subscribers acquired from NETCOM. Through our domain
registration services, MindSpring offers subscribers the ability to personalize
electronic mail addresses and URLs (Uniform Resource Locators). The services
described in this paragraph have been classified as business services in
MindSpring's statements of operations and in the "Results of Operations" table
shown below.

Costs. MindSpring's costs include (1) costs of revenue that are primarily
related to the number of subscribers; (2) selling, general and administrative
expenses that are associated more generally with operations; and (3)
depreciation and amortization, which are related to the number of
MindSpring-owned POPs and servers, and the deferred costs associated with
acquired customer bases.

Costs of revenue that are primarily related to the number of subscribers
include both recurring costs and subscriber start-up expenses. Recurring costs
of revenue consist primarily of the costs of telecommunications facilities
necessary to provide service to subscribers. Telecommunications facilities costs
include (1) the costs of providing local telephone lines into each
MindSpring-owned POP; (2) costs related to the use of third-party networks; and
(3) costs associated with leased lines connecting each MindSpring-owned POP and
third-party network to MindSpring's hub and connecting MindSpring's hub to the
Internet backbone. Start-up expenses for each subscriber include primarily the
cost of diskettes and other product media, manuals, and packaging and delivery
costs associated with the materials provided to new subscribers. MindSpring does
not defer any subscriber start-up expenses.

Selling, general and administrative costs are incurred in the areas of
sales and marketing, customer service and support, network operations and
maintenance, engineering, accounting and administration. Selling, general and
administrative costs will increase over time as MindSpring's scope of operations
increases. We may determine to significantly increase the level of marketing
activity to increase the rate of subscription growth. A significant increase in
marketing activity would have a short-term negative impact on net income. We
believe that these increased costs would be more than offset by anticipated
increases in revenue attributable to overall subscriber growth. However, there
can be no assurance that we will be able build, increase or maintain our
subscriber base in a given market to the extent necessary to generate sufficient
revenues to offset these marketing expenses. MindSpring does not defer any sales
or marketing expenses.

As MindSpring expands into new markets, both costs of revenue and selling,
general and administrative expenses will increase. To the extent MindSpring
opens MindSpring POPs in new markets, these costs and expenses may also increase
as a percentage of revenue in the short-term for the period immediately after a
new MindSpring POP is opened. Many of the fixed costs of providing service in a
new market through a new MindSpring POP are incurred before significant revenue
can be expected from that market. However, to the extent that we expand into new
markets by using third-party POPs instead of opening our own POPs, MindSpring's
incremental monthly recurring costs will consist primarily of the fees to be
paid to third parties under network services agreements. In general, the margins
on those subscribers will initially be higher than if we had opened our own POP
in new markets. When a market matures, if the market is served through
purchased, third-party network services rather than MindSpring-owned POPs, costs
of revenue as a percentage of revenue will tend to be higher, and

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<PAGE> 41

therefore, margins on subscribers will tend to be lower. This is because the
full costs of using third-party networks is included in costs of revenue, as
compared to the costs of using MindSpring-owned POPs, a portion of which is
included in depreciation and amortization. In addition, in more mature markets,
where we have greater concentrations of subscribers, we generally can provide
services at a lower cost per subscriber through MindSpring-owned POPs after the
initial period when related expenses are higher. This depends in part on how
much we must pay for local area telecommunications charges.

For the first year of the network services agreement with ICG PST, we will
pay for use of ICG PST's POPs at rates that are generally comparable to the
costs of using MindSpring POPs. We have an option for a second year under that
agreement, but on potentially different terms to be negotiated and agreed upon
by both parties. The ICG PST network services agreement should also contribute
to our ability to reduce future net losses. However, the cost advantages of
providing services to MindSpring subscribers through the ICG PST network
services agreement may be offset if there are operating inefficiencies, network
reliability issues or technical support difficulties due to the fact that ICG
PST is just beginning to offer network services as a third-party provider for
companies such as MindSpring.

We have added, and may in the future continue to add, MindSpring
subscribers by purchasing customer bases from other ISPs. MindSpring amortizes
such purchased customer bases using the straight-line method over a period of
three years, commencing when the purchase is completed. This amortization has a
negative effect on net income. Therefore, to the extent we continue to expand
our subscriber base through acquisitions such as the Spry and NETCOM
acquisitions, we will continue to experience increased amortization expense.

The board of directors has authorized an additional 1.5 million shares of
common stock for issuance pursuant to the exercise of stock options granted
under the 1995 Stock Option Plan, as amended, raising the total number of shares
that may be issued under the plan to 4.5 million. The board intends to submit
this increase in shares to the MindSpring stockholders for approval at the 1999
annual meeting to be held in May 1999. The board has granted options to purchase
approximately 300,000 shares of common stock in excess of the number of shares
currently approved by MindSpring's stockholders for issuance under the plan.

For accounting purposes, these excess grants have not occurred until
stockholder approval is obtained which is when over 50% of the stockholders
approve the necessary increase of shares at or before the annual stockholder
meeting scheduled for May 1999. Accordingly, we are currently evaluating various
alternatives to reduce our exposure to such potential additional expense. We
believe that we will be able to resolve this matter through negotiated
arrangements with a sufficient number of the employees who received such
options, such that the related compensation expense will not have a material
impact on the Company.

If we do not take any actions to reduce, or are unsuccessful in reducing,
our exposure to this additional expense, we will be required to record
additional compensation expense over the remaining vesting period of these
options, which is approximately 33 to 45 months. The additional compensation
expense would be the number of additional options, multiplied by the difference
between the exercise price for those options and the market price of the common
stock on the date stockholder approval is obtained. Based on our current stock
price, the amount of such compensation expense would be approximately $4.2
million in the aggregate or approximately $115,000 per month over approximately
33 to 45 months. If we are unable to negotiate arrangements with respect to a
sufficient number of such options and/or if the price of our common stock on the
applicable measurement date is higher than the current price, the amount of
additional compensation expense could be materially greater, which may have a
material adverse effect on our business, financial condition, and results of
operations, including EBITDA and net income.

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<PAGE> 42

RESULTS OF OPERATIONS

The following table shows financial data for the years ended December 31,
1998, 1997, and 1996. Operating results shown for 1998 do not reflect the NETCOM
acquisition. Operating results for any period are not necessarily indicative of
results for any future period. Dollar amounts (except per share data) are shown
in thousands.

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
------------------ ----------------- ------------------
% OF % OF % OF
(000'S) REVENUE (000'S) REVENUE (000'S) REVENUE
-------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues:
Dial-up access to Internet............ $ 95,852 84 $40,925 78 $ 13,420 74
Business services..................... 14,735 13 7,711 15 2,286 13
Start-up fees......................... 4,086 3 3,920 7 2,426 13
-------- --- ------- --- -------- ---
Total revenue.................. $114,673 100 $52,556 100 $ 18,132 100
Cost and expenses:
Cost of revenues-recurring............ $ 31,724 28 $15,202 29 $ 6,332 35
Cost of revenues-start-up fees........ 2,612 2 1,620 3 1,876 10
Selling, general, and
administrative...................... 57,324 50 30,784 59 14,161 78
-------- --- ------- --- -------- ---
Customer base amortization............ $ 7,048 6 $ 4,210 8 $ 1,521 8
Depreciation.......................... 8,179 7 4,485 9 1,764 10
-------- --- ------- --- -------- ---
Operating income (loss)................. 7,786 7 (3,745) (7) (7,522) (42)
Interest income (expense), net........ 1,214 1 (338) (1) (90) (1)
-------- --- ------- --- -------- ---
Pre tax income (loss)................... 9,000 8 (4,083) (8) (7,612) (42)
Provision for income taxes............ 1,544 1 -- -- -- --
-------- --- ------- --- -------- ---
Net income (loss)....................... $ 10,544 9 $(4,083) (8) $ (7,612) (42)
======== === ======= === ======== ===
PER SHARE DATA:
Diluted net income (loss) per share..... $ 0.41 $ (0.18) $ (0.48)
Weighted average common shares
outstanding........................... 25,431 22,542 15,758
OPERATING DATA:
Approximate number of subscribers at end
of year............................... 693,000 278,300 121,794
Number of MindSpring employees at end of
year.................................. 977 502 321
EBITDA(1)............................... $ 23,013 20 $ 4,950 9 $ (4,237) (23)
-------- --- ------- --- -------- ---
CASH FLOW DATA:
Cash Flow (used in) from operations..... $ 35,501 $11,354 $ (2,005)
Cash flow (used in) from investing
activities............................ $(47,647) $(9,002) $(21,336)
Cash flow (used in) from financing
activities............................ $170,503 $(2,619) $ 32,569
</TABLE>

- ---------------
(1) EBITDA represents operating income (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 MindSpring's operating performance,
financial position and cash flows. EBITDA is not necessarily comparable with
similarly titled measures for other companies.

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<PAGE> 43

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

Revenues. Revenue for the year ended December 31, 1998 totaled
approximately $114.7 million, as compared to approximately $52.6 million for the
year ended December 31, 1997. This approximately 118% increase in period
revenues resulted primarily from an approximately 150% increase in subscribers.
The greater proportional increase in subscribers was principally due to the
acquisition of Spry subscribers from AOL during the fourth quarter of 1998.
Revenues from dial-up access to the Internet for the year ended December 31,
1998 represented approximately 84% of the revenue, compared to approximately 78%
for the year ended December 31, 1997. Business services revenue decreased as a
percentage of revenue to approximately 13% for the year ended December 31, 1998,
compared to approximately 15% for the year ended December 31, 1997. This
decrease is primarily attributable to the large amount of dial-up customers
added through acquisitions in 1998. Subscriber start-up fees accounted for 3% of
revenue for the year ended December 31, 1998, as compared to approximately 7%
for the year ended December 31, 1997. MindSpring anticipates that as its
customer base continues to expand, subscriber start-up fees will progressively
represent a smaller percentage of revenue.

Cost of revenues-recurring. For the year ended December 31, 1998, cost of
revenues-recurring decreased to approximately 28% of total revenue, compared to
approximately 29% of total revenue for the year ended December 31, 1997. Cost of
revenues-recurring also decreased as a percentage of dial-up access revenue to
approximately 33% for the year ended December 31, 1998 from approximately 37%
for the year ended December 31, 1997. Not taking into account approximately $2
million in discounts we received in 1998 under our network services agreement
with PSINet, Inc., cost of revenues-recurring would have been approximately 35%
of total dial-up access revenue. Not taking into account approximately $2.1
million in discounts we received in 1997 under the network services agreement
with PSINet, Inc., cost of revenues-recurring would have been approximately 42%
of total dial-up access revenue. The discounts earned under the network services
agreement with PSINet ended in October 1998. This decrease of cost of
revenues-recurring as a percentage of total revenue and as a percentage of
dial-up access revenue resulted primarily from increased efficiency and reduced
network costs associated with MindSpring-owned POPs.

Selling, general, and administrative expenses. Selling, general, and
administrative expenses were approximately 50% of revenue for the year ended
December 31, 1998, compared to approximately 59% of revenue for the year ended
December 31, 1997. The decrease in selling, general, and administrative expenses
as a percentage of revenue resulted from economies of scale with respect to
costs such as payroll that do not increase in direct proportion to increases in
revenue and from cost control efforts implemented by MindSpring's management.

EBITDA margin. EBITDA margin refers to EBITDA as a percentage of revenues.
EBITDA margin increased to approximately 20% for the year ended December 31,
1998, compared to 9% for the year ended December 31, 1997. The increase is
attributable to the significant revenue growth outpacing the related cost
increases principally as a result of economies of scale related to selling,
general, and administrative expenses as well as efficiencies and economies of
scale associated with MindSpring-owned POPs.

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<PAGE> 44

expense resulted solely from acquired subscriber bases, which are being
amortized over three years. Depreciation expense was approximately 7% of total
revenues for the year ended December 31, 1998, compared to approximately 9% for
the year ended December 31, 1997. The decrease in depreciation expense as a
percentage of total revenues resulted from adding capacity through increased use
of network services purchased from third-party providers, as opposed to
increasing capacity by building additional MindSpring-owned POPs, and from
reductions in the cost of new equipment and improved operating efficiencies
within MindSpring's network. MindSpring anticipates amortization expense to
increase as a percentage of revenues as a result of the Spry and NETCOM
acquisitions.

Interest income (expense). The following table details the increase in
interest income in 1998 compared to 1997:

<TABLE>
<CAPTION>
1998 1997
---------- ---------
<S> <C> <C>
Interest on capital leases............................. $ (754,000) $(473,000)
Interest on PSINet notes............................... (136,000) (276,000)
Interest income -- other............................... 2,104,000 411,000
---------- ---------
Interest income (expense) net.......................... $1,214,000 $(338,000)
========== =========
</TABLE>

Interest on capital leases increased for the year ended December 31, 1998,
compared to the year ended December 31, 1997, because MindSpring entered into
several new capital leases for equipment at the end of 1997. Interest income
increased in 1998 due to the increase in outstanding cash balances available for
investment as a result of positive operating cash flows and two public equity
offerings completed during the year. See "Liquidity and Capital Resources".

Income tax provision. For the year ended December 31, 1998 MindSpring
recorded a benefit for income taxes due to a one time benefit taken in the
fourth quarter of the year as a result of the removal of the valuation allowance
associated with MindSpring's deferred tax assets. MindSpring is continually
assessing its income tax situation and management believes that it is "more
likely than not" that the deferred tax assets will be realized in the future. In
the future, MindSpring expects to report taxable earnings, even though we expect
to be incurring net losses at the same time. This is principally due to the
requirement that, for tax purposes, subscriber acquisition costs must be
amortized over 15 years, compared to the three-year period applied for
accounting purposes. For the year ended December 31, 1997, no income tax benefit
was recognized as MindSpring had a net taxable loss for the year.

Net income (loss) and income (loss) per share. As a result of the factors
discussed above, MindSpring's net income for the year ended December 31, 1998
was $10.5 million, or $0.41 income per diluted share, compared to a net loss of
$4.1 million, or $0.18 basic and diluted loss per share, for the year ended
December 31, 1997.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

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ended December 31, 1996. Business services revenue increased slightly to
approximately 15% of revenues for the year ended December 31, 1997, compared to
approximately 13% for the year ended December 31, 1996. This increase is
primarily attributable to the increase in the number of MindSpring's Web hosting
customers. Subscriber start-up fees accounted for 7% of revenues for the year
ended December 31, 1997, as compared to approximately 13% for the year ended
December 31, 1996. MindSpring anticipates that as its customer base continues to
expand, subscriber start-up fees will progressively represent a smaller
percentage of revenues.

Cost of revenues-recurring. For the year ended December 31, 1997, cost of
revenues-recurring decreased to approximately 29% of total revenues, compared to
approximately 35% of total revenues for the year ended December 31, 1996. Cost
of revenues-recurring also decreased as a percentage of dial-up access revenue
from approximately 47% for the year ended December 31, 1996 to approximately 37%
for the year ended December 31, 1997. Not taking into account approximately $2.1
million in discounts we received in 1997 under the PSINet Services Agreement,
cost of revenues-recurring would have been approximately 42% of total dial-up
revenue for the year ended December 31, 1997, compared to approximately 47% for
the year ended December 31, 1996. This decrease in cost of revenues-recurring as
a percentage of total revenues and as a percentage of dial-up access revenues
resulted primarily from increased efficiency and reduced network costs
associated with MindSpring-owned POPs.

Selling, general, and administrative expenses. Selling, general, and
administrative expenses were approximately 59% of revenues for the year ended
December 31, 1997, compared to approximately 78% of revenues for the year ended
December 31, 1996. The decrease in selling, general, and administrative expenses
as a percentage of revenues resulted from economies of scale with respect to
costs such as payroll that do not increase in direct proportion to increases in
revenue and to cost control efforts implemented by MindSpring's management.

EBITDA margin. EBITDA margin increased to approximately 9% for the year
ended December 31, 1997, compared to (23)% for the year ended December 31, 1996.
The increase is attributable to the significant revenue growth outpacing the
related cost increases principally as a result of economies of scale related to
selling, general, and administrative expenses, as well as efficiencies and
economies of scale associated with MindSpring-owned POPs.

Depreciation and amortization. Depreciation and amortization expenses
decreased to approximately 16% of revenues for the year ended December 31, 1997,
compared to approximately 18% of revenues for the year ended December 31, 1996.
Amortization expense remained steady at approximately 8% of revenue for both the
years ended December 31, 1997 and December 31, 1996. Amortization expense
resulted primarily from acquired customer bases which are being amortized over
three years. Depreciation expense was approximately 8% of total revenues for the
year ended December 31, 1997, compared to approximately 10% for the year ended
December 31, 1996. The decrease in depreciation expense as a percentage of total
revenues resulted from adding capacity through increased use of network services
purchased from third-party providers, as opposed to increasing capacity by
building additional MindSpring-owned POPs, and from reductions in cost of new
equipment and improved operating efficiencies within MindSpring's network.

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Interest income (expense). The following table details the increase in
interest expense in 1997 compared to 1996:

<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
Interest on capital leases............................... $(473,000) $(91,000)
Interest on PSINet notes................................. (276,000) (324,000)
Interest income -- other................................. 411,000 325,000
--------- --------
Interest expense, net.................................... $(338,000) $(90,000)
========= ========
</TABLE>

Interest on capital leases increased for the year ended December 31, 1997,
compared to the year ended December 31, 1996, because MindSpring entered into
several new capital leases for equipment. Interest income increased in 1997 due
to the increase in outstanding cash balances available for investment as a
result of positive operating cash flows.

Income tax provision. For the years ended December 31, 1997 and 1996, no
income tax benefit was recognized because MindSpring had a net taxable loss for
the year.

Net income (loss) and income (loss) per share. As a result of the factors
discussed above, MindSpring's net loss for the year ended December 31, 1997 was
$4.1 million, or $(0.18) basic and diluted loss per share, compared to a net
loss of $7.6 million, or $(0.48) basic and diluted loss per share, for the year
ended December 31, 1996.

LIQUIDITY AND CAPITAL RESOURCES

For the year ended December 31, 1998, MindSpring generated net cash from
operations of approximately $35.5 million, compared to $11.4 million for the
year ended December 31, 1997, an increase of approximately 212.7%. During 1998,
we used approximately $27.3 million from cash flows from operations to fund
purchases of subscriber bases. $25 million of this amount was paid to AOL on
October 15, 1998 in partial payment for the Spry acquisition with the balance of
$7 million paid in March 1999. During 1998, we spent a total of approximately
$20.2 million related to purchases of telecommunications equipment necessary for
the provision of service to subscribers. We did not enter into any capital lease
agreements in 1998, compared to approximately $8.4 million incurred in 1997
under capital leases for equipment acquisition. At December 31, 1998,
MindSpring's capital lease obligations and minimum rental commitments under
non-cancelable operating leases with initial or remaining terms of more than one
year amounted to approximately $5.7 million for capital leases, and
approximately $10 million for non-cancelable operating leases.

During 1998, MindSpring generated approximately $170.5 million from
financing activities, consisting primarily of two public equity offerings. In
June 1998, MindSpring sold 3,000,000 shares of common stock at a public offering
price of $17.67 per share. Proceeds from the June offering, net of underwriting
discounts and offering expenses, were approximately $49.8 million. In December
1998, MindSpring sold 2,300,000 shares of common stock at a public offering
price of $57 per share. Proceeds from the December offering, net of underwriting
discounts and offering expenses, were approximately $124.8 million. Cash used
for financing activities consisted of approximately $4.6 million for capital
lease obligations and the final payment to PSINet Inc. due under a promissory
note issued in connection with MindSpring's 1996 purchase from PSINet of
subscribers and other assets and rights related to PSINet's U.S. consumer
dial-up Internet access business. The final payment to PSINet was made in
December 1998. During 1997, cash used for financing

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activities consisted primarily of approximately $2.6 million in payments for
capital lease obligations and repayments of promissory notes to PSINet.

As of December 31, 1998, MindSpring had cash on hand of approximately
$167.7 million. On February 17, 1999, we paid $215 million in cash in connection
with the closing of the NETCOM acquisition, approximately $80 million of which
we borrowed under our $100 million secured revolving credit facility. After
paying the amounts indicated for the NETCOM acquisition on February 17, 1999, we
had remaining cash on hand of approximately $35 million, of which we paid
approximately $7 million to AOL in March 1999 for the balance of the purchase
price for the Spry acquisition.

MindSpring's future capital requirements depend on various factors
including, without limitation:

- our ability to integrate successfully the subscribers and assets acquired
from Spry and NETCOM, which requires us to reduce the costs previously
associated with those subscribers and assets to approximate MindSpring's
historical cost structure;

- the rate of market acceptance of MindSpring's services;

- our ability to maintain and expand our subscriber base;

- the rate of expansion of MindSpring's network infrastructure;

- the resources required to expand our marketing and sales efforts, and

- the availability of hardware and software provided by third-party
vendors.

We currently estimate that our cash and financing needs for 1999, assuming
reasonable internal growth, can be met by cash on hand, amounts available under
the credit facility, additional capital financing arrangements, and cash flow
from operations. We expect to repay all amounts outstanding under the credit
facility with a portion of the net proceeds from this offering of common stock
or, if necessary, a portion of the proceeds from the notes offering. See
"Description of Secured Credit Facility."

If our expectations change regarding our capital needs due to market
conditions, strategic opportunities or otherwise, then our capital requirements
may vary materially from those currently anticipated. We do not currently have
any commitments for any additional financing, and there can be no assurance that
if and when we need additional capital it will be available on terms that are
acceptable to us, if at all. If additional capital financing arrangements,
including public or private sales of debt or equity securities, or additional
borrowings from commercial banks are insufficient or unavailable, or if we
experience shortfalls in anticipated revenues or increases in anticipated
expenses, we will be required to modify our growth and operating plans to match
available funding. Any additional equity financing may be on terms that are
dilutive or potentially dilutive to MindSpring's stockholders. Debt financing,
if available, may involve restrictive covenants with respect to dividends,
raising future capital and other financial and operational matters and incurring
additional debt may further limit MindSpring's ability to raise additional
capital. In addition, our credit facility contains restrictions on our ability
to incur additional debt and to issue some types of convertible or redeemable
capital stock.

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MindSpring frequently engages in discussions involving potential business
acquisitions. Depending on the circumstances, MindSpring may not disclose
material acquisitions until completion of a definitive agreement. MindSpring may
determine to raise additional debt or equity capital to finance potential
acquisitions and/or to fund accelerated growth. Any significant acquisitions or
increases in MindSpring's growth rate could materially affect MindSpring's
operating and financial expectations and results, liquidity and capital
resources.

Market Risks. We believe our exposure to market rate fluctuations on our
investments is nominal due to the short-term nature of those investments. We
have no material future earnings or cash flow exposures with respect to our
outstanding capital leases, which are all at fixed rates. To the extent
MindSpring has borrowings outstanding under the credit facility, we would have
market risk relating to those amounts because the interest rates under the
credit facility are variable. At present, we have no plans to enter into any
hedging arrangements with respect to those borrowings.

RECENT ACCOUNTING PRONOUNCEMENTS

In 1998, the provisions of Statement of Financial Accounting Standards No.
130 ("SFAS 130"), "Reporting Comprehensive Income" and Statement of Financial
Accounting Standards No. 131 ("SFAS 131"), "Disclosures about Segments of an
Enterprise and Related Information" applied to MindSpring. Neither statement had
any impact on MindSpring's financial statements as MindSpring does not have any
"comprehensive income" type earnings (losses) and its financial statements
reflect how the "key operating decisions maker" views the business. MindSpring
will continue to review these statements over time, in particular, SFAS 131, to
determine if any additional disclosures are necessary based on evolving
circumstances.

YEAR 2000

Introduction. 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.

State of Readiness. MindSpring has established a Year 2000 Program Office
to coordinate appropriate activity and report to the Board of Directors on a
continuing basis with regard to the Year 2000 issue. MindSpring's Year 2000
Program Office has developed and is currently implementing a comprehensive plan
(the "Year 2000 Program") for MindSpring to become Year 2000 ready. The Year
2000 Program consists of six phases: (1) project planning and inventory of all
of MindSpring's assets, (2) assessment, (3) renovation (whether by upgrade or
replacement), (4) testing and validation, (5) implementation and (6) creation of
contingency plans in the event of year 2000 failures.

The Year 2000 Program covers: (1) software products which are supplied by
MindSpring to its customers, (2) MindSpring's information technology and
operating systems ("IT Systems"), and (3) MindSpring's non-information
technology systems, including embedded technology ("Non-IT Systems"). In
addition, the Program calls for MindSpring to identify and assess the systems
and services of MindSpring's major vendors,

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third party network service providers and other material service providers
("Third Party Systems"), and take appropriate remedial actions and develop
contingency plans where appropriate in connection with such Third Party Systems.

MindSpring supplies its customers with a software package which, among
other things, allows its customers to access MindSpring's services. The software
package consists of internally developed software (e.g., the MindSpring Internet
Desktop interface) which is bundled with third party software (collectively, the
"Access Product"). MindSpring believes that the current shipping version of its
software package (including the MindSpring Internet Desktop) is Year 2000 ready.

MindSpring has substantially completed the inventory phase of the Year 2000
Program for both its IT Systems and Non-IT Systems and has completed a majority
of the assessment phase of the Year 2000 Program for the IT Systems and Non-IT
Systems. MindSpring anticipates that it will complete the first two phases for
those systems during the second quarter of 1999. The Year 2000 Program calls for
the completion of all six phases for both IT and Non-IT Systems by the end of
the second quarter of 1999.

MindSpring has performed a technical review of many of the more critical
Third Party Systems and has surveyed the publicly available statements issued by
the vendors of those systems. Additionally, MindSpring has recently sent inquiry
letters to its significant providers of Third Party Systems requesting
information regarding their vulnerability to Year 2000 issues and whether the
products and services purchased from those entities are Year 2000 compliant.
MindSpring intends to pursue appropriate responses to those inquiries and will
evaluate the responses it receives.

MindSpring recently completed the Spry and NETCOM acquisitions. MindSpring
is developing appropriate plans to identify and address Year 2000 related
concerns with Spry and NETCOM as part of the natural integration of the Spry and
NETCOM operations into MindSpring. Management believes that the Spry and NETCOM
operations will not present any significant Year 2000 issues to MindSpring.

MindSpring has not deferred any specific IT project due to the Year 2000
Program. MindSpring has engaged a consulting firm to assist it in completing the
inventory and assessment phases of its Year 2000 Program, and to assist it in
its Year 2000 Program management.

Costs. As of December 31, 1998, MindSpring has incurred expenses of
approximately $75,000 in connection with the implementation of the Year 2000
Program Office and Year 2000 Program. MindSpring estimates that an additional
$250,000 to $300,000 in expenses will be incurred by MindSpring through the
remainder of the Year 2000 Program. These costs will be expensed as incurred.
The costs and estimates provided include MindSpring's estimate of the cost of
internal resources directly attributable to MindSpring's Year 2000 Program, but
do not yet include additional costs which may be incurred in connection with
expanding the Year 2000 Program to include the systems and products acquired in
the Spry and NETCOM transactions. MindSpring has funded, and anticipates that it
will continue funding, the costs of the Year 2000 Program from cash flows. The
estimates for the costs of the Year 2000 Program are based upon management's
best estimates and may be updated or revised as additional information becomes
available. MindSpring currently believes these costs will not have a material
effect on MindSpring's financial condition, liquidity or results of operations.
MindSpring's estimates of Year 2000-related costs may change, however, depending
on MindSpring's Year 2000 evaluation of the assets acquired from NETCOM.

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Risks. The failure by MindSpring to correct a material Year 2000 problem
could result in an interruption in, or a failure of, normal business activities
or operations. Presently, however, MindSpring perceives that its most reasonably
likely worst case scenario related to the Year 2000 is associated with potential
concerns with third party services or products.

Specifically, MindSpring is heavily dependent on a significant number of
third party vendors to provide both network services and equipment. A
significant Year 2000-related disruption of the network services or equipment
provided to MindSpring by third party vendors could cause customers to consider
seeking alternate providers or cause an unmanageable burden on customer service
and technical support, which in turn could materially and adversely affect
MindSpring's results of operations, liquidity and financial condition.
MindSpring is not presently aware of any vendor related Year 2000 issue that is
likely to result in this type of disruption.

Furthermore, MindSpring's business depends on the continued operation of,
and widespread access to, the Internet. To the extent that the normal operation
of the Internet is disrupted by the Year 2000 issue, MindSpring's results of
operations, liquidity and financial condition could be materially and adversely
affected.

Although there is inherent uncertainty in the Year 2000 issue, MindSpring
expects that as it progresses in its Year 2000 Program the level of uncertainty
about the impact of the Year 2000 issue on MindSpring will be reduced
significantly and MindSpring should be better positioned to identify the nature
and extent of material risk to MindSpring as a result of any Year 2000
disruptions.

Contingency Plans. The Year 2000 Program calls for the development of
contingency plans for at-risk functions. MindSpring has established a
Contingency Plan Committee to monitor and address the development of contingency
plans. Due to the current phase in which MindSpring is in of its Year 2000
Program, MindSpring is currently unable at this time to fully assess its risks
and determine what contingency plans, if any, need to be implemented by
MindSpring. As MindSpring progresses in its Year 2000 Program and identifies
specific risk areas, MindSpring intends to timely implement appropriate remedial
actions and contingency plans.

The estimates and conclusions included in this discussion contain
forward-looking statements and are based on management's best estimates of
future events. MindSpring's expectations about risks, future costs and the
timely completion of its Year 2000 modifications may turn out to be incorrect
and any variance from these expectations could cause actual results to differ
materially from what has been discussed above. Factors that could influence
risks, amount of future costs and the effective timing of remediation efforts
include MindSpring's success in identifying and correcting potential Year 2000
issues and the ability of third parties to appropriately address their Year 2000
issues. The foregoing Year 2000 discussion and the information contained herein
is provided as a "Year 2000 Readiness Disclosure" as defined in the Year 2000
Information and Readiness Disclosure Act of 1998 (Public Law 105-271, 112 Stat.
2386) enacted on October 19, 1998.

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BUSINESS

MindSpring offers subscribers complete Internet access and Web hosting
solutions, placing an emphasis on user-friendly and easy to install software,
network reliability, highly responsive customer service and superior technical
support. Through our nationwide network of MindSpring-owned and third-party
provider-owned points of presence, or POPs, our subscribers are able to access
the Internet in the 48 contiguous U.S. states and the District of Columbia via a
local telephone call.

Over the past three years, we have rapidly increased our subscriber base
and revenues by:

- providing superior customer service and technical support;

- expanding our 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.

Our subscriber base has grown from approximately 12,000 subscribers at
December 31, 1995, to over 693,000 subscribers at December 31, 1998, including
over 21,000 Web hosting subscribers. In February 1999, we completed the NETCOM
acquisition, which increased our subscriber base to approximately 1.1 million
subscribers, including approximately 45,000 Web hosting subscribers. As a
result, MindSpring is currently the fourth largest ISP in the U.S. in terms of
the number of subscribers.

MindSpring was incorporated in Georgia in February 1994, and was
reincorporated in Delaware in December 1995. Our executive offices are located
at 1430 West Peachtree St., 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.net. Information contained at our Web site
is not, and should not be deemed to be, a part of this prospectus supplement.

INDUSTRY BACKGROUND

GROWTH OF THE INTERNET

Internet access and enhanced Internet services represent two of the fastest
growing segments of the telecommunications services marketplace. The Internet
has emerged as a

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significant global communications medium, enabling millions of people to, among
other things, communicate, publish and retrieve information, and conduct
business electronically. Due to increased public awareness, lower prices for
access devices, increased functionality and improving content, International
Data Corporation estimates that the number of users accessing the World Wide Web
will increase from approximately 97 million at the end of 1998, to approximately
320 million by the end of 2002. Total ISP revenues in the United States are
projected to grow from $10.7 billion in 1998 to $37.4 billion in 2003.

ROLE OF THE ISP

Internet access services are the means by which ISPs interconnect either
businesses or individual consumers to the Internet's resources or to corporate
intranets and extranets. Access services include dial-up access for individuals
and small businesses and high-speed dedicated access designed primarily for
mid-sized and larger organizations. In addition to Internet access services, an
increasing number of Internet users are taking advantage of value-added
services, such as Web hosting and Web page design. We believe that value-added
services, such as those included in MindSpring's business service offerings, are
among the fastest growing segments of the ISP marketplace. According to
International Data Corporation, revenues attributable to value-added services
are projected to increase in the United States at a compounded annual growth
rate of approximately 34%, from $3 billion in 1998, to $12.9 billion in 2003.

INTERNET USERS AND THEIR NEEDS

The rapid development and growth of the Internet has resulted in a highly
fragmented industry of over 5,000 national and local ISPs in the U.S. ISPs vary
widely in geographic coverage, customer focus and levels of Internet access
provided to subscribers. For example, access providers may concentrate on
certain types of subscribers (such as businesses or individuals) that differ
substantially in the type of service and support required by the relevant
customer constituency.

MindSpring focuses on the individual and small business segments of the
Internet marketplace. We believe that the demand for Internet service in our
target subscriber markets will grow substantially from current levels. In
addition to broad demographic and economic trends driving the overall growth of
the Internet market, the individual and small business markets are expanding as
a function of falling access costs, lower prices for access devices, more
simplified operational procedures and improved content.

USER PROFILE

Users currently accessing the Internet do so primarily by means of dial-up
services, although as described below, new ways of connecting to the Internet
are becoming more common, particularly those that take advantage of higher
speeds and broader bandwidth capacity. Access to the Internet using dial-up
services requires the user to have access to a local telephone line, the use of
a modem and an ISP account, such as a MindSpring account, through which access
can be obtained. Many of the industry's early-stage dial-up users were
technologically sophisticated users. These "early adopters" generally have not
demanded significant or intensive customer service and technical support. We
believe this is changing and will continue to change, with first-time Internet
users being much less technologically sophisticated and requiring more
user-friendly software and more intensive and responsive customer service and
technical support, all of which are the cornerstones of MindSpring's business.

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GROWING NEEDS OF CURRENT USERS

We believe that, in addition to requiring more intensive customer service
and technical support, both individual and business users of Internet access
will increasingly demand Web hosting and other services. We believe that this
demand will grow as these businesses and individuals become more familiar with
the Internet and recognize the value of maintaining an Internet presence as a
way to enable other users around the world to communicate with and access
information about them.

The Web hosting market represents a rapidly growing area of the Internet
marketplace. Web hosting enables individuals and small businesses to increase
their presence on the World Wide Web by creating a Web site, which is "hosted"
by companies such as MindSpring, without the responsibility or expense
associated with maintaining a Web server or high-speed Internet connection. We
believe that services relating to e-commerce, which is the means by which
businesses offer and sell their services and products over the Internet, will be
an important outgrowth of Web hosting services. MindSpring believes that the
individual and small business markets represent a significant area for continued
growth at MindSpring.

NEXT GENERATION SERVICES

Several different types of communications services have been delivered to
homes, including voice, video and data transmissions. Each of these
communications services was delivered to homes using separate modes of
transmissions and infrastructure. With advancing technology, many different
types of services can now be delivered over the same infrastructure with many
new devices. MindSpring believes that this phenomenon has distinct advantages
for providers of services who may take advantage of their existing customer base
to sell additional products. We further believe that this trend is likely to
accelerate as the owners of cable, telephone, and data backbone assets upgrade
their equipment to permit additional means of delivering voice, video and data
services over existing infrastructure.

As a provider of Internet services, which involves the transmission of data
in packets over a data network backbone, MindSpring is well positioned to be a
leading service provider of the additional services that are likely to become
available over the packet-switched network. While applications such as Internet
telephony are in their infancy, we believe that there are significant growth
opportunities related to the use of voice and other telephony services over the
packet-switched network. In addition, as new devices are created for data
transmission over the Internet, the demand for technical support for these
devices will increase. With our reputation for excellence in this area, we
believe we are well positioned to serve this market.

MINDSPRING STRATEGY

MindSpring's objective is to strengthen our position as a leading national
provider of high quality Internet access, Web hosting and other value-added
services to individuals and small businesses, as measured by customer
satisfaction, subscriber growth and financial performance. Key elements of our
business strategy include:

CONTINUING TO PROVIDE SUPERIOR CUSTOMER SERVICE AND TECHNICAL SUPPORT

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applications designed for the Internet proliferate, we believe that even
sophisticated users, including those that have been MindSpring subscribers for
years, will periodically encounter problems. Consequently, we intend to continue
to focus on providing high levels of customer service and technical support in
an effort to achieve maximum levels of customer satisfaction. Historically, this
strategic focus has resulted in low churn rates, significant subscriber growth
from customer referrals and industry recognition. We have received numerous
customer service awards, including PC Computing's 1998 MVP Award for Best
National ISP. Currently, over half of our employees are engaged in a customer
service or technical support function, and are available 24 hours a day, seven
days a week, except for major holidays.

EFFICIENTLY EXPANDING OUR NATIONAL NETWORK

EXPANDING OUR TARGETED MARKETING AND DISTRIBUTION ACTIVITIES

INCREASING OUR REVENUES FROM VALUE-ADDED SERVICES

ENGAGING IN SELECTED ACQUISITIONS

Since early 1996, we have supplemented our internal expansion efforts
through selected acquisitions of complementary businesses and subscriber
accounts. As MindSpring

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continues to expand, we may continue to pursue this strategy. We believe that as
the ISP market evolves, customers will place ever greater emphasis on ISP
performance, network coverage, reliability, and support. As a result, smaller
ISPs may be unable to remain competitive on a national or regional basis, unless
they significantly expand the scope of their operations. These trends could lead
to greater industry consolidation and, consequently, acquisition opportunities.
We intend to continue to evaluate acquisition opportunities as they become
available.

We recently completed two substantial acquisitions:

In October 1998, we purchased substantially all of Spry, Inc.'s
subscriber base of individual dial-up Internet access customers in the
United States and Canada, including approximately 130,000 individual access
accounts. We also acquired various assets used in serving those customers,
including a leased customer support facility and a leased network
operations facility in Seattle, Washington and all rights to the "Sprynet"
name. Spry was a wholly-owned subsidiary of America Online, Inc. The
purchase price for these assets was approximately $32 million.

In February 1999, we purchased substantially all of NETCOM On-Line
Communication Services, Inc.'s subscriber accounts in the U.S., including
approximately 371,000 individual access accounts, approximately 3,000
dedicated Internet access accounts and approximately 22,000 Web hosting
accounts. NETCOM, now known as ICG PST, Inc., is a wholly owned subsidiary
of ICG Communications, Inc. MindSpring also acquired assets used in serving
those customers, including leased operations facilities in San Jose,
California and Dallas, Texas and ICG PST's rights to the "NETCOM" name
(except in Canada, the United Kingdom and Brazil). ICG PST retained all of
its assets used in connection with its network operations. Under a separate
network services agreement with ICG PST, we purchase access to ICG PST's
network. We paid $245 million for the NETCOM assets, consisting of $215
million in cash and $30 million in MindSpring common stock. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."

MINDSPRING SERVICES

Our services include dial-up Internet access and business services, which
consist of Web hosting and other services such as high-speed dedicated Internet
access for small to medium-sized businesses, Web page design and Web-server
co-location. MindSpring's primary service offerings, dial-up Internet access and
Web hosting, are offered in various price and usage plans designed to meet the
needs of our customers. We continuously evaluate the need to add additional
product offerings and modify our service features based upon market demands.

INTERNET ACCESS

Dial-Up Internet Access. MindSpring's primary service offering is dial-up
Internet access. As of December 31, 1998, approximately 84% of our total
revenues were attributable to dial-up Internet access. The basic equipment
requirements for an individual dial-up subscriber are a Windows 3.1 or later
operating system or Macintosh computer with at least 8MB of RAM and a modem of
14.4 Kbps speed or faster. The subscriber's MindSpring connection is a direct,
point-to-point protocol, or "PPP," connection to the Internet. A direct PPP
connection enables a subscriber to use any standard Internet capable software
that will run on the subscriber's computer.

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MindSpring currently offers the following five price plans for dial-up
subscription, taking account of demand for both heavy and light Internet usage.
Each plan requires a start-up fee of up to $25 (except for the Commercial plan,
which has a start-up fee of $50), which is waived in certain instances depending
upon the promotional method by which the subscriber is acquired.

The Works. For $26.95 per month, individual subscribers receive unlimited
usage (not intended to be a full-time connection) as well as 10MB of Web space,
a personal Web page editor that permits subscribers to create and upload their
own Web pages, and two additional mailboxes.

Unlimited Access. Individual subscribers pay $19.95 per month for
unlimited usage and 5MB of Web space. As with the Works Plan, the subscriber
must disconnect when not actively accessing the Internet. The subscriber is not
permitted, for example, to maintain a full-time computer connection as a World
Wide Web server.

Standard. Subscribers pay $14.95 per month for 20 hours of use and $1 per
hour for each additional hour. Subscribers also receive 5MB of Web space.

Light. Subscribers pay $6.95 per month for 5 hours of use and $2 per hour
for each additional hour. Subscribers also receive 5MB of Web space.

Commercial. Designed for small businesses, subscribers pay a $50 start-up
fee and $99 per month thereafter in exchange for 160 hours of usage and $.75 for
each additional hour. Subscribers receive 10 mailboxes and are not charged for
simultaneous usage, which would permit several employees to be on-line at once
without paying additional fees.

Subscribers to each plan can also purchase additional features such as
extra mailboxes for specified fees.

Substantially all of our subscribers are on month-to-month subscriptions.
MindSpring offers a 30-day money-back satisfaction guarantee for new
subscribers. Billing is monthly, with payments made by the majority of
subscribers by a monthly charge to the subscriber's credit card. Payment is made
at the beginning of each billing cycle, although some subscribers are invoiced
(for an extra charge). Subscribers, as well as MindSpring, may cancel an account
at any time, with the cancellation taking effect as of the first day of the
following billing month.

A subscriber who is within local dialing range of one of the MindSpring
POPs or a designated third-party provider POP can access the Internet with a
local telephone call. MindSpring also offers access to its services through an
"800" number for an additional charge. All dial-up subscribers can connect to
the MindSpring network (including the third-party provider POPs) via modem at
speeds up to 33.6 Kbps and over 90% of MindSpring's subscribers can connect at
speeds up to 56 Kbps. In a majority of the cities that MindSpring serves,
individual subscribers, except subscribers to the Unlimited Access and
Commercial plans, can also choose to connect via ISDN at 64 Kbps or 128 Kbps.
There is a one-time extra start-up fee of $25 for ISDN users who subscribe to
the Standard and Light plans; otherwise, 64K ISDN pricing is the same as for
modem subscribers, and 128K users pay a small surcharge. All dial-up subscribers
also have the option of using MindSpring servers to publish information on the
Internet through the World Wide Web or FTP. MindSpring subscribers may use the
space made available on MindSpring's servers to make World Wide Web pages or
computer data files available to the Internet.

MindSpring recently introduced high-speed cable modem Internet access on a
very limited basis in the Montgomery, Alabama area. We provide this service
through an

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agreement with KNOLOGY Holdings, Inc., an affiliate of ITC Holding Company,
Inc., one of our principal stockholders. Our ability to expand our geographic
offering of this service will depend on KNOLOGY's enhancement and expansion of
its network infrastructure and our access to other third-party cable and
broadband networks. See "-- Competition -- Broadband Technologies" and "Risk
Factors -- The Internet access and Web hosting markets are very
competitive -- Broadband Technologies."

BUSINESS SERVICES

MindSpring's business services consist of:

- Web hosting, the business of maintaining a customer's Internet Web site,

- high-speed, dedicated Internet access,

- Web page design,

- domain name registration,

- customer Web server co-locations, and

- e-commerce services.

As of December 31, 1998, business services revenues, which were derived
almost entirely from Web hosting services, accounted for approximately 13% of
our total revenues.

Web Hosting. MindSpring offers Web hosting accounts for companies and
other organizations that wish to create their own World Wide Web sites without
maintaining their own Web servers and high-speed Internet connections. Web
hosting subscribers can use their own domain names in their World Wide Web
addresses. This type of Web hosting is called "virtual hosting." Web hosting
subscribers create their Web sites themselves and then upload the pages to a
MindSpring Web server. MindSpring's Web hosting service features
state-of-the-art Web servers for high speed and reliability, a high-quality
connection to the Internet, specialized customer support, advanced services
features, such as secure transactions and VRML, or Virtual Reality Markup
Language, a feature used to make Web pages seem three-dimensional, and reporting
on site usage. MindSpring currently offers three price plans for Web hosting
subscribers ranging from $19.95 to $99.95 per month. MindSpring has
approximately 45,000 Web hosting subscribers, including approximately 22,000 Web
hosting accounts acquired from NETCOM in February 1999.

Web Page Design. Our web page design services consist of four standard
design packages from which a subscriber can choose or the subscriber can create
a custom web page from scratch. The subscriber provides the text for the Web
site, and custom design work is available from MindSpring, including logo
design, additional HTML pages, and database integration.

E-commerce. We recently introduced our e-commerce hosting service, which
enables even unsophisticated subscribers to set up an Internet storefront in
virtually minutes. We offer merchants a complete suite of commercial hosting
options including:

- Web hosting,

- Web site or Web page design,

- domain name registration,

- store front and back office applications,

- customer-to-merchant e-mail services,

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- search engine registration,

- encryption security certificates to assure confidentiality of
transactions, and

- credit card and on-line payment processing services.

Dedicated Access, Domain Registration and Web Server
Co-location. MindSpring also offers domain registration services and, in some
markets, high-speed dedicated access connections to the Internet, including for
the approximately 3,000 dedicated access accounts we purchased in the NETCOM
acquisition. We also offer Web-server co-location services at our Atlanta
headquarters and at our Dallas call center for subscribers who want to maintain
their own Web servers in MindSpring's state-of-the-art telephony environment and
receive a high-speed, full-time connection to the Internet. MindSpring's
co-location services include (1) 24-hour security monitoring, (2) an
uninterrupted power supply, (3) climate control, (4) remote access for the
subscriber, (5) tape swap, and (6) secure tape storage.

CUSTOMER SERVICE AND TECHNICAL SUPPORT

CUSTOMER SERVICE. MindSpring believes that excellent customer service and
technical support is critical to our success in retaining and in attracting new
subscribers. We currently provide customer service and technical support through
our call centers located in Atlanta, Georgia; Harrisburg, Pennsylvania; Phoenix,
Arizona; Seattle, Washington; San Jose, California; and Dallas, Texas. In
February 1999, we acquired approximately 3,000 dedicated access accounts and
related support personnel from NETCOM. These subscribers are generally small to
medium-sized businesses that require full-time, dedicated connections to the
Internet. We are in the process of integrating these subscribers into
MindSpring's operations. Dedicated access subscribers generally require
technical and customer support relating to the quality of and interruptions in
the full-time Internet connection, which in turn will require MindSpring staff
to interact and coordinate with the telephone company or other dedicated line
providers. We believe that our ability to successfully integrate and support
these acquired customers profitably will determine the extent to which we will
seek to expand this line of business.

MindSpring's customer service staff handles all questions regarding a
subscriber's account and are available from 9 a.m. to 9 p.m. eastern time seven
days a week, except for major holidays. As of February 28, 1999, we had
approximately 200 customer service employees.

Our technical support staff handles questions related to the provision of
our services such as questions regarding installation of MindSpring's service,
connection to our network and use of various software applications. MindSpring's
technical support staff is available 24 hours a day, seven days a week, except
for major holidays. As of February 28, 1999, we had approximately 820 technical
support employees. In the NETCOM acquisition, we assumed a third-party technical
support service contract through which NETCOM had provided technical support to
the subscribers we acquired. We plan to continue to provide technical support to
the acquired NETCOM subscribers under this contract until approximately the last
quarter of 1999, when we expect that substantially all of these subscribers will
have transitioned to the MindSpring software.

Subscribers can call any of our call center facilities for customer service
and technical support through a local telephone number, for those cities local
to a call center, or a toll-free "800" number. Subscribers can also e-mail their
questions directly to a customer service and technical support address at
MindSpring. In addition, we maintain MindSpring-specific

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newsgroups on the Internet where subscribers can post requests for help and
other subscribers, as well as MindSpring support personnel, can respond.

SALES AND MARKETING

MindSpring believes that the market for individual Internet access is
heavily influenced by person-to-person referrals. Accordingly, our marketing
efforts have been geared, among other things, toward generating positive
referrals and stimulating subscriber growth and retention by providing
exceptionally high-quality service to our existing subscribers. We also offer a
$10 credit to existing subscribers each time a new subscriber names the existing
subscriber as the referral source. A significant number of MindSpring's new
subscribers indicate that an existing subscriber referred them.

We also engage in targeted marketing and distribution efforts in markets
where there is the opportunity for substantial market penetration. We believe
that high geographic concentrations of subscribers improve network economics and
reduce subscriber acquisition costs, thereby resulting in higher margins. While
continuing to encourage referrals from existing subscribers, we plan to increase
our print publication, radio, television and direct mail advertising in certain
targeted major metropolitan areas throughout the United States in order to
achieve greater density in our subscriber base.

In addition, we have pursued nationwide strategic alliances available to
MindSpring as a result of the our nationwide access and reputation for
reliability and high quality. Such nationwide marketing opportunities may
include, among others, entering into large-scale bundling arrangements with
complementary products, such as computers, software products, multimedia books,
and CD-ROM merchandise, and seeking strategic alliances available with
complementary businesses operating in our service areas, such as
Internet-oriented training organizations and consulting firms, World Wide Web
content developers, computer networking firms, media companies,
telecommunications companies, local area network and World Wide Web consulting
companies, and other Internet access companies that specialize in providing
dedicated connections. The nature and terms of these alliances vary.

We intend to continue to expand our marketing and distribution efforts. We
will continue to closely monitor the results of our marketing techniques as part
of an ongoing effort to increase the cost-effectiveness of our marketing
efforts.

We have attempted to maintain a high degree of personal contact with the
communities that we serve, and we have a staff of territory managers who are
responsible for generating interest in MindSpring in these communities.
MindSpring marketing personnel spend considerable time meeting with and making
presentations to groups representing potential subscribers, such as computer
user associations, high-technology business associations, and educational
institutions. We plan to continue these efforts in the southeastern United
States, New York, California, Phoenix, Arizona and Chicago, Illinois and to
selectively expand them to include key metropolitan areas in other regions of
the country.

Sales are consummated by MindSpring's telephone sales force, which responds
to incoming subscription inquiries, as well as through an on-line sign-up
procedure. The on-line registration module, which is available in MindSpring's
retail software package, through MindSpring's Web site and through various
Original Equipment Manufacturer, or OEM, arrangements, enables a user to become
a MindSpring subscriber by selecting service plans and billing methods on-line,
without the need to speak to a MindSpring employee.

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NETWORK INFRASTRUCTURE

Geographic Coverage. Through our nationwide network of MindSpring-owned
and third-party provider-owned points of presence, or POPs, our subscribers are
able to access the Internet in the 48 contiguous U.S. states and the District of
Columbia via a local telephone call. We purchase access to third-party provider
POPs through network services agreements with PSINet, Worldcom Advanced Networks
(formerly Gridnet International, L.L.C.), GTE Internetworking Incorporated
(formerly BBN Planet Corporation) and ICG PST.

We believe that using a combination of MindSpring-owned POPs and POPs owned
by third-party network providers enables us to provide Internet access services
on a nationwide basis while managing the timing and magnitude of our capital
expenditures. We employ a strategy of leasing POPs from third-party providers in
locations where it is more economical to do so. These are typically geographic
areas where MindSpring has lower market penetration than areas we serve through
MindSpring POPs. We periodically reevaluate the economics of this strategy and,
if warranted, we may install a MindSpring POP to replace or overlap with a
leased POP.

MindSpring POPs. Each MindSpring POP typically consists of data
communications equipment such as 3Com(R) Total Control modem chassis, 3Com(R) or
Bay Networks switches and Cisco Systems routers, the majority of which are
currently co-located with a local telecommunications or media company. The
3Com(R) modem chassis employed by MindSpring support both ISDN and analog
terminations. MindSpring has upgraded all modem chassis to support the new
international 56Kb modem standard, V.90.

Each MindSpring POP is connected to MindSpring's Atlanta Network Data
Center. These connections consist of either a private line point-to-point
Internet Protocol, or "IP" connection, or a frame relay connection. In addition,
we use private peering points to more efficiently manage our network traffic. A
private peering point is a point where our network connects to the network of
one of our third-party network providers. This enables us to route network
traffic along the shortest path feasible.

We refer to some of our POPs as "super-POPs." A super-POP is a POP where
MindSpring co-locates its equipment with a competitive local exchange carrier,
or "CLEC". By co-locating with a CLEC, we are able to aggregate Internet traffic
from multiple local calling areas into a single modem pool via local telephone
numbers. This creates, in effect, a "super-POP," enabling MindSpring to offer
local dial-up access out of a single POP to areas that would otherwise require
co-location sites in each local dial-up area -- that is, multiple POPs -- to
accomplish the same task. As part of our strategy, we intend to open additional
super-POPs where demand and other economic factors warrant.

Atlanta Network Hub. MindSpring's Atlanta Network Data Center is connected
to Internet backbone providers such as GTE Internetworking via large leased
telecommunications lines called DS-3s. MindSpring's Atlanta Network Data Center
is supported by dual SONET rings provided by BellSouth Corporation and MediaOne.
The Data Center has a back-up generator for emergency use in the event of a
prolonged loss of electric power. In addition to dial-up subscribers, most of
MindSpring's Web hosting and Web-server co-location customers are served from
this location.

Network Operations Center. MindSpring maintains a Network Operations
Center at our Atlanta headquarters through which our technical staff monitors
network traffic, service quality, and security, as well as equipment at
individual POPs, to ensure reliable Internet access. The Network Operations
Center is staffed 24 hours a day, 7 days a week. We also monitor network
operations through our facilities in Seattle, Washington and Dallas, Texas.

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In the future, we may use our other call center facilities to supplement or add
redundancy to this network monitoring capability. In addition, we continue to
invest in improved network monitoring software and hardware systems.

MINDSPRING SOFTWARE

An important component of our service offering for dial-up subscribers is
the MindSpring starter kit. The starter kit includes the MindSpring installation
program, front-end software and documentation, an on-line registration module
(retail version only), network software that enables a subscriber to connect to
the Internet, and application programs. See "-- Subscriber Applications." Our
subscribers acquired from Spry and NETCOM connect to the Internet using software
that we acquired in those acquisitions. Those subscribers may switch to
MindSpring software at their option at any time.

Our objectives in developing and providing the MindSpring starter kit are
to:

Simplify Installation. MindSpring's software package automatically
configures all the individual Internet access programs after one-time entry
by the user of a few required fields of information (name, user name,
password, etc.).

Provide a Convenient and Intuitive Starting Place for
Subscribers. MindSpring's front-end software allows subscribers to connect
and disconnect, see any current messages from MindSpring, check their
monthly usage, see if they have any e-mail, and launch any of their
Internet application programs, all from one screen. "Help" files and the
accompanying documentation contain information on troubleshooting and
things to do on the Internet. Links to the most popular content sites are
also provided.

Enhance Efficiency of MindSpring's Support Services. High-quality
software with which our technical support representatives are familiar
makes it easier for MindSpring to provide fast and efficient customer
service and technical support. Software that is reliable and easy to
install and use also tends to reduce subscriber need for extensive customer
service and technical support services.

Provide State-of-the-Art Applications. MindSpring uses existing
applications developed by third parties in its software package. We believe
that this approach will enable us to include state-of-the-art software in
our package and to keep pace with technology developments by replacing
applications with newer or better programs as they become available without
diverting resources by attempting to develop new applications programs.

SUBSCRIBER APPLICATIONS

MindSpring subscribers use their accounts for, among other things,
communicating, retrieving information, and publishing information on the
Internet. In our surveys of our subscribers, a substantial number of
MindSpring's individual subscribers report that they use their MindSpring
accounts for personal as well as business purposes. The subscriber's MindSpring
connection is a direct PPP connection, enabling subscribers to use any standard
Internet-capable software that will run on their computers. A complete set of
the most popular Internet applications are part of the MindSpring starter kit
software package, including:

Electronic Mail. E-mail allows subscribers to exchange electronic messages
with anyone else who has an Internet e-mail address. These messages are usually
text only but can also include other kinds of computer files (such as images,
computer programs, or

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word processing documents), which are sent as attachments. MindSpring's software
package includes the Eudora Light(R) e-mail application.

The World Wide Web. The World Wide Web allows a multimedia presentation of
material (i.e., text, graphic, sound, and video). Users can move from one World
Wide Web site to another by clicking on hypertext links and can interact with
the World Wide Web information providers through typed input. The software
programs that allow users to explore the World Wide Web are known as "browsers."
The browser applications currently included in MindSpring's software package are
Microsoft's Internet Explorer(R) and Netscape Navigator(R).

Network News. Network News provides Internet-wide, subject-specific forums
on thousands of different subjects, where users can post information and review
posted information from other users.

FTP. File transfer protocol, or FTP, is a standard Internet tool that
allows users to send and retrieve computer files. FTP is often used for
retrieving software from various archive sites on the Internet.

Internet Relay Chat. Internet Relay Chat allows users to participate in
chat sessions, in which typed comments from all participants appear on the
screen, allowing simultaneous multiperson real-time conversations.

MindSpring has obtained permission and, in certain cases, licenses from
each manufacturer of the software that we bundle in MindSpring's front-end
software product for Windows and Macintosh subscribers. See "Proprietary
Rights."

BILLING AND MANAGEMENT INFORMATION SYSTEMS

A majority of our individual subscribers pay their MindSpring fees
automatically by credit card each month. MindSpring generally sends monthly
invoices to commercial accounts with multiple users. Billing calculations and
payment transactions are managed on our automated billing system. We expect to
continue to modify and upgrade our billing system as needed in order to maintain
our ability to bill and collect amounts due and to be responsive to changes in
the market.

PROPRIETARY RIGHTS

General. Although we believe that our success is more a function of our
technical expertise and customer service than our proprietary rights,
MindSpring's success and ability to compete depends in part upon our technology.
We rely on a combination of copyright, trademark and trade secret laws, and
contractual restrictions to establish and protect our technology. It is our
policy to require employees and consultants and, when possible, suppliers to
execute confidentiality agreements upon the commencement of their relationships
with MindSpring. These agreements provide that confidential information
developed or made known during the course of a relationship with MindSpring must
be kept confidential and not disclosed to third parties except in specific
circumstances. We cannot provide any assurances that the steps we have taken
will be adequate to prevent misappropriation of our technology or that our
competitors will not independently develop technologies that are substantially
equivalent or superior to our technology.

Licenses. We have obtained authorization to use the products of each
manufacturer of software that we bundle in MindSpring's front-end software
product for Windows and Macintosh subscribers. The particular applications
included in the MindSpring starter-kit have, in some cases, been licensed.
MindSpring currently intends to maintain or negotiate

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renewals of, as the case may be, all existing software licenses and
authorizations as necessary. MindSpring may also want or need to license other
applications in the future. License fees charged to MindSpring upon enrollment
of additional subscribers are included in the cost of subscriber start-up fees.
Other applications included in the MindSpring starter kit are shareware that
MindSpring has obtained permission to distribute or that are from the public
domain and are freely distributable. MindSpring developed the front-end software
programs in MindSpring's starter kit for Windows 3.1, Windows 95, and Macintosh.
We have acquired some software, trademarks and other proprietary technology from
Spry and NETCOM which we may continue to use for acquired subscribers. See "Risk
Factors."

COMPETITION

The markets for the provision of Internet access and business 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 may not be able to compete
successfully against current or future competitors, many of whom may have
financial resources greater than ours. Increased competition could cause us to
increase our selling and marketing expenses and related subscriber acquisition
costs and could also result in increased subscriber attrition. We may not be
able to offset the effects of these 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. These developments
could adversely affect our business, financial condition and results of
operations.

Competitive Factors. We believe that the primary competitive factors
determining success in the Internet access and business services 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. 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 ISPs.

Our Competitors. 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 ISPs, such as EarthLink Network, Inc.;

- computer hardware and software and other technology companies, such as
IBM Corp. and Microsoft Corporation;

- numerous regional and local commercial ISPs which vary widely in quality,
service offerings, and pricing;

- national and regional Web hosting companies that focus primarily on
providing Web hosting services;

- cable operators and on-line cable services;

- local telephone companies and regional Bell operating companies; and

- nonprofit or educational ISPs.

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Broadband Technologies. 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. These companies may include
Internet access or business services such as Web hosting using broadband
technologies in their basic bundle of services or may offer Internet access or
business services for a nominal additional charge. Broadband technologies enable
consumers to transmit and receive print, video, voice and data in digital form
at significantly faster access speeds than existing dial-up modems.

The companies that own these broadband networks could prevent us from
delivering Internet access through the wire and cable connections that they own.
Cable television companies are not currently required to allow ISPs to access
their broadband facilities and the availability and terms of ISP access to
broadband local telephone company networks are under regulatory review. Our
ability to compete with telephone and cable television companies that are able
to support broadband transmission, and to provide better Internet services and
products, may depend on future regulation to guarantee open access to the
broadband networks. However, in January 1999, the Federal Communications
Commission, or FCC, declined to take any action to mandate or otherwise regulate
access by ISPs to broadband cable facilities at this time. It is unclear whether
and to what extent local and state regulatory agencies will take any initiatives
to implement this type of regulation, and whether they will be successful in
establishing their authority to do so. Similarly, the FCC is considering
proposals that could limit the right of ISPs to connect with their customers
over broadband local telephone lines. In addition to competing directly in the
ISP market, both cable and telephone facilities operators are also aligning
themselves with certain ISPs who would receive preferential or exclusive use of
broadband local connections to end users. If high-speed, broadband facilities
increasingly become the preferred mode by which customers access the Internet
and we are unable to gain access to these facilities on reasonable terms, our
business, financial condition and results of operations could be materially
adversely affected.

No International Operations. We do not currently compete internationally,
except we have a small number of Canadian subscribers obtained in the Spry
acquisition. 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.

GOVERNMENT REGULATION

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should be classified as unregulated "information service providers" rather than
regulated "telecommunications providers" under the terms of the
Telecommunications Act of 1996.

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EMPLOYEES

As of February 28, 1999, MindSpring had approximately 1,600 employees, of
which approximately 300 were added in the NETCOM acquisition. None of
MindSpring's current employees is represented by a labor organization, and we
consider our relations with our employees to be good.

PROPERTIES

Our corporate headquarters are located in Atlanta, Georgia. The leases for
this space expire on March 31, 2001 and July 14, 2002. We also lease additional
office space in the vicinity of our Atlanta headquarters in order to meet
MindSpring's existing and anticipated space requirements. The lease for this
additional office space expires on March 31, 2002. We believe that these
facilities will provide sufficient capacity for MindSpring's operations for the
foreseeable future. Equipment for POPs other than the Atlanta POP site is
generally co-located with and in space leased from other companies operating in
the area of the particular POP.

We also maintain call center and/or network operations facilities in the
following locations:

- Harrisburg, Pennsylvania -- The lease for this facility expires on
December 15, 1999. We have the option to extend this lease for one
additional year.

- Phoenix, Arizona -- The lease for this facility expires on October 31,
2004. We have the option to extend this lease for two successive
five-year terms.

- Seattle, Washington -- The lease for this facility expires on February
29, 2000. We have the option to extend this lease for one additional
year.

- Bellevue, Washington -- The lease for this facility expires on December
31, 2000. We have the option to extend this lease for one five-year term.

- Dallas, Texas -- The lease for this facility expires on April 30, 2003.
We have the option to extend this lease for two successive three-year
terms.

- San Jose, California -- The lease for this facility expires on October
31, 1999. We have the option to extend this lease for two successive
three-year terms.

LEGAL PROCEEDINGS

We are not currently involved in any pending legal proceedings that are
likely to have a material impact on MindSpring.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Directors of MindSpring are elected at the annual meeting of stockholders.
Officers of MindSpring are appointed at the first meeting of the board of
directors after each annual meeting of stockholders. Directors and executive
officers of MindSpring are elected to serve until they resign or are removed, or
are otherwise disqualified to serve, or until their successors are elected and
qualified. The ages of the persons set forth below are as of March 1, 1999.

<TABLE>
<CAPTION>
TERM AS
DIRECTOR
NAME AGE POSITION(S) WITH MINDSPRING EXPIRES
---- --- ------------------------------------ --------
<S> <C> <C> <C>
Charles M. Brewer................... 40 Chairman, Chief Executive Officer 2001
and Director
Michael S. McQuary.................. 39 President, Chief Operating Officer 2000
and Director
Juliet M. Reising(1)................ 48 Executive Vice President, Chief --
Financial Officer and Treasurer
Samuel R. DeSimone, Jr. ............ 39 Executive Vice President, General --
Counsel and Secretary
Lance Weatherby..................... 39 Executive Vice President of Sales --
and Marketing
Gregory J. Stromberg................ 46 Executive Vice President --
O. Gene Gabbard(2)(3)............... 58 Director 1999
Campbell B. Lanier, III(2)(3)....... 48 Director 2001
William H. Scott, III(2)(3)......... 51 Director 2000
</TABLE>

- ---------------
(1) Ms. Reising became an executive officer on February 19, 1999.

(2) Member of the Audit Committee.

(3) Member of the Compensation Committee.

Charles M. Brewer founded MindSpring and has served as Chief Executive
Officer and Director of MindSpring since its inception in February 1994 and as
Chairman since March 1996. He also served as the President of MindSpring from
its inception until March 1996 and as the Secretary and Treasurer of MindSpring
from its inception until January 1995. From May 1993 to January 1994, Mr. Brewer
developed the concept for MindSpring and evaluated its prospects. Prior to
starting MindSpring, he served as Chief Executive Officer of AudioFax, Inc., a
software company providing fax server software, from May 1992 to April 1993 and
was the Chief Financial Officer of AudioFax from May 1989 to April 1992. Mr.
Brewer received a BA in Economics from, and was a Phi Beta Kappa graduate of,
Amherst College and received an MBA from Stanford University.

Michael S. McQuary has been the President of MindSpring since March 1996,
the Chief Operating Officer of MindSpring since September 1995, and a Director
of MindSpring since December 1995. He also served as MindSpring's Executive Vice
President from October 1995 to March 1996 and MindSpring's Executive Vice
President of Sales and Marketing from July 1995 to September 1995. Prior to
joining MindSpring, Mr. McQuary served in a variety of management positions with
Mobil Chemical Co., a petrochemical company, from August 1984 to June 1995,
including Regional Sales Manager from April 1991 to February 1994 and Manager of
Operations (Reengineering) from

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February 1994 to June 1995. Mr. McQuary received a BA in Psychology from the
University of Virginia and an MBA from Pepperdine University.

Juliet M. Reising has served as Executive Vice President, Chief Financial
Officer and Treasurer of MindSpring since February 1999. From September 1998 to
February 1999, Ms. Reising served as Chief Financial Officer with AvData
Systems, Inc. ("AvData"), a provider of network management services. From
September 1997 to January 1998, Ms. Reising served as Vice President and Chief
Financial Officer of Composit Communications International, a start-up call
center software developer. From August 1995 to August 1997, she served as Vice
President and Chief Financial Officer of InterServ Services Corp., a marketing
services provider. From September 1994 to August 1995, she served as Senior Vice
President and Chief Financial Officer of Media Marketing Services, a promotional
travel incentive company. From July 1993 to September 1994, she was a financial
consultant and from June 1992 to June 1993, she served as Executive Vice
President and Chief Financial Officer of Coin, Inc., a computer systems
developer. Ms. Reising started her career as a CPA with Ernst & Young and
received a BBA in Accounting from the University of Georgia.

Samuel R. DeSimone, Jr. has served as the Executive Vice President, General
Counsel and Secretary of MindSpring since November 1998. From September 1995 to
August 1998, Mr. DeSimone served as Vice President of Corporate Development with
Merix Corporation of Forest Grove, Oregon, a printed circuit board manufacturer.
From June 1990 to August 1995, he was an associate attorney and partner with
Lane Powell Spears Lubersky of Portland, Oregon. Mr. DeSimone received a BA
from, and was a Phi Beta Kappa graduate of, Amherst College and received a JD
from New York University School of Law.

Lance Weatherby has served as MindSpring's Executive Vice President of
Sales and Marketing since April 1998. Mr. Weatherby served as MindSpring's Vice
President of Business Development from September 1996 to April 1998,
MindSpring's Acting Vice President of Business Development from August 1996 to
September 1996, and a Market Development Manager from September 1995 to August
1996. Mr. Weatherby held a variety of sales, sales management and marketing
positions with Mobil from October 1990 to September 1995, including District
Sales Manager from December 1992 to September 1995. Mr. Weatherby received a BBA
in Marketing from Eastern Kentucky University and an MBA from Indiana
University.

Gregory J. Stromberg has served as MindSpring's Executive Vice President
and has managed the Netcom customer integration into MindSpring since January
1999. Mr. Stromberg served as MindSpring's Executive Vice President of
Technology from August 1998 until January 1999, Executive Vice President of Call
Centers from March 1998 until August 1998, Vice President of Call Centers from
June 1996 to March 1998, and Vice President of Technical Support from October
1995 until June 1996. From June 1993 to September 1994, Mr. Stromberg worked as
a Regional Manager for Digital Financial Services, a subsidiary of GE Capital.
Mr. Stromberg worked in various sales, product management, operations and
management positions with Digital Equipment Corporation from June 1983 to June
1993. Mr. Stromberg received a BS in Business Management and an MBA from the
University of Utah.

O. Gene Gabbard has been a Director of MindSpring since December 1995. He
has worked independently as an entrepreneur and consultant since February 1993.
Mr. Gabbard currently serves as a director of ITC Holding and several of its
subsidiaries, as well as ITC(+)DeltaCom, Inc. ("ITC(+)DeltaCom"), a carriers'
carrier and retail telecommunications company, and Powertel, Inc. ("Powertel"),
a wireless telecommunications company formerly

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known as InterCel, Inc. and as a director and Chairman of ClearSource, Inc., a
provider of broadband telecommunications services. From August 1990 through
January 1993, he served as Executive Vice President and Chief Financial Officer
of MCI Communications Corporation ("MCI"), a telecommunications company. Mr.
Gabbard has served as a Managing Director of South Atlantic Private Equity Fund
IV, Limited Partnership since 1997.

Campbell B. Lanier, III has served as a Director of MindSpring since
November 1994. Mr. Lanier has served as Chairman of the Board and Chief
Executive Officer of ITC Holding (or its predecessors) since its inception in
1985. In addition, Mr. Lanier is an officer and director of several ITC Holding
subsidiaries. He is also the Chairman of ITC(+)DeltaCom and is a director of
ITC(+)DeltaCom, KNOLOGY Holdings, Inc. ("KNOLOGY"), a broadband
telecommunications services company formerly known as CyberNet Holding, Inc.,
Vista Eyecare, Inc., a full service optical retailer, K&G Men's Centers, a
discount retailer of men's clothing, Innotrac Corporation ("Innotrac"), which
provides customized, technology-based marketing support services, and is Vice
Chairman of the Board of AvData and Chairman of the Board of Powertel. Mr.
Lanier has served as a Managing Director of South Atlantic Private Equity Fund
IV, Limited Partnership since 1997.

William H. Scott, III has been a Director of MindSpring since November
1994. Mr. Scott has served as President of ITC Holding (or its predecessors)
since December 1991 and has been a director of ITC Holding (or its predecessors)
since May 1989. He is also an officer and director of several ITC Holding
subsidiaries. Mr. Scott is a director of ITC(+)DeltaCom, KNOLOGY, Powertel,
Innotrac and AvData.

BOARD OF DIRECTORS

Our Certificate of Incorporation provides for a classified board of
directors consisting of three classes of directors with each class required to
be as nearly equal in number as possible. The number of directors is determined
from time to time by the board of directors and is currently fixed at six. A
single class of directors is elected each year at MindSpring's annual meeting of
stockholders. Subject to transition provisions, each director elected at each
such meeting will serve for a term ending on the date of the third annual
meeting of stockholders after his election and until his successor has been
elected and qualified. Mr. Gabbard is serving for a term expiring in 1999,
Messrs. McQuary and Scott are serving for terms expiring in 2000 and Messrs.
Brewer and Lanier are serving for terms expiring in 2001. Effective February 19,
1999, Michael G. Misikoff resigned his position as director. Mr. Misikoff's term
was to have expired in 1999. Officers of MindSpring are appointed annually by
the board of directors and serve at its discretion.

The board of directors currently has two committees, the audit committee
and the compensation committee. The audit committee, among other things,
recommends the firm to be appointed as independent accountants to audit
MindSpring's financial statements, discusses the scope and results of the audit
with the independent accountants, reviews with management and the independent
accountants MindSpring's interim and year-end operating results, considers the
adequacy of the internal accounting controls and audit procedures of MindSpring
and reviews the non-audit services to be performed by the independent
accountants. The current members of the audit committee are Messrs. Gabbard,
Lanier, and Scott.

The compensation committee reviews and recommends the compensation
arrangements for management of MindSpring and administers MindSpring's 1995
Stock Option Plan, as

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amended. The members of the compensation committee for the year ended December
31, 1998 were Messrs. Gabbard, Lanier, and Scott.

DIRECTOR COMPENSATION

Since MindSpring's inception, members of the board of directors have not
received any compensation for their service on the board of directors except
pursuant to MindSpring's Directors Stock Option Plan (the "Directors Plan").
Under the Directors Plan, 210,000 shares of common stock are authorized for
issuance to non-employee directors (in the form of grants of 30,000 options per
director) upon their initial election or appointment to the board, or, in the
case of Messrs. Lanier, Scott and Gabbard, who joined the board prior to the
creation of the Directors Plan, upon the adoption of the Directors Plan by the
board. Options are exercisable at the fair market value of the common stock (as
determined by the board) on the date of grant. The Directors Plan was amended in
1998 to provide for discretionary option grants. Upon adoption of this
amendment, each of Messrs. Lanier, Scott and Gabbard received a grant of 15,000
options.

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IMPORTANT U.S. TAX CONSEQUENCES TO NON-U.S. HOLDERS

The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of
MindSpring common stock by a Non-U.S. Holder. For purposes of this summary:

(1) the Internal Revenue Code of 1986, as amended, is referred to as "the
Code,"

(2) the Internal Revenue Service is referred to as "the IRS" and

(3) a "Non-U.S. Holder" is any beneficial owner of common stock other than
a person that is for United States federal income tax purposes:

- a citizen or resident of the United States,

- a corporation, partnership or other entity created or organized in or
under the laws of the United States or of any political subdivision
thereof, other than a partnership that is not treated as a United
States person under any applicable Treasury regulations,

- an estate whose income is subject to United States federal income tax
regardless of its source or

- a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or
more United States persons have the authority to control all
substantial decisions of the trust. In addition, certain trusts
treated as United States persons for federal income tax purposes on
August 20, 1996 may elect to continue to be so treated to the extent
permitted in applicable Treasury regulations and will not be Non-U.S.
Holders if they make such an election.

This discussion does not address all aspects of United States federal income and
estate taxes and does not deal with foreign, state and local consequences that
may be relevant to Non-U.S. Holders of common stock in light of their particular
personal circumstances. Furthermore, this discussion is based on provisions of
the Code, existing and proposed regulations promulgated under the Code and
administrative and judicial interpretations of the Code and those regulations,
as of the date hereof, all of which are subject to change, possibly on a
retroactive basis. EACH PROSPECTIVE PURCHASER OF MINDSPRING COMMON STOCK IN THE
OFFERING IS ADVISED TO CONSULT A TAX ADVISOR WITH RESPECT TO CURRENT AND
POSSIBLE FUTURE TAX CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF COMMON
STOCK AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY U.S.
STATE, MUNICIPALITY OR OTHER TAXING JURISDICTION.

DIVIDENDS

MindSpring does not currently pay cash dividends on its common stock. See
"Price Range of Common Stock and Dividend Policy." Dividends paid to a Non-U.S.
Holder of common stock generally will be subject to withholding of United States
federal income tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty if the Non-U.S. Holder is treated as a resident of
such foreign country within the meaning of the applicable treaty. However,
dividends that are effectively connected with the conduct of a trade or business
by the Non-U.S. Holder within the United States and if a tax treaty applies, are
attributable to a United States permanent establishment maintained by the
Non-U.S. Holder, are not subject to the withholding tax, but instead are subject
to United States federal income tax on a net income basis at the regular
graduated individual or corporate

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rates. Any such effectively connected dividends received by a foreign
corporation may, under some circumstances, be subject to an additional "branch
profits tax" at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty.

Under current law, dividends paid to an address outside the United States
are presumed to be paid to a resident of such country, unless the payer has
knowledge to the contrary, for purposes of the withholding tax discussed above
and, under the current interpretation of United States Treasury regulations, for
purposes of determining the applicability of a tax treaty rate. Under final
United States Treasury regulations issued on October 7, 1997 (the "Final
Regulations"), effective for payments made after December 31, 1999, a Non-U.S.
Holder of common stock who wishes to claim the benefit of an applicable treaty
rate, and avoid back-up withholding as discussed below, would be required to
satisfy applicable certification and other requirements. Currently, a Non-U.S.
Holder must comply with certification and disclosure requirements to be exempt
from withholding under the effectively connected income exemption discussed
above.

A Non-U.S. Holder of common stock eligible for a reduced rate of United
States withholding tax under an income tax treaty may obtain a refund of any
excess amounts withheld by filing an appropriate claim for refund with the IRS.

GAIN ON DISPOSITION OF COMMON STOCK

A Non-U.S. Holder generally will not be subject to United States federal
income tax with respect to gain recognized on a sale or other disposition of
MindSpring common stock unless

(1) the gain is effectively connected with a trade or business of the
Non-U.S. Holder in the United States and, if a tax treaty applies, is
attributable to a permanent establishment maintained by the Non-U.S.
Holder if a tax treaty applies,

(2) in the case of a Non-U.S. Holder who is an individual and holds the
common stock as a capital asset, the holder is present in the United
States for 183 or more days in the taxable year of the sale or other
disposition and certain other conditions are met, or

(3) MindSpring is or has been a "U.S. real property holding corporation"
for United States federal income tax purposes at any time within the
shorter of the five-year period preceding such disposition or the
period the Non-U.S. Holder held the common stock.

MindSpring has not determined whether it is or has been within the
prescribed period a "U.S. real property holding corporation," or USRPHC, for
federal income tax purposes. In general, MindSpring will be treated as a U.S.
real property holding corporation if the fair market value of its U.S. real
property interests equals or exceeds 50% of the total fair market value of its
U.S. and non-U.S. real property interests and its other assets used or held in a
trade or business. If MindSpring is, has been or becomes a U.S. real property
holding corporation, so long as the common stock continues to be regularly
traded on an established securities market within the meaning of Section
897(c)(3), only a Non-U.S. Holder who holds or held, at any time during the
shorter of the five-year period preceding the date of disposition or the
holder's holding period, more than 5% of the common stock will be subject to
U.S. federal income tax on the disposition of the common stock.

An individual Non-U.S. Holder described in clause (1) above will be taxed
on the net gain derived from the sale under regular graduated United States
federal income tax rates. An individual Non-U.S. Holder described in clause (2)
above will be subject to a flat 30% tax
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on the gain derived from the sale, which may be offset by United States capital
losses, notwithstanding the fact that the individual is not considered a
resident of the United States. If a Non-U.S. Holder that is a foreign
corporation falls under clause (1) above, it will be taxed on its gain under
regular graduated United States federal income tax rates and, in addition, may
be subject to the branch profits tax equal to 30% of its effectively connected
earnings and profits within the meaning of the Code for the taxable year, as
adjusted for specified items, unless it qualifies for a lower rate under an
applicable income tax treaty.

FEDERAL ESTATE TAX

Common stock owned or treated as owned by an individual Non-U.S. Holder at
the time of death will be includable in the individual's gross estate for United
States federal estate tax purposes unless an applicable estate tax treaty
provides otherwise and, therefore, may be subject to United States federal
estate tax.

INFORMATION REPORTING AND BACKUP WITHHOLDING TAX

MindSpring must report annually to the IRS and to each Non-U.S. Holder the
amount of dividends paid to such holder and the tax withheld with respect to
such dividends, regardless of whether withholding was required. Copies of the
information returns reporting such dividends and withholding also may be made
available to the tax authorities in the country in which the Non-U.S. Holder
resides under the provisions of an applicable income tax treaty.

Under current law, backup withholding, which generally is a withholding tax
imposed at the rate of 31% on certain payments to persons that fail to furnish
certain information under the United States information reporting requirements,
generally will not apply to

(1) dividends paid to Non-U.S. Holders that are subject to withholding at
the 30% rate, or lower treaty rate, discussed above or

(2) dividends paid to a Non-U.S. Holder at an address outside the United
States, unless the payer has knowledge that the payee is a U.S. person.

Under the Final Regulations, however, a Non-U.S. holder generally will be
subject to back-up withholding at a 31% rate unless it meets applicable
certification requirements.

Payment of the proceeds of a sale of common stock by or through a United
States office of a broker is subject to both backup withholding and information
reporting unless the beneficial owner certifies under penalties of perjury that
it is a Non-U.S. Holder, or otherwise establishes an exemption. In general,
backup withholding and information reporting will not apply to a payment of the
proceeds of a sale of common stock by or through a foreign office of a broker.
If, however, such broker is, for United States federal income tax purposes a
U.S. person, a controlled foreign corporation, or a foreign person that derives
50% or more of its gross income for certain periods from the conduct of a trade
or business in the United States, such payments will be subject to information
reporting, but not backup withholding, unless

(1) such broker has documentary evidence in its records that the beneficial
owner is a Non-U.S. Holder and certain other conditions are met or

(2) the beneficial owner otherwise establishes an exemption.

Any amounts withheld under the backup withholding rules may be allowed as a
refund or a credit against the holder's United States federal income tax
liability provided the required information is furnished to the IRS.

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DESCRIPTION OF SECURED CREDIT FACILITY

(1) our option to increase the commitment to $200,000,000 will terminate,

(2) the commitment will be automatically and permanently reduced to
$20,000,000 plus an incremental amount based upon the extent of our compliance
with the requirement concerning consents and related documents (with the
exception that if we do not deliver the consents and related documents for our
Atlanta, Georgia leased property, no incremental amount will be added to the
$20,000,000 amount); and

(3) the applicable margin will be increased between .375% and 1.00% for
both Base Rate borrowings and LIBOR rate borrowings.

While at present we do not anticipate difficulties in obtaining the
consents and related documents by the specified deadline, there can be no
assurance that we will be able to do so.

On February 17, 1999, we borrowed $80 million under the credit facility to
finance the NETCOM acquisition. We intend to repay all amounts outstanding under
the credit facility, approximately $80.8 million including accrued interest,
through April 7, 1999, with a portion of the proceeds from this offering, or, if
we do not complete this offering, with a portion of the proceeds from the notes
offering. See "Use of Proceeds." Assuming we obtain the necessary consents
described above, the total commitment under the credit facility will be $100
million.

The credit facility may also be used to finance permitted acquisitions and
for working capital and general corporate requirements. The following summary of
the material provisions of the credit agreement does not purport to be complete
and is qualified in its entirety by reference to the credit agreement. Some of
the capitalized terms used in this description of the credit facility are
defined at the end of this section.

Amounts drawn under the credit facility will bear interest, at our option,
at either the Base Rate or the reserve adjusted LIBOR rate, plus an applicable
margin. The applicable margin will be an annual rate which will fluctuate based
on our ratio of total debt to EBITDA and which will be between 0.25% and 1.00%
for Base Rate borrowings and between 1.25% and 2.00% for LIBOR rate borrowings.

The credit agreement requires us to repay indebtedness outstanding under
the credit facility with the net cash proceeds from all debt issuances, other
than the proceeds from the notes offering, from some types of sales of our
assets, and from some types of insurance proceeds. In addition, the total loan
commitment will be reduced by the amount of net cash proceeds from debt
issuances, other than the proceeds from the notes offering, and, to the extent
not reinvested in similar assets or used to finance the repair or replacement of
damaged assets, as the case may be, within 120 days after receipt of those
proceeds, by

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the amount of net cash proceeds from some types of asset sales and from some
types of insurance proceeds.

Our obligations under the credit facility will be guaranteed by all of our
future subsidiaries. Our obligations are secured by a first priority lien on all
of our current and future assets and properties and will be secured by a first
priority pledge of the capital stock of any subsidiary that we organize or
acquire.

The credit agreement contains negative covenants limiting our ability and
that of our future subsidiaries to:

- incur debt, excluding the notes from the notes offering;

- guaranty obligations;

- create liens;

- make loans, advances, investments and acquisitions;

- engage in mergers and liquidations;

- sell assets;

- pay dividends and make distributions;

- exchange and issue some types of convertible or redeemable capital stock;

- engage in transactions with affiliates;

- amend subordinated debt; and

- enter into restrictive agreements and change our fiscal year or
accounting method.

In addition, the credit agreement contains affirmative covenants, including

- covenants requiring compliance with laws and material contracts;

- maintenance of corporate existence, properties and insurance;

- payment of taxes and all other obligations;

- year 2000 compatibility; and

- the delivery of financial and other information.

The credit agreement also requires us to comply with specific financial
tests and to maintain specific financial ratios. We must maintain

(1) as of the end of any fiscal quarter, a ratio of EBITDA to interest
expense for the immediately preceding four consecutive fiscal quarters of no
less than 3.0:1.0;

(2) a maximum total debt to EBITDA ratio no greater than 3.0:1.0 and

(3) a net worth not less than $175,000,000 plus 50% of net income, to the
extent positive, plus 75% of the net cash proceeds of equity issuances.

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Failure to satisfy any of the financial covenants constitutes an event of
default under the credit facility, notwithstanding our ability to meet our debt
service obligations. The credit agreement also includes other customary events
of default, including, without limitation, cross default to other debt and
material contracts; insolvency or bankruptcy; occurrence of certain ERISA
events; material undischarged judgments and change in control.

"Base Rate" means the greater of First Union National Bank's prime lending
rate or the overnight federal funds rate plus 0.50%.

"EBITDA" means, for any period, the sum of the following on a consolidated
basis, without duplication, for MindSpring and our Subsidiaries, as defined in
the credit agreement, in accordance with generally accepted accounting
principles:

(A) net income for such period plus

(B) the sum of the following to the extent deducted in determining net
income:

(1) income and franchise taxes,

(2) interest expense,

(3) amortization, depreciation and other non-cash charges less

EBITDA will be adjusted in a manner reasonably satisfactory to First Union
National Bank to include on a pro forma basis as of the first day of any
calculation period any acquisition consummated during that period as permitted
by the credit agreement and exclude on a pro forma basis as of the first day of
any calculation any Subsidiary or assets sold during that period as permitted by
the credit agreement.

"LIBOR" means the rate of interest per annum determined on the basis of the
rate for deposits in dollars in minimum amounts of at least $5,000,000 for a
period equal to the applicable Interest Period, as defined in the credit
agreement, which appears on the Telerate Page 3750 at approximately 11:00 a.m.
(London time) two business days prior to the first day of the applicable
Interest Period. If, for any reason, the rate does not appear on Telerate Page
3750, then "LIBOR" will be determined by First Union National Bank to be the
arithmetic average of the rate per annum at which deposits in dollars would be
offered by first class banks in the London interbank market to First Union
National Bank at approximately 11:00 a.m. (London time) two business days prior
to the first day of the applicable Interest Period for a period equal to that
Interest Period and in an amount substantially equal to the amount of the
applicable loan.

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UNDERWRITING

MindSpring and the underwriters for the offering named below have entered
into an underwriting agreement with respect to the shares being offered. Subject
to certain conditions, each underwriter has severally agreed to purchase the
number of shares indicated in the following table. Goldman, Sachs & Co., ING
Baring Furman Selz LLC, J.C. Bradford & Co., Donaldson, Lufkin & Jenrette
Securities Corporation, First Union Capital Markets Corp. and Jefferies &
Company, Inc. are the representatives of the underwriters.

<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Goldman, Sachs & Co...................................
ING Baring Furman Selz LLC............................
J.C. Bradford & Co....................................
Donaldson, Lufkin & Jenrette
Securities Corporation..............................
First Union Capital Markets Corp......................
Jefferies & Company, Inc..............................
---------
Total.......................................
=========
</TABLE>

If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional 300,000
shares from MindSpring to cover such sales. They may exercise that option for 30
days. If any shares are purchased pursuant to this option, the underwriters will
severally purchase shares in approximately the same proportion as set forth in
the table above.

The following table shows the per share and total underwriting discounts
and commissions to be paid to the underwriters by MindSpring. Such amounts are
shown assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.

<TABLE>
<CAPTION>
Paid by MindSpring
----------------------------
No Exercise Full Exercise
------------ -------------
<S> <C> <C>
Per Share................................. $ $
Total..................................... $ $
</TABLE>

Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus
supplement. Any shares sold by the underwriters to securities dealers may be
sold at a discount of up to $ per share from the initial public offering
price. Any such securities dealers may resell any shares purchased from the
underwriters to certain other brokers or dealers at a discount of up to
$ per share from the initial public offering price. If all the shares are
not sold at the initial offering price, the representatives of the underwriters
may change the offering price and the other selling terms.

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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 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 supplement without the prior written consent of
Goldman, Sachs & Co. In addition, during such period, MindSpring has also agreed
not to file any registration statement with respect to, and its executive
officers, directors and certain stockholders of MindSpring have 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 Goldman,
Sachs & Co.

In connection with MindSpring's acquisition of NETCOM on February 17, 1999,
MindSpring issued to NETCOM 376,116 shares of common stock in a private
placement. As required by the terms of the acquisition, in order to permit
public resales of these shares, MindSpring has filed a registration statement
with the SEC, which permits continuous public sales of those shares for a 60-day
period beginning April 6, 1999, the date that the NETCOM registration statement
was declared effective by the SEC. NETCOM is not a party to a lock-up agreement
as described in the preceding paragraph.

In June 1998, MindSpring 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. (now known as First
Union Capital Markets Corp.) for which such underwriters received customary
compensation. In December 1998, MindSpring issued and sold 2,300,000 shares of
its common stock in a public offering underwritten by the underwriters, other
than Goldman, Sachs & Co., for which such underwriters received customary
compensation. In addition, in February 1999, MindSpring paid ING Baring Furman
Selz a cash fee of $2.45 million for advising MindSpring in connection with the
NETCOM acquisition.

Affiliates of Goldman, Sachs & Co., First Union Capital Markets Corp., and
ING Baring Furman Selz, LLC are among the lenders under MindSpring's credit
agreement. MindSpring intends to use more than 10% of the net proceeds from the
sale of the common stock to repay indebtedness owed by it to the lenders under
the credit agreement. See "Use of Proceeds." Accordingly, the offering is being
made in compliance with the requirements of Rule 2710(c)(8) of the National
Association of Securities Dealers, Inc.

In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the common stock while
this offering is in progress.

The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such underwriter in stabilizing or short covering
transactions.

These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may

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be discontinued by the underwriters at any time. These transactions may be
effected on the Nasdaq National Market, in the over-the-counter market or
otherwise.

As permitted by Rule 103 under the Exchange Act, and to the extent that the
common stock does not constitute an excepted security under Regulation M under
the Exchange Act, certain underwriters (and selling group members, if any) that
are market makers ("passive market makers") in the common stock may make bids
for or purchases of the common stock in the Nasdaq National Market until such
time, if any, when a stablizing bid for such securities has been made. Rule 103
generally provides that (1) a passive market maker's net daily purchases of the
common stock may not exceed 30% of its average daily trading volume in such
securities for the two full consecutive calendar months (or any 60 consecutive
days ending within the 10 days) immediately preceding the filing date of the
registration statement of which this prospectus forms a part, (2) a passive
market maker may not effect transactions or display bids for the common stock at
a price that exceeds the highest independent bid for the common stock by persons
who are not passive market makers and (3) bids made by passive market makers
must be identified as such.

Each underwriter has also agreed that (a) it has not offered or sold and
prior to the date six months after the date of issue of the shares of common
stock will not offer or sell any shares of common stock to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purpose of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995, (b) it
has complied, and will comply with, all applicable provisions of the Financial
Services Act 1986 of Great Britain with respect to anything done by it in
relation to the shares of common stock in, from or otherwise involving the
United Kingdom, and (c) it has only issued or passed on and will only issue or
pass on in the United Kingdom any document received by it in connection with the
issuance of the shares of common stock to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 (as amended) of Great Britain or is a person to whom the
document may otherwise lawfully be issued or passed on.

MindSpring estimates that its share of the total expenses of this offering,
excluding underwriting discounts and commissions, will be approximately
$500,000.

MindSpring has agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.

Concurrently with this offering and by a separate prospectus supplement,
MindSpring is offering $155,000,000 principal amount of % convertible
subordinated notes due 2006, plus up to an additional $23,250,000 principal
amount of notes to cover over-allotments by the underwriters for that offering.
The completion of the notes offering and the common stock offering are not
dependent on one another. The underwriters for the notes offering are the same
underwriters for the common stock offering. The underwriters will receive
customary compensation in connection with the notes offering.

LEGAL MATTERS

The validity of the common stock offered by this prospectus supplement is
being passed upon for MindSpring by Hogan & Hartson L.L.P., Washington, D.C.,
counsel for MindSpring. 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

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consent of MindSpring, Hogan & Hartson L.L.P. has represented ITC Holding in
certain transactions with MindSpring. 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 MindSpring.

EXPERTS

The financial statements of MindSpring as of December 31, 1997 and 1998 and
for the three years ended December 31, 1998, and the financial statement
schedule of MindSpring for the two years ended December 31, 1997; 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,
and the financial statements of NETCOM On-Line Communication Services, Inc.
Domestic Subscriber Operations as of December 31, 1997 and 1998, and for the
three years ended December 31, 1998 that are included or incorporated by
reference in this prospectus supplement, the accompanying prospectus and the
related registration statement have been audited by Arthur Andersen LLP,
independent certified public accountants, as indicated in their reports with
respect to these financial statements, and are included in this prospectus
supplement, the accompanying prospectus and the related registration statement
in reliance upon the authority of Arthur Andersen LLP as experts in giving these
reports.

S-79
<PAGE> 81

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MINDSPRING ENTERPRISES, INC.
Report of Independent Public Accountants.................... F-2
Balance Sheets as of December 31, 1998 and 1997............. F-3
Statement of Operations for the years ended December 31,
1998, 1997 and 1996....................................... F-4
Statement of Stockholders' Equity for the years ended
December 31, 1998, 1997 and 1996.......................... F-5
Statement of Cash Flows for the years ended December 31,
1998, 1997 and 1996....................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>

F-1
<PAGE> 82

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To MindSpring Enterprises, Inc.:

We have audited the accompanying balance sheets of MINDSPRING ENTERPRISES,
INC. (a Delaware corporation) as of December 31, 1998 and 1997 and the related
statements of operations, stockholders' equity, and cash flows for the three
years ended December 31, 1998, 1997 and 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of MindSpring Enterprises, Inc.
as of December 31, 1998 and 1997 and the results of its operations and its cash
flows for the three years ended December 31, 1998, 1997 and 1996 in conformity
with generally accepted accounting principles.

Arthur Andersen LLP

Atlanta, Georgia
February 17, 1999

F-2
<PAGE> 83

MINDSPRING ENTERPRISES, INC.

BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
(IN THOUSANDS)

<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
ASSETS

CURRENT ASSETS:
Cash and cash equivalents................................... $167,743 $ 9,386
Trade receivables, net of allowance for doubtful accounts of
$1,224 and $751 at December 31, 1998 and 1997,
respectively.............................................. 3,278 2,002
Deferred income taxes (Note 8).............................. 3,421 --
Prepaids and other current assets........................... 758 1,042
-------- --------
Total current assets...................................... 175,200 12,430
-------- --------

PROPERTY AND EQUIPMENT:
Computer and telecommunications equipment................... 35,580 18,050
Assets under capital lease.................................. 9,546 9,916
Other....................................................... 4,821 1,805
-------- --------
49,947 29,771
Less: accumulated depreciation.............................. (14,106) (6,133)
-------- --------
Property and equipment, net............................... 35,841 23,638
-------- --------

OTHER ASSETS:
Acquired customer base, net (Notes 1 and 2)................. 34,742 7,478
Deferred income taxes (Note 8).............................. 1,123 --
Other....................................................... 693 740
-------- --------
Total other assets........................................ 36,558 8,218
-------- --------
$247,599 $ 44,286
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Trade accounts payable...................................... $ 3,462 $ 4,306
Current portion of capital lease liability (Note 7)......... 2,695 2,607
Telecommunications costs payable............................ 2,831 2,233
Deferred revenue (Note 1)................................... 7,443 2,198
Current portion of notes payable (Note 6)................... -- 2,043
Other accrued expenses...................................... 5,105 1,776
Due to America Online, Inc. (Note 2)........................ 7,000 --
Accrued compensation expense................................ 2,550 1,404
Income tax payable.......................................... 2,566 --
Network services payable.................................... 4,442 1,216
-------- --------
Total current liabilities................................. 38,094 17,783
-------- --------

LONG-TERM LIABILITIES:
Capital lease liability (Note 7)............................ 2,424 5,090
-------- --------
Total long-term liabilities............................... 2,424 5,090
-------- --------
Total liabilities......................................... 40,518 22,873
-------- --------

COMMITMENTS AND CONTINGENCIES (NOTE 7)

STOCKHOLDERS' EQUITY (NOTE 3):
Common stock, $.01 par value; 60,000 and 45,000 shares
authorized at December 31, 1998 and 1997 and 28,284 and
22,603 issued and outstanding at December 31, 1998 and
1997, respectively........................................ 283 226
Additional paid-in capital.................................. 209,983 34,916
Accumulated deficit......................................... (3,185) (13,729)
-------- --------
Total stockholders' equity................................ 207,081 21,413
-------- --------
$247,599 $ 44,286
======== ========
</TABLE>

The accompanying Notes to Financial Statements are an integral part of these
statements.

F-3
<PAGE> 84

MINDSPRING ENTERPRISES, INC.

STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- -------
<S> <C> <C> <C>
REVENUES:
Access..................................................... $ 95,852 $40,925 $13,420
Business services.......................................... 14,735 7,711 2,286
Subscriber start-up fees................................... 4,086 3,920 2,426
-------- ------- -------
Total revenues........................................... 114,673 52,556 18,132
-------- ------- -------

COST AND EXPENSES:
Cost of revenues -- recurring.............................. 31,724 15,203 6,332
Cost of subscriber start-up fees........................... 2,612 1,619 1,876
General and administrative................................. 38,443 22,265 10,072
Selling.................................................... 18,881 8,519 4,089
Depreciation and amortization.............................. 15,227 8,695 3,285
-------- ------- -------
Total operating expenses................................. 106,887 56,301 25,654
-------- ------- -------

OPERATING INCOME (LOSS).................................... 7,786 (3,745) (7,522)
INTEREST INCOME (EXPENSE), NET............................. 1,214 (338) (90)
-------- ------- -------
INCOME (LOSS) BEFORE TAXES................................. $ 9,000 $(4,083) $(7,612)
-------- ------- -------
INCOME TAX BENEFIT......................................... 1,544 -- --
-------- ------- -------
NET INCOME (LOSS).......................................... $ 10,544 $(4,083) $(7,612)
======== ======= =======

NET INCOME (LOSS) PER SHARE:
Basic...................................................... $ 0.43 $ (0.18) $ (0.48)
======== ======= =======
Diluted.................................................... $ 0.41 $ (0.18) $ (0.48)
======== ======= =======

SHARES USED FOR COMPUTING NET INCOME (LOSS) PER SHARE:
Basic...................................................... 24,611 22,542 15,758
======== ======= =======
Diluted.................................................... 25,431 22,542 15,758
======== ======= =======
</TABLE>

The accompanying Notes to Financial Statements are an integral part of these
statements.

F-4
<PAGE> 85

MINDSPRING ENTERPRISES, INC.

STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL PREFERRED STOCK TOTAL
--------------- PAID-IN ---------------- ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL SHARES AMOUNT DEFICIT EQUITY
------ ------ ---------- ------ ------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995................ 3,802 $ 38 $ 95 1,933 $ 2,383 $ (2,034) $ 482
Conversion of Class A preferred stock to
common.................................. 3,563 36 709 (1,188) (745) -- --
Conversion of Class B preferred stock to
common.................................. 1,937 19 981 (645) (1,000) -- --
Issuance of additional common stock, net
of related offering expenses............ 6,075 60 14,089 -- -- -- 14,149
Conversion of Class C preferred stock to
common.................................. 300 3 635 (100) (638) -- --
Issuance of additional common stock, net
of related offering expenses............ 6,750 68 18,319 -- -- -- 18,387
Issuance of common stock pursuant to
exercise of options..................... 4 -- 1 -- -- -- 1
Net loss............................ -- -- -- -- -- (7,612) (7,612)
------ ---- -------- ------ ------- -------- --------
Balance, December 31, 1996................ 22,431 $224 $ 34,829 -- $ -- $ (9,646) $ 25,407
Issuance of common stock pursuant to
exercise of options..................... 172 2 87 -- -- -- 89
Net loss............................ -- -- -- -- -- (4,083) (4,083)
------ ---- -------- ------ ------- -------- --------

Balance, December 31, 1997................ 22,603 $226 $ 34,916 -- $ -- $(13,729) $ 21,413
Issuance of additional common stock, net
of related offering expenses............ 3,000 30 49,726 -- -- -- 49,756
Issuance of additional common stock, net
of related offering expenses............ 2,300 23 124,761 -- -- -- 124,784
Issuance of common stock pursuant to
exercise of options..................... 381 4 580 -- -- -- 584
Net income................................ -- -- -- -- -- 10,544 10,544
------ ---- -------- ------ ------- -------- --------

Balance, December 31, 1998................ 28,284 $283 $209,983 -- $ -- $ (3,185) $207,081
====== ==== ======== ====== ======= ======== ========
</TABLE>

The accompanying Notes to Financial Statements are an integral part of these
statements.

F-5
<PAGE> 86

MINDSPRING ENTERPRISES, INC.

STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(IN THOUSANDS)

<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................... $ 10,544 $(4,083) $ (7,612)
-------- ------- --------
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization............................... 15,227 8,695 3,285
Deferred income taxes..................................... (4,544) -- --
Changes in operating assets and liabilities:
Trade receivables....................................... (1,276) (5) (1,477)
Other current assets.................................... 284 (565) (158)
Trade accounts payable.................................. (844) 2,352 1,106
Telecommunications cost payable......................... 598 1,332 700
Deferred revenue........................................ 5,245 1,782 80
Other accrued expenses.................................. 3,329 1,166 246
Accrued compensation expense............................ 1,146 769 520
Income taxes payable.................................... 2,566 -- --
Network services payable................................ 3,226 (89) 1,305
-------- ------- --------
Total adjustments.................................. 24,957 15,437 5,607
-------- ------- --------
Net Cash Provided By (Used In) Operating
Activities.................................... 35,501 11,354 (2,005)
-------- ------- --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment......................... (20,176) (8,042) (8,298)
Purchase of customer base................................... (27,312) (960) (12,249)
Other....................................................... (159) -- (789)
-------- ------- --------
Net Cash Used In Investing Activities............ (47,647) (9,002) (21,336)
-------- ------- --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of loan from preferred stockholder................. -- -- 1,000
Payments of loan from preferred stockholder................. -- -- (3,500)
Proceeds from notes payable................................. -- -- 11,488
Payments of notes payable................................... (2,043) (624) (8,822)
Payments of capital lease obligations....................... (2,578) (2,084) (134)
Issuance of common stock.................................... 175,124 89 32,537
-------- ------- --------
Net Cash Provided By (Used In) Financing
Activities.................................... 170,503 (2,619) 32,569
-------- ------- --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 158,357 (267) 9,228
CASH AND CASH EQUIVALENTS, beginning of year................ 9,386 9,653 425
-------- ------- --------
CASH AND CASH EQUIVALENTS, end of year...................... $167,743 $ 9,386 $ 9,653
======== ======= ========

SUPPLEMENTAL DISCLOSURE FOR CASH FLOW INFORMATION:
Interest paid............................................... $ 890 $ 749 $ 402
======== ======= ========
Income taxes paid........................................... $ 434 $ -- $ --
======== ======= ========

SUPPLEMENTAL NONCASH DISCLOSURES:
Assets acquired under capital lease......................... $ -- $ 8,443 $ 1,473
======== ======= ========
Noncash accrual for acquired subscriber base................ $ 7,000 $ -- $ --
======== ======= ========
</TABLE>

The accompanying Notes to Financial Statements are an integral part of these
statements.

F-6
<PAGE> 87

MINDSPRING ENTERPRISES, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997, AND 1996

1. ORGANIZATION AND NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

MindSpring Enterprises, Inc. ("MindSpring" or the "Company") is a national
provider of Internet access. The Company was incorporated in Georgia on February
24, 1994 and began marketing its services in June 1994. The Company
reincorporated in Delaware and effected a recapitalization in December 1995.

ESTIMATES AND ASSUMPTIONS

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the period.
Actual results could differ from those estimates.

PRESENTATION

Certain amounts in the prior year financial statements have been
reclassified to conform to the current year presentation.

SOURCES OF SUPPLIES

The Company relies on third-party networks, local telephone companies, and
other companies to provide data communications capacity. Although management
feels alternative telecommunications facilities could be found in a timely
manner, any disruption of these services could have an adverse effect on
operating results.

CASH AND CASH EQUIVALENTS

The Company considers all short-term, highly liquid investments with an
original maturity date of three months or less to be cash equivalents. Cash and
cash equivalents are stated at cost, which approximates fair value.

CREDIT RISK

The Company's accounts receivable potentially subject the Company to credit
risk, as collateral is generally not required. The Company's risk of loss is
limited due to advance billings to customers for services, the use of
preapproved charges to customer credit cards, and the ability to terminate
access on delinquent accounts. In addition, the concentration of credit risk is
mitigated by the large number of customers comprising the customer base. The
carrying amount of the Company's receivables approximates their fair value.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation and amortization
are provided for using the straight-line method over the estimated useful lives
of the assets, commencing when assets are installed or placed in service. The
estimated useful life for all assets is five years or, for leasehold
improvements, the life of the lease, if shorter.

F-7
<PAGE> 88
MINDSPRING ENTERPRISES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

EQUIPMENT UNDER CAPITAL LEASE

The Company leases certain of its data communication and other equipment
under lease agreements accounted for as capital. The assets and liabilities
under capital leases are recorded at the lesser of the present value of
aggregate future minimum lease payments, including estimated bargain purchase
options, or the fair value of the assets under lease. Assets under capital lease
are depreciated over their estimated useful lives of five years, which are
longer than the terms of the leases.

ACQUIRED CUSTOMER BASE

The Company capitalizes specific costs incurred for the purchase of
customer bases from other Internet Service Providers ("ISPs"). The customer
acquisition costs include the actual fee paid to the selling ISP, as well as
legal and other expenses specifically related to the transactions. Subscriber
acquisition costs capitalized at December 31, 1998 and 1997 were $47,521,000 and
$13,209,000, respectively. Amortization is provided using the straight-line
method over three years commencing when the customer base is received.
Amortization expense for the years ended December 31, 1998, 1997, and 1996 was
$7,048,000, $4,210,000, and $1,521,000, respectively. See Note 2 for further
discussion.

LONG-LIVED ASSETS

The Company periodically reviews the values assigned to long-lived assets,
such as property and equipment and acquired customer bases, to determine whether
any impairments are other than temporary. Management believes that the
long-lived assets in the accompanying balance sheets are appropriately valued.

INCOME TAXES

Deferred income taxes are recorded using enacted tax laws and rates for the
years in which the taxes are expected to be paid. Deferred income taxes are
provided for items when there is a temporary difference in recording such items
for financial reporting and income tax reporting.

STOCK-BASED COMPENSATION PLANS

The Company accounts for its stock-based compensation plans under
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees." The disclosure option of Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation" requires
that companies which do not choose to account for stock-based compensation as
prescribed by this statement shall disclose the pro forma effects on earnings
and earnings per share as if SFAS No. 123 had been adopted.

REVENUE RECOGNITION

The Company recognizes revenue when services are provided. Services are
generally billed one month in advance. During 1998, the Company began offering
prepaid services. Advance billings including prepaid services and collections
relating to future access services are recorded as deferred revenue and
recognized as revenue when earned.

F-8
<PAGE> 89
MINDSPRING ENTERPRISES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

BARTER TRANSACTIONS

The Company engages in certain exchanges of services for advertising and
promotional services. The Company records these transactions at the market value
of the services provided. Such transactions are not material for the periods
presented.

ADVERTISING COSTS

The Company expenses all advertising costs as incurred.

NET INCOME (LOSS) PER SHARE

The Company calculates net income (loss) per share as required by SFAS No.
128, "Earnings Per Share." Basic earnings (loss) per common share ("EPS") was
computed by dividing net income (loss) by the weighted average number of shares
of common stock outstanding for the year ended. The effect of the Company's
stock options (using the treasury stock method) was included in the computation
of diluted EPS for the year ended December 31, 1998. For the years ended
December 31, 1997 and 1996, the effect of the options is excluded as their
effect is anti-dilutive. The following table summarizes the shares used in the
calculations:

<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
------------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
(IN THOUSANDS)
Weighted average shares outstanding -- basic................ 24,611 22,542 15,758
Effect of dilutive stock options............................ 820 -- --
------ ------ ------
Shares used for diluted earnings per share.................. 25,431 22,542 15,758
====== ====== ======
</TABLE>

RECENT ACCOUNTING PRONOUNCEMENTS

In 1998, the Company was subject to the provisions of Statement of
Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive
Income" and Statement of Financial Accounting Standards No. 131 ("SFAS 131"),
"Disclosures about Segments of an Enterprise and Related Information." Neither
statement had any impact on the Company's financial statements as the Company
does not have any "comprehensive income" type earnings (losses) and its
financial statements reflect how the "key operating decisions maker" views the
business. The Company will continue to review these statements over time, in
particular SFAS 131, to determine if any additional disclosures are necessary
based on evolving circumstances.

2. CUSTOMER BASE ACQUISITIONS

On June 28, 1996, the Company entered into a purchase agreement (as amended
on January 27, 1997, the "Purchase Agreement") with PSINet Inc. ("PSINet"),
pursuant to which the Company agreed to acquire certain of the tangible and
intangible assets and rights related to the consumer dial-up Internet access
services provided by PSINet in the United States, including (i) certain of
PSINet's individual subscriber accounts and (ii) the lease for a customer
support call center near Harrisburg, Pennsylvania (the "Harrisburg

F-9
<PAGE> 90
MINDSPRING ENTERPRISES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Facility"), and all related telephone switches and other equipment (the
"Assets") for $12,929,000 (excluding accrued interest and increases in principal
amount under the First and Second PSINet Notes previously paid by the Company)
(the "Purchase Price"). In connection with fixing the aggregate amount of the
Purchase Price, the Company and PSINet amended the Second PSINet Note to, among
other things, reduce the principal amount owed thereunder to $3,078,000, an
amount equal to the remaining balance of the Purchase Price as of January 24,
1997. As amended, the Second PSINet Note no longer accrued interest, was payable
over a two-year period, and was discounted for financial statement purposes
using the same rate of interest (Prime + 3%) as the prior PSINet Notes. The
Company accreted the difference between the principal and total payable amount
of $3,078,000 over the two years of the note.

In connection with the PSINet transaction, the parties also entered into a
network services agreement (as amended, the "Services Agreement") which enables
MindSpring to offer nationwide Internet access through PSINet's network of over
200 points of presence ("POPs"). The term of the Services Agreement is 5 years
commencing on June 28, 1996 and is automatically renewable annually thereafter
unless either party notifies the other in writing not less than 12 months prior
to the end of such 5-year period or any 12-month extension thereof. Either party
may terminate the Services Agreement at any time upon 60 days' written notice
without penalty. The Company and PSINet amended the Services Agreement effective
January 1, 1997 to provide for certain discounts to the monthly service fees
which otherwise would have been payable by the Company to PSINet. The Company
earned credits of $2,000,000 and $2,050,000 during 1998 and 1997, respectively,
and the discounts are reflected as reductions of cost of revenue. This
arrangement ended in October 1998.

On September 10, 1998, MindSpring entered into an Asset Purchase Agreement
with America Online, Inc. ("AOL") and Spry, Inc. ("Spry"), a wholly owned
subsidiary of AOL, to purchase certain assets used in connection with the
consumer dial-up Internet access business operated by Spry (the "Spry
Agreement"). Pursuant to the Spry Agreement, MindSpring 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. MindSpring also acquired all rights held by Spry to the "Spry" name.
The acquisition was closed on October 15, 1998 and in accordance with the
agreement MindSpring paid the initial payment of $25,000,000 in cash to AOL The
ultimate purchase price for these assets was based primarily upon the number of
acquired subscribers who remain active with MindSpring as continuing users in
good standing as of December 31, 1998. The Company has calculated the final
purchase price to be approximately $32,000,000 and has accordingly accrued an
additional $7,000,000 in the accompanying balance sheet. The transaction is
being accounted for as a purchase. See Note 10 for further discussion.

3. STOCKHOLDERS' EQUITY

At the annual meeting of stockholders in May 1998 the Company voted to
approve and adopt an amendment to Article 4 of the Company's Amended and
Restated Certificate of Incorporation to increase the number of authorized
shares of $.01 par value common stock from 15,000,000 to 60,000,000 and to
eliminate the Company's Class C Preferred Stock.

F-10
<PAGE> 91
MINDSPRING ENTERPRISES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

STOCK SPLIT

On June 24, 1998 the Company effected a three-for-one stock split of the
outstanding shares of common stock in the form of a stock dividend. Accordingly,
all data shown in the accompanying financial statements and notes has been
retroactively adjusted to reflect the stock split.

COMMON STOCK

In June 1998, the Company issued 3,000,000 shares at a public offering
price of $17.67. The total proceeds of the offering, net of underwriting
discounts and offering expenses, were approximately $49,756,000.

In December 1998, the Company issued 2,300,000 shares at a public offering
price of $57.00. The total proceeds of the offering, net of underwriting
discounts and offering expenses were approximately $124,784,000.

4. STOCK-BASED COMPENSATION PLANS

EMPLOYEE STOCK OPTION PLAN

Under the Company's 1995 Stock Option Plan, as amended (the "Stock Option
Plan"), 3,000,000 shares of common stock are reserved and authorized for
issuance upon the exercise of options. All employees of the Company are eligible
to receive options under the Stock Option Plan. The compensation committee of
the board of directors administers the Stock Option Plan. Options granted under
the Stock Option Plan are intended to qualify as incentive stock options under
Section 422 of the Internal Revenue Code of 1986, as amended. Options generally
become exercisable as follows: (i) 50% of the options become exercisable two
years after the date of grant or, in certain cases, the commencement date of the
holder's employment; (ii) an additional 25% of the options become exercisable
three years after the date of grant or, in certain cases, the commencement date
of the holder's employment; and (iii) the remaining 25% of the options become
exercisable four years after the date of grant or, in certain cases, the
commencement date of the holder's employment. Except as noted in the next
sentence, all options were granted at an exercise price equal to the estimated
fair value of the common stock on the dates of grant as determined by the board
of directors based on equity transactions and other analyses. Options granted to
holders of 10% or more of the outstanding common stock were granted at an
exercise price equal to 110% of the estimated fair value of the common stock on
the dates of grant as determined by the board of directors based on equity
transactions and other analyses. The options expire ten years from the date of
grant or, in certain circumstances, the commencement date of the option holder's
employment.

F-11
<PAGE> 92
MINDSPRING ENTERPRISES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

DIRECTORS' STOCK OPTION PLAN

Under the Company's Directors' Stock Option Plan (the "Directors' Plan"),
adopted in December 1995, 210,000 shares of common stock are authorized for
issuance to nonemployee directors (in the form of 30,000 options per director)
upon their initial election or appointment to the board or, in the case of
directors who joined the board prior to the creation of the Directors' Plan,
upon the adoption of the Directors' Plan by the board of directors. The
Directors' Plan, as amended by the board of directors on March 25, 1998 and
approved by the stockholders on May 20, 1998, provides for discretionary option
grants. Options become exercisable as follows: (i) 50% of the options become
exercisable two years after the date of grant, (ii) an additional 25% of the
options become exercisable three years after the date of grant, and (iii) the
remaining 25% of the options become exercisable four years after the date of
grant. All options were granted at an exercise price equal to the estimated fair
value of the common stock at the dates of grant as determined by the board of
directors based upon equity transactions and other analyses. The options expire
ten years from the date of grant.

STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123

During 1995, the Financial Accounting Standards Board issued SFAS No. 123,
which defines a fair value-based method of accounting for an employee stock
option or similar equity instrument and encourages all entities to adopt that
method of accounting for all of their employee stock-based compensation plans.
However, it also allows an entity to continue to measure compensation cost for
those plans using the method of accounting prescribed by APB No. 25. Entities
electing to remain with the accounting in APB No. 25 must make pro forma
disclosures of net income and, if presented, earnings per share as if the fair
value-based method of accounting defined in this statement had been applied.

The Company has elected to account for its stock-based compensation plans
under APB No. 25; however, the Company has computed for pro forma disclosure
purposes the value of all options granted during 1998, 1997, and 1996 using the
Black-Scholes option-pricing model as prescribed by SFAS No. 123 using the
following weighted average assumptions used for grants in 1998, 1997, and 1996:

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Risk-free interest rate................................ 5.3% 6.4% 6.4%
Expected dividend yield................................ 0% 0% 0%
Expected lives......................................... 3.5 years 3.5 years 3.5 years
Expected volatility.................................... 95.0% 58.4% 69.3%
</TABLE>

F-12
<PAGE> 93
MINDSPRING ENTERPRISES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The total value of options granted during 1998, 1997, and 1996 was computed
as approximately $38,679,000, $3,735,000 and $601,000, respectively, which would
be amortized on a pro forma basis over the four-year vesting period of the
options. If the Company had accounted for these plans in accordance with SFAS
No. 123, the Company's net income (loss) and pro forma net income (loss) per
share for the years ended December 31, 1998, 1997 and 1996 would have been as
follows:

<TABLE>
<CAPTION>
AS REPORTED PRO FORMA
----------- ---------
<S> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE DATA)
1996
Net loss.................................................... $(7,612) $(7,836)
Net loss per share.......................................... $ (0.48) $ (0.50)
1997
Net loss.................................................... $(4,083) $(5,402)
Net loss per share.......................................... $ (0.18) $ (0.24)
1998
Net income.................................................. $10,544 $ 2,291
Net income per diluted share................................ $ 0.41 $ 0.09
</TABLE>

A summary of the status of the Company's two stock options plans at
December 31, 1998, 1997 and 1996 and changes during the years then ended are
presented in the following table:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES PRICE PER
(IN THOUSANDS) SHARE
-------------- ---------
<S> <C> <C>
December 31, 1995........................................... 1,071 $ 0.62
Grants...................................................... 756 2.87
Exercised................................................... (3) 0.21
Forfeitures................................................. (90) 2.01
------ ------
December 31, 1996........................................... 1,734 1.53
Grants...................................................... 453 4.21
Exercised................................................... (171) 0.29
Forfeitures................................................. (174) 3.12
------ ------
December 31, 1997........................................... 1,842 2.15
Grants...................................................... 861 37.53
Exercised................................................... (382) 1.53
Forfeitures................................................. (198) 7.96
------ ------
December 31, 1998........................................... 2,123 16.10
====== ======
Weighted average fair value of options granted in 1998...... $ 45
======
</TABLE>

F-13
<PAGE> 94
MINDSPRING ENTERPRISES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes the number of options outstanding by year of
grant:

<TABLE>
<CAPTION>
WEIGHTED
NUMBER AVERAGE
OF EXERCISE WEIGHTED REMAINING
SHARES PRICE AVERAGE CONTRACTUAL
YEAR OF GRANT (IN THOUSANDS) RANGE PRICE LIFE
------------- -------------- ------------ -------- -----------
<S> <C> <C> <C> <C>
1998............................. 808 $10.94-60.69 $38.59 9.6 years
1997............................. 341 2.33- 9.71 4.40 8.4
1996............................. 388 2.13- 4.13 2.79 7.6
1995............................. 586 0.21- 2.13 0.67 6.5
</TABLE>

The following table summarizes the options exercisable as of December 31,
1998, 1997 and 1996:

<TABLE>
<CAPTION>
WEIGHTED
NUMBER AVERAGE
OF WEIGHTED REMAINING
SHARES AVERAGE CONTRACTUAL
AS OF (IN THOUSANDS) PRICE LIFE
----- -------------- -------- -----------
<S> <C> <C> <C>
Dec. 31, 1998................................... 537 $1.16 6.8 years
Dec. 31, 1997................................... 366 $0.73 7.5
Dec. 31, 1996................................... 210 $0.21 8.1
</TABLE>

EMPLOYEE BENEFIT PLAN

The Company has a savings plan (the "Savings Plan") that qualifies as a
deferred salary arrangement under Section 401(k) of the Internal Revenue Code.
Under the Savings Plan, participating employees may defer a portion of their
pretax earnings, up to the Internal Revenue Service annual contribution limit.
Annually, the Company determines whether to make a discretionary matching
contribution equal to a percentage, determined by the Company, of the employee's
deferred compensation contribution. The Company has not made any matching
contributions to the Savings Plan.

5. RELATED-PARTY TRANSACTIONS

The Company has entered into certain business relationships with several
subsidiaries and affiliates of ITC Holding Company, Inc. ("ITC Holding"). Except
as noted below, none of these transactions were material for the periods
presented.

The Company purchases long-distance telephone services and wide area
network transport service from ITC/\DeltaCom, Inc. ("ITC/\DeltaCom"), a related
party through relationships with ITC Holding. Long-distance charges from
ITC/\DeltaCom totaled approximately $3,672,000, $1,942,000 and $677,000 for the
years ended December 31, 1998, 1997 and 1996, respectively.

F-14
<PAGE> 95
MINDSPRING ENTERPRISES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. DEBT

The Company's only debt obligation for the periods presented is a
promissory note issued in connection with the PSINet transaction. The final
payment on this note was made in December 1998.

<TABLE>
<CAPTION>
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
PSINet Note, due October, 1998.............................. $ -- $ 2,043
Less current maturities..................................... -- (2,043)
------- -------
Long-term obligations....................................... $ -- $ --
======= =======
</TABLE>

The carrying value of the PSINet Note approximated the market value as of
December 31, 1997.

7. COMMITMENTS AND CONTINGENCIES

LEASES

The Company leases certain equipment under agreements, which are classified
as capital leases. These leases have original terms of three years or less and
contain bargain purchase options at the end of the original lease terms. The
Company also has operating leases, which relate to the lease of office and
equipment space. Rental expense attributable to these operating leases was
approximately $1,953,000, $1,420,000, and $519,000 for the year ended December
31, 1998, 1997 and 1996, respectively.

At December 31, 1998, the Company's capital lease obligations and minimum
rental commitments under non-cancelable operating leases with initial or
remaining terms of more than one year were as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
(IN THOUSANDS)
<S> <C> <C>
1999........................................................ $ 3,103 $ 3,385
2000........................................................ 2,595 3,392
2001........................................................ -- 1,441
2002........................................................ -- 829
2003 and thereafter......................................... -- 963
------- -------
Total minimum lease payments...................... $ 5,698 $10,010
======= =======
Amounts representing interest............................... (579)
-------
Present value of net minimum payments....................... 5,119
Current portion............................................. (2,695)
-------
Long-term capitalized lease obligations..................... $ 2,424
=======
</TABLE>

LEGAL PROCEEDINGS

The Company is subject to legal proceedings and claims that arise in the
ordinary course of business. As of December 31, 1998, management is not aware of
any asserted or

F-15
<PAGE> 96
MINDSPRING ENTERPRISES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

pending litigation or claims against the Company that would have a material
adverse effect on the Company's financial condition, results of operations, or
liquidity.

8. INCOME TAXES

The provision for income taxes is attributable to:

<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current.................................................... $ 3,000 $ -- $ --
Deferred................................................... 654 (1,574) (2,915)
Increase in (reversal of) valuation allowance.............. (5,198) 1,574 2,915
------- ------- -------
Income tax provision (benefit)........................ $(1,544) $ -- $ --
======= ======= =======
</TABLE>

A reconciliation of the income tax provision (benefit) computed at
statutory tax rates to the income tax benefit for the year ended December 31,
1998, 1997 and 1996 is as follows:

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Income tax benefit at statutory rate........................ 34% (34)% (34)%
State income taxes, net of federal benefit.................. 4 (4) (4)
Other....................................................... 2 0 0
Valuation allowance......................................... (57) 38 38
--- --- ---
Total income tax provision (benefit).............. (17)% 0% 0%
=== === ===
</TABLE>

Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The significant
components of the Company's deferred tax assets and liabilities as of December
31, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ -- $ 3,866
Acquired customer base.................................... 3,902 1,742
Deferred revenue.......................................... 2,221 835
Allowance for doubtful accounts........................... 465 285
Prepaid revenue........................................... 608 --
Accrued vacation.......................................... 371 --
Other accrued liabilities................................. -- 126
------- -------
Total deferred tax assets......................... $ 7,567 $ 6,854
------- -------
</TABLE>

F-16
<PAGE> 97
MINDSPRING ENTERPRISES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Depreciation.............................................. $(2,779) $(1,608)
Other..................................................... (244) (48)
------- -------
Total deferred tax liabilities.................... (3,023) (1,656)
------- -------
Net deferred tax asset...................................... 4,544 5,198
Valuation allowance for deferred tax assets................. -- (5,198)
------- -------
Net deferred taxes.......................................... $ 4,544 $ --
======= =======
</TABLE>

The Company's net operating loss carryforwards will expire between 2009 and
2012 unless utilized. Due to the fact that prior to 1998 the Company incurred
losses since inception, the Company did not recognize the income tax benefit of
the net operating loss carryforwards. Management provided a 100% valuation
reserve against its net deferred tax asset, consisting primarily of net
operating loss carryforwards. Management reviewed this position based on the net
income generated in 1998 as well as the projections of future income and
determined that it was more likely than not that the deferred tax assets would
be realized. Accordingly, the Company reversed its entire valuation allowance in
1998. In addition, the Company's ability to recognize the benefit from the net
operating loss carryforwards could be limited under Section 382 of the Internal
Revenue Code if ownership of the Company changes by more than 50%, as defined.

9. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of the unaudited quarterly results for 1998,
1997, and 1996:

<TABLE>
<CAPTION>
NET INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA) (LOSS) PER
SHARE
OPERATING NET ---------------
QUARTER ENDED REVENUE INCOME (LOSS) INCOME (LOSS) BASIC DILUTED
------------- ------- ------------- ------------- ----- -------
<S> <C> <C> <C> <C> <C>
December 31, 1998................ $39,534 $ 1,299 $ 3,679 $ .14 $ .13
September 30, 1998............... 28,695 3,440 3,985 .15 .15
June 30, 1998.................... 25,060 1,994 2,020 .09 .08
March 31, 1998................... 21,384 1,053 860 .04 .04

December 31, 1997................ $17,209 $ 646 $ 498 $ .02 $ .02
September 30, 1997............... 13,967 (465) (626) (.03) (.03)
June 30, 1997.................... 11,600 (1,421) (1,430) (.06) (.06)
March 31, 1997................... 9,780 (2,505) (2,525) (.11) (.11)

December 31, 1996................ $ 8,524 $(2,378) $(2,411) $(.11) $(.11)
September 30, 1996............... 5,301 (2,601) (2,702) (.18) (.18)
June 30, 1996.................... 2,495 (1,577) (1,460) (.10) (.10)
March 31, 1996................... 1,812 (966) (1,039) (.10) (.10)
</TABLE>

See Note 1 for a discussion of earnings per share.

F-17
<PAGE> 98
MINDSPRING ENTERPRISES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

10. SUBSEQUENT EVENT

ACQUISITION

On February 17, 1999, MindSpring acquired certain tangible and intangible
assets and rights used in connection with the Internet services business
operated in the United States by NETCOM On-Line Communication Services, Inc.
("NETCOM"), a Delaware corporation and an indirect wholly owned subsidiary of
ICG Communications, Inc. including, (i) approximately 400,000 of NETCOM's
individual Internet access accounts; (ii) approximately 3,000 dedicated Internet
access accounts; (iii) approximately 18,000 Web hosting accounts; and (iv)
various assets used in serving those subscribers, including leased operations
facilities in San Jose, California and Dallas, Texas and all of NETCOM's rights
to the "NETCOM" name (except in Brazil, Canada and the United Kingdom). The
acquisition was effected pursuant to an Asset Purchase Agreement dated January
5, 1999 between MindSpring and NETCOM. MindSpring paid NETCOM approximately
$245,000,000, including $215,000,000 in cash and $30,000,000 in MindSpring
stock.

The NETCOM operations outside the United States are not included in this
transaction. In addition, NETCOM (which will change its name in the near future)
will retain all of the assets used in connection with its network operations.
Under a separate network services agreement, NETCOM (operating under a new
corporate name) will sell MindSpring wholesale access to its network. The
agreement has an initial term of one year, with an option for a second year on
potentially different terms to be negotiated and accepted by both parties.

The transaction will be accounted for as a purchase. The purchase price
will be allocated to the underlying assets purchased and liabilities assumed
based on their fair market values at the acquisition date.

The following table summarizes the net assets purchased in connection with
the NETCOM and Spry acquisitions and the amount attributable to cost in excess
of net assets acquired in millions:

<TABLE>
<CAPTION>
NETCOM SPRY
------ -----
<S> <C> <C>
Working capital............................................. $(3.0) $ --
Property and equipment...................................... 17.2 --
Other assets................................................ 0.2 --
Acquired customer base...................................... 230.6 32.0
</TABLE>

The preliminary estimate of net assets represents management's best
estimate based on currently available information; however, such estimate may be
revised up to one year from the acquisition date. Acquired subscriber bases are
amortized over 3 years.

F-18
<PAGE> 99
MINDSPRING ENTERPRISES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The following unaudited pro forma condensed statements of operations (in
millions) assumes the NETCOM and Spry acquisitions occurred on January 1, 1997.
In the opinion of management, all adjustments necessary to present fairly such
unaudited pro forma condensed statements of operations have been made.

<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Revenue..................................................... $ 294.9 $ 250.3
Net Loss.................................................... (101.5) (101.0)
Net Loss per share.......................................... (3.57) (3.58)
</TABLE>

CREDIT FACILITY

Subsequent to year end, the Company obtained a $100 million secured
revolving credit facility from First Union National Bank and certain other
lenders. The credit facility may be increased to $200 million with the approval
of 51% of the lenders. The credit facility has an interest rate of either the
bank rate plus 25 to 100 basis points (defined as the banks prime rate or the
overnight federal funds rate plus 50 basis points) or LIBOR plus 125-200 basis
points depending upon the ratio of total debt to EBITDA. The facility is
available for 36 months and contains certain restrictive covenants including
certain financial ratios. Additionally, borrowings are secured by all assets and
properties. To complete the NETCOM acquisition, the Company borrowed $80 million
under this facility. The proceeds from any future debt issuances and certain
sales of assets and insurance proceeds must be used to repay any outstanding
borrowings.

F-19
<PAGE> 100

THE INFORMATION IN THIS PRELIMINARY PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND
MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PRELIMINARY PROSPECTUS SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND
IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE
THE OFFER OR SALE IS NOT PERMITTED.

Subject to Completion. Dated April 7, 1999.

Prospectus Supplement to Prospectus Dated April , 1999.

$155,000,000

(Mindspring LOGO)

% Convertible Subordinated Notes due 2006
----------------------

You may convert the notes into shares of common stock of MindSpring
Enterprises, Inc. at any time before their maturity or their redemption by
MindSpring. The notes will mature on , 2006. The conversion rate is
shares per each $1,000 principal amount of notes, subject to adjustment
in certain circumstances. This is equivalent to a conversion price of $ per
share. On April 6, 1999, the last reported sale price for the common stock on
the Nasdaq National Market was $105.38 per share. The common stock is listed
under the symbol "MSPG."

MindSpring will pay interest on the notes on and of each
year. The first interest payment will be made on , 1999. The notes are
subordinated in right of payment to all senior debt of MindSpring. The notes
will be issued only in denominations of $1,000 and integral multiples of $1,000.

MindSpring may redeem the notes before , 2002, in whole or in part,
at a redemption price equal to $1,000 per $1,000 note plus accrued and unpaid
interest, if any, to the redemption date, if the closing price for MindSpring's
common stock has exceeded 150% of the conversion price for at least 20 trading
days within a period of 30 consecutive trading days ending on the trading day
prior to the date of the mailing of the notice of redemption. MindSpring will
make an additional payment in cash with respect to the notes called for
redemption of $ per $1,000 note, less the amount of interest actually paid on
such note prior to the call for redemption.

On or after , 2002, MindSpring has the option to redeem all or a
portion of the notes which have not been previously converted, at the redemption
prices set forth in this prospectus supplement. You have the option, subject to
certain conditions, to require MindSpring to repurchase any notes held by you in
the event of a "Change in Control," as described in this prospectus supplement,
at a price equal to 100% of the principal amount of the notes, plus accrued
interest to the date of repurchase.

Concurrently with this notes offering, and by a separate prospectus
supplement, MindSpring is offering 2,000,000 shares of its common stock, plus up
to an additional 300,000 shares of common stock to cover over-allotments by the
underwriters for that offering. The completion of the notes offering and the
common stock offering are not dependent on one another.

See "Risk Factors" beginning on page S-15 of this prospectus supplement to
read about important factors you should consider before purchasing the notes.
----------------------

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------------

<TABLE>
<CAPTION>
Per Note Total
-------- --------
<S> <C> <C>
Initial public offering price............................... % $
Underwriting discount....................................... % $
Proceeds, before expenses, to MindSpring.................... % $
</TABLE>

The initial public offering price set forth above does not include accrued
interest, if any. Interest on the notes will accrue from , 1999 and
must be paid by the purchaser if the notes are purchased after , 1999.
The underwriters may, under certain circumstances, purchase up to an
additional notes from MindSpring at the initial public offering price
less the underwriting discount.

----------------------

The underwriters expect to deliver the notes in book-entry form only through
the facilities of The Depository Trust Company against payment in New York, New
York on , 1999.

GOLDMAN, SACHS & CO.
ING BARING FURMAN SELZ LLC
J.C. BRADFORD & CO.
DONALDSON, LUFKIN & JENRETTE
FIRST UNION CAPITAL MARKETS CORP.
JEFFERIES & COMPANY, INC.
----------------------

Prospectus Supplement dated , 1999.
<PAGE> 101

THIS PROSPECTUS SUPPLEMENT INCLUDES PRODUCT NAMES AND TRADEMARKS OF
MINDSPRING ENTERPRISES, INC. AND OF OTHER ORGANIZATIONS.
------------------------

There are restrictions on the offer and sale of the notes in the United
Kingdom. All applicable provisions of the Financial Services Act 1986 and the
Public Offers of Securities Regulations 1995 with respect to anything done by
any person in relation to the notes in, from or otherwise involving the United
Kingdom must be complied with. See "Underwriting".

------------------------

IN CONNECTION WITH THIS ISSUE GOLDMAN, SACHS & CO. AND ITS AFFILIATES MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE
OF THE NOTES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKETS OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

S-2
<PAGE> 102

SUMMARY

This summary highlights more detailed information contained elsewhere in
this prospectus supplement. This summary is not complete and does not contain
all of the information that you should consider before investing in the notes.
You should read the entire prospectus supplement and the accompanying prospectus
carefully, especially the risks of investing in the notes discussed under "Risk
Factors." Unless otherwise stated, all of the information in this prospectus
supplement assumes that the underwriters' over-allotment option is not
exercised. All share data in this prospectus supplement reflect a 3-for-1 stock
split of our common stock effected on July 24, 1998.

ABOUT MINDSPRING

OUR BUSINESS

We offer our subscribers complete Internet access and Web hosting
solutions, emphasizing:

- highly responsive customer service and technical support, which is
available 24 hours a day, seven days a week; and

- a reliable nationwide network that enables subscribers in the 48
contiguous U.S. states and the District of Columbia to access the
Internet via a local telephone call.

OUR GROWTH HISTORY AND PROFITABILITY

Over the past three years, we have rapidly increased our subscriber base
and revenues by:

- providing superior customer service and technical support;

- expanding our 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.

Our subscriber base has grown from approximately 12,000 subscribers at
December 31, 1995, to over 693,000 subscribers at December 31, 1998, including
over 21,000 Web hosting
S-3
<PAGE> 103

customers. In February 1999, we completed the NETCOM acquisition, which
increased our subscriber base to approximately 1.1 million subscribers,
including approximately 45,000 Web hosting subscribers. As a result, MindSpring
is currently the fourth largest ISP in the U.S. in terms of the number of
subscribers.

OUR TARGET SUBSCRIBER GROUP AND MARKET DEMAND

- heightened consumer awareness of the Internet;

- the increasing number of people who have computers with modems due in
part to lower prices; and

- the expanding diversity of information, entertainment and commercial
offerings available on the Internet and the World Wide Web.

MINDSPRING STRATEGY

MindSpring's objective is to strengthen our position as a leading national
provider of high quality Internet access, Web hosting and other value-added
services to individuals and
S-4
<PAGE> 104

small businesses, as measured by customer satisfaction, subscriber growth and
financial performance. Key elements of our business strategy include:

Continuing to Provide Superior Customer Service and Technical Support

Efficiently Expanding Our National Network

Expanding Our Targeted Marketing and Distribution Activities

Increasing Our Revenues from Value-Added Services

the fastest growing segments of the Internet marketplace. We began offering Web
hosting services in 1995 and currently have approximately 45,000 Web hosting
subscribers, including approximately 22,000 Web hosting accounts acquired from
NETCOM in February 1999. Web hosting represents approximately 13% of our
revenues and is an area of strategic growth for MindSpring.

Engaging in Selected Acquisitions

RECENT DEVELOPMENTS

- Acquisitions

We recently completed two substantial acquisitions:

- Credit Facility

general corporate purposes including permitted acquisitions. On February 17,
1999, we borrowed approximately $80 million under the credit facility to finance
the NETCOM acquisition, which we intend to repay in full with a portion of the
proceeds from the common stock offering that we are undertaking concurrently
with this offering. Our obligations under the credit facility are secured by
substantially all of our assets. See "Description of Secured Credit Facility"
and "Use of Proceeds."
S-7
<PAGE> 107

THE OFFERING

Securities offered............ $155,000,000 aggregate principal amount of
% convertible subordinated notes due 2006,
not including $23,250,000 aggregate principal
amount of notes subject to the underwriters'
over-allotment option.

Offering price................ 100% of the principal amount plus accrued
interest, if any, from , 1999.

Interest...................... Interest on the notes is payable semiannually
on 1, and 1, of each year,
commencing 1, 1999.

Conversion.................... The notes will be convertible at the option of
the holder into shares of common stock at a
rate of shares of common stock per
$1,000 principal amount of notes, which is
equivalent to a conversion price of $ per
share, subject to adjustment in certain events.

The notes will be convertible at any time after
the initial issuance of the notes and before
the close of business on the business day
immediately preceding the maturity date, unless
previously redeemed or repurchased, at the
conversion rate set forth above. Holders of
notes called for redemption or repurchase will
be entitled to convert the notes up to and
including, but not after, the business day
immediately preceding the date fixed for
redemption or repurchase, as the case may be.
See "Description of Notes -- Conversion
Rights."

Subordination................. The notes are subordinated to present and
future "senior debt," as that term is defined
in this prospectus supplement, of MindSpring.
If MindSpring establishes any subsidiaries, the
notes will also effectively be subordinated in
right of payment to all indebtedness and other
liabilities of our subsidiaries. As of February
28, 1999, the aggregate amount of outstanding
"senior debt" was approximately $84.8 million.
The indenture under which the notes will be
issued will not restrict the incurrence of
"senior debt" by MindSpring or any of our
subsidiaries. See "Description of Notes --
Subordination."

Global note; Book-entry
system...................... The notes offered hereby will be issued only in
fully registered form without coupons and in
minimum denominations of $1,000. The notes will
be evidenced by a global note, in fully
registered form and without coupons, deposited
with the trustee for the notes, as custodian
for DTC. Beneficial interests in the global
note will be shown on, and transfers thereof
will be effected
S-8
<PAGE> 108

only through, records maintained by DTC and its
participants and indirect participants. See
"Description of Notes -- Form, Denomination,
Transfer, Exchange and Book-Entry Procedures."

Provisional redemption by
MindSpring.................. The notes may be redeemed at the option of
MindSpring (the "Provisional Redemption"),
in whole or in part, at any time prior to
, 2002, at a redemption price equal
to $1,000 per Note to be redeemed plus accrued
and unpaid interest, if any, to the date of
redemption (the "Provisional Redemption Date")
if the closing price of the Common Stock shall
have exceeded 150% of the conversion price then
in effect for at least 20 trading days in any
consecutive 30-trading day period ending on the
trading day prior to the date of mailing of the
notice of Provisional Redemption (the "Notice
Date"). Upon any Provisional Redemption,
MindSpring will make an additional payment in
cash (the "Make-Whole Payment") with respect to
the notes called for redemption in an amount
equal to $ per $1,000 note, less the amount
of any interest actually paid on such note
prior to the call for redemption. MINDSPRING
WILL BE OBLIGATED TO MAKE THE MAKE-WHOLE
PAYMENT ON ALL NOTES CALLED FOR PROVISIONAL
REDEMPTION, INCLUDING ANY NOTES CONVERTED AFTER
THE NOTICE DATE AND PRIOR TO THE PROVISIONAL
REDEMPTION DATE. If the secured credit facility
is in effect at the time of any such proposed
redemption, MindSpring may be required to
obtain the prior consent of the lenders under
the secured credit facility or terminate the
credit facility to redeem the notes. See
"Description of Notes -- Provisional Redemption
by MindSpring."

Optional redemption by
MindSpring.................. The notes may be redeemed at the option of
MindSpring, in whole or in part, on or after , 2002, at the redemption
prices set forth herein plus accrued interest
to the redemption date. If the secured credit
facility is in effect at the time of any such
proposed redemption, MindSpring may be required
to obtain the prior consent of the lenders
under the secured credit facility or terminate
the credit facility to redeem the notes. See
"Description of Notes -- Optional Redemption."

Repurchase at option of
holders upon a change in
control..................... Upon a "change in control," as that term is
defined in the notes, you will have the right,
subject to certain conditions and restrictions,
to require MindSpring to repurchase your notes,
in whole or in part, at 100% of
S-9
<PAGE> 109

the principal amount thereof, plus accrued
interest to the repurchase date. The repurchase
price is payable in cash or, at the option of
MindSpring but subject to the satisfaction by
MindSpring of certain conditions, in shares of
common stock, valued at 95% of the average
closing sales prices of the common stock for
the five trading days preceding and including
the third trading day prior to the repurchase
date. A change in control would currently be an
event of default under the secured credit
facility, and may be an event of default under
any future bank credit facility or senior debt.
In such circumstances, the subordination
provisions of the applicable supplemental
indenture would likely restrict MindSpring's
ability to repurchase the notes prior to the
repayment in full of all amounts outstanding
under such credit facility or senior debt. See
"Description of Notes -- Repurchase at Option
of Holders Upon a Change in Control."

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.

Events of default............. Events of default include:

(1) failure to pay principal of or premium, if
any, on any note when due, whether or not such
payment is prohibited by the subordination
provisions of the notes and the indenture;

(2) failure to pay any interest on any note
when due, continuing for 30 days, whether or
not such payment is prohibited by the
subordination provisions of the notes and the
indenture;

(3) default in MindSpring's obligation to
provide notice of a "change in control,"
whether or not prohibited by the subordination
provisions of the notes and the indenture;

(4) failure to perform any other covenant of
MindSpring in the indenture, continuing for 60
days, plus an additional 60 days in the case of
defaults subject to cure, provided MindSpring
commences such cure within the initial 60 days
and is diligently pursuing such cure, after
written notice as provided in the indenture;

(5) any indebtedness under any bonds,
debentures, notes or other evidences of
indebtedness for money borrowed by MindSpring
in an aggregate principal amount in excess of
$25,000,000 is not paid at final maturity
thereof, either at its stated maturity or upon
S-10
<PAGE> 110

acceleration thereof, and such indebtedness is
not discharged, or such acceleration is not
rescinded or annulled, within a period of 30
days after notice as provided in the notes
indenture; and

(6) certain events of bankruptcy, insolvency or
reorganization. See "Description of
Notes -- Events of Default."

Nasdaq National Market symbol
for MindSpring common
stock....................... MSPG

Listing....................... The notes will not be listed on any securities
exchange or quoted on the Nasdaq National
Market. The underwriters have advised
MindSpring that they intend to make a market in
the notes. The underwriters are not obligated,
however, to make a market in the notes, and any
such market making may be discontinued at any
time at the sole discretion of the underwriters
without notice. See "Underwriting."

Governing law................. The notes indenture and the notes are governed
by the laws of the State of New York.

RISK FACTORS.................. YOU SHOULD READ THE "RISK FACTORS" SECTION,
BEGINNING ON PAGE S-15 OF THIS PROSPECTUS
SUPPLEMENT, AS WELL AS THE OTHER CAUTIONARY
STATEMENTS THROUGHOUT THE ENTIRE PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS, SO THAT YOU
UNDERSTAND THE RISKS ASSOCIATED WITH AN
INVESTMENT IN THE NOTES.

CONCURRENT COMMON STOCK
OFFERING...................... CONCURRENTLY WITH THIS NOTES OFFERING AND BY
MEANS OF A SEPARATE PROSPECTUS SUPPLEMENT,
MINDSPRING IS OFFERING 2,000,000 SHARES OF
COMMON STOCK, PLUS AN ADDITIONAL 300,000 SHARES
TO COVER OVER-ALLOTMENTS BY THE UNDERWRITERS
FOR THAT OFFERING. THE COMPLETION OF THIS NOTES
OFFERING AND THE COMMON STOCK OFFERING ARE NOT
DEPENDENT ON ONE ANOTHER.
S-11
<PAGE> 111

SUMMARY FINANCIAL AND OPERATING DATA

The Inception Period referred to in the table below is the period from
February 24, 1994, MindSpring's inception, to December 31, 1994.

The balance sheet data presented below excludes the effects of the NETCOM
acquisition and borrowings under our secured credit facility, both of which
occurred on February 17, 1999. See note 10 to MindSpring's audited Financial
Statements for the fiscal year ended December 31, 1998 included in this
prospectus supplement at page F-18 for certain pro forma and other information
concerning these and other events. Also see our Current Report on Form 8-K filed
with the SEC on February 25, 1999 for more detailed pro forma information.

The adjusted balance sheet data contained in the following table gives
effect to the sale of the notes offered by MindSpring by this prospectus
supplement and the accompanying prospectus. This assumes an increase to cash and
cash equivalents and working capital of $150.1 million upon completion of this
offering, which amount equals the aggregate estimated net proceeds of the
offering. See the section entitled "Use of Proceeds" in this prospectus
supplement for a description of MindSpring's specific plans for the application
of the net proceeds from this offering.

The "as further adjusted" balance sheet data reflects the concurrent sale
by MindSpring of 2,000,000 shares of common stock offered by MindSpring by a
separate prospectus supplement and the accompanying prospectus assuming a price
to the public of $105 per share. This assumes an increase to cash and cash
equivalents and working capital of $200.6 million upon completion of this
offering, which amount equals the aggregate estimated net proceeds of the
offering.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
INCEPTION ---------------------------------------
PERIOD 1995 1996 1997 1998
--------- ------- -------- ------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Access................................ $ 70 $ 1,455 $ 13,420 $40,925 $ 95,852
Business services..................... -- 260 2,286 7,711 14,735
Subscribers start-up fees............. 33 512 2,426 3,920 4,086
----- ------- -------- ------- --------
Total revenues................... 103 2,227 18,132 52,556 114,673
Cost and expenses:
Cost of revenues -- recurring......... 37 627 6,332 15,203 31,724
Cost of subscriber start-up fees...... 15 339 1,876 1,619 2,612
Selling, general and administrative... 121 2,230 14,161 30,784 57,324
Depreciation and amortization......... 5 265 3,285 8,695 15,227
----- ------- -------- ------- --------
Total operating expenses......... 178 3,461 25,654 56,301 106,887
----- ------- -------- ------- --------
Operating gain (loss)................... (75) (1,234) (7,522) (3,745) 7,786
Interest income (expense), net.......... -- (725) (90) (338) 1,214
----- ------- -------- ------- --------
Income before income taxes.............. (75) (1,959) (7,612) (4,083) 9,000
Income tax provision.................... -- -- -- -- 1,544
----- ------- -------- ------- --------
Net income (loss)....................... $ (75) $(1,959) $ (7,612) $(4,083) $ 10,544
===== ======= ======== ======= ========
Diluted earnings (loss) per share....... $ (0.20) $ (0.48) $ (0.18) $ 0.41
Diluted weighted average common shares
outstanding........................... 9,930 15,758 22,542 25,431
OTHER OPERATING DATA:
Approximate number of subscribers at end
of period............................. 1,000 12,000 122,000 278,000 693,000
Approximate number of employees at end
of period............................. 8 95 321 502 977
EBITDA(1)............................... $ (70) $ (969) $ (4,237) $ 4,950 $ 23,013
EBITDA margin(1)........................ (68)% (44)% (23)% 9% 20%
CASH FLOW DATA:
Operations.............................. (33) (70) (2,005) 11,354 35,501
Investing............................... (127) (3,724) (21,336) (9,002) (47,647)
Financing............................... 745 3,634 32,569 (2,619) 170,503
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1998
--------------------------------
AS
AS FURTHER
HISTORICAL ADJUSTED ADJUSTED
---------- -------- --------
<S> <C> <C> <C>
BALANCE SHEET DATA(2):
Cash and cash equivalents.................................. $167,743 $317,843 $518,417
Working capital............................................ 137,106 287,206 487,870
Total assets............................................... 247,599 402,599 603,173
Total debt, including current maturities................... 5,119 160,119 160,119
Total stockholders' equity................................. 207,081 207,081 407,655
</TABLE>

- -------------------------
(1) 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
S-13
<PAGE> 113

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 MindSpring's
operating performance, financial position and cash flows. EBITDA is not
necessarily comparable with similarly titled measures for other companies.

(2) The balance sheet data presented excludes the effects of the NETCOM
acquisition and borrowings under our secured credit facility, both of which
occurred on February 17, 1999. These transactions would (1) reduce cash and
cash equivalents by $135 million, (2) increase total debt by $80 million and
(3) increase stockholders' equity by $30 million on a historical basis. On
an "adjusted basis," and on an "as further adjusted basis," cash and cash
equivalents would decrease by approximately $215 million and stockholders'
equity would increase by $30 million. See note 10 to MindSpring's audited
Financial Statements for the fiscal year ended December 31, 1998 included in
this prospectus supplement at page F-18 for certain pro forma and other
information concerning these and other events. Also see our Current Report
on Form 8-K filed with the SEC on February 25, 1999 for more detailed pro
forma information.
S-14
<PAGE> 114

RISK FACTORS

WE HAVE A LIMITED OPERATING HISTORY DURING WHICH WE HAVE INCURRED SIGNIFICANT
ANNUAL OPERATING LOSSES.

<TABLE>
<CAPTION>
ACCUMULATED
ANNUAL DEFICIT AS OF
NET LOSS DECEMBER 31, 1998
---------- -----------------
<S> <C> <C>
1995..................................... $1,959,000
1996..................................... $7,612,000
1997..................................... $4,083,000
1998..................................... N/A $3,185,000
</TABLE>

THERE ARE RISKS ASSOCIATED WITH OUR ACQUISITIONS OF SUBSCRIBER ACCOUNTS,
INCLUDING THE SPRY AND NETCOM ACQUISITIONS.

- we may experience difficulty in assimilating the acquired operations and
personnel;

- the acquisition may disrupt our ongoing business;

- the acquisition may divert management's attention from our ongoing
business;

- we may not be able to successfully incorporate acquired assets and
technology into our service offerings;

- we may not be able to maintain uniform standards, controls, procedures,
and policies;

S-15
<PAGE> 115

- we may lack the necessary experience to enter new markets and add new
services; and

- an acquisition may impair our relationships with employees and
subscribers as a result of changes in management.

WE CANNOT ASSURE YOU THAT WE WILL EFFECTIVELY MANAGE OUR GROWTH.

- continue to implement and improve our operational, financial, and
management information systems;

- closely monitor service quality, particularly through third-party
points-of-presence, or "POPs";

- integrate leased physical sites;

- acquire and install necessary equipment and telecommunications
facilities;

- implement marketing efforts in new and existing markets, which may
involve expanding our marketing strategy to include telemarketing and
other methods;

- add new services and provide related customer and technical support;

- employ qualified personnel to provide technical and marketing support for
new sites;

- identify, attract, train, integrate, and retain other qualified
personnel, including new management personnel;

- develop additional expertise; and

- continue to expand our operational and financial resources.

S-16
<PAGE> 116

WE HAVE SIGNIFICANT DEBT AND WE MAY BE UNABLE TO SERVICE THAT DEBT.

- we would have had $85.1 million of indebtedness;

- stockholders' equity would have been $237.1 million; and

- our earnings would have been insufficient to cover our fixed charges for
the year ended December 31, 1998 by $96.2 million.

Even if we repay all amounts outstanding under our credit facility, we will
have significant additional debt upon completion of the notes offering. We
cannot assure you that we will be able to improve our earnings before fixed
charges or that we will be able to meet our debt service obligations under our
credit facility or the notes. We will be in default under the terms of our
credit facility if (1) we are unable to generate sufficient cash flow or
otherwise obtain funds necessary to make required payments, or (2) we otherwise
fail to comply with the various covenants in our debt obligations. A default
would permit the holders of the indebtedness to accelerate its maturity. This,
in turn, would have a material adverse effect on our business, financial
condition and results of operations. In addition, we are required under the
terms of the credit facility to obtain, by May 19, 1999, landlord consents under
some of our operating leases. If we do not obtain these consents by the required
date, the lenders' commitment under the credit facility could be reduced to $20
million, which could have a material adverse effect on our business, financial
condition and results of operations, including our ability to repay the notes.

Even if we are able to meet our debt service obligations, the amount of
debt we have could adversely affect us in a number of ways, including by:

- limiting our ability to obtain any necessary financing in the future for
working capital, capital expenditures, debt service requirements or other
purposes;

- limiting our flexibility in planning for, or reacting to, changes in our
business;

- placing us at a competitive disadvantage to those of our competitors
having lower levels of debt;

- making us more vulnerable to a downturn in our business or the economy
generally; and

To be able to meet our obligations under our credit facility, we must
successfully implement our business strategy, which includes:

- expanding our network;

- attracting or acquiring and retaining a significant number of
subscribers; and

S-17
<PAGE> 117

- achieving significant and sustained growth in our cash flow.

VARIOUS FACTORS OUTSIDE OF OUR CONTROL MAY AFFECT OUR OPERATING RESULTS AND
CAUSE POTENTIAL FLUCTUATIONS IN OUR QUARTERLY RESULTS.

Our operating results, cash flows and liquidity may also fluctuate
significantly in the future due to other factors beyond our control which
include:

- how quickly we are able to acquire new subscribers;

- how expensive it will be to acquire new subscribers;

- the impact of increased depreciation and amortization from acquisitions;

S-18
<PAGE> 118

- 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 we experience business 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;

- the extent to which we experience increased competition in our markets;
and

- other general economic factors.

Technology and industry standards relating to our business are constantly
evolving and our success depends on our ability to keep pace with these
developments.

S-19
<PAGE> 119

transmit data at substantially faster speeds than the modems that we and most of
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 NEED ADDITIONAL CAPITAL TO FINANCE OUR GROWTH AND CAPITAL REQUIREMENTS.

- fund growth, operating losses and increases in expenses;

- otherwise respond to unanticipated developments or competitive pressures.

OUR BUSINESS DEPENDS ON OUR NETWORK INFRASTRUCTURE, INCLUDING OUR ABILITY TO
OBTAIN SUFFICIENT NETWORK CAPACITY.

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

S-20
<PAGE> 120

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.

WE ARE DEPENDENT ON THIRD-PARTY NETWORK PROVIDERS.

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<PAGE> 121

OUR OPERATIONS AND SERVICES ARE VULNERABLE TO NATURAL DISASTERS.

WE ARE DEPENDENT ON TELECOMMUNICATIONS CARRIERS AND OTHER SUPPLIERS.

S-22
<PAGE> 122

competitors or stop selling or leasing their products or services to us at
commercially reasonable prices, or at all.

OUR NETWORK IS VULNERABLE TO SECURITY BREACHES AND INAPPROPRIATE USE BY INTERNET
USERS WHICH COULD DISRUPT OUR SERVICE.

THE INTERNET ACCESS AND WEB HOSTING MARKETS ARE VERY COMPETITIVE.

COMPETITIVE FACTORS. We believe that the primary competitive factors
determining success in the Internet access and business services markets are a
reputation for reliability and

S-23
<PAGE> 123

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. 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 ISPs.

OUR COMPETITORS. 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 ISPs, such as EarthLink Network, Inc.;

- computer hardware and software and other technology companies, such as
IBM Corp. and Microsoft Corporation;

- numerous regional and local commercial ISPs which vary widely in quality,
service offerings, and pricing;

- national and regional Web hosting companies that focus primarily on
providing Web hosting services;

- cable operators and on-line cable services;

- local telephone companies and regional Bell operating companies; and

- nonprofit or educational Internet service providers.

S-24
<PAGE> 124

the availability and terms of ISP access to broadband local telephone company
networks are under regulatory review. Our ability to compete with telephone and
cable television companies that are able to support broadband transmission, and
to provide better Internet services and products, may depend on future
regulation to guarantee open access to the broadband networks. However, in
January 1999, the Federal Communications Commission declined to take any action
to mandate or otherwise regulate access by ISPs to broadband cable facilities at
this time. It is unclear whether and to what extent local and state regulatory
agencies will take any initiatives to implement this type of regulation, and
whether they will be successful in establishing their authority to do so.
Similarly, the FCC is considering proposals that could limit the right of ISPs
to connect with their customers over broadband local telephone lines. In
addition to competing directly in the ISP market, both cable and telephone
facilities operators are also aligning themselves with certain ISPs who would
receive preferential or exclusive use of broadband local connections to end
users. If high-speed, broadband facilities increasingly become the preferred
mode by which customers access the Internet and we are unable to gain access to
these facilities on reasonable terms, our business, financial condition and
results of operations could be materially adversely affected, including our
ability to repay the notes.

WE MAY NOT BE SUCCESSFUL IN PROTECTING OUR PROPRIETARY RIGHTS OR AVOIDING CLAIMS
THAT WE INFRINGE THE PROPRIETARY RIGHTS OF OTHERS.

S-25
<PAGE> 125

other rights, it could materially adversely affect our business, financial
condition and results of operations, including our ability to repay the notes.

OUR SUCCESS DEPENDS UPON 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. 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, including our
ability to repay the notes.

ITC HOLDING COMPANY, INC., ONE OF OUR PRINCIPAL STOCKHOLDERS, AND OUR MANAGEMENT
CAN EXERCISE SIGNIFICANT INFLUENCE OVER MINDSPRING.

SOME OF OUR DIRECTORS HAVE CONFLICTS OF INTEREST INVOLVING ITC HOLDING.

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<PAGE> 126

stockholders, or their affiliates, to be on terms no less favorable to
MindSpring 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 OUR STOCKHOLDERS TO EFFECT CHANGES IN CONTROL OF MINDSPRING IS
LIMITED.

There are provisions in our Amended and Restated Certificate of
Incorporation, as amended, our Amended and Restated Bylaws, and the Delaware
General 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 MindSpring or could discourage a third-party from attempting to
acquire control of MindSpring, even if these events would be beneficial to the
interests of the stockholders. In particular, our board of directors could delay
a change in control of MindSpring. In addition, our Amended and Restated
Certificate of Incorporation authorizes the board of directors to provide for
the issuance of shares of preferred stock of MindSpring, 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 shares of
preferred stock. We are also governed by 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 specified conditions are met. These
factors could have the effect of delaying, deferring, or preventing a change of
control of MindSpring.

WE MAY BECOME REGULATED BY THE FEDERAL COMMUNICATIONS COMMISSION OR OTHER
GOVERNMENT AGENCIES.

MindSpring also could be affected by any change in the ability of customers
to reach our network through a dial-up telephone call without any additional
charges. This practice

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<PAGE> 127

has allowed ISPs to offer flat-rate, non-usage-sensitive pricing, and has been
an important reason for the growth in Internet use. Recently, the FCC ruled that
connections linking end users to their ISPs are jurisdictionally interstate
rather than local, but the FCC did not subject such calling to the access
charges that apply to 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. MindSpring could be adversely affected by any
regulatory change that would result in application of access charges to Internet
service because this would substantially increase the cost of using the
Internet. However, the FCC Chairman has stated that he opposes Internet-related
access charges, and we believe that this development is unlikely, with one
possible exception that is not currently relevant to our business. Specifically,
there is substantial debate as to whether carrier access charges, or the
universal support obligations discussed above, should apply to Internet-based
telephone services that substitute for conventional telephony. 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 were they to occur.

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<PAGE> 128

FAILURE TO ACHIEVE YEAR 2000 COMPLIANCE MAY HAVE ADVERSE EFFECTS ON MINDSPRING.

OUR CREDIT FACILITY CONTAINS RESTRICTIVE COVENANTS.

- incur additional indebtedness, excluding the notes from this offering;

- create liens;

- make investments;

S-29
<PAGE> 129

- declare and pay cash dividends;

- issue some types of convertible and redeemable stock; and

- sell assets.

THE NOTES WILL RANK BELOW OUR EXISTING AND FUTURE SENIOR DEBT AND WE MAY BE
UNABLE TO REPAY OUR OBLIGATIONS UNDER THE NOTES.

The notes will be unsecured and subordinated in right of payment to all of
our existing and future senior debt, including borrowings under our secured
credit facility. Because the notes are subordinate to our senior debt, in the
event of (1) our bankruptcy, liquidation or reorganization, (2) upon the
acceleration of the notes due to an event of default under the indenture and (3)
in certain other events, we will make payments on the notes only after we have
satisfied all of our senior debt obligations. Therefore, we may not have
sufficient assets remaining to pay amounts on any or all of the notes. In
addition, although we currently do not have any subsidiaries, the notes will be
subordinate to all liabilities, including trade payables, of any subsidiaries
that we may in the future acquire or establish. Consequently, our right to
receive assets of any future subsidiaries upon their liquidation or
reorganization, and the rights of the holders of the notes to share in those
assets, would be subordinate to the claims of the subsidiaries' creditors.

The notes will be our obligations exclusively. The notes indenture does not
limit our ability, or that of any of our future subsidiaries, to incur senior
debt, other indebtedness and other liabilities. We may have difficulty paying
our obligations under the notes if we, or any future subsidiary, incur
additional indebtedness or liabilities. As of February 28, 1999, before giving
effect to the use of proceeds from this notes offering and the concurrent common
stock offering, we had approximately $84.8 million of senior debt outstanding,
including the $80 million we borrowed under our credit facility to finance the
NETCOM acquisition. We anticipate that from time to time we may incur additional
indebtedness, including senior debt, which could adversely affect our ability to
pay our obligations under the notes.

WE MAY BE UNABLE TO REPURCHASE THE NOTES.

There is no sinking fund with respect to the notes, and at maturity the
entire outstanding principal amount of the notes will become due and payable by
MindSpring. If a change of

S-30
<PAGE> 130

control, as defined in this prospectus supplement, of MindSpring occurs, each
holder of the notes may require that we repurchase all or a portion of the
notes. At maturity or if a change of control does occur, we can not assure you
that we would have sufficient funds or would be able to arrange for additional
financing to pay the repurchase price for all the notes tendered to us or due at
maturity. Under the terms of the notes indenture, we may elect, subject to
certain conditions, to pay the repurchase price with shares of common stock. Our
existing credit facility contains, and any future borrowing arrangements or
agreements relating to senior debt to which we become a party, including any
refinancings of our existing credit facility, may contain restrictions on, or
prohibitions against, our repurchase of the notes, regardless of whether such
repurchase is made with cash or common stock. In the event that the maturity
date or a change of control occurs at a time when we are prohibited from
repurchasing the notes, we could try to obtain the consent of the lenders under
those arrangements to purchase the notes or we could attempt to refinance the
borrowings that contain the restrictions. If we do not obtain the necessary
consents or refinance these borrowings, we will be unable to repurchase the
notes. In that case, our failure to repurchase any tendered notes or notes due
upon maturity would constitute an event of default under the notes indenture.
Any such default, in turn, may cause a default under the terms of our senior
debt, including under the credit facility. As a result, in such circumstances,
the subordination provisions of the notes indenture would, absent a waiver,
prohibit any repurchase of the notes until we pay in full the senior debt.

THERE MAY BE NO PUBLIC MARKET FOR THE NOTES.

The notes will be a new issue of securities with no established trading
market. Although the underwriters for this notes offering have advised us that
they intend to make a market in the notes, they have no obligation to do so and
may discontinue any such market making, at any time without notice. In addition,
such market making activity will be subject to the limits imposed by the
Securities Act and Exchange Act. Accordingly, we cannot assure you that any
market for the notes will develop or, if it does develop, that it will be
maintained. Various factors could have a materially adverse effect on the
trading price of the notes, including (1) the failure of an active market to
develop and (2) fluctuations in the prevailing interest rates. In addition, our
operating results and prospects, could from time to time be below the
expectations of public market analysts and investors, which could adversely
affect public perception of our creditworthiness and therefore, the trading
price of the notes.

OUR STOCK PRICE WILL FLUCTUATE, AND COULD FLUCTUATE SIGNIFICANTLY.

- 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;

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<PAGE> 131

- regulatory actions; and

- general economic conditions.

WE DO NOT ANTICIPATE THAT WE WILL PAY CASH DIVIDENDS.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus supplement, the accompanying prospectus and the information
incorporated by reference, 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." Known and
unknown risks, uncertainties and other factors could cause the actual results to
differ materially from those contemplated by the statements. The forward-looking
information is based on various factors and was derived using numerous
assumptions.

Although we believe that our expectations that are expressed in these
forward-looking statements are reasonable, we cannot promise that our
expectations will turn out to be correct. Our actual results could be materially
different from and worse than our expectations. Important risks and factors that
could cause our actual results to be materially different from our expectations
include, without limitation:

- that MindSpring will not retain or grow its subscriber base,

- that MindSpring will not be able to successfully integrate new
subscribers and/or assets obtained through acquisitions,

- that MindSpring will fail to be competitive with existing and new
competitors,

- that MindSpring will not be able to sustain its current growth,

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- that MindSpring will not adequately respond to technological developments
affecting the Internet, and

- that financing will not be available to MindSpring if and as needed.

The above list is intended to identify some of the principal factors that
could cause actual results to differ materially from those described in the
forward-looking statements included elsewhere in this report. These factors are
not intended to represent a complete list of all risks and uncertainties
inherent in MindSpring's business, and should be read in conjunction with the
more detailed cautionary statements included in this prospectus supplement under
the caption "Risk Factors."

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USE OF PROCEEDS

We estimate that we will receive net proceeds from the sale of the notes
offered with this prospectus supplement and accompanying prospectus of
approximately $150.1 million, or approximately $172.7 million if the
underwriters' over-allotment option is exercised in full. This estimate includes
the deduction of the estimated underwriting discounts and commissions and other
fees and expenses payable by us of approximately $250,000.

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 from this
offering to acquire complementary businesses, subscriber accounts, products or
technologies. Depending on the nature of any such acquisitions, we could apply
all or substantially all of the net proceeds from this offering to those
acquisitions. As part of our ongoing corporate development activities, we expect
that we will continue to consider acquisition opportunities. We are not
currently evaluating any acquisition opportunities. We cannot assure you,
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 uses. 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 from this offering in short-term, interest-bearing securities.

Concurrently with the notes offering, we are offering 2,000,000 shares of
common stock, plus an additional 300,000 shares to cover over-allotments by the
underwriters for that offering, by means of a separate prospectus supplement.
The completion of this notes offering and the common stock offering are not
dependent on one another. We intend to use a portion of the net proceeds from
the common stock offering to repay all amounts outstanding under our credit
facility of approximately $80.8 million, which includes approximately $800,000
of interest as of April 7, 1999. If we do not complete the common stock
offering, we intend to use a portion of the proceeds from this notes offering to
repay the amounts outstanding under the credit facility. This indebtedness bears
interest, at our option, at either (a) a base rate equal to the greater of First
Union National Bank's prime lending rate or the overnight federal funds rate
plus 0.50% or (b) the reserve adjusted LIBOR rate, plus an applicable margin.
The applicable margin is an annual rate which fluctuates based on our ratio of
total debt to EBITDA and which is between 0.25% and 1.00% for base rate
borrowings and between 1.25% and 2.00% for LIBOR rate borrowings. We incurred
this indebtedness to fund a portion of the NETCOM acquisition. Our credit
facility expires on February 17, 2002.

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PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

<TABLE>
<CAPTION>
1997 HIGH LOW
---- ------- ------
<S> <C> <C>
First Quarter........................................ $ 3.42 $ 1.92
Second Quarter....................................... 3.79 2.21
Third Quarter........................................ 8.21 3.54
Fourth Quarter....................................... 11.54 6.08
</TABLE>

<TABLE>
<CAPTION>
1998 HIGH LOW
---- ------- ------
<S> <C> <C>
First Quarter........................................ $ 23.00 $ 9.20
Second Quarter....................................... 34.75 16.17
Third Quarter........................................ 52.38 25.31
Fourth Quarter....................................... 79.00 23.13
</TABLE>

<TABLE>
<CAPTION>
1999 HIGH LOW
---- ------- ------
<S> <C> <C>
First Quarter (through April 6, 1999)................ $125.00 $62.50
</TABLE>

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CAPITALIZATION

The following table sets forth our capitalization as of December 31, 1998
(1) on a historical basis, (2) as adjusted to reflect the sale of $155,000,000
principal amount of notes and (3) as further adjusted to reflect the sale of
2,000,000 shares of our common stock at an assumed offering price of $105.00 per
share and the application of the proceeds from that offering, in each case net
of MindSpring's estimated offering expenses and the underwriting discount. You
should read this table together with the section entitled "Use of Proceeds" and
our financial statements and notes thereto and other financial and operating
data included elsewhere in this prospectus supplement and the accompanying
prospectus or incorporated into this prospectus supplement and the accompanying
prospectus by reference.

<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------------
AS AS FURTHER
HISTORICAL(1) ADJUSTED(1) ADJUSTED(1)
------------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash or cash equivalents.......................... $167,743 $317,843 $518,417
======== ======== ========
Indebtedness(2):
Capital leases.................................. 5,119 5,119 5,119
Debt............................................ 0 155,000 155,000
-------- -------- --------
Total indebtedness......................... 5,119 160,119 160,119
-------- -------- --------
Stockholders' equity:
Preferred Stock, $0.01 par value, 1,000 shares
authorized; 0 shares issued and
outstanding.................................. -- -- --
Common Stock, $.01 par value, 60,000 shares
authorized; 30,284 shares issued and
outstanding historical and as adjusted;
30,284 shares issued and outstanding as
further adjusted(3).......................... 283 283 303
Additional paid-in capital(3)..................... 209,983 209,983 410,537
Accumulated deficit............................... (3,185) (3,185) (3,185)
-------- -------- --------
Total stockholders' equity................. 207,081 207,081 407,655
-------- -------- --------
Total capitalization.............................. $212,200 $367,200 $567,774
======== ======== ========
</TABLE>

(2) Includes current portion of related indebtedness.

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SELECTED FINANCIAL AND OPERATING DATA

The information presented in the table excludes the effects of the NETCOM
acquisition and borrowings under our secured credit facility, both of which
occurred on February 17, 1999. See note 10 to MindSpring's audited Financial
Statements for the fiscal year ended December 31, 1998 included in this
prospectus supplement at page F-18 for certain pro forma and other information
concerning these and other events. Also see our Current Report on Form 8-K filed
with the SEC on February 25, 1999 for more detailed pro forma information.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
INCEPTION ----------------------------------------
PERIOD 1995 1996 1997 1998
--------- ------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Access........................................ $ 70 $ 1,455 $ 13,420 $ 40,925 $ 95,852
Business services............................. -- 260 2,286 7,711 14,735
Subscribers start-up fees..................... 33 512 2,426 3,920 4,086
----- ------- -------- -------- --------
Total revenues............................ 103 2,227 18,132 52,556 114,673
Cost and expenses:
Cost of revenues -- recurring................. 37 627 6,332 15,203 31,724
Cost of subscriber start-up fees.............. 15 339 1,876 1,619 2,612
Selling, general and administrative........... 121 2,230 14,161 30,784 57,324
Depreciation and amortization................. 5 265 3,285 8,695 15,227
----- ------- -------- -------- --------
Total operating expenses.................. 178 3,461 25,654 56,301 106,887
----- ------- -------- -------- --------
</TABLE>

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<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
INCEPTION ----------------------------------------
PERIOD 1995 1996 1997 1998
--------- ------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Operating gain (loss)........................... (75) (1,234) (7,522) (3,745) 7,786
Interest income (expense), net.................. -- (725) (90) (338) 1,214
----- ------- -------- -------- --------
Income (loss) before taxes...................... (75) (1,959) (7,612) (4,083) 9,000
Income tax provision............................ -- -- -- -- 1,544
----- ------- -------- -------- --------
Net income (loss)............................... $ (75) $(1,959) $ (7,612) $ (4,083) $ 10,544
===== ======= ======== ======== ========
PER SHARE DATA:
Basic earnings (loss) per share................. $ (0.23) $ (0.48) $ (0.18) $ 0.43
Diluted earnings (loss) per share............... $ (0.20) $ (0.48) $ (0.18) $ 0.41
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic........................................... 8,664 15,758 22,542 24,611
Diluted......................................... 9,930 15,758 22,542 25,431
OTHER OPERATING DATA:
Approximate number of subscribers at end of
period........................................ 1,000 12,000 122,000 278,000 693,000
Approximate number of employees at end of
period........................................ 8 95 321 502 977
EBITDA(1)....................................... $ (70) $ (969) $ (4,237) $ 4,950 $ 23,013
EBITDA margin(1)................................ (68)% (44)% (23)% 9% 20%
CASH FLOW DATA:
Operations...................................... (33) (70) (2,005) 11,354 35,501
Investing....................................... (127) (3,724) (21,336) (9,002) (47,647)
Financing....................................... 745 3,634 32,569 (2,619) 170,503
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------
INCEPTION
PERIOD 1995 1996 1997 1998
--------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......................... $585 $ 425 $ 9,653 $ 9,386 $167,743
Working capital................................... 547 (3,100) 5,027 (5,353) 137,106
Total assets...................................... 722 4,845 35,232 44,286 247,599
Total debt, including current maturities.......... -- 2,500 4,005 9,740 5,119
Total stockholders' equity........................ 670 482 25,407 21,413 207,081
</TABLE>

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

All common stock numbers and per share amounts in this report give effect
to a 3-for-1 stock split effected by MindSpring in June 1998.

OVERVIEW

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 business services which we offer in various price
and usage plans designed to meet the needs of our subscribers. Our business
services include Web hosting, which entails maintaining a customer's Web site;
high-speed, dedicated Internet access; Web page design; domain name registration
and customer Web server co-location. Web hosting, our principal business
service, complements our Internet access business and is one of the fastest
growing segments of the Internet marketplace.

We offer our subscribers:

- highly responsive customer service, and technical support which is
available 24 hours a day, seven days a week; and

- a reliable nationwide network that enables subscribers in the 48
contiguous United States and the District of Columbia to access the
Internet via a local telephone call.

Our nationwide network consists of MindSpring-owned points of presence, or
"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 MindSpring-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
MindSpring-owned POPs in markets where we have higher numbers of subscribers.

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.

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Spry Acquisition. On September 10, 1998, we entered into an Asset Purchase
Agreement with AOL and Spry, a wholly owned subsidiary of AOL, to purchase
assets used in connection with the consumer dial-up Internet access business
operated by Spry. In that transaction, we acquired Spry's subscriber base of
approximately 130,000 individual Internet access customers in the United States
and Canada as well as various assets used in serving those customers. These
assets included a leased customer support facility and a leased network
operations facility in Seattle, Washington. MindSpring also acquired all rights
held by Spry to the "Sprynet" name. On October 15, 1998, we completed the Spry
acquisition and we made an initial cash payment to AOL of $25 million. In March
1999, we made an additional and final payment to AOL of approximately $7
million. The total purchase price of approximately $32 million for the Spry
subscribers and assets was primarily a function of the number of acquired
subscribers who remained active with MindSpring as continuing users in good
standing after two billing cycles, measured as of December 31, 1998.

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United States Internet access and Web hosting business operated by NETCOM. In
that transaction, we acquired NETCOM's subscriber base of approximately 371,000
individual Internet access accounts, 22,000 Web hosting accounts, and 3,000
dedicated Internet access accounts in the United States. The acquisition closed
on February 17, 1999. We paid NETCOM approximately $245 million, consisting of
$215 million in cash and $30 million in MindSpring common stock (376,116 shares,
at a price per share of $79.76). In addition to the NETCOM subscriber base,
MindSpring also acquired various assets used in serving those subscribers,
including leased operations facilities in San Jose, California and Dallas, Texas
and all of NETCOM's rights to the "NETCOM" name (except in Canada, the United
Kingdom and Brazil). ICG PST has retained the network assets used to serve those
subscribers. We purchase access to that network under a network services
agreement with ICG PST at rates that are generally comparable to the costs of
using MindSpring POPs. This network services agreement has a term of one year
with an option for a second year on potentially different terms to be agreed
upon by the parties. During the first year under this network services
agreement, we are obligated to pay at least $27 million for network services, as
long as the services provided meet specified performance levels.

Credit Facility. On February 17, 1999, we entered into a credit agreement
with First Union National Bank and several other lenders. The credit agreement
provides for a $100 million revolving credit facility that may be increased at
our option to $200 million with the approval of First Union and the other
lenders under the credit agreement. The credit facility will mature on February
17, 2002. The credit facility is to be used to fund working capital and for
general corporate purposes, including permitted acquisitions. On February 17,
1999, we borrowed approximately $80 million under the credit facility to finance
the NETCOM acquisition. Our obligations under the credit facility are secured by
substantially all of MindSpring's assets. We intend to repay all amounts
outstanding under the credit facility with a portion of the net proceeds from
the offering of common stock that we are undertaking concurrently with this
notes offering. If we do not complete the common stock offering, we intend to
use a portion of the proceeds from this notes offering to repay those amounts.
See "Use of Proceeds."

- communication with and increased technical and customer support to
acquired subscribers;

- network supervision, provisioning and maintenance, including of
third-party networks;

- increased management time and resources related to hiring and integration
of new employees to support acquired subscribers;

- integration of acquired subscribers into MindSpring's billing systems;
and

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<PAGE> 141

- attempting to bring the cost structures associated with the acquired
subscribers and assets into alignment with MindSpring's historical cost
structure.

- economies of scale in selling, general and administrative costs,
particularly in the areas of numbers of employees and salaries, operating
leases, and marketing expenses.

In addition, MindSpring earns revenue by providing Web-hosting, full-time
dedicated access connections to the Internet, other value-added services such as
Web page design,

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<PAGE> 142

domain registration, Web-server co-location. MindSpring's Web-hosting services
allow a business or individual to post information on the World Wide Web so that
the information is available to anyone who has access to the Internet.
MindSpring currently offers three price plans for Web hosting subscribers
ranging from $19.95 to $99.95 per month. MindSpring had approximately 21,000
Web-hosting subscribers as of December 31, 1998, not including approximately
22,000 Web-hosting subscribers acquired from NETCOM. Through our domain
registration services, MindSpring offers subscribers the ability to personalize
electronic mail addresses and URLs (Uniform Resource Locators). The services
described in this paragraph have been classified as business services in
MindSpring's statements of operations and in the "Results of Operations" table
shown below.

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<PAGE> 143

network services rather than MindSpring-owned POPs, costs of revenue as a
percentage of revenue will tend to be higher, and therefore, margins on
subscribers will tend to be lower. This is because the full costs of using
third-party networks is included in costs of revenue, as compared to the costs
of using MindSpring-owned POPs, a portion of which is included in depreciation
and amortization. In addition, in more mature markets, where we have greater
concentrations of subscribers, we generally can provide services at a lower cost
per subscriber through MindSpring-owned POPs after the initial period when
related expenses are higher. This depends in part on how much we must pay for
local area telecommunications charges.

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<PAGE> 144

aggregate or approximately $115,000 per month over 33 to 45 months. If we are
unable to negotiate arrangements with respect to a sufficient number of such
options and/or the price of our common stock on the applicable measurement date
is higher than the current price, the amount of additional compensation expense
could be materially greater, which may have a material adverse effect on our
business, financial condition, and results of operations, including EBITDA and
net income.

RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
------------------- ------------------ -------------------
% OF % OF % OF
(000'S) REVENUE (000'S) REVENUE (000'S) REVENUE
--------- ------- -------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues:
Dial-up access to Internet............ $ 95,852 84 $40,925 78 $ 13,420 74
Business services..................... 14,735 13 7,711 15 2,286 13
Start-up fees......................... 4,086 3 3,920 7 2,426 13
-------- --- ------- --- -------- ---
Total revenue..................... $114,673 100 $52,556 100 $ 18,132 100
Cost and expenses:
Cost of revenues-recurring............ $ 31,724 28 $15,202 29 $ 6,332 35
Cost of revenues-start-up fees........ 2,612 2 1,620 3 1,876 10
Selling, general, and
administrative...................... 57,324 50 30,784 59 14,161 78
-------- --- ------- --- -------- ---
Customer base amortization............ $ 7,048 6 $ 4,210 8 $ 1,521 8
Depreciation.......................... 8,179 7 4,485 9 1,764 10
-------- --- ------- --- -------- ---
Operating income (loss)................. 7,786 7 (3,745) (7) (7,522) (42)
Interest income (expense), net........ 1,214 1 (338) (1) (90) (1)
-------- --- ------- --- -------- ---
Pre tax income (loss)................... 9,000 8 (4,083) (8) (7,612) (42)
Provision for income taxes............ 1,544 1 -- -- -- --
-------- --- ------- --- -------- ---
Net income (loss)....................... $ 10,544 9 $(4,083) (8) $ (7,612) (42)
======== === ======= === ======== ===
PER SHARE DATA:
Diluted net income (loss) per share..... $ 0.41 $ (0.18) $ (0.48)
Weighted average common shares
outstanding........................... 25,431 22,542 15,758
OPERATING DATA:
Approximate number of subscribers at end
of year............................... 693,000 278,300 121,794
Number of MindSpring employees at end of
year.................................. 977 502 321
EBITDA (1).............................. $ 23,013 20 $ 4,950 9 $ (4,237) (23)
-------- --- ------- --- -------- ---
</TABLE>

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YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

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<PAGE> 146

Depreciation and amortization. Depreciation and amortization expenses
decreased to approximately 13% of revenues for the year ended December 31, 1998,
compared to approximately 17% of revenues for the year ended December 31, 1997.
Amortization expense declined slightly to 6% of total revenues for the year
ended December 31, 1998, compared to approximately 8% for the year ended
December 31, 1997. Amortization expense resulted solely from acquired subscriber
bases, which are being amortized over three years. Depreciation expense was
approximately 7% of total revenues for the year ended December 31, 1998,
compared to approximately 9% for the year ended December 31, 1997. The decrease
in depreciation expense as a percentage of total revenues resulted from adding
capacity through increased use of network services purchased from third-party
providers, as opposed to increasing capacity by building additional
MindSpring-owned POPs, and from reductions in the cost of new equipment and
improved operating efficiencies within MindSpring's network. MindSpring
anticipates amortization expense to increase as a percentage of revenues as a
result of the Spry and NETCOM acquisitions.

Interest income (expense). The following table details the increase in
interest income in 1998 compared to 1997:

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<PAGE> 147

for tax purposes, subscriber acquisition costs must be amortized over 15 years,
compared to the three-year period applied for accounting purposes. For the year
ended December 31, 1997, no income tax benefit was recognized as MindSpring had
a net taxable loss for the year.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

Revenues. Revenues for the year ended December 31, 1997 totaled
approximately $52.6 million, as compared to approximately $18.1 million for the
year ended December 31, 1996. The approximately 190% increase in revenues
resulted primarily from an approximately 129% increase in subscribers. Revenues
increased in a greater proportion than subscribers due to the subscribers
acquired from PSINet Inc. during the fourth quarter of 1996. Revenues from
dial-up access to the Internet for the year ended December 31, 1997 represented
approximately 78% of the revenue, compared to approximately 74% for the year
ended December 31, 1996. Business services revenue increased slightly to
approximately 15% of revenues for the year ended December 31, 1997, compared to
approximately 13% for the year ended December 31, 1996. This increase is
primarily attributable to the increase in the number of MindSpring's Web hosting
customers. Subscriber start-up fees accounted for 7% of revenues for the year
ended December 31, 1997, as compared to approximately 13% for the year ended
December 31, 1996. MindSpring anticipates that as its customer base continues to
expand, subscriber start-up fees will progressively represent a smaller
percentage of revenues.

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<PAGE> 148

expenses, as well as efficiencies and economies of scale associated with
MindSpring-owned POPs.

Interest income (expense). The following table details the increase in
interest expense in 1997 compared to 1996:

Income tax provision. For the years ended December 31, 1997 and 1996, no
income tax benefit was recognized because MindSpring had a net taxable loss for
the year.

LIQUIDITY AND CAPITAL RESOURCES

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<PAGE> 149

MindSpring's future capital requirements depend on various factors
including, without limitation:

- the rate of market acceptance of MindSpring's services;

- our ability to maintain and expand our subscriber base;

- the rate of expansion of MindSpring's network infrastructure;

- the resources required to expand our marketing and sales efforts, and

- the availability of hardware and software provided by third-party
vendors.

We currently estimate that our cash and financing needs for 1999, assuming
reasonable internal growth, can be met by cash on hand, amounts available under
the credit facility, additional capital financing arrangements, and cash flow
from operations. We expect to repay all amounts outstanding under the credit
facility with a portion of the net proceeds from our offering of common stock
or, if necessary, a portion of the proceeds from this notes offering. See
"Description of Secured Credit Facility."

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<PAGE> 150

stockholders. Debt financing, if available, may involve restrictive covenants
with respect to dividends, raising future capital and other financial and
operational matters and incurring additional debt may further limit MindSpring's
ability to raise additional capital. In addition, our credit facility contains
restrictions on our ability to incur additional debt and to issue some types of
convertible or redeemable capital stock.

RECENT ACCOUNTING PRONOUNCEMENTS

YEAR 2000

The Year 2000 Program covers: (1) software products which are supplied by
MindSpring to its customers, (2) MindSpring's information technology and
operating

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<PAGE> 151

systems ("IT Systems"), and (3) MindSpring's non-information technology systems,
including embedded technology ("Non-IT Systems"). In addition, the Program calls
for MindSpring to identify and assess the systems and services of MindSpring's
major vendors, third party network service providers and other material service
providers ("Third Party Systems"), and take appropriate remedial actions and
develop contingency plans where appropriate in connection with such Third Party
Systems.

MindSpring recently completed its acquisition of Spry, Inc. MindSpring is
developing appropriate plans to identify and address Year 2000 related concerns
with Spry as part of the natural integration of the Spry operation into
MindSpring. Management believes that the Spry operation will not present any
significant Year 2000 issues to MindSpring.

MindSpring also recently acquired customers and assets of NETCOM, and
intends to develop plans to identify and address Year 2000 related concerns with
NETCOM as part of the natural integration of the NETCOM operation into
MindSpring.

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<PAGE> 152

costs will not have a material effect on MindSpring's financial condition,
liquidity or results of operations. MindSpring's estimates of Year 2000-related
costs may change, however, depending on MindSpring's Year 2000 evaluation of the
assets acquired from NETCOM.

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<PAGE> 153

BUSINESS

Over the past three years, we have rapidly increased our subscriber base
and revenues by:

- providing superior customer service and technical support;

- expanding our 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.

INDUSTRY BACKGROUND

GROWTH OF THE INTERNET

Internet access and enhanced Internet services represent two of the fastest
growing segments of the telecommunications services marketplace. The Internet
has emerged as a

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<PAGE> 154

ROLE OF THE ISP

Internet access services are the means by which ISPs interconnect either
businesses or individual consumers to the Internet's resources or to corporate
intranets and extranets. Access services include dial-up access for individuals
and small businesses and high-speed dedicated access designed primarily for
mid-sized and larger organizations. In addition to Internet access services, an
increasing number of Internet users are taking advantage of value-added services
such as Web hosting and Web page design. We believe that value-added services,
such as those included in MindSpring's business service offerings, are among the
fastest growing segments of the ISP marketplace. According to International Data
Corporation, revenues attributable to value-added services are projected to
increase in the United States at a compounded annual growth rate of
approximately 34%, from $3 billion in 1998, to $12.9 billion in 2003.

INTERNET USERS AND THEIR NEEDS

USER PROFILE

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<PAGE> 155

GROWING NEEDS OF CURRENT USERS

NEXT GENERATION SERVICES

MINDSPRING STRATEGY

CONTINUING TO PROVIDE SUPERIOR CUSTOMER SERVICE AND TECHNICAL SUPPORT

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<PAGE> 156

EFFICIENTLY EXPANDING OUR NATIONAL NETWORK

EXPANDING OUR TARGETED MARKETING AND DISTRIBUTION ACTIVITIES

INCREASING OUR REVENUES FROM VALUE-ADDED SERVICES

ENGAGING IN SELECTED ACQUISITIONS

Since early 1996, we have supplemented our internal expansion efforts
through selected acquisitions of complementary businesses and subscriber
accounts. As MindSpring

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We recently completed two substantial acquisitions:

MINDSPRING SERVICES

Our services include dial-up Internet access and business services, which
consist of Web hosting and other services such as high-speed, dedicated Internet
access for small to medium-sized businesses, Web page design and Web-server
co-location. MindSpring's primary service offerings, dial-up Internet access and
Web hosting, are offered in various price and usage plans designed to meet the
needs of our customers. We continuously evaluate the need to add additional
product offerings and modify our service features based upon market demands.

INTERNET ACCESS

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Unlimited Access. Individual subscribers pay $19.95 per month for unlimited
usage and 5MB of Web space. As with the Works Plan, the subscriber must
disconnect when not actively accessing the Internet. The subscriber is not
permitted, for example, to maintain a full-time computer connection as a World
Wide Web server.

Standard. Subscribers pay $14.95 per month for 20 hours of use and $1 per
hour for each additional hour. Subscribers also receive 5MB of Web space.

Light. Subscribers pay $6.95 per month for 5 hours of use and $2 per hour
for each additional hour. Subscribers also receive 5MB of Web space.

Subscribers to each plan can also purchase additional features such as
extra mailboxes for specified fees.

MindSpring recently introduced high-speed cable modem Internet access on a
very limited basis in the Montgomery, Alabama area. We provide this service
through an

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BUSINESS SERVICES

MindSpring's business services consist of:

- Web hosting, the business of maintaining a customer's Internet Web
site,

- high-speed, dedicated Internet access,

- Web page design,

- domain name registration,

- customer Web server co-location, and

- e-commerce services.

As of December 31, 1998, our business services accounted for approximately
13% of total revenues, which were derived almost entirely from Web hosting
services.

- Web hosting,

- Web site or Web page design,

- domain name registration,

- store front and back office applications,

- customer-to-merchant e-mail services,

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- search engine registration,

- encryption security certificates to assure confidentiality of
transactions, and

- credit card and on-line payment processing services.

Dedicated Access, Domain Registration and Web Server Co-location.
MindSpring also offers domain registration services and, in some markets,
high-speed dedicated access connections to the Internet, including for the
approximately 3,000 dedicated access accounts we purchased in the NETCOM
acquisition. We also offer Web-server co-location services at our Atlanta
headquarters and at our Dallas call center for subscribers who want to maintain
their own Web servers in MindSpring's state-of-the-art telephony environment and
receive a high-speed, full-time connection to the Internet. MindSpring's
co-location services include (1) 24-hour security monitoring, (2) an
uninterrupted power supply, (3) climate control, (4) remote access for the
subscriber, (5) tape swap, and (6) secure tape storage.

CUSTOMER SERVICE AND TECHNICAL SUPPORT

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newsgroups on the Internet where subscribers can post requests for help and
other subscribers, as well as MindSpring support personnel, can respond.

SALES AND MARKETING

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NETWORK INFRASTRUCTURE

Geographic Coverage. Through our nationwide network of MindSpring-owned and
third-party provider-owned points of presence, or POPs, our subscribers are able
to access the Internet in the 48 contiguous U.S. states and the District of
Columbia via a local telephone call. We purchase access to third-party provider
POPs through network services agreements with PSINet, Worldcom Advanced Networks
(formerly Gridnet International, L.L.C.), GTE Internetworking Incorporated
(formerly BBN Planet Corporation) and ICG PST.

MindSpring POPs. Each MindSpring POP typically consists of data
communications equipment such as 3Com(Registered Trademark) Total Control modem
chassis, 3Com(Registered Trademark) or Bay Networks switches and Cisco Systems
routers, the majority of which are currently co-located with a local
telecommunications or media company. The 3Com(Registered Trademark) modem
chassis employed by MindSpring support both ISDN and analog terminations.
MindSpring has upgraded all modem chassis to support the new international 56Kb
modem standard, V.90.

Network Operations Center. MindSpring maintains a Network Operations Center
at our Atlanta headquarters through which our technical staff monitors network
traffic, service quality, and security, as well as equipment at individual POPs,
to ensure reliable Internet access. The Network Operations Center is staffed 24
hours a day, 7 days a week. We also monitor network operations through our
facilities in Seattle, Washington and Dallas, Texas.

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MINDSPRING SOFTWARE

Our objectives in developing and providing the MindSpring starter kit are
to:

SUBSCRIBER APPLICATIONS

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word processing documents), which are sent as attachments. MindSpring's software
package includes the Eudora Light(R) e-mail application.

Network News. Network News provides Internet-wide, subject-specific forums
on thousands of different subjects, where users can post information and review
posted information from other users.

BILLING AND MANAGEMENT INFORMATION SYSTEMS

PROPRIETARY RIGHTS

Licenses. We have obtained authorization to use the products of each
manufacturer of software that we bundle in MindSpring's front-end software
product for Windows and

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Macintosh subscribers. The particular applications included in the MindSpring
starter-kit have, in some cases, been licensed. MindSpring currently intends to
maintain or negotiate renewals of, as the case may be, all existing software
licenses and authorizations as necessary. MindSpring may also want or need to
license other applications in the future. License fees charged to MindSpring
upon enrollment of additional subscribers are included in the cost of subscriber
start-up fees. Other applications included in the MindSpring starter kit are
shareware that MindSpring has obtained permission to distribute or that are from
the public domain and are freely distributable. MindSpring developed the
front-end software programs in MindSpring's starter kit for Windows 3.1, Windows
95, and Macintosh. We have acquired some software, trademarks and other
proprietary technology from Spry and NETCOM which we may continue to use for
acquired subscribers. See "Risk Factors."