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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 10, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
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MINDSPRING ENTERPRISES, INC.
(Exact name of Registrant as specified in its charter)
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DELAWARE 58-2113290
(State of Organization) (I.R.S. Employer Identification Number)
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1430 WEST PEACHTREE STREET, SUITE 400 ATLANTA, GA 30309 (404) 815-0770
(Address and telephone number of principal executive offices)
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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)
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COPIES TO:
NANCY J. KELLNER, ESQ.
HOGAN & HARTSON L.L.P.
555 THIRTEENTH STREET, N.W.
WASHINGTON, D.C. 20004-1109
(202) 637-5600
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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. [ ]
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CALCULATION OF REGISTRATION FEE
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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
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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)
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Total....................................... $800,000,000 (7) (4) $800,000,000 (8) $222,400 (9)
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(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.
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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.
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THE INFORMATION IN THIS PROSPECTUS 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 PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MARCH 10, 1999
PROSPECTUS
MINDSPRING ENTERPRISES, INC.
$800,000,000
DEBT SECURITIES, COMMON STOCK, PREFERRED STOCK, DEPOSITARY SHARES,
WARRANTS, SUBSCRIPTION RIGHTS, STOCK PURCHASE CONTRACTS TO PURCHASE
COMMON STOCK OR PREFERRED STOCK AND STOCK PURCHASE UNITS
By this prospectus, we may offer, from time to time, in one or more series
or classes the following securities:
- shares of our common stock,
- shares of our preferred stock,
- shares of our preferred stock represented by depositary shares,
- our debt securities,
- warrants exercisable for our debt securities, common stock, preferred
stock or depositary shares,
- subscription rights evidencing the right to purchase any of the above
securities, and
- stock purchase contracts to purchase common stock or preferred stock and
stock purchase units.
The aggregate initial offering price of these "offered securities" that we
may issue will not exceed $800,000,000. If we issue debt securities at a
discount from their original principal stated amount, then, for purposes of
calculating the aggregate initial offering price of the offered securities
issued under this prospectus, we will treat the initial offering price of the
debt securities as the total original principal amount of the debt securities.
Our common stock is listed for trading on The Nasdaq Stock Market's
National Market under the symbol "MSPG." On March 9, 1999, the last reported
sale price of our common stock on the Nasdaq National Market was $91.625.
We may offer the offered securities in amounts, at prices and on terms
determined at the time of the offering. We will provide you with specific terms
of the applicable offered securities in supplements to this prospectus.
You should read this prospectus and any prospectus supplement carefully
before you decide to invest. This prospectus may not be used to consummate sales
of the offered securities unless it is accompanied by a prospectus supplement
describing the method and terms of the offering of those offered securities.
INVESTING IN THE OFFERED SECURITIES INVOLVES RISKS. SEE THE SECTION
ENTITLED "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF FACTORS THAT YOU
SHOULD CONSIDER BEFORE PURCHASING THE SECURITIES OFFERED BY THIS PROSPECTUS.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these offered securities or determined
if this prospectus is truthful or complete. It is illegal for any person to tell
you otherwise.
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The date of this prospectus is , 1999.
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[INSIDE FRONT COVER PAGE]
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TABLE OF CONTENTS
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PROSPECTUS PAGE
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Risk Factors................................................ 3
Cautionary Note Regarding Forward-Looking Statements........ 16
About This Prospectus....................................... 17
Where You Can Find More Information......................... 17
About MindSpring............................................ 19
Ratios of Earnings to Fixed Charges......................... 20
Use of Proceeds............................................. 20
ERISA Matters............................................... 20
Description of Debt Securities.............................. 21
Description of Common Stock................................. 33
Description of Preferred Stock.............................. 35
Description of Depositary Shares............................ 38
Description of Warrants..................................... 42
Description of Stock Purchase Contracts to Purchase Common
Stock or Preferred Stock and Stock Purchase Units......... 43
Description of Subscription Rights.......................... 44
Plan of Distribution........................................ 45
Legal Matters............................................... 46
Experts..................................................... 47
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RISK FACTORS
In addition to the other information contained in this prospectus, you
should carefully consider the following risk factors relating to MindSpring
before purchasing MindSpring securities.
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:
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ANNUAL ACCUMULATED DEFICIT
NET LOSS AS OF DECEMBER 31, 1998
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1995.................................................. $1,959,000
1996.................................................. $7,612,000
1997.................................................. $4,083,000
1998.................................................. N/A $3,185,000
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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, including
our ability to repay any of our debt securities.
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,
technology and rights 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
- 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, a 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, including our ability to repay any of our debt securities.
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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, including our
ability to repay any of our debt securities.
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 such as dedicated Internet access 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 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.
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. 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, within 90 days after February 17, 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
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material adverse effect on our business, financial condition and results of
operations, including our ability to repay any of our debt securities.
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.
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.
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.
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;
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- 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.
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
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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 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, including our ability to repay any of our debt securities.
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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, including our ability to repay any of our debt securities.
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.
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, including our ability to repay any of our
debt securities.
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
Corporation and high-performance routers manufactured by Cisco Systems,
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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.
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 Web hosting services
to individuals and small businesses are extremely competitive and highly
fragmented. There are no substantial barriers to entry, and we expect that
competition will continue to intensify. We 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, including our ability to repay any of our debt securities.
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COMPETITIVE FACTORS. We believe that the primary competitive factors
determining success in the Internet access and Web hosting 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 Internet service providers.
We believe that new competitors, including large computer hardware and
software, media, and telecommunications companies, will continue to enter the
Internet access and Web hosting markets. As consumer awareness of the Internet
grows, existing competitors are likely to further increase their emphasis on
their Internet access and Web hosting services, resulting in even greater
competition for us. In addition, telecommunications companies may be able to
offer customers reduced communications costs in connection with these services,
reducing the overall cost of their Internet access and Web hosting solutions and
significantly increasing pricing pressures on us. The ability of our competitors
to acquire other ISPs, to enter into strategic alliances or joint ventures or to
bundle other services and products with Internet access or Web hosting 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 Web hosting in their basic
bundle of services or may offer Internet access or Web hosting 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 owners are not currently required to allow ISPs to access their
broadband facilities and the terms of ISP access to broadband local telephone
company networks are not certain. Therefore, 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 facilities
at this time. It is unclear at this time 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. If the owners of these high-speed, broadband facilities increasingly
use them to provide Internet access and we are unable to gain access to these
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facilities on reasonable terms, our business, financial condition and results of
operations, including our ability to repay any of our debt securities, could be
materially adversely affected.
NO INTERNATIONAL OPERATIONS. We do not currently compete internationally.
If the ability to provide Internet access internationally becomes a competitive
advantage in the Internet access industry, we may be at a competitive
disadvantage relative to our competitors.
WE MAY NOT BE SUCCESSFUL IN PROTECTING OUR PROPRIETARY RIGHTS OR AVOIDING CLAIMS
THAT WE INFRINGE THE PROPRIETARY RIGHTS OF OTHERS.
Our success depends in part upon our software and related documentation. We
principally rely upon copyright, trade secret, and contract laws to protect our
proprietary technology. We cannot be certain that we have taken adequate steps
to prevent misappropriation of our technology or that our competitors will not
independently develop technologies that are substantially equivalent or superior
to our technology.
We have permission and, in 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,
including our ability to repay any of our debt securities.
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 any of our debt securities.
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 January 31, 1998. MindSpring's executive officers and directors own
an aggregate of approximately 10.4% 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
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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.
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, the Restated Certificate
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.
We provide Internet access, in part, through transmissions over public
telephone lines. These transmissions are governed by regulatory policies
establishing charges and terms for communications. As an Internet service
provider, we are not currently 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
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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. The FCC is also considering whether the universal
service support obligations discussed above should apply to Internet-based
telephone services, or whether Internet-based telephone services should be
required to pay carrier access charges on the same basis as traditional
telecommunications companies. Local telephone companies assess access charges to
long distance companies for the use of the local telephone network to originate
and terminate long distance calls, generally on a per-minute basis. Access
charges have been a matter of continuing dispute, with long distance companies
complaining that the rates are substantially in excess of cost, and local
telephone companies arguing that access rates are justified to subsidize lower
local rates for end users and other purposes. Both local and long distance
companies, however, contend that these charges should apply to Internet-based
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. However, we cannot predict whether these debates will cause the
FCC to reconsider its current policy of not regulating Internet service
providers.
The law relating to the liability of Internet service providers and on-line
services companies for information carried on, stored on, or disseminated
through their network is unsettled, even with the recent enactment of the
Digital Millennium Copyright Act. While no one has ever filed a claim against us
relating to information carried on, stored on, or disseminated through our
network, someone may file a claim of that type in the future and may be
successful in imposing liability on us. If that happens, we may have to spend
significant amounts of money to defend ourselves against these claims and, if we
are not successful in our defense, the amount of damages that we will have to
pay may be significant. Any costs that we incur as a result of defending these
claims or the amount of liability that we may suffer if our defense is not
successful could materially adversely affect our business, financial condition
and results of operations, including our ability to repay any of our debt
securities.
If, as the law in this area develops, we become liable for information
carried on, stored on, or disseminated through our network, we may decide to
spend significant amounts of money to reduce our exposure to this type of
liability. This may require us to spend significant amounts of money for new
equipment and may also require us to discontinue offering 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, including our ability to repay any of our
debt securities.
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.
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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 support. This in turn could materially
and adversely affect MindSpring's results of operations, liquidity and financial
condition, including our ability to repay any of our debt securities.
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, including
our ability to repay any of our debt securities.
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, including our ability to repay any of our
debt securities.
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, including our ability to repay
any of our debt securities.
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;
- 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
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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 could have a material adverse
effect on our business, financial condition and results of operations, including
our ability to repay any of our debt securities.
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.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, any prospectus supplement and the information incorporated
by reference, may 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, (1) that MindSpring will not retain or grow its
subscriber base, (2) that MindSpring will not be able to successfully integrate
new subscribers and/or assets obtained through acquisitions, (3) that MindSpring
will fail to be competitive with existing and new competitors, (4) that
MindSpring will not be able to sustain its current growth, (5) that MindSpring
will not adequately respond to technological developments impacting the
Internet, and (6) 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 and/or any
prospectus supplement under the caption "Risk Factors."
As used in this prospectus and in the accompanying prospectus supplement,
"MindSpring" means MindSpring Enterprises, Inc., a Delaware corporation.
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
SEC using a "shelf" registration process under the Securities Act of 1933. Under
the shelf process, we may, from time to time, sell any combination of the
offered securities described in this prospectus in one or more offerings up to a
total dollar amount of $800,000,000.
This prospectus and the accompanying prospectus supplement do not contain
all of the information included in the registration statement. We have omitted
parts of the registration statement as permitted by the rules and regulations of
the SEC. For further information, we refer you to the registration statement on
Form S-3, including its exhibits. Statements contained in this prospectus and
any accompanying prospectus supplement about the provisions or contents of any
agreement or other document are not necessarily complete. If SEC rules and
regulations require that any agreement or document be filed as an exhibit to the
registration statement, you should refer to that agreement or document for a
complete description of these matters. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the date on the front of each document.
This prospectus provides you with a general description of the offered
securities. Each time we sell offered securities, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. The prospectus supplement may also add, update or change any
information contained in this prospectus. You should read both this prospectus
and any prospectus supplement together with the additional information described
under the heading "Where You Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy materials that we have filed
with the SEC, including the registration statement, at the following SEC public
reference rooms:
<TABLE>
<S> <C> <C>
450 Fifth Street, N.W 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, New York 10048 Chicago, Illinois 60661
</TABLE>
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms.
Our common stock is quoted on the Nasdaq National Market under the symbol
"MSPG," and our SEC filings can also be read at the following Nasdaq address:
Nasdaq Operations
1735 K Street, N.W.
Washington, D.C. 20006
Our SEC filings are also available to the public on the SEC's Web Site at
http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below:
- Our Annual Report on Form 10-K for our fiscal year ended December 31,
1997, filed with the SEC on March 30, 1998, which we amended by filing
an amendment on Form 10-K/A with the SEC on April 30, 1998.
- Our Quarterly Reports on Form 10-Q for the:
-- quarter ended March 31, 1998, filed with the SEC on May 1, 1998;
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-- quarter ended June 30, 1998, filed with the SEC on August 13, 1998,
which we amended by filing an amendment on Form 10-Q/A with the SEC on
December 7, 1998; and
-- quarter ended September 30, 1998, filed with the SEC on November 16,
1998.
- Our Current Reports on Form 8-K, filed with the SEC on:
-- June 25, 1998;
-- September 15, 1998;
-- November 13, 1998, which we amended by filing a report on Form 8-K/A
with the SEC on December 11, 1998;
-- December 7, 1998, which we amended by filing a report on Form 8-K/A
with the SEC on December 11, 1998;
-- January 8, 1999; and
-- February 25, 1999.
- The description of our common stock included in a registration statement
on Form 8-A, filed with the SEC on March 1, 1996, including any
amendments or reports filed for the purpose of updating that
description.
In addition to the documents listed above, we also incorporate by reference any
future filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 until we have sold all of the offered
securities to which this prospectus relates or the offering is otherwise
terminated.
You may request a copy of these filings, at no cost, by writing to us at
the following address or telephoning us at (404) 815-0770 between the hours of
9:00 a.m. and 4:00 p.m., Atlanta, Georgia local time:
INVESTOR RELATIONS
MINDSPRING ENTERPRISES, INC.
1430 WEST PEACHTREE STREET, SUITE 400
ATLANTA, GEORGIA 30309
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ABOUT MINDSPRING
MindSpring Enterprises, Inc., which began operations in February 1994, is a
leading national Internet service provider, or ISP. We focus on serving
individuals and small businesses. Our subscribers use their MindSpring accounts
to, among other things, communicate, retrieve information, and publish
information on the Internet. Our primary service offerings are dial-up Internet
access and Web hosting, both of which we offer in various price and usage plans
designed to meet the needs of our subscribers. Web hosting complements our
Internet access business and is one of the fastest growing segments of the
Internet marketplace. In addition to dial-up Internet access and Web hosting, we
offer other value-added services, such as Web page design. We believe that our
highly responsive customer service and technical support, which is available 24
hours a day, seven days a week, distinguishes MindSpring from other ISPs.
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. This reliable network enables subscribers in the 48 contiguous U.S.
states and the District of Columbia to access the Internet via a local telephone
call.
Our objective is to strengthen MindSpring's position as a leading national
provider of high quality Internet access, Web hosting and other value-added
services to individuals and small businesses. We believe that to achieve this
objective we need to continue to:
-- provide superior customer service and technical support by maintaining
and, as necessary, increasing our staff of qualified service and support
personnel;
-- efficiently expand our national network through a combination of
MindSpring-owned POPs and POPs we lease from third-party network service
providers;
-- expand our targeted marketing and distribution activities in markets
where there is the opportunity for substantial market penetration;
-- increase our revenues from value-added services, such as Web hosting and
Web page design, by continuing to take advantage of our current sales,
marketing and network capabilities; and
-- engage in selected and strategic acquisitions of businesses and
subscriber accounts.
In October 1998, we acquired approximately 130,000 subscriber accounts and
some related assets from Spry, Inc., a wholly owned subsidiary of America
Online, Inc. In February 1999, we acquired approximately 400,000 subscriber
accounts and some related assets from NETCOM On-Line Communication Services,
Inc., a wholly owned subsidiary of ICG Communications, Inc. These acquisitions
increased our subscriber base to approximately 1,100,000 subscribers, compared
to approximately 12,000 subscribers at the end of 1995, our first full year of
operations. We intend to continue to evaluate new acquisition opportunities as
they become available.
Our principal executive offices are located at 1430 West Peachtree Street,
Suite 400, Atlanta, Georgia 30309, and our telephone number at that address is
(404) 815-0770.
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RATIOS OF EARNINGS TO FIXED CHARGES
The following table shows MindSpring's ratios of earnings to fixed charges
on a historical basis for the fiscal years indicated, expect for 1994,
MindSpring's initial year of operations, which began on February 24, 1994. The
amount shown as "Pro Forma 1998" gives effect to the NETCOM acquisition and the
borrowings under the credit facility, which occurred on February 17, 1999, as if
each had occurred on January 1, 1998. Earnings consist of income before income
taxes plus fixed charges. Fixed charges consist of interest charges and the
portion of rent expense under operating leases representing interest, which is
estimated to be one-third of rent expense. To date, MindSpring has not issued
any preferred stock; therefore, the ratios of earnings to combined fixed charges
and preference dividends are the same as the ratios shown below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PRO
------------------------------------ FORMA
1994 1995 1996 1997 1998 1998
---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges............ -- -- -- -- 9.7x --
Amount by which earnings insufficient to cover
fixed charges (in millions)................. $0.1 $2.0 $7.6 $4.1 -- $96.2
</TABLE>
USE OF PROCEEDS
Unless otherwise indicated in the applicable prospectus supplement, we
anticipate that any net proceeds from the sale of offered securities will be
used to fund expansion of our business, including for:
- additional working capital,
- capital expenditures,
- repayment of debt, including amounts we may have borrowed under our
secured, revolving credit facility,
- funding net losses,
- acquisitions, and
- general corporate purposes.
When we offer a particular series of offered securities, the prospectus
supplement relating to that offering will set forth the intended use of the net
proceeds received from that offering. Pending the application of the net
proceeds, we expect to invest the proceeds from the sale of offered securities
in short-term, interest-bearing instruments or other investment-grade debt
securities.
ERISA MATTERS
MindSpring or any of our affiliates may be considered a "party in
interest," within the meaning of the Employee Retirement Income Security Act, or
a "disqualified person," within the meaning of Section 4975 of the Internal
Revenue Code, with respect to many employee benefit plans that are subject to
ERISA. The purchase and/or holding of offered securities by an ERISA plan,
including an individual retirement plan, that is subject to the fiduciary
responsibility provisions of ERISA or the prohibited transaction provisions of
the Internal Revenue Code and with respect to which MindSpring or any of our
affiliates is a service provider, or otherwise is a party in interest or a
disqualified person, may constitute or result in a prohibited transaction under
ERISA or the Internal Revenue Code, unless such offered securities are acquired
pursuant to and in accordance with an applicable federal statutory exemption, or
administrative exemption issued on a class-wide basis by the United States
Department of Labor. Any pension or other employee benefit plan proposing to
acquire any offered securities should consult with its counsel.
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DESCRIPTION OF DEBT SECURITIES
GENERAL
The debt securities that we may issue will be unsecured, direct, general
obligations of MindSpring. We may issue either senior debt securities or
subordinated debt securities. Our senior debt securities and our subordinated
debt securities will be subordinated to our secured indebtedness, including
amounts we have borrowed under any secured, revolving credit facility. Our
senior debt securities will rank equally with all other unsecured and
unsubordinated indebtedness of MindSpring. Our subordinated debt securities will
be subordinated in right of payment to the prior payment in full of the "senior
debt" of MindSpring, as described below under "-- Subordination of Subordinated
Debt Securities" and in the prospectus supplement applicable to any subordinated
debt securities that we may offer.
Senior debt securities will be issued under a "senior debt indenture" and
subordinated debt securities will be issued under a separate "subordinated debt
indenture." Provisions relating to the issuance of debt securities may also be
set forth in a supplemental indenture to either of the indentures. For purposes
of the descriptions under this heading, we may refer to the senior debt
indenture and the subordinated debt indenture, and any related supplemental
indentures, as "an indenture" or, collectively, as "the indentures." The
indentures will be subject to and governed by the Trust Indenture Act of 1939.
Each indenture will be between MindSpring and a trustee that meets the
requirements of the Trust Indenture Act of 1939. We expect that each indenture
will provide that there may be more than one trustee under that indenture, each
with respect to one or more series of debt securities. Any trustee under an
indenture may resign or be removed with respect to one or more series of debt
securities and, in that event, we may appoint a successor trustee. Except as
otherwise provided in the indenture or supplemental indenture, any action
permitted to be taken by a trustee may be taken by that trustee only with
respect to the one or more series of debt securities for which it is trustee
under the applicable indenture.
The descriptions under this heading relating to the debt securities and the
indentures are summaries of their anticipated provisions. The summaries are not
complete and are qualified in their entirety by reference to the actual
indentures and debt securities. A form of the senior debt indenture and a form
of the subordinated debt indenture under which we may issue our debt securities
have been filed as exhibits to the registration statement of which this
prospectus is a part. In the summaries we have included references to section
numbers of the forms of indenture so that you can easily locate these
provisions. Whenever we refer in this prospectus or in the prospectus supplement
to particular sections or defined terms of an indenture, those sections or
defined terms are incorporated by reference in this prospectus or in the
prospectus supplement, as applicable. You should read the indentures for
provisions that may be important to you. The forms of the indentures can be
examined at the locations listed above under the heading "Where You Can Find
More Information."
The terms and conditions described under this heading are of terms and
conditions that apply generally to the debt securities. The particular terms of
any series of debt securities will be summarized in the applicable prospectus
supplement. Those terms may differ from the terms summarized below.
Except as set forth in the applicable indenture or in one or more
supplemental indentures and described in an applicable prospectus supplement, we
may issue the debt securities in one or more series and without limitation as to
aggregate principal amount. We are not required to issue all of the debt
securities of one series at the same time and, unless otherwise provided in the
applicable indenture, supplemental indenture or prospectus supplement, we may
reopen a series and issue additional debt securities under that series without
the consent of the holders of the outstanding debt securities of that series.
TERMS OF DEBT SECURITIES TO BE INCLUDED IN THE PROSPECTUS SUPPLEMENT
The prospectus supplement relating to any series of debt securities that we
may offer will set forth the price or prices at which the debt securities will
be offered, and will contain the specific terms of the debt securities of that
series. These terms may include, without limitation, the following:
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(1) the title of the debt securities, whether they are senior debt
securities or subordinated debt securities and, if subordinated, the
terms of subordination;
(2) the aggregate principal amount of the debt securities and any limit on
that aggregate principal amount;
(3) the percentage of the principal amount at which the debt securities
will be issued and, if other than the principal amount of those debt
securities, the portion of the principal amount payable upon
declaration of acceleration of the maturity of those debt securities;
(4) the date or dates, or the method for determining the date or dates, on
which the principal of the debt securities will be payable;
(5) the rate or rates, which may be fixed or variable, or the method by
which the rate or rates are to be determined, at which the debt
securities will bear interest, if any;
(6) the date or dates, or the method for determining the date or dates,
from which any interest will accrue, the dates on which any interest
will be payable, the regular record dates for interest payment dates,
or the method by which record dates may be determined, the persons to
whom interest will be payable, and the basis upon which interest is to
be calculated if other than that of a 360-day year of twelve 30-day
months;
(7) the place or places where the principal of (and premium, if any) and
interest, if any, on the debt securities will be payable, where the
debt securities may be surrendered for registration of transfer or
exchange and where notices or demands to or upon MindSpring in respect
of the debt securities and the applicable indenture may be served;
(8) the period or periods within which, the price or prices at which and
the other terms and conditions upon which the debt securities may be
redeemed, in whole or in part, at the option of MindSpring, if
MindSpring is to have such an option;
(9) the right or obligation, if any, of MindSpring to redeem, repay or
purchase the debt securities pursuant to any sinking fund or analogous
provision or at the option of a holder of the debt securities, and the
period or periods within which, or the date and dates on which, the
price or prices at which and the other terms and conditions upon which
the debt securities will be redeemed, repaid or purchased, in whole or
in part, pursuant to that obligation;
(10) if other than U.S. dollars, the currency or currencies in which the
debt securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite
currency or currencies, and the related terms and conditions;
(11) whether the amount of payments of principal of (and premium, if any)
or interest, if any, on the debt securities may be determined with
reference to an index, formula or other method, which index, formula
or method may, but need not be, based on a currency, currencies,
currency unit or units or composite currency or currencies, and the
manner in which the amounts are to be determined;
(12) any additions to, modifications of or deletions from the terms of the
debt securities with respect to events of default, amendments, merger,
consolidation and sale or covenants set forth in the applicable
indenture;
(13) whether the debt securities will be issued in certificated or
book-entry form;
(14) whether the debt securities will be in registered or bearer form and,
if in registered form, their denominations, if other than $1,000 and
any integral multiple thereof, and, if in bearer form, their
denominations, if other than $5,000, and the related terms and
conditions;
(15) if the debt securities will be issuable only in the form of a Global
Security as described below under the subheading "-- Global
Securities," the depositary or its nominee with respect to the debt
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securities and the circumstances under which the Global Security may be
registered for transfer or exchange in the name of a person other than
the depositary or its nominee;
(16) the applicability, if any, of the defeasance and covenant defeasance
provisions of the indenture and any additional or different terms on
which the series of debt securities may be defeased;
(17) whether and the extent to which the debt securities will be
guaranteed, any guarantors and the form of any such guarantee;
(18) in the case of subordinated debt securities, whether the securities
may be converted into or exchanged for other securities of MindSpring
and the terms and conditions of conversion or exchange;
(19) whether the debt securities will be sold as part of Units consisting
of debt securities and other securities;
(20) if the debt securities are to be issued upon the exercise of warrants,
the time, manner and place for the debt securities to be authenticated
and delivered;
(21) whether and under what circumstances MindSpring will pay any
additional amounts on the debt securities in respect of any tax,
assessment or governmental charge and, if so, whether MindSpring will
have the option to redeem the debt securities instead of paying any
additional amounts; and
(22) any other terms of the debt securities not inconsistent with the
provisions of the applicable indenture (Section 301).
The debt securities may be offered and sold at a substantial discount below
their stated principal amount and may be "original issue discount securities."
"Original issue discount securities" means that less than the entire principal
amount of the securities will be payable upon declaration of acceleration of
their maturity. Special federal income tax, accounting and other considerations
applicable to original issue discount securities will be described in the
applicable prospectus supplement.
Debt securities may bear interest at a fixed rate or a floating rate. Debt
securities bearing no interest or interest at a rate that at the time of
issuance is below the prevailing market rate or as part of units consisting of
debt securities and other securities may be sold or deemed to be sold at a
discount below their stated principal amount. With respect to any debt
securities as to which MindSpring has the right to defer interest, the holders
of these debt securities may be allocated interest income for federal and state
income tax purposes without receiving equivalent, or any, interest payments. Any
material federal income tax considerations applicable to any such discounted
debt securities or to certain debt securities issued at par that are treated as
having been issued at a discount for federal income tax purposes will be
described in the applicable prospectus supplement.
Except as set forth in the applicable indenture or in one or more
supplemental indentures, the applicable indenture will not contain any
provisions that would limit the ability of MindSpring to incur indebtedness or
that would afford holders of debt securities protection in the event of a highly
leveraged or similar transaction involving MindSpring. The applicable indenture
may contain provisions that would afford debt security holders protection in the
event of a change of control. You should refer to the applicable prospectus
supplement for information with respect to any deletions from, modifications of
or additions to the events of default or covenants of MindSpring that are
described below, including any addition of a covenant or other provision
providing event risk or similar protection.
As of the date of this prospectus, MindSpring has no subsidiaries. However,
in the event that MindSpring establishes one or more subsidiaries in the future,
some of the terms and provisions of the indentures would apply to those
subsidiaries. For purposes of the descriptions under this heading (1)
"Subsidiary" means a corporation or a partnership a majority of the outstanding
voting stock or partnership interests, as the case may be, of which is owned or
controlled, directly or indirectly, by MindSpring or by one or more other
Subsidiaries of MindSpring. For the purposes of this definition, "voting stock"
means stock having voting power for the election of directors, or trustees, as
the case may be, whether at all times or only so long as no senior class of
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stock has such voting power by reason of any contingency; and (2) "Significant
Subsidiary" means any Subsidiary of MindSpring that is a "significant
subsidiary," within the meaning of Regulation S-X promulgated by the SEC under
the Securities Act.
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
To the extent provided in the subordinated debt indenture and any
supplemental indenture, the payment of the principal of, and premium, if any,
and interest on any subordinated debt securities, (including amounts payable on
any redemption or repurchase,) will be subordinated in right of payment to the
prior payment in full in cash of all "senior debt," as defined below (Sections
1501 and 1502 of the subordinated debt indenture). In the event of (1) a
distribution to creditors in a liquidation or dissolution, or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to
MindSpring or (2) an event of default with respect to senior debt which results
in suspension of payment on the subordinated debt securities, MindSpring will
have to make payment on the senior debt before making payments on any
subordinated debt securities. The obligation described in the previous sentence
of MindSpring to make payment on the senior debt will not otherwise affect
MindSpring's obligation to make payment of the principal, and premium, if any,
and interest on the subordinated debt securities. (Section 1508 of the
subordinated debt indenture). Upon any distribution to creditors of MindSpring
in a liquidation or dissolution, or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding, the holders of senior debt will first be
entitled to receive payment in full in cash of all amounts due on the senior
debt before any payments may be made on the subordinated debt securities. By
reason of this subordination, in the event of a distribution of assets upon
insolvency, specific general creditors of MindSpring may recover more, ratably,
than holders of subordinated debt securities.
The supplemental indenture will set forth the terms and conditions under
which, if any, MindSpring will not be permitted to pay principal, premium, if
any, or interest on the related subordinated debt securities upon the occurrence
of an event of default or other circumstances arising under or with respect to
"senior debt" which is defined below. (Section 1503 of the subordinated debt
indenture). After all senior debt is paid in full and until the subordinated
debt securities are paid in full, holders of subordinated debt securities will
succeed to the right of holders of senior debt to the extent that distributions
otherwise payable to holders of subordinated debt securities have been applied
to the payment of senior debt (Section 1507 of the subordinated debt indenture).
The subordinated debt indenture will define "senior debt" generally as the
principal of, and premium, if any, and interest, (including interest accruing
after the commencement of any bankruptcy proceeding relating to MindSpring,) on,
or substantially similar payments to be made by MindSpring in respect of, the
following, whether outstanding at the date of execution of the applicable
indenture or thereafter incurred, created or assumed:
(1) indebtedness of MindSpring evidenced by notes, debentures, or bonds or
other securities issued under the provisions of an indenture, fiscal
agency agreement or other agreement, including the senior debt
securities that may be offered by means of this prospectus and one or
more prospectus supplements,
(2) indebtedness of MindSpring for money borrowed or represented by
purchase-money obligations, as defined below,
(3) obligations of MindSpring as lessee under leases of property either
made as part of a sale and leaseback transaction to which MindSpring
is a party or otherwise,
(4) indebtedness, obligations and liabilities of others in respect of
which MindSpring is liable contingently or otherwise to pay or advance
money or property or as guarantor, endorser or otherwise or which
MindSpring has agreed to purchase or otherwise acquire,
(5) reimbursement and other obligations relating to letters of credit,
bankers' acceptances and similar obligations,
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(6) obligations under various hedging arrangements and agreements,
including interest rate and currency hedging agreements,
(7) all obligations of MindSpring issued or assumed as the deferred
purchase price of property or services, but excluding trade accounts
payable and accrued liabilities arising in the ordinary course of
business, and
(8) renewals, extensions, modifications, replacements, restatements and
refundings of, or any indebtedness or obligation issued in exchange
for, any of the indebtedness or obligations described in clauses (1)
through (7), above,
in each case other than:
(1) any indebtedness, obligation or liability referred to in clauses (1)
through (8) above as to which, in the instrument creating or
evidencing that indebtedness, obligation or liability, it is expressly
provided that such indebtedness, obligation or liability is not senior
in right of payment to the subordinated debt securities or ranks
equally with the subordinated debt securities;
(2) any such indebtedness, obligation or liability which is subordinated
to indebtedness of MindSpring to substantially the same extent as or
to a greater extent than the subordinated debt securities are
subordinated; and
(3) the subordinated debt securities (Section 101 of the subordinated debt
indenture).
As used above, the term "purchase money obligations" is defined to mean
indebtedness or obligations evidenced by a note, debenture, bond or other
instrument, whether or not secured by a lien or other security interest but
excluding indebtedness or obligations for which recourse is limited to the
property purchased, issued or assumed as all or a part of the consideration for
the acquisition of property or services, whether by purchase, merger,
consolidation or otherwise, but does not include any trade accounts payable.
There will not be any restrictions in an indenture relating to subordinated debt
securities upon the creation of additional senior debt.
The applicable prospectus supplement may further describe the provisions, if
any, applicable to the subordination of the subordinated debt securities of a
particular series. The applicable prospectus supplement or the information
incorporated therein or herein by reference will describe as of a recent date
the approximate amount of our senior debt outstanding as to which the
subordinated debt of that series will be subordinated.
In addition, the subordinated debt securities will be structurally subordinated
to all indebtedness and other liabilities (including trade payables and lease
obligations) of MindSpring's subsidiaries, as any right of MindSpring to receive
any assets of its subsidiaries upon their liquidation or reorganization (and the
consequent right of the holders of the subordinated debt securities to
participate in those assets) will be effectively subordinated to the claims of
that subsidiary's creditors (including trade creditors), except to the extent
that MindSpring itself is recognized as a creditor of such subsidiary, in which
case the claims of MindSpring would still be subordinate to any security
interest in the assets of such subsidiary and any indebtedness of such
subsidiary senior to that held by MindSpring.
CONVERSION OR EXCHANGE OF SUBORDINATED DEBT SECURITIES
The applicable prospectus supplement will set forth the terms, if any, on
which a series of subordinated debt securities may be converted into or
exchanged for other securities of MindSpring. These terms will include whether
conversion or exchange is mandatory, or is at MindSpring's option or at the
option of the holder. We will also describe in the applicable prospectus
supplement how we will calculate the number of securities that holders of
subordinated debt securities would receive if they were to convert or exchange
their debt securities, the conversion price and other terms related to
conversion and any anti-dilution protections.
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REDEMPTION OF SECURITIES
The indentures will provide that the debt securities may be redeemed at any
time at the option of MindSpring, in whole or in part, at the prescribed
redemption price, except as may otherwise be provided in connection with any
debt securities or series of debt securities.
From and after notice has been given as provided in the indentures, if
funds for the redemption of any debt securities called for redemption have been
made available on the applicable redemption date, the debt securities will cease
to bear interest on the date fixed for the redemption specified in the notice,
and the only right of the holders of the debt securities will be to receive
payment of the redemption price.
Notice of any optional redemption by MindSpring of any debt securities is
required to be given to holders at their addresses, as shown in the Security
Register, not more than 60 nor less than 30 days before the date fixed for
redemption. The notice of redemption will be required to specify, among other
items, the redemption price and the principal amount of the debt securities held
by the holder to be redeemed.
If MindSpring elects to redeem debt securities, it will be required to
notify the trustee at least 45 days before the redemption date (or such shorter
period as is satisfactory to the trustee) of the aggregate principal amount of
debt securities to be redeemed and the redemption date. If fewer than all the
debt securities are to be redeemed, the trustee is required to select the debt
securities to be redeemed pro rata, by lot or in such manner as it deems fair
and appropriate.
DENOMINATION, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise specified in the applicable prospectus supplement, we will
issue the debt securities in denominations of $1,000 and integral multiples of
those $1,000 denominations if in registered form and, if in bearer form, we will
issue the debt securities in denominations of $5,000 (Section 302).
Unless otherwise specified in the applicable prospectus supplement, the
principal of (and applicable premium, if any) and interest on any series of debt
securities will be payable at the corporate trust office of the trustee, the
address of which will be stated in the applicable prospectus supplements. At the
option of MindSpring, payment of interest may be made by check mailed to the
address of the person entitled to the interest payment as it appears in the
register for the applicable debt securities or by wire transfer of funds to such
person at an account maintained within the United States (Sections 301, 305,
306, 307 and 1002).
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a debt security ("Defaulted Interest") will
immediately cease to be payable to the holder on the applicable regular record
date and may either be paid to the person in whose name the debt security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
trustee, notice of which is to be given to the holder of the debt security not
less than ten days before such Special Record Date, or may be paid at any time
in any other lawful manner, all as more completely described in the applicable
indenture or supplemental indenture (Section 307).
Subject to limitations imposed upon debt securities issued in book-entry
form, the debt securities of any series will be exchangeable for other debt
securities of the same series and of a like aggregate principal amount and tenor
of different authorized denominations upon surrender of the debt securities at
the corporate trust office of the applicable trustee. In addition, subject to
limitations imposed upon debt securities issued in book-entry form, the debt
securities of any series may be surrendered for registration of transfer or
exchange at the corporate trust office of the applicable trustee. Every debt
security surrendered for registration of transfer or exchange must be duly
endorsed or accompanied by a written instrument of transfer. No service charge
will be imposed for any registration of transfer or exchange of any debt
securities, but MindSpring may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection with any registration of
transfer or exchange of any debt securities. If the applicable prospectus
supplement refers to any transfer agent (in addition to the applicable trustee)
initially designated by MindSpring with respect to any series of debt
securities, MindSpring may at any time rescind the designation of that transfer
agent or approve a change in the location through which any such transfer agent
acts, except that MindSpring will be
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required to maintain a transfer agent in each place of payment for that series.
MindSpring may at any time designate additional transfer agents with respect to
any series of debt securities (Section 1002).
Neither MindSpring nor any trustee will be required to:
(1) issue, register the transfer of, or exchange debt securities of any
series during a period beginning at the opening of business 15 days
before any selection of debt securities of that series to be redeemed
and ending at the close of business on the day of mailing of the
relevant notice of redemption;
(2) register the transfer of, or exchange any debt security, or portion of
any debt security, called for redemption, except the unredeemed
portion of any debt security being redeemed in part; or
(3) issue, register the transfer of, or exchange any debt security that
has been surrendered for repayment at the option of the holder, except
the portion, if any, of the debt security not to be repaid (Section
305).
GLOBAL SECURITIES
We may issue the debt securities of a series in whole or in part in the
form of one or more global securities to be deposited with, or on behalf of, a
depository identified in the applicable prospectus supplement relating to such
series. We may issue global securities in either registered or bearer form and
in either temporary or permanent form. The specific terms of the depository
arrangement with respect to a series of debt securities will be described in the
applicable prospectus supplement relating to that series.
MERGER, CONSOLIDATION OR SALE OF ASSETS
MindSpring will not be permitted to consolidate with, or sell, lease or
convey all or substantially all of its assets to, or merge with or into, any
other entity, unless:
(1) either (A) MindSpring is the continuing entity, or (B) the successor
entity, if other than MindSpring, formed by or resulting from any such
consolidation or merger, or which has received the transfer of
MindSpring's assets, expressly assumes payment of the principal of,
and premium, if any, and interest on all of the outstanding debt
securities and the due and punctual performance and observance of all
of the covenants and conditions contained in each indenture;
(2) immediately after giving effect to such transaction and treating any
indebtedness that becomes an obligation of MindSpring or any
Subsidiary as a result of that transaction as having been incurred by
MindSpring or a Subsidiary at the time of the transaction, no event of
default under the indentures or supplemental indentures, and no event
which, after notice or the lapse of time, or both, would become such
an event of default, will have occurred and be continuing; and
(3) an officer's certificate and legal opinion relating to the conditions
described in (1) and (2) above is delivered to each trustee (Sections
801 and 803).
SELECTED COVENANTS
Existence. Except as described above under "Merger, Consolidation or Sale
of Assets," MindSpring will be required to do or cause to be done all things
necessary to preserve and keep in full force and effect its existence, rights
(by certificate of incorporation, by-laws and statute) and franchises, but
MindSpring will not be required to preserve any right or franchise if it
determines that its preservation is no longer desirable in the conduct of
MindSpring's business and that its loss is not disadvantageous in any material
respect to the holders of the debt securities (Section 1004).
Maintenance of Properties. MindSpring will be required to, and will be
required to cause each of its Subsidiaries to, keep all of its and its
Subsidiaries' properties that are used or useful in the conduct of its business
or the business of any Subsidiary to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment. MindSpring
will also cause all necessary repairs, renewals,
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replacements, and improvements of those properties to be made, all as in
MindSpring's judgment may be necessary for the conduct of its business. (Section
1005).
Payment of Taxes and Other Claims. MindSpring will be required to pay or
discharge or cause to be paid or discharged, before the same become delinquent:
(1) all material taxes, assessments and governmental charges levied or
imposed upon it or any Subsidiary or upon the income, profits or
property of MindSpring or any Subsidiary; and
(2) all material lawful claims for labor, materials and supplies that, if
unpaid, might by law become a lien upon the property of MindSpring or
any Subsidiary;
but MindSpring will not be required to pay or discharge or cause to be paid or
discharged any tax, assessment, charge or claim whose amount, applicability or
validity is being contested in good faith in appropriate proceedings (Section
1007).
ADDITIONAL COVENANTS AND/OR MODIFICATIONS TO THE COVENANTS DESCRIBED ABOVE
Any additional covenants of MindSpring and/or modifications to the
covenants described above with respect to any series of debt securities,
including any covenants relating to limitations on incurrence of indebtedness or
other financial covenants, will be set forth in the applicable indenture or
supplemental indenture and described in the prospectus supplement relating to
that series of debt securities.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Events of Default. Each indenture will provide that the following events
are "events of default" with respect to any series of debt securities issued
under it, subject to any modifications or deletions provided in any supplemental
indenture with respect to any specific series of debt securities:
(1) failure to pay any installment of interest on any debt security of the
series for 30 days;
(2) failure to pay principal of, or premium, if any, on, any debt security
of the series when due;
(3) default in making any sinking fund payment, if required, for any debt
security of the series;
(4) default in the performance or breach of any other covenant or warranty
of MindSpring contained in the applicable indenture, other than a
covenant added to the indenture solely for the benefit of any other
series of debt securities issued under that indenture, continued for
60 days after written notice as provided in the applicable indenture;
(5) default in the payment of an aggregate principal amount exceeding
$25,000,000 of any indebtedness of MindSpring or any mortgage,
indenture or other instrument under which such indebtedness is issued
or by which such indebtedness is secured, such default having occurred
after the expiration of any applicable grace period and having
resulted in the acceleration of the maturity of such indebtedness, but
only if such indebtedness is not discharged or the acceleration is not
rescinded or annulled within 30 days after written notice as provided
in the applicable indenture;
(6) specific events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee of MindSpring or any
Significant Subsidiary or either of their property;
(7) if any guarantee of a debt security by a guarantor ceases to be, or
MindSpring or the guarantor asserts in writing that the guarantee is
not, in full force and effect or enforceable in accordance with its
terms; and
(8) any other event of default provided with respect to a particular
series of debt securities (Section 501).
If an event of default under any indenture with respect to debt securities
of any series at the time outstanding occurs and is continuing, then in every
case other than in the case described in clause (6) above, in which case
acceleration will be automatic, the applicable trustee or the holders of not
less than 25% of the
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principal amount of the outstanding debt securities of that series will have the
right to declare the principal amount (or, if the debt securities of that series
are "original issue discount securities" or indexed securities, such portion of
the principal amount as may be specified in the terms of that series) of all the
debt securities of that series to be due and payable immediately by written
notice to MindSpring, and to the applicable trustee if given by the holders. At
any time after such a declaration of acceleration has been made with respect to
debt securities of such series, or of all debt securities then outstanding under
any indenture, as the case may be, but before a judgment or decree for payment
of the money due has been obtained by the applicable trustee, however, the
holders of not less than a majority in principal amount of the outstanding debt
securities of that series, or of all debt securities then outstanding under the
applicable indenture, as the case may be, may rescind and annul the declaration
of acceleration and its consequences if:
(1) MindSpring has deposited with the applicable trustee all required
payments of the principal of, and premium, if any, and interest on the
debt securities of that series, or of all debt securities then
outstanding under the applicable indenture, as the case may be, plus
specified fees, expenses, disbursements and advances of the applicable
trustee; and
(2) all events of default, other than the non-payment of all or a
specified portion of the accelerated principal, with respect to debt
securities of that series, or of all debt securities then outstanding
under the applicable indenture, as the case may be, have been cured or
waived as provided in such indenture (Section 502).
Waiver. Each indenture also will provide that the holders of not less than
a majority in principal amount of the outstanding debt securities of any series,
or of all debt securities then outstanding under the applicable indenture, as
the case may be, may waive any past default with respect to that series and its
consequences, except a default:
(1) in the payment of the principal of, or premium, if any, or interest on
any debt security of that series; or
(2) in respect of a covenant or provision contained in the applicable
indenture that cannot be modified or amended without the consent of
each affected holder of an outstanding debt security (Section 513).
Notice. Each trustee will be required to give notice to the holders of the
applicable debt securities within 90 days of a default under the applicable
indenture unless the default has been cured or waived; but the trustee may
withhold notice of any default (except a default in the payment of the principal
of, or premium, if any, or interest on such debt securities or in the payment of
any sinking fund installment in respect of the debt securities) if specified
responsible officers of the trustee consider the withholding to be in the
interest of the holders (Section 601).
Each indenture will provide that no holders of debt securities of any
series may institute any proceedings, judicial or otherwise, with respect to
that indenture or for any remedy under that indenture, except in the cases of
failure of the applicable trustee, for 60 days, to act after it has received a
written request to institute proceedings in respect of an event of default from
the holders of not less than 25% in principal amount of the outstanding debt
securities of that series, as well as an offer of indemnity reasonably
satisfactory to it (Section 507). This provision will not prevent any holder of
debt securities from instituting suit for the enforcement of payment of the
principal of (and premium, if any) and interest on the debt securities at their
respective due dates (Section 508).
Subject to provisions in each indenture relating to its duties in case of
default, no trustee will be under any obligation to exercise any of its rights
or powers under an indenture at the request or direction of any holders of any
series of debt securities then outstanding under that indenture, unless the
holders offer to the trustee reasonable security or indemnity (Section 602). The
holders of not less than a majority in principal amount of the outstanding debt
securities of any series (or of all debt securities then outstanding under an
indenture, as the case may be) will have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the
applicable trustee, or of exercising any trust or power conferred upon the
trustee. A trustee may refuse, however, to follow any direction that is in
conflict with any law or the applicable
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indenture that may involve the trustee in personal liability or may be unduly
prejudicial to the holders of debt securities of that series not joining in the
direction (Section 512).
Within 120 days after the end of each fiscal year, MindSpring will be
required to deliver to each trustee a certificate, signed by one of several
specified officers, stating whether or not such officer has knowledge of any
default under the applicable indenture and, if so, specifying each such default
and the nature and status thereof (Section 1008).
MODIFICATION OF THE INDENTURES
Except as otherwise specifically provided in the indenture, modifications
and amendments of an indenture generally will be permitted to be made only with
the consent of the holders of not less than a majority in principal amount of
all outstanding debt securities issued under that indenture that are affected by
the modification or amendment. In any case, however, no modification or
amendment may, without the consent of the holder of each debt security affected
by the modification or amendment:
(1) change the stated maturity of the principal of, or any installment of
interest (or the premium, if any) on, any debt security;
(2) reduce the principal amount of, or the rate or amount of interest on,
or any premium payable on redemption of, any debt security, or reduce
the amount of principal of an "original issue discount security" that
would be due and payable upon declaration of acceleration of its
maturity or would be provable in bankruptcy, or adversely affect any
right of repayment of the holder of any debt security;
(3) change the place of payment, or the coin or currency for payment, of
principal (or premium, if any) or interest on any debt security;
(4) impair the right to institute suit for the enforcement of any payment
on or with respect to any debt security;
(5) release any guarantors from their guarantees of the debt securities,
or, except as contemplated in any supplemental indenture, make any
change in a guarantee of a debt security that would adversely affect
the interests of the holders of those debt securities;
(6) in the case of subordinated debt securities, modify the ranking or
priority of the securities;
(7) reduce the percentage of outstanding debt securities of any series
necessary to modify or amend the applicable indenture, to waive
compliance with specific provisions of or certain defaults and
consequences under the applicable indenture, or to reduce the quorum
or voting requirements set forth in the applicable indenture; or
(8) modify any of the foregoing provisions or any of the provisions
relating to the waiver of specific past defaults or specific
covenants, except to increase the required percentage to effect such
action or to provide that specific other provisions may not be
modified or waived without the consent of the holder of that debt
security (Section 902).
The holders of not less than a majority in principal amount of the
outstanding debt securities of each series affected by the modification or
amendment will have the right to waive compliance by MindSpring with specific
covenants in the indenture (Section 1010).
Modifications and amendments of an indenture will be permitted to be made
by MindSpring and the respective trustee under the indenture without the consent
of any holder of debt securities for any of the following purposes:
(1) to evidence the succession of another person to MindSpring as obligor
under the indenture or to evidence the addition or release of any
guarantor in accordance with the indenture or any supplemental
indenture;
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(2) to add to the covenants of MindSpring for the benefit of the holders
of all or any series of debt securities or to surrender any right or
power conferred upon MindSpring in the indenture;
(3) to add events of default for the benefit of the holders of all or any
series of debt securities;
(4) to add or change any provisions of an indenture to facilitate the
issuance of, or to liberalize specific terms of, debt securities in
bearer form, or to permit or facilitate the issuance of debt
securities in uncertificated form, provided that such action shall not
adversely affect the interests of the holders of the debt securities
of any series in any material respect;
(5) to change or eliminate any provisions of an indenture, if the change
or elimination becomes effective only when there are no debt
securities outstanding of any series created prior to the change or
elimination that are entitled to the benefit of the changed or
eliminated provision;
(6) to secure the debt securities;
(7) to establish the form or terms of debt securities of any series;
(8) to provide for the acceptance of appointment by a successor trustee or
facilitate the administration of the trusts under an indenture by more
than one trustee;
(9) to cure any ambiguity, defect or inconsistency in an indenture;
(10) to supplement any of the provisions of an indenture to the extent
necessary to permit or facilitate defeasance and discharge of any
series of such debt securities, provided that the supplement does not
adversely affect the interests of the holders of the debt securities
of any series in any material respect; or
(11) to make any change that does not adversely affect the legal rights
under an indenture of any holder of debt securities of any series
issued under that indenture (Section 901).
Each indenture will provide that in determining whether the holders of the
requisite principal amount of outstanding debt securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver under
the indenture or whether a quorum is present at a meeting of holders of debt
securities:
(1) the principal amount of an "original issue discount security" that is
deemed to be outstanding will be the amount of the principal of that
"original issue discount security" that would be due and payable as of
the date of the determination upon declaration of acceleration of the
maturity of that "original issue discount security";
(2) the principal amount of any debt security denominated in a foreign
currency that is deemed outstanding will be the U.S. dollar
equivalent, determined on the issue date for that debt security, of
the principal amount (or, in the case of an "original issue discount
security", the U.S. dollar equivalent on the issue date of that debt
security of the amount determined as provided in (1) above);
(3) the principal amount of an indexed security that is deemed outstanding
will be the principal face amount of such indexed security at original
issuance, unless otherwise provided with respect to such indexed
security under the applicable indenture; and
(4) debt securities owned by MindSpring or any other obligor upon the debt
securities or any affiliate of MindSpring or of any other obligor are
to be disregarded.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Discharge. MindSpring may be permitted under the applicable indenture to
discharge specific obligations to holders of any series of debt securities (1)
that have not already been delivered to the applicable trustee for cancellation
and (2) that either have become due and payable or will, within one year, become
due and payable or scheduled for redemption, by irrevocably depositing with the
applicable trustee, in trust, an
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amount of funds sufficient to pay the principal, and premium, if any, and
interest to the date of deposit, if such debt securities have become due and
payable, or to the stated maturity or redemption date, as the case may be.
Defeasance and Covenant Defeasance. Each indenture will provide that, if
the provisions in that indenture relating to defeasance and covenant defeasance
are made applicable to the debt securities of or within any series, MindSpring
may elect either:
(1) "defeasance," which means MindSpring elects to defease and be
discharged from any and all obligations with respect to the debt
securities, except for the obligations to register the transfer or
exchange of the debt securities, to replace temporary or mutilated,
destroyed, lost or stolen debt securities, to maintain an office or
agency in respect of the debt securities and to hold moneys for
payment in trust (Section 1302); or
(2) "covenant defeasance," which means MindSpring elects to be released
from its obligations with respect to the debt securities under
specified sections of Article Ten of the applicable indenture, which
relate to covenants, as described in the applicable prospectus
supplement and any omission to comply with its obligations shall not
constitute an event of default with respect to such debt securities
(Section 1303);
in either case upon the irrevocable deposit by MindSpring with the applicable
trustee, in trust, of an amount, in such currency or currencies or U.S.
"Government Obligations" as defined in Section 101 of the indentures, or both,
sufficient without reinvestment to make scheduled payments of the principal of,
and premium, if any, and interest on the debt securities, and any mandatory
sinking fund or analogous payments.
Such a trust will only be permitted to be established if, among other
things, MindSpring has delivered to the applicable trustee an opinion of
counsel, as specified in the applicable indenture, to the effect that the
holders of the debt securities will not recognize income, gain or loss for
federal income tax purposes as a result of the defeasance or covenant defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such defeasance or
covenant defeasance had not occurred, and the opinion of counsel, in the case of
defeasance, will be required to refer to and be based upon a ruling of the
Internal Revenue Service or a change in applicable U.S. federal income tax law
occurring after the date of the indenture (Section 1304).
In general, if MindSpring elects covenant defeasance with respect to any
debt securities and payments on those debt securities are declared due and
payable because of the occurrence of an event of default, the amount of money
and/or Government Obligations on deposit with the applicable trustee would be
sufficient to pay amounts due on those debt securities at the time of their
stated maturity, but may not be sufficient to pay amounts due on those debt
securities at the time of the acceleration resulting from such event of default.
In that case, MindSpring would remain liable to make payment of the amounts due
on the debt securities at the time of acceleration.
The applicable prospectus supplement may further describe the provisions,
if any, permitting defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the debt
securities of or within a particular series.
GOVERNING LAW
The indentures and the debt securities will be governed by, and construed
in accordance with, the internal laws of the State of New York (Section 112).
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DESCRIPTION OF COMMON STOCK
The following description is a general summary of the terms of the common
stock which MindSpring may issue. The description below and in any prospectus
supplement does not purport to be complete and is subject to and qualified in
its entirety by reference to MindSpring's Amended and Restated Certificate of
Incorporation, as amended, and Restated Bylaws, each of which will be made
available upon request.
GENERAL
Our Amended and Restated Certificate of Incorporation, as amended provides
that we have authority to issue 60,000,000 shares of our common stock, par value
$.01 per share. At March 5, 1999, there were 28,852,588 shares of common stock
outstanding.
Voting Rights. Each holder of shares of our common stock is entitled to
attend all special and annual meetings of our stockholders. In addition, each
holder is entitled, share-for-share and without regard to class, together with
the holders of all other classes of stock entitled to attend the special and
annual meetings of our stockholders and to vote, except any class or series of
stock having special voting rights, to cast one vote for each outstanding share
of common stock held upon any matter or thing, including, without limitation,
the election of one or more directors, properly considered and acted upon by the
stockholders.
Liquidation Rights. The holders of our common stock and the holders of any
class or series of stock entitled to participate with the holders of our common
stock as to the distribution of assets in the event of any dissolution,
liquidation, or winding up of MindSpring, whether voluntary or involuntary,
shall become entitled to participate in the distribution of any assets of
MindSpring remaining after MindSpring has paid, or provided for the payment of,
all of its debts and liabilities and after MindSpring has paid, or set aside for
payment, to the holders of any class of stock having preference over the common
stock in the event of dissolution, liquidation or winding up, the full
preferential amounts, if any, to which they are entitled.
Dividends. Dividends may be paid on the common stock and on any class or
series of stock entitled to participate with the common stock as to dividends,
but only when and as declared by our board of directors.
SOME IMPORTANT CHARTER AND STATUTORY PROVISIONS
Our Certificate of Incorporation provides for the division of our board of
directors into three classes of directors, each serving staggered, three-year
terms. The Certificate of Incorporation further provides that any alteration,
amendment or repeal of certain sections of the Certificate of Incorporation
relating to the election and classification of the board of directors,
indemnification and the vote requirements for such amendments to the Certificate
of Incorporation requires the:
(1) approval of the holders of at least two-thirds of the shares entitled
to vote thereon; and
(2) approval of a majority of the entire board of directors.
These provisions may have the effect of deterring hostile takeovers or delaying
changes in control or management of MindSpring.
MindSpring is subject to the provisions of Section 203 of the Delaware
General Corporation Law. In general, the statute prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless:
(1) prior to such date, the board of directors approved either the
business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
(2) upon consummation of the transaction that resulted in such person
becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding, for purposes of determining
the number of shares outstanding, shares owned by certain directors or
certain employee stock plans; or
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(3) on or after the date the stockholder became an interested stockholder,
the business combination is approved by the board of directors and
authorized by the affirmative vote, and not by the written consent, of
at least two-thirds of the outstanding voting stock, excluding the
stock owned by the interested stockholder.
A "business combination" includes a merger, asset sale, or other transaction
resulting in a financial benefit to the interested stockholder. An "interested
stockholder" is a person who, other than the corporation and any direct or
indirect majority-owned subsidiary of the corporation, together with affiliates
and associates, owns or, as an affiliate or associate, within three years prior,
did own, 15% or more of the corporation's outstanding voting stock.
NASDAQ LISTING
The common stock is listed on The Nasdaq Stock Market's National Market
under the symbol "MSPG."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company.
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DESCRIPTION OF PREFERRED STOCK
The following description is a general summary of the terms of the
preferred stock which MindSpring may issue. The description below and in any
prospectus supplement does not purport to be complete and is subject to and
qualified in its entirety by reference to our Certificate of Incorporation, the
applicable Certificate of Designation to our Certificate of Incorporation,
determining the terms of the related series of preferred stock and our Restated
Bylaws, each of which will be made available upon request.
GENERAL
Our Certificate of Incorporation authorizes our board of directors, from
time to time and without further stockholder action, to provide for the issuance
of up to 1,000,000 shares of preferred stock, par value $.01 per share, in one
or more series, and to fix the relative rights and preferences of the shares,
including voting powers, dividend rights, liquidation preferences, redemption
rights and conversion privileges. As of the date of this prospectus, no shares
of preferred stock are outstanding, the board of directors has not provided for
the issuance of any series of preferred stock, and there are no agreements or
understandings for the issuance of any preferred stock. As a result of its broad
discretion with respect to the creation and issuance of preferred stock without
stockholder approval, the board of directors could adversely affect the voting
power of the holders of common stock and, by issuing shares of preferred stock
with certain voting, conversion and/or redemption rights, could discourage any
attempt to obtain control of MindSpring.
You should refer to the prospectus supplement relating to the class or
series of preferred stock being offered for the specific terms of that class or
series, including:
(1) the title and stated value of the preferred stock being offered;
(2) the number of shares of preferred stock being offered, their
liquidation preference per share and their purchase price;
(3) the dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculating the payment date(s) applicable to the preferred stock
being offered;
(4) whether dividends shall be cumulative or non-cumulative and, if
cumulative, the date from which dividends on the preferred stock being
offered shall accumulate;
(5) the procedures for any auction and remarketing, if any, for the
preferred stock being offered;
(6) the provisions for a sinking fund, if any, for the preferred stock
being offered;
(7) the provisions for redemption, if applicable, of the preferred stock
being offered;
(8) any listing of the preferred stock being offered on any securities
exchange or market;
(9) the terms and conditions, if applicable, upon which the preferred
stock being offered will be convertible into common stock of
MindSpring, including the conversion price, or the manner of
calculating the conversion price, and the conversion period;
(10) the terms and conditions, if applicable, upon which the preferred
stock being offered will be exchangeable into debt securities,
including the exchange price, or the manner of calculating the
exchange price, and the exchange period;
(11) voting rights, if any, of the preferred stock being offered;
(12) whether interests in the preferred stock being offered will be
represented by depositary shares;
(13) a discussion of any material and/or special United States federal
income tax considerations applicable to the preferred stock being
offered;
(14) the relative ranking and preferences of the preferred stock being
offered as to dividend rights and rights upon liquidation, dissolution
or winding up of the affairs of MindSpring;
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(15) any limitations on the issuance of any class or series of preferred
stock ranking senior to or on a parity with the series of preferred
stock being offered as to dividend rights and rights upon liquidation,
dissolution or winding up of the affairs of MindSpring; and
(16) any other specific terms, preferences, rights, limitations or
restrictions of the preferred stock being offered.
RANK
Unless otherwise specified in the applicable prospectus supplement, the
preferred stock will, with respect to distribution rights and rights upon
liquidation, dissolution or winding up of MindSpring, rank:
(1) senior to all classes or series of common stock of MindSpring and to
all equity securities the terms of which specifically provide that
such equity securities rank junior to the preferred stock being
offered;
(2) on a parity with all equity securities issued by MindSpring other than
those referred to in clauses (1) and (3) of this subheading; and
(3) junior to all equity securities issued by MindSpring the terms of
which specifically provide that such equity securities rank senior to
the preferred stock being offered.
For purposes of this description, the term "equity securities" does not include
convertible debt securities.
DISTRIBUTIONS
Holders of the preferred stock of each series will be entitled to receive,
when, as and if declared by our board of directors, out of assets of MindSpring
legally available for payment to stockholders, cash distributions, or
distributions in kind or in other property if expressly permitted and described
in the applicable prospectus supplement, at such rates and on such dates as will
be set forth in the applicable prospectus supplement. Each such distribution
shall be payable to holders of record as they appear on the stock transfer books
of MindSpring on such record dates as shall be fixed by our board of directors.
Distributions on any series of preferred stock, if cumulative, will be
cumulative from and after the date set forth in the applicable prospectus
supplement.
REDEMPTION
If so provided in the applicable prospectus supplement, the preferred stock
will be subject to mandatory redemption or redemption at the option of
MindSpring, in whole or in part, in each case upon the terms, at the times and
at the redemption prices set forth in such prospectus supplement.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of MindSpring, then, before any distribution or payment shall be
made to the holders of any common stock or any other class or series of shares
of capital stock of MindSpring ranking junior to the preferred stock in the
distribution of assets upon any liquidation, dissolution or winding up of
MindSpring, the holders of each series of preferred stock shall be entitled to
receive out of assets of MindSpring legally available for distribution to
shareholders liquidating distributions in the amount of the liquidation
preference set forth in the applicable prospectus supplement, plus an amount
equal to all accumulated and unpaid distributions. After payment of the full
amount of the liquidating distributions to which they are entitled, the holders
of shares of preferred stock will have no right or claim to any of the remaining
assets of MindSpring. If, upon any such voluntary or involuntary liquidation,
dissolution or winding up, the available assets of MindSpring are insufficient
to pay the amount of the liquidating distributions on all outstanding shares of
preferred stock and the corresponding amounts payable on all shares of other
classes or series of shares of capital stock of MindSpring ranking on a parity
with the preferred stock in the distribution of assets, then the holders of the
preferred stock and all
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other such classes or series of shares of capital stock shall share ratably in
any such distribution of assets in proportion to the full liquidating
distributions to which they would otherwise be respectively entitled.
If liquidating distributions shall have been made in full to all holders of
preferred stock, the remaining assets of MindSpring shall be distributed among
the holders of any other classes or series of shares of capital stock ranking
junior to the preferred stock upon liquidation, dissolution or winding up,
according to their respective rights and preferences and in each case according
to their respective number of shares. For such purposes, the consolidation or
merger of MindSpring with or into any other corporation, trust or entity, or the
sale, lease or conveyance of all or substantially all of the property or
business of MindSpring, shall not be deemed to constitute a liquidation,
dissolution or winding up of MindSpring.
VOTING RIGHTS
Holders of preferred stock will not have any voting rights, except as set
forth below or as otherwise from time to time required by law, or as indicated
in the applicable prospectus supplement.
Under the Delaware General Corporation Law, holders of outstanding shares
of a series of preferred stock may be entitled to vote as a separate class on a
proposed amendment to the terms of that series of preferred stock or
MindSpring's Restated Certificate if the amendment would:
(1) increase or decrease the aggregate number of authorized shares of that
series of preferred stock;
(2) increase or decrease the par value of that series of preferred stock;
or
(3) alter or change the powers, preferences or special rights of the
shares of such class so as to affect them adversely,
in which case the approval of proposed amendment would require the affirmative
vote of at least a majority of the outstanding shares of that series of
preferred stock.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of preferred stock
is convertible into common stock will be set forth in the applicable prospectus
supplement relating thereto. Such terms will include the number of shares of
common stock into which the shares of preferred stock are convertible, the
conversion price or the manner of calculating the conversion price, the
conversion date(s) or period(s), provisions as to whether conversion will be at
the option of the holders of the preferred stock or at MindSpring's option, the
events requiring an adjustment of the conversion price and provisions affecting
conversion in the event of the redemption of such series of preferred stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the preferred stock will be set forth
in the applicable prospectus supplement.
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DESCRIPTION OF DEPOSITARY SHARES
GENERAL
MindSpring may issue depositary receipts for depositary shares, each of
which will represent a fractional interest of a share of a particular series of
preferred stock, as specified in the applicable prospectus supplement. Shares of
preferred stock of each series represented by depositary shares will be
deposited under a separate Deposit Agreement among MindSpring and the
"depositary" named in the Deposit Agreement. Subject to the terms of the Deposit
Agreement, each owner of a depositary receipt will be entitled, in proportion to
the fractional interest of a share of a particular series of preferred stock
represented by the depositary shares evidenced by that depositary receipt, to
all the rights and preferences of the preferred stock represented by those
depositary shares, including dividend, voting, conversion, redemption and
liquidation rights.
The depositary shares will be evidenced by depositary receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the issuance
and delivery of the preferred stock by MindSpring to the depositary, MindSpring
will cause the depositary to issue, on behalf of MindSpring, the depositary
receipts. Copies of the applicable form of Deposit Agreement and depositary
receipt may be obtained from MindSpring upon request, and the statements made in
this summary relating to the Deposit Agreement and the depositary receipts to be
issued under the Deposit Agreement are summaries of provisions of the Deposit
Agreement and the related depositary receipts. This summary does not purport to
be complete and is subject to, and is qualified in its entirety by reference to,
all of the provisions of the applicable Deposit Agreement and related depositary
receipts.
DIVIDENDS AND OTHER DISTRIBUTIONS
The depositary will distribute all cash dividends or other cash
distributions received in respect of the preferred stock to the record holders
of depositary receipts evidencing the related depositary shares in proportion to
the number of such depositary receipts owned by such holders, subject to the
obligations of holders to file proofs, certificates and other information and to
pay some charges and expenses to the depositary.
In the event of a distribution other than in cash, the depositary will
distribute property received by it to the record holders of depositary receipts
entitled to that property, subject to the obligations of holders to file proofs,
certificates and other information and to pay some charges and expenses to the
depositary, unless the depositary determines that it is not feasible to make the
distribution, in which case the depositary may, with the approval of MindSpring,
sell the property and distribute the net proceeds from the sale to the holders.
No distribution will be made in respect of any depositary share to the
extent that it represents any preferred stock converted into other securities.
WITHDRAWAL OF STOCK
Upon surrender of the depositary receipts at the corporate trust office of
the depositary, unless the related depositary shares have previously been called
for redemption or converted into other securities, the holders of those
depositary receipts will be entitled to delivery at the corporate trust office,
to or upon the holder's order, of the number of whole or fractional shares of
the preferred stock and any money or other property represented by the
depositary shares evidenced by the depositary receipts. Holders of depositary
receipts will be entitled to receive whole or fractional shares of the related
preferred stock on the basis of the proportion of preferred stock represented by
the depositary share as specified in the applicable prospectus supplement, but
holders of the shares of preferred stock will not thereafter be entitled to
receive depositary shares therefor. If the depositary receipts delivered by the
holder evidence a number of depositary shares in excess of the number of
depositary shares representing the number of shares of preferred stock to be
withdrawn, the depositary will deliver to the holder at the same time a new
depositary receipt evidencing the excess number of depositary shares.
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REDEMPTION OF DEPOSITARY SHARES
Whenever MindSpring redeems shares of preferred stock held by the
depositary, the depositary will redeem, as of the same redemption date, the
number of depositary shares representing shares of the preferred stock so
redeemed, provided MindSpring shall have paid in full to the depositary the
redemption price of the preferred stock to be redeemed plus an amount equal to
any accrued and unpaid dividends thereon to the date fixed for redemption. The
redemption price per depositary share will be equal to the corresponding
proportion of the redemption price and any other amounts per share payable with
respect to the preferred stock. If fewer than all the depositary shares are to
be redeemed, the depositary shares to be redeemed will be selected pro rata, as
nearly as may be practicable without creating fractional depositary shares, or
by any other equitable method determined by MindSpring.
From and after the date fixed for redemption, all dividends in respect of
the shares of preferred stock so called for redemption will cease to accrue, the
depositary shares so called for redemption will no longer be deemed to be
outstanding and all rights of the holders of the depositary receipts evidencing
the depositary shares so called for redemption will cease, except the right to
receive any moneys payable upon the redemption and any money or other property
to which the holders of the depositary receipts were entitled the redemption and
surrender thereof to the depositary.
VOTING OF THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the preferred
stock are entitled to vote, the depositary will mail the information contained
in the notice of meeting to the record holders of the depositary receipts
evidencing the depositary shares which represent the preferred stock. Each
record holder of depositary receipts evidencing depositary shares on the record
date, which will be the same date as the record date for the preferred stock,
will be entitled to instruct the depositary as to the exercise of the voting
rights pertaining to the amount of preferred stock represented by the holder's
depositary shares. The depositary will vote the amount of preferred stock
represented by the depositary shares in accordance with the instructions, and
MindSpring will agree to take all reasonable action which may be deemed
necessary by the depositary in order to enable the depositary to do so. The
depositary will abstain from voting the amount of preferred stock represented by
the depositary shares to the extent it does not receive specific instructions
from the holders of depositary receipts evidencing the depositary shares. The
depositary shall not be responsible for any failure to carry out any instruction
to vote, or for the manner or effect of any such vote made, as long as such
action or non-action is in good faith and does not result from negligence or
willful misconduct of the depositary.
LIQUIDATION PREFERENCE
In the event of the liquidation, dissolution or winding up of MindSpring,
whether voluntary or involuntary, the holders of each depositary receipt will be
entitled to the fraction of the liquidation preference accorded each share of
preferred stock represented by the depositary shares evidenced by such
depositary receipt, as set forth in the applicable prospectus supplement.
CONVERSION OF PREFERRED STOCK
The depositary shares, as such, are not convertible into common stock or
any other securities or property of MindSpring. Nevertheless, if so specified in
the applicable prospectus supplement relating to an offering of depositary
shares, the depositary receipts may be surrendered by their holders to the
depositary with written instructions to the depositary to instruct MindSpring to
cause conversion of the preferred stock represented by the depositary shares
evidenced by the depositary receipts into whole shares of common stock, other
shares of preferred stock of MindSpring or other shares of stock, and MindSpring
has agreed that upon receipt of those instructions and any amounts payable in
respect thereof, it will cause the conversion thereof utilizing the same
procedures as those provided for delivery of preferred stock to effect such
conversion. If the depositary shares evidenced by a depositary receipt are to be
converted in part only, a new depositary receipt or receipts will be issued for
any depositary shares not to be converted. No fractional shares of common stock
will be issued upon conversion, and if such conversion would result in a
fractional share being issued, an amount
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will be paid in cash by MindSpring equal to the value of the fractional interest
based upon the closing price of the common stock on the last business day prior
to the conversion.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of depositary receipt evidencing the depositary shares which
represent the preferred stock and any provision of the Deposit Agreement may at
any time be amended by agreement between MindSpring and the depositary. However,
any amendment that materially and adversely alters the rights of the holders of
depositary receipts or that would be materially and adversely inconsistent with
the rights granted to the holders of the related preferred stock will not be
effective unless such amendment has been approved by the existing holders of at
least 66% of the depositary shares evidenced by the depositary receipts then
outstanding. No amendment shall impair the right, subject to certain exceptions
in the Deposit Agreement, of any holder of depositary receipts to surrender any
depositary receipt with instructions to deliver to the holder the related
preferred stock and all money and other property, if any, represented thereby,
except in order to comply with law. Every holder of an outstanding depositary
receipt at the time any such amendment becomes effective shall be deemed, by
continuing to hold such receipt, to consent and agree to such amendment and to
be bound by the Deposit Agreement as amended thereby.
The Deposit Agreement may be terminated by MindSpring upon not less than 30
days prior written notice to the depositary if a majority of each series of
preferred stock affected by such termination consents to such termination,
whereupon the depositary shall deliver or make available to each holder of
Depositary Receipts, upon surrender of the depositary receipts held by such
holder, such number of whole or fractional shares of preferred stock as are
represented by the depositary shares evidenced by such depositary receipts
together with any other property held by the depositary with respect to such
depositary receipt. In addition, the Deposit Agreement will automatically
terminate if:
(1) all outstanding depositary shares shall have been redeemed;
(2) there shall have been a final distribution in respect of the related
preferred stock in connection with any liquidation, dissolution or
winding up of MindSpring and such distribution shall have been
distributed to the holders of depositary receipts evidencing the
depositary shares representing such preferred stock; or
(3) each share of the related preferred stock shall have been converted
into securities of MindSpring not so represented by depositary shares.
CHARGES OF PREFERRED STOCK DEPOSITARY
MindSpring will pay all transfer and other taxes and governmental charges
arising solely from the existence of the Deposit Agreement. In addition,
MindSpring will pay the fees and expenses of the depositary in connection with
the performance of its duties under the Deposit Agreement. However, holders of
depositary receipts will pay the fees and expenses of the depositary for any
duties requested by such holders to be performed which are outside of those
expressly provided for in the Deposit Agreement.
RESIGNATION AND REMOVAL OF DEPOSITARY
The depositary may resign at any time by delivering to MindSpring notice of
its election to do so, and MindSpring may at any time remove the depositary, any
such resignation or removal to take effect upon the appointment of a successor
depositary. A successor depositary must be appointed within 60 days after
delivery of the notice of resignation or removal and must be a bank or trust
company having its principal office in the United States and having a combined
capital and surplus of at least $50,000,000.
MISCELLANEOUS
The depositary will forward to holders of depositary receipts any reports
and communications from MindSpring which are received by the depositary with
respect to the related preferred stock.
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Neither the depositary nor MindSpring will be liable if it is prevented
from or delayed in, by law or any circumstances beyond its control, performing
its obligations under the Deposit Agreement. The obligations of MindSpring and
the depositary under the Deposit Agreement will be limited to performing their
duties thereunder in good faith and without negligence, in the case of any
action or inaction in the voting of preferred stock represented by the
depositary shares, gross negligence or willful misconduct, and MindSpring and
the depositary will not be obligated to prosecute or defend any legal proceeding
in respect of any depositary receipts, depositary shares or shares of preferred
stock represented thereby unless satisfactory indemnity is furnished. MindSpring
and the depositary may rely on written advice of counsel or accountants, or
information provided by persons presenting shares of preferred stock represented
thereby for deposit, holders of depositary receipts or other persons believed in
good faith to be competent to give such information, and on documents believed
in good faith to be genuine and signed by a proper party.
In the event the depositary shall receive conflicting claims, requests or
instructions from any holders of depositary receipts, on the one hand, and
MindSpring, on the other hand, the depositary shall be entitled to act on such
claims, requests or instructions received from MindSpring.
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DESCRIPTION OF WARRANTS
GENERAL
MindSpring may issue warrants to purchase its debt securities, common
stock, preferred stock, or depositary shares. MindSpring may issue warrants
independently or together with any offered securities and may be attached to or
separate from those offered securities. MindSpring will issue the warrants under
Warrant Agreements to be entered into between MindSpring and a bank or trust
company, as warrant agent, all as shall be set forth in the applicable
prospectus supplement. The warrant agent will act solely as an agent of
MindSpring in connection with the warrants of the series being offered and will
not assume any obligation or relationship of agency or trust for or with any
holders or beneficial owners of warrants.
The applicable prospectus supplement will describe the following terms,
where applicable, of warrants in respect of which this prospectus is being
delivered:
(1) the title of the warrants;
(2) the designation, amount and terms of the securities for which the
warrants are exercisable;
(3) the designation and terms of the other securities, if any, with which
the warrants are to be issued and the number of warrants issued with
each such security;
(4) the price or prices at which the warrants will be issued;
(5) the aggregate number of warrants;
(6) any provisions for adjustment of the number or amount of securities
receivable upon exercise of the warrants or the exercise price of the
warrants;
(7) the price or prices at which the securities purchasable upon exercise
of the warrants may be purchased;
(8) if applicable, the date on and after which the warrants and the
securities purchasable upon exercise of the warrants will be
separately transferable;
(9) if applicable, a discussion of the material United States federal
income tax considerations applicable to the exercise of the warrants;
(10) any other terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants;
(11) the date on which the right to exercise the warrants shall commence,
and the date on which the right shall expire;
(12) the maximum or minimum number of warrants which may be exercised at
any time; and
(13) information with respect to book-entry procedures, if any.
EXERCISE OF WARRANTS
Each warrant will entitle the holder of warrants to purchase for cash the
amount of debt securities, shares of preferred stock, shares of common stock or
depositary shares at the exercise price as shall in each case be set forth in,
or be determinable as set forth in, the prospectus supplement relating to the
warrants offered thereby. Warrants may be exercised at any time up to the close
of business on the expiration date set forth in the prospectus supplement
relating to the warrants offered thereby. After the close of business on the
expiration date, unexercised warrants will become void.
Warrants may be exercised as set forth in the prospectus supplement
relating to the warrants offered thereby. Upon receipt of payment and the
warrant certificate properly completed and duly executed at the corporate trust
office of the warrant agent or any other office indicated in the prospectus
supplement, MindSpring will, as soon as practicable, forward the debt
securities, shares of preferred stock, shares of common stock or depositary
shares purchasable upon such exercise. If less than all of the warrants
represented by the warrant certificate are exercised, a new warrant certificate
will be issued for the remaining warrants.
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DESCRIPTION OF STOCK PURCHASE CONTRACTS TO PURCHASE COMMON STOCK OR
PREFERRED STOCK AND STOCK PURCHASE UNITS
Unless otherwise specified in the applicable prospectus supplement,
MindSpring may issue stock purchase contracts, including contracts obligating
holders to purchase from MindSpring, and MindSpring to sell to the holders, a
specified number of shares of common stock or preferred stock at a future date
or dates. The consideration per share of common stock or preferred stock may be
fixed at the time the stock purchase contracts are issued or may be determined
by a specific reference to a formula set forth in the stock purchase contracts.
The stock purchase contracts may be issued separately or as part of stock
purchase units consisting of (1) a stock purchase contract and (2) debt
securities, preferred securities or debt obligations of third parties, including
U.S. Treasury securities, securing the holders' obligations to purchase the
common stock or the preferred stock under the stock purchase contracts. The
stock purchase contracts may require MindSpring to make periodic payments to the
holders of the stock purchase units or vice versa, and such payments may be
unsecured or prefunded on some basis. The stock purchase contracts may require
holders to secure their obligations thereunder in a specified manner.
The securities related to the stock purchase contracts will be pledged to a
collateral agent, for the benefit of MindSpring, pursuant to a pledge agreement.
The pledged securities will secure the obligations of holders of stock purchase
contracts to purchase common stock or preferred stock under the related stock
purchase contracts. The rights of holders of stock purchase contracts to the
related pledged securities will be subject to MindSpring's security interest in
those pledged securities. That security interest will be created by the pledge
agreement. No holder of stock purchase contracts will be permitted to withdraw
the pledged securities related to such stock purchase contracts from the pledge
arrangement except upon the termination or early settlement of the related stock
purchase contracts. Subject to that security interest and the terms of the
purchase contract agreement and the pledge agreement, each holder of a stock
purchase contract will retain full beneficial ownership of the related pledged
securities.
Except as described in the applicable prospectus supplement, the collateral
agent will, upon receipt of distributions on the pledged securities, distribute
such payments to MindSpring or a purchase contract agent, as provided in the
pledge agreement. The purchase contract agent will in turn distribute payments
it receives as provided in the stock purchase contract. The applicable
prospectus supplement will describe the terms of any stock purchase contracts or
stock purchase units. The description in the prospectus supplement will not
necessarily be complete and will be qualified in its entirety by reference to
the stock purchase contracts, and, if applicable, collateral arrangements and
depositary arrangements, relating to such stock purchase contracts or stock
purchase units.
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DESCRIPTION OF SUBSCRIPTION RIGHTS
GENERAL
MindSpring may issue subscription rights to purchase debt securities,
common stock, preferred stock, depositary shares or warrants to purchase debt
securities, preferred stock or common stock. MindSpring may issue subscription
rights independently or together with any other offered security. The
subscription rights may or may not be transferable by the purchaser receiving
the subscription rights. In connection with any subscription rights offering to
MindSpring's stockholders, MindSpring may enter into a standby underwriting
arrangement with one or more underwriters pursuant to which the underwriter(s)
will purchase any offered securities remaining unsubscribed for after the
subscription rights offering. In connection with a subscription rights offering
to MindSpring's stockholders, certificates evidencing the subscription rights
and a prospectus supplement will be distributed to MindSpring's stockholders on
the record date for receiving subscription rights in the subscription rights
offering set by MindSpring.
The applicable prospectus supplement will describe the following terms of
subscription rights in respect of which this prospectus is being delivered:
(1) the title of the subscription rights;
(2) the securities for which the subscription rights are exercisable;
(3) the exercise price for the subscription rights;
(4) the number of subscription rights issued to each stockholder;
(5) the extent to which the subscription rights are transferable;
(6) if applicable, a discussion of the material United States federal
income tax considerations applicable to the issuance or exercise of
the subscription rights;
(7) any other terms of the subscription rights, including terms,
procedures and limitations relating to the exchange and exercise of
the subscription rights;
(8) the date on which the right to exercise the subscription rights shall
commence, and the date on which the right shall expire;
(9) the extent to which the subscription rights include an
over-subscription privilege with respect to unsubscribed securities;
and
(10) if applicable, the material terms of any standby underwriting
arrangement entered into by MindSpring in connection with the
subscription rights offering.
EXERCISE OF SUBSCRIPTION RIGHTS
Each subscription right will entitle the holder of subscription rights to
purchase for cash the principal amount of debt securities, shares of preferred
stock, depositary shares, common stock, warrants or any combination thereof, at
the exercise price as shall in each case be set forth in, or be determinable as
set forth in, the prospectus supplement relating to the subscription rights
offered thereby. Subscription rights may be exercised at any time up to the
close of business on the expiration date for such subscription rights set forth
in the prospectus supplement. After the close of business on the expiration
date, all unexercised subscription rights will become void.
Subscription rights may be exercised as set forth in the prospectus
supplement relating to the subscription rights offered thereby. Upon receipt of
payment and the subscription rights certificate properly completed and duly
executed at the corporate trust office of the subscription rights agent or any
other office indicated in the prospectus supplement, MindSpring will, as soon as
practicable, forward the debt securities, shares of preferred stock or common
stock, depositary shares or warrants purchasable upon such exercise. In the
event that not all of the subscription rights issued in any offering are
exercised, MindSpring may determine to offer any unsubscribed offered securities
directly to persons other than stockholders, to or through agents, underwriters
or dealers or through a combination of such methods, including pursuant to
standby underwriting arrangements, as set forth in the applicable prospectus
supplement.
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PLAN OF DISTRIBUTION
MindSpring may sell the offered securities:
- directly to purchasers,
- through agents,
- through dealers,
- through underwriters,
- directly to its stockholders, or
- through a combination of any of these methods of sale.
In addition, MindSpring may issue the offered securities as a dividend or
distribution.
We may effect the distribution of the offered securities from time to time
in one or more transactions either:
- at a fixed price or prices, which may be changed,
- at market prices prevailing at the time of sale,
- at prices related to such prevailing market prices, or
- at negotiated prices.
MindSpring may directly solicit offers to purchase offered securities.
Agents designated by MindSpring from time to time may also solicit offers to
purchase offered securities. Any agent designated by MindSpring, who may be
deemed to be an "underwriter" as that term is defined in the Securities Act,
involved in the offer or sale of the offered securities in respect of which this
prospectus is delivered will be named, and any commissions payable by MindSpring
to such agent will be set forth in the prospectus supplement.
If a dealer is utilized in the sale of the offered securities in respect of
which this prospectus is delivered, MindSpring will sell such offered securities
to the dealer, as principal. The dealer, who may be deemed to be an
"underwriter" as that term is defined in the Securities Act, may then resell
such offered securities to the public at varying prices to be determined by such
dealer at the time of resale.
If an underwriter is, or underwriters are, utilized in the sale, MindSpring
will execute an underwriting agreement with such underwriters at the time of
sale to them and the names of the underwriters will be set forth in the
prospectus supplement, which will be used by the underwriter to make resales of
the offered securities in respect of which this prospectus is delivered to the
public. In connection with the sale of offered securities, such underwriter may
be deemed to have received compensation from MindSpring in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of offered securities for whom they may act as agents. Underwriters
may also sell offered securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they may act as
agents. Any underwriting compensation paid by MindSpring to underwriters in
connection with the offering of offered securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable prospectus supplement.
Pursuant to any standby underwriting agreement entered into in connection
with a subscription rights offering to MindSpring's stockholders, persons acting
as standby underwriters may receive a commitment fee for all securities
underlying the subscription rights that the underwriter commits to purchase on a
standby basis. Additionally, prior to the expiration date with respect to any
subscription rights, any standby underwriters in a subscription rights offering
to MindSpring's stockholders may offer such securities on a when-issued basis,
including securities to be acquired through the purchase and exercise of
subscription rights, at prices set from time to time by the standby
underwriters. After the expiration date with respect to such subscription
rights, the underwriters may offer securities of the type underlying the
subscription rights,
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whether acquired pursuant to a standby underwriting agreement, the exercise of
the subscription rights or the purchase of such securities in the market, to the
public at a price or prices to be determined by the underwriters. The standby
underwriters may thus realize profits or losses independent of the underwriting
discounts or commissions paid by MindSpring. If MindSpring does not enter into a
standby underwriting arrangement in connection with a subscription rights
offering to MindSpring's stockholders, MindSpring may elect to retain a
dealer-manager to manage such a subscription rights offering for MindSpring. Any
such dealer-manager may offer securities of the type underlying the subscription
rights acquired or to be acquired pursuant to the purchase and exercise of
subscription rights and may thus realize profits or losses independent of any
dealer-manager fee paid by MindSpring.
Underwriters, dealers, agents and other persons may be entitled, under
agreements that may be entered into with MindSpring, to indemnification by
MindSpring against certain civil liabilities, including liabilities under the
Securities Act, or to contribution with respect to payments which they may be
required to make in respect thereof. Underwriters and agents may engage in
transactions with, or perform services for, MindSpring in the ordinary course of
business.
If so indicated in the applicable prospectus supplement, MindSpring will
authorize underwriters, dealers or other persons to solicit offers by certain
institutions to purchase offered securities pursuant to contracts providing for
payment and delivery on a future date or dates. Institutions with which such
contracts may be made include commercial and savings banks, insurance companies,
pension funds, investment companies, educational and charitable institutions and
others. The obligations of any purchasers under any such contract will not be
subject to any conditions except that:
- the purchase of the offered securities shall not at the time of delivery
be prohibited under the laws of the jurisdiction to which such purchaser
is subject; and
- if the offered securities are also being sold to underwriters,
MindSpring shall have sold to such underwriters the offered securities
not sold for delayed delivery.
The underwriters, dealers and such other persons will not have any
responsibility in respect of the validity or performance of such contracts. The
prospectus supplement relating to such contracts will set forth the price to be
paid for offered securities pursuant to such contracts, the commission payable
for solicitation of such contracts and the date or dates in the future for
delivery of offered securities pursuant to such contracts.
Any underwriter may engage in stabilizing and syndicate covering
transactions in accordance with Rule 104 under the Exchange Act. Rule 104
permits stabilizing bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. The underwriters may
over-allot shares of the offered securities in connection with an offering of
offered securities, thereby creating a short position in the underwriters'
account. Syndicate covering transactions involve purchases of the offered
securities in the open market after the distribution has been completed in order
to cover syndicate short positions. Stabilizing and syndicate covering
transactions may cause the price of the offered securities to be higher than it
would otherwise be in the absence of such transactions. These transactions, if
commenced, may be discontinued at any time.
The anticipated date of delivery of offered securities will be set forth in
the applicable prospectus supplement relating to each offer.
LEGAL MATTERS
The validity of the offered securities will be passed upon for MindSpring
by Hogan & Hartson L.L.P., Washington, D.C., counsel to 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 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. If the offered securities are distributed in an
underwritten
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offering or through agents, certain legal matters may be passed upon for any
agents or underwriters by counsel for such agents or underwriters identified in
the applicable prospectus supplement.
EXPERTS
The financial statements and financial statement schedules of MindSpring as
of December 31, 1997 and 1998 and for the three years ended December 31, 1998,
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 incorporated by
reference in this prospectus have been audited by Arthur Andersen LLP,
independent certified public accountants, as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in giving said reports.
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NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST NOT RELY ON ANY
UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS IS AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ONLY THE SHARES OFFERED HEREBY, BUT ONLY
UNDER CIRCUMSTANCES AND IN JURISDICTIONS WHERE IT IS LAWFUL TO DO SO. THE
INFORMATION CONTAINED IN THIS PROSPECTUS IS CURRENT ONLY AS OF ITS DATE.
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PROSPECTUS
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MARCH , 1999
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated fees and expenses, other than
underwriting discounts and commissions, payable by MindSpring in connection with
the issuance and distribution of the securities being registered:
<TABLE>
<S> <C>
Registration Fee............................................ $222,400
Printing and Duplicating Expenses........................... *
Legal Fees and Expenses..................................... *
Accounting Fees and Expenses................................ *
Miscellaneous............................................... *
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Total..................................................... $ *
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</TABLE>
- ---------------
* To be filed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law, a corporation
may indemnify its directors, officers, employees and agents and its former
directors, officers, employees and agents and those who serve, at the
corporation's request, in such capacities with another enterprise, against
expenses (including attorneys' fees), as well as judgments, fines and
settlements in nonderivative lawsuits, actually and reasonably incurred in
connection with the defense of any action, suit or proceeding in which they or
any of them were or are made parties or are threatened to be made parties by
reason of their serving or having served in such capacity. The Delaware General
Corporation Law provides, however, that such person must have acted in good
faith and in a manner such person reasonably believed to be in (or not opposed
to) the best interests of the corporation and, in the case of a criminal action,
such person must have had no reasonable cause to believe his or her conduct was
unlawful. In addition, the Delaware General Corporation Law does not permit
indemnification in an action or suit by or in the right of the corporation,
where such person has been adjudged liable to the corporation, unless, and only
to the extent that, a court determines that such person fairly and reasonably is
entitled to indemnity for costs the court deems proper in light of liability
adjudication. Indemnity is mandatory to the extent a claim, issue or matter has
been successfully defended.
The Amended and Restated Certificate of Incorporation, as amended, of
MindSpring contains provisions that provide that no director of MindSpring shall
be liable for breach of fiduciary duty as a director except for (1) any breach
of the director's duty of loyalty to MindSpring or its stockholders; (2) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law; (3) liability under Section 174 of the Delaware General
Corporation Law; or (4) any transaction from which the director derived an
improper personal benefit. MindSpring's Restated Certificate contains provisions
that further provide for the indemnification of directors and officers to the
fullest extent permitted by the Delaware General Corporation Law. Under
MindSpring's Restated Bylaws, MindSpring is required to advance expenses
incurred by an officer or director in defending any such action if the director
or officer undertakes to repay such amount if it is determined that the director
or officer is not entitled to indemnification. In addition, MindSpring has
entered into indemnity agreements with each of its directors pursuant to which
MindSpring has agreed to indemnify the directors as permitted by the Delaware
General Corporation Law and has obtained directors and officers liability
insurance.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, MindSpring has been informed
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
II-1
<PAGE> 52
ITEM 16. EXHIBITS
<TABLE>
<S> <C>
* 1.1 Form of Underwriting Agreement
4.1 Form of Common Stock Certificate of the Company. (Filed as
Exhibit 4 to registration statement on Form S-1, File No.
333-00108, and incorporated herein by reference.)
* 4.2 Form of Senior Debt Indenture
* 4.3 Form of Subordinated Debt Indenture
* 5.1 Opinion of Hogan & Hartson L.L.P. regarding the legality of
the securities being registered
12.1 Statement Regarding Computation of Ratios
23.1 Consent of Arthur Andersen LLP, independent public
accountants
* 23.2 Consent of Hogan & Hartson L.L.P. (included as part of
Exhibit 5.1)
24.1 Power of Attorney (included in signature page)
* 25. Statements on Form T-1 of Eligibility of Trustees
</TABLE>
- ---------------
* To be filed by amendment or by a Current Report on Form 8-K pursuant to
Regulation S-K, Item 601(b).
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in this registration statement;
provided, however, that subparagraphs (i) and (ii) above shall not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in the periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in this
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-2
<PAGE> 53
(b) The undersigned Registrant hereby further undertakes that, for the
purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in this registration statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) The undersigned Registrant hereby undertakes to supplement the
prospectus, after the expiration of the subscription period, to set forth the
results of the subscription offer, the transactions by the underwriters during
the subscription period, the amount of unsubscribed securities to be purchased
by the underwriters, and the terms of any subsequent reoffering thereof. If any
public offering by the underwriters is to be made on terms differing from those
set forth on the cover page of the prospectus, a post-effective amendment will
be filed to set forth the terms of such offering.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to existing provisions or arrangements whereby the
Registrant may indemnify a director, officer or controlling person of the
Registrant against liabilities arising under the Securities Act of 1933, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(e) The undersigned Registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be a part of this
registration statement as of the time it was declared effective; and
(ii) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(f) The undersigned Registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act ("Act") in accordance
with the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Act.
II-3
<PAGE> 54
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Atlanta, State of Georgia, on this 10th day of March,
1999.
MINDSPRING ENTERPRISES, INC.
/s/ MICHAEL S. MCQUARY
By:
--------------------------------------
Michael S. McQuary
President and Chief Operating
Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Charles M. Brewer, Campbell B. Lanier, III and
Michael S. McQuary, jointly and severally, each in his own capacity, his true
and lawful attorneys-in-fact, with full power of substitution, for him and his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement, and any
registration statement relating to the same offering as this registration
statement that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agents with full power and
authority to do so and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact, or their substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons, in the
capacities indicated below, on this day of March, 1999.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
/s/ CHARLES M. BREWER Chairman, Chief Executive Officer and Director
- --------------------------------------------- (Principal executive officer)
Charles M. Brewer
/s/ MICHAEL S. MCQUARY President, Chief Operating Officer and Director
- ---------------------------------------------
Michael S. McQuary
/s/ JULIET M. REISING Executive Vice President, Chief Financial Officer and
- --------------------------------------------- Treasurer (Principal financial officer and principal
Juliet M. Reising accounting officer)
/s/ O. GENE GABBARD Director
- ---------------------------------------------
O. Gene Gabbard
/s/ CAMPBELL B. LANIER, III Director
- ---------------------------------------------
Campbell B. Lanier, III
/s/ WILLIAM H. SCOTT, III Director
- ---------------------------------------------
William H. Scott, III
</TABLE>
II-4
<PAGE> 55
INDEX TO EXHIBITS
<TABLE>
<C> <S> <C>
* 1.1 Form of Underwriting Agreement
4.1 Form of Common Stock Certificate of the Company. (Filed as
Exhibit 4 to registration statement on Form S-1, File No.
333-00108, and incorporated herein by reference.)
* 4.2 Form of Senior Debt Indenture
* 4.3 Form of Subordinated Debt Indenture
* 5.1 Opinion of Hogan & Hartson L.L.P. regarding the legality of
the securities being registered
12.1 Statement Regarding Computation of Ratios
23.1 Consent of Arthur Andersen LLP, independent public
accountants
*23.2 Consent of Hogan & Hartson L.L.P. (included as part of
Exhibit 5.1)
24.1 Power of Attorney (included in signature page)
*25. Statements on Form T-1 of Eligibility of Trustees
</TABLE>
- ---------------
* To be filed by amendment or by a Current Report on Form 8-K pursuant to
Regulation S-K, Item 601(b).
<PAGE> 1
EXHIBIT 12
STATEMENT REGARDING COMPUTATION OF RATIOS
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
FIXED CHARGES:
Interest expense (including amortization
of
debt issuance costs)................... -- (725) (415) (749) (890)
Interest element of rent expense.......... (492) (21) (171) (492) (492)
(492) (746) (586) (1,241) (1,382)
EARNINGS:
Consolidated net (loss) income............ (75) (1,959) (7,612) (4,083) 10,544
Add back:
Benefit for income taxes.................. -- -- -- -- 1,544
Fixed charges............................. (492) (746) (586) (1,241) (1,382)
417 (1,213) (7,026) (2,842) 13,470
COVERAGE (DEFICIENCY)....................... (75) (1,959) (7,612) (4,083) 9.7
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference of our report dated February 17, 1999 included in the Company's
Current Report on Form 8-K dated February 25, 1999, our report on Spry, Inc.
dated November 6, 1998 included in the Company's Current Report on Form 8-K
dated November 13, 1998 (as amended by the Company's Current Report on Form
8-K/A filed with the SEC on December 11, 1998), and our report on NETCOM On-Line
Communications, Inc. Domestic Subscriber Operations dated January 27, 1999
included in the Company's Current Report on Form 8-K dated February 25, 1999
into this Registration Statement.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 9, 1999
