UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
EarthLink Network, Inc.
------------------------------------------------
(Name of Issuer)
Common Stock, $0.01 Par Value
------------------------------------------------
(Title of Class of Securities)
270322100
-----------------------
(CUSIP Number)
Stephen M. Vine, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
399 Park Avenue
New York, New York 10022
(212) 872-1000
---------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
January 22, 1997
------------------------------
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [_].
Check the following box if a fee is being paid with the statement [_].** (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7)
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d- 1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter disclosure
provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Continued on following page(s)
Page 1 of 29 Pages
Exhibit Index: Page 23
- -----------------
** A filing fee is not being paid with this statement pursuant to SEC
Release No. 33-7331 whereby the filing fee has been eliminated for
Schedule 13D.
<PAGE>
Page 2 of 29 Pages
SCHEDULE 13D
CUSIP No. 270322100
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
QUANTUM INDUSTRIAL PARTNERS LDC
2 Check the Appropriate Box If a Member of a Group*
a. [_]
b. [x]
3 SEC Use Only
4 Source of Funds*
WC
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [_]
6 Citizenship or Place of Organization
Cayman Islands
7 Sole Voting Power
Number of 1,058,063
Shares
Beneficially 8 Shared Voting Power
Owned By 0
Each
Reporting 9 Sole Dispositive Power
Person 1,058,063
With
10 Shared Dispositive Power
0
11 Aggregate Amount Beneficially Owned by Each Reporting Person
1,058,063
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[x]
13 Percent of Class Represented By Amount in Row (11)
11.13%
14 Type of Reporting Person*
OO; IV
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 3 of 29 Pages
SCHEDULE 13D
CUSIP No. 270322100
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
QIH MANAGEMENT INVESTOR, L.P.
2 Check the Appropriate Box If a Member of a Group*
a. [_]
b. [x]
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [_]
6 Citizenship or Place of Organization
Delaware
7 Sole Voting Power
Number of 1,058,063
Shares
Beneficially 8 Shared Voting Power
Owned By 0
Each
Reporting 9 Sole Dispositive Power
Person 1,058,063
With
10 Shared Dispositive Power
0
11 Aggregate Amount Beneficially Owned by Each Reporting Person
1,058,063
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[x]
13 Percent of Class Represented By Amount in Row (11)
11.13%
14 Type of Reporting Person*
PN; IA
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 4 of 29 Pages
SCHEDULE 13D
CUSIP No. 270322100
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
QIH MANAGEMENT, INC.
2 Check the Appropriate Box If a Member of a Group*
a. [_]
b. [x]
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [_]
6 Citizenship or Place of Organization
Delaware
7 Sole Voting Power
Number of 1,058,063
Shares
Beneficially 8 Shared Voting Power
Owned By 0
Each
Reporting 9 Sole Dispositive Power
Person 1,058,063
With
10 Shared Dispositive Power
0
11 Aggregate Amount Beneficially Owned by Each Reporting Person
1,058,063
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[x]
13 Percent of Class Represented By Amount in Row (11)
11.13%
14 Type of Reporting Person*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 5 of 29 Pages
SCHEDULE 13D
CUSIP No. 270322100
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
SOROS FUND MANAGEMENT LLC
2 Check the Appropriate Box If a Member of a Group*
a. [_]
b. [x]
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [_]
6 Citizenship or Place of Organization
Delaware
7 Sole Voting Power
Number of 1,058,063
Shares
Beneficially 8 Shared Voting Power
Owned By 0
Each
Reporting 9 Sole Dispositive Power
Person 1,058,063
With
10 Shared Dispositive Power
0
11 Aggregate Amount Beneficially Owned by Each Reporting Person
1,058,063
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[x]
13 Percent of Class Represented By Amount in Row (11)
11.13%
14 Type of Reporting Person*
OO; IA
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 6 of 29 Pages
SCHEDULE 13D
CUSIP No. 270322100
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
GEORGE SOROS (in the capacity described herein)
2 Check the Appropriate Box If a Member of a Group*
a. [_]
b. [x]
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [_]
6 Citizenship or Place of Organization
United States
7 Sole Voting Power
Number of 238,145
Shares
Beneficially 8 Shared Voting Power
Owned By 1,058,063
Each
Reporting 9 Sole Dispositive Power
Person 238,145
With
10 Shared Dispositive Power
1,058,063
11 Aggregate Amount Beneficially Owned by Each Reporting Person
1,296,208
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[x]
13 Percent of Class Represented By Amount in Row (11)
13.60%
14 Type of Reporting Person*
IA; IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 7 of 29 Pages
SCHEDULE 13D
CUSIP No. 270322100
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
STANLEY F. DRUCKENMILLER (in the capacity described herein)
2 Check the Appropriate Box If a Member of a Group*
a. [_]
b. [x]
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [_]
6 Citizenship or Place of Organization
United States
7 Sole Voting Power
Number of 179,227
Shares
Beneficially 8 Shared Voting Power
Owned By 1,058,063
Each
Reporting 9 Sole Dispositive Power
Person 179,227
With
10 Shared Dispositive Power
1,058,063
11 Aggregate Amount Beneficially Owned by Each Reporting Person
1,237,290
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[x]
13 Percent of Class Represented By Amount in Row (11)
13.01%
14 Type of Reporting Person*
IA; IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 8 of 29 Pages
SCHEDULE 13D
CUSIP No. 270322100
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
DUQUESNE CAPITAL MANAGEMENT, L.L.C.
2 Check the Appropriate Box If a Member of a Group*
a. [_]
b. [x]
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [_]
6 Citizenship or Place of Organization
Pennsylvania
7 Sole Voting Power
Number of 154,000
Shares
Beneficially 8 Shared Voting Power
Owned By 0
Each
Reporting 9 Sole Dispositive Power
Person 154,000
With
10 Shared Dispositive Power
0
11 Aggregate Amount Beneficially Owned by Each Reporting Person
154,000
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[x]
13 Percent of Class Represented By Amount in Row (11)
1.63%
14 Type of Reporting Person*
OO; IA
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 9 of 29 Pages
This Statement on Schedule 13D relates to shares of Common Stock,
$0.01 par value per share (the "Shares"), of EarthLink Network, Inc. (the
"Issuer"). This Statement is being filed by the Reporting Persons (as defined
herein) to report recent acquisitions of Shares of the Issuer as a result of
which the Reporting Persons may be deemed to be the beneficial owners of more
than 5% of the outstanding Shares.
Item 1. Security and Issuer.
This Statement relates to the Shares. The address of the
principal executive office of the Issuer is 3100 New York Drive, Pasadena,
California 91107.
Item 2. Identity and Background.
This Statement is being filed on behalf of each of the following persons
(collectively, the "Reporting Persons"):
i) Quantum Industrial Partners ("QIP");
ii) QIH Management Investor, L.P. ("QIHMI");
iii) QIH Management, Inc. ("QIH Management");
iv) Soros Fund Management LLC ("SFM LLC");
v) Mr. George Soros ("Mr. Soros");
vi) Mr. Stanley F. Druckenmiller ("Mr. Druckenmiller"); and
vii) Duquesne Capital Management, L.L.C. ("Duquesne LLC").
This Statement relates to the Shares held for the accounts of
QIP, Mr. Soros, Mr. Druckenmiller and the Duquesne LLC Clients (as defined
herein).
The Reporting Persons
QIP, QIHMI and QIH Management
- -----------------------------
QIP is a Cayman Islands exempted limited duration company with
its principal address at Kaya Flamboyan 9, Willemstad, Curacao, Netherlands
Antilles. The principal business of QIP is investment in securities. Current
information concerning the identity and background of the directors and officers
of QIP is set forth in Annex A hereto, which is incorporated by reference in
response to this Item 2.
QIHMI, an investment advisory firm organized as a Delaware
limited partnership, is a minority shareholder of, and (pursuant to constituent
documents of QIP) is vested with investment discretion with respect to the
portfolio assets held for the account of, QIP. The principal business of QIHMI
is to provide management and advisory services to, and to invest in, QIP. QIH
Management, a Delaware corporation of which Mr. Soros is the sole shareholder,
is the sole general partner of QIHMI. The principal business of QIH Management
<PAGE>
Page 10 of 29 Pages
is to serve as the sole general partner of QIHMI. QIHMI and QIH Management have
their principal offices at 888 Seventh Avenue, 33rd Floor, New York, New York
10106. QIHMI, by reason of its investment discretion over the securities owned
by QIP, and QIH Management, as the sole general partner of QIHMI, may each be
deemed the beneficial owner of the Shares held for the account of QIP for
purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Act").
Mr. Soros has entered into an agreement dated as of January 1,
1997 with SFM LLC pursuant to which Mr. Soros has, among other things, agreed to
use his best efforts to cause QIH Management, as the general partner of QIHMI,
to act at the direction of SFM LLC, which agreement to so act shall terminate
upon the earlier of (a) the assignment to SFM LLC of the legal and beneficial
ownership interest in QIH Management and (b) the assignment to SFM LLC of the
general partnership interest in QIHMI (the "QIP Contract").
SFM LLC, Mr. Soros, Mr. Druckenmiller and Duquesne LLC
- ------------------------------------------------------
The business of SFM LLC is managed through a Management Committee
(the "Management Committee") comprised of Mr. Soros, Mr. Druckenmiller and Mr.
Gary Gladstein. SFM LLC, a Delaware limited liability company, has its principal
office at 888 Seventh Avenue, 33rd Floor, New York, New York 10106. Its
principal business is to serve, pursuant to contract, as the principal
investment manager to several foreign investment companies (the "SFM Clients").
Mr. Soros, as Chairman of SFM LLC, has the ability to direct the investment
decisions of SFM LLC and as such may be deemed to have investment discretion
over the securities held for the accounts of the SFM Clients. Mr. Druckenmiller,
as Lead Portfolio Manager of SFM LLC, has the ability to direct the investment
decisions of SFM LLC and as such may be deemed to have investment discretion
over the securities held for the accounts of the SFM Clients. Set forth in Annex
B hereto and incorporated by reference in response to this Item 2 and elsewhere
in this Schedule 13D as applicable is a list of the Managing Directors (the
executive officers) of SFM LLC. Mr. Paul McNulty, a Managing Director of SFM
LLC, is also a member of the Board of Directors of the Issuer.
The principal occupation of Mr. Soros, a United States citizen,
is his direction of the activities of SFM LLC, which is carried out in his
capacity as Chairman of SFM LLC at SFM LLC's principal office.
The principal occupation of Mr. Druckenmiller, a United States
citizen, is his position as Lead Portfolio Manager and a Member of the
Management Committee of SFM LLC, which is carried out at SFM LLC's principal
office. Mr. Druckenmiller also owns a 75% interest in, and is the sole managing
member of, Duquesne LLC, an investment advisory firm. Duquesne LLC, a
Pennsylvania limited liability company, has its principal offices at 2579
Washington Road, Suite 322, Pittsburgh, Pennsylvania 15241-2591. Its principal
business is to serve, pursuant to contract, as a discretionary investment
advisor to a limited number of institutional clients (the "Duquesne LLC
Clients"). Set forth in Annex C hereto and incorporated by reference in response
to this Item 2 and elsewhere in this Schedule 13D as applicable is a list of the
executive officers of Duquesne LLC.
Pursuant to regulations promulgated under Section 13(d) of the
Act, SFM LLC, pursuant to the provisions of the QIP Contract, Mr. Soros, in his
capacity as Chairman of SFM LLC, and Mr. Druckenmiller, in his capacity as Lead
Portfolio Manager of SFM LLC, each may be deemed a beneficial owner of the
Shares held for the account of QIP.
<PAGE>
Page 11 of 29 Pages
Pursuant to regulations promulgated under Section 13(d) of the
Act, each of Duquesne LLC and Mr. Druckenmiller, by virtue of his interest in,
and position as sole managing member of, Duquesne LLC, may be deemed a
beneficial owner of the Shares held for the accounts of the Duquesne LLC Clients
as a result of the contractual authority of Duquesne LLC to exercise voting and
dispositive power with respect to such securities.
During the past five years, none of the Reporting Persons and, to
the best of the Reporting Persons' knowledge, any other person identified in
response to this Item 2 has been (a) convicted in a criminal proceeding, or (b)
a party to any civil proceeding as a result of which it or he has been subject
to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities
laws, or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
QIP expended approximately $5,005,000 of its working capital to
purchase the Shares reported herein as being acquired in the last 60 days.
Duquesne LLC expended approximately $2,002,000 of the working capital of the
Duquesne LLC Clients to purchase the Shares reported herein as being acquired in
the last 60 days.
The securities held for the accounts of QIP, Mr. Soros, Mr.
Druckenmiller, the SFM Clients and/or the Duquesne LLC Clients may be held
through margin accounts maintained with brokers, which extend margin credit as
and when required to open or carry positions in their margin accounts, subject
to applicable federal margin regulations, stock exchange rules and such firms'
credit policies. The positions which may be held in the margin accounts,
including the Shares, are pledged as collateral security for the repayment of
debit balances in the respective accounts.
Item 4. Purpose of Transaction.
All of the Shares reported herein as having been acquired for or
disposed of from the accounts of QIP, Mr. Soros, Mr. Druckenmiller and/or the
Duquesne LLC Clients were acquired or disposed of for investment purposes.
Neither the Reporting Persons nor, to the best of their knowledge, any of the
other persons identified in response to Item 2, has any plans or proposals that
relate to or would result in any of the transactions described in subparagraphs
(a) through (j) of Item 4 of Schedule 13D.
SFM LLC, Mr. Soros and Mr. Druckenmiller reserve the right to
acquire, or cause to be acquired, additional securities of the Issuer, to
dispose of, or cause to be disposed, such securities at any time or to formulate
other purposes, plans or proposals regarding the Issuer or any of its
securities, to the extent deemed advisable in light of general investment and
trading policies of the SFM Clients, market conditions or other factors.
Mr. Druckenmiller and Duquesne LLC reserve the right to acquire,
or cause to be acquired, additional securities of the Issuer, to dispose of, or
cause to be disposed, such securities at any time or to formulate other
purposes, plans or proposal regarding the Issuer or any of its securities, to
the extent deemed advisable in light of general investment and trading policies
of the Duquesne LLC Clients, market conditions or other factors.
In addition, Mr. Soros and Mr. Druckenmiller reserve the right to
acquire, or cause to be acquired, additional securities of the Issuer, to
dispose of, or cause to be disposed, such securities at any time or to formulate
<PAGE>
Page 12 of 29 Pages
other purposes, plans or proposals regarding the Issuer or any of its securities
held for their personal accounts, to the extent deemed advisable in light of
market conditions or other factors.
Item 5. Interest in Securities of the Issuer.
(a) (i) Each of QIP, QIHMI, QIH Management and SFM LLC may
be deemed the beneficial owner of the 1,058,063 Shares (approximately 11.13% of
the total number of Shares which would be outstanding assuming the exercise of
all of the warrants held for the account of QIP). This number includes 991,363
Shares and 66,700 Shares issuable upon the exercise of 66,700 currently
exercisable warrants held for the account of QIP.
(ii) Mr. Soros may be deemed the beneficial owner of
1,296,208 Shares (approximately 13.60% of the total number of Shares which would
be outstanding assuming the exercise of all of the warrants held for his
personal account and the account of QIP). This number includes (A) 214,545
Shares and 23,600 Shares issuable upon the exercise of 23,600 currently
exercisable warrants held directly for his personal account and (B) 991,363
Shares and 66,700 Shares issuable upon the exercise of 66,700 currently
exercisable warrants held for the account of QIP.
(iii) Mr. Druckenmiller may be deemed the beneficial
owner of 1,237,290 Shares (approximately 13.01% of the total number of Shares
which would be outstanding assuming the exercise of all of the warrants held for
his personal account and the account of QIP). This number includes (A) 22,727
Shares and 2,500 Shares issuable upon the exercise of 2,500 currently
exercisable warrants held directly for his personal account, (B) 154,000 Shares
held for the accounts of the Duquesne LLC Clients and (C) 991,363 Shares and
66,700 Shares issuable upon the exercise of 66,700 currently exercisable
warrants held for the account of QIP.
(iv) Duquesne LLC may be deemed the beneficial owner of
the 154,000 Shares held for the accounts of the Duquesne LLC Clients
(approximately 1.63% of the total number of Shares outstanding).
(b) (i) Each of QIP, QIHMI, QIH Management and SFM LLC (by
virtue of the QIP contract) may be deemed to have the sole power to direct the
voting and disposition of the 1,058,063 Shares held for the account of QIP
(assuming the exercise of all of the warrants held for the account of QIP).
(ii) Each of Mr. Soros and Mr. Druckenmiller, as a
result of their positions with SFM LLC, may be deemed to have shared power to
direct the voting and disposition of the 1,058,063 Shares held for the account
of QIP (assuming the exercise of all of the warrants held for the account of
QIP).
(iii) Mr. Soros has the sole power to vote and dispose
of the 238,145 Shares held for his personal account (assuming the exercise of
all of the warrants held for his personal account).
(iv) Mr. Druckenmiller has the sole power to vote and
dispose of the 25,227 Shares held for his personal account (assuming the
exercise of all of the warrants held for his personal account).
Pursuant to contracts with the Duquesne LLC Clients, and as a
result of the position held by Mr. Druckenmiller with Duquesne LLC, each of
<PAGE>
Page 13 of 29 Pages
Duquesne LLC and Mr. Druckenmiller may be deemed to have the sole power to
direct the voting and disposition of the 154,000 Shares held for the accounts of
the Duquesne LLC Clients.
(c) Except for the transactions listed on Annex D hereto,
there have been no transactions effected with respect to the Shares since
December 5, 1996 (60 days prior to the date hereof) by any of the Reporting
Persons or the Duquesne LLC Clients.
(d) (i) The shareholders of QIP, including Quantum
Industrial Holdings, Ltd., a British Virgin Islands international business
company, have the right to participate in the receipt of dividends from, or
proceeds from the sale of, the Shares held for the account of QIP in accordance
with their ownership interests in QIP.
(ii) Mr. Soros has the sole right to participate in the
receipt of dividends from, or proceeds from the sale of, the Shares held for his
personal account.
(iii) Mr. Druckenmiller has the sole right to
participate in the receipt of dividends from, or proceeds from the sale of, the
Shares held for his personal account.
(iv) The Duquesne LLC Clients have the right to
participate in the receipt of dividends from, or proceeds from the sale of, the
Shares held for their accounts.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
On September 10, 1996, each of QIP, Mr. Soros and Mr.
Druckenmiller, and others, entered into an Amended and Restated Stock Purchase
Agreement (the "Stock Purchase Agreement") with the Issuer, a copy of which is
attached hereto as Exhibit E and incorporated herein by reference in response to
this Item 6, pursuant to which they purchased shares of Series A Convertible
Preferred Stock ("Series A Stock"). The Series A Stock automatically converted
into Shares on a one-for-one basis at the time of the Issuer's initial public
offering (the "IPO"). As set forth in Section 3.6 of the Stock Purchase
Agreement, disposition of the Series A Stock, as well as the underlying Shares
that are currently outstanding, is prohibited unless: (i) an effective
Registration Statement so permits (ii) the holder of the Series A Stock provides
the Issuer with information as specified in Section 3.7(b) thereof, or (iii) the
holder falls within a number of exceptions pertaining to transfer of the
securities as specified in Section 3.7(c) thereof.
The Issuer executed a Registration Rights Agreement for the
benefit of QIP, Mr. Soros and Mr. Druckenmiller, among others, dated June 1,
1996, as amended (the "Registration Rights Agreement"), in connection with the
acquisition of certain Restricted Shares (as defined in the Registration Rights
Agreement), which term includes the Series A Stock and their underlying Shares,
all of which are currently outstanding, a copy of which is attached hereto as
Exhibit F and incorporated herein by reference in response to this Item 6. The
Registration Rights Agreement provides that after its IPO the Issuer will use
its best efforts to qualify for registration on Form S-3 or any successor form,
and that holders of Restricted Shares have certain rights, subject to
restrictions, pertaining to their ability to demand that the Issuer register the
Restricted Shares under the Securities Act.
<PAGE>
Page 14 of 29 Pages
The Registration Rights Agreement contains other provisions
relating to registration procedures, indemnification and contribution and other
matters, all of which are incorporated herein by reference.
The Warrant to Purchase Common Stock dated September 10, 1996
(the "Warrant") issued to each of QIP, Mr. Soros and Mr. Druckenmiller, in the
form attached hereto as Exhibit G and incorporated herein by reference in
response to this Item 6, provides that the holder thereof may exercise it and be
issued Shares on a two-for-one basis, in whole or in part, at any time prior to
September 10, 2001, at an exercise price of $5.50 per Share, subject to
adjustment in the event of certain capital transactions by the Issuer. The
Warrant also provides for certain restrictions of transferability, and
exceptions thereto, as well as "piggyback" registration rights. Subsequent to
the date of the issuance of the Warrant, and prior to the IPO, the Issuer
effected a one-for- two reverse stock split which increased the exercise price
of the warrants to $11.00 per Share. All Warrants reported herein reflect the
two-for-one reverse stock split.
Pursuant to a Letter Agreement (the "Letter Agreement") between
the Issuer, Invemed Associates, Inc., the underwriter of the IPO ("Invemed") and
each of QIP, Mr. Soros and Mr. Druckenmiller, and others, in the form attached
hereto as Exhibit H and incorporated herein by reference in response to this
Item 6, each of QIP, Mr. Soros and Mr. Druckenmiller have agreed that for a
period of 365 days after the IPO, which occurred on January 22, 1997, they will
not offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any Shares or securities convertible into or exchangeable or
exercisable for any Shares, or publicly disclose the intention to make any such
offer, sale, pledge or disposal without the prior written consent of Invemed.
From time to time, each of the Reporting Persons, the SFM Clients
and/or the Duquesne LLC Clients may lend portfolio securities to brokers, banks
or other financial institutions. These loans typically obligate the borrower to
return the securities, or an equal amount of securities of the same class, to
the lender and typically provide that the borrower is entitled to exercise
voting rights and to retain dividends during the term of the loan. From time to
time, to the extent permitted by applicable laws or otherwise permitted by the
Letter Agreement, each of the Reporting Persons, the SFM Clients and/or the
Duquesne LLC Clients may borrow securities, including the Shares, for the
purpose of effecting, and may effect, short sale transactions, and may purchase
securities for the purpose of closing out short positions in such securities.
Except as described above, the Reporting Persons and the SFM
Clients do not have any contracts, arrangements, understandings or relationships
with respect to any securities of the Issuer.
Item 7. Material to be Filed as Exhibits.
A. Power of Attorney dated as of January 1, 1997 granted by Mr.
Soros in favor of Mr. Sean C. Warren and Mr. Michael C. Neus.
B. Power of Attorney dated as of January 1, 1997 granted by Mr.
Druckenmiller in favor of Mr. Sean C. Warren and Mr. Michael C. Neus.
C. Joint Filing Agreement dated February 3, 1997 by and among
QIP, QIHMI, QIH Management, SFM LLC, Mr. Soros, Mr. Druckenmiller and Duquesne
LLC.
D. Power of Attorney dated May 23, 1996 granted by QIP in favor
of Mr. Gary Gladstein,
<PAGE>
Page 18 of 29 Pages
Mr. Sean Warren and Mr. Michael Neus.
- -------------------------------------
E. Amended and Restated Stock Purchase Agreement dated September
10, 1996 among the Issuer, QIP, Mr. Soros, Mr. Druckenmiller et al. (filed as
Exhibit 10.18 to Amendment No. 2 to the Issuer's Form S-1 (Registration No.
333-1578) and incorporated herein by reference).
F. Registration Rights Agreement dated June 1, 1996, and all
amendments thereto, executed by the Issuer for the benefit of QIP, Mr. Soros and
Mr. Druckenmiller, among others (filed as Exhibit 4.4 to Amendment No. 2 to the
Issuer's Form S-1 (Registration No. 333-1578) and incorporated herein by
reference).
G. Form of Warrant issued to each of QIP, Mr. Soros, Mr.
Druckenmiller et al. (filed as Exhibit 10.18(a) to Amendment No. 2 to the
Issuer's Form S-1 (Registration No. 333-1578) and incorporated herein by
reference).
H. Form of the Letter Agreement addressed to the Issuer and
Invemed, from each of QIP, Mr. Soros and Mr. Druckenmiller et al.
<PAGE>
Page 16 of 29 Pages
SIGNATURES
After reasonable inquiry and to the best of my knowledge and
belief, the undersigned certifies that the information set forth in this
Statement is true, complete and correct.
Date: February 3, 1997
QUANTUM INDUSTRIAL PARTNERS LDC
By: /S/ MICHAEL C. NEUS
----------------------------------
Michael C. Neus
Attorney-in-Fact
QIH MANAGEMENT INVESTOR, L.P.
By: QIH Management, Inc.,
its General Partner
By: /S/ MICHAEL C. NEUS
-----------------------------
Michael C. Neus
Vice President
QIH MANAGEMENT, INC.
By: /S/ MICHAEL C. NEUS
----------------------------------
Michael C. Neus
Vice President
SOROS FUND MANAGEMENT LLC
By: /S/ MICHAEL C. NEUS
----------------------------------
Michael C. Neus
Assistant General Counsel
GEORGE SOROS
By: /S/ MICHAEL C. NEUS
----------------------------------
Michael C. Neus
Attorney-in-Fact
<PAGE>
Page 17 of 29 Pages
STANLEY F. DRUCKENMILLER
By: /S/ MICHAEL C. NEUS
----------------------------------
Michael C. Neus
Attorney-in-Fact
DUQUESNE CAPITAL MANAGEMENT, L.L.C.
By: /S/ GERALD KERNER
----------------------------------
Gerald Kerner
Managing Director
<PAGE>
Page 15 of 29 Pages
ANNEX A
Directors and Officers of Quantum Industrial Partners LDC
Name/Title/Citizenship Principal Occupation Business Address
Curacao Corporation Managing Director of Kaya Flamboyan 9
Company N.V. Netherlands Antilles Willemstad
Managing Director corporations Curacao,
(Netherlands Antilles) Netherlands Antilles
Inter Caribbean Services Administrative services Citco Building
Limited Wickhams Cay
Secretary Road Town
(British Virgin Islands) Tortola
British Virgin Islands
<PAGE>
Page 19 of 29 Pages
ANNEX B
The following is a list of all of the persons (other than Stanley
Druckenmiller) who serve as Managing Directors of SFM LLC, as well as the number
of Shares, if any, held for the account of each:
Number of Shares
----------------
Scott K. H. Bessent
Walter Burlock
Brian J. Corvese
Jeffrey L. Feinberg
Arminio Fraga.............................................. 2,523/1/
Gary Gladstein............................................. 7,443/2/
Robert K. Jermain.......................................... 2,523/3/
David N. Kowitz
Alexander C. McAree
Paul McNulty............................................... 504/4/
Gabriel S. Nechamkin
Steven Okin
Dale Precoda
Lief D. Rosenblatt
Mark D. Sonnino
Filiberto H. Verticelli
Sean C. Warren............................................. 2,018/5/
Each of the above-listed persons is a United States citizen whose principal
occupation is serving as Managing Director of SFM LLC, and each has a business
address c/o Soros Fund Management LLC, 888 Seventh Avenue, 33rd Floor, New York,
New York 10106.
To the best of the Reporting Persons' knowledge:
(a) The consideration used for purchasing the Shares reported above
was the personal funds of each of the Managing Directors who purchased
such Shares.
(b) All of the Shares reported above were acquired for investment
purposes.
(c) Each of the Managing Directors (i) holds the Shares reported above
as being held for his or her own account, (ii) has the sole power to
vote or dispose of such Shares and has the right to receive the
dividends from, or proceeds from the sale of, the Shares, and (iii)
has not effected any transactions in the Shares since December 5, 1996
(60 days prior to the date hereof).
- --------
/1/ This number includes 2,273 Shares and 250 currently exercisable
warrants.
/2/ This number includes 6,818 Shares and 625 currently exercisable
warrants.
/3/ This number includes 2,273 Shares and 250 currently exercisable
warrants.
/4/ This number includes 454 Shares and 50 currently exercisable warrants.
/5/ This number includes 1,818 Shares and 200 currently exercisable
warrants.
<PAGE>
Page 20 of 29 Pages
(d) Except for the Stock Purchase Agreement, the Registration Rights
Agreement, the Warrant and the Letter Agreement, which are
incorporated herein by reference, none of the Managing Directors has
any contracts, arrangements, understandings or relationships with
respect to the securities of the Issuer.
An aggregate of 45,455 Shares and 5,000 Warrants are held in five
separate irrevocable trusts for the children of Mr. Soros, one of the trustees
of which is Mr. Gary Gladstein. The Reporting Persons disclaim beneficial
ownership of any shares held in the aforementioned trusts for the benefit of the
children of Mr. Soros.
<PAGE>
Page 21 of 29 Pages
ANNEX C
The following is a list of all of the persons who serve as executive
officers of Duquesne LLC (other than Stanley Druckenmiller):
Michael A. Shay ("Mr. Shay")
Gerald Kerner ("Mr. Kerner")
Mr. Shay is a United States citizen whose principal occupation is
serving as a Managing Director of Duquesne LLC. Mr. Shay's business address is
Duquesne Capital Management, L.L.C., 2579 Washington Road, Suite 322,
Pittsburgh, Pennsylvania 15241.
Mr. Kerner is a United States citizen whose principal occupation is
serving as a Managing Director of Duquesne LLC. Mr. Kerner's business address is
Duquesne Capital Management, L.L.C., 888 Seventh Avenue, 32nd Floor, New York,
New York 10106.
<PAGE>
Page 22 of 29 Pages
<TABLE>
<CAPTION>
ANNEX D
RECENT TRANSACTIONS IN THE COMMON STOCK OF
EARTHLINK NETWORK, INC./6/
Date of Nature of
For the Account of Transaction Transaction Number of Shares Price Per Share
- ------------------ ----------- ----------- ---------------- ---------------
<S> <C> <C> <C> <C>
QIP/7/ 1/22/97 PURCHASE 385,000 $13.00
Duquesne Clients/8/ 1/22/97 PURCHASE 154,000 $13.00
- --------
/6/ All of the Shares reported herein, excluding those set forth in this Annex D, were originally
acquired shares of Series A Convertible Preferred Stock which were automatically converted into
Shares on a one-for-one basis at the time of the Issuer's IPO after a reverse two-for-one
stock split.
/7/ This acquisition directly from the underwriter was effected at the direction of SFM LLC and
represents a purchase of Shares in the Issuer's IPO.
/8/ This acquisition directly from the underwriter was effected at the direction of Duquesne LLC
and represents a purchase of Shares in the Issuer's IPO.
</TABLE>
<PAGE>
Page 23 of 29 Pages
EXHIBIT INDEX
Page No.
---------
A. Power of Attorney dated as of January 1, 1997
granted by Mr. George Soros in favor of Mr. Sean C.
Warren and Mr. Michael C. Neus...................................... 24
B. Power of Attorney dated as of January 1, 1997
granted by Mr. Stanley F. Druckenmiller in favor of Mr.
Sean C. Warren and Mr. Michael C. Neus.............................. 25
C. Joint Filing Agreement dated February 3, 1997 by and
among Quantum Industrial Partners LDC, QIH Management
Investor, L.P., QIH Management, Inc., Soros Fund
Management LLC, Mr. George Soros, Mr. Stanley F.
Druckenmiller and Duquesne Capital Management, L.L.C.............. 26
D. Power of Attorney dated May 23, 1996 granted by
Quantum Industrial Partners LDC in favor of Mr. Gary
Gladstein, Mr. Sean Warren and Mr. Michael
Neus................................................................ 28
H. Form of the Letter Agreement addressed to EarthLink
Network, Inc. and Invemed Associates, Inc. from each of
Quantum Industrial Partners LDC, Mr. George Soros and
Mr. Stanley Druckenmiller et al..................................... 29
Page 24 of 29 Pages
EXHIBIT A
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, GEORGE SOROS, hereby make, constitute
and appoint each of SEAN C. WARREN and MICHAEL C. NEUS, acting individually, as
my agent and attorney-in-fact for the purpose of executing in my name, (a) in my
personal capacity or (b) in my capacity as Chairman of, member of or in other
capacities with Soros Fund Management LLC, all documents, certificates,
instruments, statements, filings and agreements ("documents") to be filed with
or delivered to any foreign or domestic governmental or regulatory body or
required or requested by any other person or entity pursuant to any legal or
regulatory requirement relating to the acquisition, ownership, management or
disposition of securities or other investments, and any other documents relating
or ancillary thereto, including but not limited to, all documents relating to
filings with the United States Securities and Exchange Commission (the "SEC")
pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934
(the "Act") and the rules and regulations promulgated thereunder, including: (1)
all documents relating to the beneficial ownership of securities required to be
filed with the SEC pursuant to Section 13(d) or Section 16(a) of the Act
including, without limitation: (a) any acquisition statements on Schedule 13D or
Schedule 13G and any amendments thereto, (b) any joint filing agreements
pursuant to Rule 13d-1(f) and (c) any initial statements of, or statements of
changes in, beneficial ownership of securities on Form 3, Form 4 or Form 5 and
(2) any information statements on Form 13F required to be filed with the SEC
pursuant to Section 13(f) of the Act.
All past acts of the attorney-in-fact in furtherance of the foregoing are hereby
ratified and confirmed.
This power of attorney shall be valid from the date hereof until revoked by me.
IN WITNESS WHEREOF, I have executed this instrument as of the 1st day of
January, 1997.
/s/ George Soros
-----------------------------------------------
GEORGE SOROS
Page 25 of 29 Pages
EXHIBIT B
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, STANLEY F. DRUCKENMILLER, hereby make,
constitute and appoint each of SEAN C. WARREN and MICHAEL C. NEUS, acting
individually, as my agent and attorney-in-fact for the purpose of executing in
my name, (a) in my personal capacity or (b) in my capacity as Lead Portfolio
Manager of, member of or in other capacities with Soros Fund Management LLC, all
documents, certificates, instruments, statements, filings and agreements
("documents") to be filed with or delivered to any foreign or domestic
governmental or regulatory body or required or requested by any other person or
entity pursuant to any legal or regulatory requirement relating to the
acquisition, ownership, management or disposition of securities or other
investments, and any other documents relating or ancillary thereto, including
but not limited to, all documents relating to filings with the United States
Securities and Exchange Commission (the "SEC") pursuant to the Securities Act of
1933 or the Securities Exchange Act of 1934 (the "Act") and the rules and
regulations promulgated thereunder, including: (1) all documents relating to the
beneficial ownership of securities required to be filed with the SEC pursuant to
Section 13(d) or Section 16(a) of the Act including, without limitation: (a) any
acquisition statements on Schedule 13D or Schedule 13G and any amendments
thereto, (b) any joint filing agreements pursuant to Rule 13d-1(f) and (c) any
initial statements of, or statements of changes in, beneficial ownership of
securities on Form 3, Form 4 or Form 5 and (2) any information statements on
Form 13F required to be filed with the SEC pursuant to Section 13(f) of the Act.
All past acts of the attorney-in-fact in furtherance of the foregoing are hereby
ratified and confirmed.
This power of attorney shall be valid from the date hereof until revoked by me.
IN WITNESS WHEREOF, I have executed this instrument as of the 1st day of
January, 1997.
/s/ Stanley F. Druckenmiller
-----------------------------------
STANLEY F. DRUCKENMILLER
Page 26 of 29 Pages
EXHIBIT C
JOINT FILING AGREEMENT
The undersigned hereby agree that the statement on Schedule 13D
with respect to the Common Stock of EarthLink Network, Inc. dated February 3,
1997 is, and any amendments thereto signed by each of the undersigned shall be,
filed on behalf of each of us pursuant to and in accordance with the provisions
of Rule 13d- 1(f) under the Securities Exchange Act of 1934.
Date: February 3, 1997
QUANTUM INDUSTRIAL PARTNERS LDC
By: /S/ MICHAEL C. NEUS
----------------------------------
Michael C. Neus
Attorney-in-Fact
QIH MANAGEMENT INVESTOR, L.P.
By: QIH Management, Inc.,
its General Partner
By: /S/ MICHAEL C. NEUS
-----------------------------
Michael C. Neus
Vice President
QIH MANAGEMENT, INC.
By: /S/ MICHAEL C. NEUS
----------------------------------
Michael C. Neus
Vice President
SOROS FUND MANAGEMENT LLC
By: /S/ MICHAEL C. NEUS
----------------------------------
Michael C. Neus
Assistant General Counsel
GEORGE SOROS
By: /S/ MICHAEL C. NEUS
----------------------------------
Michael C. Neus
Attorney-in-Fact
<PAGE>
Page 27 of 29 Pages
STANLEY F. DRUCKENMILLER
By: /S/ MICHAEL C. NEUS
----------------------------------
Michael C. Neus
Attorney-in-Fact
DUQUESNE CAPITAL MANAGEMENT, L.L.C.
By: /S/ GERALD KERNER
----------------------------------
Gerald Kerner
Managing Director
Page 28 of 29 Pages
EXHIBIT D
QUANTUM INDUSTRIAL PARTNERS LDC
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned QUANTUM INDUSTRIAL PARTNERS
LDC (the "Company"), an exempted limited duration company existing and operating
under the laws of the Cayman Islands does, pursuant to a duly adopted resolution
of its Managing Director, hereby designate, constitute and appoint:
GARY GLADSTEIN, SEAN WARREN and MICHAEL NEUS
acting, singly and not jointly, as its true and lawful agent and attorney in
fact for the purpose of executing in its name, all documents, certificates,
instruments, statements, filings and agreements ("documents") to be filed with
or delivered to any foreign or domestic governmental or regulatory body or
required or requested by any other person or entity pursuant to any legal or
regulatory requirement relating to the acquisition, ownership, management or
disposition of securities or other investments, and any other documents relating
or ancillary thereto, including but not limited to, all documents relating to
filings with the United States Securities and Exchange Commission (the "SEC")
pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934
(the "Act") and the rules and regulations promulgated thereunder, including: (1)
all documents relating to the beneficial ownership of securities required to be
filed with the SEC pursuant to Section 13(d) or Section 16(a) of the Act
including, without limitation: (a) any acquisition statements on Schedule 13D or
Schedule 13G and any amendments thereto, (b) any joint filing agreements
pursuant to Rule 13d-1(f) and (c) any initial statements of, or statements of
changes in, beneficial ownership of securities on Form 3, Form 4 or Form 5 and
(2) any information statements on Form 13F required to be filed with the SEC
pursuant to Section 13(f) of the Act.
Each attorney-in-fact is hereby authorized and empowered to perform all other
acts and deeds, which he or she in his or her sole discretion deems necessary or
appropriate to carry out to the fullest extent the terms and the intent of the
foregoing. All prior acts of each attorney-in-fact in furtherance of the
foregoing are hereby ratified and confirmed.
IN WITNESS WHEREOF, the Company has caused this document to be execute this 23rd
day of May, 1996.
QUANTUM INDUSTRIAL PARTNERS LDC
-----------------------------------
Curacao Corporation Company N.V.
Managing Director
Page 29 of 29 Pages
EXHIBIT H
Date:_______________ 1996
EARTHLINK NETWORK, INC.
3100 New York Drive
Pasadena, CA 91108
INVEMED ASSOCIATES, INC.
375 Park Avenue, Suite 2205
New York, New York 10152-0189
Ladies and Gentlemen:
As an inducement to Invemed Associates, Inc. to execute the
Underwriting Agreement, pursuant to which an offering will be made of the Common
Stock, $0.01 par value (the "Common Stock"), of EarthLink Network, Inc. (the
"Company"), the undersigned hereby agrees that, for a period of 365 days after
the initial public offering (the "Commencement Date") of the Common Stock
pursuant to the Underwriting Agreement to which you are or expect to become
parties, the undersigned will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, any shares of Common Stock or
securities convertible into or exchangeable or exercisable for any shares of
Common Stock, or publicly disclose the intention to make any such offer, sale,
pledge or disposal without the prior written consent of Invemed Associates, Inc.
In furtherance of the foregoing, the Company and its transfer agent
and registrar are hereby authorized to decline to make any transfer of Common
Stock or other Company securities if such transfer would constitute a violation
or breach of this Agreement.
This Agreement shall be binding on the undersigned and the respective
successors, heirs, personal representatives and assigns of the undersigned.
Very truly yours,
Signature:__________________________
Printed Name:_______________________
Name of Entity Signatory Represents,
if applicable_______________________
____________________________________
____________________________________
