AGREEMENT AND PLAN OF REORGANIZATION
dated as of
SEPTEMBER 22, 1999 among
EARTHLINK NETWORK, INC.,
MINDSPRING ENTERPRISES, INC. and
WWW HOLDINGS, INC.
TABLE OF CONTENTS PAGE --------
ARTICLE I
DEFINITIONS............................................................. 2
Section 1.1. DEFINITIONS................................................. 2
ARTICLE II THE MERGERS............................................................ 7
Section 2.1. THE EARTHLINK
MERGER........................................ 7
Section 2.2. THE MINDSPRING
MERGER....................................... 8
Section 2.3. CANCELLATION OF NEWCO COMMON STOCK.......................... 8
Section 2.4. EXCHANGE OF CERTIFICATES.................................... 8
ARTICLE III STOCKHOLDER APPROVAL; CLOSING......................................... 10
Section 3.1. STOCKHOLDER APPROVAL........................................ 10
Section 3.2. TIME AND PLACE OF CLOSING................................... 10
ARTICLE IV NEWCO.................................................................. 10
Section 4.1. NO CONDUCT OF BUSINESS BY NEWCO; RESTATED ARTICLES AND BYLAWS...................................................... 10
Section 4.2. BOARD OF DIRECTORS.......................................... 11
Section 4.3. MANAGEMENT.................................................. 11
Section 4.4. HEADQUARTERS OF NEWCO....................................... 11
Section 4.5. INDEMNIFICATION AND INSURANCE............................... 11
Section 4.7. MINDSPRING NOTES............................................ 12
ARTICLE V REPRESENTATIONS AND WARRANTIES OF EARTHLINK............................. 12
Section 5.1. CORPORATE EXISTENCE AND
POWER............................... 12
Section 5.2. CORPORATE
AUTHORIZATION..................................... 12
Section 5.3. GOVERNMENTAL AUTHORIZATION.................................. 13
Section 5.4. NON- CONTRAVENTION........................................... 13
Section 5.5. CAPITALIZATION.............................................. 13
Section 5.6. SUBSIDIARIES................................................ 14
Section 5.7. EARTHLINK SEC
DOCUMENTS..................................... 14
Section 5.8. FINANCIAL STATEMENTS, NO MATERIAL UNDISCLOSED LIABILITIES... 15
Section 5.9. INFORMATION TO BE SUPPLIED.................................. 15
Section 5.10. ABSENCE OF CERTAIN
CHANGES.................................. 15
Section 5.11. LITIGATION.................................................. 16
Section 5.12. TAXES....................................................... 16
Section 5.13. EMPLOYEE BENEFITS........................................... 16 i PAGE --------
Section 5.14. COMPLIANCE WITH LAWS; LICENSES, PERMITS AND
REGISTRATIONS... 18
Section 5.15. TITLE TO PROPERTIES......................................... 18
Section 5.16. INTELLECTUAL PROPERTY....................................... 18
Section 5.17. ENVIRONMENTAL
MATTERS....................................... 18
Section 5.18. FINDERS' FEES; OPINIONS OF FINANCIAL
ADVISOR................ 19
Section 5.19. REQUIRED VOTE, BOARD APPROVAL............................... 19
Section 5.20. STATE TAKEOVER STATUTES..................................... 19
Section 5.21. POOLING MATTERS; TAX TREATMENT.............................. 19
Section 5.22. CERTAIN AGREEMENTS.......................................... 20
Section 5.23. YEAR 2000
COMPLIANCE........................................ 20
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF MINDSPRING........................... 20
Section 6.1. CORPORATE EXISTENCE AND
POWER............................... 20
Section 6.2. CORPORATE
AUTHORIZATION..................................... 20
Section 6.3. GOVERNMENTAL AUTHORIZATION.................................. 21
Section 6.4. NON- CONTRAVENTION........................................... 21
Section 6.5. CAPITALIZATION.............................................. 21
Section 6.6. SUBSIDIARIES................................................ 22
Section 6.7. MINDSPRING SEC DOCUMENTS.................................... 22
Section 6.8. FINANCIAL STATEMENTS, NO MATERIAL UNDISCLOSED LIABILITIES... 22
Section 6.9. INFORMATION TO BE SUPPLIED.................................. 23
Section 6.10. ABSENCE OF CERTAIN
CHANGES.................................. 23
Section 6.11. LITIGATION.................................................. 23
Section 6.12. TAXES....................................................... 23
Section 6.13. EMPLOYEE BENEFITS........................................... 24
Section 6.14. COMPLIANCE WITH LAWS; LICENSES, PERMITS AND
REGISTRATIONS... 25
Section 6.15. TITLE TO PROPERTIES......................................... 25
Section 6.16. INTELLECTUAL PROPERTY....................................... 26
Section 6.17. ENVIRONMENTAL
MATTERS....................................... 26
Section 6.18. FINDERS' FEES; OPINIONS OF FINANCIAL
ADVISOR................ 26
Section 6.19. REQUIRED VOTE, BOARD APPROVAL............................... 26
Section 6.20. STATE TAKEOVER STATUTES..................................... 26
Section 6.21. POOLING MATTERS; TAX TREATMENT.............................. 27
Section 6.22. CERTAIN AGREEMENTS.......................................... 27
ii PAGE --------
Section 6.23. YEAR 2000
COMPLIANCE........................................ 27
ARTICLE VII COVENANTS OF EARTHLINK................................................ 28
Section 7.1. EARTHLINK INTERIM OPERATIONS................................ 28
Section 7.2. ACQUISITION PROPOSALS; BOARD RECOMMENDATION................. 30
ARTICLE VIII COVENANTS OF MINDSPRING.............................................. 31
Section 8.1. MINDSPRING INTERIM
OPERATIONS............................... 31
Section 8.2. ACQUISITION PROPOSALS; BOARD RECOMMENDATION................. 33
ARTICLE IX COVENANTS OF MINDSPRING, NEWCO AND
EARTHLINK........................... 35
Section 9.1. REASONABLE BEST EFFORTS..................................... 35
Section 9.2. CERTAIN FILINGS; COOPERATION IN RECEIPT OF CONSENTS; LISTING..................................................... 35
Section 9.3. PUBLIC ANNOUNCEMENTS........................................ 36
Section 9.4. ACCESS TO INFORMATION, NOTIFICATION OF CERTAIN MATTERS...... 36
Section 9.5. FURTHER ASSURANCES.......................................... 36
Section 9.6. TAX AND ACCOUNTING
TREATMENT................................ 37
Section 9.7. AFFILIATE
LETTERS........................................... 37
Section 9.8. CONFIDENTIALITY............................................. 37
Section 9.9. MINDSPRING STANDSTILL....................................... 38
Section 9.10. EARTHLINK
STANDSTILL........................................ 40
Section 9.11. ASR 135..................................................... 41
Section 9.12. BENEFIT MATTERS............................................. 41
Section 9.13. ANTITRUST
MATTERS........................................... 41
Section 9.14. EXEMPTION FROM LIABILITY UNDER SECTION 16(B)................ 42
ARTICLE X CONDITIONS TO THE MERGERS............................................... 43
Section 10.1. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY................. 43
Section 10.2. CONDITIONS TO THE OBLIGATIONS OF EARTHLINK.................. 43
Section 10.3. CONDITIONS TO THE OBLIGATIONS OF MINDSPRING................. 44
ARTICLE XI TERMINATION............................................................ 45
Section 11.1. TERMINATION................................................. 45
Section 11.2. EFFECT OF
TERMINATION....................................... 46
Section 11.3. FEES AND EXPENSES........................................... 46
ARTICLE XII MISCELLANEOUS......................................................... 47
Section 12.1. NOTICES..................................................... 47
Section 12.2. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS AFTER THE
EFFECTIVE
TIME.............................................. 47 iii PAGE --------
Section 12.3. AMENDMENTS: NO WAIVERS...................................... 47
Section 12.4. SUCCESSORS AND ASSIGNS...................................... 48
Section 12.5. GOVERNING
LAW............................................... 48
Section 12.6. COUNTERPARTS; EFFECTIVENESS; THIRD PARTY BENEFICIARIES...... 48
Section 12.7. JURISDICTION................................................ 48
Section 12.8. WAIVER OF JURY TRIAL........................................ 48
Section 12.9. ENFORCEMENT................................................. 48
Section 12.10. ENTIRE AGREEMENT............................................ 49
Section 12.11. SEVERABILITY................................................ 49 EXHIBITS
Exhibit 1. Stock Option Agreements
Exhibit 2. Stockholders Agreements
Exhibit 3. EarthLink Certificate of Merger
Exhibit 4. MindSpring Certificate of Merger
Exhibit 5. Restated Certificate of Incorporation of Newco
Exhibit 6. Bylaws of Newco
Exhibit 7. Nominating Committee
Exhibit 8. Director Designees
Exhibit 9. Principal Officers of Newco
Exhibit 10. Indemnification Agreements
Exhibit 11-A. Form of EarthLink Affiliate Letter
Exhibit 11-B. Form of MindSpring Affiliate Letter iv
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of September 22, 1999, by and
among WWW HOLDINGS, INC., a Delaware corporation ("NEWCO"), EARTHLINK
NETWORK, INC., a Delaware corporation ("EARTHLINK"), and MINDSPRING
ENTERPRISES, INC., a Delaware corporation ("MINDSPRING"). RECITALS
WHEREAS, the respective Boards of Directors of EarthLink and MindSpring have
determined that a combination of the business and operations of EarthLink and
MindSpring is advisable and in the best interests of their respective
stockholders and presents an opportunity for their respective companies to
achieve long-term strategic and financial benefits; and
WHEREAS, the respective Boards of Directors of EarthLink and MindSpring have
determined that the combination should be effected by causing EarthLink and
MindSpring to be merged with and into Newco; and
WHEREAS, pursuant to the EarthLink Merger (as hereinafter defined), each
outstanding share of EarthLink Common Stock (as hereinafter defined) will be
converted into 1.615 shares of Newco Common Stock (as hereinafter defined) each
outstanding share of EarthLink Series A Preferred (as hereinafter defined) shall
be converted into 1.615 shares of Newco Series A Preferred (as hereinafter
defined) and each outstanding share of EarthLink Series B Preferred (as
hereinafter defined) shall be converted into 1.615 shares of Newco Series B
Preferred (as hereinafter defined); and pursuant to the MindSpring Merger (as
hereinafter defined) each outstanding share of MindSpring Common Stock (as
hereinafter defined) will be converted into one (1) share of Newco Common Stock;and
WHEREAS, for Federal income tax purposes, it is intended that the
transactions contemplated by this Agreement shall constitute transactions
described in section 368 of the Internal Revenue Code of 1986, as amended (a
"368 REORGANIZATION"), and the regulations thereunder; and
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to EarthLink's and MindSpring's willingness to
enter into this Agreement, EarthLink and MindSpring have entered into stock
option agreements of even date herewith (collectively, the "STOCK OPTION
AGREEMENTS", in the form attached as EXHIBIT 1 hereto) providing for the
granting: (i) by EarthLink to MindSpring of an option to purchase from EarthLink
up to 19.9% of the outstanding shares of EarthLink Common Stock, subject to the
terms and conditions set forth therein and (ii) by MindSpring to EarthLink of an
option to purchase from MindSpring up to 19.9% of the outstanding shares of
MindSpring Common Stock, subject to the terms and conditions set forth therein;and
WHEREAS, simultaneously with the execution and delivery of this Agreement:
(iii) MindSpring has entered into an agreement (the "EARTHLINK STOCKHOLDERS
AGREEMENT") with certain stockholders of EarthLink pursuant to which such
EarthLink stockholders have agreed to vote the shares of EarthLink Common Stock
owned by them in favor of the EarthLink Merger under certain circumstances; and
(iv) EarthLink has entered into an agreement (the "MINDSPRING STOCKHOLDERS
AGREEMENT" and, together with the EarthLink Stockholders Agreement, the
"STOCKHOLDERS AGREEMENTS," each in the form attached as EXHIBIT 2 hereto) with
certain stockholders of MindSpring pursuant to which such MindSpring
stockholders have agreed to vote the shares of MindSpring Common Stock owned by
them in favor of the MindSpring Merger under certain circumstances.
NOW, THEREFORE, in consideration of the premises, which are incorporated
into and made part of this Agreement, and of the mutual representations,
warranties, covenants, agreements and
conditions set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows: ARTICLE I DEFINITIONS
Section 1.1. DEFINITIONS.
(a) As used herein, the following terms have the following meanings:
"ACQUISITION PROPOSAL FOR EARTHLINK" means any offer or proposal for, or
indication of interest in, a merger, consolidation, share exchange, business
combination, reorganization, recapitalization, liquidation, dissolution, tender
offer or exchange offer or other similar transaction involving, or any purchase
of 10% or more of the assets or any class of equity securities of, EarthLink or
any Significant Subsidiary of EarthLink, other than the transactions
contemplated by this Agreement or by Sprint or the Affiliated Equity Holders as
defined in and pursuant to Sections 3.01, 4.02 and 4.03 of the Sprint GovernanceAgreement.
"ACQUISITION PROPOSAL FOR MINDSPRING" means any offer or proposal for, or
indication of interest in, a merger, consolidation, share exchange, business
combination, reorganization, recapitalization, liquidation, dissolution, tender
offer or exchange offer or other similar transaction involving, or any purchase
of 10% or more of the assets or any class of equity securities of, MindSpring or
any Significant Subsidiary of MindSpring, other than the transactions
contemplated by this Agreement.
"AFFILIATE" means, with respect to any Person, any other Person, directly or
indirectly, controlling, controlled by, or under common control with, such
Person. For purposes of this definition, the term "control" (including the
correlative terms "CONTROLLING", "CONTROLLED BY" and "UNDER COMMON CONTROL
WITH,") means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract, or otherwise.
"BUSINESS DAY" means any day other than a Saturday, Sunday or one on which
banks are authorized by law to close in New York, New York.
"CERTIFICATES OF MERGER" means the EarthLink Certificate of Merger and the
MindSpring Certificate of Merger.
"CLOSING" means the conference held pursuant to Section 3.2.
"CLOSING DATE" means the date on which the Closing occurs.
"CODE" means the Internal Revenue Code of 1986, as amended.
"DGCL" means the Delaware General Corporation Law, as amended.
"EARTHLINK BALANCE SHEET" means EarthLink's consolidated balance sheet
included in the EarthLink 10-K relating to its fiscal year ended on
December 31, 1998.
"EARTHLINK CERTIFICATE OF MERGER" means the certificate of merger of
EarthLink with and into Newco, in substantially the form attached hereto as
EXHIBIT 3.
"EARTHLINK COMMON STOCK" means the common stock of EarthLink, par value
$0.01 per share.
"EARTHLINK EXCHANGE RATIO" means, collectively, the conversion formulas
described in SECTION 2.1(C) and 2.1(F) hereof.
"EARTHLINK PREFERRED STOCK" means the EarthLink Series A Preferred and the
EarthLink Series B Preferred. 2
"EARTHLINK SEC DOCUMENTS" means (i) EarthLink's annual report on Form 10-K
for its fiscal year ended December 31, 1998 (the "EARTHLINK 10-K"),
(ii) EarthLink's quarterly report on Form 10-Q (the "EARTHLINK 10-Q") for its
fiscal quarter ended June 30, 1999, (iii) EarthLink's proxy or information
statements relating to meetings of, or actions taken without a meeting by,
EarthLink's stockholders held since December 31, 1998, and (iv) all other
reports, filings, registration statements and other documents filed by it with
the SEC since December 31, 1998.
"EARTHLINK SERIES A PREFERRED" means the Series A Convertible Preferred
Stock of EarthLink, par value $0.01 per share.
"EARTHLINK SERIES B PREFERRED" means the Series B Convertible Preferred
Stock of EarthLink, par value $0.01 per share.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"EXCHANGE AGENT" means the agent to be agreed upon by EarthLink and
MindSpring and engaged by Newco to effect the exchange of the Certificates
pursuant to SECTION 2.4 of this Agreement.
"GOVERNMENTAL ENTITY" means any federal, state or local governmental
authority, any transgovernmental authority or any court, administrative or
regulatory agency or commission or other governmental authority or agency,
domestic or foreign.
"JOINT PROXY STATEMENT/PROSPECTUS" means the joint proxy statement/
prospectus included in the Registration Statement relating to the Special
Meetings, together with any amendments or supplements thereto.
"KNOWLEDGE" means, with respect to the matter in question, if any of the
executive officers of EarthLink or MindSpring, as the case may be, has actual
knowledge of such matter.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, PROVIDED,
HOWEVER, that the term "Lien" shall not include (i) liens for water and sewer
charges and current taxes not yet due and payable or being contested in good
faith and (ii) mechanics', carriers', workers', repairers', materialmen's,
warehousemen's and other similar liens arising or incurred in the ordinary
course of business.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the financial
condition, business or results of operations of a Person and its Subsidiaries,
taken as a whole, but shall exclude any material adverse effect arising out of
any change or development relating to (i) U.S. or global economic or industry
conditions (including, without limitation, conditions applicable generally to
the Internet service business), (ii) changes in U.S. or global financial markets
or conditions, (iii) any generally applicable change in law, rule or regulation
or GAAP or interpretation of any thereof, (iv) the announcement of this
Agreement or the transactions contemplated hereby, (v) a change in market price
or trading volume of any securities of EarthLink or MindSpring and/or
(vi) stockholder litigation arising in connection with this Agreement.
"EARTHLINK MATERIAL ADVERSE EFFECT" means a Material Adverse Effect in respect
of EarthLink and "MINDSPRING MATERIAL ADVERSE EFFECT" means a Material Adverse
Effect in respect of MindSpring and "NEWCO MATERIAL ADVERSE EFFECT" means a
Material Adverse Effect in respect of Newco.
"MERGERS" means the EarthLink Merger and the MindSpring Merger.
"MINDSPRING BALANCE SHEET" means MindSpring's balance sheet included in the
MindSpring 10-K relating to its fiscal year ended on December 31, 1998.
"MINDSPRING CERTIFICATE OF MERGER" means the certificate of merger of
MindSpring with and into Newco, in substantially the form attached hereto as
EXHIBIT 4. 3
"MINDSPRING COMMON STOCK" means the common stock of MindSpring, $0.01 par
value per share.
"MINDSPRING EXCHANGE RATIO" means the conversion formula described in
SECTION 2.2(C) hereof.
"MINDSPRING INDENTURE" means, collectively, the Indenture, as supplemented
by the First Supplemental Indenture, each dated as of April 14, 1999, between
MindSpring and United States Trust Company of New York as Trustee, pursuant to
which the MindSpring Notes were issued.
"MINDSPRING NOTES" means the 5% Convertible Subordinated Notes due 2006 of MindSpring.
"MINDSPRING PREFERRED STOCK" means the Serial Preferred Stock of MindSpring,
$0.01 par value per share.
"MINDSPRING SEC DOCUMENTS" means (i) the annual report on Form 10-K of
MindSpring (the "MINDSPRING 10-K") for its fiscal year ended December 31, 1998,
(ii) the quarterly report on Form 10-Q of MindSpring (the "MINDSPRING 10-Q") for
its fiscal quarter ended June 30, 1999, (iii) MindSpring's proxy or information
statements relating to meetings of, or actions taken without a meeting by, the
MindSpring stockholders, held since December 31, 1998, and (iv) all other
reports filings, registration statements and other documents filed by MindSpring
with the SEC since December 31, 1998.
"NEWCO COMMON STOCK" means the common stock of Newco, $0.01 par value per share.
"NEWCO PREFERRED STOCK" means the Newco Series A Preferred and the Newco
Series B Preferred.
"NEWCO SERIES A PREFERRED" means the Series A Convertible Preferred Stock of
Newco, par value $0.01 per share.
"NEWCO SERIES B PREFERRED" means the Series B Convertible Preferred Stock of
Newco, par value $0.01 per share.
"PERSON" means an individual, a corporation, a limited liability company, a
partnership, an association, a trust or any other entity or organization,
including any Governmental Entity.
"REGISTRATION STATEMENT" means the Registration Statement on Form S-4
registering under the Securities Act the Newco Common Stock issuable in
connection with the Mergers.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that constitutes a
"significant subsidiary" of such Person within the meaning of Rule 1-02 of
Regulation S-X of the Exchange Act.
"SPRINT" means Sprint Corporation, a Kansas corporation.
"SPRINT CREDIT AGREEMENT" means the Credit Agreement, dated as of
February 10, 1998, by and among EarthLink, Sprint and Dolphin, Inc.
"SPRINT GOVERNANCE AGREEMENT" means the governance agreement, dated as of
February 10, 1998, by and among EarthLink, Sprint, Sprint L.P. and
Dolphin, Inc.
"SUBSIDIARY" means, with respect to any Person, any corporation or other
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other Persons performing
similar functions are directly or indirectly owned by such Person. "EARTHLINK
SUBSIDIARY" means a Subsidiary of EarthLink and "MINDSPRING SUBSIDIARY" means a
Subsidiary of MindSpring. 4
"TAX" or "TAXES" means any federal, state, county, local or foreign taxes,
charges, levies, imposts, duties, other assessments or similar charges of any
kind whatsoever, including any interest, penalties and addition imposed thereon
or with respect thereto.
(b) Each of the following terms is defined in the Section set forth opposite
such term: TERMS SECTION
- ----- ----------
Acquisition Proposal for EarthLink 1.1(a)
Acquisition Proposal for MindSpring 1.1(a)Affiliate 1.1(a)
Business Day 1.1(a)Certificates 2.4(a)
Closing 1.1(a)
Closing Date 1.1(a)Code 1.1(a)
Confidential Material 9.8(a)DGCL 1.1(a)
Delivering Company 9.8(a)EarthLink Preamble
EarthLink 10-K 1.1(a)
EarthLink 10-Q 1.1(a)
EarthLink Balance Sheet 1.1(a)
EarthLink Certificate of Merger 1.1(a)
EarthLink Common Stock 1.1(a)
EarthLink Counter Proposal 8.2(c)
EarthLink Designees 4.2
EarthLink Employee Plans 5.13(a)
EarthLink Equity Securities 7.2(e)
EarthLink Exchange Ratio 1.1(a)
EarthLink Insider 9.14(d)
EarthLink Intellectual Property 5.16
EarthLink Material Adverse Effect 1.1(a)
EarthLink Merger 2.1(b)
EarthLink Preferred Stock 1.1(a)
EarthLink Recommendation 3.1
EarthLink Returns 5.12
EarthLink SEC Documents 1.1(a)
EarthLink Securities 5.5(b)
EarthLink Series A Preferred 1.1(a)
EarthLink Series B Preferred 1.1(a)
EarthLink Stockholders Agreement Recitals
EarthLink Stockholder Approval 5.19(a)
EarthLink Subsequent Alternate Transaction 11.3(b)
EarthLink Subsidiary 1.1(a)
EarthLink Superior Proposal 7.2(d)
Effective Time 3.1
End Date 11.1(b)(i)
Environmental Laws 5.17(b)ERISA 5.13(a)
ERISA Affiliate 5.13(a)
Exchange Act 1.1(a) 5 TERMS SECTION
- ----- ----------
Exchange Agent 1.1(a)GAAP 5.8(a)
Governmental Entity 1.1(a)
HSR Act 5.3
Joint Proxy Statement/Prospectus 1.1(a)Knowledge 1.1(a)Lien 1.1(a)
Material Adverse Effect 1.1(a)
Mergers 1.1(a)MindSpring Preamble
MindSpring 10-K 1.1(a)
MindSpring 10-Q 1.1(a)
MindSpring Balance Sheet 1.1(a)
MindSpring Certificate of Merger 1.1(a)
MindSpring Common Stock 1.1(a)
MindSpring Counter Proposal 7.2(c)
MindSpring Designees 4.2(a)
MindSpring Employee Plans 6.13(a)
MindSpring Equity Securities 8.2(e)
MindSpring Exchange Ratio 1.1(a)
MindSpring Indenture 1.1(a)
MindSpring Insider 9.14(d)
MindSpring Intellectual Property 6.16
MindSpring Material Adverse Effect 1.1(a)
MindSpring Merger 2.2(b)
MindSpring Notes 1.1(a)
MindSpring Preferred Stock 1.1(a)
MindSpring Recommendation 3.1
MindSpring Returns 6.12
MindSpring SEC Documents 1.1(a)
MindSpring Securities 6.5(b)
MindSpring Stockholders Agreement Recitals
MindSpring Stockholder Approval 6.19
MindSpring Subsequent Alternate Transaction 11.3(b)
MindSpring Subsidiary 1.1(a)
MindSpring Superior Proposal 8.2(d)
Multiemployer Plan 5.13(b)Newco Preamble
Newco Common Stock 1.1(a)
Newco Material Adverse Effect 1.1(a)
Newco Preferred Stock 1.1(a)
Newco Series A Preferred 1.1(a)
Newco Series B Preferred 1.1(a)Person 1.1(a)
Registration Statement 1.1(a)
Receiving Company 9.8(a)
Representatives 9.8(a)
Retirement Plan 5.13(b)SEC 1.1(a)
Section 16 Information 9.14(c) 6 TERMS SECTION
- ----- ----------
Securities Act 1.1(a)
Significant Subsidiary 1.1(a)
Special Meetings 3.1Sprint 1.1(a)
Sprint Credit Agreement 1.1(a)
Spring Designees 4.2(a)
Sprint Governance Agreement 1.1(a)
Stock Option Agreements Recitals
Stockholders Agreements RecitalsSubsidiary 1.1(a)Taxes 1.1(a)
Termination Fee 11.3(b)
368 Reorganization Recitals
Year 2000 Problem 5.23 ARTICLE II
THE MERGERS
Section 2.1. THE EARTHLINK MERGER.
(a) EarthLink agrees to submit this Agreement to its stockholders for
approval in accordance with SECTION 3.1 hereof.
(b) Subject to the terms and conditions of this Agreement and the EarthLink
Certificate of Merger, at the Effective Time, immediately prior to the
MindSpring Merger (as hereinafter defined), EarthLink shall be merged with and
into Newco in accordance with the provisions of, and with the effects provided
in, Subchapter IX of the DGCL (the "EARTHLINK MERGER"). Newco shall be the
surviving corporation resulting from the EarthLink Merger, shall continue to be
governed by the laws of the State of Delaware, shall at the Effective Time amend
Article I of its Certificate of Incorporation to change its name to "EarthLink
Network, Inc.," and shall adopt the Nasdaq ticker symbol "ELNK."
(c) Pursuant to the EarthLink Merger, each share of EarthLink Common Stock
outstanding immediately prior to the Effective Time shall be converted into and
become 1.615 shares of Newco Common Stock, and each outstanding option, warrant
and other right to purchase, or which is convertible into, EarthLink Common
Stock shall be converted into an option, warrant or other right, as the case may
be, to purchase or be convertible into a number of shares of Newco Common Stock
equal to the number of shares of EarthLink Common Stock subject to such option,
warrant or other right multiplied by 1.615 and otherwise having substantially
identical terms and conditions, except that the exercise or purchase price shall
be divided by 1.615.
(d) Each share of EarthLink Common Stock held by EarthLink as treasury stock
or owned by MindSpring immediately prior to the Effective Time shall becanceled.
(e) No fraction of a share of Newco Common Stock shall be issued in
connection with the conversion of EarthLink Common Stock in the EarthLink Merger
and the distribution of Newco Common Stock in respect thereof, but in lieu of
such fraction, the Exchange Agent shall make a cash payment (without interest
and subject to the payment of any applicable withholding Taxes) equal to the
same fraction of the market value of a full share of Newco Common Stock,
computed on the basis of the mean of the high and low sales prices of Newco
Common Stock as reported on NASDAQ on the first full day on which the Newco
Common Stock is traded on the Nasdaq Stock Market after the Effective Time. 7
(f) Each share of EarthLink Series A Preferred and each share of EarthLink
Series B Preferred shall be converted into 1.615 shares of newly created Newco
Series A Preferred and 1.615 shares of newly created Newco Series B Preferred,
having terms, conditions, rights, preferences and designations substantially
similar to the EarthLink Series A Preferred and the EarthLink Series B
Preferred, respectively.
(g) EarthLink agrees to use its best efforts to cause the EarthLink Merger
to be consummated in accordance with the terms of this Agreement and the
EarthLink Certificate of Merger.
Section 2.2. THE MINDSPRING MERGER.
(a) MindSpring agrees to submit this Agreement to its stockholders for
approval in accordance with SECTION 3.1 hereof.
(b) Subject to the terms and conditions of this Agreement and the MindSpring
Certificate of Merger, at the Effective Time, immediately following the
EarthLink Merger, MindSpring shall be merged with and into Newco in accordance
with the provisions of, and with the effects provided in, Subchapter IX of the
DGCL (the "MINDSPRING MERGER"). Newco shall be the surviving corporation
resulting from the MindSpring Merger and shall continue to be governed by the
laws of the State of Delaware.
(c) Pursuant to the MindSpring Merger, each share of MindSpring Common Stock
outstanding immediately prior to the Effective Time shall be converted into and
become one (1) share of Newco Common Stock, and each outstanding option, warrant
and other right to purchase, or which is convertible into, MindSpring Common
Stock shall be converted into an option, warrant or right, as the case may be,
to purchase or be convertible into a number shares of Newco Common Stock equal
to the number of shares of Newco Common Stock subject to such option, warrant or
other right multiplied by one (1) and otherwise having substantially identical
terms and conditions, except that the exercise or purchase price shall be
divided by one (1).
(d) Each share of MindSpring Common Stock held by MindSpring as treasury
stock or owned by EarthLink immediately prior to the Effective Time shall becanceled.
(e) The parties will take such action as may be necessary to cause Newco,
and Newco agrees, to execute a supplemental indenture to the MindSpring
Indenture, which shall comply with the requirements of the MindSpring Indenture,
for the purpose of assuming all of MindSpring's obligations with respect to the
MindSpring Notes, and to reserve out of its authorized Newco Common Stock a
sufficient number of shares of Newco Common Stock to permit conversion of the
MindSpring Notes on or after the Effective Time pursuant to the terms thereof
and the MindSpring Indenture.
(f) MindSpring agrees to use its best efforts to cause the MindSpring Merger
to be consummated in accordance with the terms this Agreement of the MindSpring
Certificate of Merger.
Section 2.3. CANCELLATION OF NEWCO COMMON STOCK.
Pursuant to the Mergers, the shares of Newco Common Stock held by EarthLink
and MindSpring, respectively, immediately prior to the Mergers will be canceled
in the Mergers.
Section 2.4. EXCHANGE OF CERTIFICATES.
(a) Prior to the Effective Time, EarthLink and MindSpring shall cause Newco,
and Newco agrees, to appoint the Exchange Agent to act as the exchange agent in
connection with the Mergers. Except as otherwise provided in SECTION 2.1 and
SECTION 2.2, from and after the Effective Time, each holder of a certificate
that immediately prior to the Effective Time represented outstanding shares of
MindSpring Common Stock or EarthLink Common Stock (the "CERTIFICATES") shall be
entitled to receive in exchange therefor, upon surrender thereof to the Exchange
Agent, a certificate or certificates representing the number of whole shares of
Newco Common Stock into which such holder's shares 8
were converted in the MindSpring Merger or the EarthLink Merger, as the case may
be. Immediately prior to the Effective Time, Newco will deliver to the Exchange
Agent, in trust for the benefit of the holders of EarthLink Common Stock and
MindSpring Common Stock, (i) certificates representing shares of Newco Common
Stock and (ii) cash in an amount sufficient for payment in lieu of fractional
shares necessary to make the exchanges contemplated by SECTION 2.1 and SECTION
2.2 hereof on a timely basis.
(b) Promptly after the Effective Time, the Exchange Agent shall mail to each
record holder of EarthLink Common Stock and MindSpring Common Stock as of the
Effective Time, a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to Certificates shall pass, only upon
proper delivery of the Certificates to the Exchange Agent) and instructions for
use in effecting the surrender of Certificates in exchange for certificates
representing shares of Newco Common Stock. Upon surrender to the Exchange Agent
of a Certificate, together with such letter of transmittal duly executed, and
any other required documents, the holder of such Certificate shall be entitled
to receive in exchange therefor certificates representing shares of Newco Common
Stock as set forth in this ARTICLE II, and such Certificate shall forthwith be
canceled. No holder of a Certificate or Certificates shall be entitled to
receive any dividend or other distribution from Newco until the surrender of
such holder's Certificate for a certificate or certificates representing shares
of Newco Common Stock. Upon such surrender, there shall be paid to the holder
the amount of any dividends or other distributions (without interest) that
theretofore became payable, but that were not paid by reason of the foregoing,
with respect to the number of whole shares of Newco Common Stock represented by
the certificates issued upon surrender, which amount shall be delivered to the
Exchange Agent by Newco from time to time as such dividends or other
distributions are declared. If delivery of certificates representing shares of
Newco Common Stock is to be made to a person other than the person in whose name
the Certificate surrendered is registered or if any certificate for shares of
Newco Common Stock is to be issued in a name other than that in which the
Certificate surrendered therefor is registered, it shall be a condition of such
delivery or issuance that the Certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the person requesting
such delivery or issuance shall pay any transfer or other Taxes required by
reason of such delivery or issuance to a person other than the registered holder
of the Certificate surrendered or establish to the satisfaction of Newco that
such Tax has been paid or is not applicable. Until surrendered in accordance
with the provisions of this SECTION 2.4, each Certificate shall represent for
all purposes only the right to receive shares of Newco Common Stock (and cash in
lieu of fractional shares) as provided in SECTION 2.1, and SECTION 2.2 hereto,
without any interest thereon.
(c) After the Effective Time, there shall be no transfers on the stock
transfer books of Newco, as the surviving corporation in the Mergers, of the
shares of EarthLink Common Stock or MindSpring Common Stock that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to Newco for transfer, they shall be canceled
and exchanged for shares of Newco Common Stock as provided in SECTION 2.1 and
SECTION 2.2 hereof, in accordance with the procedures set forth in this SECTION2.4.
(d) Any shares of Newco Common Stock (and any accrued dividends and
distributions thereon), and any cash held by the Exchange Agent for payment in
lieu of fractional shares, that remains unclaimed by the former stockholders of
EarthLink or MindSpring on the first anniversary of the Effective Time shall be
delivered by the Exchange Agent to Newco. Any former stockholders of EarthLink
or MindSpring who have not theretofore complied with this SECTION 2.4 shall
thereafter look only to Newco for satisfaction of their claim for the
consideration set forth in this ARTICLE II, without any interest thereon.
Notwithstanding the foregoing, Newco shall not be liable to any holder of shares
of MindSpring Common Stock or EarthLink Common Stock for any shares of Newco
Common Stock (or dividends or distributions with respect thereto) delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. 9
(e) Upon delivery of certificates representing shares of EarthLink Preferred
Stock to Newco by Sprint Communications Company L.P. after the Effective Time,
Newco shall deliver promptly to Sprint Communications Company L.P. certificates
representing shares of Newco Preferred Stock in appropriate denominations.
ARTICLE III
STOCKHOLDER APPROVAL; CLOSING
Section 3.1. STOCKHOLDER APPROVAL.
This Agreement shall be submitted for consideration and approval to the
holders of shares of MindSpring Common Stock at a special meeting of
stockholders duly held for such purpose by MindSpring, and this Agreement shall
be submitted for consideration and approval to the holders of shares of
EarthLink Common Stock at a special meeting of stockholders duly held for such
purpose by EarthLink (collectively, the "SPECIAL MEETINGS"). MindSpring and
EarthLink shall coordinate and cooperate with respect to the timing of the
Special Meetings and shall endeavor to hold the Special Meetings on the same day
and as soon as practicable after the date hereof. MindSpring and EarthLink shall
each recommend that their respective stockholders approve this Agreement and the
transactions contemplated hereby, and such recommendations shall be contained in
the Joint Proxy Statement/ Prospectus (the "EARTHLINK RECOMMENDATION" and the
"MINDSPRING RECOMMENDATION," respectively). On the first business day on or by
which (a) this Agreement has been duly approved by the requisite vote of the
holders of shares of MindSpring Common Stock, and (b) this Agreement has been
duly approved by the requisite vote of the holders of shares of EarthLink Common
Stock and (c) the Closing of the transactions contemplated by this Agreement
shall have occurred, or such later date as shall be agreed upon by MindSpring
and EarthLink, the Certificates of Merger shall be filed in accordance with the
DGCL, and the Mergers shall become effective in accordance with the terms of
this Agreement and the Certificates of Merger at the time and date contemplated
therein (such time and date being referred to herein as the "EFFECTIVE TIME").
Section 3.2. TIME AND PLACE OF CLOSING.
The Closing of the transactions contemplated by this Agreement will take
place at 11:00 A.M. on a date mutually agreed upon by the parties hereto, which
shall be no later than the third business day following the date on which all of
the conditions to the obligations of the parties hereunder set forth in
ARTICLE X hereof have been satisfied or waived. The place of Closing shall be at
such place as may be mutually agreed upon by the parties hereto. ARTICLE IV NEWCO
Section 4.1. NO CONDUCT OF BUSINESS BY NEWCO; RESTATED ARTICLES AND BYLAWS.
(a) Prior to the Effective Time, Newco shall not (i) conduct any business
operations whatsoever or (ii) enter into any contract or agreement of any kind
or acquire any assets or incur any liability, except as may be specifically
contemplated by this Agreement or as the parties may otherwise agree. In the
event this Agreement is terminated prior to the Effective Time, Newco shall bedissolved.
(b) MindSpring and EarthLink shall cause Newco, and Newco agrees, to file,
immediately prior to the filing of the Certificates of Merger pursuant to
SECTION 3.1 hereof, a Restated Certificate of Incorporation of Newco,
substantially in the form attached hereto as EXHIBIT 5. MindSpring and EarthLink
shall cause Newco, and Newco agrees, to adopt effective as of the Effective
Time, By-laws substantially in the form attached hereto as EXHIBIT 6.
10
Section 4.2. BOARD OF DIRECTORS.
At the Effective Time, the Board of Directors of Newco shall consist of
thirteen (13) persons. Of the thirteen persons initially elected to the Board of
Directors of Newco, four (4) (the "EARTHLINK DESIGNEES") shall be persons named
by the Board of Directors of EarthLink, four (4) (the "MINDSPRING DESIGNEES")
shall be persons named by the Board of Directors of MindSpring, two (2) (the
"SPRINT DESIGNEES") shall be the persons named by the Board of Directors of
Sprint, three (3) (the "OUTSIDE DIRECTORS") shall be nominated by the nominating
committee to be comprised of the persons named on EXHIBIT 7 attached hereto and
in accordance with the terms set forth thereon prior to Closing (the "NOMINATING
COMMITTEE") and subsequently elected by the Newco Board of Directors; provided,
however, the number of Outside Directors shall be reduced to two (2) in the
event that Sprint fails to exercise its rights to maintain its Higher Threshold
as defined in and as pursuant to the Sprint Governance Agreement and, as a
result thereof and in accordance with section 7(b) of the Certificates of
Designation for each of the Series A Preferred Stock and Series B Preferred
Stock, and section 2.01(d) of the Sprint Governance Agreement, as the case may
be, the number of Sprint Designees sitting on the Board of Directors is reduced
to one(1). In the event the number of Outside Directors and Sprint Designees is
reduced as described in the immediately preceding sentence, the size of the
Board of Directors of Newco shall be reduced by two (2) members. The Board of
Directors of Newco shall be divided into three classes, with the initial terms
of office of the first, second and third classes expiring at the first, second
and third annual meetings of the stockholders of Newco, respectively. The
EarthLink Designees, the MindSpring Designees and the Sprint Designees are each
listed by class on EXHIBIT 8 attached hereto. If, prior to the Effective Time,
(i) any of the individuals named by EarthLink, MindSpring or Sprint to serve on
the Board of Directors of Newco following the Effective Time resigns, retires or
otherwise ceases to serve as a director of EarthLink, MindSpring or Sprint, as
the case may be, or otherwise becomes unable or unwilling to serve as a director
of Newco, or (ii) EarthLink, MindSpring or Sprint shall determine to replace an
individual named by such party to serve on the Board of Directors of Newco, the
party that designated such individual may name a replacement to become a
director of Newco. Any such replacement of an EarthLink Designee or a MindSpring
Designee shall be subject to the approval of the Chief Executive Officer of
Newco, which approval shall not be unreasonably withheld, conditioned ordelayed.
(a) The persons named as members of the Board of Directors of Newco
pursuant to SECTION 4.2 shall be named in the Joint Proxy Statement/Prospectus
and the Registration Statement, subject to receipt of the consent of such
individuals to be so named.
Section 4.3. MANAGEMENT.
The principal officers of Newco at the Effective Time shall be as listed on
EXHIBIT 9. All other management positions of Newco shall be determined by
Newco's Chief Executive Officer and President.
Section 4.4. HEADQUARTERS OF NEWCO.
The headquarters of Newco shall be located in Atlanta, Georgia.
Section 4.5. INDEMNIFICATION AND INSURANCE.
(a) Newco agrees to assume the agreements listed in EXHIBIT 10, which
agreements will survive the Mergers and will continue in full force and effect
for a period of not less than six (6) years from the Effective Time. In the
event any claim is asserted or made within such six-year period, all rights to
indemnification in respect of any such claim will continue until final
disposition thereof. An "INDEMNIFIED PARTY" shall mean any Person who is at the
Effective Time or prior thereto has been an employee, agent, director or officer
of either MindSpring or EarthLink as provided in their respective charters,
Bylaws or resolutions. 11
(b) From and after the Effective Time, Newco shall indemnify all
Indemnified Parties to the fullest extent permitted by the DGCL with respect to
all acts and omissions arising out of such individuals' services as officers,
directors, employees or agents of either MindSpring or EarthLink or as trustees
or fiduciaries of any plan for the benefit of employees, or otherwise on behalf
of, either MindSpring or EarthLink, occurring at or prior to the Effective Time,
including the transactions contemplated by this Agreement. In the event any
Indemnified Party is or becomes involved in any capacity in any action,
proceeding or investigation in connection with any such matter occurring at or
prior to the Effective Time, Newco will pay as incurred such Indemnified Party's
legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith. Newco will pay all expenses,
including attorneys' fees, that may be incurred by any Indemnified Party in
enforcing the indemnity and other obligations provided for in this SECTION 4.5.
(c) Newco will cause to be maintained in effect for not less than six
(6) years from the Effective Time directors' and officers' liability insurance
covering the directors and officers of MindSpring and EarthLink similar in scope
and coverage to the directors' and officers' liability insurance maintained by
MindSpring and EarthLink for their directors and officers.
(d) The provisions of this SECTION 4.5 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party, his or her heirs and
his or her personal representatives and shall be binding on all successors and
assigns of Newco.
Section 4.6. [Intentionally Omitted]
Section 4.7. MINDSPRING NOTES.
Newco shall redeem in cash only any MindSpring Notes presented for
redemption as a result of the Merger. ARTICLE V
REPRESENTATIONS AND WARRANTIES OF EARTHLINK
Except as disclosed in (i) the EarthLink Disclosure Schedule delivered to
MindSpring separately prior to, or contemporaneously with, the date hereof
(which disclosure schedule shall make a specific reference to the particular
Section or subsection of this Agreement to which exception is being taken but
once made shall be deemed made for all purposes of the EarthLink Disclosure
Schedule) or (ii) (except with respect to the third sentence of SECTION 5.5(B)
hereof) the EarthLink SEC Documents filed or made prior to the date hereof,
EarthLink represents and warrants to MindSpring that:
Section 5.1. CORPORATE EXISTENCE AND POWER.
EarthLink is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, and has all corporate powers
required to carry on its business as now conducted. EarthLink is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction where the character of the property owned or leased by it or the
nature of its activities makes such qualification necessary, except where the
failure to be so qualified, individually or in the aggregate, would not be
reasonably likely to have an EarthLink Material Adverse Effect. EarthLink has
heretofore made available to MindSpring true and complete copies of EarthLink's
certificate of incorporation and bylaws as currently in effect.
Section 5.2. CORPORATE AUTHORIZATION.
The execution, delivery and performance by EarthLink of this Agreement and
the consummation by EarthLink of the transactions contemplated hereby are within
EarthLink's corporate powers and, except for the EarthLink Stockholder Approval
(as defined herein), have been duly authorized by all necessary corporate
action. Assuming that this Agreement constitutes the valid and bindingobligation 12
of MindSpring and Newco, this Agreement constitutes a valid and binding
agreement of EarthLink, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws, now or
hereafter in effect, relating to or affecting creditors' rights and remedies and
to general principles of equity.
Section 5.3. GOVERNMENTAL AUTHORIZATION.
The execution, delivery and performance by EarthLink of this Agreement and
the consummation by EarthLink of the transactions contemplated hereby require no
action by or in respect of, or filing with, any Governmental Entity other than
(a) the filing of (i) a certificate of merger in accordance with the DGCL and
(ii) appropriate documents with the relevant authorities of other states or
jurisdictions in which EarthLink or any EarthLink Subsidiary is qualified to do
business; (b) compliance with any applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR ACT");
(c) compliance with any applicable requirements of the Securities Act and the
Exchange Act; (d) such as may be required under any applicable state securities
or blue sky laws; and (e) such other consents, approvals, actions, orders,
authorizations, registrations, declarations and filings that, if not obtained or
made, would not, individually or in the aggregate, (x) be reasonably likely to
have an EarthLink Material Adverse Effect or (assuming for this purpose that the
Effective Time had occurred) a Newco Material Adverse Effect, or (y) prevent or
materially impair the ability of EarthLink to consummate the transactions
contemplated by this Agreement.
Section 5.4. NON-CONTRAVENTION.
The execution, delivery and performance by EarthLink of this Agreement and
the consummation by EarthLink of the transactions contemplated hereby do not and
will not (a) contravene or conflict with EarthLink's certificate of
incorporation or bylaws, (b) assuming compliance with the matters referred to in
SECTION 5.3, contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree binding
upon or applicable to EarthLink or any EarthLink Subsidiary, (c) constitute a
default under or give rise to a right of termination, cancellation or
acceleration of any right or obligation of EarthLink or any EarthLink Subsidiary
or to a loss of any benefit or status to which EarthLink or any EarthLink
Subsidiary is entitled under any provision of any agreement, contract or other
instrument binding upon EarthLink or any EarthLink Subsidiary or any license,
franchise, permit or other similar authorization held by EarthLink or any
EarthLink Subsidiary, or (d) result in the creation or imposition of any Lien on
any asset of EarthLink or any EarthLink Subsidiary other than, in the case of
each of (b), (c) and (d), any such items that would not, individually or in the
aggregate (x) be reasonably likely to have an EarthLink Material Adverse Effect
or (y) prevent or materially impair the ability of EarthLink to consummate the
transactions contemplated by this Agreement.
Section 5.5. CAPITALIZATION.
(a) The authorized capital stock of EarthLink consists of 200,000,000
shares of EarthLink Common Stock, 25,000,000 shares of EarthLink Series A
Preferred and 625,000 shares of EarthLink Series B Preferred. As of
September 21, 1999, there were outstanding (w) 32,554,382 shares of EarthLink
Common Stock, (x) 4,102,941 shares of EarthLink Series A Preferred, (y) 606,155
shares of EarthLink Series B Preferred and (z) stock options and warrants to
purchase an aggregate of 4,853,377 shares of EarthLink Common Stock (of which
options and warrants to purchase an aggregate of 1,465,629 shares of EarthLink
Common Stock were exercisable). All outstanding shares of capital stock of
EarthLink have been duly authorized and validly issued and are fully paid andnonassessable.
(b) As of the date hereof, except (i) as set forth in this SECTION 5.5, and
(ii) for changes since September 21, 1999, resulting from the exercise of stock
options or warrants outstanding on such date, there are no outstanding
(x) shares of capital stock or other voting securities of EarthLink,
(y) securities of EarthLink convertible into or exchangeable for shares of
capital stock or voting 13
securities of EarthLink, or (z) options or other rights to acquire from
EarthLink, and no obligation of EarthLink to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of EarthLink (the items in clauses (x), (y) and (z) being
referred to collectively as the "EARTHLINK SECURITIES"). There are no
outstanding obligations of EarthLink or any EarthLink Subsidiary to repurchase,
redeem or otherwise acquire any EarthLink Securities. If fully converted as of
the date hereof, assuming that all conditions or limitations to such conversion
have been satisfied or waived, EarthLink Series A Preferred and the EarthLink
Series B Preferred would be convertible into 7,335,833 shares of EarthLink
Common Stock and 541,886 shares of EarthLink Common Stock, respectively. There
are no outstanding contractual obligations of EarthLink to provide funds to, or
make any investment (in the form of a loan, capital contribution or otherwise)
in, any other Person other than in the ordinary course of business consistent
with past practice. There are no stockholder agreements, voting trusts or other
agreements or understandings to which EarthLink is a party, or of which
EarthLink is aware, relating to voting, registration or disposition of any
shares of capital stock of EarthLink or granting to any person or group of
persons the right to elect, or to designate or nominate for election, a director
to the board of directors of EarthLink.
Section 5.6. SUBSIDIARIES.
(a) Each Significant Subsidiary of EarthLink is a corporation duly
incorporated or an entity duly organized, and is validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has all powers and authority and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted and is duly qualified to do business as a foreign entity and is in
good standing in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such qualification necessary,
in each case with such exceptions as, individually or in the aggregate, would
not be reasonably likely to have, an EarthLink Material Adverse Effect.
EarthLink Operations, Inc., the only Significant Subsidiary of EarthLink, is
incorporated in Delaware and is a wholly-owned subsidiary of EarthLink.
(b) All of the outstanding shares of capital stock of, or other ownership
interest in, each Significant Subsidiary of EarthLink has been validly issued
and is fully paid and nonassessable. All of the outstanding capital stock of, or
other ownership interest in, each of EarthLink's Significant Subsidiaries, that
is owned, directly or indirectly, by EarthLink, is owned free and clear of any
Lien and free of any other limitation or restriction (including any limitation
or restriction on the right to vote, sell or otherwise dispose of such
