<PAGE>
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
AT HOME CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
April 24, 1998
To Our Stockholders:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders of
At Home Corporation to be held at the principal executive offices of the Company
at 425 Broadway, Redwood City, California 94063 on Wednesday, May 13, 1998 at
3:00 p.m.
The matters expected to be acted upon at the meeting are described in detail in
the following Notice of Annual Meeting of Stockholders and Proxy Statement.
It is important that you use this opportunity to take part in the affairs of
your Company by voting on the business to come before this meeting. WHETHER OR
NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND PROMPTLY
RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO THAT YOUR
SHARES MAY BE REPRESENTED AT THE MEETING. Returning the Proxy does not deprive
you of your right to attend the meeting and to vote your shares in person.
We look forward to seeing you at the meeting.
Sincerely,
/s/ Thomas A. Jermoluk
Thomas A. Jermoluk
Chairman of the Board, President and
Chief Executive Officer
<PAGE>
________________________________________________________________________________
AT HOME CORPORATION
425 BROADWAY
REDWOOD CITY, CALIFORNIA 94063
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 13, 1998
________________________________________________________________________________
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of At Home
Corporation (the "Company") will be held at the principal executive offices of
the Company at 425 Broadway, Redwood City, California 94063 on Wednesday, May
13, 1998 at 3:00 p.m. for the following purposes:
1. To elect eleven (11) directors of the Company, consisting of two Series A
Directors, five Series B Directors, one Series K Director and three Common
Stock Directors, to hold office until the next annual meeting of
stockholders and until their respective successors have been elected and
qualified or until their earlier resignation or removal. The Company's
Board of Directors intends to present the following nominees for election
as directors:
<TABLE>
<CAPTION>
SERIES A DIRECTORS SERIES B DIRECTORS SERIES K DIRECTOR COMMON STOCK DIRECTORS
- ----------------------------------- ------------------------ ---------------------- ------------------------------
<S> <C> <C> <C>
James L. Barksdale Leo J. Hindery, Jr. L. John Doerr Thomas A. Jermoluk
William R. Hearst III Bruce W. Ravenel John C. Malone
Brian L. Roberts Edward S. Rogers
Larry E. Romrell
David M. Woodrow
</TABLE>
2. To consider and vote upon a proposal to amend the Company's 1997 Equity
Incentive Plan to increase the number of shares of Series A Common Stock
reserved for issuance thereunder by 4,975,000 shares.
3. To consider and vote upon a proposal to amend the Company's 1997 Employee
Stock Purchase Plan to increase the number of shares of Series A Common
Stock reserved for issuance thereunder by 600,000 shares, from 400,000
shares to 1,000,000 shares.
4. To consider and vote upon a proposal to amend the Company's Fourth Amended
and Restated Certificate of Incorporation to change the Board of
Directors' supermajority approval requirements related to increases in the
number of shares issued or reserved for issuance to employees or
management of the Company.
5. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for 1998.
6. To transact such other business as may properly come before the meeting or
any adjournment thereof.
The foregoing items of business are more fully described in the Proxy Statement
accompanying this Notice.
Only stockholders of record at the close of business on March 14, 1998 are
entitled to notice of and to vote at the meeting or any adjournment thereof.
By Order of the Board of Directors
David G. Pine
Secretary
Redwood City, California
April 24, 1998
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO
THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
<PAGE>
________________________________________________________________________________
AT HOME CORPORATION
PROXY STATEMENT
APRIL 24, 1998
________________________________________________________________________________
GENERAL
The accompanying proxy is solicited on behalf of the Board of Directors of At
Home Corporation, a Delaware corporation (the "Company"), for use at the 1998
Annual Meeting of Stockholders of the Company to be held at the principal
executive offices of the Company at 425 Broadway, Redwood City, California 94063
on Wednesday, May 13, 1998 at 3:00 p.m. (the "Meeting"). The Company has one
class of capital stock outstanding, Common Stock, divided into three series: (i)
Series A Common Stock, par value $.01 per share ("Series A Common Stock"); (ii)
Series B Common Stock, par value $.01 per share ("Series B Common Stock"); and
(iii) Series K Common Stock, par value $.01 per share ("Series K Common Stock").
Only holders of record of the Series A Common Stock, Series B Common Stock and
Series K Common Stock (collectively, the "Common Stock") on March 14, 1998 (the
"Record Date") will be entitled to vote at the Meeting. On that date, the
Company had 91,651,082 shares of Series A Common Stock, 15,400,000 shares of
Series B Common Stock and 11,658,245 shares of Series K Common Stock outstanding
and entitled to vote at the Meeting. Except for the election of directors,
described below, a majority of the total voting power of the shares of Common
Stock represented in person or by proxy will constitute a quorum for the
transaction of business at the Meeting. This Proxy Statement and the
accompanying proxy will first be mailed to stockholders on or about April 24,
1998.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Holders of the Company's Common Stock are entitled to one vote for each share
held as of the Record Date, except that holders of Series B Common Stock are
entitled to 10 votes for each share held as of the Record Date. All of the
outstanding shares of Series B Common Stock are beneficially owned by Tele-
Communications, Inc., a Delaware corporation ("TCI").
Holders of Series A Common Stock, voting as a separate series, have the
exclusive right to elect two directors (the "Series A Directors") to the
Company's Board of Directors (the "Board"). The Series A Directors will be
elected by a plurality of the votes of the shares of Series A Common Stock
present in person or represented by proxy at the Meeting. Each of the Series A
Directors must be a person (i) who is not an officer (other than the Vice
Chairman) of, or employed by, the Company or its subsidiary and (ii) who is not
an affiliate or an associate of Cox Enterprises, Inc., a Delaware corporation
("Cox"), Comcast Corporation, a Pennsylvania corporation ("Comcast"), or TCI, or
any of their respective controlled affiliates (other than the Company and its
subsidiary). A majority of the shares of Series A Common Stock present in
person or represented by proxy at the Meeting will constitute a quorum for the
purposes of electing Series A Directors.
Holders of Series B Common Stock, voting as a separate series, have the
exclusive right to elect five directors (the "Series B Directors") to the Board.
The Series B Directors will be elected by a plurality of the votes of the shares
of Series B Common Stock present in person or represented by proxy at the
Meeting. A majority of the shares of Series B Common Stock present in person or
represented by proxy at the Meeting will constitute a quorum for the purposes of
electing Series B Directors.
Holders of Series K Common Stock, voting as a separate series, have the
exclusive right to elect one director (the "Series K Director") to the Board.
The Series K Director will be elected by a plurality of the votes of the shares
of Series K Common Stock present in person or represented by proxy at the
Meeting. A majority of the shares of Series K Common Stock present in person or
represented by proxy at the Meeting will constitute a quorum for the purposes of
electing the Series K Director. A substantial majority of the outstanding
shares of Series K Common Stock are beneficially owned by Kleiner Perkins
Caufield & Byers ("KPCB").
<PAGE>
Holders of the Common Stock, voting together as a single class, have the
exclusive right to elect three directors (the "Common Stock Directors") to the
Board. Common Stock Directors will be elected by a plurality of the votes of
the shares of Common Stock present in person or represented by proxy at the
Meeting. A majority in total voting power of the shares of Common Stock
represented in person or by proxy at the Meeting will constitute a quorum for
the purposes of electing the Common Stock Directors.
Approval of Proposal Nos. 2, 3, and 5 each require the affirmative vote of a
majority in total voting power of the shares of Common Stock represented in
person or by proxy at the Meeting and entitled to vote on the proposal.
Approval of Proposal No. 4 requires the affirmative vote of the majority in
total voting power of the outstanding shares of Common Stock as of the Record
Date. In the event that a broker, bank, custodian, nominee or other record
holder of Common Stock indicates on a proxy that it does not have discretionary
authority to vote certain shares on a particular matter (a "broker non-vote"),
those shares will not be considered for purposes of determining the number of
shares entitled to vote with respect to the particular proposal on which the
broker has expressly not voted, but will be counted for purposes of determining
the presence or absence of a quorum for the transaction of business.
Abstentions on a Proposal will be considered as votes "against" that Proposal.
All votes will be tabulated by the inspector of elections appointed for the
Meeting.
Unless otherwise instructed, each valid returned proxy in the form accompanying
this Proxy Statement that is not revoked will be voted in the election of
directors "FOR" the nominees of the Board and "FOR" Proposals No. 2, 3, 4 and 5
described in this Proxy Statement, and, at the proxy holder's discretion, on
such other matters, if any, that may come before the Meeting (including any
proposal to adjourn the Meeting).
In the event that sufficient votes in favor of the proposals are not received by
the date of the Meeting, the proxy holders may propose one or more adjournments
of the Meeting to permit further solicitations of proxies. Any such adjournment
would require the affirmative vote of the majority of the shares present in
person or represented by proxy at the Meeting.
The expenses of soliciting proxies in the form accompanying this Proxy Statement
will be paid by the Company. Following the original mailing of the proxies and
other soliciting materials, the Company and/or its agents, without additional
compensation, may also solicit proxies by mail, telephone, facsimile or in
person. The Company will request brokers, custodians, nominees and other record
holders of the Company's Common Stock to forward copies of the proxy and other
soliciting materials to persons for whom they hold shares of Common Stock and to
request authority for the exercise of proxies. In such cases, the Company, upon
the request of the record holders, will reimburse such holders for their
reasonable expenses.
REVOCABILITY OF PROXIES
Any person signing a proxy in the form accompanying this Proxy Statement has the
power to revoke it prior to the Meeting or at the Meeting prior to the vote
pursuant to the proxy. A proxy may be revoked by (i) a writing delivered to the
Company stating that the proxy is revoked, (ii) a subsequent proxy executed by
the person executing the prior proxy and presented at the Meeting, or (iii)
attendance at the Meeting and voting in person. Please note, however, that if a
stockholder's shares are held of record by a broker, bank or other nominee and
that stockholder wishes to vote at the Meeting, the stockholder must bring to
the Meeting a letter from the broker, bank or other nominee confirming that
stockholder's beneficial ownership of the shares.
2
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Meeting, stockholders will elect a board of eleven directors, consisting
of two Series A Directors, five Series B Directors, one Series K Director and
three Common Stock Directors, to hold office until the next annual meeting of
stockholders and until their respective successors have been elected and
qualified or until their earlier resignation or removal. Shares represented by
a proxy returned to the Company will be voted for the election of the eleven
nominees set forth below, to the extent such shares are entitled to vote for
such nominees, unless the proxy is marked in such a manner as to withhold
authority so to vote. If any nominee, other than a Series B or Series K
nominee, for any reason is unable to serve or for good cause will not serve, the
proxies entitled to vote for such nominee may be voted for a substitute nominee
as the proxy holders may determine. If any Series B or Series K nominee for any
reason is unable to serve or for good cause will not serve, the proxies entitled
to vote for such nominee may be voted for a substitute nominee designated by TCI
or KPCB, as the case may be. The Company is not aware of any nominee who will
be unable to, or for good cause will not, serve as a director. Each of the
eleven nominees currently serves on the Board. See "Certain Relationships and
Related Transactions--Transactions with Directors, Executive Officers and 5%
Security Holders" for a description of arrangements pursuant to which certain
individuals may be selected as directors or nominees.
DIRECTORS/NOMINEES
The names of the nominees, and certain information about them (including their
respective terms of service), are set forth below.
<TABLE>
<CAPTION>
SERIES A DIRECTORS/NOMINEES
Director
Name of Nominee Age Principal Occupation Since
- ----------------------------------------- --- ------------------------------------- --------
<S> <C> <C> <C>
James L. Barksdale (1) 55 President and Chief Executive Officer 1995
of Netscape Communications Corporation
William R. Hearst III (1) (2) 48 General Partner of KPCB 1995
SERIES B DIRECTORS/NOMINEES
Director
Name of Nominee Age Principal Occupation Since
- ----------------------------------------- --- ------------------------------------- --------
Leo J. Hindery, Jr. (3) 50 President and Chief Operating Officer 1997
of TCI
Bruce W. Ravenel (2) (3) (4) 48 Executive Vice President--Interactive 1995
Ventures of TCI Communications, Inc.
Brian L. Roberts 38 President of Comcast 1996
Larry E. Romrell (3) 58 Executive Vice President of TCI 1995
David M. Woodrow (2) 52 Senior Vice President of Broadband 1996
Services of Cox
</TABLE>
3
<PAGE>
SERIES K DIRECTOR/NOMINEE
<TABLE>
<CAPTION>
Director
Name of Nominee Age Principal Occupation Since
- ------------------------------ --- ------------------------------------- --------
<S> <C> <C> <C>
L. John Doerr (1) (4) 46 General Partner, KPCB 1995
</TABLE>
COMMON STOCK DIRECTORS/NOMINEES
<TABLE>
<CAPTION>
Director
Name of Nominee Age Principal Occupation Since
- ------------------------------ --- ------------------------------------- --------
<S> <C> <C> <C>
Thomas A. Jermoluk (1) 41 Chairman of the Board, President 1996
and Chief Executive Officer
of the Company
John C. Malone 57 Chairman and Chief Executive 1997
Officer of TCI
Edward S. Rogers 64 President and Chief Executive Officer 1997
of Rogers Communications
</TABLE>
___________________________
(1) Member of the .Com Committee
(2) Member of the Audit Committee
(3) Member of the Series B Committee
(4) Member of the Compensation Committee
JAMES L. BARKSDALE has been a director of the Company since August 1995. He has
been President and Chief Executive Officer of Netscape Communications
Corporation ("Netscape"), an Internet software company, since January 1995. He
has served as a director of Netscape since October 1994. From January 1992 to
January 1995, Mr. Barksdale served as President and Chief Operating Officer,
and, as of September 1994, Chief Executive Officer, of AT&T Wireless Services
(formerly, McCaw Cellular Communications, Inc., a cellular telecommunications
company). From April 1983 to January 1992, Mr. Barksdale served as Executive
Vice President and Chief Operating Officer of Federal Express Corporation
("Federal Express"), an express package delivery company. From 1979 to 1983,
Mr. Barksdale served as Chief Information Officer of Federal Express. Mr.
Barksdale also held various management positions, including Chief Information
Officer, with Cook Industries Inc., during the mid-1970s and was employed by IBM
from 1965 to 1972. He holds a B.A. from the University of Mississippi. Mr.
Barksdale serves as a director of 3Com Corporation, Harrah's Entertainment,
Inc., Robert Mondavi Corp. and Network Computer, Inc.
WILLIAM R. HEARST III has been a director of the Company since August 1995 and
has served as Vice Chairman of the Board of Directors since July 1996. He has
been a general partner of KPCB, a venture capital firm, since January 1995.
From May 1995 to July 1996, he was the founding Chief Executive Officer of the
Company. Before joining KPCB, Mr. Hearst was editor and publisher of the San
Francisco Examiner for ten years. He is a Fellow of the American Association
for the Advancement of Science and a Trustee of the Carnegie Institute of
Washington and the California Academy of Sciences. Mr. Hearst serves on the
board of directors of Preview Travel, Inc. and Hearst Argylle Television, Inc.
Mr. Hearst holds an A.B. degree in Mathematics from Harvard University.
LEO J. HINDERY, JR. has been a director of the Company since October 1997.
Mr. Hindery has served as the President and Chief Operating Officer of TCI, a
cable systems company, since March 1997. Mr. Hindery has served as a director
of TCI since May 1997 and has served as Chairman of the Board of TCI Music, Inc.
since January 1997. Mr. Hindery has served as President and Chief Executive
Officer of TCI Communications, Inc. ("TCIC") since March 1997 and has served as
President and Chief Executive Officer of TCI Pacific Communications, Inc. ("TCI
Pacific") since September 1997. Mr. Hindery has served as a director of TCIC
since
4
<PAGE>
March 1997, and has served as a director of TCI Pacific since September 1997. In
addition, Mr. Hindery is President, Chief Executive Officer and/or a director of
many of TCI's subsidiaries. Mr. Hindery was previously founder, Managing General
Partner and Chief Executive Officer of InterMedia Partners, a cable TV operator,
and its affiliated entities from 1988 until March 1997. Mr. Hindery was a
director of DMX Inc. from May 1996 to July 1997. Mr. Hindery also is a director
of Tele-Communications International, Inc., United Video Satellite Group, Inc.
TCI Satellite Entertainment, Inc., Cablevision Systems Corporation and Lenfest
Communications, Inc.
BRUCE W. RAVENEL has been a director of the Company since August 1995. Since
March 1998, he has served as Executive Vice President--Interactive Ventures of
TCIC. From January 1996 to March 1998, he served as President and Chief
Executive Officer of TCI.NET, Inc. and Senior Vice President of TCIC, both
wholly owned subsidiaries of TCI, where he has been responsible for all
Internet-related business activities of TCI. From March 1994 to January 1996,
Mr. Ravenel was Senior Vice President and Chief Operating Officer of TCI
Technology Ventures, Inc., a division of TCI. From March 1992 to March 1994, he
served as Vice President of TCI Technology, Inc., a subsidiary of TCI. Mr.
Ravenel holds a B.A. degree in Economics from the University of Colorado.
BRIAN L. ROBERTS has been a director of the Company since August 1996. He has
served as President of Comcast, a cable systems company, since February 1990 and
as a director of Comcast since 1987. Mr. Roberts also serves as Vice President
and a director of Sural Corporation, a privately-held investment company. Mr.
Roberts holds a B.S. degree in Economics from the Wharton School of Finance of
the University of Pennsylvania.
LARRY E. ROMRELL has been a director of the Company since August 1995. He has
served as Executive Vice President of TCI since January 1994 and Executive Vice
President and Chief Executive Officer of TCI Business Alliance and Technology
Co., Inc., a subsidiary of TCI, and he served as President of TCI Technology
Ventures, Inc. from September 1994 to October 1997. From 1991 to October 1994,
Mr. Romrell was Senior Vice President of TCIC. He serves on the boards of
directors of General Communication, Inc., Teleport Communications Group, Inc.
("TCG") and United Video Satellite Group, Inc.
DAVID M. WOODROW has been a director of the Company since August 1996. He has
served as Senior Vice President of Broadband Services for Cox, a cable systems
company, since April 1994. Mr. Woodrow joined Cox in 1982 as Director, Business
Development, and was promoted to Western Regional Manager in 1984, to Vice
President and General Manager of Cox Cable Santa Barbara, Inc. in 1985 and to
Senior Vice President, Operations in 1989. Prior to joining Cox, he was
employed by the Technology Components Group of Exxon Enterprises from 1976 to
1982 and by Pitney Bowes, Inc. from 1970 to 1976. Mr. Woodrow serves on the
board of directors of TCG and is a director of the Cellular Telephone Industry
Association. He holds B.S. and M.S. degrees in Mechanical Engineering from
Purdue University and an M.B.A. degree from the University of Connecticut.
L. JOHN DOERR has been a director of the Company since August 1995. He has been
a general partner of KPCB, a venture capital firm, since August 1980. He holds
Bachelor of Science and Master of Science degrees in electrical engineering and
computer science from Rice University and a Masters in Business Administration
from Harvard University. He is also a director of Amazon.com, Inc., Intuit
Inc., Macromedia, Inc., Netscape, Platinum Software Corporation, Sun
Microsystems, Inc. and Shiva Corporation.
THOMAS A. JERMOLUK has served as Chairman of the Board, President and Chief
Executive Officer of the Company since he joined the Company in July 1996. From
1994 to July 1996, he was President, and from 1992 to July 1996 he was Chief
Operating Officer, of Silicon Graphics, Inc. ("SGI"), a visual computing
company. From 1991 to 1994, Mr. Jermoluk was Executive Vice President of SGI,
and, from 1988 to 1991, he was Vice President and General Manager of SGI's
Advanced System Division. From October 1993 to August 1996, he was a member of
the board of directors of SGI. Prior to joining SGI in 1986, Mr. Jermoluk
managed a variety of hardware and software development projects at Hewlett-
Packard Company and Bell Laboratories. He serves on the board of directors of
Forte Software, Inc. Mr. Jermoluk holds B.S. and M.S. degrees in Computer
Science from Virginia Tech.
5
<PAGE>
JOHN C. MALONE has been a director of the Company since April 1997. He has
served as Chairman of the Board of TCI since November 1996 and has served as
Chief Executive Officer of TCI since August 1994. Dr. Malone was also President
of TCI from August 1994 through March 1997. Dr. Malone served as Chief
Executive Officer of a predecessor of TCI from March 1992 to August 1994; and as
President of such predecessor company from 1973 to August 1994. Dr. Malone has
been a director of TCI and its predecessors since 1973. Dr. Malone also serves
on the boards of directors of Tele-Communications International, Inc., TCI
Satellite Entertainment, Inc., BET Holdings, Inc., Cablevision Systems
Corporation, Lenfest Communications, Inc., TCI Pacific and the Bank of New York
Company, Inc. He holds a B.S. degree in Electrical Engineering and Economics
from Yale University and an M.S. degree in Industrial Management and a Ph.D. in
Operations Research from Johns Hopkins University.
EDWARD S. ROGERS has been a director of the Company since April 1997. He has
served as President and Chief Executive Officer and as a director of Rogers
Communications, Inc., a telecommunications company, since 1979 and as Acting
President and Chief Executive Officer of Rogers Cablesystems Limited, a cable
company and a wholly owned subsidiary of Rogers Communications, since April
1996. Mr. Rogers founded Rogers Cable TV (now Rogers Cablesystems Limited) in
1967, Rogers Radio Broadcasting Limited (now Rogers Broadcasting Limited) in
1969 and Cantel, Inc. (now Rogers Cantel, Inc.) in 1983 and has served in
various management positions with Rogers-related entities during the last 30
years. Mr. Rogers serves on the boards of directors of Rogers Cantel Mobile
Communications Inc. and the Toronto-Dominion Bank. He holds a B.A. in Political
Science and Economics from the University of Toronto and an LL.B from Osgoode
Hall Law School.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE NOMINEES.
BOARD COMPOSITION AND PROCEDURES
The Board consists of eleven directors. Under the Company's Certificate of
Incorporation, the holders of the Series B Common Stock, all of which are owned
by a subsidiary of TCI, have the right to elect the five Series B Directors.
TCI has designated Messrs. Hindery, Ravenel and Romrell as Series B Directors.
Subject to certain conditions, TCI has also agreed to elect one representative
designated by Comcast and one representative designated by Cox as Series B
Directors. Mr. Roberts is the current representative of Comcast, and Mr.
Woodrow is the current representative of Cox. The holders of the Series K
Common Stock, the substantial majority of which is controlled by KPCB, have the
right to elect the Series K Director, who is currently Mr. Doerr. So long as
the holders of Series B Common Stock or Series K Common Stock are entitled to
elect any Series B Director or any Series K Director, the holders of Series A
Common Stock have the right to elect the Series A Directors. Messrs. Barksdale
and Hearst are the current Series A Directors. TCI, Comcast and Cox own
approximately 34%, 16% and 16% respectively, of the outstanding Series A Common
Stock, and TCI together with either Comcast and/or Cox has the ability to elect
both of the Series A Directors. The remaining directors are elected by the
holders of the Common Stock voting together as a single class. Since TCI holds
more than 50% of the outstanding voting power of the Company's capital stock, it
has the power to elect all of these directors. However, TCI, Comcast, Cox and
KPCB have agreed to vote for the election of the Chief Executive Officer of the
Company. Subject to certain conditions, TCI, Comcast and Cox have also agreed
to vote for the election to the Board of one representative jointly designated
by Rogers and Shaw Cablesystems Ltd. ("Shaw"), who is currently Mr. Rogers. TCI
has elected Dr. Malone to the remaining position on the Board. TCI, Comcast,
Cox and KPCB have also agreed to vote for the election of a designee of
Cablevision as a Common Stock Director in the event Cablevision so requests,
provided that Cablevision beneficially owns at least 5,000,000 shares of Series
A Common Stock. In addition, the Certificate of Incorporation provides that, so
long as TCI owns at least 7,700,000 shares of Series B Common Stock and
securities representing a majority of the outstanding voting power of the
Company, there will be a committee of the Board consisting of those Series B
Directors who are officers, directors or employees of TCI or any subsidiary of
TCI (the "Series B Committee"), which shall have the sole power, exercisable at
any time, to increase the size of the Board to up to 17 directors and to fill
any vacancies created by such an increase. Since four of the 11 current
directors are officers of TCI or a subsidiary of TCI and TCI has the power,
without a meeting of the stockholders, to increase the size of the Board to up
to 17 directors and appoint additional members of the Board, TCI has the power
to appoint a majority of the Board at any time.
6
<PAGE>
Under the Certificate of Incorporation, all actions of the Board must be
approved by (i) a majority of the members of the Board present at a meeting at
which a quorum is present or unanimous written consent of all members of the
Board and (ii) so long as TCI owns at least 7,700,000 shares of Series B Common
Stock and securities representing a majority of the outstanding voting power of
the Company, a majority of the Series B Directors. Accordingly, because TCI has
the right to designate and elect three of the five Series B Directors, TCI has
the power to prevent the Board from taking any action that is not approved by
its designated Series B Directors. In addition, to the extent that TCI
exercises its power to elect a majority of the entire Board, TCI will be able to
control all Board decisions, subject to the supermajority and unanimous vote
requirements and other limitations discussed below.
In addition, certain actions of the Board require the approval of at least 75%
(currently five of six) of the total number of Series B and Series K Directors
("Supermajority Approval"), and certain other actions of the Board require the
unanimous approval of all of the Series B and Series K Directors. Accordingly,
with the current composition of the Board, actions that require Supermajority
Approval cannot be taken without the approval of the Series B Directors
designated by TCI and at least two of the three directors designated by Comcast,
Cox and KPCB, and actions that require unanimous approval cannot be taken
without the approval of all three of such directors and the Series B Directors
designated by TCI.
The Company actions that require Supermajority Approval by the Series B and
Series K Directors are: (i) a merger, consolidation or other business
combination; (ii) the acquisition of assets having a value greater than 20% of
the value of the Company's assets; (iii) the disposition of assets having an
aggregate value greater than 50% of the value of the Company's assets; (iv) the
acquisition by the Company of assets in exchange for capital stock that would
constitute more than 16% of its fully diluted shares (other than a sale of stock
solely for cash); (v) the appointment or removal of the Chief Executive Officer;
(vi) voluntary dissolution or liquidation or the initiation of voluntary
bankruptcy proceedings; (vii) any amendment of the Certificate of Incorporation
or Bylaws of the Company other than the filing of a Certificate of Designation
establishing a series of Preferred Stock that does not have certain specified
special voting rights; (viii) the creation or issuance of any additional class
or series of capital stock having more than one vote per share or entitled to
vote as a separate class or series on any matter subject to certain exceptions;
(ix) any increase in the number of shares reserved for issuance to management
and employees of the Company in excess of 16,000,000 shares plus an amount equal
to the greater of (a) 7.5% of the number of shares issued by the Company after
August 1, 1996 or (b) 4% per year of the total fully diluted shares outstanding
on August 1, 1996; (x) the declaration of dividends on or certain repurchases of
Common Stock, (xi) the adoption of any budget for the Company that does not
provide for a substantially pro rata rollout of the Company's services to TCI,
Comcast and Cox in proportion to the number of qualifying homes passed made
available by them to the Company and (xii) the appointment of any directors to
the .Com Committee other than the current members of the .Com Committee.
The Company actions that require unanimous approval by the Series B and Series K
Directors are: (i) any amendments to or modifications of the actions requiring
supermajority or unanimous approval of the Series B and Series K Directors; (ii)
any increase in the number of Series B or Series K Directors; (iii) any
modifications of the rights of the holders of Series B or Series K Common Stock
to designate and elect directors; (iv) the appointment of any directors to the
.Com Committee other than the Chief Executive Officer, the other directors who
are currently members of the .Com Committee and any additional directors elected
to the .Com Committee by supermajority vote; and (v) any amendment to the
specifications and standards for the @Home service that would require the
operator facilities of any affiliate of TCI, Comcast or Cox to be capable of
distributing or providing streaming video transmissions that include video
segments in excess of the duration limit set forth in the specifications and
standards, which is currently ten minutes.
The Certificate of Incorporation specifies certain requirements for the approval
of certain transactions between the Company and any holder of more than 5% of
the voting power of the Company or any affiliate of such holder. First, such a
related party transaction must be approved by a majority of the members of the
Board present at a meeting for which the notice sets forth the related party
transaction and a reasonably detailed description of the matter, or by unanimous
written consent of the Board following such a meeting. In addition, so long as
the holders of Series B Common Stock are entitled to elect a Series B Director,
the related party transaction must also be approved either (i) by a majority of
the Series B and Series K Directors who are disinterested with respect to the
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transaction and by a majority of all Series B Directors regardless of whether
they are disinterested with respect to the transaction or (ii) by all of the
Series B Directors regardless of whether they are disinterested with respect to
the transaction. These requirements do not apply to (i) transactions involving
an aggregate amount less than $1,000,000 that are entered into in the ordinary
course of business on arms'-length terms, (ii) the entering into of LCO
Agreements (as defined below) and other agreements for the provision of
ancillary or related services that are on terms no more favorable to the related
party than the terms of similar agreements then currently offered by the Company
to affiliates of each other Principal Cable Affiliate (as defined below) without
regard to size, identity or ownership of securities of the Company, (iii) the
entering into or performance under any .Com Agreement or Promotional Agreement
discussed below or (iv) any actions taken by the Series B Committee.
.COM COMMITTEE
The Company's Certificate of Incorporation establishes a committee of the Board
referred to as the ".Com Committee" consisting of the Chief Executive Officer of
the Company and the other members of the Board who are not affiliated with TCI,
Comcast, Cox and Cablevision (currently Messrs. Jermoluk, Barksdale, Doerr and
Hearst) to review and approve certain connectivity and promotional agreements
(''.Com Agreements'' and ''Promotional Agreements'') between the Company and
content providers that are affiliates of TCI, Comcast or Cox. It is the
Company's policy to maintain a position of openness and non-exclusion with
regard to entering into such agreements and that such content providers will not
be unfairly advantaged or disadvantaged in their ability to obtain carriage or
promotion on the Company's services by reason of their relationship with TCI,
Comcast or Cox. Accordingly, any .Com Agreement or Promotional Agreement
between the Company and any affiliate of TCI, Comcast or Cox may be approved by
any one of three methods, to be chosen by TCI, Comcast or Cox, as applicable:
(i) by the authorized officers of the Company on the Company's standard terms
and conditions, (ii) by a majority of the .Com Committee or (iii) by a majority
of the entire Board including all of the Series B Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee was formed in July 1996 to review and
approve the compensation and benefits for the Company's key executive officers,
administer the Company's stock purchase and stock option plans and make
recommendations to the Board regarding such matters. The Compensation Committee
is currently composed of Messrs. Ravenel and Doerr. No interlocking
relationship exists between the Board or Compensation Committee and the board of
directors or compensation committee of any other company, nor has any such
interlocking relationship existed in the past. In 1997, Mr. Ravenel was an
executive officer for the division of TCI with which the Company conducts
business. See "Certain Relationships and Related Transactions" for a
description of the Company's relationship and transactions with TCI.
AUDIT COMMITTEE
The Board has established an Audit Committee to meet with and consider
suggestions from members of management, as well as the Company's independent
accountants, concerning the financial operations of the Company. The Audit
Committee also has the responsibility to review the annual audited financial
statements of the Company, and meets with management and the Company's
independent accountants at the end of each quarter to review the quarterly
financial results. In addition, the Audit Committee considers and recommends
the employment of, and approves the fee arrangements with, independent
accountants for audit functions. Messrs. Hearst, Ravenel and Woodrow are the
members of the Audit Committee.
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
During the year ended December 31, 1997, the Board met eight times and acted by
written consent two times, the Compensation Committee met two times and acted by
written consent seven times, the Audit Committee met one time, and the Series B
Committee and the .Com Committee did not meet or act by written consent. None
of the nominees for director attended fewer than 75% of the aggregate total
number of meetings of the Board of Directors
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(held during the period for which he was a director) and the total number of
meetings held by all committees of the Board of Directors on which he served
(held during the period that he served) except for Messrs. Malone, Roberts and
Romrell.
DIRECTOR COMPENSATION
Directors, other than Mr. Jermoluk, do not receive compensation from the Company
and have not been awarded stock options to purchase the Company's stock.
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO 1997 EQUITY INCENTIVE PLAN
Stockholders are being asked to approve an amendment to the 1997 Equity
Incentive Plan to provide for an increase in the number of shares of Series A
Common Stock reserved for issuance thereunder by 4,975,000. The Board believes
that adding shares to the 1997 Equity Incentive Plan is in the best interests of
the Company because it will permit the Company to attract and retain employees
by providing them with appropriate equity incentives. The 1997 Equity Incentive
Plan plays an important role in the Company's efforts to attract and retain
employees of outstanding ability.
Set forth below is a summary of the principal features of the 1997 Equity
Incentive Plan. The Company will provide, without charge, to each person to
whom a Proxy Statement is delivered, upon request of such person and by first
class mail within three business days of receipt of such request, a copy of the
1997 Equity Incentive Plan. Any such request should be directed as follows:
Secretary, At Home Corporation, 425 Broadway Street, Redwood City, California
94063; telephone number (650) 569-5000; facsimile (650) 569-5100.
History of the 1997 Equity Incentive Plan and Termination. In May 1997, the
Board adopted and in July 1997 the stockholders approved the 1997 Equity
Incentive Plan, which became effective on July 11, 1997 and serves as the
successor to the Company's 1996 Incentive Stock Option Plan and 1996 Incentive
Stock Option Plan No. 2 (collectively, the "Prior Plans"). On August 1, 1997,
the number of shares reserved for issuance under the 1997 Equity Incentive Plan
automatically increased by 4,200,000 shares. As of March 14, 1998, options to
purchase 3,426,235 shares of Series A Common Stock were outstanding under the
1997 Equity Incentive Plan and the Prior Plans, options to purchase 6,362,390
shares of Series A Common Stock had been exercised under these plans, and there
were 3,403,725 shares of Series A Common Stock available for issuance but not
subject to outstanding options under the 1997 Equity Incentive Plan. The 1997
Equity Incentive Plan will terminate in May 2007, unless sooner terminated by
the Board.
Shares Subject to the 1997 Equity Incentive Plan. The total number of shares of
Series A Common Stock reserved for issuance under the 1997 Equity Incentive Plan
is 20,200,000 less: (a) the total number of shares issued by the Company under
(i) restricted stock purchase agreements entered into prior to the effective
date of the 1997 Equity Incentive Plan with employees, officers, directors,
consultants, independent contractors or advisors of the Company and (ii) the
Prior Plans pursuant to the exercise of options granted on or before the
effective date of the 1997 Equity Incentive Plan; (b) shares that are issuable
as of the effective date of the 1997 Equity Incentive Plan upon exercise of
options granted under the Prior Plans; and (c) shares issued as of any date
under the Company's 1997 Employee Stock Purchase Plan. The 1997 Equity
Incentive Plan authorizes the award of options, restricted stock and stock
bonuses (each an "Award"). Shares will again be available for grant and
issuance under the 1997 Equity Incentive Plan, if they: (x) are issuable upon
exercise of an option granted under the Prior Plans or under the 1997 Equity
Incentive Plan that cease to be subject to such option for any reason other than
exercise of such option; (y) are subject to an award granted under restricted
stock purchase agreements entered into prior to the effective date of the 1997
Equity Incentive Plan with employees, officers, directors, consultants,
independent contractors or advisors of the Company, the Prior Plans, or the 1997
Equity Incentive Plan, that are forfeited or are repurchased by the Company at
the original issue price; or (z) are subject to any other award granted under
the Prior Plans or under the 1997 Equity Incentive Plan that otherwise
terminates without shares being issued.
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Plan Administration. The 1997 Equity Incentive Plan is administered by a
committee appointed by the Board, currently the Compensation Committee, which
presently consists of Messrs. Doerr and Ravenel, both of whom are non-employee
directors under applicable federal securities laws and "outside directors" as
defined under applicable federal tax laws. The committee has the authority to
construe and interpret the 1997 Equity Incentive Plan and any agreement made
thereunder, grant Awards and make all other determinations necessary or
advisable for the administration of the 1997 Equity Incentive Plan. The members
of the Compensation Committee do not receive any compensation for administering
the 1997 Equity Incentive Plan. The Company bears all expenses in connection
with administration of the 1997 Equity Incentive Plan.
Eligibility. The 1997 Equity Incentive Plan provides for the grant of both
incentive stock options ("ISOs") that qualify under Section 422 of the Code and
nonqualified stock options ("NQSOs"). ISOs may be granted only to employees of
the Company or of a parent or subsidiary of the Company. NQSOs may be granted
to employees, officers, directors, consultants, independent contractors and
advisors of the Company or any parent or subsidiary of the Company, provided
such consultants, independent contractors and advisors render bona fide services
not in connection with the offer and sale of securities in a capital-raising
transaction ("Eligible Service Providers"). No person will be eligible to
receive more than 1,000,000 shares in any calendar year pursuant to Awards under
the 1997 Equity Incentive Plan other than a new employee of the Company, who
will be eligible to receive no more than 2,000,000 shares in the calendar year
in which such employee commences employment. Opportunities to purchase shares
of the Company's Series A Common Stock ("Restricted Stock Awards"), and awards
of shares of the Company's Series A Common Stock ("Stock Bonuses"), either of
which may be subject to a right of repurchase in favor of the Company or other
restrictions on ownership or transfer, may be given to Eligible Service
Providers. The administrator of the 1997 Equity Incentive Plan has the
authority to determine the restrictions applied to the stock. The sum of (i)
Restricted Stock Awards, (ii) Stock Bonuses and (iii) options with an exercise
or purchase price below fair market value issued under the 1997 Equity Incentive
Plan may not exceed 20% of the total number of shares reserved for issuance
under the 1997 Equity Incentive Plan as of any date.
Terms of the Options.
. Vesting. Options under the 1995 Plan generally become exercisable or vest
over a four-year period.
. Expiration Date. The maximum term of options granted under the 1997 Equity
Incentive Plan is ten years.
. Exercise Price. The exercise price of ISOs must be at least equal to the
fair market value of the Company's Series A Common Stock on the date of
grant. (The exercise price of ISOs granted to 10% stockholders must be at
least equal to 110% of that value.) The exercise price of NQSOs must be at
least equal to 85% of the fair market value of the Company's Series A
Common Stock on the date of grant.
. Option Exercise and Payment Alternatives. To exercise an option, the
optionee must deliver to the Company an executed Stock Option Exercise
Agreement and full payment for the shares being purchased. Payment may be
made: (i) in cash; (ii) by surrender of fully paid shares of Series A
Common Stock; (iii) where permitted by applicable law and approved by the
Board, by tender of a full recourse promissory note having such terms as
determined by the Board; (iv) by waiver of compensation due or accrued to
an optionee for services rendered; (v) by cancellation of indebtedness of
the Company to the optionee; (vi) through a "same day sale"; (vii) through
a "margin commitment"; or (viii) through any combination of the foregoing
where approved by the Board.
. Nontransferability of Options. Options granted under the 1997 Equity
Incentive Plan may not be transferred in any manner other than by will or
by the laws of descent and distribution and may be exercised during the
lifetime of the optionee only by the optionee.
. Termination of Employment. Options granted under the 1997 Equity Incentive
Plan generally expire three months after the termination of the optionee's
service to the Company or a parent or subsidiary of the Company, except in
the case of death or disability, in which case the options generally may be
exercised up
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to 12 months following the date of death or termination of service. Options
will generally terminate one month after termination for cause. Options
cease vesting on the date of death or termination of service.
. Modification and Adjustment of Options. If the number of outstanding
shares of Series A Common Stock of the Company is changed by a stock
dividend, stock split, reverse stock split, combination, reclassification
or similar change in the capital structure of the Company without
consideration, the number of shares of Series A Common Stock available for
Awards under the 1997 Equity Incentive Plan and the number of shares and
the exercise price per share for each outstanding option will be
proportionately adjusted, subject to any required action by the Board or
stockholders of the Company.
. Change in Control. If the Company is acquired under certain circumstances,
any or all outstanding Awards may be assumed or replaced by the successor
corporation. If Awards are not assumed or replaced, the vesting of such
Awards will accelerate and all outstanding options will become exercisable
in full prior to the consummation of the transaction. Any options not
exercised prior to the transaction will expire.
Federal Income Tax Information
THE FOLLOWING IS A GENERAL SUMMARY AS OF THE DATE OF THIS PROXY STATEMENT OF THE
FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY AND PARTICIPANTS UNDER THE 1997
EQUITY INCENTIVE PLAN. THE FEDERAL TAX LAWS MAY CHANGE AND THE FEDERAL, STATE
AND LOCAL TAX CONSEQUENCES FOR ANY PARTICIPANT WILL DEPEND UPON HIS OR HER
INDIVIDUAL CIRCUMSTANCES. EACH PARTICIPANT HAS BEEN AND IS ENCOURAGED TO SEEK
THE ADVICE OF A QUALIFIED TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF
PARTICIPATION IN THE 1997 EQUITY INCENTIVE PLAN.
. Incentive Stock Options. A participant will recognize no income upon grant
of an ISO and incur no tax on its exercise (unless the participant is
subject to the alternative minimum tax ("AMT")). If the participant holds
the stock acquired upon exercise of an ISO (the "ISO Shares") for more than
one year after the date the option was exercised and for more than two
years after the date the option was granted, the participant generally will
realize medium-term or long-term capital gain or loss (rather than ordinary
income or loss) upon disposition of the ISO Shares. This gain or loss will
be equal to the difference between the amount realized upon such
disposition and the amount paid for the ISO Shares.
. If the participant disposes of ISO Shares prior to the expiration of either
required holding period (a "disqualifying disposition"), the gain realized
upon such disposition, up to the difference between the fair market value
of the ISO Shares on the date of exercise (or, if less, the amount realized
on a sale of such shares) and the option exercise price, will be treated as
ordinary income. Any additional gain will be long-term, medium-term or
short-term capital gain, depending upon the amount of time the ISO Shares
were held by the participant.
. Alternative Minimum Tax. The difference between the fair market value of
the ISO Shares on the date of exercise and the exercise price is an
adjustment to income for purposes of the AMT. The AMT (imposed to the
extent it exceeds the taxpayer's regular tax) is 26% of an individual
taxpayer's alternative minimum taxable income (28% in the case of
alternative minimum taxable income in excess of $175,000). Alternative
minimum taxable income is determined by adjusting regular taxable income
for certain items, increasing that income by certain tax preference items
(including the difference between the fair market value of the ISO Shares
on the date of exercise and the exercise price) and reducing this amount by
the applicable exemption amount ($45,000 in case of a joint return, subject
to reduction under certain circumstances). If a disqualifying disposition
of the ISO Shares occurs in the same calendar year as exercise of the ISO,
there is no AMT adjustment with respect to those ISO Shares. Also, upon a
sale of ISO Shares that is not a disqualifying disposition, alternative
minimum taxable income is reduced in the year of sale by the excess of the
fair market value of the ISO Shares at exercise over the amount paid for
the ISO Shares.
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. Nonstatutory Stock Options. A participant will not recognize any taxable
income at the time a NQSO is granted. However, upon exercise of a NQSO,
the participant must include in income as compensation an amount equal to
the difference between the fair market value of the shares on the date of
exercise and the participant's exercise price. The included amount must be
treated as ordinary income by the participant and may be subject to
withholding by the Company (either by payment in cash or withholding out of
the participant's salary). Upon resale of the shares by the participant,
any subsequent appreciation or depreciation in the value of the shares will
be treated as capital gain or loss.
. Tax Treatment of the Company. The Company generally will be entitled to a
deduction in connection with the exercise of a NQSO by a participant to the
extent that the participant recognizes ordinary income and the Company
withholds tax. The Company will be entitled to a deduction in connection
with the disposition of ISO Shares only to the extent that the participant
recognizes ordinary income on a disqualifying disposition of the ISO
Shares.
ERISA. The 1997 Equity Incentive Plan is not subject to any of the provisions
of the Employee Retirement Income Security Act of 1974 ("ERISA").
-----
The approval of the amendment to the 1997 Equity Incentive Plan requires the
affirmative vote of the holders of a majority of the total voting power of the
shares of Common Stock represented in person or by proxy at the Meeting and
entitled to vote on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE AMENDMENT TO
THE 1997 EQUITY INCENTIVE PLAN.
PROPOSAL NO. 3 -- APPROVAL OF AMENDMENT TO
1997 EMPLOYEE STOCK PURCHASE PLAN
Stockholders are being asked to approve an amendment to the Company's 1997
Employee Stock Purchase Plan (the "Purchase Plan") to increase the number of
shares of Series A Common Stock reserved for issuance under the Purchase Plan by
600,000 shares, from 400,000 shares to 1,000,000 shares. The Board believes
that adding shares to the Purchase Plan is in the best interests of the Company
because it will permit the Company to attract and retain employees by providing
them with appropriate equity incentives. The Purchase Plan plays an important
role in the Company's efforts to attract and retain employees of outstanding
ability as it is available to all full time employees.
Set forth below is a summary of the principal features of the Purchase Plan.
The Company will provide, without charge, to each person to whom a Proxy
Statement is delivered, upon request of such person and by first class mail
within three business days of receipt of such request, a copy of the 1997
Purchase Plan. Any such request should be directed as follows: Secretary, At
Home Corporation, 425 Broadway Street, Redwood City, California 94063; telephone
number (650) 569-5000; facsimile (650) 569-5100.
History of the Purchase Plan and Termination. In May 1997, the Board adopted
and in July 1997 the stockholders approved the Purchase Plan and reserved a
total of 400,000 shares of the Company's Series A Common Stock for issuance
thereunder. The number of shares available under the Purchase Plan may be
reduced if such shares are first issued under the 1997 Equity Incentive Plan.
The Purchase Plan became effective on July 11, 1997. The Purchase Plan will
continue until the earliest to occur of (i) its termination by the Board, (ii)
issuance of all shares of Series A Common Stock reserved for issuance under the
Purchase Plan or (iii) May 14, 2007.
Purpose. The Purchase Plan has been established to provide employees of the
Company and its subsidiaries designated by the Board as eligible to participate
in the Purchase Plan ("Participating Employees") with a convenient means of
acquiring an equity interest in the Company, to enhance such employees' sense of
participation in the affairs of the Company and to provide an incentive for
continued employment. The Purchase Plan accomplishes this purpose by permitting
Participating Employees to purchase from the Company shares of Series A
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Common Stock of the Company at a discount from the market price and to pay for
such shares through payroll deductions.
Number of Shares. The maximum member of shares that currently may be issued
under the Purchase Plan is 550,000 shares. If the Company's stockholders adopt
this Proposal, the maximum number of shares that may be issued under the
Purchase Plan will be 1,000,000 shares.
Administration. The Purchase Plan is administered by a committee appointed by
the Board, currently the Compensation Committee, which presently consists of
Messrs. Doerr and Ravenel, both of whom are non-employee directors under
applicable federal securities laws and "outside directors" as defined under
applicable federal tax laws. The Compensation Committee has the authority to
construe and interpret the Purchase Plan. The members of the Compensation
Committee do not receive any compensation for administering the Purchase Plan.
The Company bears all expenses in connection with administration of the Purchase
Plan.
Eligibility. All employees of the Company, or any parent or subsidiary, are
eligible to participate in an Offering Period (as defined below) under the
Purchase Plan, except the following:
(a) employees who are not employed by the Company 15 days before
the beginning of such Offering Period;
(b) employees who are customarily employed for less than 20
hours per week;
(c) employees who are customarily employed for less than five
months in a calendar year; and
(d) employees who own stock or hold options to purchase stock or
who, as a result of participation in the Purchase Plan,
would own stock or hold options to purchase stock,
possessing 5% or more of the total combined voting power or
value of all classes of stock of the Company.
As of March 14, 1998, approximately 350 persons were eligible to participate in
the Purchase Plan and 117,027 shares had been issued pursuant to the Purchase
Plan. As of that date, 432,973 shares were available for future issuance under
the Purchase Plan, not including the proposed amendment to the Purchase Plan.
As of March 13, 1998, the last trading day prior to the Record Date, the closing
price of the Company's Series A Common Stock on Nasdaq was $35.75 per share.
Participating Employees participate in the Purchase Plan through payroll
deductions. A Participating Employee sets the rate of such payroll deductions,
which may not be less than 2% nor more than 10% of the Participating Employee's
base salary, commissions, bonuses and shift premiums, including any deductions
authorized for plans under Sections 125 or 401(k) of the Code. No Participating
Employee is permitted to purchase shares under the Purchase Plan at a rate
which, when aggregated with such employee's rights to purchase stock under all
similar purchase plans of the Company, exceeds $25,000 in fair market value
determined as of the Offering Date for each calendar year.
Offering Period. Except for the first offering, each offering under the
Purchase Plan will be for a period of 24 months (the "Offering Period") and will
consist of four six-month purchase periods (each a "Purchase Period"). The
first Offering Period began on July 11, 1997 and will end on August 14, 1999.
Offering Periods thereafter will begin on February 15 and August 15 of each
successive year. Each Offering Period generally consists of four six-month
purchase periods (individually, a "Purchase Period") during which payroll
deductions of the Participating Employees are accumulated under the Purchase
Plan. The Board has the power to set the beginning of any Offering Period and
to change dates or the duration of Offering Periods or Purchase Periods without
stockholder approval if such change is announced at least 15 days before the
scheduled beginning of the first Offering Period or Purchase Period to be
affected. The first day of each Offering Period is the "Offering Date" for such
Offering Period and the last business day of each Purchase Period is the
"Purchase Date" for such Purchase Period.
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Participating Employees will participate in the Purchase Plan during each
Offering Period through regular payroll deductions as described above.
Participating Employees may elect to participate in any Offering Period by
enrolling as provided under the terms of the Purchase Plan. Once enrolled, a
Participating Employee will automatically participate in each succeeding
Offering Period unless the Participating Employee withdraws from the Offering
Period or the Purchase Plan is terminated. After the rate of payroll deductions
for an Offering Period has been set by a Participating Employee, that rate will
continue to be effective for the remainder of the Offering Period (and for all
subsequent Offering Periods in which the Participating Employee is automatically
enrolled) unless otherwise changed by the Participating Employee. The
Participating Employee may increase or lower the rate of payroll deductions for
any subsequent Offering Period, but may only lower the rate of payroll
deductions for an ongoing Offering Period. No more than one change may be made
during a single Offering Period. Participating Employees may not purchase more
than (i) 1,000 shares on a single Purchase Date or (ii) twice the number of
shares the Participating Employee would have been eligible to purchase at 85% of
the market price of a share on the Offering Date if the market price of a share
on the Purchase Date drops to less than one-half of the market price on the
Offering Date. If the number of shares calculated for purchase on a Purchase
Date exceeds the number of shares available for issuance under the Purchase
Plan, the Company will make a pro rata allocation of the shares among
Participating Employees.
Purchase Price. The purchase price of shares that may be acquired in any
Purchase Period under the Purchase Plan will be 85% of the lesser of: (i) the
fair market value of the shares on the Offering Date; or (ii) the fair market
value of the shares on the Purchase Date. The fair market value of a share of
the Series A Common Stock is deemed to be the closing price of the Series A
Common Stock on Nasdaq on the date of determination as reported in The Wall
Street Journal, except that the fair market value of a share of the Series A
Common Stock on the Offering Date of the first Offering Period was the price per
share at which shares of the Series A Common Stock were offered for sale to the
public in the Company's initial public offering of shares of its Series A Common
Stock pursuant to a registration statement filed with the SEC under the
Securities Act of 1933, as amended (the "Securities Act").
Purchase of Stock Under the Purchase Plan. The number of whole shares a
Participating Employee will be able to purchase in any Purchase Period will be
determined by dividing the total payroll amount withheld from the Participating
Employee during the Purchase Period pursuant to the Purchase Plan by the
purchase price for each share determined as described above. The purchase will
take place automatically on the Purchase Date of such Purchase Period. If a
Participating Employee is limited for any reason in the number of shares he or
she can purchase on a given Purchase Date, any amount remaining in the
Participating Employee's account will be refunded without interest after the end
of the Purchase Period.
Withdrawal. A Participating Employee may withdraw from any Offering Period.
Upon withdrawal, the accumulated payroll deductions will be returned to the
withdrawn Participating Employee, without interest, provided that the withdrawal
occurs at least 15 days before the related Purchase Date. If the withdrawal
occurs less than 15 days before such Purchase Date, payroll deductions will
continue for the remainder of that Purchase Period. No further payroll
deductions for the purchase of shares will be made for the succeeding Offering
Period unless the Participating Employee enrolls in the new Offering Period at
least 15 days before the Offering Date.
Amendment of the Purchase Plan. The Board may at any time amend, terminate or
extend the term of the Purchase Plan, except that any such termination cannot
affect the terms of shares previously granted under the Purchase Plan, nor may
any amendment make any change in the terms of shares previously granted which
would adversely affect the right of any participant, nor may any amendment be
made without stockholder approval if such amendment would: (a) increase the
number of shares that may be issued under the Purchase Plan; (b) change the
designation of the employees (or class of employees) eligible for participation
in the Purchase Plan; or (c) constitute an amendment for which stockholder
approval is required in order to comply with Rule 16b-3 (or any successor rule)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Federal Income Tax Information. THE FOLLOWING IS A GENERAL SUMMARY AS OF THE
DATE OF THIS PROXY STATEMENT OF THE FEDERAL INCOME TAX CONSEQUENCES TO THE
COMPANY AND EMPLOYEES PARTICIPATING IN THE PURCHASE PLAN. FEDERAL TAX LAWS MAY
CHANGE AND THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES FOR ANY PARTICIPATING
EMPLOYEE
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WILL DEPEND UPON HIS OR HER INDIVIDUAL CIRCUMSTANCES. EACH PARTICIPATING
EMPLOYEE HAS BEEN AND IS ENCOURAGED TO SEEK THE ADVICE OF A QUALIFIED TAX
ADVISER REGARDING THE TAX CONSEQUENCES OF PARTICIPATION IN THE PURCHASE PLAN.
The Purchase Plan is intended to qualify as an "employee stock purchase plan"
within the meaning of Section 423 of the Code.
Tax Treatment of the Participating Employee. Participating Employees will not
recognize income for federal income tax purposes either upon enrollment in the
Purchase Plan or upon the purchase of shares. All tax consequences are deferred
until a Participating Employee sells the shares, disposes of the shares by gift
or dies.
If shares are held for more than one year after the date of purchase and more
than two years from the beginning of the applicable Offering Period, or if the
Participating Employee dies while owning the shares, the Participating Employee
realizes ordinary income on a sale (or a disposition by way of gift or upon
death) to the extent of the lesser of: (i) 15% of the fair market value of the
shares at the beginning of the Offering Period; or (ii) the actual gain (the
amount by which the market value of the shares on the date of sale, gift or
death exceeds the purchase price). All additional gain upon the sale of shares
is treated as medium-term or long-term capital gain. If the shares are sold and
the sale price is less than the purchase price, there is no ordinary income and
the Participating Employee has a medium-term or long-term capital loss for the
difference between the sale price and the purchase price.
If the shares are sold or are otherwise disposed of including by way of gift
(but not death, bequest or inheritance) (in any case, a "disqualifying
disposition") within either the one-year or the two-year holding periods
described above, the Participating Employee realizes ordinary income at the time
of sale or other disposition, taxable to the extent that the fair market value
of the shares at the date of purchase is greater than the purchase price. This
excess will constitute ordinary income (not currently subject to withholding) in
the year of the sale or other disposition even if no gain is realized on the
sale or if a gratuitous transfer is made. The difference, if any, between the
proceeds of sale and the aggregate fair market value of the shares at the date
of purchase is a capital gain or loss. Capital gains may be offset by capital
losses, and up to $3,000 of capital losses may be used annually against ordinary
income.
Tax Treatment of the Company. The Company will be entitled to a deduction in
connection with the disposition of shares acquired under the Purchase Plan only
to the extent that the Participating Employee recognizes ordinary income on a
disqualifying disposition of the shares. The Company will treat any transfer of
record ownership of shares as a disposition, unless it is notified to the
contrary. In order to enable the Company to learn of disqualifying dispositions
and ascertain the amount of the deductions to which it is entitled,
Participating Employees will be required to notify the Company in writing of the
date and terms of any disposition of shares purchased under the Purchase Plan.
ERISA. The Purchase Plan is not subject to any of the provisions of ERISA nor
is it qualified under Section 401(a) of the Code.
The approval of the amendment to the Purchase Plan requires the affirmative vote
of the holders of a majority of the total voting power of the shares of Common
Stock represented in person or by proxy at the Meeting and entitled to vote on
the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE AMENDMENT TO
THE PURCHASE PLAN.
PROPOSAL NO. 4 -- APPROVAL OF AMENDMENT TO THE COMPANY'S
FOURTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
The Company's Fourth Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") currently provides that certain increases in the
number of shares of Series A Common Stock issued or reserved for
15
<PAGE>
issuance to employees and management of the Company must be approved by
Supermajority Approval of the Board. The Board has adopted an amendment to the
Certificate of Incorporation, subject to stockholder approval, which results in
certain technical changes in the manner in which such increases are calculated.
These changes effectively provide that Supermajority Approval will not be
required for annual increases in the number of shares of Series A Common Stock
issued or reserved for issuance to employees and management of the Company that
in the aggregate do not exceed 4% of the fully diluted equity of the Company as
of the end of the prior fiscal year (together with certain amounts carried over
from prior fiscal years). The Company believes that these changes will ease the
administrative requirements surrounding such increases and provide greater
certainty as to which increases are subject to Supermajority Approval. The
Company believes that this amendment will not have a material impact in
determining the actual increases in the number of shares of Series A Common
Stock issued or reserved for issuance to employees and management that may be
approved by the Board.
The Board of Directors has adopted a resolution setting forth the proposed
amendment to the Certificate of Incorporation. The following is the text of the
proposed amendment.
"Article V, Section B, paragraph 4(a)(9) is hereby amended to read in its
entirety as follows:
(9) Any increase during a calendar year in the total number of shares of
Series A Common Stock issued to, and reserved for issuance to, management and
employees (including shares reserved for issuance upon exercise of options,
warrants or other rights) pursuant to all incentive compensation plans
(collectively, the "@Home Stock Plan") where the total of all such increases
during that calendar year (including the proposed increase which is the subject
of consideration) would exceed the Maximum Amount (as defined below) for such
calendar year. The "Maximum Amount" for any calendar year equals
(i) 0.04 multiplied by the number of shares of Common Stock outstanding
on a fully diluted basis, assuming the issuance of all shares reserved for
issuance in the @Home Stock Plan prior to such increase and the assumed issuance
of shares upon the exercise of all other outstanding options, warrants and other
rights to acquire shares, as of the close of business on December 31 of the
immediately preceding calendar year (the "Base Date"); plus
----
(ii) the excess, if any, of
(x) the Maximum Amount calculated as of the close of business on
December 31 of the calendar year immediately preceding the Base Date, over
(y) the total number of shares (A) reserved for issuance under
the @Home Stock Plan in the calendar year in which the Base Date occurs plus (B)
issued under the @Home Stock Plan in the calendar year in which the Base Date
occurs (other than any shares which had been previously reserved prior to the
calendar year in which the Base Date occurs and are subsequently issued in the
calendar year in which the Base Date occurs)."
The approval of the amendment to the Certificate of Incorporation requires the
affirmative vote of the holders of a majority of the total voting power of the
shares of Common Stock represented in person or by proxy at the Meeting and
entitled to vote on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE AMENDMENT TO
THE CERTIFICATE OF INCORPORATION.
PROPOSAL NO. 5
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Company has appointed Ernst & Young LLP as its independent auditors to
perform the audit of the Company's financial statements for the 1998 fiscal
year, and the stockholders are being asked to ratify such appointment. Ernst
16
<PAGE>
& Young LLP have served as the Company's independent auditors since April 1,
1997 and have audited all financial statements of the Company since the
Company's inception. Representatives of Ernst & Young LLP will be present at the
Meeting, will be given an opportunity to make a statement at the Meeting if they
desire to do so and will be available to respond to questions.
Effective April 1, 1997, the Company selected Ernst & Young LLP as its principal
independent auditors to replace KPMG Peat Marwick LLP. The decision to change
independent auditors was approved by the Board. In connection with the audit
for the period from March 28, 1995 (inception) to December 31, 1995, and the
subsequent interim periods through April 1, 1997, there were no disagreements
with KPMG Peat Marwick LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedures that, if not
resolved to the satisfaction of KPMG Peat Marwick LLP, would have caused them to
make reference to the matter in their report. The report of KPMG Peat Marwick
LLP on the consolidated financial statements of the Company for the period from
March 28, 1995 (inception) to December 31, 1995 did not contain any adverse
opinion or disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope or accounting principles.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF THE RATIFICATION OF THE APPOINTMENT OF
ERNST & YOUNG LLP.
17
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company with
respect to beneficial ownership of the Company's Common Stock as of March 14,
1998 for: (i) each shareholder who is known by the Company to be the beneficial
owner of more than 5% of the Company's Common Stock; (ii) the Chief Executive
Officer and each of the Company's five other most highly compensated executive
officers at December 31, 1997 (collectively, the "Named Executive Officers");
(iii) each of the Company's directors; and (iv) all current directors and
executive officers of the Company as a group. Unless otherwise noted, the
address of each named beneficial owner is that of the Company.
<TABLE>
<CAPTION>
Number of Shares Voting
Beneficially Owned(1) Percentage of Percentage of
------------------------------------------------------ Common Stock All Series of
Name of Beneficial Owner Series A Series B Series K Beneficially Owned Common Stock
- --------------------------- ----------------- ------------------ ---------------- ------------------- -----------------
<S> <C> <C> <C> <C> <C>
TCI (2) 31,060,000 15,400,000 39.1% 71.9%
Cox (3) 14,557,300 12.3% 5.7%
Comcast (4) 14,557,300 12.3% 5.7%
Cablevision (5) 10,946,936 8.4% 4.1%
KPCB (6) 9,658,245 8.1% 3.8%
Thomas A. Jermoluk (7) 3,001,000 1,000,000 3.4% 1.6%
Rogers (8) 1,500,000 1.3% *
Milo S. Medin (9) 601,000 * *
Kenneth A. Goldman (10) 551,000 * *
William R. Hearst III (11) 505,422 * *
Dean A. Gilbert (12) 490,924 * *
David P. Bagshaw (13) 476,000 * *
Donald P. Hutchison (14) 426,000 * *
Netscape (15) 400,000 * *
L. John Doerr (16) 184,864 * *
James L. Barksdale (17) 117,715 * *
John C. Malone (18) 23,000 * *
Larry E. Romrell (19) 10,000 * *
David M. Woodrow (20) 9,750 * *
Bruce W. Ravenel (21) 5,000 * *
Brian L. Roberts (22) 2,500 * *
All directors and executive 7,036,175 1,000,000 6.8% 3.1%
officers as a group
(20 persons) (23)
</TABLE>
*Less than 1% of the Company's outstanding Common Stock
(1) Percentage ownership is based on 118,709,327 shares of Common Stock
outstanding as of the Record Date. All shares subject to options and
warrants exercisable within 60 days after the Record Date are deemed to be
beneficially owned by the person or entity holding such options or
warrants and to be outstanding solely for calculating such person's or
entity's percentage ownership. Unless otherwise indicated below, the
persons and entities named in the table have sole voting and sole
investment power with respect to all shares beneficially owned, subject to
community property laws where applicable.
(2) Represents shares of Series A Common Stock and shares of Series B
Common Stock held by TCI Internet Holdings, Inc., a wholly owned subsidiary
of TCI. TCI disclaims beneficial ownership of all shares held by Messrs.
Malone, Ravenel and Romrell. The address of TCI is 5619 DTC Parkway,
Englewood, Colorado 80111.
(3) Represents shares of Series A Common Stock held by Cox @Home, Inc., a
wholly owned subsidiary of Cox. Cox disclaims beneficial ownership of all
shares held by Mr. Woodrow. The address of Cox is 1400 Lake Hearn Drive,
Atlanta, Georgia 30319.
18
<PAGE>
(4) Represents shares of Series A Common Stock held by Comcast PC Investments,
Inc., a wholly owned subsidiary of Comcast. Comcast disclaims beneficial
ownership of all shares held by Mr. Roberts. The address of Comcast is 1500
Market Street, 35th Floor, Philadelphia, Pennsylvania 19102.
(5) Represents warrants to purchase 10,946,936 shares of Series A Common
Stock. Of these shares, 10,231,298 are immediately exercisable and the
balance will become exercisable as and to the extent certain Connecticut
cable systems are transferred to Cablevision from TCI and its controlled
affiliates. See, "Certain Relationships and Related Transactions, 1997
Warrant Issuance to Cablevision." The address of Cablevision is One Media
Crossways, Woodbury, New York 11797.
(6) Represents 9,336,305 shares of Series K Common Stock held by Kleiner
Perkins Caufield & Byers VII ("KPCB VII"), and 321,940 shares of Series K
Common Stock held by KPCB Information Sciences Zaibatsu Fund II ("KPCB
Info."). KPCB VII and KPCB Info. disclaim beneficial ownership of all
shares held by Messrs. Doerr and Hearst outside of these funds. The
address of KPCB VII and KPCB Info. is Kleiner Perkins Caufield & Byers,
2750 Sand Hill Road, Menlo Park, California 94025.
(7) Mr. Jermoluk is the Company's Chairman, President and Chief Executive
Officer. Of these shares, 2,416,667 are subject to repurchase at March 14,
1998.
(8) Represents shares held by Rogers, a wholly owned subsidiary of Rogers
Communications, Inc. Edward S. Rogers is the President and Chief Executive
Officer of Rogers Communications, Inc. and the designee of Rogers and Shaw
on the Board. Mr. Rogers disclaims beneficial ownership of the shares held
by Rogers. The address of Rogers is Suite 2400, Scotia Plaza, 40 King
Street West, Toronto, Ontario, Canada M5H 3Y2.
(9) Mr. Medin is the Company's Senior Vice President and Chief Technology
Officer. Of these shares, 186,660 are subject to repurchase at March 14,
1998.
(10) Mr. Goldman is the Company's Senior Vice President and Chief Financial
Officer. Of these shares, 288,751 are subject to repurchase at March 14,
1998.
(11) Mr. Hearst, Vice Chairman of the Board, is a general partner of KPCB,
which is the general partner of the general partner of KPCB VII and KPCB
Info. Mr. Hearst disclaims beneficial ownership of the shares held by KPCB
VII and KPCB Info. The address of Mr. Hearst is Kleiner Perkins Caufield &
Byers, 2750 Sand Hill Road, Menlo Park, California 94025.
(12) Mr. Gilbert is the Company's Senior Vice President and General
Manager, @Home. Of these shares, 210,452 are subject to repurchase at
March 14, 1998 and 50,000 are subject to options that are exercisable on
May 13, 1998 but, if exercised, are subject to repurchase.
(13) Mr. Bagshaw is the Company's Senior Vice President and General
Manager, @Media. Of these shares 281,070 are subject to repurchase at
March 14, 1998 and 25,000 are subject to options that are exercisable on
May 13, 1998 but, if exercised, are subject to repurchase.
(14) Mr. Hutchison is the Company's Senior Vice President and General
Manager, @Work. Of these shares, 291,667 are subject to repurchase at
March 14, 1998 and 25,000 are subject to options that are exercisable on
May 13, 1998 but, if exercised, are subject to repurchase.
(15) Represents shares of Series A Common Stock held by Netscape. Netscape
disclaims beneficial ownership of all shares held by Mr. Barksdale. The
address of Netscape is 487 East Middlefield, Mountain View, California
94043.
(16) Of the shares of Series A Common Stock reported by Mr. Doerr, 66,735
are held in trusts for which Mr. Doerr disclaims beneficial ownership
except to the extent of any indirect pecuniary interest therein. Mr. Doerr
is a general partner of KPCB, which is the general partner of the general
partner of KPCB VII and KPCB Info. Mr. Doerr disclaims beneficial
ownership of the shares held by KPCB VII and KPCB Info.
19
<PAGE>
Mr. Doerr serves as the Series K Director on the Board. The address of Mr.
Doerr is Kleiner Perkins Caufield & Byers, 2750 Sand Hill Road, Menlo Park,
California 94025.
(17) Mr. Barksdale, a director of the Company, is the President and Chief
Executive Officer of Netscape. Mr. Barksdale disclaims beneficial
ownership of the shares held by Netscape. The address of Mr. Barksdale is
487 East Middlefield, Mountain View, California 94043
(18) Mr. Malone, a director of the Company, is Chairman and Chief Executive
Officer of TCI. Mr. Malone disclaims beneficial ownership of the shares
held by TCI. The address of Mr. Malone is 5619 DTC Parkway, Englewood,
Colorado 80111.
(19) Mr. Romrell is Executive Vice President of TCI and serves as its
designee as a Series B Director of the Company. Mr. Romrell disclaims
beneficial ownership of the shares held by TCI. The address of Mr. Romrell
is 5619 DTC Parkway, Englewood, Colorado 80111.
(20) Mr. Woodrow is the Senior Vice President of Broadband Services of Cox
and serves as its designee as a Series B Director. Mr. Woodrow disclaims
beneficial ownership of the shares held by Cox. The address of Mr. Woodrow
is 1400 Lake Hearn Drive, Atlanta, Georgia 30319.
(21) Mr. Ravenel is Executive Vice President - Interactive Ventures of TCIC
and serves as TCI's designee as a Series B Director of the Company. Mr.
Ravenel disclaims beneficial ownership of the shares held by TCI. The
address of Mr. Ravenel is 5619 DTC Parkway, Englewood, Colorado 80111.
(22) Mr. Roberts is the President of Comcast and serves as its designee as
a Series B Director. Mr. Roberts disclaims beneficial ownership of the
shares held by Comcast. The address of Mr. Roberts is Comcast, 1500 Market
Street, 35th Floor, Philadelphia, Pennsylvania 19102.
(23) Includes the shares described in all footnotes above relating to
directors and executive officers, plus an additional 632,000 shares of
Series A Common Stock held by two other executives, of which 437,300 are
subject to repurchase at March 14, 1998, and 55,000 shares of Series A
Common Stock that are subject to options that are exercisable as of May 13,
1998 but, if exercised, are subject to repurchase. Excludes all shares
held by TCI, Cox, Comcast, Cablevision, KPCB, Rogers and Netscape including
shares that may be deemed to be indirectly owned by a director who is also
an executive officer or director of one of these stockholders.
MANAGEMENT
EXECUTIVE OFFICERS
The executive officers of the Company, and their ages and positions are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Thomas A. Jermoluk 41 Chairman of the Board, President and Chief Executive Officer
David P. Bagshaw 44 Senior Vice President and General Manager, @Media
Leilani T. Gayles 43 Vice President, Human Resources
Dean A. Gilbert 41 Senior Vice President and General Manager, @Home
Kenneth A. Goldman 48 Senior Vice President and Chief Financial Officer
Donald P. Hutchison 41 Senior Vice President and General Manager, @Work
Milo S. Medin 35 Senior Vice President and Chief Technology Officer
John L. O'Farrell 39 Senior Vice President, International
David G. Pine 39 Vice President, General Counsel and Secretary
Robert E. Tomasi, Jr. 46 Senior Vice President, Operations
</TABLE>
THOMAS A. JERMOLUK has served as the Company's Chairman of the Board, President
and Chief Executive Officer since he joined the Company in July 1996. From 1994
to July 1996, he was President, and from 1992 to July 1996
20
<PAGE>
he was Chief Operating Officer, of Silicon Graphics, Inc. ("SGI"), a visual
computing company. From 1991 to 1994, Mr. Jermoluk was Executive Vice President
of SGI, and, from 1988 to 1991, he was Vice President and General Manager of
SGI's Advanced System Division. From October 1993 to August 1996, he was a
member of the board of directors of SGI. Prior to joining SGI in 1986, Mr.
Jermoluk managed a variety of hardware and software development projects at
Hewlett-Packard Company and Bell Laboratories. He serves on the board of
directors of Forte Software, Inc. Mr. Jermoluk holds B.S. and M.S. degrees in
Computer Science from Virginia Tech.
DAVID P. BAGSHAW has served as the Company's Senior Vice President and General
Manager, @Media since he joined the Company in September 1996. From August 1991
to August 1996, he served as Vice President of Marketing of SGI, where he was
responsible for various marketing organizations and activities, including
communications, public relations, business development, application developer
support and product marketing. From 1987 to August 1991, he served as a product
manager and as a director of marketing at SGI. Mr. Bagshaw holds B.S. and M.S.
degrees in Mechanical Engineering from Stanford University and an M.B.A. degree
from the Stanford University Graduate School of Business.
LEILANI T. GAYLES has served as the Company's Vice President, Human Resources
since she joined the Company in October 1997. From October 1995 until October
1997 she served as a human resources consultant to a variety of companies. From
February 1985 until June 1995, she held various management positions at Silicon
Graphics Computer Systems, a worldwide manufacturer of computer workstations,
including Vice President, Human Resources. Previously, Ms. Gayles was employed
by Hewlett-Packard Company, a manufacturer of computing and other electronic
products. Ms. Gayles holds a B.S. degree in Organization Behavior from the
University of San Francisco.
DEAN A. GILBERT has served as the Company's Senior Vice President and General
Manager, @Home since November 1996 and served as Senior Vice President,
Marketing and Sales of the Company from February 1996 to November 1996. From
September 1994 to February 1996, he served as President and Chief Executive
Officer of Positive Communications, Inc., a provider of paging products and
services. From 1991 to September 1994, Mr. Gilbert was Executive Vice President,
Group Operations and from 1989 to 1991 was Senior Vice President, Marketing,
Programming and Business Development of KBLCOM, Incorporated, a cable television
provider. He holds B.A. and M.A. degrees in Telecommunications from Michigan
State University.
KENNETH A. GOLDMAN has served as the Company's Senior Vice President and Chief
Financial Officer since he joined the Company in July 1996. From July 1992 to
July 1996, he was Senior Vice President and Chief Financial Officer of Sybase,
Inc., a database software and services company. From 1989 to July 1992, Mr.
Goldman was Vice President of Finance and Administration and Chief Financial
Officer at Cypress Semiconductor Corporation, a semiconductor manufacturer. From
1983 to 1989, he was Vice President and Chief Financial Officer of VLSI
Technology Inc. Mr. Goldman serves on the board of directors of Global Village
Inc. He holds a B.S. degree in Electrical Engineering from Cornell University
and an M.B.A. degree from the Harvard University Graduate School of Business.
DONALD P. HUTCHISON has served as the Company's Senior Vice President and
General Manager, @Work since he joined the Company in February 1997. Prior to
that time, he served as Senior Vice President, Strategic Partnerships from March
1996 to November 1996, Senior Vice President, Sales from August 1995 to March
1996 and Vice President, Sales and Marketing from May 1994 to August 1995 of
Netcom On-Line Communications Services, Inc. ("Netcom"), an Internet access
service provider. From 1989 to May 1994, Mr. Hutchison was Director of Sales and
Marketing at TAU Corporation, a digital video imaging company. From 1987 to
1989, he was Director of Sales and Business Planning for Pixar, and, prior to
that time, he held various sales and management positions with Prime Computer
and Data General Corporation. Mr. Hutchison holds a B.A. degree in Business
Economics from the University of California at Santa Barbara and an M.B.A.
degree from Loyola Marymount University.
MILO S. MEDIN has served as the Company's Senior Vice President and Chief
Technology Officer since March 1998. Prior to March, Mr. Medin served as the
Company's Vice President, Networks from the time he joined the Company as its
founder in June 1995. From 1985 to June 1995, he was employed at the NASA Ames
Research Center ("NASA Ames"), where he was responsible for a variety of wide
area networking projects, including the use of Internet technology to
interconnect NASA facilities and researchers at over 200 sites in 16 countries.
In 1989, Mr. Medin developed the architecture for the first Internet
interconnect at NASA Ames, linking the major government backbones together. He
also managed the National Research and Educational network project at NASA
21
<PAGE>
Ames, which, in concert with the United States Department of Energy, deployed
the first non-experimental 155 Mbps Internet backbone using switched ATM
services to interconnect supercomputing and data archive facilities across the
United States. Prior to joining NASA, he was employed by Science Applications
Inc. as a programmer for defense program activities at the Lawrence Livermore
National Laboratory and at the Los Alamos National Laboratory. In addition, Mr.
Medin has been active in the development of Internet routing protocols and
standards, primarily in the Internet Engineering Task Force, the leading
Internet development and standards organization, for more than 10 years. He
studied Computer Science at the University of California at Berkeley.
JOHN L. O'FARRELL has served as the Company's Senior Vice President,
International since he joined the Company in April 1997. From August 1995 to
April 1997, he was President of U S WEST Interactive Services, Inc., an Internet
content development company. From May 1994 to August 1995, Mr. O'Farrell served
as Vice President, Corporate Strategy of U S WEST, Inc., a telephone and cable
network operator, and from 1992 to May 1994, as Executive Director, Corporate
Strategy of U S WEST, Inc. Before joining U S WEST, Inc., he held general
management, marketing and consulting positions in the United States and Europe
with Telecom Ireland (Ireland), Booz, Allen & Hamilton (U.S.), the Commission of
European Communities (Luxembourg), Digital Equipment Corporation and Siemens AG
(both Germany). Mr. O'Farrell holds a B.E.E. degree from University College
Dublin, Ireland and an M.B.A. degree from the Stanford University Graduate
School of Business.
DAVID G. PINE has served as the Company's Vice President and General Counsel
since he joined the Company in April 1996 and as Secretary of the Company since
July 1996. From 1990 to March 1996, he served as Vice President, General Counsel
and Secretary of Radius Inc., a manufacturer of computer peripherals. Before
that, Mr. Pine was in private law practice with Fenwick & West LLP. Mr. Pine
holds an A.B. degree in Government from Dartmouth College and a J.D. degree from
the University of Michigan Law School.
ROBERT E. TOMASI, JR. has served as the Company's Senior Vice President,
Operations since he joined the Company in November 1997. From November 1996 to
November 1997, he served as Chief Operating Officer of Best Internet
Communications, an Internet services organization specializing in web hosting.
From November 1994 to November 1996, Mr. Tomasi served as Vice President
Operations of Netcom. Prior to that, Mr. Tomasi spent sixteen years in various
management positions at British Telecommunications ("BT"), a telecommunications
provider. As Vice President of Operations for BT, he directed the domestic and
international expansion of Tymnet Data Network, and had responsibility for
global operations, customer service and technical support. He also served as
General Manager of BT's Custom Data Networks business in London, England. Mr.
Tomasi holds a B.S. degree in Electrical Engineering, Computer Systems from the
New Jersey Institute of Technology.
22
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the
compensation awarded to, earned by or paid, for services rendered to the Company
in all capacities during the fiscal years ended December 31, 1995, 1996 and 1997
by the Named Executive Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
------------------------------
Annual Compensation Awards
--------------------------- ------------------------------
Restricted Securities All Other
Name and Annual Stock Underlying Compen-
Principal Position Year (1) Salary($) Bonus($) Awards (#) (2) Options(#) sation($)(3)
- ------------------------- -------- --------- ------------------ ----------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Thomas A. Jermoluk 1997 500,000 200,000 - - 1,377
President, CEO and 1996 210,257 - 4,000,000(4) - 272
Chairman of the Board 1995 - - - - -
of Directors
Kenneth A. Goldman 1997 250,000 50,000 - - 1,479
Senior Vice President, 1996 105,128 50,000(5) 550,000(6) - 464
and Chief Financial 1995 - - - - -
Officer
David P. Bagshaw 1997 250,000 40,000 - 25,000 867
Senior Vice President, 1996 85,407 - 450,000(7) - 204
@Media Group 1995 - - - - -
Dean A. Gilbert 1997 225,000 30,000 - 50,000 815
Senior Vice President 1996 202,068 30,000(8) 440,000(9) - 425
and General Manager, 1995 - - - - -
@Home Group
Donald P. Hutchison 1997 201,203 25,000 - 450,000 714
Senior Vice President 1996 - - - - -
and General Manager, 1995 - - - - -
@Work Group
Milo S. Medin 1997 175,000 50,000 - 50,000 324
Senior Vice President 1996 155,000 - 600,000(10) - 257
and Chief Technology 1995 56,250 - - - -
Officer
</TABLE>
(1) The Company was founded in March 1995. All the Named Executive Officers
commenced employment with the Company in 1996, except Mr. Medin and Mr.
Hutchison who commenced employment in 1995 and 1997, respectively.
(2) All shares reflected in this column were purchased at their fair market
value on the date of purchase. All of these shares were restricted shares
that vest over a period of four year so long as the individual remains
continuously employed by the Company. The Company has the right to
repurchase unvested restricted shares at their original purchase price upon
the termination of the executive's employment.
(3) Represents life insurance premiums paid by the Company.
(4) Represents 3,000,000 shares of the Company's Series A Common Stock
purchased in July 1996 for $150,000 in cash and 50,000 shares of the
Company's Series K Preferred Stock, which converted to 1,000,000 shares of
Series K Common Stock on July 16, 1997, for $500,000 in cash.
23
<PAGE>
(5) Represents a sign-on bonus paid to Mr. Goldman when he joined the Company.
(6) Represents 550,000 shares of the Company's Series A Common Stock purchased
in July 1996 for $27,500 in cash.
(7) Represents 450,000 shares of the Company's Series A Common Stock purchased
in October 1996 for $45,000 in cash.
(8) Represents a sign-on a bonus paid to Mr. Gilbert when he joined the
Company.
(9) Represents 440,000 shares of the Company's Series A Common Stock purchased
in May 1996 in exchange for a promissory note in the amount of $22,000. In
January 1998, Mr. Gilbert reduced the balance of the promissory note to
$11,450 by a cash payment of $10,550.
(10) Represents 600,000 shares of the Company's Series A Common Stock purchased
in May 1996 in exchange for a promissory note in the amount of $30,000.
STOCK OPTION GRANTS IN 1997
The following table sets forth further information regarding individual grants
of stock options pursuant to the Company's 1997 Equity Incentive Plan and the
Prior Plan during 1997 to each of the Named Executive Officers.
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------------- Potential Realizable Value
Number of % of at Assumed Annual Rates
Securities Total of Stock Price
Underlying Options Appreciation for Option
Options Granted to Exercise Terms ($)(1)
Granted Employees in Price per Expiration ---------------------------
Name (#) Fiscal Year Share ($) Date 5% 10%
- --------------------- ---------- ------------ --------- ---------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas A. Jermoluk - - - - - -
Kenneth A. Goldman - - - - - -
David P. Bagshaw 25,000(2) .5% 4.00 6/11/07 62,889 159,374
Dean A. Gilbert 50,000(2) .9% 4.00 6/11/07 125,779 318,748
Donald P. Hutchison 400,000(3) 7.8% 0.25 3/3/07 62,889 159,374
25,000(2) .5% 4.00 6/11/07 62,889 159,374
25,000(2) .5% 18.44 11/25/07 289,881 734,616
Milo S. Medin 50,000(2) .9% 18.44 11/25/07 579,762 1,469,231
</TABLE>
(1) The potential realizable value is calculated based on the term of the option
at its time of grant, compounded annually. It is calculated by assuming
that the stock price on the date of grant appreciates at the indicated
annual rate, compounded annually for the entire term of the option and that
the option is exercised and sold on the last day of its term for the
appreciated stock price. Actual gains, if any, on option exercises are
dependent on future performance of the Company's Common Stock and overall
market conditions. There can be no assurance that the potential realizable
values shown in this table will be achieved.
(2) These stock options were granted with an exercise price equal to the closing
fair market value of the Company's Series A Common Stock on the date of
grant. These options become exercisable at the rate of 25% of the total
shares on the first anniversary of the grant date, and 2.083% of the total
shares for next 36 months. These options lapse within 90 days after the
termination of an employment or consultancy relationship with the
Company.
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<PAGE>
(3) This stock option was granted with an exercise price equal to the closing
fair market value of the Company's Series A Common Stock on the date of
grant. This option becomes exercisable for 15% of the total shares on the
date of grant, 10% of the total shares on the first anniversary of the date
he commenced employment with the Company, and 2.083% of the total shares for
the next 36 months. The option will lapse within 90 days after the
termination of employment or consultancy relationship with the
Company.
AGGREGATE OPTION EXERCISES IN 1997 AND YEAR-END OPTION VALUES
The following table sets forth information concerning the number of shares
subject to both exercisable and non-exercisable stock options as of December 31,
1997. Also reported are the values for "in-the-money" options which represent
the positive spread between the respective exercise prices of outstanding stock
options and the fair market value of the Company's Common Stock as of December
31, 1997 ($25.125) for the Named Executive Officers.
<TABLE>
<CAPTION>
Number of Value of
Securities Underlying Unexercised
Shares Unexercised Options In-the-Money Options
Acquired on Value at Year-end (#) at Year-end ($)
Name Exercise (#) Realized Exercisable/Unexercisable Exercisable/Unexercisable
- --------------------- ------------ -------- -------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Thomas A. Jermoluk - - - - - -
Kenneth A. Goldman - - - - - -
David P. Bagshaw - - 25,000(1) - 528,125 -
Dean A. Gilbert - - 50,000(1) - 1,056,250 -
Donald P. Hutchison 400,000 0 25,000(1) 25,000 528,125 167,188
Milo S. Medin - - - 50,000 - 334,375
</TABLE>
(1) Represents shares that are exercisable but, if exercised, are subject to
repurchase.
EMPLOYMENT AGREEMENT
On July 31, 1996, the Board elected Thomas A. Jermoluk as President, Chief
Executive Officer and Chairman of the Board of the Company pursuant to an
employment agreement dated July 19, 1996. Under the employment agreement, the
Company has agreed to pay Mr. Jermoluk an annual base salary of $500,000 per
year, and Mr. Jermoluk is eligible to receive a bonus of $200,000 per year based
on the performance of the Company with respect to its annual operating plan. On
July 31, 1996, the Company sold to Mr. Jermoluk a total of 3,000,000 shares of
the Company's Series A Common Stock at a purchase price of $0.05 per share for a
total of $150,000 and a total of 50,000 shares of the Company's Series K
Preferred Stock at a purchase price of $10.00 per share for a total of $500,000.
Of these shares, 25% were immediately vested and an additional 2.08% will vest
on August 22, 1997 and each subsequent month of Mr. Jermoluk's continuous
employment. The Series K Preferred Stock was converted into 1,000,000 shares of
Series K Common Stock in connection with the company's initial public offering.
Under the terms of Mr. Jermoluk's employment agreement, so long as Mr. Jermoluk
is employed by the Company, and for 90 days thereafter if his employment is
terminated without cause, to the extent that Mr. Jermoluk sells any of his
vested shares during the five-year period beginning on July 22, 2000 at an
average price less than $5.00 per share, the Company is obligated to pay Mr.
Jermoluk the difference between $5.00 per share and such average price for each
share sold. The Company must repurchase any unvested shares at Mr. Jermoluk's
cost upon the termination of his employment. If the Company terminates Mr.
Jermoluk's employment without cause, the Company will be obligated to pay Mr.
Jermoluk's base salary and bonus for six months after the date of such
termination, and the Company's right to repurchase any unvested shares will
lapse at the date of such termination.
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<PAGE>
AT HOME CORPORATION
REPORT OF THE COMPENSATION COMMITTEE
This Report of the Compensation Committee is required by the Securities and
Exchange Commission and shall not be deemed to be incorporated by reference by
any general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act, or under the Exchange Act, except to the extent
that the Company specifically incorporates this information by reference, and
shall not otherwise be deemed soliciting material or filed under such
acts.
TO THE BOARD OF DIRECTORS:
Final decisions regarding compensation and stock option grants to executive
officers are made by the Compensation Committee of the Board of Directors (the
"Committee"). The Committee is composed of two non-employee Directors, none of
whom have any interlocking relationships as defined by the Securities and
Exchange Commission.
GENERAL COMPENSATION POLICY
The Committee acts on behalf of the Board to establish the general compensation
policy of the Company. The Committee reviews base salary levels and target
bonuses for the Chief Executive Officer ("CEO") and other executive officers of
the Company each year. The Committee also administers the Company's 1997 Equity
Incentive Plan and the 1997 Employee Stock Purchase Plan. Prior to the
Company's initial public offering on July 11, 1997, the Committee approved by
written consent all stock option grants, including all stock option grants to
the Company's executives. After the Company's initial public offering, the
Committee delegated to the CEO the authority to grant stock options to non-
executive employees.
The Committee's philosophy in compensating executive officers, including the
CEO, is to relate compensation to corporate and individual performance and
customer satisfaction. Consistent with this philosophy, annual salary
adjustments and the incentive component of executive officer compensation is
determined after a review of the Company's and individual's performance for the
previous year. Long-term equity incentives for executive officers are affected
through the granting of stock options under the 1997 Equity Incentive Plan.
The Company's Vice President of Human Resources assists the Committee by making
available competitive executive compensation data, such as stock data, for
companies with whom the Company competes for executive talent. Some of these
companies are included in the Morgan Stanley High Technology Index, the line of
business index used by the Company in its "Performance Graph" set forth in this
Proxy Statement.
1997 EXECUTIVE COMPENSATION
Executive Compensation for 1997 included base salary, cash bonuses and stock
option grants. In October 1997, the CEO recommended that the Committee grant
bonuses to certain executives in recognition of the Company's successful
performance and the significant individual contributions of these executives.
These bonuses were approved by the Committee and ranged from approximately 10%
to 25% of base salary.
In January 1998, the Committee approved a bonus plan for the Company's
executives for 1998 (the "1998 Bonus Plan") based on the following measures:
Company revenue (40% weighting); Company earnings (40% weighting) and customer
satisfaction (20% weighting). The target bonus for each executive under the
1998 bonus plan ranges from 10% to 25%.
On June 11, 1997, the Committee granted stock options to purchase a total of
130,000 shares of Series A Common Stock to four executive officers at an
exercise price of $4.00 per share, which the Compensation Committee determined
to be the fair market value of the Series A Common Stock on that date. On
November 25, 1997, the Committee granted stock options to purchase a total of
105,000 shares of Series A Common Stock to three executive officers at an
exercise price of $18.44 per share, which equaled the closing sale price for the
Series A Common Stock on the Nasdaq National Market on that date. These options
vest and become exercisable as to 25% of the shares one year after the date of
grant and on a monthly basis for 36 months thereafter. These options were
26
<PAGE>
granted on the recommendation of the CEO in recognition of the Company's
successful performance and the significant individual contributions of these
executives.
1997 CEO COMPENSATION
Mr. Jermoluk was hired by the Company pursuant to an employment agreement dated
July 19, 1996 which provides for a base salary of $500,000 and a target bonus of
$200,000 per year. In December 1997, the Committee solicited input from all of
the Company's Board members concerning Mr. Jermoluk's performance as part of the
process of determining Mr. Jermoluk's bonus for 1997. As most of the Company's
Board members represent Cable Partners, the Company's major customers and
investors, the Committee carefully evaluated this input in assessing Mr.
Jermoluk's performance. Based on this input, the Company meeting its financial
and operational goals for 1997, the Company's highly successful initial public
offering, and Mr. Jermoluk's leadership during a period of rapid growth and
transition, the Committee awarded Mr. Jermoluk the full target bonus of
$200,000. In 1998, the amount of Mr. Jermoluk's bonus will be determined based
on the Company's success in meeting its financial targets, operational
objectives (including Cable Partner and subscriber satisfaction), and strategic
goals.
Compliance with Section 162(m) of the Internal Revenue Code of 1986. The Company
intends to comply with the requirements of Section 162(m) of the Internal
Revenue Code of 1986. The 1997 Plan is already in compliance with Section
162(m) by limiting stock awards to named executive officers. The Company does
not expect cash compensation for 1998 for any executive officer to exceed
$1,000,000.
COMPENSATION COMMITTEE
L. John Doerr
Bruce W. Ravenel
27
<PAGE>
PERFORMANCE GRAPH
The SEC requires a comparison on an indexed basis of cumulative total
stockholder return for the Company, a relevant broad equity market index and a
published industry or line-of-business index. Cumulative total stockholder
return represents share value appreciation assuming the investment of $100 in
the Series A Common Stock of the Company at the initial public offering price of
$10.50 per share on July 11, 1997 and in each of the other indexes on the same
date, and reinvestment of all dividends. The Series A Common Stock of the
Company is traded on the Nasdaq National Market. Set forth below is a graph
comparing cumulative total stockholder return on the Company's Series A Common
Stock, the Nasdaq (US) Index and the Morgan Stanley High Technology Index from
July 11, 1997 to December 31, 1997.
<TABLE>
<CAPTION>
At Home Nasdaq (US) Morgan Stanley High
Corporation Index Technology Index
----------- ----------- -------------------
<S> <C> <C> <C>
July 11, 1997 100 100 100
September 30, 1997 220.24 112.18 112.9
December 31, 1997 239.29 104.5 97.1
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1, 1997, there has not been nor is there currently proposed, any
transaction or series of similar transactions to which the Company or any of its
subsidiaries was or is to be a party in which the amount involved exceeds
$60,000 and in which any director, executive officer, holder of more than 5% of
the Common Stock of the Company or any member of the immediate family of any of
the foregoing persons had or will have a direct or indirect material interest
other than (i) compensation agreements, which are described where required in
"Executive Compensation," and (ii) the transactions described below.
TRANSACTIONS WITH DIRECTORS, EXECUTIVE OFFICERS AND 5% SECURITY HOLDERS
1997 Financing from Rogers, Shaw and Other Strategic Partners. On April 11,
1997, the Company sold an aggregate of 240,000 shares of its Series C Preferred
Stock at a cash purchase price of $200 per share to certain companies with which
the Company has established strategic commercial relationships and to James L.
Barksdale, who is a director of the Company and the Chief Executive Officer of
Netscape. Among the purchasers were the following:
28
<PAGE>
<TABLE>
<CAPTION>
PURCHASER Type of Stock SHARES TOTAL PURCHASE PRICE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rogers Series C Preferred Stock 75,000 $15,000,000
Shaw Series C Preferred Stock 75,000 15,000,000
Netscape Series C Preferred Stock 20,000 4,000,000
James L. Barksdale Series C Preferred Stock 5,000 1,000,000
</TABLE>
In connection with the Series C Preferred Stock financing, the Company entered
into agreements with Rogers and Shaw granting them exclusive rights to
distribute the @Home service in Canada and the right to license other cable
companies to distribute the service in Canada. In addition, on April 11, 1997,
the Company granted to Rogers and Shaw transferable warrants to purchase up to
an aggregate of 100,000 shares of Series C Preferred Stock each at a purchase
price of $200 per share. These warrants become fully exercisable on the earlier
of April 11, 2004 or the achievement of certain performance milestones with
respect to the distribution of the @Home service in Canada. Each share of
Series C Preferred Stock issued in the Series C Preferred Stock financing
converted into 20 shares of Series A Common Stock on July 16, 1997 in connection
with the closing of the Company's initial public offering.
Pursuant to a Voting Agreement entered into with Rogers and Shaw on April 11,
1997, TCI, Comcast and Cox have agreed (i) to use their reasonable best efforts
to cause a single representative designated jointly by Rogers and Shaw to be
nominated for election to the Board and an additional representative designated
jointly by Rogers and Shaw to be afforded the right to attend all meetings of
the Board as a nonvoting observer and (ii) to vote all voting securities of the
Company controlled by them in favor of election of the designee of Rogers and
Shaw to the Board. The Voting Agreement will terminate on the earlier to occur
of the date that (i) neither Rogers nor Shaw continues to offer the @Home
service on an exclusive basis or (ii) Rogers and Shaw together with their
controlled affiliates cease to own at least (x) 2,500,000 shares of Series A
Common Stock, or (y) 2,000,000 shares of Series A Common Stock plus warrants to
purchase an additional 500,000 shares of Series A Common Stock.
Stockholders' Agreement On August 1, 1996, TCI, Comcast, Cox, purchasers
affiliated with KPCB (collectively, the "Principal Stockholders") and the
Company entered into a Stockholders' Agreement, which was amended on July 16,
1997 (as amended, the "Prior Stockholders' Agreement"), which provides for
certain voting agreements, restrictions on transfer of Company securities,
rights of first offer, tag-along and drag-along rights and preemptive rights.
The Prior Stockholders' Agreement was amended effective October 2, 1997 (as
further amended, the "Stockholders' Agreement"), pursuant to a Letter Agreement
and Term Sheet among the Principal Stockholders, Cablevision and the Company
(the "Cablevision Amendment"), to add Cablevision as a party to the
Stockholders' Agreement with the same rights as TCI, Comcast and Cox, subject to
certain exceptions. The following summary description of the Stockholders'
Agreement does not purport to be complete and is qualified in its entirety by
reference to the text of the Prior Stockholders' Agreement which is filed as an
exhibit to the Company's Registration Statement on Form S-1 (file number 333-
27323), as amended by the Cablevision Amendment which is filed as an exhibit to
the Company's Current Report on Form 8-K (filed with the SEC on October 22,
1997).
The Stockholders' Agreement provides that each Principal Stockholder will vote
all of its shares of Company's voting stock in favor of any action required by
the Stockholders' Agreement, including the election of the Chief Executive
Officer of the Company to its Board, and that any holder of Series B Common
Stock (all of which is currently owned by TCI) will vote all such shares in
favor of the election of certain designees of TCI, Comcast and Cox to the Board
as Series B Directors as follows: Comcast will be entitled to designate one
director so long as it owns at least 5,000,000 shares of Common Stock; Cox will
be entitled to designate one director so long as it owns at least 5,000,000
shares of Common Stock; and TCI will be entitled to designate three directors so
long as it owns at least 7,700,000 shares of Series B Common Stock, two
directors so long as it owns at least 6,350,000 shares of Series B Common Stock
and one director so long as it owns at least 5,000,000 shares of Series B Common
Stock. In addition, the Stockholders' Agreement provides, if Cablevision so
requests, that the Company and the Principal Stockholders are required to take
such commercially reasonable actions as are required to cause a designee of
Cablevision to be appointed as a Common Stock Director and that each Principal
Stockholders will vote all of its shares of the Company's voting stock in favor
of the election of the Cablevision designee as a Common Stock Director so long
as Cablevision beneficially owns at least 5,000,000 shares of Common Stock.
29
<PAGE>
The Stockholders' Agreement, with certain exceptions (including public
offerings), restricts transfers of Company securities by the Principal
Stockholders and Cablevision until the earliest to occur of (i) June 4, 2006,
(ii) the fifth anniversary of the termination of the exclusive period applicable
to TCI, Comcast, Cox or Cablevision (collectively, the "Principal Cable
Affiliates") and (iii) the sixth anniversary of the Company's initial public
offering. To the extent transfers of Series B and K Common Stock are permitted,
the holders of such shares generally must convert them to Series A Common Stock
prior to consummating such transfers. After July 11, 1998, each Principal
Stockholder and Cablevision will be permitted to sell its Series A Common Stock
in the public market if it first offers to each other Principal Stockholder and
Cablevision the right of first offer to purchase such securities. The
restrictions on transfer contained in the Stockholders' Agreement do not apply
to any constituent partner of KPCB. The restrictions on transfer do not apply
to a transfer of Company securities that would result in an unaffiliated third
party acquiring a majority of the voting stock of the Company (a "Control Block
Sale"). In the event of a Control Block Sale, all Principal Stockholders that
continue to own at least 25% of the Company securities they originally purchased
on or before August 1, 1996, and Cablevision, if it owns at least 1,968,946
shares of Series A Common Stock (collectively, the "Eligible Principal
Stockholders") will be permitted to participate in the Control Block Sale by
selling a pro rata portion of their Company securities to the third party (the
"Tag-Along Right"). If any group consisting of TCI and any three other Eligible
Principal Stockholders proposes to make a Control Block Sale, that group will
have the right to require the other Principal Stockholders, and Cablevision, if
applicable, to sell a pro rata portion of their Company securities to the third
party in the Control Block Sale (the "Drag-Along Right").
The Stockholders' Agreement provides that, if the number of homes passed by a
Principal Cable Affiliate's cable systems that remain subject to the exclusivity
provisions of the Master Distribution Agreement (together with any systems that
have been released from such provisions due to the Company's failure to meet the
rollout schedule) falls below 80% of such Principal Cable Affiliate's base homes
passed as of June 4, 1996, as such number is amended by the Cablevision
Amendment, then such Principal Cable Affiliate must offer to sell a
proportionate amount of its Company securities to the other Principal
Stockholders and Cablevision, if applicable, at a price equal to the average
closing price of the Company's Series A Common Stock over the most recent 20
trading days preceding the event.
The Stockholders' Agreement gives each Eligible Principal Stockholder the
preemptive right to purchase a pro rata portion of any new securities offered by
the Company other than securities issued pursuant to a public offering,
securities issued pursuant to any incentive plan or agreement for the benefit of
the Company's employees, directors or consultants, securities issued by the
Company in connection with an acquisition, and securities issued in exchange for
interests in a joint venture or other business combination.
The Stockholders' Agreement will terminate on the earliest of (i) June 4, 2021,
(ii) when there are no Eligible Principal Stockholders and no Principal Cable
Affiliates subject to exclusivity obligations under the Master Distribution
Agreement (as defined below), (iii) a merger in which the Company is not the
surviving entity or (iv) when there are no shares of Common Stock or Preferred
Stock of the Company outstanding.
1997 Warrant Issuance to Cablevision. In connection with the Cablevision
Amendment, the Company issued Cablevision a warrant to purchase up to 7,875,784
shares of the Company's Series A Common Stock at an exercise price of $0.50 per
share (the "Warrant"). The Warrant is immediately exercisable, subject to the
receipt of all necessary governmental consents or approvals. The Company also
issued Cablevision a warrant to purchase up to 3,071,152 shares of the Company's
Series A Common Stock at an exercise price of $0.50 per share under certain
conditions (the "Contingent Warrant"). The Contingent Warrant is not
immediately exercisable and will become exercisable as and to the extent certain
cable television systems are transferred from TCI and its controlled affiliates
to Cablevision. During the first quarter of 1998, the Contingent Warrant became
exercisable as to 2,355,514 shares of Series A Common Stock upon the completion
of the transfer from TCI to Cablevision of certain homes in New York, New Jersey
and Connecticut. The remaining 715,638 shares of Series A Common Stock subject
to the Contingent Warrant will become exercisable upon the transfer from TCI to
Cablevision of certain additional homes in Connecticut. Copies of the
Cablevision Amendment, the related Warrant Purchase Agreement, the Warrant and
the Contingent Warrant are filed as Exhibits 10.01 through 10.04 to the
Company's Current Report on Form 8-K (filed with the SEC on October 22, 1997)
and the above description is qualified in its entirety by reference to those
exhibits.
1998 Warrant Issuance to Rogers and Shaw. In February 1998, the Company and
Rogers and Shaw entered into a Binding Warrant Term Sheet providing for the
issuance of warrants to purchase 2,900,000 and 2,100,000 shares of
30
<PAGE>
the Company's Series A Common Stock to Rogers and Shaw, respectively, at a
purchase price of $10.50 per share. These warrants vest and become exercisable
following the satisfaction of certain performance conditions by Rogers and Shaw
related to their numbers of subscribers to the Company's @Home service. The
warrants expire on March 31, 2008, if not exercised. During the first quarter of
1998, in connection with the satisfaction of certain performance conditions,
warrants to purchase 350,000 shares of Series A Common Stock vested with respect
to Shaw.
Registration Rights Agreement All of the holders of the Company's Preferred
Stock prior to the Company's initial public offering have certain registration
rights with respect to their shares of Series A Common Stock. Specifically, the
holders of approximately 92,033,115 shares of Series A Common Stock (including
shares issuable upon conversion of other series of Common Stock) and holders of
warrants to purchase approximately 2,000,000 shares of Series A Common Stock
have certain rights to cause the Company to register those shares (the
"Registrable Shares") under the Securities Act at any time after July 16, 1998.
Thereafter, the Company may be required to effect up to four registrations
requested by the TCI stockholder group, two registrations requested by the
Comcast stockholder group, two registrations requested by the Cox stockholder
group, two registrations requested by the Cablevision stockholder group, two
registrations requested by the KPCB stockholder group and two registrations
requested by the persons who held Series C Preferred Stock and warrants to
purchase Series C Preferred Stock prior to the Company's initial public
offering. Stockholder groups not part of the initial registration demand are
entitled to notice of such registration and are entitled to include Registrable
Shares therein. These registration rights are subject to certain conditions and
limitations, including (1) the right, under certain circumstances, of the
underwriters of an offering to limit the number of shares included in such
registration and (ii) the right of the Company to delay the filing of a
registration statement for not more than 120 days after receiving the
registration demand. Notwithstanding the foregoing, the exercise of the
Principal Stockholders' and Cablevision's registration rights are subject to the
other Principal Stockholders' and Cablevision's rights of first offer as set
forth in the Stockholders' Agreement, unless specifically exempted therefrom.
If any stockholder group requests registration of at least 500,000 Registrable
Shares, the Company is obligated to pay all registration expenses incurred in
connection with such registration (other than underwriters' discounts and
commissions and stock transfer fees or expenses) and the fees and expenses of a
single counsel to the selling stockholders. These demand registration rights
expire with respect to the Series C Preferred stockholder group on July 16,
2002.
In addition, if the Company proposes to register any of its equity securities
under the Securities Act, whether or not for sale for its own account, other
than in connection with a Company employee benefit plan or a corporate
reorganization, the holders of Registrable Shares and the holder of a warrant to
purchase 200,000 shares of Series A Common Stock are entitled to notice of such
registration and are entitled to include Registrable Shares and the shares
issuable upon exercise of such warrant therein. These rights are subject to
certain conditions and limitations, including the right of the underwriters of
an offering to limit the number of shares included in such registration under
certain circumstances and the right of the Company to delay or withdraw any such
registration. The Company is obligated to pay all registration expenses
incurred in connection with such registration other than underwriters' discounts
and commissions, stock transfer fees or expenses, the pro rata share of the
incremental filing fee under the Securities Act attributable to the applicable
Registrable Shares and the fees and disbursements of counsel to the holders of
the Registrable Shares. These "piggyback" registration rights expire with
respect to the Series C Preferred stockholder group on July 16, 2002.
Officer Loans. In connection with the exercise of stock options granted under
one of the Prior Plans, the Company permitted two executive officers, Donald P.
Hutchison and John L. O'Farrell, to purchase shares of Series A Common Stock in
exchange for promissory notes in the amounts of $96,000 and $66,000,
respectively. Each note is secured by the shares purchased with that note. The
notes bear interest at the rates of 6.31% and 6.42%, respectively, and are due
and payable on March 15, 2002 and April 28, 2002, respectively. The Company has
approved loans to Messrs. Hutchison and O'Farrell of $100,000 and $200,000,
respectively, to assist each of them in the purchase of a home. The loans will
be secured by the homes purchased by Messrs. Hutchison and O'Farrell,
respectively. Mr. O'Farrell's loan has been issued, has a five-year term and
bears interest at the minimum rate sufficient to avoid imputation of taxable
income. Mr. Hutchison's loan has not yet been issued, and, if issued, will have
a five-year term and bear interest at the minimum rate sufficient to avoid
imputation of taxable income. In November 1997, the Company approved a loan to
Robert E. Tomasi, Jr. of $250,000, to assist him in the purchase of shares of
Common Stock of Best Internet Communications, Inc. ("Best"), his former
employer. Mr. Tomasi has borrowed $100,000 under this loan. The loan, which
has a two-year term, bears interest at the minimum rate
31
<PAGE>
sufficient to avoid imputation of taxable income and is secured by the shares of
Best Common Stock and any of the Company's Series A Common Stock that Mr. Tomasi
acquires.
CERTAIN BUSINESS RELATIONSHIPS
Master Distribution Agreement with TCI, Comcast, Cox and Cablevision. The
Company and the Principal Cable Affiliates are parties to a Master Distribution
Agreement. The following summary description of the Master Distribution
Agreement does not purport to be complete and is qualified in its entirety by
reference to the text of the Master Distribution Agreement, which is filed as an
exhibit to the Company's Registration Statement on Form S-1 (file number 333-
27323), as amended by the Cablevision Amendment (as amended, the "Master
Distribution Agreement").
Under the terms of the Master Distribution Agreement, in connection with the
Company's periodic budgets and business plans, the parties have agreed to
cooperate in good faith to establish a master rollout schedule for the
deployment of the @Home service within the cable system territories of the
Principal Cable Affiliates, and the Company is obligated to use commercially
reasonable efforts to cause the @Home service to be made available to the
qualifying upgraded homes passed of these parties on a substantially pro rata
basis in accordance with the master roll-out schedule. While the Master
Distribution Agreement provides that the Principal Cable Affiliates will be
subject to certain exclusivity obligations described below, there is no
affirmative obligation on the part of the Principal Cable Affiliates to upgrade
their cable plants to two-way HFC cable or to offer the @Home service over their
cable systems. The Master Distribution Agreement contemplates that the Company
will enter into agreements ("LCO Agreements") with the affiliated local cable
operators ("Affiliated LCOs") of the Principal Cable Affiliates for the
distribution of the @Home service, although no LCO Agreements have been executed
to date. The Company and the Principal Cable Affiliates have established the
principal terms of the LCO Agreements, including the payment to the Company of
35% of the basic and premium service revenue received by Affiliated LCOs from
subscribers to the @Home service. During 1997, TCI, Comcast and Cox accounted
for $1,255,000, $1,484,000 and $134,000 of the Company's revenues, respectively.
Until June 4, 2002 or such earlier time as the exclusivity provisions described
below terminate as to a Principal Cable Affiliate (the "Restricted Period"),
each Principal Cable Affiliate on behalf of itself and its controlled affiliates
has agreed not to conduct, participate in or have a material beneficial
ownership interest in any business within the United States (a "Restricted
Business") that involves (i) the provision of a residential Internet service
over the cable television plant of the Principal Cable Affiliate at data
transmission speeds greater than 128 kilobits per second ("Kbps") and whose
primary purpose is the provision to consumers of entertainment, information
content, transactional services or electronic mail, chat and news groups (a
"Consumer Purpose"), (ii) the connection by the Principal Cable Affiliate of its
cable television plant directly or indirectly to any Internet backbone for a
Consumer Purpose at data transmission speeds greater than 128 Kbps or (iii) the
provision of an Internet backbone service. These exclusivity provisions do not
apply to the creation or aggregation of content or, among other things, the
following Excluded Services: (i) the provision of telephony services, (ii) the
provision of services that are primarily work-related such as the Company's
@Work services, (iii) the provision of Internet services that do not use the
cable television infrastructures of the Principal Cable Affiliates, (iv) the
provision of any local Internet service that does not require use of an Internet
backbone outside a single metropolitan area, (v) the provision of services that
are utilized primarily to connect students to schools, colleges or universities,
(vi) the provision of Internet telephony, Internet video telephony or Internet
video conferencing, (vii) the provision of certain limited Internet services for
display on a television, (viii) the provision of certain Internet services that
are primarily downstream services where the user cannot send upstream commands
in "real-time," as referenced in the Master Distribution Agreement, (ix) the
provision of streaming video transmissions that include video segments longer
than ten minutes in duration or (x) limited testing, trials and similar
activities of less than six months.
The exclusivity provisions described in the preceding paragraph may be
terminated under the following circumstances: (i) any Affiliated LCO may
terminate its exclusivity obligations if the Company fails to roll out the @Home
service in such operator's territory by mutually agreed dates in a schedule set
forth in an LCO Agreement; (ii) the Principal Cable Affiliates may terminate all
exclusivity obligations upon a change in law that materially impairs certain of
the Principal Cable Affiliates' rights under the Master Distribution Agreement;
(iii) Comcast or Cox may terminate all Principal Cable Affiliates' exclusivity
obligations if there is a change of control of TCI at any time or if certain
subscriber penetration levels for the @Home services are not achieved by TCI and
its affiliates on June 4, 1999 or any anniversary thereof; and (iv) Comcast may
terminate its exclusivity obligations at its election
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after June 4, 1999 if it permits a portion of its equity in the Company to be
repurchased by the Company at Comcast's original cost. Comcast has informed the
Company that Comcast has entered into an agreement with Microsoft Corporation
("Microsoft") pursuant to which Microsoft can require Comcast to terminate its
exclusivity obligations after June 4, 1999. Although Microsoft has stated in the
agreement that it has no present intention to do so, there can be no assurance
that Microsoft will not be more likely than Comcast to terminate Comcast's
exclusivity obligations.
Until the later of (i) such time as the applicable Principal Cable Affiliate
ceases to be obligated under the exclusivity provisions set forth above or (ii)
June 4, 2002 if the exclusivity provisions are terminated by reason of TCI's
failure to meet specified subscriber penetration requirements, the Company has
agreed (a) not to offer or provide Internet services at data transmission speeds
greater than 128 Kbps per second to residences in the geographic area served by
the cable systems of a Principal Cable Affiliate that remains in compliance with
the exclusivity provisions without regard to whether the Restricted Period has
ended as to such Principal Cable Affiliate (the "Exclusive Territory") and (b)
not to offer, provide, distribute, advertise, promote or market (or carry or
otherwise distribute advertising or promotions with respect to) any streaming
video transmissions that include video segments longer than ten minutes in
duration or any other Internet service that is not a Restricted Business to
residences in the Exclusive Territory of a Principal Cable Affiliate without its
prior written consent.
In addition, the Company has agreed that it will not offer, provide, distribute,
advertise, promote or market any streaming video transmissions that include
video segments longer than ten minutes in duration in any "area of dominant
influence" as defined by the FCC ("ADI") that includes an Exclusive Territory of
a Principal Cable Affiliate without the prior consent of the affected Principal
Cable Affiliates having two-thirds of the cable television subscribers of all
Principal Cable Affiliates having an Exclusive Territory in the ADI.
The Company's agreements with its Principal Cable Affiliates do not require that
such Principal Cable Affiliates maintain a specified number of cable systems,
subscribers or homes passed by cable infrastructure in order to maintain their
control over and equity ownership of the Company. However, the Stockholders'
Agreement does provide that if a Principal Cable Affiliate's number of homes
passed that remain subject to certain exclusivity provisions decreases by more
than 20% of the number of homes passed as of June 4, 1996, as amended by the
Cablevision Amendment (subject to certain exceptions), then such Principal Cable
Affiliate must offer to sell a proportionate amount of its equity interest in
the Company to the other Principal Cable Affiliates at the fair market value
thereof. However, such provisions would permit the disposition of a portion of
such Principal Cable Affiliates' cable assets without imposing any penalty and,
in the event a Principal Cable Affiliate exceeds the 20% threshold, selling
shares at fair market value may not constitute a significant penalty to such
Principal Cable Affiliate. Therefore, there can be no assurance that such
arrangements will effectively discourage a Principal Cable Affiliate from
disposing of a significant amount of its cable systems without requiring that
such cable systems remain subject to such exclusivity provisions. The Principal
Cable Affiliates have announced that they are considering various plans and
proposals that may result in the disposition of their cable systems, and certain
dispositions may have been completed or may be pending. To the extent that the
terms of any such transactions require that such systems remain subject to such
exclusivity provisions, such cable systems and their homes passed would continue
to be included in such Principal Cable Affiliate's homes passed for purposes of
determining whether or not the Principal Cable Affiliate is obligated to offer a
portion of its equity interest in the Company to the other Principal Cable
Affiliates, even though such cable systems are no longer owned or controlled by
the Principal Cable Affiliate. To the extent that the Principal Cable
Affiliates dispose of cable systems in the future without causing such cable
systems to remain subject to such exclusivity provisions, the number of homes
passed that are exclusive to the Company will be decreased. Such decreases in
the number of exclusive homes passed may have an adverse effect upon the
business, operating results and financial condition of the Company.
Each Principal Cable Affiliate and its controlled affiliates are entitled to
"most favored nation" ("MFN") terms and conditions of carriage with respect to
the distribution of the Company's services and with respect to the terms and
conditions of any related trademark license agreement or ancillary services
arrangements, including all direct and indirect benefits as a result of a
transaction with the Company that are no less favorable than those offered to
any other cable operator individually or collectively from time to time. This
MFN provision requires identical treatment of the Principal Cable Affiliates and
their controlled affiliates without regard to size or identity with respect to
each other and with respect to the terms and conditions provided to unaffiliated
third parties (except as to exclusivity and certain other terms applicable to
third parties).
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The Principal Cable Affiliates and their affiliates are entitled to create,
author, promote and otherwise engage in the business of local content offerings,
and will retain all revenue from such local content offerings and associated
advertising within the designated local area of the @ Home service's home page.
The Company is responsible for the aggregation and promotion of national content
offerings as part of the @Home service and will retain all revenues from
associated advertising within the designated national area of the @Home
service's home page and Web site. Each Principal Cable Affiliate has the right
to exclude the promotion of specified national content providers from the @Home
service offered through such Principal Cable Affiliate's cable systems, subject
to an adjustment in the split of premium service revenues between the Principal
Cable Affiliate and the Company if the number of specified exclusions exceeds
certain limits. In addition, a Principal Cable Affiliate has the right to block
access to content that (i) includes streaming video segments of more than ten
minutes in duration, (ii) is pornographic or overly violent or (iii) could
adversely affect a cable operator's franchise to deliver cable television
service or the @Home service, and the Company is obligated to use its best
efforts to block such access.
The Company is obligated to use reasonable best efforts to consult with and
involve each of the Principal Cable Affiliates in the development of
requirements for and design of enhancements, new features and new applications
of the @Home service and coordinate with respect to the introduction of such
enhancements, features and applications that could have a significant effect on
the cable operations of a Principal Cable Affiliate with respect to its delivery
of the @Home service to its customers. If Principal Cable Affiliates
representing a majority of the residential subscribers of the @Home service
object to such enhancement, feature or application, the Company has agreed not
to implement such enhancement, feature or application in the territories of
objecting Principal Cable Affiliates.
TCI has exercised its rights under the Master Distribution Agreement to provide
certain support services to its subscribers, and the Company paid TCI $184,000
in 1997 in connection with TCI's provision of such support services.
Agreement with Rogers and Shaw. In March 1997, in connection with the equity
investment in the Company by Rogers and Shaw, the Company, Rogers and Shaw
entered into an agreement for the distribution by Rogers and Shaw in Canada of a
localized version of the @Home service. The Company has granted Rogers and Shaw
the exclusive rights for an initial period of six years, subject to achievement
of certain performance milestones, to distribute, market and promote the service
in Canada either directly in jurisdictions where they are licensed to operate
cable systems or indirectly through the sublicensing of other cable operators in
Canada. During the term of the exclusivity of such licenses, Rogers and Shaw
have each agreed, subject to the same exceptions to exclusivity available to the
Principal Cable Affiliates, not to market, promote or control any other
residential Internet service (other than dial-up services at data transmission
speeds of 128 Kbps or less). However, Rogers and Shaw are not precluded from
distributing other residential Internet Services. Rogers and Shaw will be
responsible, among other things, for (i) upgrading their cable systems for two-
way data transmission services, (ii) providing the necessary cable data routers
and cable modems, (iii) providing the telecommunications systems necessary to
connect their subscribers to cable headends or fiber nodes, to connect such
headends or fiber nodes to the Company's RDCs in Canada and to connect such RDCs
to the nearest points of presence of the @Home backbone in the United States,
(iv) providing customer installation, billing, customer service and technical
support, (v) providing the Company with space to co-locate its RDCs and related
equipment within Rogers' and Shaw's network distribution facilities, (vi)
providing necessary modifications to billing, subscriber and network management
systems to interface with the Company, (vii) distributing and promoting the
@Home Service and (viii) programming local content and customizing certain
national content for the Canadian market.
The Company will be responsible under the Agreement, among other things, for:
(i) treating Rogers and Shaw with a priority equal to the Principal Cable
Affiliates in matters of deployment, (ii) granting Rogers and Shaw access to the
Company's broadband networks, (iii) installing and maintaining an optimal number
of RDCs and providing the same level of performance received by the Principal
Cable Affiliates, (iv) providing software necessary for the @Home Service, (v)
providing the telecommunications facilities connecting the nearest points of
presence of the Company's backbone in the United States to the @Network, (vi)
providing network support, (vii) providing general engineering, operations,
marketing and management support, when reasonably requested, (viii) providing
training programs, (ix) providing access and automated exchange of data from the
Company to Rogers and Shaw necessary for billing and subscriber management, (x)
working with Rogers and Shaw to develop a network architecture that minimizes
inter-city data transport within Rogers' and Shaw's networks, (xi) developing
and maintaining the user interface and page templates for national content and
(xii) providing the same or additional content platform technologies provided to
the Principal Cable Affiliates. The Company is restricted from offering,
promoting,
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marketing or providing (or carrying third-party advertising or promotion with
respect to) any streaming video transmissions that include video segments longer
than ten minutes in duration.
Agreement with TCG. In April 1997, the Company and Teleport Communications
Group, Inc. ("TCG"), of which TCI, Comcast and Cox collectively hold a majority
of the voting stock, entered into a Master Communications Services Agreement,
with an initial term of five years, under which TCG has agreed to provide the
Company with facilities management and telecommunications network services for
the local telecommunications transport requirements of the Company's services.
TCG is the largest CLEC in the United States, providing high-speed fiber optic
telecommunications to customer sites in 65 metropolitan centers in the United
States. In markets served by TCG networks, TCG will provide the Company with
(i) the ability to co-locate its RDCs within TCG's network distribution
facilities and (ii) all intralata and interlata transport access facilities to
and from the co-located RDC, including all services provided completely on TCG's
network and services provided through a combination of TCG's network and the
network of a third-party local exchange carrier. In market areas not served by
TCG, TCG will serve as a facility manager to procure co-location space and
intralata and interlata transport facilities. The agreement provides the
Company with such telecommunications services at rates generally at or below
those of competing carriers, and the ability to co-locate the Company's RDCs
within TCG's network distribution facilities at favorable rates. During 1997,
the Company paid $691,000 to TCG in connection with the Master Communications
Services Agreement. In January 1998, TCG agreed to be acquired by AT&T Corp.
Agreement with Netscape. Pursuant to an OEM Software License Agreement,
Netscape has granted the Company a nonexclusive, worldwide license to use
certain Netscape Internet client, Internet server and Internet applications
software internally, distribute the Netscape Internet client software to
subscribers of the Company's services, and distribute the Netscape Internet
server and Internet applications software to the Company's cable affiliates
until December 31, 1998. Under the terms of the agreement, the Company paid
Netscape $2,275,000 in 1997 as nonrefundable license fees and prepaid support
and service fees. James L. Barksdale, a director of the Company, is the Chief
Executive Officer of Netscape.
Set-Top Device Agreement with TCI. In February 1998, the Company entered into a
non-binding Memorandum of Understanding with TCI's National Digital Television
Center ("NDTC") pursuant to which the Company agreed to develop software and
provide integration services for TCI's advanced set-top devices that will
deliver both digital television and Internet data services. The Memorandum of
Understanding contemplates that the Company will provide Internet connectivity
for these devices, supply email accounts via geographically dispersed mail
servers and provide overall system management for TCI's email services. The
Company also would work with NDTC on the overall software integration related to
TCI's advanced digital set-top devices.
@Work Remote Agreement with TCI, Comcast and Cox. In November 1997, the Company
announced a non-exclusive agreement with TCI, Cox and Comcast to develop, deploy
and market high-speed virtual private networking services for remote local area
network ("LAN") access (the "@Work Remote Service") in areas served by these
Principal Cable Affiliates' cable infrastructure. The @Work Remote Service also
includes the network equipment and software needed to connect the corporate LAN
securely to the Company's broadband network via high-bandwidth local telephone
circuits. Under the agreement, each of TCI, Comcast and Cox are obligated to
pay the Company certain license and development fees, as well as monthly fees
based on its numbers of subscribers to the @Work Remote Service and the types of
services and related functions the Company provides. Although TCI, Comcast and
Cox are responsible for providing certain equipment in connection with
subscribers' use of the @Work Remote Service, they may require the Company to
assume this obligation on a cost-plus-profit basis. The parties have also
agreed to cooperate in marketing and selling the @Work Remote Service, and the
Company is entitled to certain fees in connection with its sales activities.
MFN provisions similar to those contained in the Master Distribution Agreement
apply to the @Work Remote Service. This agreement will remain in effect until
December 31, 2001, subject to earlier termination in certain circumstances. In
1997, TCI, Comcast and Cox paid the Company $215,000, $67,000 and $67,000,
respectively, under this agreement.
@Work Internet Agreement with Cox. In December 1997, the Company and Cox
entered into an agreement covering the offering of commercial Internet services,
including connectivity to a subscriber's LAN, multiple workstation support,
domain name registration, email access and support, Web hosting services and
usage-based billing, to businesses and other institutions using Cox's cable
infrastructure and the Company's network infrastructure (the "Cox @Work Internet
Service"). Under the agreement, Cox is obligated to pay the Company certain
license fees, as well as monthly fees based on Cox's monthly subscription fees
for the Cox @Work Internet
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<PAGE>
Service and the types of services and related functions the Company provides.
Although Cox is responsible for providing certain equipment in connection with
subscribers' use of the Cox @Work Internet Service, it may require the Company
to assume this obligation on a cost-plus basis. The parties have also agreed to
cooperate in marketing and selling the Cox @Work Internet Service, and the
Company is entitled to certain fees in connection with its sales activities. MFN
provisions similar to those contained in the Master Distribution Agreement apply
to the Cox @Work Internet Service. This agreement will remain in effect until
March 31, 2002, subject to earlier termination in certain circumstances,
including on 90 days written notice by Cox. In 1997, Cox paid the Company
$400,000 under this agreement.
The Company believes that the terms of each of the transactions described above,
taken as a whole, were no less favorable than the Company could have obtained
from unaffiliated third parties.
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COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE
ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of the
Company's Common Stock ("10% Stockholders"), to file with the Securities and
Exchange Commission ("SEC") initial reports of ownership on a Form 3 and reports
of changes in ownership of Common Stock and other equity securities of the
Company on a Form 4 or Form 5. Officers, directors and 10% Stockholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such reports
furnished to the Company and written representations from the executive officers
and directors, the Company believes that all Section 16(a) filing requirements
applicable to its officers, directors, and 10% Stockholders were met during
1997.
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in the Company's Proxy Statement and form of
proxy relating to the Company's 1999 Annual Meeting of Stockholders must be
received by December 28, 1998.
OTHER BUSINESS
The Board of Directors does not presently intend to bring any other business
before the Meeting and, so far as is known to the Board, no matters are to be
brought before the Meeting except as specified in the notice of such meeting.
As to any business that may properly come before the Meeting, or any adjournment
thereof, however, it is intended that proxies, in the form enclosed, will be
voted in the respect thereof in accordance with the judgment of the persons
voting such proxies.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO SIGN
AND PROMPTLY MAIL THE ENCLOSED PROXY IN THE RETURN ENVELOPE PROVIDED SO THAT
YOUR SHARES WILL BE REPRESENTED AT THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ David G. Pine
------------------------------------
David G. Pine
Vice President, General Counsel and
Secretary
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<PAGE>
AT HOME CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
April 24, 1998
The undersigned hereby appoints Thomas A. Jermoluk, Kenneth A. Goldman
and David G. Pine, or any of them, each with full power of substitution, to
represent the undersigned at the Annual Meeting of Stockholders of At Home
Corporation (the "Company") to be held at 3:00 p.m. on Wednesday, May 13,
1998, at the Company's headquarters, 425 Broadway, Redwood City, California
94063, and at any adjournments or postponements thereof, and to vote the
number of shares the undersigned would be entitled to vote if personally
present at the meeting on the following matters:
1. ELECTION OF DIRECTORS.
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
below (except as indicated to vote for all nominees
to the contrary below) listed below
Nominees:
<TABLE>
<CAPTION>
SERIES A DIRECTORS SERIES B DIRECTORS SERIES K DIRECTORS COMMON STOCK DIRECTORS
------------------ ------------------ ------------------ ----------------------
<S> <C> <C> <C>
James L. Barksdale Leo J. Hindery, Jr. L. John Doerr Thomas A. Jermoluk
William R. Hearst III Bruce W. Ravenel John C. Malone
Brian L. Roberts Edward S. Rogers
Larry E. Romrell
David M. Woodrow
</TABLE>
Instructions: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below. Only holders of
the Company's Series B Common Stock are entitled to vote on the
election of Series B Directors, and only holders of the Company's
Series K Common Stock are entitled to vote on the election of the
Series K Director.
- -------------------------------------------------------------------------------
2. AMENDMENT TO THE COMPANY'S 1997 EQUITY INCENTIVE PLAN TO INCREASE THE NUMBER
OF SHARES OF SERIES A COMMON STOCK RESERVED FOR ISSUANCE THEREUNDER BY
4,975,000 SHARES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. AMENDMENT TO THE COMPANY'S 1997 EMPLOYEE STOCK PURCHASE PLAN TO INCREASE THE
NUMBER OF SHARES OF SERIES A COMMON STOCK RESERVED FOR ISSUANCE THEREUNDER
BY 600,000 SHARES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. AMENDMENT TO THE COMPANY'S FOURTH AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION TO CHANGE THE BOARD OF DIRECTORS' SUPERMAJORITY APPROVAL
REQUIREMENTS RELATED TO INCREASES IN THE NUMBER OF SHARES ISSUED OR RESERVED
FOR ISSUANCE TO EMPLOYEES OR MANAGEMENT OF THE COMPANY.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT
ACCOUNTANTS FOR THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Board of Directors recommends that you vote FOR the election of the
eleven nominees (to the extent applicable) and FOR proposals 2, 3, 4 and 5.
(Continued and to be signed and dated on the reverse side.)
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. WHEN NO CHOICE IS
INDICATED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE ELEVEN NOMINEES (TO
THE EXTENT APPLICABLE) AND FOR PROPOSALS 2, 3, 4 AND 5. In their discretion, the
proxy holders are authorized to vote upon such business as may properly come
before the meeting or any adjournments or postponements thereof to the extent
authorized by Rule 14a-4(c) promulgated under the Securities Exchange Act of
1934, as amended.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF AT HOME CORPORATION
Signature(s) of Stockholder(s):
Name: Name:
------------------------------- --------------------------------
By: By:
--------------------------------- ----------------------------------
Title: Title:
------------------------------ -------------------------------
Dated: ______________________, 1998 Dated: ______________________, 1998
Please sign exactly as your name(s) appear(s) on your stock certificate. If
shares of stock stand of record in the names of two or more persons or in the
name of husband and wife, whether as joint tenants or otherwise, both or all of
such persons should sign the proxy. If shares of stock are held of record by a
corporation, the proxy should be executed by the president or vice president and
the secretary or assistant secretary. Executors, administrators or other
fiduciaries who execute the above proxy for a deceased Stockholder should give
their full title. Please date the proxy.
Please check the following box if you plan to attend the meeting: [ ]
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
2
