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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 18, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AT HOME CORPORATION
(EXACT NAME OF THE REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 77-0408542
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
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425 BROADWAY STREET
REDWOOD CITY, CALIFORNIA 94063
(650) 569-5000
(ADDRESS AND TELEPHONE NUMBER OF THE REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
KENNETH A. GOLDMAN
CHIEF FINANCIAL OFFICER
AT HOME CORPORATION
425 BROADWAY STREET
REDWOOD CITY, CALIFORNIA 94063
(650) 569-5000
(NAME, ADDRESS AND TELEPHONE NUMBER OF THE REGISTRANT'S AGENT FOR SERVICE)
COPIES TO:
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GORDON K. DAVIDSON, ESQ. JANE D. GOLDSTEIN, ESQ.
WILLIAM R. SCHREIBER, ESQ. ROPES & GRAY
THOMAS J. HALL, ESQ. ONE INTERNATIONAL PLACE
FENWICK & WEST LLP BOSTON, MASSACHUSETTS 02110-2624
TWO PALO ALTO SQUARE (617) 951-7000
PALO ALTO, CALIFORNIA 94306
(650) 494-0600
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SHARES AMOUNTS TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1) SHARE(1) PRICE(1) REGISTRATION FEE
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Series A common stock, $.01 par
value per share 919,000 $98.0625 $90,119,438 $25,054
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(1) Estimated solely for the purpose of calculating the amount of registration
fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended,
based on the average of the high and low prices of the Series A common stock
on the Nasdaq National Market on February 17, 1999.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT FILES
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
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PROSPECTUS
AT HOME LOGO
AT HOME CORPORATION
919,000 SHARES OF SERIES A COMMON STOCK
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At Home's Series A common stock currently trades on the Nasdaq National Market.
Last reported sale price on February 18, 1999: $97.0625 per share.
Trading Symbol: ATHM
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THE OFFERING
- - The shares offered in this prospectus will be sold from time to time at then
prevailing market prices, at prices relating to market prices or at negotiated
prices. We are not aware of any underwriting discounts or commissions in
connection with this offering.
- - All of the shares of Series A common stock offered in this prospectus are
being sold by the selling stockholders named on pages 31 and 32 of this
prospectus. We will not receive any of the proceeds from the sale of these
shares. These shares are being offered on a continuous basis under Rule 415 of
the Securities Act until at least December 30, 1999 or the earlier sale of all
the shares offered hereby.
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THE MERGER
On December 17, 1998, we entered into an Agreement and Plan of Merger with
Narrative Communications Corp. Pursuant to this agreement, our subsidiary merged
with and into Narrative, and Narrative became a wholly owned subsidiary of At
Home. The merger became effective on December 30, 1998. All of the shares
offered hereby were originally issued by us in connection with the merger.
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THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. PLEASE CAREFULLY CONSIDER THE
"RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is February , 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
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IN CONNECTION WITH THIS OFFERING, NO PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS. IF
SUCH INFORMATION IS GIVEN OR REPRESENTATIONS MADE, YOU MAY NOT RELY ON SUCH
INFORMATION OR REPRESENTATIONS AS HAVING BEEN AUTHORIZED BY US. THIS PROSPECTUS
IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THOSE REGISTERED HEREBY, NOR IS IT AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY SECURITIES WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. YOU MAY NOT IMPLY FROM THE DELIVERY OF THIS PROSPECTUS, NOR FROM ANY
SALE MADE UNDER THIS PROSPECTUS, THAT OUR AFFAIRS ARE UNCHANGED SINCE THE DATE
OF THIS PROSPECTUS OR THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS IS
CORRECT AS OF ANY TIME AFTER THE DATE OF THIS PROSPECTUS.
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TABLE OF CONTENTS
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Prospectus Summary............... 3
Risk Factors..................... 7
Available Information............ 29
Documents Incorporated by
Reference...................... 30
Use of Proceeds.................. 30
Dividend Policy.................. 30
Selling Stockholders............. 31
Plan of Distribution............. 35
Legal Matters.................... 38
Experts.......................... 38
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This prospectus contains forward-looking statements relating to future
events or financial results, such as statements indicating that "we believe,"
"we expect" or "we anticipate" that certain events may occur or certain trends
may continue, and similar statements relating to future events or financial
results. These forward-looking statements are subject to material risks and
uncertainties as indicated under the caption "Risk Factors." Actual results
could vary materially as a result of a number of factors including those set
forth in "Risk Factors" and elsewhere in this prospectus.
Unless the context otherwise requires, the terms "we," "our," "us," "the
company" and "At Home" refer to At Home Corporation, a Delaware corporation.
@Home, @Home Network, @Media, @Work and the @ball logo are our trademarks
and we have registered them in certain jurisdictions. @Work Internet is our
service mark. This prospectus also includes trademarks of other companies.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all the information you should
consider before buying shares in this offering. You should read the entire
prospectus carefully.
THE COMPANY
We are the leading provider of broadband Internet services over the cable
television infrastructure to consumers. By virtue of our relationships with 18
cable companies in North America and Europe, we have access to approximately
58.7 million homes, which includes exclusive access to over 50% of the
households in the United States and Canada. We also provide broadband Internet
services to businesses over both the cable television infrastructure and digital
telecommunications lines.
Our primary offering, the @Home service, allows residential subscribers to
connect their personal computers via cable modems to a high-speed Internet
backbone network developed and managed by us. This service enables subscribers
to receive the "@Home Experience," which includes Internet service over hybrid
fiber co-axial, or HFC, cable at transmission speeds up to 100 times faster than
typical dial-up connections, "always on" connection and rich multimedia
programming through our broadband Internet portal. The technology foundation of
the @Home Experience is our scalable, distributed, intelligent network
architecture (our broadband network), a "parallel Internet" that optimizes
traffic routing, improves security and consistency of service, and facilitates
end-to-end network management, enhancing our ability to address performance
bottlenecks before they affect the user experience.
Our @Media group has established the @Home launch screen as the leading
broadband Internet portal, providing a gateway to compelling multimedia and
electronic commerce offerings on the Internet. To date, the @Home Experience has
generated greater page views per subscriber than are reported by the leading
narrowband Internet portal companies. Our @Media group works with content
providers to facilitate the creation of rich multimedia broadband content
delivered through the @Home portal and to facilitate online transactions and
services for @Home subscribers. Multimedia content offerings include on-demand
video clips from partners such as Bloomberg and CNN Interactive, on-demand music
and CD previews provided by our Tune-In service and low-latency multiplayer
gaming from SegaSoft. Electronic commerce partners include Amazon.com, the
leading online bookseller, BuyDirect.com, an online software distributor, and
Travelocity, a leading online travel site. Our @Media group also sells
advertising on a cost per thousand impressions, or CPM, basis as well as on a
sponsorship basis. We had 57 advertisers in the fourth quarter of 1998,
including Ford, Godiva, Intel, Kodak, Lands' End, Lexus, Mercedes Benz and
Starbucks.
For businesses, our @Work services provide a platform for Internet,
intranet and extranet connectivity solutions and networked business applications
over both cable infrastructure and digital telecommunications lines. In order to
accelerate deployment of the @Work connectivity and hosting solutions into major
U.S. metropolitan areas, we have established strategic relationships with
Teleport Communications Group, the country's largest competitive local exchange
carrier and a subsidiary of AT&T, Northpoint, a provider of digital subscriber
line services to businesses, and Exodus, a provider of Internet hosting and
network management services. By combining our broadband distributed network
architecture with cable, telephone and technology relationships, the @Work
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services provide a compelling platform for nationwide delivery of network-based
business applications. We have developed this platform at a low incremental cost
by leveraging our existing broadband network investment. We currently provide
@Work services to nearly 1,700 businesses.
We have entered into distribution arrangements for our @Home service with
16 cable companies in North America whose cable systems pass approximately 57.3
million homes -- Tele-Communications, Inc., Cablevision Systems Corp., Comcast
Corporation, Cox Communications, Inc., Rogers Cablesystems Limited, Shaw
Cablesystems Ltd., Bresnan Communications Company, Century Communications Corp.,
Cogeco Cable, Inc., Garden State Cable, Insight Communications, InterMedia
Partners IV L.P., Jones Intercable, Inc., Lenfest Communications Inc., Marcus
Cable Operating Company, L.P. and Midcontinent Cable Co. Some of these
distribution arrangements are subject to the completion of definitive
agreements. As of December 31, 1998, approximately 13.2 million of the homes
served by these cable partners were passed by upgraded two-way HFC cable, and we
believe that our cable partners will complete the upgrade of systems passing a
majority of their homes within four years. In order to shorten time to market
for cable operators, we provide a turnkey solution, which includes not only a
technology platform and a national brand, but also ongoing marketing, customer
service, billing and product development support. As of December, 1998, we had
launched the @Home service through our cable partners in portions of 59 cities
and communities in the United States and Canada and have approximately 331,000
subscribers.
As part of our strategy to expand into international markets, we have
entered into agreements for the distribution of our @Home service by Edon and
Palet Kabelcom in the Netherlands. We have entered into an agreement with Intel
to create a limited partnership whereby Intel will invest $20 million in @Home
Benelux, which operates under the trade name @Home Nederland, to help speed the
deployment of broadband services in the Netherlands. We have also initiated
distribution programs with leading consumer electronics retailers and computer
manufacturers, including CompUSA, Compaq and Dell, to facilitate the sale of the
@Home service and cable modems compliant with the new DOCSIS cable modem
standard. In addition, we are working with CableLabs and National Digital
Television Center, a subsidiary of TCI, to develop advanced digital set-top
boxes to provide broadband Internet access via television sets and to accelerate
transformation of the Internet into a mass medium.
RECENT EVENTS
Acquisition of Excite, Inc. On January 19, 1999, we agreed to acquire
Excite, Inc. and to issue shares of our Series A common stock, including shares
issuable upon the exercise of Excite options and warrants, valued at
approximately $6.7 billion at the time of the announcement of the acquisition.
Excite is a global Internet media company that attracts approximately 17 million
visitors monthly to its www.excite.com and www.webcrawler.com portal Web sites.
Excite is based in Redwood City, California. Under the merger agreement, we will
issue approximately 1.0419 shares of our Series A common stock in exchange for
each outstanding share of Excite common stock. As a result, assuming no exercise
of Excite or our outstanding options and warrants, former shareholders of Excite
will own approximately 30% of the outstanding shares of our Series A common
stock. The acquisition will be accounted for as a purchase and is expected to
close in the second quarter of 1999. Although our and Excite's boards of
directors have approved the transaction, the acquisition is subject to several
conditions, including approval by both companies' stockholders and the
expiration of applicable
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waiting periods under certain antitrust laws. Therefore, there is a risk that
the merger may not be consummated, and, even if the merger is consummated, we
will face challenges integrating Excite's business with ours.
Backbone Capacity Contract with AT&T. On January 5, 1999, we announced that
we had entered an agreement with AT&T to create a nationwide Internet Protocol
network utilizing AT&T's backbone to cost-effectively support broadband services
throughout North America over the next 20 years. This new backbone facility,
which is scheduled to be deployed in mid-1999, represents a 100-fold increase in
our backbone capacity and initially will enable us to support up to five million
broadband users. AT&T will first provide us with 2 OC-48 channels, each with the
capacity to transport 2.5 gigabits per second of data, over a 15,000 mile
optical network. The agreement provides for significant expansion of capacity
that allows us to take advantage of the rapid evolution of data transport
technology.
Accounting Change for Certain Warrants. Following discussions with the
staff of the Securities and Exchange Commission, we will record as intangible
assets and amortize ratably over their remaining lives amounts which were
previously expensed in connection with our Cablevision distribution agreement.
We had recorded non-cash charges to operations of $172.6 million and $74.5
million in the fourth quarter of 1997 and the first quarter of 1998 related to
the agreement. We have reversed these previously expensed amounts and recorded
the entire $247.1 million as intangible assets, which will be amortized ratably
over their remaining lives. We will carry these intangible assets in our
financial statements at the lower of its amortized cost or fair value. These
adjustments to our financial statements for the year ended December 31, 1997 and
for the first three quarters of 1998 resulted in an increase to assets and
stockholders' equity at the end of each of these periods. The reversal of the
previously recorded charges to operations, less the amortization of the
intangible asset, resulted in a decrease to our previously reported net losses
for the fourth quarter of 1997 and the first quarter of 1998 and an increase in
the previously reported net losses for the second and third quarters of 1998.
Acquisition of Narrative Communications Corp. On December 30, 1998, we
acquired Narrative for approximately 1.3 million shares of Series A common
stock, including shares issuable upon the exercise of outstanding Narrative
options, valued at approximately $93.8 million. Narrative, a market leader in
rich media advertising and direct marketing solutions for the World Wide Web, is
based in Waltham, Massachusetts and has nearly 50 employees. Narrative had a net
loss of approximately $5.7 million on revenues of approximately $202,000 in 1997
and had a net loss of $5.8 million on revenues of approximately $621,000 through
December 30, 1998, the purchase date. The acquisition was accounted for as a
purchase, and approximately $92.4 million of the purchase price was allocated to
goodwill and other intangible assets and will be amortized over the respective
useful lives of those assets, estimated to be 3.5 years. The remainder of the
purchase price, $2.7 million, was charged to operations in the fourth quarter of
1998 as purchased in-process research and development.
Offering of Convertible Subordinated Debentures. On December 28, 1998, we
issued $437.0 million of Convertible Subordinated Debentures in a private
offering within the United States to qualified institutional investors. The
issue price of each $1,000 debenture was $524.64, or 52.464% of principal amount
at maturity, and the effective annual interest rate on the debentures, excluding
amortization of the issuance cost, is approximately 4%. Each debenture is
convertible at the option of the holder at any time prior to maturity into 6.55
shares of our Series A common stock. The debentures mature on December 28, 2018,
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and interest on the debentures at the rate of 0.5246% per annum on the principal
amount due at maturity is payable semiannually commencing June 28, 1999. We
raised approximately $22.4 million of net proceeds from the offering. We intend
to use the net proceeds of the offering for general corporate purposes,
including working capital and capital expenditures, including those associated
with domestic and international expansion and additional backbone capacity. A
portion of the net proceeds also may be used to acquire or invest in
complementary businesses or products or to obtain the right to complementary
technologies.
THE OFFERING
Each of the shares offered hereby were originally issued by us to the
former stockholders of Narrative in connection with our acquisition of
Narrative. The shares of our Series A common stock offered hereby represent less
than one percent of our outstanding shares of Series A common stock as of the
date of this prospectus. The shares offered hereby are being offered on a
continuous basis pursuant to Rule 415 of the Securities Act of 1933 during the
period of time commencing on the effective date of the registration statement of
which this prospectus is a part and ending on December 30, 1999, or such other
date as specified in the Rights Agreement dated December 30, 1998 between us and
the Narrative stockholders.
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Series A common stock that may be
offered by selling stockholders....... 919,000 shares
Series A common stock to be outstanding
after this offering................... 106,472,376 shares*
Use of proceeds......................... We will not receive any proceeds.
Nasdaq National Market symbol........... ATHM
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* This figure is based on the number of shares of Series A common stock
outstanding as of February 10, 1999.
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RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should carefully consider the following risk factors and the other information
in this prospectus before investing in our common stock. Our business and
results of operations could be seriously harmed by any of the following risks.
The trading price of our common stock could decline due to any of these risks,
and you may lose all or part of your investment.
RISKS RELATED TO OUR BUSINESS
OUR BUSINESS IS UNPROVEN, AND WE MAY NOT ACHIEVE PROFITABILITY
We were incorporated in March 1995, and we commenced operations in August
1995; we have incurred operating losses in each fiscal period since our
inception. As of December 31, 1998, we had an accumulated deficit of $227.2
million. In addition, we currently intend to increase capital expenditures and
operating expenses in order to expand our network and to market and provide our
services to a growing number of potential subscribers. As a result, we expect to
incur additional net operating losses before cost and amortization of
distribution agreements and amortization of goodwill and other intangible assets
for at least the next three quarters.
The profit potential of our business model is unproven. Our @Home service
was available only in portions of 59 geographic markets as of December 31, 1998
and may not achieve broad consumer or commercial acceptance. Although
approximately 2,053 organizations have agreed to utilize @Work services as of
December 31, 1998, our @Work services may not achieve broad commercial
acceptance and the current rate of deployment for @Work services may not be
sustained. We have difficulty predicting whether the pricing models for our
Internet services will prove to be viable, whether demand for our Internet
services will materialize at the prices our cable partners charge for the @Home
service or the prices we or our cable partners charge for @Work services, or
whether current or future pricing levels will be sustainable. If such pricing
levels are not achieved or sustained or if our services do not achieve or
sustain broad market acceptance, our business will be significantly harmed. We
may never achieve favorable operating results or profitability.
SEVERAL FACTORS MAY INHIBIT THE GROWTH OF THE @HOME SERVICE
As of December 31, 1998, we had approximately 331,000 cable modem
subscribers, including recently acquired Internet subscribers that are being
converted to the @Home service. Our ability to increase the number of
subscribers to the @Home service to achieve our business plans and generate
future revenues will be dependent on a number of factors, many of which are
beyond our control. For instance, certain cable partners from time to time have
not achieved subscriber levels which we had originally anticipated. These
factors include, among others:
- the rate at which our current and future cable partners upgrade their
cable infrastructures
- our ability and the ability of our cable partners to coordinate timely
and effective marketing campaigns with the availability of cable
infrastructure upgrades
- the success of our cable partners in marketing and installing the @Home
service in their local cable areas
- the prices that our cable partners set for the @Home service and for its
installation
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- the speed at which our cable partners can complete the installations
required to initiate service for new subscribers
- the commercial availability of DOCSIS-compliant, self-installable modems
and the success of our roll-out of these products with the @Home service
- the quality of customer and technical support provided by us and our
cable partners
- the quality of content on the @Home service
We believe subscriber growth has been constrained, and will continue to be
constrained, by the cost and the amount of time required to install the @Home
service for each residential consumer. In addition, our growth has been
constrained by the rate at which our cable partners have upgraded their cable
systems, and most of our cable partners are not obligated to upgrade their cable
infrastructures or market the @Home service. Moreover, the @Home service is
currently priced at a premium to many other online services, and large numbers
of subscribers may not be willing to pay a premium for the @Home service.
Because of the preceding factors, among others, our actual revenues or the rate
at which we will add new subscribers may differ from our forecasts. We may not
be able to increase our subscriber base in accordance with our internal
forecasts or the forecasts of industry analysts or to a level that meets the
expectations of investors. The rate at which subscribers have increased during
1998 does not necessarily indicate the rate at which subscribers may be expected
to increase in the future. In particular, while we have recently forecast that
our number of subscribers could grow to over 1.1 million by December 31, 1999
from approximately 331,000 subscribers at December 31, 1998, we may not achieve
this level of subscriber growth, particularly given the risks set forth here.
OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY
Our operating results may fluctuate significantly due to a variety of
factors, many of which are outside our control. Factors that may affect our
operating results attributable to our @Home service include:
- the timing of our cable partners' upgrades of their cable infrastructures
and roll-outs of the @Home service
- the rate at which customers subscribe to our Internet services and the
prices subscribers pay for these services
- changes in the revenue splits between us and our cable partners
- the demand for electronic commerce
- the effectiveness of our cable partners' marketing, installation and
other operations
Operating results attributable to our @Work services are dependent on:
- the demand for, and level of acceptance of, our corporate Internet,
intranet and extranet connectivity and telecommuting solutions
- the introduction of, demand for, and level of acceptance of, our
value-added business applications
- in part, the timing of our cable partners' upgrades of their cable
infrastructures
- the effectiveness of our cable partners' marketing and other operations
- competitive pressures, including pricing pressure and the availability of
competing technologies, in the market for business Internet services
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- the creditworthiness of our @Work customers
Following discussions with the staff of the Securities and Exchange
Commission, we recently restated our financial statements for the year ended
December 31, 1997 and the first three quarters of 1998 to record as intangible
assets and amortize ratably over their useful lives amounts that were previously
expensed in connection with our Cablevision distribution agreement. Our
operating results have been and will continue to be adversely affected by
significant charges associated with warrants issued to current and potential
cable partners in connection with distribution agreements.
Our quarterly revenues and operating results are difficult to forecast even
in the short term. A significant portion of our expenses are fixed in advance
based in large part on future revenue forecasts. If revenue is below
expectations in any given quarter, the adverse impact of the shortfall on our
operating results may be magnified by our inability to adjust spending to
compensate for the shortfall. Moreover, our cable partners have complete
discretion regarding the pricing of the @Home service in their territories,
which could further impact our ability to generate revenue. A shortfall in
actual compared to estimated revenue could significantly harm our business.
THE SCALABILITY, SPEED AND SECURITY OF OUR NETWORK IS UNPROVEN
Due to the limited deployment of our services, the ability of our network
to connect and manage a substantial number of online subscribers at high
transmission speeds is as yet unknown, and we face risks related to our
network's ability to be scaled up to its expected subscriber levels while
maintaining superior performance. The network may be unable to achieve or
maintain a high speed of data transmission, especially as our subscribers
increase. In recent periods, the performance of the network has experienced some
deterioration in certain markets as a result of subscriber abuse of the @Home
service. While we seek to eliminate such abuse by limiting users' upstream
bandwidth, our failure to achieve or maintain high-speed data transmission would
significantly reduce consumer demand for our services. In addition, while we
have taken steps to prevent users from sharing files via the @Home service and
to protect against "email spamming," public concerns about security, privacy and
reliability of the cable network, or actual problems with the security, privacy
or reliability of our network, may inhibit the acceptance of our Internet
services.
WE FACE CHALLENGES MANAGING OUR EXPANDED OPERATIONS AND WE DEPEND ON KEY
PERSONNEL
We may not be able to successfully manage any future periods of rapid
growth or expansion, which we expect to place a significant strain on our
managerial, operating, financial and other resources. From time to time, we and
our cable partners have had difficulty managing network operations and expansion
of backbone capacity and providing adequate customer service or efficient
provisioning of new subscribers. A prolonged failure to perform these functions
successfully would significantly inhibit subscriber growth and retention. We are
highly dependent upon the efforts of our senior management team, and our future
performance will depend, in part, upon the ability of senior management to
manage growth effectively. This will require us:
- to implement additional management information systems capabilities
- to further develop our operating, administrative, financial and
accounting systems and controls
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- to maintain close coordination among engineering, accounting, finance,
marketing, sales and operations
- to hire and train additional technical and marketing personnel
There is intense competition for senior management, technical and marketing
personnel in the areas of our activities. The loss of the services of any of our
senior management team or the failure to attract and retain additional key
employees could significantly harm our business. We maintain no key-person life
insurance.
WE DEPEND ON TWO-WAY CABLE MODEMS BASED UPON A NEW INDUSTRY STANDARD
Each of our subscribers currently must obtain a cable modem from a cable
partner to access the @Home service. The North American cable industry has
recently adopted a set of interface standards known as DOCSIS for hardware and
software to support the delivery of data services over the cable infrastructure
utilizing interoperable cable modems. We believe that these specifications,
together with our distribution relationships with CompUSA, Compaq and Dell, will
facilitate the growth of the cable modem industry and the availability of lower
cost, interoperable cable modems through retail channels. However, certain of
our cable partners have chosen to delay some deployments of the @Home service
until the widespread commercial availability of DOCSIS-compliant cable modems.
Our subscriber growth could be constrained and our business could be
significantly harmed if our cable partners choose to slow the deployment of the
@Home service further, as a result of the timing of widespread commercial
availability of DOCSIS-compliant cable modems or otherwise. Cable modems that
are DOCSIS-compliant are not expected to be available in significant quantities
until at least the second quarter of 1999. Although multiple vendors are
expected to supply DOCSIS-compliant cable modems and their constituent
components, any cable partner's reliance on a single provider of these modems or
components could cause that cable partner to be unable to generate expected
subscriber growth for the @Home service if the supplier does not provide the
cable partner with a sufficient quantity of DOCSIS-compliant modems.
OUR MARKETS ARE HIGHLY COMPETITIVE
The markets for consumer and business Internet services and online content
are extremely competitive, and we expect that competition will intensify in the
future. Our most direct competitors are other providers of cable-based Internet
services, unaffiliated cable companies, national long-distance and local
exchange carriers, Internet and online service providers, and Internet content
aggregators.
We compete with other cable-based services. Our competitors in the
cable-based services market are those companies that have developed their own
cable-based services and market those services to unaffiliated cable system
operators that are planning to deploy data services. In particular, Time Warner
Inc. and MediaOne Group have deployed high-speed Internet access services over
their existing local HFC cable networks through their cable-based Internet
service, Road Runner, which features a variety of proprietary content from Time
Warner Publications. Time Warner's substantial libraries of multimedia content
could provide Road Runner with a significant competitive advantage. In June
1998, Microsoft and Compaq each invested $212.5 million in Road Runner and
announced that Microsoft will provide software for the Road Runner service and
that Compaq will produce cable-ready personal computers to be used with the
service. Time Warner and MediaOne plan to market the Road Runner service through
their own cable systems as well as to other cable system operators nationwide.
Although we do not presently compete directly
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with the Road Runner service for subscribers because Road Runner is offered over
different cable systems than those that carry the @Home service, we do compete
with the Road Runner service in seeking to establish distribution arrangements
with cable system operators. Furthermore, if and when our existing cable
partners cease to be subject to their exclusivity obligations, we may compete
with Road Runner and potentially other Internet service providers for
distribution over the cable systems of our cable partners. In addition, other
cable system operators, including Adelphia Communications Corporation, have
launched their own cable-based Internet services that could compete with our
services.
We also compete with other high-speed telecommunications technologies. Long
distance inter-exchange carriers, such as AT&T, MCI Worldcom and Sprint have
deployed large-scale Internet access networks and sell connectivity to business
and residential customers. The regional Bell operating companies and other local
exchange carriers have also entered this field and are providing price
competitive services. Many such carriers are offering diversified packages of
telecommunications services, including Internet access, to residential customers
and could bundle these services together, which could put us at a competitive
disadvantage. Many of these competitors are offering or may soon offer
technologies that will compete with some or all of our high-speed data service
offerings. These technologies include integrated services digital network (ISDN)
and asymmetric digital subscriber line (ADSL). In January 1998, technology
companies including Compaq, Intel and Microsoft together with numerous
telecommunications providers announced an initiative to develop a simplified
version of ADSL, referred to as "ADSL Lite," which is intended to reduce the
complexity and expense of installing Internet services based on ADSL. Also, in
October 1998, the International Telecommunications Union adopted an ADSL
standard called G Lite. Widespread commercial acceptance of ADSL technologies
could significantly reduce the potential subscriber base for our Internet
services, which could significantly harm our business.
We compete with other online services. We also compete with Internet
service providers that provide basic Internet access to residential consumers
and businesses, generally using existing telephone network infrastructures.
While not offering the advantages of broadband access, these services are widely
available and inexpensive. In addition, we compete with online service providers
such as America Online, Inc. that provide, over the Internet and on proprietary
online services, content and applications ranging from news and sports to
consumer videoconferencing. These services currently are designed for broad
consumer access over telecommunications-based transmission media, which enables
the provision of data services to the large group of consumers who have personal
computers with modems. America Online and Bell Atlantic have recently entered
into an agreement whereby America Online will offer its Internet services using
Bell Atlantic's advanced digital subscriber line infrastructure. Online service
providers also provide basic Internet connectivity, ease of use and consistency
of environment. In addition to developing their own content or supporting
proprietary third-party content developers, online services often establish
relationships with traditional broadcast and print media outlets to bundle their
content into the service.
We compete with content aggregators and Internet portals. Finally, we
compete with content aggregators and Internet portals that seek to capture
audience flow by providing ease-of-use and offering content that appeals to a
broad audience. Leading companies in this area include America Online, Yahoo!
Inc. and Lycos, Inc. In this market, competition affects existing and potential
relationships with both content providers and subscribers. The principal bases
of competition in attracting content providers include quality of demographics,
audience size, cost-effectiveness of the medium and ability to create
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differentiated experiences using aggregator tools. The principal bases of
competition in attracting subscribers include richness and variety of content
and ease of access of the desired content. Many online service providers, such
as America Online, have the advantage of large customer bases, industry
experience, many content partnerships and significant resources.
Many of our competitors have more resources than we do. Many of our
competitors and potential competitors have substantially greater financial,
technical and marketing resources, larger subscriber bases, longer operating
histories, greater name recognition and more established relationships with
advertisers and content and application providers than we do. These competitors
may be able to undertake more extensive marketing campaigns, adopt more
aggressive pricing policies and devote substantially more resources to
developing Internet services or online content than we could. We may not be able
to compete successfully against current or future competitors, and competitive
pressures could significantly harm us. Further, as a strategic response to
changes in the competitive environment, we and our cable partners may make
certain pricing, service or marketing decisions or enter into acquisitions or
new ventures that could significantly harm us.
WE FACE CHALLENGES ASSOCIATED WITH OUR JOINT DEVELOPMENT EFFORT WITH TCI
We were selected by TCI to develop software and provide integration
services for TCI's next generation advanced digital set-top devices. Although we
believe this relationship could enable us to expand our product line and market
the @Home service to a broader audience of consumers who do not regularly use a
personal computer, the agreement does not require that TCI deploy the @Home
service on these set-top devices, and we cannot predict when these set-top
devices will become commercially available. Notwithstanding our agreement with
TCI, we cannot deploy set-top device Internet services over the cable
infrastructure of TCI or our cable partners without their consent.
In addition to the technological, financial and infrastructure challenges
TCI faces in deploying the new set-top devices, the success of this development
effort is subject to:
- the technological and operational challenges of providing and supporting
email and other Internet services to set-top device users
- competition from alternative Internet service providers and deployment
technologies
- the degree to which consumers desire Internet services, including email,
on their televisions
In addition, our cable partners can work with third parties to develop and
deploy set-top devices, and even if they do choose to work with us, our revenue
split on any fees generated from services deployed on these devices may differ
from our revenue split with respect to our current high-speed cable Internet
services.
OUR DEPENDENCE ON OUR NETWORK EXPOSES US TO A SIGNIFICANT RISK OF SYSTEM FAILURE
Our operations are dependent upon our ability to support our highly complex
network infrastructure and avoid damage from fires, earthquakes, floods, power
losses, telecommunications failures and similar events. The occurrence of a
natural disaster or other unanticipated problem at our network operations center
or at a number of our regional data centers could cause interruptions in our
services. Additionally, failure of our cable partners or companies from which we
obtain data transport services to provide the data communications capacity we
require, as a result of natural disaster, operational disruption
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or any other reason, could cause interruptions in the services we provide. Any
damage or failure that causes interruptions in our operations could
significantly harm our business.
WE MUST RESPOND TO RAPID TECHNOLOGICAL CHANGE
The markets for consumer and business Internet access services and online
content are characterized by rapid technological developments, frequent new
product introductions and evolving industry standards. The emerging nature of
these products and services and their rapid evolution will require that we
continually improve the performance, features and reliability of our network,
Internet content and consumer and business services, particularly in response to
competitive offerings. We may not be successful in responding quickly, cost
effectively and sufficiently to these developments. There may be a time-limited
market opportunity for our cable-based consumer and business Internet services,
and we may not be successful in achieving widespread acceptance of our services
before competitors offer products and services with speed and performance
similar to or better than our current offerings. In addition, the widespread
adoption of new Internet or telecommuting technologies or standards, cable-based
or otherwise, could require that we make substantial expenditures to modify or
adapt our network, products and services. This could fundamentally affect the
character, viability and frequency of Internet-based advertising and content
services. Finally, new Internet or telecommuting services or enhancements that
we offer may contain design flaws or other defects.
YEAR 2000 ISSUES COULD AFFECT OUR BUSINESS
If our internal and network information systems do not correctly recognize
and process date information beyond the year 1999, we may not be able to conduct
operations. To address these Year 2000 issues, we and our majority shareholder,
TCI, have initiated a comprehensive program to address Year 2000 readiness in
our systems and with our customers' and suppliers' systems. The program has been
designed to gather information regarding the Year 2000 compliance of products
and services that we require to deploy our residential and commercial Internet
services. Under the program, assessment and remediation are proceeding in
tandem, and we intend to have our critical systems in Year 2000 compliance by
June 30, 1999. These activities encompass all major categories of systems that
we use, including network management, customer service and business operations.
The costs incurred to date related to the program have not been material. We
currently expect that the total cost of our Year 2000 readiness program will not
exceed $750,000 in 1999. The total cost estimate does not include potential
costs related to any customer or other claims or the costs of internal software
or hardware replaced in the normal course of business. The total cost estimate
is based on the current assessment of our Year 2000 readiness needs and is
subject to change as the program proceeds.
As part of our normal course of operations, we are currently in the process
of transitioning to or implementing new computer software for our accounting,
billing, network management, human resources and other management information
systems. We are assessing and testing these systems for Year 2000 compliance and
will implement changes to these systems, if necessary. The successful
implementation of these new systems is crucial to the efficient operation of our
business. However, we may not implement our new systems in an efficient and
timely manner, and the new systems may not be adequate to support our
operations. Problems with installation or initial operation of the new systems
could cause substantial difficulties in operations planning, business management
and financial reporting, which could significantly harm our business, financial
condition and results of operations. The cost of bringing our new systems into
Year 2000
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compliance, if necessary, is not expected to have a material effect on our
financial condition or results of operations.
We have also initiated formal communications with many of our significant
suppliers to determine the extent to which we are vulnerable to these suppliers'
failure to remedy their own Year 2000 issues. We have already received
assurances of Year 2000 compliance from a number of those suppliers. Most of the
suppliers have no contractual obligations under existing contracts to provide us
with this information. We are taking steps with respect to new supplier
agreements to seek assurance that the suppliers' products and internal systems
are Year 2000 compliant. Despite these assurances, we may still experience
supplier-related Year 2000 problems.
Although we currently expect that the Year 2000 issue will not pose
significant operational problems, delays in the implementation of new
information systems or a failure to fully identify all Year 2000 dependencies in
our existing system and in the systems of our suppliers could have material
adverse consequences. Therefore, we are developing, but do not yet have,
contingency plans for continuing operations in the event these problems arise.
WE FACE CHALLENGES EXPANDING INTERNATIONALLY
A key component of our strategy is expansion into international markets. To
date, we have developed distribution relationships only with United States,
Canadian and Dutch cable system operators. We have extremely limited experience
in developing localized versions of our products and services and in developing
relationships with international cable system operators. We may not be
successful in expanding our product and service offerings into foreign markets.
In addition to the uncertainty regarding our ability to generate revenues from
foreign operations and expand our international presence, there are certain
risks inherent in doing business internationally, such as:
- regulatory requirements (including the regulation of Internet access)
- legal uncertainty regarding liability for information retrieved and
replicated in foreign jurisdictions
- export and import restrictions
- tariffs and other trade barriers
- difficulties in staffing and managing foreign operations
- longer payment cycles
- problems in collecting accounts receivable
- fluctuations in currency exchange rates
- seasonal reductions in business activity during the summer months in
Europe and certain other parts of the world
- potential inability to use European customer information due to new
European governmental regulations
- potential adverse tax consequences
One or more of these factors could significantly harm our international
operations and therefore our business.
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OUR BUSINESS MAY BE IMPACTED BY CABLE UNBUNDLING PROPOSALS AND OTHER GOVERNMENT
REGULATION AND LEGAL UNCERTAINTIES
Federal regulation could harm our business. Currently, our services are not
directly subject to regulations of the Federal Communication Commission or any
other federal or state communications regulatory agency. However, changes in the
regulatory environment relating to the Internet market, including regulatory
changes that affect telecommunications costs, limit usage of subscriber-related
information or increase the likelihood or scope of competition from the regional
Bell operating companies or other telecommunications companies, could affect our
pricing or ability to market our services successfully. For example, regulation
of cable television rates may affect the speed at which our cable partners
upgrade their cable systems to carry our services. Similarly, legislation
considered in the last Congress, which would have restricted the use of
subscriber information by interactive computer services for marketing and other
purposes, could adversely affect the marketing of our services as well as our
revenue from advertising.
Local franchise authorities could seek to regulate our services. Many of
our United States cable partners' local cable affiliates have elected to
classify the provision of the @Home service as additional cable services under
their respective local franchise agreements, and to pay franchise fees in
accordance with those agreements. Local franchise authorities may attempt to
subject cable systems to higher or other franchise fees or taxes or otherwise
require cable operators to obtain additional franchises in connection with their
distribution of the @Home service. There are thousands of franchise authorities,
and thus it will be difficult or impossible for us or our cable partners to
operate under a unified set of franchise requirements.
The FCC could require our cable partners to grant our competitors access to
the cable infrastructure. America Online, MindSpring Enterprises, Inc.,
Consumers Union and other parties have requested the FCC to require cable
operators to provide Internet and online service providers with unbundled access
to the cable infrastructure. In the event that the FCC were to require
third-party access to the cable infrastructure, Internet and online service
providers could potentially provide services over the cable infrastructure of
our cable partners that compete with our services. If the FCC or another
governmental agency were to classify our cable partners as common carriers of
Internet services, or if they were to seek such classification as a means of
protecting themselves against liabilities, our rights as the exclusive
residential high-speed Internet service provider over the systems of our United
States cable partners could be lost. In addition, if we or our United States
cable partners were classified as common carriers, these cable partners could be
subject to government-regulated tariff schedules for the amounts they could
charge for our services.
Local agencies may require third party access. The third party access issue
has also been raised in proceedings before local governments. Local governments
must approve the transfer of TCI's cable systems to AT&T in connection with the
AT&T's acquisition of TCI. America Online, U S West and some Internet service
providers have asked local governments to impose a third-party access
requirement on TCI as a condition to approving the transfer, and Portland and
Multnomah County, Oregon have imposed such a condition. AT&T and TCI have
challenged this action in Federal District Court. Seattle and King County,
Washington, are considering a similar condition. Other local governments are
considering imposing third-party access requirements on cable operators in
franchise renewal proceedings and in connection with transfers of cable systems
between cable operators.
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Canadian regulation could affect our business. Rogers and Shaw have
informed us that, due to certain Canadian regulations, they are required to
provide access to their respective networks to third-party Internet service
providers. Although no third party currently uses Rogers' or Shaw's networks for
the purpose of offering Internet services, these Canadian regulations preclude
us from having an exclusive contractual right to access these networks.
Deregulation of telephone companies could enhance their ability to compete
against our service. The FCC also is considering whether to provide the Bell
operating companies and other incumbent local exchange carriers with significant
relief from existing access, resale, unbundling, pricing, and cost recovery
rules and policies, without regard to local access and transport boundaries, in
order to encourage the deployment and operations by these carriers of
high-capacity, packet-switched networks and other advanced telecommunications
facilities and related services, including Internet access services.
Deregulation of telephone company advanced services could enhance the ability of
these companies to compete against the delivery of @Home's services by our cable
partners.
WE COULD FACE LIABILITY FOR DEFAMATORY OR INDECENT CONTENT
It is possible that claims could be made against Internet and online
service providers under both United States and foreign law for defamation,
negligence, copyright or trademark infringement, or other theories based on the
nature and content of the materials disseminated through their networks. Several
private lawsuits seeking to impose such liability are currently pending. In
addition, legislation has been proposed that imposes liability for or prohibits
the transmission over the Internet of certain types of information. The
imposition upon Internet and online service providers of potential liability for
information carried on or disseminated through their systems could require us to
implement measures to reduce our exposure to this liability. This may require
that we expend substantial resources or discontinue certain service or product
offerings. The increased attention focused upon liability issues as a result of
these lawsuits and legislative proposals could impact the growth of Internet
use. Furthermore, certain foreign governments, such as Germany, have enacted
laws and regulations governing content distributed over the Internet that are
more strict than those currently in place in the United States. One or more of
these factors could significantly harm our business.
OUR PRO FORMA ACCOUNTING FOR THE EXCITE MERGER MAY CHANGE
The total estimated purchase price for the Excite merger has been allocated
on a preliminary basis to assets and liabilities based on our best estimates of
their fair values, with the excess costs over the net assets acquired allocated
to goodwill and other intangible assets. This allocation is subject to change
pending a final analysis of the fair values of the assets acquired and
liabilities assumed. The impact of these changes could be material to our future
results of operations.
CERTAIN TRANSACTIONS MAY RESULT IN ADDITIONAL DILUTION TO OUR STOCKHOLDERS
We have entered into agreements with Cablevision, Rogers, Shaw, certain
other cable partners and other business partners pursuant to which we have
issued warrants to purchase a total of 23,619,036 shares of our Series A common
stock. Under these agreements, warrants to purchase 12,386,125 shares of our
Series A common stock at an average price of $2.26 per share were exercisable as
of December 31, 1998. To the extent that Cablevision, Rogers, Shaw, certain
other cable partners or other business partners become eligible to and exercise
their warrants, our stockholders would experience substantial dilution. We also
may issue additional stock, or warrants to purchase stock, at
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prices less than fair market value in connection with efforts to expand
distribution of the @Home service.
OUR STOCK PRICE IS SUBJECT TO SIGNIFICANT VOLATILITY
The stock market has from time to time experienced significant price and
volume fluctuations. In addition, the market price of the shares of our Series A
common stock, like the market prices of shares of other Internet companies, has
been and is likely to be highly volatile. Factors such as fluctuations in our
operating results, announcements of technological innovations or new products by
us or our competitors, regulatory actions, market rumors, acquisitions in the
Internet, telecommunications or cable industries and general market conditions
may have a significant effect on the market price of our Series A common stock
and other securities, such as our outstanding debentures, that are convertible
into or exercisable for our Series A common stock.
RISKS RELATED TO OUR RELATIONSHIPS WITH OUR CABLE PARTNERS
WE DEPEND ON OUR CABLE PARTNERS TO UPGRADE TO THE TWO-WAY CABLE INFRASTRUCTURE
NECESSARY TO SUPPORT OUR @HOME SERVICE; THE AVAILABILITY AND TIMING OF THESE
UPGRADES ARE UNCERTAIN
Transmission of the @Home service and certain @Work services over cable
depends on the availability of high-speed two-way HFC cable infrastructure.
However, only a portion of existing cable plant in the United States and in
certain international markets has been upgraded to HFC cable, and even less is
capable of high-speed two-way transmission. Our cable partners have announced
and begun to implement major infrastructure investments in order to deploy
two-way HFC cable. However, certain of our cable partners have limited
experience with these upgrades, and these investments have placed a significant
strain on the financial, managerial, operating and other resources of our cable
partners, most of which are already highly leveraged. Therefore, these
infrastructure investments have been, and we expect will continue to be, subject
to change, delay or cancellation. Although our commercial success depends on the
successful and timely completion of these infrastructure upgrades, most of our
cable partners are under no obligation to upgrade systems or to introduce,
market or promote our services. The failure of our cable partners to complete
these upgrades in a timely and satisfactory manner, or at all, would prevent us
from delivering high-performance Internet services and would significantly harm
our business.
OUR CABLE PARTNERS ARE NOT GENERALLY OBLIGATED TO CARRY OUR SERVICES, AND THE
EXCLUSIVITY OBLIGATIONS THAT PREVENT THEM FROM CARRYING COMPETING SERVICES MAY
BE TERMINATED
Our cable partners are subject to certain exclusivity obligations that
prohibit them from obtaining high-speed (greater than 128 kilobits per second)
residential consumer Internet services from any source other than us. However,
most of our cable partners are under no affirmative obligation to carry any of
our services, and the exclusivity obligations of our principal cable partners,
TCI, Comcast, Cox and Cablevision, expire on June 4, 2002, and may be terminated
sooner under certain circumstances. For example, our principal cable partners
may terminate all their exclusivity obligations upon a change in law that
materially impairs certain of their rights. Also, Comcast or Cox may terminate
all exclusivity obligations of our principal cable partners at any time if there
is a change of control of TCI that results, within one year, in the incumbent
directors of TCI no longer constituting a majority of the TCI board of
directors. AT&T has agreed with TCI not to take intentional actions that would
allow termination of these exclusivity obligations. Either
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Comcast or Cox, based on relative subscriber criteria as of June 4, 1999 and as
of each anniversary of that date, has the right to terminate the exclusivity
obligations of our principal cable partners if TCI and its affiliates do not
meet certain subscriber penetration levels for the @Home service. Based upon
current subscriber information available to us, it is uncertain whether TCI will
meet these penetration levels at June 4, 1999 or in the future. If Comcast or
Cox terminates the exclusivity obligations, this could significantly harm our
business and cause an immediate drop in our stock price. Finally, Comcast may
terminate its own exclusivity obligations upon its election after June 4, 1999
if it permits a portion of its equity in us to be repurchased by us at Comcast's
original cost. Comcast has informed us that it has entered into an agreement
with Microsoft Corporation under 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, Microsoft may
be more likely than Comcast to terminate Comcast's exclusivity obligations.
THE EXCLUSIVITY OBLIGATIONS OF OUR CABLE PARTNERS ARE LIMITED
The exclusivity obligations also are subject to exceptions that would
permit our principal cable partners and their affiliates to engage in certain
activities which could compete, directly or indirectly, with our activities. For
example, each of these cable partners and its affiliates is permitted to:
- engage in any business other than the provision of high-speed residential
consumer Internet services, including competing with our @Work operations
- maintain voting equity interests of 10% or less in public companies that
directly compete with our @Home service and related Internet backbone
connectivity services
- acquire an interest in any business that competes with our high-speed
residential consumer Internet services (so long as the competitive
business is not its primary business)
- acquire equity securities of public companies that compete with us,
provided that it does not control (or is not under common control with)
such companies
- operate a competing business in any cable system territory where the
exclusivity obligations have been terminated
OUR CABLE PARTNERS MAY OFFER CERTAIN SERVICES DESPITE THEIR EXCLUSIVITY
OBLIGATIONS
Most of our cable partners' exclusivity obligations are limited to
high-speed residential Internet services and do not extend to various excluded
services that they may offer without us. These excluded services include:
- telephony services
- services that are primarily work-related (such as @Work services)
- residential Internet services that do not use the cable partners' cable
television infrastructures, regardless of data transmission speed
- local Internet services that do not require use of an Internet backbone
outside a single metropolitan area
- services that are utilized primarily to connect students to schools,
colleges or universities
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- Internet telephony, Internet video telephony or Internet video
conferencing
- limited Internet services primarily intended for display on a television
such as some types of Internet-based digital set-top services
- certain Internet services that are primarily downstream services where
the user cannot send upstream commands in real-time
- streaming video services that include video segments longer than 10
minutes in duration
In addition, our cable partners can engage in limited testing, trials and
similar activities with respect to businesses subject to their exclusivity
obligations. By engaging in the excluded services, most cable partners can
compete, directly or indirectly, with our activities, including our @Work
services.
WE ARE PROHIBITED FROM OFFERING THE EXCLUDED SERVICES
Until the later of June 4, 2002 or such time as a principal cable partner
is no longer in compliance with its exclusivity obligations, we may not offer
the excluded services described above using a principal cable partner's cable
plant, or to residences in the geographic areas served by its cable systems,
without its consent. These restrictions apply even if we have integrated an
excluded service with the @Home service in another geographic area. In the case
of streaming video transmissions that include video segments longer than 10
minutes in duration, we face increased obligations to our principal cable
partners that remain in compliance with their exclusivity obligations.
Specifically, we have agreed not to allow these video transmissions using their
cable infrastructure or in the geographic areas served by their cable systems,
without their consent. Therefore, we may never have access to the cable
infrastructures of our principal cable partners for excluded services, and we
must negotiate a separate agreement, including a new revenue split, if
applicable, with each of the principal cable partners for each excluded service
that we seek to provide over their cable infrastructures.
WE ARE CONTROLLED BY TCI
TCI controls approximately 71% of our voting power and has the power to
elect a majority of our board members and to control all matters requiring the
approval of our stockholders. TCI's Series B common stock carries ten votes per
share and gives TCI the right to elect five Series B directors, one of which is
designated by Comcast and one of which is designated by Cox. Currently, four of
our 11 directors are directors, officers or employees of TCI or its affiliates.
As long as TCI owns at least 7,700,000 shares of our Series B common stock and
holds a majority of our voting power, our Board may take action only if approved
by the Board and by a majority of the Series B directors, three of five of which
are designees of TCI. This allows TCI to block actions of our Board, even
through the TCI directors may not then constitute a majority of the Board. In
addition, TCI can expand the Board at any time and fill the vacancies with TCI
designees to control a majority of the Board. Further, we may not take certain
corporate actions without the approval of TCI's Series B directors and in
certain cases the directors designated by Comcast and Cox. Notwithstanding these
provisions, all of our directors owe fiduciary duties to our stockholders. If
and when the merger of AT&T and TCI is complete, AT&T will control TCI and thus
control us. Even if and when we complete the Excite merger, TCI or AT&T will
continue to own more than 50% of our voting power.
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WE MAY NOT REALIZE THE EXPECTED BENEFITS FROM, AND COULD BE HARMED BY, AT&T'S
ACQUISITION OF TCI AND TCG
On June 24, 1998, TCI and AT&T announced that AT&T has agreed to acquire
TCI. AT&T and TCI anticipate that their merger, which is subject to regulatory
approval, will be completed in the first quarter of 1999. In addition, in July
1998, AT&T acquired Teleport Communications Group, Inc. While we believe that
AT&T's acquisition of TCI and TCG may benefit us by increasing the rate at which
TCI's cable facilities will be upgraded to the two-way HFC cable necessary to
carry our services, by allowing us to utilize the strength of AT&T's brand in
marketing the @Home service to consumers and by increasing the potential for
cooperation between us and TCG, these benefits may not be realized and AT&T's
TCI acquisition may not be completed. Moreover upon a change of control of TCI
that results within one year in the incumbent directors of TCI no longer
constituting a majority of the TCI board of directors, either Cox or Comcast can
terminate the exclusivity obligations that apply to our principal cable
partners. While AT&T has agreed with TCI not to take intentional actions that
would allow termination of these exclusivity obligations, if AT&T did take these
actions, either Cox or Comcast would have the right to terminate the exclusivity
obligations of all our principal cable partners. This would significantly harm
our business and cause an immediate drop in our stock price.
As discussed above, local franchise authorities could impose an obligation,
in connection with AT&T's acquisition of TCI, that AT&T and TCI allow third
parties to access TCI's cable infrastructure. The imposition of such an
obligation could lessen the anticipated benefits of their merger, and therefore
the benefits we may receive as a result of their merger.
WE MAY FACE ADDITIONAL COMPETITION FROM AT&T
AT&T operates certain businesses that could compete with our services,
notwithstanding any exclusivity obligations that may apply to it if and when its
acquisition of TCI is completed. First, AT&T operates a consumer Internet
service known as AT&T WorldNet. Although AT&T WorldNet is currently a dial-up
service that does not utilize broadband technologies, AT&T may be able to use
non-cable-based data transport mechanisms to offer high-speed residential
Internet services that compete with our @Home service. Second, AT&T owns TCG,
which operates an Internet service for business customers that competes with our
@Work service. Our @Work business depends to a significant extent on our
agreement with TCG for local access telecommunications services. If TCG ceases
to cooperate with us, our @Work business would be harmed. Because our @Work
business is not subject to the cable partners' exclusivity obligations, AT&T or
TCG are not limited in their ability to compete with our @Work business. In
addition, AT&T and Time Warner recently announced the formation of a significant
strategic relationship that will include a joint venture to offer AT&T-branded
cable telephony service to residential and small business customers over Time
Warner's existing cable television systems in 33 states. The relationship
between AT&T and Time Warner could ultimately extend to other broadband
services, including cable Internet services, that compete with our @Home
service. Therefore, even once it controls us, AT&T may take actions that benefit
TCG, WorldNet or other services of AT&T or other parties to our detriment.
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WE DEPEND ON OUR CABLE PARTNERS FOR DISTRIBUTION; THIS CREATES CONFLICTS OF
INTEREST
Through their cable systems, our cable partners provide the principal
distribution network for our services, and they share the revenue from the @Home
services that are derived from our subscribers. Given our contractual and
business relationships with our cable partners, the interests of our cable
partners may not always coincide with our interests, and conflicts of interest
concerning the split of revenues and other matters exist. Because TCI,
Cablevision, Comcast and Cox all operate cable systems that will be the primary
distributors of the @Home service, situations may arise where their interests
may diverge or appear to diverge from the interests of our other stockholders.
TCI and the other principal cable partners, acting through their Board
designees, have the ability to cause us to take certain actions or prohibit us
from taking certain actions that may be favored by other stockholders or by the
other directors who are not affiliated with our principal cable partners. Our
Board, which is controlled by TCI, has the power, subject to directors'
fiduciary duties, to approve transactions in which our principal cable partners
have an interest, including amending or terminating their distribution agreement
with us or changing the revenue splits in their favor. Under the agreements
under which our U.S. cable partners distribute our services, we receive 35% of
monthly fees and fees for premium services. However, most of these agreements,
including the agreement with our principal cable partners, contain contractual
"most favored nation" provisions, which provide that our principal cable
partners are entitled to distribution arrangements and related services on terms
at least as favorable as those obtained by any other cable system operator.
Therefore, our principal cable partners have the power, subject to their
fiduciary duties, to cause us to approve more favorable distribution
arrangements, including more favorable revenue splits, for one or more
unaffiliated cable operators in order to receive more favorable distribution
arrangements themselves and reduce our share of subscriber fees.
WE DEPEND ON OUR CABLE PARTNERS TO MARKET, DELIVER AND SUPPORT THE @HOME SERVICE
Because subscribers to the @Home service will subscribe through a cable
partner, the cable partner will substantially control the customer relationship
with the subscriber. Each cable partner has complete discretion regarding the
pricing of the @Home service to subscribers in its territories (except for
certain premium services for which we may contract directly with the
subscriber), and a cable partner could use the @Home service as a loss leader in
order to increase demand for other products or services with more attractive
terms. The cable partners do not have any affirmative obligations (other than
the payment of revenue splits to us) with respect to marketing, installing and
maintaining infrastructure for, providing customer service for and billing for
the @Home service. In limited circumstances, such as a cable partner's failure
to upgrade a cable system or roll out the @Home service after it has committed
to do so, we may be entitled to certain cost reimbursements and to be released
from certain of our exclusivity obligations, neither of which may be an
effective remedy for the failure. Our business requires a substantial rollout of
the @Home service, and if a widespread rollout does not occur, our business will
not be viable. Moreover, our cable partners have in the past experienced, and
may in the future experience, delays in installing the @Home service in areas in
which it has been introduced. Our cable partners are expected to provide general
customer service to our subscribers and, under their distribution agreements,
have the option to provide technical support, rather than utilizing our service
and support capabilities. If a cable partner elects to provide technical
support, we must reimburse them for our avoided costs, and we would have little
or no control over the quality of customer service actually provided to
subscribers of the @Home service. If the customer service and support provided
by our
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<PAGE> 23
cable partners are unsatisfactory to subscribers, consumer demand for the @Home
service will likely diminish.
OUR CABLE PARTNERS CONTROL THE TERMS OF DISTRIBUTION OF THE @HOME SERVICE
We and our cable partners have entered into agreements providing for the
distribution of the @Home service by our cable partners and their affiliates.
The economic and other terms of these agreements may be less favorable to us
than those that could have been negotiated had we been independent of our
principal cable partners. In addition, the agreements with our principal cable
partners contain provisions that permit a cable partner to change certain
aspects of the distribution of the @Home service without our approval. For
example, a principal cable partner has the option to provide certain customer
service functions that we currently provide and upon which our 35% revenue split
was based. If a principal cable partner elects to provide these services, it is
also entitled to reimbursement of our avoided costs. Similarly, the principal
cable partners have certain rights to remove cable systems from the approved
rollout schedule or to substitute cable systems in place of removed systems.
These rights are contractual in nature and may be exercised by the principal
cable partners in their sole discretion. The exercise by the principal cable
partners of these contractual rights may significantly harm our business. Our
cable partners also control the rollout schedule of the @Home service, and our
principal cable partners hold certain priority rights with respect to this
rollout schedule. This priority could harm us because we may be required to roll
out our services to our principal cable partners before rolling out the services
to other cable system operators, even though the other cable system operators
may be ready to roll out the @Home service sooner or on terms more favorable for
us.
OUR PRINCIPAL CABLE PARTNERS CAN BLOCK ACCESS TO CERTAIN CONTENT AND SERVICES
Each principal cable partner has the right to exclude the promotion of
specified national content providers from the @Home service offered through its
cable systems, subject to an adjustment in the revenue split if the number of
such exclusions exceeds a specified number. In addition, a principal cable
partner has the right to block access to certain content, including streaming
video segments of more than ten minutes in duration, and we are obligated to use
reasonable best efforts to block such access. We are also obligated to use
reasonable best efforts to consult with and involve each of the principal cable
partners in the development of requirements for, design of and introduction of
enhancements, new features and new applications of the @Home service. If
principal cable partners representing a majority of the residential subscribers
who subscribe to the @Home service object to any enhancement, feature or
application, we have agreed not to implement that enhancement, feature or
application in the territories of the objecting cable partners. If any of the
cable partners exercise these rights to block access to certain content or
services in certain territories, we may be required to devote substantial
expenses and resources to provide different content and services in different
territories and to assist them in blocking such access. This could significantly
harm our business.
OUR CABLE PARTNERS MAY COMPETE WITH US FOR ADVERTISING AND PROGRAMMING REVENUE
While we retain 100% of the revenue from our programming of the designated
national area of the @Home service, our principal U.S. cable partners retain
100% of revenue generated from their programming of a designated local area of
the start page of the @Home service. These revenues could include advertising
fees, service fees, content provider charges, transaction fees and promotional
revenue. Accordingly, in exercising their right to program the local area, our
cable partners could place a significant amount of advertising or program
content on the @Home service for which we receive no revenues. For example,
given the national or regional coverage of their operations, any of our
principal cable partners and its
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<PAGE> 24
affiliates could strike agreements with advertisers that could effectively
result in broad-based advertising campaigns reaching significant regions of the
United States in competition with our advertising campaigns, generating revenue
only for such cable partner and its affiliates and not for us. In Canada, we
share national advertising revenue with our Canadian cable partners.
WE DEPEND ON TCG FOR LOCAL TELECOMMUNICATIONS SERVICES FOR OUR @WORK SERVICES
We depend on TCG, which is owned by AT&T, to provide local
telecommunications services and co-location within TCG's facilities on favorable
economic terms. This relationship enables us to provide @Work services to an
entire metropolitan area in which TCG has facilities. If we were required to
obtain comparable telecommunications services from local exchange carriers, we
would effectively be limited to providing @Work services to commercial customers
within a ten-mile radius of one of our points of presence. As a result, we would
be required to build multiple points of presence to service an entire
metropolitan area, which would substantially increase our capital costs to enter
new markets and which could make such market entry uneconomical. If we were
required to pay standard local exchange carrier rates, the ongoing operating
costs for our @Work services would be substantially higher. The loss of our
strategic relationship with TCG would significantly harm our ability to deploy
our @Work services. In addition, TCG has acquired a provider of Internet-related
services to businesses and corporate customers and will compete directly with
the @Work Internet service. To the extent TCG acquires or enters into strategic
relationships with other Internet service providers, TCG may reduce its support
of the @Work services. Although there are alternative suppliers for TCG's
services, it could take a significant period of time for us to establish similar
relationships, and equivalent terms might not be available.
OUR PRINCIPAL CABLE PARTNERS MAY DISPOSE OF THEIR CABLE SYSTEMS, WHICH WOULD
REDUCE OUR POTENTIAL SUBSCRIBER BASE
Our agreements with our principal cable partners do not require that they
maintain a specified number of cable systems, subscribers or homes passed in
order to maintain their control over equity ownership of us. These principal
cable partners may dispose of a significant amount of their cable systems
without requiring that these cable systems remain subject to any exclusivity
provisions. However, to the extent that any of our principal cable partners
disposes of systems accounting for more than 20% of the number of homes passed
in its service areas as of June 4, 1996 (subject to certain exceptions) without
causing such transferred homes to remain exclusive to us, then that principal
cable partner may be required to sell a proportionate amount of its equity
interest in us to our other principal cable partners at fair market value. For
example, TCI has completed the transfer or sale of certain cable systems and has
announced the proposed sale or transfer of additional cable systems and is
considering various plans and proposals that may result in the disposition of
other of its cable systems. Although TCI has informed us that it is attempting
to cause certain of these transferred systems to remain subject to TCI's
exclusivity obligations, these efforts may not be successful. These dispositions
could significantly harm us if the transferred homes do not remain exclusive.
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<PAGE> 25
RISKS RELATING TO THE PROPOSED MERGER WITH EXCITE, INC.
WE WILL ISSUE APPROXIMATELY 1.0419 SHARES OF OUR SERIES A COMMON STOCK PER
EXCITE SHARE DESPITE CHANGES IN MARKET VALUE OF EXCITE COMMON STOCK OR OUR
SERIES A COMMON STOCK
There will be no adjustment to this exchange ratio if the market price of
either Excite common stock or our Series A common stock fluctuates. The specific
dollar value of our Series A common stock that Excite stockholders will receive
upon completion of the merger will depend on the market value of our Series A
common stock at the time of the merger. The share prices of both Excite common
stock and our Series A common stock are subject to price fluctuations in the
market for publicly-traded equity securities and have each experienced
significant volatility. No prediction can be made as to the market prices of
either Excite common stock or our Series A common stock at any time before the
completion of the merger or as to the market price of our Series A common stock
after the completion of the merger.
WE MAY NOT SUCCESSFULLY INTEGRATE EXCITE
The merger involves risks related to, among other things, the integration
and management of acquired technology, operations and personnel. Our integration
of Excite will be a complex, time consuming and expensive process and may
disrupt the business of the combined company if not completed in a timely and
efficient manner. Following the merger, the combined company must operate as a
combined organization utilizing common information and communication systems,
operating procedures, financial controls and human resources practices. We and
Excite may encounter substantial difficulties, costs and delays involved in
integrating the operations of the companies, including:
- potential incompatibility of business cultures
- perceived adverse changes in business focus
- potential conflicts in sponsor, advertising or content relationships
- the loss of key employees and diversion of the attention of management
from other ongoing business concerns
Any of these factors could materially and adversely affect the combined
company's business.
THE MERGER COULD HAVE ADVERSE EFFECTS ON KEY THIRD PARTY RELATIONSHIPS
The present and potential relationships of us and Excite with sponsors,
content providers, advertisers, users and subscribers may be adversely affected
by the proposed merger. Uncertainties regarding sponsorship and joint venture
overlap and new service development following the merger may cause these parties
to delay decisions regarding these relationships. Any changes in these
relationships could materially and adversely affect the combined company's
business.
WE AND EXCITE MAY LOSE CERTAIN CONTRACTUAL RIGHTS DUE TO THE MERGER
We and Excite have contracts with many of their suppliers, customers and
other business partners relating to, among other things, certain intellectual
property rights. Some of these contracts require us and Excite to obtain the
consent, waiver or approval of these
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<PAGE> 26
other parties in connection with the proposed merger. If consent, waiver or
approval cannot be obtained, we and/or Excite may lose the right to use
intellectual property or other rights that are necessary for smooth operation of
the @Home or Excite services. We and Excite have agreed to use commercially
reasonable efforts to secure the necessary consents, waivers and approvals.
However, we and Excite may not be able to obtain all of the necessary consents,
waivers and approvals. Failure to do so could have a material adverse effect on
the combined company's business.
In addition, both we and Excite have granted exclusive rights to third
parties with regard to certain content, sponsorship or other strategic
relationships, some of which rights conflict with rights granted by the other
party. We may not successfully resolve some or all of these conflicts and
failure to do so could materially and adversely affect the combined company's
business.
ADDITIONAL RISKS RELATING TO EXCITE'S BUSINESS
EXCITE HAS NOT BEEN AND MAY NEVER BE PROFITABLE
Excite has incurred significant operating expenses since it was formed. As
of December 31, 1998, Excite had an accumulated deficit of $135.6 million.
Although Excite has had significant revenue growth in recent periods, it may not
be able to sustain this growth in future periods. Excite may never achieve
profitability.
EXCITE'S AGREEMENT WITH NETSCAPE INVOLVES SIGNIFICANT RISKS
Excite has entered into an agreement with Netscape to provide certain
co-branded services for Netscape's Netcenter web portal. This agreement has a
number of substantial risks and uncertainties including:
Revenue Risks. Excite will only receive revenues from the portions of
Netcenter that are co-branded with Excite. Excite will not receive any revenues
from other areas of the Netcenter service. If Netscape-programmed channels, such
as News, Sports and Entertainment, are more popular than co-branded channels
with users and advertisers, Excite's revenues could be adversely affected.
Excite may not Recoup its Initial Investment. Excite paid Netscape a cash
payment of $70 million when it signed the Netcenter agreement. A substantial
portion of this amount represented a prepayment of Excite's royalty obligations
under this agreement. If the co-branded portions of the Netcenter service do not
generate enough revenues over the two-year term of the agreement, Excite would
not be able to realize a sufficient return on its investment. Netscape has not
guaranteed any minimum revenues to Excite. The ability of Netcenter to generate
revenues involves a number of risks, including:
- General risks relating to an advertising supported service discussed
elsewhere in this section
- Pricing competition from Netscape
- Netscape's ability to attract users to Netcenter, particularly in light
of the fact that while Netscape's Web browser features Netcenter,
Microsoft's Web browser does not
- Risks that Netscape-programmed channels will have more user traffic
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<PAGE> 27
- Risks that the "premier provider" placements of Excite will not generate
sufficient traffic to Excite
- Risks that Excite may not be able to sell a sufficient number of
advertisements on the co-branded portions of Netcenter
Netscape has a License to Use Excite's Search Technology. At the end of the
term of the Netcenter agreement, Netscape could retain a license to use Excite's
Internet search technology. Therefore, after the term of the Netcenter
agreement, Netscape may be able to operate a competitive service without paying
Excite. Netscape could also sublicense this technology to a third party. As a
result, Excite could face increased competition.
Non-Renewal and Termination Risks. Netscape has no obligation to renew the
Netcenter agreement. In addition, if Netscape believes that Excite is delivering
objectionable content on Netcenter, it could elect to terminate the agreement if
Excite does not remove that content. If this occurred, Netscape would not be
required to refund Excite any amounts it prepaid or costs it incurred in
performing under the Netcenter agreement.
Netcenter Competes With Excite. Most of the services offered on Netcenter
compete directly with Excite's services. Therefore, Excite faces additional
competition for both users and advertisers from Netcenter. If Excite devotes
significant resources towards programming or selling and marketing the
co-branded portions of Netcenter, these efforts could adversely affect Excite's
ability to perform similar activities for the Excite services.
America Online's Acquisition of Netscape. America Online is a competitor of
Excite. In November 1998, America Online agreed to acquire Netscape. Excite does
not know what effect this acquisition by America Online will have on its current
relationship with Netscape or on any future potential relationship with
Netscape.
EXCITE DEPENDS ON SPONSORSHIP AGREEMENTS FOR REVENUES
Excite derives a substantial portion of its revenues from third parties to
provide sponsored services and placements on Excite's Web sites. These
sponsorships typically last for a longer period of time than traditional banner
advertisement purchases. If these sponsorship arrangements do not meet the
advertisers' expectations as to new customers or increased sales or brand
awareness, the sponsors may not renew their arrangements with Excite. It may
also be difficult for Excite to obtain additional sponsors if potential new
sponsors compete with existing sponsors. If Excite does not renew its existing
sponsorships or obtain new sponsors, for any reason, its business would be
adversely affected.
PRIVACY CONCERNS COULD ADVERSELY AFFECT PORTIONS OF EXCITE'S BUSINESS
Excite's and certain of our services, as well as those of Excite's
subsidiary MatchLogic, use "cookies" to help deliver targeted advertising and
help compile demographic information about users. Cookies are bits of
information on a user's drive and are passed between a Web server and the user's
Web browser. These cookies can be placed on a user's hard drive without the
user's consent or knowledge. Due to privacy concerns, some commentators and
governmental bodies have suggested that the use of cookies be limited. In
addition, many versions of Web browsers permit users to block or delete cookies.
Any reduction or limitation in the use of cookies could limit Excite's or
MatchLogic's ad targeting capabilities, which could adversely affect their
businesses.
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EXCITE WILL NEED TO CONTINUE TO DEVELOP NEW SERVICES
Excite believes it will need to constantly update its service offerings on
its Web site in order to attract and retain users. If any new service is not
favorably received it could adversely affect Excite's reputation, brand and user
traffic. Excite could also experience difficulties or delays in developing new
services. In addition new services could contain undetected errors. Excite may
need to significantly redesign these services to correct any errors. Any
difficulty or delays could cause user dissatisfaction or result in lost or
delayed advertising revenues. Excite's business could be adversely affected if
its new services are not well received.
EXCITE'S BUSINESS DEPENDS ON THE CONTINUED GROWTH IN INTERNET USE
Excite operates in a new and rapidly evolving market. Excite's business
could be adversely affected if usage of the Internet or other online services
does not continue to grow. This growth could be hindered by a number of factors
including: the adequacy of the Internet's infrastructure to meet increased usage
demands; privacy and security concerns; and availability of cost-effective
service. Any of these issues could cause the Internet's performance or level of
usage to decline.
POTENTIAL LITIGATION WITH RESPECT TO INTELLECTUAL PROPERTY RIGHTS COULD HARM
EXCITE'S BUSINESS
Many parties, including competitors of Excite, are actively developing
search, indexing and related Internet technologies. Some of these parties have
taken, and Excite believes that others will take, steps to protect these
technologies. Therefore, Excite believes that disputes regarding the ownership
of such technologies are likely to arise in the future. For example, two
companies, including a competitor of Excite, have announced the issuance of
patents with respect to certain Internet technologies. Although Excite has not
received any correspondence with respect to any of these announced patents,
these parties could initiate a lawsuit against Excite asserting patent
infringement. Excite may not be able to defend any such litigation successfully.
Even if successful, defending litigation can be costly and divert management
resources.
EXCITE'S MARKET IS INTENSELY COMPETITIVE
Excite competes with a number of companies both for users and advertisers.
Excite expects this competition will intensify, particularly because there are
few barriers to entry in Excite's market. Excite's competitors include:
- Web "portal" companies such as Infoseek's Go Network, Lycos, Netscape's
Netcenter, Yahoo!, Alta Vista, HotBot, CYNet's Snap service and LookSmart
- Online service providers such as America Online and Microsoft's MSN
service
- Large media companies, such as CBS, NBC, Time-Warner and USA Networks,
Inc., who have announced initiatives to develop Web services or partner
with Web companies
- Other smaller companies providing Web-based and advertising supported
content
MatchLogic competes with AdForce and indirectly with DoubleClick Inc., each
of which offer advertising solutions for advertisers and Web sites. MatchLogic
also competes with NetGravity, Inc., which provides advertising management
software.
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Many providers of Internet services have been entering into distribution
arrangements and other strategic relationships with other Internet service
companies or with other third parties. For example, CBS and America Online have
announced a strategic relationship. If these relationships are successful,
Excite's competitors could receive more users and page views, which could make
their services more attractive to advertisers.
Excite also competes with traditional advertising media, such as print,
radio and television, for a share of advertisers' total advertising budgets. If
advertisers do not perceive Internet advertising to be as effective as
traditional media, Excite business could be adversely affected.
EXCITE WILL DEPEND ON A NUMBER OF THIRD PARTY RELATIONSHIPS
Excite will depend on a number of third party relationships to provide
users and content for its services. Examples of some of these important
relationships include:
- Relationships with respect to the positioning of Excite's service on Web
browsers or other high-traffic Web sites
- Arrangements under which third parties provide content for Excite's
services
- Arrangements under which third parties provide services such as games or
email
- Relationships with ISPs and other third parties to provide communications
infrastructure for Excite
If Excite cannot renew these relationships on favorable terms, or if these
relationships terminate, Excite would have to enter into new relationships.
Excite may not be able to replace any of its important third party relationships
on reasonable terms, if at all. If Excite cannot replace any important
relationship, it could lose users or advertisers, which could adversely affect
Excite's revenues. Even if Excite replaces any relationships or enters into new
relationships, Excite could incur increased costs such as distribution license
fees or selling and marketing expenses in order to pay for these relationships.
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<PAGE> 30
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934 and, in accordance therewith, we file reports and other information
with the Securities and Exchange Commission. Reports, registration statements,
proxy and information statements, and other information that we have filed can
be inspected and copied at the public reference facilities maintained by the
Securities and Exchange Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may obtain copies of such material from the Public
Reference Section of the Securities and Exchange Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 at rates prescribed by the Commission. The public
may obtain information on the operation of the Public Reference Room by calling
the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and
Exchange Commission also maintains a World Wide Web site that contains reports,
proxy and information statements and other information that is filed
electronically with the Securities and Exchange Commission. This Web site can be
accessed at http://www.sec.gov.
We have filed with the Securities and Exchange Commission a registration
statement on Form S-3 under the Securities Act with respect to the Series A
common stock offered hereby. This prospectus does not contain all of the
information set forth in the registration statement, certain parts of which are
omitted in accordance with the rules and regulations of the Securities and
Exchange Commission. For further information with respect to us and our Series A
common stock, please refer to the registration statement. Statements contained
in this prospectus as to the contents of any contract or other document are not
necessarily complete and, in each instance, reference is made to the copy of
such contract or document filed as an exhibit to the registration statement.
Each such statement is qualified in all respects by such reference. Copies of
the registration statement, including exhibits thereto, may be inspected without
charge at the Securities and Exchange Commission's principal office in
Washington, D.C., and you may obtain copies from this office upon payment of the
fees prescribed by the Securities and Exchange Commission.
We will furnish without charge to each person to whom a copy of this
prospectus is delivered, upon such person's written or oral request, a copy of
any and all of the information that has been incorporated by reference into this
prospectus (other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference herein as well). Requests for such copies
should be directed to At Home Corporation, 425 Broadway Street, Redwood City,
California 94063, Attention: David G. Pine, Vice President and General Counsel,
telephone: (650) 569-5000.
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<PAGE> 31
DOCUMENTS INCORPORATED BY REFERENCE
The following documents that we have filed with the Securities and Exchange
Commission are incorporated by reference into this prospectus:
- the registration statement on Form S-3 of which this prospectus is a
part, and the exhibits filed and incorporated by reference therewith;
- our annual report on Form 10-K for the fiscal year ended December 31,
1998;
- the registration of our Series A common stock on Form 8-A filed on June
13, 1997;
- all other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since December 31, 1998, including: (1) our quarterly
reports on Form 10-Q for the fiscal quarters ended March 31, June 30 and
September 30, 1998, each as amended on February 8, 1999; (2) our report
on Form 8-K filed on January 14, 1999, as amended on February 19, 1999;
(3) our two reports on Form 8-K filed on January 21, 1999; and (4) our
report on Form 8-K filed on February 19, 1999; and
- all other information that we file with the Securities and Exchange
Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act subsequent to the date of this prospectus and prior to the
termination of this offering.
Any statement incorporated herein shall be deemed to be modified or
superseded for the purposes of this prospectus and the registration statement to
the extent that a statement contained herein or in any other subsequently filed
document that is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
prospectus and the registration statement.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the Series A common stock
by the selling stockholders.
DIVIDEND POLICY
We have never paid any cash dividends on our stock and we anticipate that,
for the foreseeable future, we will continue to retain any earnings for use in
the operation of our business and do not intend to pay dividends.
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SELLING STOCKHOLDERS
The following table sets forth information with respect to the selling
stockholders and the shares of our Series A common stock that they may offer
pursuant to this prospectus. Each of the selling stockholders named below was
formerly a stockholder or warrant holder of Narrative who acquired the shares
offered hereby pursuant to our acquisition of Narrative. To our knowledge, none
of the selling stockholders has, or within the past three years has had, any
position, office or other material relationship with us or any of our
predecessors or affiliates.
The selling stockholders may also include certain permitted transferees of
the persons and entities listed below. Pursuant to the terms and conditions of
the Rights Agreement dated December 30, 1998 between At Home and each of the
Narrative stockholders, permitted transferees may include assignees by will or
by laws of intestacy. Furthermore, certain of the selling stockholders are
venture capital funds which may distribute their shares to their limited
partners. Those shares offered hereby may be sold by these limited partners as
long as the terms and conditions set forth in the Rights Agreement are
satisfied.
The selling stockholders may from time to time offer and sell any or all of
the shares pursuant to this prospectus. Because the selling stockholders are not
obligated to sell shares, and because selling stockholders may also acquire
publicly traded shares of our Series A common stock, we cannot estimate how many
shares each selling stockholder will beneficially own after this offering. We
may update amend or supplement this prospectus from time to time to update the
disclosure set forth herein.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED(1) OWNED
PRIOR TO THE OFFERING SHARES THAT AFTER THE OFFERING
--------------------- MAY BE --------------------
NAME NUMBER(2) PERCENT OFFERED(3) NUMBER PERCENT
---- ---------- -------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
Greylock Equity Limited
Partnership(4).............. 340,692 * 340,692 -- --
Hilmi Ozguc(5)................ 213,518 * 71,270 -- --
Scott A. Kliger(5)............ 213,518 * 71,270 -- --
Accel V L.P.(6)............... 126,663 * 126,663 -- --
Carlyle Venture Partners
L.P.(7)..................... 115,826 * 115,826 -- --
John B. Landry(8)............. 70,197 * 70,197 -- --
Allison Parker(9)............. 55,614 * 55,614 -- --
Accel Internet/Strategic
Technology Fund L.P.(6)..... 16,972 * 16,972 -- --
Carlyle U.S. Venture Partners
L.P.(7)..................... 15,361 * 15,361 -- --
Carlyle Venture Coinvestment
L.L.C.(7)(10)............... 9,319 * 9,319 -- --
Accel Investors '96 L.P.(6)... 7,543 * 7,543 -- --
Ellmore C. Patterson
Partners(6)................. 3,457 * 3,457 -- --
Jamie L. Bertasi(5)........... 2,758 * 921 -- --
Accel Keiretsu V L.P.(6)...... 2,514 * 2,514 -- --
Silicon Valley Bank(11)....... 1,776 * 1,776 -- --
Grant Schneider(12)(13)....... 1,654 * 728 -- --
Alexandra Trevelyan(12)(13)... 1,654 * 1,241 -- --
Patrick W. O'Brien(12)........ 1,448 * 1,448 -- --
</TABLE>
31
<PAGE> 33
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED(1) OWNED
PRIOR TO THE OFFERING SHARES THAT AFTER THE OFFERING
--------------------- MAY BE --------------------
NAME NUMBER(2) PERCENT OFFERED(3) NUMBER PERCENT
---- ---------- -------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
John Puopolo(12).............. 1,117 * 1,117 -- --
Jim Coloprisco(12)............ 820 * 820 -- --
Joanne Bryce(5)............... 774 * 774 -- --
David White(12)............... 717 * 717 -- --
Paul Santinelli(12)........... 689 * 689 -- --
Nancy Wilson(12).............. 622 * 622 -- --
Cathy Fielding(12)............ 455 * 455 -- --
Sarah Groark(12).............. 346 * 346 -- --
Carma Makarawicz(5)(13)....... 164 * 137 -- --
Wei-Meng Chee(12)............. 138 * 138 -- --
Lauren Chatham(12)............ 137 * 137 -- --
Mike Kopel(12)................ 137 * 137 -- --
Mike Trinkala(12)............. 99 * 99 -- --
TOTALS.............. 1,206,699(2) 919,000 -- --
</TABLE>
- -------------------------
* Each of the selling stockholders is currently the beneficial owner of less
than 1% of our outstanding Series A common stock, based on 106,472,376
shares of Series A common stock outstanding as of February 10, 1999.
(1) Beneficial ownership is determined in accordance with Rule 13d-3 of the
Exchange Act, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under this rule, beneficial
ownership includes any shares as to which the stockholder has sole or
shared voting power or investment power and also any shares which the
stockholder has the right to acquire within 60 days of the date of this
prospectus through the exercise of any stock option or other right. 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.
Shares of Series A common stock held in escrow on account of each of the
above selling stockholders by At Home pursuant to the Escrow Agreement
dated December 30, 1998 between At Home, Narrative and State Street Bank
and Trust Company of California, N.A. are deemed to be outstanding and
beneficially owned by each of the above selling stockholders. Also,
although shares of Series A common stock that are subject to options that
are currently exercisable or exercisable within 60 days of December 30,
1998 are deemed to be beneficially owned by the option holder for the
purpose of computing that holder's percentage ownership, such shares are
not deemed outstanding for purposes of computing the total shares of At
Home Series A common stock outstanding and are not treated as outstanding
for the purpose of computing any other person's percentage ownership.
(2) As of February 12, 1999, based on information provided to At Home by each
of the selling stockholders listed above. Includes shares beneficially
owned and subject to options that are either currently exercisable or are
exercisable within 60 days of February 19, 1999.
(3) As of February 19, 1999, a portion not exceeding 12% of each selling
stockholder's beneficially-owned shares are being held in escrow pursuant
to the Escrow Agreement. Such shares may only be sold under this prospectus
if and when they are
32
<PAGE> 34
released from escrow and returned to the selling stockholders pursuant to
the terms of the Escrow Agreement.
(4) Subsequent to the date of this prospectus, Greylock Equity Limited
Partnership may distribute its shares of our Series A common stock to:
Henry F. McCance, McCance Family Limited Partnership, Howard E. Cox, Jr.,
David N. Strohm, William W. Helman, William S. Kaiser, Roger L. Evans, Mary
H. Murphy, Barbara P. Murray, Oneonta Properties, Sherman Fairchild
Foundation, Inc., Helen C. Alexander, Emory A. Hamilton, John D. Alexander,
Jr., Caroline R. Alexander, Henrietta A. George, Dorothy A. Matz, Thomas W.
Keesee, Jr., Ashbourne Partners III Limited Partnership, Henry H. Corning,
Key Trust Company of Ohio, N.A., Theodore T. Jones and Latham W. Murfey,
III, Trustees of Trust f/b/o Alison C. Jones u/a established by Edith W.
Corning dtd 7/25/46 as amended, Key Trust Company of Ohio, N.A., Edson
Spencer, Jr. and David Warshawsky, Trustees of Trust f/b/o Samuel D. Long
u/a established by Edith W. Corning dtd 7/25/46 as amended, Key Trust
Company of Ohio, N.A., Edson Spencer, Jr. David Warshawsky, Trustees of
Trust f/b/o Maud-Alison Long u/a established by Edith W. Corning dtd
7/25/46 as amended, Key Trust Company of Ohio, N.A., Edson Spencer, Jr.
David Warshawsky, Trustees of Trust f/b/o Henry H. Corning u/a established
by Edith W. Corning dtd 7/25/46 as amended, Dartmouth College, Field
Venture Partners, Gothic Corporation, Poduska Family Limited Partnership
TLP, Michael J. Birck, Robert E. Cook, The Northern Trust Company, Trustee
of The Daisy Trust, Gabriel Schmergel, Thomas H. Bruggere, John W. Brown
Trust, Grossman Family Partnership or its nominee Saturn & Co., Peter
Preuss, William C. O'Neil, Jr., Curt A. Rawley, William J. Warner, John M.
Connolly, Mone Anathan, III, Samuel J. Gerson, Ronald J. Friedsam, David C.
Mahoney, Tadeusz Witkowicz, James A. Perakis, Joshua Boger, Malcolm L.
Gefter, Dirk I. Gates, Safi U. Qureshey, Trustee of Safi U. Qureshey Family
Trust dtd 5/21/84, Goel Family Partnership, William M. Gibson, Alexander V.
d'Arbeloff, Irwin F. Smith, Donald K. Miller, Robert A. Lawrence, Hill and
Company, Neil L. Thompson, PH Investments LLC, Frechette Fund, Inc., PCW
Fund, Inc., Scaup & Co., Edward H. Ladd, Trustee u/a/d 12/15/78 or its
nominee, Freya Fanning & Co., M-C Partners I Limited Partnership or its
nominees, A. A. Welsh & Co. and Atwell & Co., Massachusetts Institute of
Technology, Fleet National Bank, Trustee of Orchard Trust u/a/d 5/1/73,
Phemus Corporation, John Lillard Family Limited Partnership, Lillard
Partners, Louis F. Polk, Jr., Trustee of Louis F. Polk, Sr. Rev. Trust dtd
1/22/69, Paula P. Lillard, Trustee of Louis F. Polk, Sr. Rev Trust dtd
1/22/69, Louis F. Polk, Jr. Marital Trust, Polk Family Partnership, Board
of Trustees of Leland Stanford Junior University, Standish Ventures III
Limited Partnership, Julia L. Thorne Trust u/a 9/29/65, Edwin Thorne Sole
Trustee, Edwin Thorne, Gordon G. Thorne, Brinkley S. Thorne, Snowball
Trust, Wink Thorne, Jennifer Hislop, Benjamin Thorne, Brooks Walker, Jr.
Trustee of M.K. Walker Trust dtd 9/1/89, Brooks Walker, Jr., Wellington S.
Henderson, Trustee of Welling S. Henderson, Jr. Revocable Trust dtd 3/9/93,
Harriett W. Henderson Trust u/a/d 8/14/73 fbo Charles C. Henderson, Brooks
Walker III, Trustee of Walker Trust dtd 12/24/74, Harriett W. Henderson
Trust u/a/d 8/14/73 fbo James A. Henderson, Harriett W. Henderson Trust
u/a/d 8/14/73 fbo Joan H. Henderson, Harriett W. Henderson Trust u/a/d
8/14/73 fbo Elena D. Henderson, Harriett W. Henderson Trust u/a/d 8/14/73
fbo Mark W. Henderson, Ann M. Hatch Revocable Trust No. 2, Richard Greene
Trust fbo Francis Timothy Hatch, David Ayer, Susanna B. Place, Trustee SMBP
Trust u/a/d 2/28/85, Essex Equity Limited Partnership V,
33
<PAGE> 35
Frederick H. Bruenner, David E. Place, Richard M. Place, Daniel S. Gregory
and Richard N. Hoehn, Trustees, U/I Place/ Greylock Trust dtd 12/27/78,
William Elfers, Roger L. Evans, Trustee of Roger and Jacqueline Evans
Family Trust u/a/d 3/8/89, Stephen Bochner, Trustee Evans Children's Trust
u/a 12/20/93, Arthur Hughes, Trustee u/i/d 2/2/94 Helman Children's Trust
fbo Beatrice Page Helman, Arthur Hughes, Trustee u/i/d 2/2/94 Helman
Children's Trust fbo William Wilson Helman V, Robert N. Shapiro, Trustee of
Robert P. Henderson 1994 Irrevocable Trust dtd 1/19/94, William S. Kaiser,
Charles and Angela Waite, Thomas McCance, Jr. and Keith Jennings, Trustees
u/a/d 11/16/76 f/b/o Ellen L. McCance, Elizabeth F. McCance, Henry F.
McCance, Allison J. McCance and Keith S. Jennings u/i dtd 12/22/93 Trustees
of McCance Family Trust f/b/o Ellen Lee McCance, Henry F. McCance, Allison
J. McCance and Keith S. Jennings u/i dtd 12/22/93 Trustees of McCance
Family Trust f/b/o Elizabeth Ferguson McCance, Thomas J. Watson, III,
Daniel Moseley, Trustee u/a Blodgett 1989 Family Trust, Miriam A.
Gilpatric, John B. Jessup, Trustee of Julia Thorne Trust dtd 9/29/65, and
Yale University.
(5) The selling stockholder is an employee of At Home, with address at: c/o At
Home Corporation, 425 Broadway Street, Redwood City, California 94063.
(6) The selling stockholder is a limited partnership affiliated with Accel
Partners, with address at: c/o Accel Partners, attn: Carter Sednaoui, One
Palmer Square, Princeton, New Jersey 08542.
(7) The selling stockholder is a limited partnership affiliated with The
Carlyle Group, with address at: c/o The Carlyle Group, attn: Brian
Hayhurst, 1001 Pennsylvania Avenue, Washington, D.C. 20001-2505.
(8) Mr. Landry is the former Chairman of Narrative.
(9) Ms. Parker is a former employee and co-founder of Narrative.
(10) Subsequent to the date of this prospectus, Carlyle Venture Coinvestment
L.L.C. may distribute its shares of our Series A common stock to: Allan M.
Holt, Brian Bailey, Brian Hayhurst, Brooke Coburn, Cammack Holdings
Corporation, David Henderson, David W. Dupree, Edward J. Mathias, Frank C.
Carlucci, III, Frontier Ventures Corporation, Harry L. Alverson, James A.
Barker III, Jerome H. Powell, J. Mitchell Reese, Orange Crimson Holdings
Corporation, Ryan Schwarz, Stupar Holdings Corporation, Sulaiman S.
Mamdani.
(11) Silicon Valley Bank is currently a lender to At Home. Silicon Valley Bank's
address is c/o Silicon Valley Bancshares, attn: David Jaques, 3003 Tasman
Drive (HG100), Santa Clara, California 95054.
(12) The selling stockholder formerly had an employment relationship with
Narrative.
(13) The selling stockholder's beneficial ownership includes shares subject to
options that are either currently exercisable or are exercisable within 60
days of February 19, 1999.
34
<PAGE> 36
PLAN OF DISTRIBUTION
The selling stockholders will be offering and selling all shares offered
and sold under this prospectus. We will not receive any of the proceeds of the
sales of the shares offered hereby. In connection with our acquisition of
Narrative, we entered into a Rights Agreement dated December 30, 1998 with all
of the selling stockholders. The registration statement of which this prospectus
forms a part has been filed pursuant to the Rights Agreement. Pursuant to the
terms of the Rights Agreement, shares may only be offered or sold under this
prospectus during the normal quarterly time periods, or trading windows,
specified by our insider trading policy. Each trading window typically begins on
the third trading day after we publicly report our operating results for the
previous calendar quarter and ends on the last day of the second month of each
respective calendar quarter (February, May, August and November).
Shares Not Offered Hereby. Pursuant to the Escrow Agreement dated December
30, 1998 by and among us, Charles M. Hazard, Jr. as representative of the former
Narrative stockholders and State Street Bank and Trust Company of California,
N.A., we will hold a total of approximately 134,647 shares of our Series A
common stock beneficially owned by the selling stockholders in escrow until no
later than March 31, 2000. Except as set forth in the Escrow Agreement, shares
held in escrow may not be sold or transferred without our consent.
Pursuant to Article 2 of the Rights Agreement and subject to the terms and
conditions as more fully described throughout the Rights Agreement, certain
selling stockholders designated therein as "Key Employees" are restricted from
selling, transferring or otherwise disposing of their shares until December 30,
2001, except that: (1) each Key Employee may currently sell, transfer or
otherwise dispose of up to 25% of his shares received in exchange for his
Narrative common stock and shares subject to options to purchase shares that
have vested as of the date of this prospectus ("Restricted Shares"); (2) each
Key Employee may sell, transfer or dispose of up to another 25% of his
Restricted Shares on or after December 30, 1999 if such Key Employee is still an
At Home employee upon such date; and (3) each Key Employee may sell, transfer or
dispose of the remainder of his Restricted Shares after December 30, 2000 if
such Key Employee is still an At Home employee upon such date. These Restricted
Shares are not offered and may not be offered or sold under this prospectus.
Except as set forth in Article 3 of the Rights Agreement, these shares may not
be sold or transferred without our consent.
Who May Sell; Quantity; Applicable Restrictions. The shares may be sold
directly by the selling stockholders (including their permitted transferees, as
set forth in Article 3 of the Rights Agreement) from time to time. Permitted
transferees may include assignees by will or by laws of intestacy, or limited
partners of venture capital funds who are listed as selling stockholders,
pursuant to the terms and conditions of the Rights Agreement. In addition, any
securities covered by this prospectus which qualify for sale pursuant to Rule
144 or Rule 145 under the Securities Act may be sold under Rule 144 rather than
pursuant to this prospectus. We cannot guarantee that any selling stockholder
will sell any or all of the shares offered hereby or that any such selling
stockholder will not transfer, devise or gift such shares by other means not
described herein.
Alternatively, the selling stockholders may from time to time offer the
shares through brokers, dealers or agents that may receive compensation in the
form of discounts, concessions or commissions from the selling stockholders
and/or the purchasers of the
35
<PAGE> 37
shares for whom they may act as agent. In effecting sales, broker-dealers that
are engaged by the selling stockholders may arrange for other broker-dealers to
participate. The selling stockholders and any such brokers, dealers or agents
who participate in the distribution of the shares may be deemed to be
"underwriters," and any profits on the sale of the shares by them and any
discounts, commissions or concessions received by any such brokers, dealers or
agents might be deemed to be underwriting discounts and commissions under the
Securities Act. To the extent the selling stockholders may be deemed to be
underwriters, the selling stockholders may be subject to certain statutory
liabilities of, including, but not limited to, Sections 11, 12 and 17 of the
Securities Act and Rule 10b-5 under the Exchange Act. To our knowledge, there
are currently no plans, arrangements or understandings between any selling
stockholders and any broker, dealer, agent or underwriter regarding the sale of
the shares by the selling stockholders.
Manner of Sales and Applicable Restrictions. The selling stockholders will
act independently of the company in making decisions with respect to the timing,
manner and size of each sale. Such sales may be made over the Nasdaq National
Market or otherwise, at then prevailing market prices, at prices related to
prevailing market prices or at negotiated prices. The shares may be sold
according to one or more of the following methods:
- a block trade in which the broker or dealer so engaged will attempt to
sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
- purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this prospectus;
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
- an exchange distribution in accordance with the rules of such exchange;
- face-to-face transactions between sellers and purchasers without a
broker-dealer; and
- through the writing of options.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF OUR SERIES A COMMON
STOCK, INCLUDING THE ENTRY OF STABILIZING BIDS OR SYNDICATE COVERING
TRANSACTIONS OR THE IMPOSITION OF PENALTY BIDS. The selling stockholders and any
other person participating in such distribution will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder
including, without limitation, Regulation M (which regulation may limit the
timing of purchases and sales of any of the shares by the selling stockholders
and any other such person). The anti-manipulation rules under the Exchange Act
may apply to sales of shares in the market and to the activities of the selling
stockholders and their affiliates. Furthermore, Regulation M of the Exchange Act
may restrict the ability of any person engaged in the distribution of the shares
to engage in market-making activities with respect to the particular shares
being distributed for a period of up to five business days prior to the
commencement of such distribution. All of the foregoing may affect the
marketability of the shares and the ability of any person or entity to engage in
market-making activities with respect to the shares.
36
<PAGE> 38
Hedging and Other Certain Transactions with Broker-Dealers. In connection
with distributions of the shares or otherwise, the selling stockholders may
enter into hedging transactions with broker-dealers. In connection with such
transactions, broker-dealers may engage in short sales of the shares registered
hereunder in the course of hedging the positions they assume with selling
stockholders. The selling stockholders may also sell shares short and redeliver
the shares to close out such short positions. The selling stockholders may also
enter into option or other transactions with broker-dealers which require the
delivery to the broker-dealer of the shares registered hereunder, which the
broker-dealer may resell or otherwise transfer pursuant to this prospectus. A
selling stockholder may also loan or pledge the shares registered hereunder to a
broker-dealer and the broker-dealer may sell the shares so loaned or, upon a
default, the broker-dealer may effect sales of the pledged shares pursuant to
this prospectus.
Expenses Associated With Registration. We have agreed to pay the expenses
of registering the shares under the Securities Act, including registration and
filing fees, printing expenses, administrative expenses and certain legal and
accounting fees. Each of the selling stockholders will bear its pro rata share
of all discounts, commissions or other amounts payable to underwriters, dealers
or agents as well as fees and disbursements for legal counsel retained by any
such selling stockholder.
Indemnification. Under the Rights Agreement, we and the selling
stockholders have agreed to indemnify each other and certain other persons
against certain liabilities in connection with the offering of the shares,
including liabilities arising under the Securities Act. The selling stockholders
may also agree to indemnify any broker-dealer or agent that participates in
transactions involving sales of the shares against certain liabilities,
including liabilities arising under the Securities Act. In addition, Carlyle
Venture Coinvestment LLC and Greylock Equity Limited Partnership have each
agreed to indemnify us against certain liabilities, including liabilities
arising under the Securities Act, related to information about selling
stockholders that was provided by each of Carlyle Venture Coinvestment LLC and
Greylock Equity Limited Partnership, respectively.
Prospectus Updates; Suspension of this Offering. At any time a particular
offer of the shares is made, a revised prospectus or prospectus supplement, if
required, will be distributed. Such prospectus supplement or post-effective
amendment will be filed with the Securities and Exchange Commission to reflect
the disclosure of additional information with respect to the distribution of the
shares. Under the terms of the Rights Agreement, we may suspend the use of this
prospectus upon the occurrence of any event known to our executive officers as a
result of which this prospectus is known by our executive officers to include an
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances then existing. Upon the occurrence of such an
event, a prospectus supplement or post-effective amendment, if required, will be
distributed to each selling stockholder. Each selling stockholder has agreed not
to trade shares from the time the selling stockholder receives notice from the
company of such an event until such selling stockholder receives a prospectus
supplement or amendment, such time period not to exceed five trading days in any
one instance.
Termination of this Offering. Pursuant to the Rights Agreement, we are
obligated to use commercially reasonable efforts to keep the registration
statement of which this prospectus is a part effective until December 30, 1999,
or later in certain limited circumstances (the "Registration Period").
Therefore, this offering will terminate on the
37
<PAGE> 39
earlier of: (1) the expiration of the Registration Period, or (2) the date on
which all shares offered hereby have been sold by the selling stockholders.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered hereby
will be passed upon for us by Fenwick & West LLP, Two Palo Alto Square, Palo
Alto, California 94306. Fenwick & West LLP holds an option to purchase 6,250
shares of our Series A common stock.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 1998, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements are incorporated by reference in reliance on the report of
Ernst & Young LLP given on their authority as experts in accounting and
auditing.
The financial statements of Narrative incorporated in this prospectus by
reference to the audited historical financial statements included as Exhibit
99.01 of our Form 8-K/A filed on February 18, 1999 have been so incorporated in
reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
38
<PAGE> 40
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AT HOME CORPORATION
919,000 SHARES OF
SERIES A COMMON STOCK
---------------------------------------------
PROSPECTUS
---------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 41
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses payable by the
Registrant in connection with the sale and distribution of the securities being
registered hereby. Normal commission expenses and brokerage fees are payable
individually by the selling stockholders. All amounts are estimated except the
Securities and Exchange Commission registration fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $25,054
Nasdaq National Market filing fee........................... 17,500
Accounting fees and expenses................................ 10,000
Legal fees and expenses..................................... 30,000
Miscellaneous............................................... 7,446
-------
Total............................................. $90,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by the Delaware General Corporation Law, the Registrant's
Certificate of Incorporation includes a provision that eliminates the personal
liability of its directors to the Registrant or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability: (1)
for any breach of the director's duty of loyalty to the corporation or its
stockholders; (2) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law; (3) under Section 174 of
the Delaware General Corporation Law; or (4) for any transaction from which the
director derived an improper personal benefit. As permitted by Section 145 of
the Delaware General Corporation Law, the Registrant's Certificate of
Incorporation further provides: (1) for mandatory indemnification, to the
fullest extent permitted by applicable law, for any person who is or was a
director or officer, or is or was serving at the request of the Registrant as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust, enterprise or nonprofit entity, including service with
respect to employee benefit plans, against all liability and loss suffered and
expenses (including attorneys' fees) reasonably incurred by such person; (2)
that the Registrant's obligation to indemnify any person who was or is serving
at the Registrant's request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, enterprise or nonprofit entity
must be reduced by any amount such person may collect as indemnification from
such other corporation, partnership, joint venture, trust, enterprise or
nonprofit entity; (3) that the Registrant must advance to all indemnified
parties the expenses (including attorneys' fees) incurred in defending any
proceeding provided that indemnified parties (if they are directors or officers)
must provide the Registrant an undertaking to repay such advances if
indemnification is determined to be unavailable; (4) that the rights conferred
in the Certificate of Incorporation are not exclusive; and (5) that the
Registrant may not retroactively amend the Certification of Incorporation
provisions relating to indemnity.
II-1
<PAGE> 42
The indemnification provision in the Registrant's Certificate of
Incorporation and the Indemnification Agreements entered into between the
Registrant and each of its directors and executive officers may be sufficiently
broad to permit indemnification of the Registrant's directors and officers for
liabilities arising under the Securities Act. The Registrant has also obtained
directors' and officers' liability insurance. The following documents are hereby
incorporated by reference:
DOCUMENT
1. Form of Fourth Amended and Restated Certificate of Incorporation of the
Registrant filed July 16, 1997 (incorporated by reference to Exhibit
3.06 to Registrant's registration statement on Form S-1, File No.
333-27323, declared effective July 11, 1997).
2. Form of Indemnification Agreement entered into by the Registrant with
each of its directors and executive officers (incorporated herein by
reference to Exhibit 10.09 to the Registrant's registration statement
on Form S-1, File No. 333-27323, declared effective July 11, 1997).
Certain agreements related to the Registrant's acquisition of Narrative
provide for the indemnification of the Registrant and its directors, officers
and employees from and against certain liabilities, including losses by the
Registrant and its directors, officers and employees arising out of
misrepresentations or breaches by Narrative regarding its business, and certain
liabilities of the Registrant and its directors, officers and employees arising
under the Securities Act of 1933, the Securities Exchange Act of 1934 or other
federal or state laws. In addition, the Escrow Agreement referenced below
provides that certain shares of the Registrant's Series A common stock will be
held as collateral for the indemnity obligations of the Narrative stockholders
to the Registrant and its directors, officers and employees. The following
documents are hereby incorporated by reference:
DOCUMENT
1. Agreement and Plan of Merger by and among the Registrant, Transitory
Corporation (a subsidiary of the Registrant) and Narrative dated
December 17, 1998 (incorporated by reference to Exhibit 2.1 to the
Registrant's report on Form 8-K filed with the Securities and Exchange
Commission on January 14, 1999).
2. Escrow Agreement dated December 30, 1998 by and among the Registrant,
Charles M. Hazard, Jr. as representative of the Narrative stockholders
and State Street Bank and Trust Company of California, N.A., as escrow
agent (incorporated by reference to Exhibit 2.3 to the Registrant's
report on Form 8-K filed with the Securities and Exchange Commission on
January 14, 1999).
3. Rights Agreement dated December 30, 1998 by and between the Registrant
and each of the Narrative stockholders (incorporated by reference to
Exhibit 2.4 to the Registrant's report on Form 8-K filed with the
Securities and Exchange Commission on January 14, 1999).
4. Letter Agreement dated February 9, 1999 by and between the Registrant
and Carlyle Venture Coinvestment LLC (see Exhibit 99.02).
II-2
<PAGE> 43
5. Letter Agreement dated February 9, 1999 by and between the Registrant
and Greylock Equity Limited Partnership (see Exhibit 99.03).
ITEM 16. EXHIBITS.
The following exhibits are filed herewith or incorporated by reference
herein:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
2.01 Agreement and Plan of Merger by and among the Registrant,
Transitory Corporation (a subsidiary of the Registrant) and
Narrative dated December 17, 1998 (incorporated by reference
to Exhibit 2.1 to the Registrant's report on Form 8-K filed
with the Securities and Exchange Commission on January 14,
1999).
2.02 Certificate of Merger, as filed on December 30, 1998 with
the Secretary of State of the State of Delaware
(incorporated by reference to Exhibit 2.2 to the
Registrant's report on Form 8-K filed with the Securities
and Exchange Commission on January 14, 1999).
2.03 Escrow Agreement dated December 30, 1998 by and among the
Registrant, Charles M. Hazard, Jr. as representative of the
Narrative stockholders and State Street Bank and Trust
Company of California, N.A. as escrow agent (incorporated by
reference to Exhibit 2.3 to the Registrant's report on Form
8-K filed with the Securities and Exchange Commission on
January 14, 1999).
2.04 Rights Agreement dated December 30, 1998 by and between the
Registrant and each of the Narrative stockholders
(incorporated by reference to Exhibit 2.4 to the
Registrant's report on Form 8-K filed with the Securities
and Exchange Commission on January 14, 1999).
3.01 Form of Fourth Amended and Restated Certificate of
Incorporation of the Registrant filed July 16, 1997
(incorporated by reference to Exhibit 3.06 to the
Registrant's registration statement on Form S-1, File No.
333-27323, declared effective July 11).
3.02 Form of Second Amended and Restated Bylaws of Registrant
effective July 16, 1997 (incorporated by reference to
Exhibit 3.05 to the Registrant's registration statement on
Form S-1, File No. 333-27323, declared effective July 11).
4.01 Form of Certificate of the Registrant's Series A common
stock (incorporated by reference to Exhibit 4.05 to the
Registrant's registration statement on Form S-1, File No.
333-27323, declared effective July 11).
4.02 Amended and Restated Stockholders' Agreement, dated August
1, 1996, by and among the Registrant and the parties
indicated therein, as amended on May 15, 1997 (incorporated
by reference to Exhibit 4.04 to the Registrant's
registration statement on Form S-1, File No. 333-27323,
declared effective July 11).
5.01 Opinion of Fenwick & West LLP regarding legality of the
securities being registered.
23.01 Consent of Fenwick & West LLP (included in Exhibit 5.01).
23.02 Consent of Ernst & Young LLP, Independent Auditors.
23.03 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
24.01 Power of attorney (see pg. II-6 of this registration
statement).
</TABLE>
II-3
<PAGE> 44
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
99.01 Press release issued by Registrant on December 18, 1998
announcing its agreement to acquire Narrative (incorporated
by reference to Exhibit 99.1 to the Registrant's report on
Form 8-K filed with the Securities and Exchange Commission
on January 14, 1999).
99.02 Letter Agreement dated February 9, 1999 by and between the
Registrant and Carlyle Venture Coinvestment LLC.
99.03 Letter Agreement dated February 9, 1999 by and between the
Registrant and Greylock Equity Limited Partnership.
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933 each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement: (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information in the registration
statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent
no more than a 20 percent change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
registration statement; and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material
II-4
<PAGE> 45
change to such information in the registration statement; provided,
however, that (i) and (ii) do not apply if the information required to be
included in a post-effective amendment thereby is contained in periodic
reports filed with or furnished to the Commission by the Registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-5
<PAGE> 46
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
At Home Corporation, certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Redwood City, State of California, on this 19th day of
February, 1999.
AT HOME CORPORATION
By: /s/THOMAS A. JERMOLUK
-------------------------------
Thomas A. Jermoluk
Chairman, President and
Chief Executive Officer
POWER OF ATTORNEY
Each individual whose signature appears below constitutes and appoints
Thomas A. Jermoluk, Kenneth A. Goldman and David G. Pine, and each of them, his
true and lawful attorneys-in-fact and agents, each with the power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this registration statement, and to sign any registration statement for the
same offering covered by this registration statement that is to be effective
upon filing pursuant to Rule 415 promulgated under the Securities Act of 1933,
and all post-effective amendments thereto, and to file the same, with all
exhibits thereto and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or his or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
PRINCIPAL EXECUTIVE OFFICER:
/s/ THOMAS A. JERMOLUK President, Chief Executive February 19, 1999
- ---------------------------- Officer and Chairman of the
Thomas A. Jermoluk Board
PRINCIPAL FINANCIAL OFFICER:
/s/ KENNETH A. GOLDMAN Senior Vice President and February 19, 1999
- ---------------------------- Chief Financial Officer
Kenneth A. Goldman
PRINCIPAL ACCOUNTING
OFFICER:
/s/ ROBERT A. LERNER Corporate Controller February 19, 1999
- ----------------------------
Robert A. Lerner
</TABLE>
II-6
<PAGE> 47
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
ADDITIONAL DIRECTORS:
/s/ WILLIAM R. HEARST III Vice Chairman February 19, 1999
- ----------------------------
William R. Hearst III
/s/ JAMES L. BARKSDALE Director February 19, 1999
- ----------------------------
James L. Barksdale
/s/ L. JOHN DOERR Director February 19, 1999
- ----------------------------
L. John Doerr
/s/ LEO J. HINDERY Director February 19, 1999
- ----------------------------
Leo J. Hindery
/s/ JOHN C. MALONE Director February 19, 1999
- ----------------------------
John C. Malone
/s/ BRUCE W. RAVENEL Director February 9, 1999
- ----------------------------
Bruce W. Ravenel
/s/ BRIAN L. ROBERTS Director February 19, 1999
- ----------------------------
Brian L. Roberts
/s/ LARRY E. ROMRELL Director February 19, 1999
- ----------------------------
Larry E. Romrell
/s/ JAMES R. SHAW Director February 11, 1999
- ----------------------------
James R. Shaw
/s/ DAVID M. WOODROW Director February 6, 1999
- ----------------------------
David M. Woodrow
</TABLE>
II-7
<PAGE> 48
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- -------------
<S> <C>
5.01 Opinion of Fenwick & West LLP regarding legality of the
securities being registered.
23.01 Consent of Fenwick & West LLP (included in Exhibit 5.01).
23.02 Consent of Ernst & Young LLP, Independent Auditors.
23.03 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
24.01 Power of attorney (see pg. II-6 of this registration
statement).
99.02 Letter Agreement dated February 9, 1999 by and between the
Registrant and Carlyle Venture Coinvestment LLC.
99.03 Letter Agreement dated February 9, 1999 by and between the
Registrant and Greylock Equity Limited Partnership.
</TABLE>
<PAGE> 1
EXHIBIT 5.01
February 12, 1999
At Home Corporation
425 Broadway Street
Redwood City, California 94063
Gentlemen/Ladies:
At your request, we have examined the Registration Statement on Form S-3
to be filed by you with the Securities and Exchange Commission (the "SEC") on or
about February 16, 1999 (the "Registration Statement") in connection with the
registration under the Securities Act of 1933, as amended, of an aggregate of
919,000 shares of your Series A common stock (the "Stock"), each of which may be
sold only by certain selling stockholders (the "Selling Stockholders") named in
the Registration Statement and in subsequent amendments thereto.
In rendering this opinion, we have examined the following:
(1) your registration statement on Form S-1 (File Number 333-27323)
filed with and declared effective by the SEC on July 11, 1997,
together with the Exhibits filed as a part thereof;
(2) your registration statement on Form 8-A (File Number 000-22697)
filed with the SEC on June 13, 1997, together with the order of
effectiveness issued by the SEC therefor on July 11, 1997;
(3) the Registration Statement, together with the exhibits filed as a
part thereof;
(4) the prospectus prepared in connection with the Registration
Statement;
(5) the minutes of meetings and actions by written consent of the
stockholders and Board of Directors that are contained in your
minute books in your possession;
(6) your stock records that you have provided to us (consisting of a
certificate from your transfer agent verifying the number of your
issued and outstanding shares of capital stock as of February 10,
1999 and a certificate verifying the outstanding rights to purchase
your capital stock that was prepared by you and dated February 12,
1999 verifying the number of such issued and outstanding
securities);
(7) a Management Certificate addressed to us and dated of even date
herewith executed by the Company containing certain factual and
other representations (the "Management Certificate"); and
<PAGE> 2
At Home Corporation
Page 2
(8) The Agreement and Plan of Merger dated December 17, 1998 by and
among the Company, Transitory Corporation, a Delaware corporation
and Narrative Communications Corp., a Delaware corporation, and the
exhibits and schedules thereto, under which the Selling Stockholders
acquired the Stock to be sold by them as described in the
Registration Statement.
By telephone call to the offices of the SEC, we have also confirmed the
continued effectiveness of the Company' registration under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the timely filing by
you of all reports required to be filed by you pursuant to Rules 13, 14 and 15
promulgated under the Exchange Act.
In our examination of documents for purposes of this opinion, we have
assumed, and express no opinion as to, the genuineness of all signatures on
original documents, the authenticity and completeness of all documents submitted
to us as originals, the conformity to originals and completeness of all
documents submitted to us as copies, the legal capacity of all natural persons
executing the same, the lack of any undisclosed termination, modification,
waiver or amendment to any document reviewed by us and the due authorization,
execution and delivery of all documents where due authorization, execution and
delivery are prerequisites to the effectiveness thereof.
As to matters of fact relevant to this opinion, we have relied solely upon
our examination of the documents referred to above and have assumed the current
accuracy and completeness of the information obtained from public officials and
records referred to above. We have made no independent investigation or other
attempt to verify the accuracy of any of such information or to determine the
existence or non-existence of any other factual matters; however, we are not
aware of any facts that would cause us to believe that the opinion expressed
herein is not accurate.
We are admitted to practice law in the State of California, and we express
no opinion herein with respect to the application or effect of the laws of any
jurisdiction other than the existing laws of the United States of America and
the State of California and (without reference to case law or secondary sources)
the existing Delaware General Corporation Law.
In connection with our opinion expressed below, we have assumed that, at
or prior to the time of the delivery of any shares of Stock, the Registration
Statement will have been declared effective under the Securities Act of 1933, as
amended, that the registration will apply to such shares of Stock and will not
have been modified or rescinded and that there will not have occurred any change
in law affecting the validity or enforceability of such shares of Stock.
You have informed us that you intend to issue the Stock from time to time
on a delayed or continuous basis. This opinion is limited to the laws, including
the rules and regulations, as in effect on the date hereof. We are basing this
opinion on our understanding that, prior to issuing any Stock, you will advise
us in writing of the terms thereof and other information material
8
<PAGE> 3
AtHome Corporation
Page 3
thereto, will afford us an opportunity to review the operative documents
pursuant to which such Stock is to be issued (including the Registration
Statement, the prospectus and the applicable prospectus supplement, as then in
effect) and will file such supplement or amendment to this opinion (if any) as
we may reasonably consider necessary or appropriate with respect to such Stock.
However, we undertake no responsibility to monitor your future compliance with
applicable laws, rules or regulations of the SEC or other governmental body. We
also assume you will timely file any and all supplements to the Registration
Statement and prospectus as are necessary to comply with applicable laws in
effect from time to time.
Based upon the foregoing, it is our opinion that the 919,000 shares of
Stock to be sold by the Selling Stockholders pursuant to the Registration
Statement, when evidenced by appropriate certificates that have been properly
executed and delivered and when issued and sold in accordance with and in the
manner referred to in the relevant prospectus associated with the Registration
Statement, will be validly issued, fully paid and non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us, if any, in the
Registration Statement, the Prospectus constituting a part thereof and any
amendments thereto.
This opinion speaks only as of its date and we assume no obligation to
update this opinion should circumstances change after the date hereof. This
opinion is intended solely for the your use as an exhibit to the Registration
Statement for the purpose of the above sale of the Stock and is not to be relied
upon for any other purpose.
Very truly yours,
FENWICK & WEST LLP
By: /s/ GORDON K. DAVIDSON
----------------------------------------
<PAGE> 1
EXHIBIT 23.02
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of At Home Corporation
for the registration of 919,000 shares of its Series A common stock and to the
incorporation by reference therein of our report dated January 19, 1999, with
respect to the consolidated financial statements of At Home Corporation included
in its Annual Report (Form 10-K) for the year ended December 31, 1998, filed
with the Securities and Exchange Commission.
Ernst & Young LLP
San Jose, California
February 19, 1999
<PAGE> 1
EXHIBIT 23.03
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
April 23, 1998, which appears in Exhibit 99.01 of the Current Report on Form
8-K/A dated February 19, 1999. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
February 19, 1999
<PAGE> 1
EXHIBIT 99.02
February 9, 1999
At Home Corporation
425 Broadway Street
Redwood City, CA 94063
Re: Registration Statement on Form S-3 to be filed with the SEC
Ladies and Gentlemen:
In connection with the above-referenced registration statement (the
"REGISTRATION STATEMENT"), this letter confirms that, pursuant to that certain
Rights Agreement dated December 30, 1998 by and between At Home Corporation (the
"COMPANY") and each of the former Narrative stockholders (including the
undersigned) (the "RIGHTS AGREEMENT"), the undersigned will indemnify and hold
harmless, to the same extent as provided in the indemnity obligations contained
in the Rights Agreement, the Company, each person or entity, if any, that
controls the Company within the meaning of the Securities Act of 1933, as
amended (the "1933 ACT"), each of its directors, and each of its officers who
have signed the Registration Statement (each, an "INDEMNIFIED PERSON") against
any losses, claims, damages or liabilities (joint or several), reduced by any
recovery under insurance policies, to which an Indemnified Person may become
subject under the 1933 Act, the Securities Exchange Act of 1934, as amended, or
other federal or state securities law, to the extent, and only to the extent,
that such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact, or any omission or alleged omission to state a material
fact, included or required to be included in the Registration Statement, in each
case only to the extent that such untrue statements or alleged untrue statements
or omissions or alleged omissions occur in reliance upon and in conformity with
written information furnished by the undersigned expressly for use in connection
with the Registration Statement; provided, however, that: (1) the amount payable
by the undersigned shall not exceed the amount of proceeds, net of commissions
and selling expenses, received by the undersigned and permitted assignees of its
shares in the aggregate pursuant to the sale of the shares under the
Registration Statement, and (2) the reimbursement obligations contained in this
letter shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the written
consent of the undersigned, which consent shall not be unreasonably withheld.
The undersigned confirms that it will, pursuant to the terms of the Rights
Agreement, reimburse any reasonable attorneys' fees and other expenses
reasonably incurred by the Company or any such director or officer in connection
with investigating or defending any such loss, claim, damage, liability or
action, subject to the limitations set forth in the preceding sentence.
Very truly yours,
CARLYLE VENTURE COINVESTMENT LLC
By: TCG Ventures, L.L.C., its Manager
By: /s/ J. Mitchell Reese
------------------------------------------------------------------------------
Title: J. Mitchell Reese, Managing Director
------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 99.03
February 9, 1999
At Home Corporation
425 Broadway Street
Redwood City, CA 94063
Re: Registration Statement on Form S-3 to be filed with the SEC
Ladies and Gentlemen:
In connection with the above-referenced registration statement (the
"REGISTRATION STATEMENT"), this letter confirms that, pursuant to that certain
Rights Agreement dated December 30, 1998 by and between At Home Corporation (the
"COMPANY") and each of the former Narrative stockholders (including the
undersigned) (the "RIGHTS AGREEMENT"), the undersigned will indemnify and hold
harmless, to the same extent as provided in the indemnity obligations contained
in the Rights Agreement, the Company, each person or entity, if any, that
controls the Company within the meaning of the Securities Act of 1933, as
amended (the "1933 ACT"), each of its directors, and each of its officers who
have signed the Registration Statement (each, an "INDEMNIFIED PERSON") against
any losses, claims, damages or liabilities (joint or several), reduced by any
recovery under insurance policies, to which an Indemnified Person may become
subject under the 1933 Act, the Securities Exchange Act of 1934, as amended, or
other federal or state securities law, to the extent, and only to the extent,
that such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact, or any omission or alleged omission to state a material
fact, included or required to be included in the Registration Statement, in each
case only to the extent that such untrue statements or alleged untrue statements
or omissions or alleged omissions occur in reliance upon and in conformity with
written information furnished by the undersigned expressly for use in connection
with the Registration Statement; provided, however, that: (1) the amount payable
by the undersigned shall not exceed the amount of proceeds, net of commissions
and selling expenses, received by the undersigned and permitted assignees of its
shares in the aggregate pursuant to the sale of the shares under the
Registration Statement, and (2) the reimbursement obligations contained in this
letter shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the written
consent of the undersigned, which consent shall not be unreasonably withheld.
The undersigned confirms that it will, pursuant to the terms of the Rights
Agreement, reimburse any reasonable attorneys' fees and other expenses
reasonably incurred by the Company or any such director or officer in connection
with investigating or defending any such loss, claim, damage, liability or
action, subject to the limitations set forth in the preceding sentence.
Very truly yours,
GREYLOCK EQUITY LIMITED PARTNERSHIP
By: Greylock Equity GP Limited Partnership
By: /s/ Henry F. McCance
-------------------------------------------
Title: Managing Partner
-------------------------------------------
