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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 14, 1999
REGISTRATION NO. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
AT HOME CORPORATION
(Exact name of the Registrant as specified in its charter)
DELAWARE 77-0408542
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
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:
GORDON K. DAVIDSON, ESQ.
DAVID K. MICHAELS, ESQ.
THOMAS J. HALL, ESQ.
FENWICK & WEST LLP
TWO PALO ALTO SQUARE
PALO ALTO, CALIFORNIA 94306
(650) 494-0600
----------------------
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. [ ]
<TABLE>
<CAPTION>
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 UNIT(1) PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Convertible subordinated debentures due 2018 $437,000,000(2) 103.0% $450,110,000 $125,131
Series A common stock, $.01 par value per share 2,862,350(3) -- -- -- (4)
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</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended, based
upon the average of the bid and ask prices of the debentures on the Portal
Market on May 10, 1999.
(2) Represents the principal amount at maturity of the debentures that were
originally issued by the Registrant on December 28, 1998.
(3) Represents the number of shares of Series A common stock that are currently
issuable upon conversion of the debentures. The number of shares of Series
A common stock that may be issued upon conversion of the debentures in the
future is indeterminate, and the Registrant is also registering this
indeterminate amount pursuant to Rule 416 under the Securities Act.
(4) No additional consideration will be received for the Series A common stock,
and, therefore, no registration fee is required pursuant to Rule 457(i).
<PAGE> 2
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
[@HOME Network LOGO]
AT HOME CORPORATION
$437,000,000 PRINCIPAL AMOUNT AT MATURITY
CONVERTIBLE SUBORDINATED DEBENTURES DUE 2018
SHARES OF SERIES A COMMON STOCK
ISSUABLE UPON CONVERSION OF THE DEBENTURES
------------------
Our Series A common stock currently trades on the Nasdaq National Market.
Last reported sale price on May 13, 1999: $149.3125 per share.
Trading Symbol: ATHM
------------------
THE OFFERING
Under this prospectus, the selling stockholders named in this prospectus
or in prospectus supplements may offer and sell the debentures or the
shares of our Series A common stock into which the debentures may be
converted.
The debentures were initially issued at a price of $524.64 per $1,000
principal amount at maturity. Interest of .5246% per year on the
principal amount at maturity is payable semiannually beginning June 28,
1999.
The debentures mature December 28, 2018. Each $1,000 principal amount
debenture is initially convertible into 6.55 shares of our Series A
common stock. We may redeem our debentures on or after December 28, 2003
at the redemption prices listed in this prospectus. Holders of the
debentures also have an option to require us to purchase the debentures
for cash or shares of our Series A common stock, at our election, on
specified purchase dates or upon a change of control of At Home. The
debentures are general unsecured obligations and are subordinated in
right of repayment below all of our existing and future senior debt.
------------------
INVESTING IN OUR CONVERTIBLE SUBORDINATED DEBENTURES OR OUR SERIES A
COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. PLEASE CAREFULLY CONSIDER
THE "RISK FACTORS" BEGINNING ON PAGE 5 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 May __, 1999
********************************************************************************
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING SECURITY HOLDERS 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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TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary............................... 3
Risk Factors..................................... 5
Ratio of Earnings to Fixed Charges............... 13
Use of Proceeds.................................. 13
Dividend Policy.................................. 13
Description of Debentures........................ 14
United States Federal Income Tax
Considerations................................... 23
Selling Securityholders.......................... 27
Plan of Distribution............................. 30
Legal Matters.................................... 32
Experts.......................................... 32
Forward-Looking Statements....................... 32
Where You Can Find More Information.............. 32
</TABLE>
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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 securities in this offering. You should read the entire
prospectus carefully. Unless the context otherwise requires, the terms we, our,
us, the company and At Home refer to At Home Corporation, a Delaware
corporation. Unless explicitly stated otherwise, the share numbers in this
prospectus do not reflect the two-for-one stock split declared by our board on
April 16, 1999, which is subject to stockholder approval.
AT HOME CORPORATION
We are the leading provider of broadband Internet services to consumers
over the cable television infrastructure. Our primary offering, the @Home
service, allows residential subscribers to connect their personal computers
through cable television wiring infrastructures to a high-speed Internet
backbone network developed and managed by us.
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. For businesses, our @Work
services provide a platform for Internet, intranet and extranet connectivity
solutions and networked business applications over both cable infrastructures
and digital telecommunications lines.
@Home, @Home Network, @Media, @Work and the @ball logo are our registered
trademarks, and @Work Internet is our service mark. This prospectus also
includes trademarks of other companies.
THE OFFERING
Amount offered $437,000,000 principal amount at maturity
Original issue price $524.64 per $1,000 principal amount at maturity
Maturity date December 28, 2018
Cash interest .5246% per year on the principal amount at
maturity, payable semiannually commencing June
28, 1999
Yield to maturity 4% per year
Conversion rights Each debenture holder may convert each debenture
into 6.55 shares of our Series A common stock at
any time on or prior to maturity. The conversion
rate may be adjusted in designated
circumstances, but will not be adjusted for
accrued original issue discount. Upon
conversion, you will not receive any cash
payment representing accrued original issue
discount. Instead, accrued original issue
discount will be deemed paid by the Series A
common stock received by you on conversion.
Subordination Our debentures are subordinated to our existing
and future senior debt and are effectively
subordinated to all existing and future
liabilities of our subsidiaries. The indenture
does not limit our ability to take on senior
debt or other debt.
Original issue discount We initially sold each debenture at an original
issue discount for United States federal income
tax purposes. This original issue discount
amount equals the excess of the stated
redemption price at maturity of the debenture,
$1,000, over the issue price of $524.64. You
must include accrued original issue discount in
your gross income for United States federal
income tax purposes prior to conversion,
redemption,
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sale or maturity of the debentures. This will be
true even if the debentures are ultimately not
converted, redeemed, sold or paid at maturity.
Optional redemption On and after December 28, 2003, we
can redeem the debentures for cash at any time
at our option at the redemption prices listed in
this prospectus, plus cash interest.
Purchase at the option Each debenture holder has the option to require
of the holder us to purchase debentures for a purchase price
of $610.81 on December 28, 2003, for $715.86 on
December 28, 2008 and for $843.91 on December
28, 2013. We may generally choose to pay this
purchase price in cash, shares of our Series A
common stock or any combination of cash and
stock.
If a change of control of At Home occurs prior
to December 29, 2003, then each debenture holder
will have an option to require us to repurchase
the debentures for an amount equal to the issue
price plus accrued original issue discount and
cash interest.
Optional conversion to We have the option to convert original issue
semiannual coupon debenture discount to interest on the occurrence of
upon tax event specified tax events. This interest would accrue
at 4% per year on a restated principal amount
equal to the issue price plus accrued original
issue discount.
Use of proceeds We will not receive any cash from the sale of
our debentures or Series A common stock offered
under this prospectus.
Trading The debentures issued in the initial private
placement are eligible for trading in The Portal
Market. However, debentures sold using this
prospectus will no longer be eligible for
trading in The Portal Market. Our Series A
common stock is traded on the Nasdaq National
Market under the symbol ATHM.
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RISK FACTORS
An investment in our debentures or our Series A 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 debentures
or our Series A common stock. Our business and results of operations could be
seriously harmed by any of the following risks. The trading price of our
debentures and our Series A common stock could decline due to any of these
risks, and you may lose all or part of your investment.
RISKS RELATED TO THE DEBENTURES
WE MAY NOT BE ABLE TO PAY OFF THE DEBENTURES ON THE PURCHASE DATES OR UPON A
CHANGE OF CONTROL OF AT HOME
On each purchase date of December 28, 2003, December 28, 2008 and December
28, 2013, each debenture holder will generally have an option to require us to
purchase their debentures. Also, if a change of control of At Home occurs, each
debenture holder will generally have an option for us to repurchase their
debentures. We may not have sufficient cash to pay the debentures, or
restrictions in other agreements may not allow us to make these repurchases. In
either case, we may have to issue shares of our Series A common stock instead.
THE DEBENTURES ARE SUBORDINATED TO OUR SENIOR DEBT OBLIGATIONS
The debentures will be unsecured and subordinated in right of payment to
all of our existing and future senior debt obligations. Therefore, if we go
bankrupt, liquidate our assets, reorganize or enter into other specified
transactions, our assets will be available to pay our obligations with respect
to the debentures only after we have paid all of our senior debt obligations in
full, and there may not be sufficient assets remaining to pay amounts due on any
or all of the debentures then outstanding. The debentures also will be
effectively subordinated in right of payment of all the liabilities, including
trade payables, of our subsidiaries. The indenture governing the debentures does
not prohibit or limit the ability of us or our subsidiaries to incur senior debt
obligations, other debt obligations and other liabilities. If we take any of
these actions, this could harm our ability to pay off the debentures. As of
April 30, 1999, we had approximately $32.3 million (excluding accrued interest)
of senior debt obligations outstanding. Our subsidiaries had liabilities of $1.6
million, including trade payables, as of April 30, 1999, but they may incur
additional liabilities in the future.
A TRADING MARKET FOR THE DEBENTURES MAY NOT DEVELOP
Although the initial purchaser of the debentures has advised us that it
intends to make a market in the debentures, it is not obligated to do so and may
discontinue market making at any time without notice. Its market-making activity
will be subject to the limited imposed by the securities laws. We cannot
guarantee that the market for the debentures will be maintained. Also, we do not
intend to apply for listing of the debentures on any securities exchange. The
trading price of the debentures will decline if there ceases to be an active
trading market for them.
RISKS RELATED TO OUR BUSINESS
WE HAVE INCURRED AND EXPECT TO INCUR SUBSTANTIAL LOSSES
We were incorporated in March 1995, commenced operations in August 1995,
and have incurred net losses from operations in each fiscal period since our
inception. As of March 31, 1999, we had an accumulated deficit of $245.3
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 losses before cost and amortization of distribution
agreements and amortization of goodwill and other intangible assets for at least
the next three quarters.
OUR BUSINESS IS UNPROVEN, AND WE MAY NOT ACHIEVE PROFITABILITY
The profit potential of our business model is unproven. Our @Home service was
available only in portions of 68 geographic markets as of March 31, 1999 and may
not achieve broad consumer or commercial acceptance. Although approximately
2,200 primarily small- and medium-sized business organizations have agreed to
utilize
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@Work services as of March 31, 1999, 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
these pricing levels are not achieved or sustained or if our services do not
achieve or sustain broad market acceptance, our business, operating results and
financial condition will be significantly harmed. We may never achieve favorable
operating results or profitability.
GROWTH OF THE @HOME SERVICE MAY BE INHIBITED BY FACTORS BEYOND OUR CONTROL
As of March 31, 1999, we had in excess of 460,000 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 depend
on many factors which are beyond our control. For instance, some of our cable
partners have not achieved the subscriber levels that we had originally
anticipated. Other factors include:
o the rate at which our current and future cable partners upgrade their
cable infrastructures for two-way data services
o our ability and the ability of our cable partners to coordinate timely
and effective marketing campaigns with the availability of cable
infrastructure upgrades
o the success of our cable partners in marketing and installing the
@Home service in their local cable areas
o the prices that our cable partners set for the @Home service and for
its installation
o the speed at which our cable partners can complete the installations
required to initiate service for new subscribers
o the commercial availability of self-installable, two-way modems that
comply with the recently adopted interface standards known as DOCSIS,
and the success of our roll-out of these products with the @Home
service
o the quality of customer and technical support provided by us and our
cable partners and
o the quality of content on the @Home service.
WE NEED TO ADD SUBSCRIBERS AT A RAPID RATE FOR OUR BUSINESS TO SUCCEED, BUT WE
MAY NOT ACHIEVE OUR SUBSCRIBER GROWTH GOALS
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
enough to meet 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 in the past does not necessarily indicate the rate at
which subscribers may be expected to grow in the future. In particular, while we
have forecast that our number of subscribers could grow to over 1.1 million by
December 31, 1999 from more than 460,000 subscribers at March 31, 1999, we may
not achieve this level of subscriber growth.
OUR SUBSCRIBER GROWTH DEPENDS ON THE ACTIONS OF OUR CABLE PARTNERS, AND IS
LIMITED BY PRICE AND INSTALLATION CONSTRAINTS
We believe subscriber growth has been constrained, and will continue to be
constrained, by the cost and 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 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.
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IF WE CANNOT MAINTAIN THE SCALABILITY, SPEED AND SECURITY OF OUR NETWORK,
CUSTOMERS WILL NOT ACCEPT OUR SERVICES
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 unknown. Therefore, we face risks related to our
network's ability to be scaled up to its expected subscriber levels while
maintaining superior performance. Our 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 our network has experienced some
deterioration in some markets as a result of subscriber abuse of the @Home
service. While we seek to eliminate this 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 bulk unsolicited e-mail, 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.
IF NEW TWO-WAY CABLE MODEMS ARE NOT DEPLOYED TIMELY AND SUCCESSFULLY, WE MAY NOT
BE ABLE TO GROW OUR SUBSCRIBER BASE AS QUICKLY
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 interface standards known as DOCSIS for hardware and software
to support the delivery of data services over the cable infrastructure utilizing
compatible cable modems. Some 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. Cable modems that are
DOCSIS-compliant are not expected to be available in significant quantities
until at least the second quarter of 1999. If our cable partners are not able to
obtain a sufficient quantity of DOCSIS-compliant modems, our growth will be
limited.
WE COULD LOSE SUBSCRIBERS, DISTRIBUTION RELATIONSHIPS AND REVENUES TO OUR
COMPETITORS
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 in these markets include the following:
o Providers of cable-based Internet services. For example, Time Warner
Inc. and Media One Group have deployed high-speed Internet access
services over their local cable networks through their own cable-based
Internet service, Road Runner. We currently compete with Road Runner
to establish distribution arrangements with cable system operators,
but we may compete for subscribers in the future if and when our cable
partners cease to be subject to their exclusivity obligations.
o Telecommunications providers. We compete with national long-distance
and local exchange carriers that offer high-speed, Internet access
services such as integrated services digital network and asymmetric
digital subscriber line. If the advanced services offered by these
companies are deregulated, this would further enhance the ability of
these companies to compete against our services.
o Internet and online service providers. We compete with Internet
service providers that provide basic Internet access services and with
online service providers such as America Online.
o Internet content aggregators. 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,
including America Online, Yahoo! Inc. and Lycos, Inc.
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 more resources
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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 our subscriber base, our ability
to renew and enter into new distribution agreements and our revenues.
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 that
we require, for example as a result of natural disaster, or operational
disruption, could cause interruptions in the services we provide. Any damage or
failure that causes interruptions in our operations could harm our business.
YEAR 2000 ISSUES COULD AFFECT THE PERFORMANCE OF OUR SYSTEMS
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. We may also experience supplier-related Year 2000 problems. To
address these Year 2000 issues, we and TCI, our majority stockholder, have
initiated a comprehensive program to address Year 2000 readiness in our systems
and with our customers' and suppliers' systems. Although we currently expect
that the Year 2000 issue will not pose significant operational problems, delays
in the implementation of new information systems or failure to fully identify
all Year 2000 dependencies in our existing systems and in the systems of our
suppliers could harm our business. Therefore, we are developing, but do not yet
have, contingency plans for continuing operations in the event these problems
arise.
OUR LIMITED EXPERIENCE WITH INTERNATIONAL EXPANSION MAY PREVENT US FROM GROWING
OUR BUSINESS OUTSIDE THE UNITED STATES
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, we face specific risks
related to providing Internet services in foreign jurisdictions, including:
o regulatory requirements, including the regulation of Internet access
o legal uncertainty regarding liability for information retrieved and
replicated in foreign jurisdictions and
o potential inability to use European customer information due to new
European governmental regulations.
OUR BUSINESS MAY BE IMPACTED BY CABLE UNBUNDLING PROPOSALS AND OTHER GOVERNMENT
REGULATION
Currently, our services are not directly subject to regulations of the
Federal Communication Commission or any other federal, state or local
communications regulatory agency. However, changes in the regulatory environment
relating to the Internet, cable or telecommunications markets which could
require regulatory compliance by us or which could impact our exclusivity
arrangements, subscribers and revenues could develop, including:
o Federal regulation. Regulatory changes that affect telecommunications
costs, limit usage of subscriber-related information or increase
competition from 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.
o Regulation by local franchise authorities. 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 local franchise agreements, and to pay franchise fees under
those agreements. Local franchise authorities may
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attempt to subject cable systems to higher or different franchise
fees, taxes or requirements in connection with their distribution of
the @Home service. There are thousands of franchise authorities, and
it would be difficult or impossible for us or our cable partners to
operate under a unified set of franchise requirements.
o The FCC or local agencies could require our cable partners to grant
our competitors access to their cable systems. 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 their cable systems.
If we or our cable partners are classified as common carriers of
Internet services, or if the FCC otherwise requires third-party access
to their cable infrastructures, Internet and online service providers
could provide services over our cable partners' systems that compete
with our services. Our cable partners could also be subject to tariffs
for the amounts they could charge for our services. Also, in local
government proceedings, Portland and Multnomah County, Oregon have
imposed third-party access requirements on TCI as a condition of its
merger with AT&T, and other municipalities such as Los Angeles are
considering imposing similar requirements.
WE COULD FACE LIABILITY FOR DEFAMATORY OR INDECENT CONTENT
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 this liability are currently pending. In addition, legislation has
been proposed that imposes liability for or prohibits the transmission over the
Internet of indecent content. 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 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, some 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.
RISKS RELATED TO OUR RELATIONSHIPS WITH OUR CABLE PARTNERS
Our agreements with our cable partners are complex. For a summary of some
of the key aspects of these agreements, you should refer to our annual report on
Form 10-K.
WE DEPEND ON OUR CABLE PARTNERS TO UPGRADE TO THE TWO-WAY CABLE INFRASTRUCTURE
NECESSARY TO SUPPORT THE @HOME SERVICE; THE AVAILABILITY AND TIMING OF THESE
UPGRADES ARE UNCERTAIN
Transmission of the @Home service and cable-based @Work services depends on
the availability of high-speed two-way hybrid fiber coaxial cable
infrastructure. However, only a portion of existing cable plant in the United
States and in some international markets has been upgraded to two-way hybrid
fiber coaxial cable, and even less is capable of high-speed two-way
transmission. As of March 31, 1999, approximately 25% of our North American
cable partners' cable infrastructure is capable of delivering the @Home service.
Our cable partners have announced and begun to implement major infrastructure
investments in order to deploy two-way hybrid fiber coaxial cable. However,
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 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. Also, the exclusivity
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<PAGE> 12
obligations of our principal cable partners, TCI, Comcast, Cox and Cablevision,
expire on June 4, 2002, and may be terminated sooner under some circumstances,
including:
o Our principal cable partners may terminate all their exclusivity
obligations upon a change in law that materially impairs some of their
rights.
o 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 12 months in the incumbent TCI directors no
longer constituting a majority of TCI's board. AT&T, TCI, Comcast and
Cox have agreed, however, that AT&T's acquisition of TCI did not
constitute a change of control under the terms of the original
agreement.
o Cox or Comcast may terminate the exclusivity provisions of our
principal cable partners if AT&T and its affiliates do not meet @Home
subscriber penetration levels. On June 4, 1999, we expect that Cox
will have this right, but Cox has agreed to waive this right for 1999
so long as our stockholders approve proposed governance changes prior
to July 22, 1999.
o Comcast may terminate its own exclusivity obligations after June 4,
1999 if it allows us to repurchase a portion of Comcast's equity
interest in us. 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.
If the exclusivity obligations of our cable partners are terminated, this
could significantly harm our business and cause an immediate drop in our stock
price.
WE ARE CONTROLLED BY TCI AND AT&T
TCI, which recently merged with AT&T, controls approximately 71% of our
voting power and currently 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 ten directors are
directors, officers or employees of TCI or its affiliates, including AT&T. Under
our current corporate governance structure, 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 the 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. After our 1999 annual stockholders meeting, if the proposed
governance changes are adopted, TCI will no longer have the ability to expand
the board and fill vacancies, and approval of at least 75%, or four of the five,
of our Series B directors will be required for most board actions. As a result
of the proposed governing changes we will not be able to take any corporate
actions without the approval of TCI's Series B directors and one, or in some
cases both, of the directors designated by Comcast and Cox. Notwithstanding
these provisions, all of our directors owe fiduciary duties to our stockholders.
AT&T now owns TCI and therefore controls 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.
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 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
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<PAGE> 13
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.
WE MAY FACE ADDITIONAL COMPETITION FROM AT&T
AT&T operates businesses that could compete with our services,
notwithstanding any exclusivity obligations that may apply to it due to its
ownership of TCI. First, AT&T operates a consumer Internet service known as AT&T
WorldNet. Although AT&T WorldNet is currently a telephone 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. AT&T may take actions that
benefit TCG, WorldNet or other services of AT&T or other parties to our
detriment.
WARRANTS ISSUED TO OUR CABLE PARTNERS MAY RESULT IN ADDITIONAL DILUTION TO OUR
STOCKHOLDERS
We have entered into agreements with Cablevision Systems Corporation,
Rogers, Shaw and other cable partners under warrants to purchase a total of
23,106,722 shares of our Series A common stock were outstanding as of March 31,
1999. Under these agreements, warrants to purchase 10,431,590 shares of our
Series A common stock at an average price of $0.76 per share were exercisable as
of March 31, 1999. To the extent that these cable partners become eligible to
and choose to exercise their warrants, our stockholders would experience
substantial dilution. We also may issue additional stock, or warrants to
purchase stock, at prices less than fair market value in connection with efforts
to expand distribution of the @Home service.
ADDITIONAL RISKS ASSOCIATED WITH OUR ACQUISITION OF EXCITE AND EXCITE'S
BUSINESS
WE FACE SEVERAL TRANSITORY RISKS ASSOCIATED WITH OUR ACQUISITION OF EXCITE
In January 1999, we agreed to acquire Excite, Inc., a global Internet media
company. This acquisition is subject to several conditions, including approval
by both companies' stockholders. In addition to the risks associated with
Excite's business generally, this acquisition presents the following risks:
o Our pro forma accounting for the merger may 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
operating results.
o We may encounter substantial difficulties, costs and delays associated
with integrating the operations of our companies. This process may
disrupt our business if not completed in a timely and efficient
manner.
o The present and potential relationships of us and Excite with
sponsors, content providers, advertisers, users and subscribers may be
harmed by the proposed merger.
o We and Excite may lose the right to use intellectual property or other
contractual rights if we or Excite cannot obtain third party consent,
waiver or approval of the proposed merger where required under
existing agreements.
o The merger may result in conflicts associated with exclusive rights
that both we and Excite have granted to third parties with regard to
content, sponsorship or other strategic relationships, and failure to
resolve these conflicts could harm our business.
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<PAGE> 14
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 MAY NO LONGER RECEIVE REVENUES AND USERS FROM NETCENTER
In April 1998, Excite entered into a two-year agreement with Netscape to
provide, host and sell advertising for co-branded content channels, a co-branded
Web search service and a co-branded Web directory service to be offered on
Netscape's Netcenter online service. In April 1999, Excite announced that it had
notified Netscape that it intends to terminate the agreement due to the
acquisition of Netscape by American Online, a competitor of Excite. As a result,
unless the parties renegotiate this agreement or enter into a new agreement,
this agreement will terminate during the second quarter of 1999. If this
agreement is terminated, Excite's revenues could be harmed if it does not
successfully generate new revenues to replace the revenues it was receiving
under this agreement.
EXCITE COULD LOSE USERS, ADVERTISERS AND REVENUES TO ITS COMPETITORS
Excite competes with a number of companies both for users and advertisers,
and therefore for revenues. Excite expects this competition will intensify,
particularly because there are few barriers to entry in Excite's market.
Excite's competitors include:
o Web portal companies such as Infoseek's Go Network, Lycos, Netscape's
Netcenter and Yahoo!
o online service providers such as America Online and Microsoft's MSN
service
o 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 and
o providers of Web-based advertising solutions, including AdForce,
advertising management software, including NetGravity, Inc.,
advertising supported content and traditional advertising media.
EXCITE DEPENDS ON SPONSORSHIP AGREEMENTS FOR REVENUES
Excite derived approximately 25% of its 1998 advertising 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, its business would be harmed.
EXCITE DEPENDS ON SEVERAL THIRD PARTY RELATIONSHIPS FOR USERS, ADVERTISERS AND
REVENUES
Excite depends on a number of third party relationships to provide users
and content for its services, including agreements for links to Excite's
services to be placed on high-traffic Web sites and agreements for third parties
to provide content, games and e-mail for Excite's Web sites. If these
relationships terminate and Excite is not able to replace them, it could lose
users or advertisers, and this could harm Excite's revenues.
PRIVACY CONCERNS REGARDING THE USAGE OF DEMOGRAPHIC INFORMATION COULD PREVENT US
AND EXCITE FROM BENEFITING FROM SELLING TARGETED ADVERTISING
Due to privacy concerns regarding the usage of demographic information in
online advertising, some commentators and governmental bodies have suggested
limitations on technology that we and Excite use to deliver targeted advertising
and compile demographic information about users. Any reduction or limitation in
the use of this technology could result in lower advertising rates.
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<PAGE> 15
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 steps to protect these technologies, and Excite believes that others will
follow. Therefore, Excite believes that disputes regarding the ownership of
these technologies are likely to arise in the future. Excite may not be able to
defend any litigation successfully. Even if successful, defending litigation may
be costly and may divert management resources.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the periods indicated is
as follows (in thousands):
<TABLE>
<CAPTION>
Period from
March 28, 1995
(inception) to Year ended December 31, Three months ended
December 31, 1995 1996 1997 1998 March 31, 1999
----------------- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C>
Deficiency of earnings available
to cover fixed charges .......... $ (2,756) $ (24,513) $ (55,717) $ (144,179) $(18,124)
</TABLE>
These computations include us and our consolidated subsidiaries. Earnings
consist of net loss plus fixed charges. Fixed charges consist of interest
expense, including amortization of debt issuance costs, and that portion of
rental expense we believe to be representative of interest.
USE OF PROCEEDS
We will not receive any proceeds from sales of debentures or Series A
common stock by the selling securityholders under this prospectus. On December
28, 1998, we received approximately $222.4 million from the sale of our
debentures to the initial purchasers of the debentures, after deducting expenses
and the initial purchaser's discount. 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.
DIVIDEND POLICY
We have never paid any cash dividends on our stock. We anticipate that we
will continue to retain any earnings for use in the operation of our business
and we do not currently intend to pay dividends.
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<PAGE> 16
DESCRIPTION OF DEBENTURES
The debentures were issued under an indenture dated December 28, 1998,
between us and State Street Bank and Trust Company of California, N.A., as
trustee. This section is only a summary of the provisions of the debentures and
the indenture and the related registration rights agreement and is not complete.
You should refer to these documents for more detailed information. Wherever we
refer to particular provisions or defined terms of the indenture, we also
incorporate these provisions or defined terms into this prospectus by reference.
The terms we, our, us, the company and At Home in this section refer solely to
At Home and not to our subsidiaries.
GENERAL
We issued $437,000,000 aggregate principal amount at maturity of the
debentures in a December 1998 private placement. The principal amount at
maturity of each debenture is $1,000. The debentures will be payable at the
office of the paying agent, which initially will be the trustee, or an office or
agency that we maintain for this purpose in the Borough of Manhattan, City of
New York. The debentures will mature on December 28, 2018.
The debentures were initially issued at a price of $524.64 per $1,000
principal amount at maturity. Original issue discount will be periodically
includable in your gross income for United States federal income tax purposes.
See "United States Federal Income Tax Considerations--Interest and original
issue discount." The debentures will bear interest at the rate of .5246% per
year on the principal amount due at maturity, and will be payable semiannually
commencing on June 28, 1999.
State Street Bank and Trust Company of California, N.A., is the trustee,
registrar, paying agent and conversion agent under the indenture.
FORM, DENOMINATION AND REGISTRATION
General. The debentures were issued in registered book-entry form, without
coupons, in denominations of $1,000 principal amount at maturity and integral
multiples of $1,000. There is no service charge for any registration of transfer
or exchange of debentures, but we may require a holder of debentures to pay for
any tax, assessment or other governmental charge payable in connection with the
transfer.
The debentures that are sold under this prospectus will be represented by
one or more global debentures without coupons. The global debentures will be
deposited with a custodian for and registered in the name of a nominee of DTC in
New York, New York.
Ownership interests in global debentures. Purchasers of debentures under
this prospectus may hold their interests in a global debenture directly through
DTC if they are participants in DTC. Purchasers who are not DTC participants may
own interests in global debentures only through DTC participants or specified
parties that clear through or maintain a custodial relationship with a DTC
participant. So long as DTC, or its nominee, is the registered owner or holder
of a global debenture, DTC or the nominee will be considered the sole owner or
holder of the debentures represented by the global debenture. DTC or its
participants will be responsible for recording beneficial ownership interests in
the global debentures.
DTC has advised us that it will only take actions on the debentures that
you would be permitted to take, including presentation of the debentures for
exchange, to the extent that you direct it to do so, and then only with regards
to your ownership interests.
Transfer of ownership interests. Transfers between participants in DTC will
be made according to DTC rules and will be settled in same-day funds. The
ability of a person holding a beneficial interest in a global note to transfer
or pledge its interest to persons or entities who are not DTC participants may
be restricted in states that require persons to take physical delivery of
securities in definitive form, since debentures will only be delivered in
certificated form in the limited circumstances described below.
Exchange for certificated debentures. Any beneficial interest in global
debentures may be exchanged for certificated debentures by following the
procedures described in the indenture.
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<PAGE> 17
Payments on global debentures. Payments on global debentures will be made
to DTC or its nominee. Neither we, the trustee nor any paying agent will have
any responsibility or liability for payments made to beneficial ownership
interests in the global debentures or for maintaining, supervising or reviewing
any records relating to these beneficial ownership interests. We expect DTC to
credit participants' accounts on the payment date with payments in amounts
proportional to their beneficial interests in the global note, unless it has
reason to believe that it will not receive payment. Also, we expect that any
payment by a DTC participant to a non-participants who holds beneficial
interests in a global debenture through that participant will be governed by
standing instructions and customary practices. However, the participants will be
responsible for these payments.
SUBORDINATION OF THE DEBENTURES
Subordination. The debentures are subordinated to all existing and future
senior debt. Senior debt includes indebtedness for borrowed money, obligations
for outstanding bonds, debentures, notes or similar instruments and obligations
assumed in connection with acquisitions.
The debentures are also effectively subordinated to all existing and future
liabilities of our subsidiaries. Any right we have to receive assets of a
subsidiary upon its liquidation or reorganization, and therefore your right to
participate in those assets, will be subject to the claims of that subsidiary's
creditors. Even if we are recognized as a creditor of the subsidiary, our claims
would still rank below any security interests in the assets of the subsidiary
and any debt of that subsidiary that is senior to our debt.
Effects upon liquidation or bankruptcy. Because of this subordination, in
the event of our liquidation, dissolution or other winding up, or insolvency or
bankruptcy, we will repay the senior debt before we make any payments on the
debentures. If you or the trustee receive any distribution before the senior
debt is paid in full, then you or the trustee must hold the distribution in
trust for the benefit of the senior debt holders to the extent necessary to pay
off all outstanding senior debt in full. As a result, other unsecured creditors,
who would recover less than holders of senior debt, may still recover more than
you.
Payment blockage periods. In addition, except for limited circumstances
defined in the indenture, the subordination provisions of the indenture prevent
us from making any payments on the debentures, or acquiring any debentures for
cash or property if:
o we fail to pay any amounts due on any designated senior debt beyond
the applicable grace period or
o any other default event occurs and continues under any designated
senior debt that permits its holders to accelerate the maturity of
that debt, and this default is either the subject of judicial
proceedings or we receive a written notice of this default.
However, we may resume making payments on the debentures:
o once the payment default is cured or waived or
o in the event of a default other than a payment default, as described
above, if 179 or more days pass after we receive notice of the
default, so long as the terms of the indenture otherwise permit the
payment or acquisition of the debentures at that time.
In addition, we may not make payments on any debentures that are declared
due and payable before their stated maturity due to a default event until the
earlier of:
o 120 days after the date of the acceleration or
o the payment in full of all senior debt,
but only if the payment is then otherwise permitted under the terms of the
indenture.
Recent amount of senior debt. As of April 30, 1999, we had approximately
$32.3 million in outstanding senior debt, and our subsidiaries had liabilities
of approximately $1.6 million. The indenture does not restrict us or our
15
<PAGE> 18
subsidiaries from incurring additional senior debt or other debt.
CONVERSION RIGHTS
You may convert each $1,000 principal amount of a debenture, or an integral
multiple of $1,000, into shares of Series A common stock at any time before the
close of business on December 28, 2018, unless previously redeemed or
repurchased. Initially, each $1,000 principal amount at maturity of a debenture
is convertible into 6.55 shares of our Series A common stock, subject to
adjustment as described below. On April 16, 1999, our board of directors
declared a two-for-one stock split on our common stock, subject to stockholder
approval at our 1999 annual stockholders meeting. Following the effective date
of this stock split, the conversion rate will be 13.10 shares of Series A common
stock per $1,000 principal amount at maturity of debentures. We will not issue
fractional shares. Instead, you will receive cash equal to the market value of
any fractional share of our Series A common stock to which you would be
entitled.
Method of conversion. You may convert a debenture by delivering the
debenture and a duly signed and completed notice of conversion to the conversion
agent, which is initially the trustee. You may also need to furnish appropriate
endorsements and transfer documents and pay any transfer or similar taxes. The
conversion date will be the date on which you fulfill these requirements.
Cash payments. We will not make any payment or other adjustment on
conversion for accrued cash interest or accrued original issue discount, except
for:
o cash in lieu of fractional shares to which you would otherwise be
entitled upon the conversion or
o accrued but unpaid cash interest upon your conversion of the
debentures concurrently with or after acceleration of the debentures
following a default event on the debentures.
Upon our delivery to you of the shares of Series A common stock into which the
debenture is convertible, our obligation to pay the principal amount at maturity
of the debenture, including accrued original issue discount and accrued cash
interest, will be deemed to be paid in full, rather than canceled, extinguished
or forfeited.
If you convert any debentures during the period from (but excluding) an
interest payment record date to (but excluding) the interest payment date, you
must provide us with funds equal to the interest we must pay on the interest
payment date on the principal amount you convert unless the debenture has been
called for redemption on a redemption date during this period. Except where this
payment is required, we will not pay any interest on converted debentures on any
interest payment date subsequent to the date of conversion. You will not be
entitled to receive dividends payable to holders of Series A common stock as of
any record time or date before the close of business on your conversion date.
Adjustment of conversion ratio. We will adjust the conversion rate if we:
o pay a dividend or make a distribution on our Series A common stock
payable in Series A common stock or other types of our capital stock
o subdivide, combine or reclassify our Series A common stock into a
different number of shares
o distribute rights, warrants or options to purchase, for a period of up
to 60 days after the record date of the distribution, Series A common
stock or securities convertible into Series A common stock to all
holders of Series A common stock, at a price per share less than the
average sale price of our Series A common stock at the time or
o distribute assets (other than designated cash dividends from net
earnings or earned surplus), debt securities, or rights, warrants or
options to purchase our securities other than those specified above to
all holders of Series A common stock.
The conversion rate is not required to be adjusted:
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<PAGE> 19
o until the current cumulative adjustments in the conversion rate amount
to at least 1.0% of the conversion rate
o for accrued original issue discount or accrued cash interest, at any
time during the terms of the debentures
o if you may participate in the transactions otherwise giving rise to an
adjustment on a basis and with notice that our board of directors
determines to be fair and appropriate or
o if we distribute assets, debt securities or rights, warrants or
options to purchase our securities, and the fair market value of this
distribution per share of Series A common stock exceeds or is less
than $1.00 below the average sale price per share of our Series A
common stock (instead of adjusting the conversion rate, you would
receive, upon conversion, both the shares of Series A common stock
into which the debenture is convertible and the distribution that you
would have received if you had converted the debenture immediately
prior to the record date for the distribution).
If specified tax events occur and we exercise our option to convert the
debentures to semiannual coupon debentures, you would receive the same number of
shares of Series A common stock upon conversion as if we had not exercised our
option to convert the debentures to semiannual coupon debentures.
If we are party to a consolidation, merger or binding share exchange or a
transfer of all or substantially all of our assets which is otherwise permitted
under the terms of the indenture, the right to convert a debenture into Series A
common stock may be changed into a right to convert it into the kind and amount
of securities, cash or other assets which the debenture holder would have
received if the holder had converted its debentures immediately prior to the
transaction.
If we make a taxable distribution to holders of Series A common stock which
results in an adjustment of the conversion rate or in which debenture holders
otherwise participate, or if we increase the conversion rate at our discretion,
the holders of the debentures may, in some circumstances, be deemed to have
received a distribution subject to United States federal income tax as a
dividend. See "United Stated Federal Income Tax Considerations--Constructive
dividend."
WE MAY REDEEM THE DEBENTURES ON AND AFTER DECEMBER 28, 2003
On and after December 28, 2003, we may redeem the debentures for cash at
any time, in whole or in part in integral multiples of $1,000 principal amount
at maturity. We must provide notice to you by mail at least 30 days (unless the
trustee approves shorter notice), but not more than 60 days, prior to the
redemption date.
The table below shows redemption prices of a debenture per $1,000 principal
amount at maturity on December 28, 2003, at each subsequent December 28 through
maturity on December 28, 2018. These redemption prices reflect the accrued
original issue discount calculated as of each date. The redemption price of a
debenture redeemed on a date other than December 28 would include the additional
original issue discount that had accrued since the preceding December 28.
<TABLE>
<CAPTION>
(1) (2) (3)
DEBENTURE ACCRUED ORIGINAL REDEMPTION
REDEMPTION DATE ISSUE PRICE ISSUE DISCOUNT PRICE (1)+(2)
----------------- ----------- --------------- -------------
<S> <C> <C> <C>
December 28, 2003...................... $ 524.64 $ 86.17 $610.81
December 28, 2004...................... 524.64 105.55 630.19
December 28, 2005...................... 524.64 125.71 650.35
December 28, 2006...................... 524.64 146.69 671.33
December 28, 2007...................... 524.64 168.51 693.15
December 28, 2008...................... 524.64 191.22 715.86
December 28, 2009...................... 524.64 214.84 739.48
December 28, 2010...................... 524.64 239.42 764.06
December 28, 2011...................... 524.64 264.99 789.63
December 28, 2012...................... 524.64 291.59 816.23
</TABLE>
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<PAGE> 20
<TABLE>
<S> <C> <C> <C>
December 28, 2013...................... 524.64 319.27 843.91
December 28, 2014...................... 524.64 348.06 872.70
December 28, 2015...................... 524.64 378.02 902.66
December 28, 2016...................... 524.64 409.19 933.83
December 28, 2017...................... 524.64 441.62 966.26
At stated maturity..................... 524.64 475.36 1,000.00
</TABLE>
If specified tax events occur and we exercise our option to convert the
debentures to semiannual coupon debentures, the debentures will be redeemable at
the restated principal amount (as defined below) plus interest that has accrued
since the date of conversion. If we do not redeem all of the debentures at once,
the trustee will select which debentures shall be redeemed by a method which the
trustee considers fair and appropriate.
YOU MAY REQUIRE US TO REPURCHASE THE DEBENTURES AS OF SPECIFIED PURCHASE DATES
You may require us to purchase all or some of your debentures on December
28, 2003, December 28, 2008 and December 28, 2013 at the purchase price below
for each purchase date, plus cash interest that has accrued to the purchase
date. Each purchase price equals the issue price plus original issue discount
accrued as of the respective purchase date. If specified tax events occur and we
exercise our option to convert the debentures to semiannual coupon debentures
prior to a purchase date, the purchase price for that purchase date will equal
the restated principal amount plus cash interest accrued as of the conversion to
semiannual coupon debentures.
<TABLE>
<CAPTION>
PURCHASE DATE PURCHASE PRICE
-------------- --------------
<S> <C>
December 28, 2003 $ 610.81
December 28, 2008 $ 715.86
December 28, 2013 $ 843.91
</TABLE>
Payment in shares of Series A common stock. We may elect to pay the
purchase price in cash or in shares of Series A common stock, or a combination,
at our option. If we elect to pay any part of the purchase price in shares of
Series A common stock, the number of shares that you will receive will be
calculated by dividing the specified percentage of the purchase price by the
market price of a share of Series A common stock. You should refer to the
indenture for calculation of the market price. Because the market price of the
Series A common stock is determined prior to the purchase date, you bear the
market risk with respect to the value of the Series A common stock that you
would receive from the date the market price is determined to the purchase date.
We will not issue fractional shares. Instead, you will receive cash equal to the
market value of any fractional share of our Series A common stock to which you
would be entitled. Each holder who exercises this option will receive the same
percentage of cash or Series A common stock in payment of the purchase price for
the debentures.
Notice requirements. We will give you notice at least 20 business days
prior to each purchase date at your address shown in the register of the
registrar. This notice will state whether we will pay the purchase price of the
debentures in cash, Series A common stock, or a combination, and the procedures
that you must follow to exercise this option. Once we provide this notice, we
cannot change the form of payment (unless we fail to satisfy the conditions
required to allow us to pay in shares of Series A common stock, in which case we
must pay in cash).
If you wish to exercise this option, you must provide written notice to the
paying agent (or an office or agency maintained by us for this purpose in the
Borough of Manhattan, City of New York) within 20 business days prior to the
relevant purchase date. You may withdraw this purchase notice in writing prior
to the purchase date.
Delivery requirement. We will pay the purchase price for your debentures on
the later of the purchase date or promptly following the business day after the
day that you deliver your debenture to the paying agent (or an office or agency
maintained by us for this purpose in the Borough of Manhattan, City of New
York). Delivery of the debenture is a condition to our payment of the purchase
price. If you have given notice that you intend to exercise this option but have
not delivered your debenture to the paying agent as of the purchase date, then
as long as the paying agent has sufficient cash or securities to pay the
purchase price, cash interest and original issue discount will cease to accrue
and will be deemed paid, and all rights except the right to receive payment will
terminate, immediately after the purchase date.
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Limitations on this option. We cannot repurchase your debentures, even if
you have exercised this option, if a default event has occurred and is
continuing. See "Default events" and "Risk Factors - We may not be able to pay
off the debentures in the future."
YOU MAY REQUIRE US TO REPURCHASE THE DEBENTURES UPON A CHANGE OF CONTROL OF AT
HOME
If a change in control of At Home occurs on or prior to December 28, 2003,
you will generally have the option to require us to repurchase all or some of
your debentures on the date 30 business days after the change of control at a
change in control purchase price, in cash, equal to the issue price plus
original issue discount and cash interest that has accrued to the repurchase
date. If specified tax events occurred and we had converted the debentures to
semiannual coupon debentures prior to the change of control, we will be required
to repurchase the debentures at a cash price equal to the restated principal
amount plus accrued and unpaid interest from the date of the conversion to the
repurchase date.
Definition of change of control. A change in control of At Home will
generally be deemed to have occurred if:
o any person other than a person or entity affiliated with AT&T or TCI,
as defined in further detail in the indenture, and excluding
acquisitions by us, a subsidiary of ours or any of our employee
benefit plans, files a Schedule 13D or 14D-1 under the Exchange Act
disclosing that the person has become the beneficial owner of 50% or
more of the total voting power of our outstanding capital stock
o we have consolidated or merged with another entity, and in this
transaction our Series A common stock would be converted into cash,
securities or other property, except for transactions of this type in
which our stockholders immediately prior to the transaction own a
majority of total voting power of the surviving corporation or
o we enter into a transaction in which all or substantially all of our
Series A common stock will be exchanged for consideration other than
common stock that is listed on a United States national securities
exchange or approved for listing on the Nasdaq National Market, or
rights to acquire common stock of this type.
We may enter into some transactions, including recapitalizations, that would not
constitute a change in control under the indenture, but that would increase the
amount of our senior debt.
Notice requirements. We will provide you with notice of the change of
control within 15 business days of its occurrence. To exercise your option, you
must deliver written notice to the paying agent (or an office or agency
maintained by us for this purpose in the Borough of Manhattan, City of New York)
within 30 business days after the change of control. You may withdraw this
change in control purchase notice in writing prior to the repurchase date.
Delivery requirement. We will pay the change in control purchase price for
your debentures on the later of 30 business days after the change of control or
after you deliver your debenture to the paying agent (or an office or agency
maintained by us for this purpose in the Borough of Manhattan, City of New
York). Delivery of the debenture is a condition to our payment of the change in
control purchase price. If you have given notice that you intend to exercise
this option but have not delivered your debenture to the paying agent as of the
repurchase date, then as long as the paying agent has sufficient cash or
securities to pay the change in control purchase price, cash interest and
original issue discount will cease to accrue and will be deemed paid, and all
rights except the right to receive payment will terminate, immediately after the
repurchase date.
Regulatory requirements. We will comply with the provisions of Rule 13e-4,
Rule 14e-1 and any other tender offer rules under the Exchange Act which apply,
and we will file Schedule 13E-4 or any other schedule required under the
Exchange Act in connection with any offer by us to repurchase your debentures if
you exercise this option.
Limitations on this option. We cannot repurchase your debentures, even if
you have exercised this option, if a default event has occurred and is
continuing. See "Default events" and "Risk Factors - We may not be able to pay
off the debentures in the future."
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WE MAY CONVERT THE DEBENTURES TO SEMIANNUAL COUPON DEBENTURES UPON SPECIFIED TAX
EVENTS
If a specified tax event occurs, we will have the option to elect to have
cash interest accrue and be payable at 4% per year on a restated principal
amount per debenture in lieu of future original issue discount and the cash
interest provided for under the indenture. This interest would accrue from the
date on which we exercise this option and would be payable semiannually. Our
exercise of this option could alter the timing of income recognition by holders
of the debentures with respect to these semiannual interest payments. For the
purposes of this option:
o the restated principal amount would equal the issue price of the
debenture plus original issue discount accrued to the later of the
date immediately prior to the tax event or the date on which we
exercise this option and
o a tax event means that we shall have received an opinion from
independent tax counsel that, on or after December 21, 1998, as a
result of any change in the laws of the United States or underlying
regulations, the laws or regulations of any political subdivision or
taxing authority or interpretation of these laws or regulations by any
legislative body, court, governmental agency or regulatory authority,
there is more than an insubstantial risk that we could not deduct
interest or original issue discount payable on the debentures on a
current accrual basis or under any other method for United States
federal income tax purposes.
President Clinton's fiscal year 1998 budget proposed a series of tax law
changes that would have, if enacted and if they applied to the debentures,
prevented us from deducting interest and original issue discount payable on the
debentures on a current accrual basis and some or all of the interest and
original issue discount under any other method for United States federal income
tax purposes. This proposal was not adopted by Congress and was not part of the
Taxpayer Relief Act of 1997. A similar proposal was included in President
Clinton's fiscal year 1999 budget proposal introduced in February 1998 but was
not adopted by Congress and was not part of the Internal Revenue Services
Restructuring and Reform Bill of 1998 or the Tax and Trade Relief Extension Act
of 1998. If a similar proposal were ever enacted and made applicable to the
debentures, this would result in a tax event and we would obtain the option
described above.
WE MAY CONSOLIDATE, MERGE OR SELL OUR ASSETS WITHOUT YOUR CONSENT
We may consolidate with, merge into, transfer or lease all or substantially
all of our assets to any person or entity without the consent of the holders of
the debentures if specified conditions are satisfied, including:
o the other person is an entity organized and existing under the laws of
a United States jurisdiction and expressly assumes our obligations on
the debentures and under the indenture and
o immediately after this transaction, no default event, and no event
which, after notice or lapse of time or both, would become a default
event, is continuing.
DEFAULT EVENTS
Default events. The indenture defines a default event as:
o our failure to pay principal, accrued cash interest (if the default
continues for 31 days) or original issue discount or other amounts due
on the debentures, whether or not payment is prohibited by the
subordination provisions of the debentures and the indenture
o our failure to deliver shares of Series A common stock when required
upon conversion of a debenture, and failure to remedy this within 10
days after the required delivery date
o our failure to comply with any other agreement in the debentures or
the indenture, after we receive notice of default from the trustee or
holders of at least 25% of the aggregate principal amount at maturity
of the debentures then outstanding, and our failure to cure this
failure within 90 days after we receive the notice
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o default on any debt in excess of $10,000,000 which results in that
debt being accelerated, without this debt being discharged or the
acceleration being rescinded or annulled within 20 days after we
receive notice of default from the trustee or at least of the
aggregate principal amount at maturity of debentures then outstanding
or
o designated events of bankruptcy or insolvency.
Notice. Within 90 days after a default event, the trustee will mail notice
of all defaults of which it is aware to the debenture holders, unless these
defaults have been cured or waived prior to the mailing. However, the trustee
may elect to withhold notice of a default (other than a payment default) if the
trustee determines in good faith that this is in the interests of the debenture
holders.
Remedies upon default events. If a default event occurs and continues, the
trustee or the holders of at least 25% in principal amount at maturity of the
debentures outstanding may declare the debentures to be due and payable
immediately. If we experience bankruptcy or insolvency, the debentures
automatically become immediately due and payable. If our obligations under the
debentures have accelerated, we cannot make any payment until the earlier of our
payment in full of all outstanding senior debt or 120 days after the
acceleration, subject to limited exceptions.
Trustee. Generally, the trustee will be under no obligation to exercise any
right or power under the indenture or otherwise incur financial liability unless
the debenture holders have offered reasonable indemnity against loss, liability
or expense that is satisfactory to the trustee. We are required to furnish the
trustee with an annual statement of our defaults under the indenture, and we
must give the trustee 5 business days notice of any default.
Requirements to pursue remedies. Before any debenture holder may pursue any
remedy with respect to the debentures or the indenture, the following conditions
must be satisfied:
o the debenture holder wishing to pursue a remedy must give the trustee
written notice of a continuing default event
o the holders of at least 25% in aggregate principal amount at maturity
of the outstanding debentures must make a written request to the
trustee to pursue the remedy
o the debenture holder(s) wishing to pursue the remedy must have offered
the trustee reasonable security or indemnity against any loss,
liability or expense satisfactory to the trustee
o the trustee has not instituted the proceeding requested by the
debenture holders within 60 days after it receives the notice and
o the holders of a majority in aggregate principal amount at maturity of
the outstanding debentures not have given the trustee instructions
that are different from the original request.
However, notwithstanding these requirements, the rights of each debenture holder
to receive their principal, premium and interest on the debentures, to convert
their debentures into Series A common stock or to bring suit to enforce either
of these rights will not be impaired without each debenture holder's consent.
Waiver. The holders of a majority in aggregate principal amount at maturity
of the debentures outstanding may waive past defaults and their consequences,
except for:
o payment defaults on the debentures
o defaults on the conversion rights of the debentures or
o defaults on designated provisions in the indenture that may not be
modified without the consent of the individual debenture holder
affected.
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AMENDMENT OF THE INDENTURE OR DEBENTURES
Limited modifications, including curing ambiguities, omissions or defects
or making other changes that do not harm the debenture holders, may be made
without the consent of the debenture holders. However, generally, neither we nor
the trustee may amend the indenture or the debentures without the consent of
holders of a majority in aggregate principal amount at maturity of the
debentures. In addition, the following amendments require the consent of each
debenture holder affected by the modification:
o reduce the principal, original issue discount or cash interest due on
the debentures, extend the stated maturity of the debentures or change
the form of consideration in which the debentures are payable
o reduce the principal amount of debentures whose holders must consent
to an amendment or waiver under the indenture or modify the indenture
provisions relating to amendments or waivers
o make any change that harms the right to convert any debenture or any
option to require us to purchase a debenture
o modify the subordination provisions of the indenture in a manner
adverse to the debenture holders or
o impair the right to sue to enforce any payment on or conversion of the
debentures.
In addition, any amendment that would harm the rights of senior debt holders
requires the consent of the senior debt holders under the terms of the relevant
senior debt.
DISCHARGE OF THE INDENTURE
Our obligations under the indenture will be discharged if:
o all outstanding debentures are delivered to the trustee for
cancellation or
o if we deliver cash or Series A common stock sufficient to pay off all
outstanding debentures and sums due under the indenture with the
trustee, the paying agent or the conversion agent after the debentures
have become due and payable.
NO RECOURSE AGAINST OTHERS
The indenture provides that a director, officer, employee or stockholder of
At Home shall not have any liability for any of our obligations under the
debentures or the indenture or claims based on these obligations.
DESTRUCTION, LOSS OR THEFT OF DEBENTURES
In case one of your debentures becomes mutilated, defaced, destroyed, lost
or stolen, we will execute and upon our request the trustee will authenticate
and deliver a new debenture with the same maturity and date of issuance, an
equal principal amount at maturity, registered in the same manner and dated the
date of its authentication. You must provide us with evidence that you owned the
debenture and evidence of its destruction, loss or theft. You must also provide
us and the trustee with a security or indemnity for the substituted debenture.
You may have to pay for fees and expenses for issuing the substituted debenture.
REGISTRATION RIGHTS
We entered into a registration rights agreement with the initial purchasers
of the debentures. If you sell debentures or Series A common stock issued upon
conversion of the debentures under this registration statement, you generally
will be required to be named as a selling security holder in this prospectus,
deliver this prospectus to purchasers and be bound by applicable provisions of
the registration rights agreement, including some indemnification provisions.
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In this agreement, we agreed to file a registration statement that includes
this prospectus with the Securities and Exchange Commission by March 29, 1999.
We agreed to use all reasonable efforts to cause this registration statement to
become effective as promptly as practicable, but before June 28, 1999. We agreed
to keep this registration statement effective until either all of the securities
registered under this registration statement are sold, or the holding period
applicable to the debentures and underlying shares of our Series A common stock
held by non-affiliates under Rule 144(k) under the Securities Act expires. We
may suspend the use of this prospectus under limited circumstances, including
pending corporate developments or public filings with the Securities and
Exchange Commission, for a period not to exceed 45 days in any 3-month period
and 90 days in any 12-month period. We also agreed to pay liquidated damages to
holders of debentures and shares of Series A common stock issued upon conversion
of the debentures if the registration statement is not timely filed or made
effective or if the prospectus is unavailable for the periods in excess of those
permitted above. You should refer to the indenture for a description of these
liquidated damages.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of some United States federal income tax
considerations relevant to holders of debentures. This summary is based upon the
Internal Revenue Code of 1986, as amended, Treasury Regulations, Internal
Revenue Service rulings and judicial decisions now in effect, all of which are
subject to change (possibly with retroactive effect) or different
interpretations. The Internal Revenue Service could challenge one or more of the
conclusions described in this prospectus, and we have not obtained, nor do we
intend to obtain, a ruling from the Internal Revenue Service with respect to the
United States federal income tax consequences of acquiring or holding
debentures. This discussion does not purport to deal with all aspects of United
States federal income taxation that may be relevant to a particular debenture
holder in light of the holder's circumstances (for example, persons subject to
the alternative minimum tax provisions of the Internal Revenue Code). Also, it
is not intended to be wholly applicable to all categories of investors, some of
which (such as dealers in securities, banks, insurance companies, tax-exempt
organizations, foreign persons and persons holding debentures as part of a
hedging or conversion transaction or straddle or other risk reduction
transaction) may be subject to special rules. The discussion also does not
discuss the tax consequences arising under the laws of any state, local or
foreign jurisdiction. In addition, this discussion is limited to persons who
will hold the debentures and common stock into which the debentures are
converted as "capital assets" within the meaning of Section 1221 of the Internal
Revenue Code.
PERSONS CONSIDERING THE PURCHASE, OWNERSHIP, CONVERSION OR OTHER
DISPOSITION OF DEBENTURES SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE
FEDERAL INCOME TAX CONSEQUENCES AND THE CONSEQUENCES ARISING UNDER THE LAWS OF
ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION.
INTEREST AND ORIGINAL ISSUE DISCOUNT
Holders of the debentures will be required to include payments of
"qualified stated interest" (as defined below) received thereon in taxable
income in accordance with their respective methods of accounting for federal
income tax purposes. In addition, the debentures will be issued with a
substantial amount of "original issue discount" for federal income tax purposes.
A debenture holder generally is required to include original issue discount in
gross income as it accrues, regardless of the holder's method of accounting for
federal income tax purposes. Accordingly, each holder will be required to
include amounts in gross income without regard to when the cash or other
payments to which this income is attributable are received.
The amount of original issue discount with respect to each debenture is an
amount equal to the excess of the "stated redemption price at maturity" of each
debenture over its issue price (the initial price at which a substantial number
of debentures are sold for money). The stated redemption price at maturity of
each debenture will include all cash payments including principal and interest,
required to be made on the debenture until maturity, other than "qualified
stated interest" payments. "Qualified stated interest" is stated interest that
is required to be paid at least annually during the term of the debenture.
Stated interest on the debentures will be treated as qualified stated interest.
A holder of a debenture must include in gross income for federal income tax
purposes the sum of the daily portions of original issue discount with respect
to the debenture for each day during the taxable year or portion of a taxable
year on which each holder holds the debenture ("accrued original issue
discount"). The daily portion is
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determined by allocating to each day of an accrual period a pro rata portion of
an amount equal to the adjusted issue price of the debenture at the beginning of
the accrual period multiplied by the yield to maturity of the debenture. The
accrual period of a debenture may be of any length and may vary in length over
the term of the debenture, provided that each accrual period is no longer than
one year and each scheduled payment of principal or interest occurs at the end
of an accrual period or on the first day of an accrual period. The adjusted
issue price of the debenture at the start of any accrual period is the issue
price of the debenture increased by the accrued original issue discount for each
prior accrual period. Under these rules, debenture holders will have to include
in gross income increasingly greater amounts of original issue discount in each
successive accrual period. Any amount included in income as original issue
discount will increase a holder's tax basis in the debenture.
If your purchase price for a debenture exceeds the "adjusted issue price"
(the sum of the issue price of the debenture and the aggregate amount of
original issue discount includable in the gross income of all holders of the
debenture for periods before your acquisition of the debenture reduced by the
amount of any payment previously made on the debenture other than a payment of
qualified stated interest, the excess (referred to as "acquisition premium") may
offset the amount of original issue discount otherwise includible in your
taxable income unless the purchase price also exceeds the sum of all amounts
payable on the debenture after the purchase date other than payments of
qualified stated interest, i.e., the debenture is purchased at a "premium." The
above described rules for inclusion in gross income of original issue discount
do not apply to holders who have purchased the debentures at a premium.
We will be required to furnish annually to the Internal Revenue Service and
to some noncorporate debenture holders information regarding the amount of the
original issue discount attributable to that year. For this purpose, we will use
a six-month accrual period which ends on the day in each calendar year
corresponding to the maturity day of the debenture or the date six months before
the maturity date.
MARKET DISCOUNT
The market discount rules discussed below will apply if, subject to a de
minimis exception, the "revised issue price" of the debenture exceeds your tax
basis in the debenture immediately after your acquisition of the debenture. The
revised issue price is the sum of the issue price of the debenture and the
aggregate amount of the original issue discount includible in the gross income
of all holders for periods before the acquisition of the bond by the taxpayer
(determined without regard to section 1272(a)(7) or (b)(4)) or, in the case of a
tax-exempt obligation, the aggregate amount of the original issue discount which
accrued in the manner provided by section 1272(a) (determined without regard to
paragraph (7) thereof) during periods before the acquisition of the bond by the
taxpayer.
If a debenture has market discount, then some or all of any gain realized
upon a subsequent disposition (including a sale or a taxable exchange) or
redemption at maturity of the debenture may be treated as ordinary income.
The amount of market discount treated as having accrued will be determined
either on a ratable basis, or if you so elect, on a constant interest method.
Upon any subsequent disposition (including a gift or redemption at maturity) of
the debenture (other than in connection with designated nonrecognition
transactions but not including conversion of the debenture), the lesser of the
gain on the disposition (or appreciation in the case of a gift) or the portion
of the market discount that accrued while the debenture was held by you will be
treated as ordinary interest income at the time of disposition.
In lieu of including accrued market discount in income at the time of
disposition, you may elect to include market discount in income currently.
Unless you so elect, you may be required to defer a portion of any interest
expense that may otherwise be deductible on any indebtedness incurred or
maintained to purchase or carry the debenture until you dispose of the
debenture. The election to include market discount in income currently, once
made, is irrevocable and applies to all market discount obligations acquired on
or after the first day of the first taxable year to which the election applies
and may not be revoked without the consent of the IRS.
A Department of Treasury legislative proposal would require accrual basis
taxpayers to include market discount in income as it accrues. The holder's yield
for purposes of determining and accruing market discount would be limited to the
greater of (1) the original yield-to-maturity of the debt instrument plus 5
percentage points, or (2) the
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applicable Federal rate at the time the holder acquired the debt instrument plus
5 percentage points. The proposal would be effective for debt instruments
acquired on or after the date of enactment.
Gain on the disposition (including a redemption) of a debenture that has
accrued market discount is treated as ordinary income, and not as capital gain,
to the extent of the accrued market discount
BOND PREMIUM
Generally the holder of a debenture has bond premium if the holder's basis
in the debenture (reduced by, in the case of a convertible debenture, the value
attributable to the conversion feature of the debenture) exceeds the stated
redemption price on maturity of the debenture. If the holder elects, an
allocable portion of the bond premium may be used to offset interest income on
the debenture. Pursuant to Treasury Regulations, the value of the conversion
feature may be determined under any reasonable method.
DISPOSITION OR CONVERSION
Except as described below, gain or loss upon a sale or other disposition of
a debenture will generally be capital gain or loss (which will be long term if
the debenture is held for more than one year). Net capital gains of individuals
are, under some circumstances, taxed at lower rates than items of ordinary
income. In the case of individuals, long-term capital gains with respect to
property held for more than one year are taxed at a maximum 20% federal tax
rate. Net capital gain of corporations is taxed the same as ordinary income,
with a maximum federal tax rate of 35%.
A holder's conversion of a debenture into Series A common stock is
generally not a taxable event (except with respect to cash received in lieu of a
fractional share). The holder's obligation to include in gross income the daily
portions of original issue discount with respect to a debenture will terminate
prospectively on the date of conversion. The holder's basis in the common stock
received on conversion of a debenture will be the same as the holder's basis in
the debenture at the time of conversion (exclusive of any tax basis allocable to
a fractional share), and the holding period for the common stock received on
conversion will include the holding period of the debenture converted (assuming
each is held as a capital asset), except that the holder's holding period for
common stock treated as received for accrued original issue discount may
commence on the day following the date of conversion.
If a holder elects to exercise its option to tender a debenture to us on a
purchase date and we issue Series A common stock in satisfaction of all or part
of the purchase price, the exchange of the debenture for Series A common stock
should qualify as a reorganization or an otherwise nontaxable transaction for
federal income tax purposes. If the purchase price is paid solely in Series A
common stock, neither gain nor loss would generally be recognized by the holder,
except as described below with respect to a fractional share. If the purchase
price is paid in a combination of shares of Series A common stock and cash
(other than cash received in lieu of a fractional share), gain (but not loss)
realized by the holder would be recognized, but only to the extent the gain does
not exceed the cash. A holder's tax basis in the Series A common stock received
in the exchange will be the same as the holder's tax basis in the debenture
tendered to us in exchange therefor (exclusive of any tax basis allocable to a
fractional share interest as described below), decreased by the amount of cash
(other than cash received in lieu of a fractional share), if any, received in
exchange and increased by the amount of any gain recognized by the holder on the
exchange (other than gain with respect to a fractional share). The holding
period for Series A common stock received in the exchange will include the
holding period for the debenture tendered to us in exchange therefor (assuming
each is held as a capital asset), except that the holding period for Series A
common stock treated as received for accrued original issue discount may
commence on the day following the purchase date.
Cash received in lieu of a fractional share of Series A common stock upon
conversion of a debenture or upon a put of a debenture to us on a purchase date
should be treated as a payment in exchange for the fractional share.
Accordingly, if the Series A common stock is a capital asset in the hands of a
debenture holder, the receipt of cash in lieu of a fractional share of Series A
common stock should generally result in capital gain or loss, if any, measured
by the difference between the cash received for the fractional share and the
holder's basis in the fractional share.
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If a debenture holder elects to exercise its option to tender a debenture
to us on a purchase date or a change in control purchase date and we deliver
cash in satisfaction of the purchase price, the holder would recognize gain or
loss, measured by the difference between the amount of cash transferred by us to
the holder and the holder's basis in the tendered debenture. Gain or loss
recognized by the holder would generally be capital gain or loss.
If a holder sells a debenture in the market, it will be a taxable sale with
the same results to the holder as a tender to us with a payment in cash.
Gain or loss upon a sale or other disposition of the Series A common stock
received upon conversion of a debenture or in satisfaction of the purchase price
of a debenture put to us generally will be capital gain or loss if the Series A
common stock is held as a capital asset (which gain or loss will be long-term if
the holding period for the common stock is more than one year). In the case of
individuals, long-term capital gains with respect to property held for more than
one year are taxed at a maximum 20% federal tax rate. Net capital gain of
corporations is taxed the same as ordinary income, with a maximum federal tax
rate of 35%.
CONSTRUCTIVE DIVIDEND
If at any time we make a distribution of property to our stockholders that
would be taxable to the stockholders as a dividend for United States federal
income tax purposes and, in accordance with the anti-dilution provisions of the
debentures, the conversion rate of the debentures is increased, the increase may
be deemed to be the payment of a taxable dividend to holders of the debentures.
For example, an increase in the conversion rate in the event of distributions of
evidences of indebtedness or assets of us or an increase in the event of an
extraordinary cash dividend will generally result in deemed dividend treatment
to holders of the debentures, but generally an increase in the event of stock
dividends or the distribution of rights to subscribe for common stock will not.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Information reporting will apply to payments of interest or dividends, if
any, made by us on, or the proceeds of the sale or other disposition of, the
debentures or shares of Series A common stock with respect to some noncorporate
debenture holders, and backup withholding at a rate of 31% may apply unless the
recipient of the payment supplies a taxpayer identification number, certified
under penalties of perjury, as well as designated other information or otherwise
establishes an exemption from backup withholding. Any amount withheld under the
backup withholding rules will be allowable as a credit against the holder's
federal income tax, provided that the required information is provided to the
Internal Revenue Service.
TAX EVENT
Our modification of the terms of the debentures upon designated tax events,
as described in "Description of Debentures-- We may convert the debentures to
semiannual coupon debentures upon specified tax events," could possibly alter
the timing of income recognition by the holders of the debentures with respect
to the semiannual payments of interest due on the debentures after the option
exercise date.
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<PAGE> 29
SELLING SECURITYHOLDERS
The following table presents information with respect to the selling
securityholders and the principal amounts of debentures and shares of our Series
A common stock issuable upon the conversion of these debentures that they may
offer under this prospectus. The term selling securityholders includes donees
and pledgees selling securities received from a named selling securityholder
after the date of this prospectus. The debentures were originally issued by us
and sold by an initial purchaser, in a transaction exempt from the registration
requirements of the Securities Act, to qualified institutional buyers. To our
knowledge, none of the selling securityholders 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 principal amounts of debentures provided in the table below is based on
information provided to us by each of the selling securityholders as of April
30, 1999, and the percentages are based on $437,000,000 principal amount at
maturity of debentures outstanding. The number of shares of Series A common
stock that may be sold is calculated based on the current conversion ratio of
6.55 shares of Series A common stock per $1,000 principal amount at maturity of
a debenture, and does not reflect the two-for-one split of our Series A common
stock that our board of directors approved on April 16, 1999, which is subject
to stockholder approval at our 1999 annual stockholders meeting. Following the
effective date of this split, the conversion rate will be 13.10 shares of Series
A common stock per $1,000 principal amount at maturity of debentures. If each
selling securityholder named below converted all of its debentures, each would
own less than 1% of our outstanding Series A common stock, based on 107,705,907
shares of Series A common stock outstanding as of April 30, 1999.
Since the date on which each provided this information, each selling
securityholder identified below may have sold, transferred or otherwise disposed
of all or a portion of their debentures in a transaction exempt from the
registration requirements of the Securities Act. Information concerning the
selling security holders may change from time to time and any changed
information will be set forth in supplements to this prospectus to the extent
required. In addition, the conversion ratio, and therefore the number of shares
of our Series A common stock issuable upon conversion of the debentures, is
subject to adjustment. Accordingly, the number of shares of Series A common
stock issuable upon conversion of the debentures may increase or decrease.
The selling securityholders may from time to time offer and sell any or all
of the securities under this prospectus. Because the selling securityholders are
not obligated to sell the debentures or the Series A common stock issuable upon
the conversion of the debentures, we cannot estimate the amount of the
debentures or how many shares of our Series A common that each selling
securityholder will beneficially own after this offering.
<TABLE>
<CAPTION>
Principal amount of Percentage Number of shares of
debentures of Series A common
beneficially owned debentures stock that may be
Name that may be sold outstanding sold
- ---- ------------------- ----------- -------------------
<S> <C> <C> <C>
AIG/National Union Fire Insurance - FRIC........... $1,435,000 * 9,399
Alexandra Global Investment Fund I LTD............. $1,000,000 * 6,550
Aloha Airlines Non-Pilots Pension Trust............ $ 350,000 * 2,292
Aloha Airlines Pilots Retirement Trust............. $ 195,000 * 1,277
Alta Partners Holdings, LDC........................ $3,000,000 * 19,650
Angelo, Gordon & Co., L.P.......................... $1,500,000 * 9,825
Aristela International, Ltd........................ $1,500,000 * 9,825
Arpeggio Fund, LP.................................. $ 500,000 * 3,275
Associated Electric & Gas Insurance Services Ltd... $ 700,000 * 4,585
BancBoston Robertson Stephens...................... $ 250,000 * 1,637
Bancroft Convertible Fund, Inc..................... $ 500,000 * 3,275
Black Diamond Offshore, Ltd........................ $1,856,000 * 12,156
</TABLE>
27
<PAGE> 30
<TABLE>
<S> <C> <C> <C>
C&H Sugar Company.................................. $ 375,000 * 2,456
Calamos Convertible Fund........................... $1,500,000 * 9,825
Champion International Corporation Master
Retirement Plan................................. $ 900,000 * 5,895
City of Knoxville Pension System................... $ 745,000 * 4,880
David Lipscomb University General Endowment........ $ 85,000 * 557
Delaware PERS...................................... $2,740,000 * 17,947
Delta Airlines Master Trust........................ $2,000,000 * 13,100
Double Black Diamond Offshore LDC.................. $3,144,000 * 20,593
Dow Chemical Company Employees' Retirement Plan.... $1,800,000 * 11,790
Ellsworth Convertible Growth and Income Fund Inc... $ 500,000 * 3,275
Equitable Life Assurance Separate Account
Balanced........................................ $ 135,000 * 884
Equitable Life Assurance Separate Account
Convertibles.................................... $2,000,000 * 13,100
Fidelity Financial Trust........................... $1,050,000 * 6,877
The First Foundation............................... $ 325,000 * 2,129
GLG Market Neutral Fund............................ $5,000,000 * 32,750
GLG Trust Growth & Income Series................... $2,000,000 * 13,100
General Motors Employees Global Group Pension
Trust........................................... $8,160,000 * 53,448
General Motors Foundation.......................... $ 224,000 * 1,467
General Motors Insurance Corporation............... $1,616,000 * 10,585
Goldman Sachs & Co................................. $1,440,000 * 9,432
Gryphon Domestic III, LLC.......................... $2,000,000 * 13,100
HBK Cayman L.P..................................... $4,095,000 * 26,822
HBK Offshore Fund Ltd.............................. $7,605,000 1.7% 49,812
Hawaiian Airlines Employees Pension Plan - IAM..... $ 300,000 * 1,965
Hawaiian Airlines Pension Plan for Salaried
Employees....................................... $ 75,000 * 491
Hawaiian Airlines Pilots Retirement Plan........... $ 460,000 * 3,013
Hudson River Trust Balanced Account................ $1,575,000 * 10,316
Hudson River Trust Growth & Income Account......... $2,820,000 * 18,471
Hudson River Trust Growth Investors................ $1,325,000 * 8,679
ICI American Holdings Trust........................ $1,175,000 * 7,696
Investcorp SAM Fund Limited........................ $3,500,000 * 22,925
J.M. Hull Associates, L.P.......................... $ 200,000 * 1,310
JMG Convertible Investments, L.P................... $8,008,000 1.8% 52,452
</TABLE>
28
<PAGE> 31
<TABLE>
<S> <C> <C> <C>
Jackson Investment Fund Ltd........................ $ 6,352,000 1.5% 41,605
Julius Back Securities............................. $ 600,000 * 3,930
Kapiolani Medical Center........................... $ 650,000 * 4,257
MainStay VP Convertible Portfolio.................. $ 1,500,000 * 9,825
Memphis Light, Gas & Water Retirement Fund......... $ 1,340,000 * 8,777
MichaelAngelo L.P.................................. $ 6,750,000 1.5% 44,212
Morgan Stanley Dean Witter......................... $ 5,000,000 1.1% 32,750
Morgan Stanley Dean Witter Convertible Securities
Trust.............................................. $ 4,500,000 1.0% 29,475
Nalco Chemical Company............................. $600,000 * 3,930
NationsBanc Montgomery Securities.................. $ 4,000,000 * 26,200
Pell Rudman Trust Co............................... $ 1,075,000 * 7,041
Port Authority of Alleghany County Retirement
and Disability Allowance Plan................... $ 1,000,000 * 6,550
Putnam Advisory Company, Inc....................... $ 422,000 * 2,764
Putnam Investment Management, Inc.................. $ 4,132,000 * 27,065
Queens Health Plan................................. $ 120,000 * 786
R2 Investments, LDC................................ $18,900,000 4.3% 123,795
Ramius Fund Ltd.................................... $10,500,000 2.4% 68,775
Ramius, L.P........................................ $ 5,220,000 1.2% 34,191
Raphael, L.P....................................... $ 3,250,000 * 21,287
RCG Baldwin, L.P................................... $ 3,250,000 * 21,287
Rhapsody Fund, LP.................................. $ 500,000 * 3,275
SG Cowen Securities Corp........................... $10,000,000 2.3% 65,500
SPT................................................ $ 580,000 * 3,799
Salomon Smith Barney Inc........................... $ 492,000 * 3,222
Soundshore Holdings Ltd............................ $ 5,850,000 1.3% 38,318
Soundshore Opportunity Holding Fund Ltd............ $ 2,000,000 * 13,100
Southern Farm Bureau Life Insurance - FRIC......... $ 1,550,000 * 10,152
Starvest Combined Portfolio........................ $ 1,925,000 * 12,608
State of Oregon Equity............................. $13,500,000 3.1% 88,425
State of Oregon/SAIF Corporation................... $ 9,150,000 2.1% 59,932
Triarc Companies, Inc.............................. $ 780,000 * 5,109
Triton Capital Investments, Ltd.................... $12,907,000 3.0% 84,540
United Food and Commercial Workers Local 1262
and Employers Pension Fund...................... $ 400,000 * 2,620
Van Waters & Rogers, Inc. Retirement Plan.......... $ 550,000 * 3,602
Warburg Dillon Read................................ $ 1,695,000 * 11,102
Zeneca Holdings Trust.............................. $ 1,175,000 * 7,696
</TABLE>
29
<PAGE> 32
<TABLE>
<S> <C> <C> <C>
Other holders of debentures or future transferees of
these holders (**)................................. $212,622,000 48.65% 1,392,674
</TABLE>
- -------------------
* Less than 1%
** Assumes that any other holders of debentures, or any future transferees of
these holders, do not beneficially own any Series A common stock other than
the Series A common stock issuable upon conversion of the debentures at the
initial conversion rate.
PLAN OF DISTRIBUTION
The selling securityholders will be offering and selling all securities
offered and sold under this prospectus. We will not receive any of the proceeds
of the sales of these securities. In connection with this offering, we entered
into a registration rights agreement dated December 28, 1998 with the initial
purchasers of the debentures. Securities may only be offered or sold under this
prospectus pursuant to the terms of the registration rights agreement. However,
selling securityholders may resell all or a portion of the securities in open
market transactions in reliance upon Rule 144 or Rule 144A under the Securities
Act, provided they meet the criteria and conform to the requirements of one of
these rules.
Who may sell and applicable restrictions. The securities may be sold
directly by the selling securityholders from time to time. The selling
securityholders may decide not to sell any of the securities offered under this
prospectus, and selling stockholders could transfer, devise or gift these
securities by other means.
Alternatively, the selling securityholders may from time to time offer the
securities through brokers, dealers or agents that may receive compensation in
the form of discounts, concessions or commissions from the selling
securityholders and/or the purchasers of the securities for whom they may act as
agent. In effecting sales, broker-dealers that are engaged by the selling
securityholders may arrange for other broker-dealers to participate. The selling
securityholders and any brokers, dealers or agents who participate in the
distribution of the securities may be deemed to be underwriters, and any profits
on the sale of the securities by them and any discounts, commissions or
concessions received by any broker, dealer or agent might be deemed to be
underwriting discounts and commissions under the Securities Act. To the extent
the selling securityholders may be deemed to be underwriters, the selling
securityholders may be subject to statutory liabilities, including, but not
limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under
the Exchange Act.
Prospectus delivery. Because selling securityholders may be deemed to be
underwriters within the meaning of Section 2(11) of the Securities Act, they
will be subject to the prospectus delivery requirements of the Securities Act.
At any time a particular offer of the securities is made, a revised prospectus
or prospectus supplement, if required, will be distributed which will disclose:
o the name of the selling securityholder and of any participating
underwriters, broker-dealers or agents
o the aggregate amount and type of securities being offered
o the price at which the securities were sold and other material terms
of the offering
o any discounts, commissions, concessions and other items constituting
compensation from the selling securityholders and any discounts,
commissions or concessions allowed or reallowed or paid to dealers and
o that the participating broker-dealers did not conduct any
investigation to verify the information in this prospectus or
incorporated in this prospectus by reference.
The prospectus supplement or a 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 securities. In
30
<PAGE> 33
addition, if we receive notice from a selling securityholder that a donee or
pledgee intends to sell more than 500 shares of Series A common stock, a
supplement to this prospectus will be filed.
Manner of sales. The selling securityholders will act independently of the
company in making decisions with respect to the timing, manner and size of each
sale. Sales may be made over the Nasdaq National Market or the over-the-counter
market. The shares may be sold at then prevailing market prices, at prices
related to prevailing market prices, at fixed prices or at negotiated prices.
The securities may be sold according to one or more of the following
methods:
o a block trade in which the broker or dealer so engaged will attempt to
sell the securities as agent but may position and resell a portion of
the block as principal to facilitate the transaction
o purchases by a broker or dealer as principal and resale by the broker
or dealer for its account as allowed under this prospectus
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers
o an exchange distribution under the rules of the exchange
o face-to-face transactions between sellers and purchasers without a
broker-dealer and
o by writing options.
SOME PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES, INCLUDING
THE ENTRY OF STABILIZING BIDS OR SYNDICATE COVERING TRANSACTIONS OR THE
IMPOSITION OF PENALTY BIDS. The selling securityholders and any other person
participating in a distribution will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder including Regulation M.
This regulation may limit the timing of purchases and sales of any of the
securities by the selling securityholders and any other person. The
anti-manipulation rules under the Exchange Act may apply to sales of securities
in the market and to the activities of the selling securityholders and their
affiliates. Furthermore, Regulation M of the Exchange Act may restrict the
ability of any person engaged in the distribution of the securities to engage in
market-making activities with respect to the particular securities being
distributed for a period of up to five business days before the distribution.
All of the foregoing may affect the marketability of the securities and the
ability of any person or entity to engage in market-making activities with
respect to the securities.
Hedging and other transactions with broker-dealers. In connection with
distributions of the securities, the selling securityholders may enter into
hedging transactions with broker-dealers. In connection with these transactions,
broker-dealers may engage in short sales of the registered securities in the
course of hedging the positions they assume with selling securityholders. The
selling securityholders may also sell securities short and redeliver the
securities to close out short positions. The selling securityholders may also
enter into option or other transactions with broker-dealers which require the
delivery to the broker-dealer of the registered securities. The broker-dealer
may then resell or transfer these securities under this prospectus. A selling
stockholder may also loan or pledge the registered securities to a broker-dealer
and the broker-dealer may sell the securities so loaned or, upon a default, the
broker-dealer may effect sales of the pledged securities under this prospectus.
Expenses associated with registration. We have agreed to pay substantially
all of the expenses of registering the securities under the Securities Act and
of compliance with blue sky laws, including registration and filing fees,
printing and duplication expenses, administrative expenses, legal and accounting
fees, fees for one legal counsel retained by the selling securityholders and
fees of the trustee under the indenture pursuant to which we originally issued
the securities. If the debentures or the underlying Series A common stock are
sold through underwriters or broker-dealers, the selling securityholders will be
responsible for underwriting discounts, underwriting commissions and agent
commissions.
Indemnification and contribution. In the registration rights agreement, we
and the selling securityholders have agreed to indemnify or provide contribution
to each other and specified other persons against some liabilities in connection
with the offering of the securities, including liabilities arising under the
Securities Act. The selling
31
<PAGE> 34
securityholders may also agree to indemnify any broker-dealer or agent that
participates in transactions involving sales of the securities against some
liabilities, including liabilities arising under the Securities Act.
Suspension of this offering. We may suspend the use of this prospectus if
we learn of any event that causes this prospectus to include an untrue statement
of a material fact or omits to state a material fact required to be stated in
the prospectus or necessary to make the statements in the prospectus not
misleading in the light of the circumstances then existing. If this type of
event occurs, a prospectus supplement or post-effective amendment, if required,
will be distributed to each selling securityholder. Each selling securityholder
has agreed not to trade securities from the time the selling securityholder
receives notice from us of this type of event until the selling securityholder
receives a prospectus supplement or amendment. This time period will not to
exceed forty-five days in any three month period or ninety days in any twelve
month period.
Termination of this offering. Under the registration rights agreement, we
are obligated to use reasonable efforts to keep the registration statement
effective until December 28, 2000. Therefore, this offering will terminate on
the earlier of: (1) the expiration of this effectiveness period, or (2) the date
on which all securities offered under this prospectus have been sold by the
selling securityholders.
LEGAL MATTERS
The validity of the issuance of the shares of Series A common stock offered
by this prospectus will be passed upon for us by Fenwick & West LLP, Two Palo
Alto Square, Palo Alto, California 94306. The validity of the issuance of the
debentures offered under this prospectus will be passed upon for us by Winthrop
Stimson Putnam & Roberts, One Battery Park Plaza, New York, New York 10004-1490.
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 amended, 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.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act relating
to future events or financial results. These forward-looking statements include
statements indicating that we believe, we expect or we anticipate that events
may occur or 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 disclosed in "Risk Factors" and elsewhere in this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
The following documents that we have filed with the Securities and Exchange
Commission are incorporated into this prospectus by reference:
o the registration statement on Form S-3 of which this prospectus is a
part, and the exhibits filed the registration statement and
incorporated into the registration statement by reference
o our annual reports on Form 10-K for the fiscal year ended December 31,
1998, as amended on March 31, 1999 and on April 27, 1999
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<PAGE> 35
o the registration of our Series A common stock on Form 8-A filed on
June 13, 1997
o all other reports filed under 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
current report on Form 8-K filed on January 14, 1999, as amended on
February 19, 1999; (3) our two current reports on Form 8-K filed on
January 21, 1999; (4) our current report on Form 8-K filed on February
19, 1999; and (5) our current report on Form 8-K filed on April 8,
1999 and
o 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 after the date of this prospectus and before the
termination of this offering.
To the extent that any statement in this prospectus is inconsistent with
any statement that is incorporated by reference, the statement in this
prospectus shall control. The incorporated statement shall not be deemed, except
as modified or superceded, to constitute a part of this prospectus or the
registration statement.
Because we are subject to the informational requirements of the Securities
Exchange Act of 1934, 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 Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain copies of this
material from the Public Reference Section of the 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 Commission at 1-800-SEC-0330. The Commission also maintains a World
Wide Web site that contains reports, proxy and information statements and other
information that is filed electronically with the Commission. This web site can
be accessed at http://www.sec.gov.
We have filed with the Commission a registration statement on Form S-3
under the Securities Act with respect to the debentures and Series A common
stock offered under this prospectus. This prospectus does not contain all of the
information in the registration statement, parts of which we have omitted, as
allowed under the rules and regulations of the Commission. You should refer to
the registration statement for further information with respect to us, our
debentures and our Series A common stock. Statements contained in this
prospectus as to the contents of any contract or other document, including the
indenture and the registration rights agreement, are not necessarily complete
and, in each instance, we refer you to the copy of each contract or document
filed as an exhibit to the registration statement. Copies of the registration
statement, including exhibits, may be inspected without charge at the
Commission's principal office in Washington, D.C., and you may obtain copies
from this office upon payment of the fees prescribed by the Commission.
We will furnish without charge to each person to whom a copy of this
prospectus is delivered, upon written or oral request, a copy of the information
that has been incorporated by reference into this prospectus (except exhibits,
unless they are specifically incorporated by reference into this prospectus).
You should direct any requests for copies to At Home Corporation, 425 Broadway
Street, Redwood City, California 94063, Attention: David G. Pine, Vice President
and General Counsel, telephone: (650) 569-5000.
33
<PAGE> 36
================================================================================
AT HOME CORPORATION
$437,000,000 PRINCIPAL AMOUNT AT MATURITY
CONVERTIBLE SUBORDINATED DEBENTURES DUE 2018
SHARES OF SERIES A COMMON STOCK
ISSUABLE UPON CONVERSION OF THE DEBENTURES
--------------------
PROSPECTUS
--------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY
STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IS
ACCURATE AS OF ANY DATE OTHER THAN THE DATE OF THIS PROSPECTUS.
================================================================================
<PAGE> 37
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 $ 63,737
Nasdaq National Market filing fee 17,500
Accounting fees and expenses 10,000
Legal fees and expenses 30,000
Miscellaneous 3,763
---------
Total $ 125,000
=========
</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:
o for any breach of the director's duty of loyalty to the corporation or
its stockholders
o for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law
o under Section 174 of the Delaware General Corporation Law and
o 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:
o 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 this person
o 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 the
person may collect as indemnification from the other corporation,
partnership, joint venture, trust, enterprise or nonprofit entity
o 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 the
advances if indemnification is determined to be unavailable
o that the rights conferred in the Certificate of Incorporation are not
exclusive and
o that the Registrant may not retroactively amend the Certification of
Incorporation provisions relating to indemnity.
II-1
<PAGE> 38
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
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 the 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 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).
Under the following agreements related to the Registrant's acquisition of
Narrative Communications Corp., third parties have agreed to indemnify the
Registrant and its directors, officers and employees against some liabilities,
including losses by the Registrant and its directors, officers and employees
arising out of misrepresentations or breaches by Narrative regarding its
business, and some liabilities of the Registrant and its directors, officers and
employees arising under the Securities Act, the Exchange Act or other federal or
state laws:
DOCUMENT
1 Agreement and Plan of Merger 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 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 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 between the Registrant and Carlyle
Venture Coinvestment LLC (incorporated by reference to Exhibit 99.02 to the
Registrant's registration statement on Form S-3 filed with the Securities
and Exchange Commission on February 19, 1999).
5 Letter Agreement dated February 9, 1999 between the Registrant and Greylock
Equity Limited Partnership (incorporated by reference to Exhibit 99.03 to
the Registrant's registration statement on Form S-3 filed with the
Securities and Exchange Commission on February 19, 1999).
II-2
<PAGE> 39
ITEM 16. EXHIBITS.
The following exhibits are filed with this registration statement or
incorporated into this registration statement by reference:
EXHIBIT EXHIBIT
NUMBER TITLE
------ -------
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 Certificate of Amendment to Fourth Amended and Restated
Certificate of Incorporation of the Registrant filed July 9, 1998
(incorporated by reference to Exhibit 3.07 to the Registrant's
1998 annual report on Form 10-K/A filed with the Securities and
Exchange Commission on March 31, 1999).
3.03 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).
4.03 Indenture, dated December 28, 1998, between Registrant to State
Street Bank and Trust Company of California, N.A., as trustee
(incorporated by reference to Exhibit 10.38 to the Registrant's
1998 annual report on Form 10-K/A filed with the Securities and
Exchange Commission on March 31, 1999).
4.04 Registration Rights Agreement, dated December 28, 1998, between
Registrant and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated, Morgan Stanley & Co. Incorporated and
Goldman, Sachs & Co. (incorporated by reference to Exhibit 10.39
to the Registrant's 1998 annual report on Form 10-K/A filed with
the Securities and Exchange Commission on March 31, 1999).
5.01 Opinion of Fenwick & West LLP regarding the legality of the
shares of Series A common stock being registered.*
5.02 Opinion of Winthrop Stimson Putnam & Roberts regarding the
legality of the debentures being registered.*
11.01 Statement regarding the computation of the ratio of earnings to
fixed charges.
23.01 Consent of Fenwick & West LLP (included in Exhibit 5.01).*
23.02 Consent of Ernst & Young LLP, Independent Auditors.
24.01 Power of attorney (see pg. II-5 of this registration statement).
25.01 Form T-1 statement of eligibility of trustee for indenture under
the Trust Indenture Act of 1939.
II-3
<PAGE> 40
* To be filed by amendment.
ITEM 17. UNDERTAKINGS.
The Registrant undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(a) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(b) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement; and
(c) to include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to the information in the
registration statement;
provided, however, that paragraphs (1)(a) and (1)(b) above do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
with or furnished to the Commission by 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 post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered in the
registration statement, and the offering of the securities at that
time shall be deemed to be the initial bona fide offering of those
securities.
(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.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered in the
registration statement, and the offering of the securities at that
time shall be deemed to be the initial bona fide offering of those
securities.
(5) 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 discussed in Item
6 hereof, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission this indemnification
is against public policy as expressed in the Securities Act and is,
therefore, unenforceable. If a claim for indemnification against these
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 the director, officer or controlling person
in connection with the securities being registered under this
registration statement, 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
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of this
issue.
II-4
<PAGE> 41
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 14th day of May,
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 May 14, 1999
- ------------------------------------ Officer and Chairman of the Board
Thomas A. Jermoluk
PRINCIPAL FINANCIAL OFFICER:
/s/ KENNETH A. GOLDMAN Senior Vice President and May 14, 1999
- ------------------------------------ Chief Financial Officer
Kenneth A. Goldman
PRINCIPAL ACCOUNTING OFFICER:
/s/ ROBERT A. LERNER Corporate Controller May 14, 1999
- ------------------------------------
Robert A. Lerner
</TABLE>
II-5
<PAGE> 42
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
ADDITIONAL DIRECTORS:
/s/ WILLIAM R. HEARST III Vice Chairman May 14, 1999
- ------------------------------------
William R. Hearst III
/s/ C. MICHAEL ARMSTRONG Director May 14, 1999
- ------------------------------------
C. Michael Armstrong
/s/ L. JOHN DOERR Director May 14, 1999
- ------------------------------------
L. John Doerr
/s/ LEO J. HINDERY Director May 14, 1999
- ------------------------------------
Leo J. Hindery
/s/ JOHN C. MALONE Director May 14, 1999
- ------------------------------------
John C. Malone
/s/ JOHN C. PETRILLO Director May 14, 1999
- ------------------------------------
John C. Petrillo
/s/ BRIAN L. ROBERTS Director May 14, 1999
- ------------------------------------
Brian L. Roberts
/s/ JAMES R. SHAW Director May 14, 1999
- ------------------------------------
James R. Shaw
/s/ DAVID M. WOODROW Director May 14, 1999
- ------------------------------------
</TABLE>
II-6
<PAGE> 43
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------ -------------
<S> <C>
5.01 Opinion of Fenwick & West LLP regarding the legality of the shares of Series A common stock being
registered.*
5.02 Opinion of Winthrop Stimson Putnam & Roberts regarding the legality of the debentures being
registered.*
11.01 Statement regarding the computation of the ratio of earnings to fixed charges.
23.01 Consent of Fenwick & West LLP (included in Exhibit 5.01).*
23.02 Consent of Ernst & Young LLP, Independent Auditors.
24.01 Power of attorney (see pg. II-5 of this registration statement).
25.01 Form T-1 statement of eligibility of trustee for indenture under the Trust Indenture Act of 1939.
</TABLE>
- --------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 11.01
At Home
Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Period from March 28, 1995
(Inception) to Year ended December 31, Three months ended
December 31, 1995 1996 1997 1998 March 31,1999
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Loss $ (2,756) $ (24,513) $ (55,717) $(144,179) $ (18,124)
Plus fixed charges:
Interest expense including amortization of -- 179 1,205 1,356 2,296
debt issuance costs
Assumed interest element included in
rent expense 33 200 415 1,198 244
---------------------------------------------------------------------------------------
Adjusted (loss) (2,723) (24,134) (54,097) (141,625) (15,584)
Fixed charges 33 379 1,620 2,554 2,540
---------------------------------------------------------------------------------------
Deficiency of earnings available to
cover fixed charges $ (2,756) $ (24,513) $ (55,717) $(144,179) $ (18,124)
=======================================================================================
</TABLE>
<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 $437,000,000 principal amount at maturity convertible
subordinated debentures due 2018 and shares of Series A common stock issuable
upon conversion of the debentures and to the incorporation by reference therein
of our report dated January 19, 1999, with respect to the consolidated financial
statements, as amended, of At Home Corporation included in its Annual Report
(Form 10-K) for the year ended December 31, 1998, as amended, filed with the
Securities and Exchange Commission.
San Jose, California
May 12, 1999
<PAGE> 1
EXHIBIT 25.01
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
---------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2) [X]
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
United States 06-1143380
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
633 West 5th Street, 12th Floor, Los Angeles, California 90071
(Address of principal executive offices) (Zip Code)
Lynda A. Vogel, Senior Vice President and Managing Director
633 West 5th Street, 12th Floor, Los Angeles, California 90071
(213) 362-7399
(Name, address and telephone number of agent for service)
AT HOME CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 77-0408542
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
425 Broadway Street
Redwood, CA 94063
(Address of principal executive offices) (Zip Code)
Convertible Subordinated Debentures
(TYPE OF SECURITIES)
<PAGE> 2
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Comptroller of the Currency, Western District Office, 50
Fremont Street, Suite 3900, San Francisco, California,
94105-2292
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent,
State Street Bank and Trust Company.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as
Exhibits with corresponding exhibit numbers to the Form T-1 of Western
Digital Corporation, filed pursuant to Section 305(b)(2) of the Act, on
May 12, 1998 (Registration No. 333-52463), and are incorporated herein
by reference.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO
COMMENCE BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A Certificate of Corporate Existence (with fiduciary powers)
from the Comptroller of the Currency, Administrator of National Banks is
on file with the Securities and Exchange Commission as Exhibits with
corresponding exhibit numbers to the Form T-1 of Western Digital
Corporation, filed pursuant to Section 305(b)(2) of the Act, on May 12,
1998 (Registration No. 333-52463), and are incorporated herein by
reference.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS
SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
Authorization of the Trustee to exercise fiduciary powers
(included in Exhibits 1 and 2; no separate instrument).
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibits with
corresponding exhibit numbers to the Form T-1 of Western Digital
Corporation, filed pursuant to Section 305(b)(2) of the Act, on May 12,
1998 (Registration No. 333-52463), and are incorporated herein by
reference.
1
<PAGE> 3
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR
IS IN DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(b) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act
is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE
PUBLISHED PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR
EXAMINING AUTHORITY.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its supervising
or examining authority is annexed hereto as Exhibit 7 and made a
part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company of California,
National Association, organized and existing under the laws of the United States
of America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of Los
Angeles, and State of California, on the May 11, 1999.
STATE STREET BANK AND TRUST COMPANY
OF CALIFORNIA, NATIONAL ASSOCIATION
By: /S/ Mark Henson
-----------------------------------------
NAME: MARK HENSON
TITLE: ASSISTANT VICE PRESIDENT
2
<PAGE> 4
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by At Home
Corporation of its Convertible Subordinated Debentures, we hereby consent that
reports of examination by Federal, State, Territorial or District authorities
may be furnished by such authorities to the Securities and Exchange Commission
upon request therefor.
STATE STREET BANK AND TRUST COMPANY
OF CALIFORNIA, NATIONAL ASSOCIATION
By: /S/ Mark Henson
---------------------------------------
NAME: MARK HENSON
TITLE: ASSISTANT VICE PRESIDENT
DATED: MAY 11, 1999
3
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition and Income for A Bank With Domestic Offices
Only and Total Assets of Less Than $100 Million of State Street Bank and Trust
Company of California, a national banking association duly organized and
existing under and by virtue of the laws of the United States of America, at the
close of business March 31, 1999, published in accordance with a call made by
the Federal Deposit Insurance Corporation pursuant to the required law: 12
U.S.C. Section 324 (State member banks); 12 U.S.C. Section 1817 (State nonmember
banks); and 12 U.S.C. Section 161 (National banks).
<TABLE>
<CAPTION>
Thousands
of Dollars
------------
<S> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin .................... 6,881
Interest-bearing balances ............................................. 0
Securities ..................................................................... 38
Federal funds sold and securities purchased under agreements to resell in
domestic offices of the bank and its Edge subsidiary .................. 0
Loans and lease financing receivables:
Loans and leases, net of unearned income .............................. 0
Allowance for loan and lease losses ................................... 0
Allocated transfer risk reserve ....................................... 0
Loans and leases, net of unearned income and allowances ............... 0
Assets held in trading accounts ................................................ 0
Premises and fixed assets ...................................................... 41
Other real estate owned ........................................................ 0
Investments in unconsolidated subsidiaries ..................................... 0
Customers' liability to this bank on acceptances outstanding ................... 0
Intangible assets .............................................................. 0
Other assets ................................................................... 718
------------
Total assets ................................................................... 7,678
============
LIABILITIES
Deposits:
In domestic offices ................................................... 0
Noninterest-bearing .......................................... 0
Interest-bearing ............................................. 0
In foreign offices and Edge subsidiary ................................ 0
Noninterest-bearing .......................................... 0
Interest-bearing ............................................. 0
Federal funds purchased and securities sold under agreements to repurchase in
domestic offices of the bank and of its Edge subsidiary ............... 0
Demand notes issued to the U.S. Treasury and Trading Liabilities ............... 0
Other borrowed money ........................................................... 0
Subordinated notes and debentures .............................................. 0
Bank's liability on acceptances executed and outstanding ....................... 0
Other liabilities .............................................................. 3,370
Total liabilities .............................................................. 3,370
------------
EQUITY CAPITAL
Perpetual preferred stock and related surplus .................................. 0
Common stock ................................................................... 500
Surplus ........................................................................ 750
Undivided profits and capital reserves/Net unrealized holding gains (losses) ... 3,058
Cumulative foreign currency translation adjustments ............................ 0
Total equity capital ........................................................... 4,308
------------
Total liabilities and equity capital ........................................... 7,678
============
</TABLE>
4
<PAGE> 6
I, Kevin R. Wallace, Vice President and Comptroller of the above named bank do
hereby declare that this Report of Condition and Income for this report date
have been prepared in conformance with the instructions issued by the
appropriate Federal regulatory authority and is true to the best of my knowledge
and belief.
Kevin R. Wallace
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.
Lynda A. Vogel
James A. Quale
Stephen Rivero
5
