<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 8, 1999
REGISTRATION NO. 333-72669
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AT HOME CORPORATION
(EXACT NAME OF THE REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 77-0408542
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
</TABLE>
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:
<TABLE>
<S> <C>
GORDON K. DAVIDSON, ESQ. JANE D. GOLDSTEIN, ESQ.
WILLIAM R. SCHREIBER, ESQ. ROPES & GRAY
THOMAS J. HALL, ESQ. ONE INTERNATIONAL PLACE
FENWICK & WEST LLP BOSTON, MASSACHUSETTS 02110-2624
TWO PALO ALTO SQUARE (617) 951-7000
PALO ALTO, CALIFORNIA 94306
(650) 494-0600
</TABLE>
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. [ ]
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PROSPECTUS AT HOME LOGO
AT HOME CORPORATION
919,000 SHARES OF SERIES A COMMON STOCK
-------------------------
- - At Home's Series A common stock currently trades on the Nasdaq National
Market.
- - Last reported sale price on April 7, 1999: $165.8125 per share.
- - Trading Symbol: ATHM
-------------------------
THE OFFERING
- - All of the shares of Series A common stock offered in this prospectus are
being sold from time to time by the selling stockholders named on pages 29 and
30 of this prospectus. We will not receive any of the proceeds from the sale
of these shares.
- - We are not aware of any underwriting discounts or commissions in connection
with this offering.
-------------------------
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. PLEASE CAREFULLY CONSIDER THE
"RISK FACTORS" BEGINNING ON PAGE 6 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 April 8, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
<PAGE> 3
-------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary............... 3
Risk Factors..................... 6
Use of Proceeds.................. 28
Dividend Policy.................. 28
Selling Stockholders............. 29
Plan of Distribution............. 34
Where You Can Find More
Information.................... 37
Legal Matters.................... 38
Experts.......................... 38
</TABLE>
2
<PAGE> 4
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all the information you should
consider before buying shares in this offering. You should read the entire
prospectus carefully. Unless the context otherwise requires, the terms "we,"
"our," "us," "the company" and "At Home" refer to At Home Corporation, a
Delaware corporation.
THE COMPANY
We are the leading provider of broadband Internet services over the cable
television infrastructure to consumers. Our primary offering, the @Home
services, allows residential subscribers to connect their personal computers via
modems utilizing 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 infrastructure and
digital telecommunications lines.
@Home, @Home Network, @Media, @Work and the @ball logo are our trademarks
and we have registered them in certain jurisdictions. @Work Internet is our
service mark. This prospectus also includes trademarks of other companies.
RECENT EVENTS
Acquisition of Excite, Inc. On January 19, 1999, we agreed to acquire
Excite, Inc. and to issue shares of our Series A common stock, including shares
issuable upon the exercise of Excite options and warrants, valued at
approximately $7.1 billion at the time of the announcement of the acquisition.
Excite is a global Internet media company that attracts approximately 17 million
visitors monthly to its www.excite.com and www.webcrawler.com portal Web sites.
Excite is based in Redwood City, California. Under the merger agreement, we will
issue approximately 1.0419 shares of our Series A common stock in exchange for
each outstanding share of Excite common stock. As a result, assuming no exercise
of Excite or our outstanding options and warrants, former shareholders of Excite
will own approximately 30% of the outstanding shares of our Series A common
stock. The acquisition will be accounted for as a purchase and is expected to
close in the second quarter of 1999. Although our and Excite's boards of
directors have approved the transaction, the acquisition is subject to several
conditions, including approval by both companies' stockholders and the
expiration of applicable waiting periods under certain antitrust laws.
Therefore, there is a risk that the merger may not be consummated, and, even if
the merger is consummated, we will face challenges integrating Excite's business
with ours.
Backbone capacity contract with AT&T. On January 5, 1999, we announced that
we had entered an agreement with AT&T to create a nationwide Internet Protocol
network utilizing AT&T's backbone to cost-effectively support broadband services
throughout North America over the next 20 years. This new backbone facility,
which is scheduled to be deployed in mid-1999, represents a 100-fold increase in
our backbone capacity and initially will enable us to support up to five million
broadband users. AT&T will first provide us with 2 OC-48 channels, each with the
capacity to transport 2.5 gigabits per second of data,
3
<PAGE> 5
over a 15,000 mile optical network. The agreement provides for significant
expansion of capacity that allows us to take advantage of the rapid evolution of
data transport technology.
Accounting change for certain warrants. Following discussions with the
staff of the Securities and Exchange Commission, we have recorded as intangible
assets and are amortizing ratably over their remaining lives amounts which were
previously expensed in connection with our Cablevision distribution agreement.
We had recorded non-cash charges to operations of $172.6 million and $74.5
million in the fourth quarter of 1997 and the first quarter of 1998 related to
the agreement. We have reversed these previously expensed amounts and recorded
the entire $247.1 million as intangible assets, which are being amortized
ratably over their remaining lives. We will carry these intangible assets in our
financial statements at the lower of its amortized cost or fair value. These
adjustments to our financial statements for the year ended December 31, 1997 and
for the first three quarters of 1998 resulted in an increase to assets and
stockholders' equity at the end of each of these periods. The reversal of the
previously recorded charges to operations, less the amortization of the
intangible asset, resulted in a decrease to our previously reported net losses
for the fourth quarter of 1997 and the first quarter of 1998 and an increase in
the previously reported net losses for the second and third quarters of 1998.
Acquisition of Narrative Communications Corp. On December 30, 1998, we
acquired Narrative for approximately 1.3 million shares of Series A common
stock, including shares issuable upon the exercise of outstanding Narrative
options, valued at approximately $93.8 million. Narrative, a market leader in
rich media advertising and direct marketing solutions for the World Wide Web, is
based in Waltham, Massachusetts and has nearly 50 employees. Narrative had a net
loss of approximately $5.7 million on revenues of approximately $202,000 in 1997
and had a net loss of $5.8 million on revenues of approximately $621,000 through
December 30, 1998, the purchase date. The acquisition was accounted for as a
purchase, and approximately $92.4 million of the purchase price was allocated to
goodwill and other intangible assets and will be amortized over the respective
useful lives of those assets, estimated to be 3.5 years. The remainder of the
purchase price, $2.7 million, was charged to operations in the fourth quarter of
1998 as purchased in-process research and development.
Offering of convertible subordinated debentures. On December 28, 1998, we
issued $437.0 million of Convertible Subordinated Debentures in a private
offering within the United States to qualified institutional investors. The
issue price of each $1,000 debenture was $524.64, or 52.464% of principal amount
at maturity, and the effective annual interest rate on the debentures, excluding
amortization of the issuance cost, is approximately 4%. Each debenture is
convertible at the option of the holder at any time prior to maturity into 6.55
shares of our Series A common stock. The debentures mature on December 28, 2018,
and interest on the debentures at the rate of 0.5246% per year on the principal
amount due at maturity is payable semiannually commencing June 28, 1999. We
raised approximately $22.4 million of net proceeds from the offering. We intend
to use the net proceeds of the offering for general corporate purposes,
including working capital and capital expenditures, including those associated
with domestic and international expansion and additional backbone capacity. A
portion of the net proceeds also may be used to acquire or invest in
complementary businesses or products or to obtain the right to complementary
technologies.
4
<PAGE> 6
THE OFFERING
Each of the shares offered by this prospectus were originally issued by us
to the former stockholders of Narrative in connection with our acquisition of
Narrative. The shares of our Series A common stock offered by this prospectus
represent less than one percent of our outstanding shares of Series A common
stock as of the date of this prospectus. These shares are being offered on a
continuous basis pursuant to Rule 415 of the Securities Act of 1933 during the
period of time commencing on the effective date of the registration statement of
which this prospectus is a part and ending on December 30, 1999, or such other
date as specified in our rights agreement dated December 30, 1998 with the
Narrative stockholders.
<TABLE>
<S> <C>
Series A common stock that may be
offered by selling stockholders....... 919,000 shares
Series A common stock to be outstanding
after this offering................... 107,312,141 shares*
Series B common stock to be outstanding
after this offering................... 15,400,000 shares*
Series K common stock to be outstanding
after this offering................... 2,609,707 shares*
Use of proceeds......................... We will not receive any proceeds.
Nasdaq National Market symbol........... ATHM
</TABLE>
- -------------------------
* This figure is based on the number of shares outstanding as of March 31, 1999.
5
<PAGE> 7
RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should carefully consider the following risk factors and the other information
in this prospectus before investing in our common stock. Our business and
results of operations could be seriously harmed by any of the following risks.
The trading price of our common stock could decline due to any of these risks,
and you may lose all or part of your investment.
RISKS RELATED TO OUR BUSINESS
OUR BUSINESS IS UNPROVEN, AND WE MAY NOT ACHIEVE PROFITABILITY
We were incorporated in March 1995, commenced operations in August 1995,
and have incurred net losses from operations in each fiscal period since our
inception. As of December 31, 1998, we had an accumulated deficit of $227.2
million. In addition, we currently intend to increase capital expenditures and
operating expenses in order to expand our network and to market and provide our
services to a growing number of potential subscribers. As a result, we expect to
incur additional net losses before cost and amortization of distribution
agreements and amortization of goodwill and other intangible assets for at least
the next three quarters.
The profit potential of our business model is unproven. Our @Home service
was available only in portions of 59 geographic markets as of December 31, 1998
and may not achieve broad consumer or commercial acceptance. Although
approximately 2,053 primarily small- and medium-sized business organizations
have agreed to utilize @Work services as of December 31, 1998, our @Work
services may not achieve broad commercial acceptance and the current rate of
deployment for @Work services may not be sustained. We have difficulty
predicting whether the pricing models for our Internet services will prove to be
viable, whether demand for our Internet services will materialize at the prices
our cable partners charge for the @Home service or the prices we or our cable
partners charge for @Work services, or whether current or future pricing levels
will be sustainable. If 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 December 31, 1998, we had approximately 331,000 cable modem
subscribers, including recently acquired Internet subscribers that are being
converted to the @Home service. Our ability to increase the number of
subscribers to the @Home service to achieve our business plans and generate
future revenues will be dependent on a number of factors, many of which are
beyond our control. For instance, certain cable partners from time to time have
not achieved subscriber levels which we had originally anticipated. Other
factors include:
- the rate at which our current and future cable partners upgrade their
cable infrastructures
- our ability and the ability of our cable partners to coordinate timely
and effective marketing campaigns with the availability of cable
infrastructure upgrades
- the success of our cable partners in marketing and installing the @Home
service in their local cable areas
- the prices that our cable partners set for the @Home service and for its
installation
6
<PAGE> 8
- the speed at which our cable partners can complete the installations
required to initiate service for new subscribers
- the commercial availability of self-installable modems that are compliant
with the new data over cable services interface specification, DOCSIS,
and the success of our roll-out of these products with the @Home service
- the quality of customer and technical support provided by us and our
cable partners
- the quality of content on the @Home service
OUR SUBSCRIBER GROWTH DEPENDS ON THE ACTIONS OF OUR CABLE PARTNERS
We believe subscriber growth has been constrained, and will continue to be
constrained, by the cost and the amount of time required to install the @Home
service for each residential consumer. In addition, our growth has been
constrained by the rate at which our cable partners have upgraded their 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.
WE MAY NOT ACHIEVE EXPECTED SUBSCRIBER GROWTH
Our actual revenues or the rate at which we will add new subscribers may
differ from our forecasts. We may not be able to increase our subscriber base in
accordance with our internal forecasts or the forecasts of industry analysts or
to a level that meets the expectations of investors. The rate at which
subscribers have increased during 1998 does not necessarily indicate the rate at
which subscribers may be expected to increase in the future. In particular,
while we have recently forecast that our number of subscribers could grow to
over 1.1 million by December 31, 1999 from approximately 331,000 subscribers at
December 31, 1998, we may not achieve this level of subscriber growth.
FLUCTUATIONS IN OUR OPERATING RESULTS MAY HARM OUR BUSINESS AND STOCK PRICE
Our quarterly revenues and operating results are difficult to forecast even
in the short term. A significant portion of our expenses are fixed in advance
based in large part on future revenue forecasts. If revenue is below
expectations in any given quarter, the adverse impact of the shortfall on our
operating results may be magnified by our inability to adjust spending to
compensate for the shortfall. Moreover, our cable partners have complete
discretion regarding the pricing of the @Home service in their territories,
which could further impact our ability to generate revenue. A shortfall in
actual revenue compared to estimated or expected revenue could significantly
harm our business or stock price.
Our operating results may fluctuate significantly due to a variety of
factors, many of which are outside our control. Factors that may affect our
operating results attributable to the @Home service include:
- the timing of our cable partners' upgrades of their cable infrastructures
and roll-outs of the @Home service
- the rate at which customers subscribe to our Internet services and the
prices subscribers pay for these services, generally $35 - $50 per month
in the United States
7
<PAGE> 9
- changes in the revenue splits, generally 35% - 50% in the United States,
between us and our cable partners
- the demand for electronic commerce
- the effectiveness of our cable partners' marketing, installation and
other operations
Operating results attributable to our @Work services are dependent on:
- the demand for, and level of acceptance of, our corporate Internet,
intranet and extranet connectivity and telecommuting solutions
- the introduction of, demand for, and level of acceptance of, our
value-added business applications
- in part, the timing of our cable partners' upgrades of their cable
infrastructures
- the effectiveness of our cable partners' marketing and other operations
- competitive pressures, including pricing pressure and the availability of
competing technologies, in the market for business Internet services
- the creditworthiness of our @Work customers
Following discussions with the staff of the Securities and Exchange
Commission, we recently restated our financial statements for the year ended
December 31, 1997 and the first three quarters of 1998 to record as intangible
assets and amortize ratably over their useful lives amounts that were previously
expensed in connection with our Cablevision distribution agreement. Our
operating results have been and will continue to be adversely affected by
significant charges associated with warrants issued to current and potential
cable partners in connection with distribution agreements.
THE SCALABILITY, SPEED AND SECURITY OF OUR NETWORK IS UNPROVEN
Due to the limited deployment of our services, the ability of our network
to connect and manage a substantial number of online subscribers at high
transmission speeds is unknown. Therefore, we face risks related to our
network's ability to be scaled up to its expected subscriber levels while
maintaining superior performance. The network may be unable to achieve or
maintain a high speed of data transmission, especially as our subscribers
increase. In recent periods, the performance of the network has experienced some
deterioration in certain markets as a result of subscriber abuse of the @Home
service. While we seek to eliminate such abuse by limiting users' upstream
bandwidth, our failure to achieve or maintain high-speed data transmission would
significantly reduce consumer demand for our services. In addition, while we
have taken steps to prevent users from sharing files via the @Home service and
to protect against 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.
WE FACE CHALLENGES MANAGING OUR EXPANDED OPERATIONS AND WE DEPEND ON KEY
PERSONNEL
We may not be able to successfully manage any future periods of rapid
growth or expansion, which we expect to place a significant strain on our
managerial, operating, financial and other resources. From time to time, we and
our cable partners have had difficulty managing network operations and expansion
of backbone capacity and providing adequate customer service or efficient
provisioning of new subscribers. A prolonged failure to perform these functions
successfully would significantly inhibit subscriber growth and
8
<PAGE> 10
retention. We are highly dependent upon the efforts of our senior management
team, and our future performance will depend, in part, upon the ability of
senior management to manage growth effectively. This will require us:
- to implement additional management information systems capabilities
- to further develop our operating, administrative, financial and
accounting systems and controls
- to maintain close coordination among engineering, accounting, finance,
marketing, sales and operations
- to hire and train additional technical and marketing personnel
There is intense competition for senior management, technical and marketing
personnel in the areas of our activities. The loss of the services of any of our
senior management team or the failure to attract and retain additional key
employees could significantly harm our business. We maintain no key-person life
insurance.
WE DEPEND ON TWO-WAY CABLE MODEMS BASED UPON A NEW INDUSTRY STANDARD
Each of our subscribers currently must obtain a cable modem from a cable
partner to access the @Home service. The North American cable industry has
recently adopted a set of interface standards known as DOCSIS for hardware and
software to support the delivery of data services over the cable infrastructure
utilizing interoperable cable modems. Certain of our cable partners have chosen
to delay some deployments of the @Home service until the widespread commercial
availability of DOCSIS-compliant cable modems. Our subscriber growth could be
constrained and our business could be significantly harmed if our cable partners
choose to slow the deployment of the @Home service further. Cable modems that
are DOCSIS-compliant are not expected to be available in significant quantities
until at least the second quarter of 1999. Although multiple vendors are
expected to supply DOCSIS-compliant cable modems and their constituent
components, any cable partner's reliance on a single provider of these modems or
components could cause that cable partner to be unable to generate expected
subscriber growth for the @Home service if the supplier does not provide the
cable partner with a sufficient quantity of DOCSIS-compliant modems.
OUR MARKETS ARE HIGHLY COMPETITIVE
The markets for consumer and business Internet services and online content
are extremely competitive, and we expect that competition will intensify in the
future. Our most direct competitors in these markets are other providers of
cable-based Internet services, unaffiliated cable companies, national
long-distance and local exchange carriers, Internet and online service
providers, and Internet content aggregators.
We compete with other cable-based services. Our competitors in the
cable-based services market are those companies that have developed their own
cable-based services and market those services to unaffiliated cable system
operators that are planning to deploy data services. In particular, Time Warner
Inc. and MediaOne Group, which recently agreed to merge with our cable partner
Comcast Corporation, have deployed high-speed Internet access services over
their existing local HFC cable networks through their cable-based Internet
service, Road Runner. Road Runner features a variety of proprietary content from
Time Warner Publications. Time Warner's substantial libraries of multimedia
content could provide Road Runner with a significant competitive advantage. In
June 1998, Microsoft Corporation and Compaq Computer Corporation each invested
9
<PAGE> 11
$212.5 million in Road Runner and announced that Microsoft will provide software
for the Road Runner service and that Compaq will produce cable-ready personal
computers to be used with the service. Time Warner and MediaOne plan to market
the Road Runner service through their own cable systems as well as to other
cable system operators nationwide. Although we do not presently compete directly
with the Road Runner service for subscribers because Road Runner is offered over
different cable systems than those that carry the @Home service, we do compete
with the Road Runner service in seeking to establish distribution arrangements
with cable system operators. Furthermore, if and when our existing cable
partners cease to be subject to their exclusivity obligations, we may compete
with Road Runner and potentially other Internet service providers for
distribution over the cable systems of our cable partners. In addition, other
cable system operators, including Adelphia Communications Corporation, have
launched their own cable-based Internet services that could compete with our
services.
We also compete with other high-speed telecommunications technologies. Long
distance inter-exchange carriers, such as AT&T, MCI Worldcom and Sprint have
deployed large-scale Internet access networks and sell connectivity to business
and residential customers. The regional Bell operating companies and other local
exchange carriers have also entered this field and are providing price
competitive services. Many such carriers are offering diversified packages of
telecommunications services, including Internet access, to residential customers
and could bundle these services together, which could put us at a competitive
disadvantage. Many of these competitors are offering or may soon offer
technologies that will compete with some or all of our high-speed data service
offerings. These technologies include integrated services digital network (ISDN)
and asymmetric digital subscriber line (ADSL). In January 1998, technology
companies including Compaq, Intel and Microsoft together with numerous
telecommunications providers announced an initiative to develop a simplified
version of ADSL, referred to as ADSL Lite, which is intended to reduce the
complexity and expense of installing Internet services based on ADSL. Also, in
October 1998, the International Telecommunications Union adopted an ADSL
standard called GLite. Widespread commercial acceptance of ADSL technologies
could significantly reduce the potential subscriber base for our Internet
services, which could significantly harm our business.
We compete with other online services. We also compete with Internet
service providers that provide basic Internet access to residential consumers
and businesses, generally using existing telephone network infrastructures.
While not offering the advantages of broadband access, these services are widely
available and inexpensive. In addition, we compete with online service providers
such as America Online, Inc. that provide, over the Internet and on proprietary
online services, content and applications ranging from news and sports to
consumer videoconferencing. These services currently are designed for broad
consumer access over telecommunications-based transmission media, which enables
the provision of data services to the large group of consumers who have personal
computers with modems. America Online and Bell Atlantic have recently entered
into an agreement whereby America Online will offer its Internet services using
Bell Atlantic's advanced digital subscriber line infrastructure. Online service
providers also provide basic Internet connectivity, ease of use and consistency
of environment. In addition to developing their own content or supporting
proprietary third-party content developers, online services often establish
relationships with traditional broadcast and print media outlets to bundle their
content into the service.
We compete with content aggregators and Internet portals. Finally, we
compete with content aggregators and Internet portals that seek to capture
audience flow by providing
10
<PAGE> 12
ease-of-use and offering content that appeals to a broad audience. Leading
companies in this area include America Online, Yahoo! Inc. and Lycos, Inc. In
this market, competition affects existing and potential relationships with both
content providers and subscribers. The principal bases of competition in
attracting content providers include quality of demographics, audience size,
cost-effectiveness of the medium and ability to create differentiated
experiences using aggregator tools. The principal bases of competition in
attracting subscribers include richness and variety of content and ease of
access of the desired content. Many online service providers, such as America
Online, have the advantage of large customer bases, industry experience, many
content partnerships and significant resources.
Many of our competitors have more resources than we do. Many of our
competitors and potential competitors have substantially greater financial,
technical and marketing resources, larger subscriber bases, longer operating
histories, greater name recognition and more established relationships with
advertisers and content and application providers than we do. These competitors
may be able to undertake more extensive marketing campaigns, adopt more
aggressive pricing policies and devote substantially more resources to
developing Internet services or online content than we could. We may not be able
to compete successfully against current or future competitors, and competitive
pressures could significantly harm us. Further, as a strategic response to
changes in the competitive environment, we and our cable partners may make
pricing, service or marketing decisions or enter into acquisitions or new
ventures that could significantly harm us.
WE FACE CHALLENGES ASSOCIATED WITH OUR JOINT DEVELOPMENT EFFORT WITH TCI
We were selected by TCI to develop software and provide integration
services for TCI's next generation advanced digital set-top devices. Although we
believe this relationship could enable us to expand our product line and market
the @Home service to a broader audience of consumers who do not regularly use a
personal computer, the agreement does not require that TCI deploy the @Home
service on these set-top devices. In addition, we cannot predict when these
set-top devices will become commercially available. Notwithstanding our
agreement with TCI, we cannot deploy set-top device Internet services over the
cable infrastructure of TCI or our cable partners without their consent.
In addition to the technological, financial and infrastructure challenges
TCI faces in deploying the new set-top devices, the success of this development
effort is subject to:
- the technological and operational challenges of providing and supporting
email and other Internet services to set-top device users
- competition from alternative Internet service providers and deployment
technologies
- the degree to which consumers desire Internet services, including email,
on their televisions
Our cable partners can work with third parties to develop and deploy set-top
devices. Even if they do choose to work with us, our revenue split on any fees
generated from services deployed on these devices may differ from our revenue
split with respect to our current high-speed cable Internet services.
OUR DEPENDENCE ON OUR NETWORK EXPOSES US TO A SIGNIFICANT RISK OF SYSTEM FAILURE
Our operations are dependent upon our ability to support our highly complex
network infrastructure and avoid damage from fires, earthquakes, floods, power
losses, telecommu-
11
<PAGE> 13
nications 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.
WE MUST RESPOND TO RAPID TECHNOLOGICAL CHANGE
The markets for consumer and business Internet access services and online
content are characterized by rapid technological developments, frequent new
product introductions and evolving industry standards. The emerging nature of
these products and services and their rapid evolution will require that we
continually improve the performance, features and reliability of our network,
Internet content and consumer and business services, particularly in response to
competitive offerings. We may not be successful in responding quickly, cost
effectively and sufficiently to these developments. There may be a time-limited
market opportunity for our cable-based consumer and business Internet services,
and we may not be successful in achieving widespread acceptance of our services
before competitors offer products and services with speed and performance
similar to or better than our current offerings. In addition, the widespread
adoption of new Internet or telecommuting technologies or standards, cable-based
or otherwise, could require that we make substantial expenditures to modify or
adapt our network, products and services. This could fundamentally affect the
character, viability and frequency of Internet-based advertising and content
services. Finally, new Internet or telecommuting services or enhancements that
we offer may contain design flaws or other defects.
YEAR 2000 ISSUES COULD AFFECT OUR BUSINESS
If our internal and network information systems do not correctly recognize
and process date information beyond the year 1999, we may not be able to conduct
operations. To address these Year 2000 issues, we and our majority shareholder,
TCI, have initiated a comprehensive program to address Year 2000 readiness in
our systems and with our customers' and suppliers' systems. The program has been
designed to gather information regarding the Year 2000 compliance of products
and services that we require to deploy our residential and commercial Internet
services. Under the program, assessment and remediation are proceeding in
tandem, and we intend to have our critical systems in Year 2000 compliance by
June 30, 1999. These activities encompass all major categories of systems that
we use, including network management, customer service and business operations.
The costs incurred to date related to the program have not been material. We
currently expect that the total cost of our Year 2000 readiness program will not
exceed $750,000 in 1999. The total cost estimate does not include potential
costs related to any customer or other claims or the costs of internal software
or hardware replaced in the normal course of business. The total cost estimate
is based on the current assessment of our Year 2000 readiness needs and is
subject to change as the program proceeds.
As part of our normal course of operations, we are currently in the process
of transitioning to or implementing new computer software for our accounting,
billing, network management, human resources and other management information
systems. We are assessing and testing these systems for Year 2000 compliance and
will implement changes to these systems, if necessary. The successful
implementation of these new systems is crucial to the efficient operation of our
business. However, we may not
12
<PAGE> 14
implement our new systems in an efficient and timely manner, and the new systems
may not be adequate to support our operations. Problems with installation or
initial operation of the new systems could cause substantial difficulties in
operations planning, business management and financial reporting, which could
significantly harm our business. The cost of bringing our new systems into Year
2000 compliance, if necessary, is not expected to have a material effect on our
financial condition or results of operations.
We have also initiated formal communications with many of our significant
suppliers to determine the extent to which we are vulnerable to these suppliers'
failure to remedy their own Year 2000 issues. We have already received
assurances of Year 2000 compliance from a number of those suppliers. Most of the
suppliers have no contractual obligations under existing contracts to provide us
with this information. We are taking steps with respect to new supplier
agreements to seek assurance that the suppliers' products and internal systems
are Year 2000 compliant. Despite these assurances, we may still experience
supplier-related Year 2000 problems.
Although we currently expect that the Year 2000 issue will not pose
significant operational problems, delays in the implementation of new
information systems or a failure to fully identify all Year 2000 dependencies in
our existing system and in the systems of our suppliers could have material
adverse consequences. Therefore, we are developing, but do not yet have,
contingency plans for continuing operations in the event these problems arise.
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:
- regulatory requirements, including the regulation of Internet access
- legal uncertainty regarding liability for information retrieved and
replicated in foreign jurisdictions
- 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 AND LEGAL UNCERTAINTIES
Federal regulation could harm our business. Currently, our services are not
directly subject to regulations of the Federal Communication Commission or any
other federal or state communications regulatory agency. However, changes in the
regulatory environment relating to the Internet market, including regulatory
changes that affect telecommunications costs, limit usage of subscriber-related
information or increase the likelihood or scope of competition from the regional
Bell operating companies or other telecommunications companies, could affect our
pricing or ability to market our services successfully. For example, regulation
of cable television rates may affect the speed at which our cable
13
<PAGE> 15
partners upgrade their cable systems to carry our services. Similarly,
legislation considered in the last Congress, which would have restricted the use
of subscriber information by interactive computer services for marketing and
other purposes, could adversely affect the marketing of our services or our
revenue from advertising.
Local franchise authorities could seek to regulate our services. Many of
our United States cable partners' local cable affiliates have elected to
classify the provision of the @Home service as additional cable services under
their respective local franchise agreements, and to pay franchise fees in
accordance with those agreements. Local franchise authorities may attempt to
subject cable systems to higher or other franchise fees or taxes or otherwise
require cable operators to obtain additional franchises in connection with their
distribution of the @Home service. There are thousands of franchise authorities,
and it would be difficult or impossible for us or our cable partners to operate
under a unified set of franchise requirements.
The FCC could require our cable partners to grant our competitors access to
the cable infrastructure. America Online, MindSpring Enterprises, Inc.,
Consumers Union and other parties have requested the FCC to require cable
operators to provide Internet and online service providers with unbundled access
to the cable infrastructure. If the FCC were to require third-party access to
the cable infrastructure, Internet and online service providers could
potentially provide services over the cable infrastructure of our cable partners
that compete with our services. If the FCC or another governmental agency were
to classify our cable partners as common carriers of Internet services, or if
they were to seek such classification as a means of protecting themselves
against liabilities, our rights as the exclusive residential high-speed Internet
service provider over the systems of our United States cable partners could be
lost. In addition, if we or our United States cable partners were classified as
common carriers, these cable partners could be subject to government-regulated
tariff schedules for the amounts they could charge for our services.
Local agencies may require third party access. The third party access issue
has also been raised in proceedings before local governments. Portland and
Multnomah County, Oregon have imposed a third-party access requirement on TCI as
a condition of its merger with AT&T. AT&T and TCI have challenged this action in
Federal District Court. Other municipalities, including Los Angeles, are
considering imposing third-party access requirements on cable operators. This
issue is likely to be raised in franchise renewal proceedings and in connection
with transfers of cable systems between cable operators.
Canadian regulation could affect our business. Rogers and Shaw have
informed us that, due to Canadian regulations, they are required to provide
access to their respective networks to third-party Internet service providers.
Although no third party currently uses Rogers' or Shaw's networks for the
purpose of offering Internet services, these Canadian regulations preclude us
from having an exclusive contractual right to access these networks.
Deregulation of telephone companies could enhance their ability to compete
against our service. The FCC also is considering whether to provide the Bell
operating companies and other incumbent local exchange carriers with significant
relief from existing access, resale, unbundling, pricing, and cost recovery
rules and policies. This relief, which would ignore local access and transport
boundaries, would be designed to encourage the deployment and operations by
these carriers of high-capacity, packet-switched networks and other advanced
telecommunications facilities and related services, including Internet access
services. Deregulation of telephone company advanced services could enhance the
14
<PAGE> 16
ability of these companies to compete against the delivery of @Home's services
by our cable partners.
WE COULD FACE LIABILITY FOR DEFAMATORY OR INDECENT CONTENT
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 defined types of information. The imposition upon Internet and
online service providers of potential liability for information carried on or
disseminated through their systems could require us to implement measures to
reduce our exposure to this liability. This may require that we expend
substantial resources or discontinue 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.
OUR PRO FORMA ACCOUNTING FOR THE EXCITE MERGER MAY CHANGE
The total estimated purchase price for the Excite merger has been allocated
on a preliminary basis to assets and liabilities based on our best estimates of
their fair values, with the excess costs over the net assets acquired allocated
to goodwill and other intangible assets. This allocation is subject to change
pending a final analysis of the fair values of the assets acquired and
liabilities assumed. The impact of these changes could be material to our future
results of operations.
CERTAIN TRANSACTIONS MAY RESULT IN ADDITIONAL DILUTION TO OUR STOCKHOLDERS
We have entered into agreements with Cablevision Systems Corporation,
Rogers, Shaw and other cable partners pursuant to which we have issued warrants
to purchase a total of 23,619,036 shares of our Series A common stock. Under
these agreements, warrants to purchase 12,386,125 shares of our Series A common
stock at an average price of $2.26 per share were exercisable as of December 31,
1998. To the extent that Cablevision, Rogers, Shaw or other cable partners
become eligible to and exercise their warrants, our stockholders would
experience substantial dilution. We also may issue additional stock, or warrants
to purchase stock, at prices less than fair market value in connection with
efforts to expand distribution of the @Home service.
RISKS RELATED TO OUR RELATIONSHIPS WITH OUR CABLE PARTNERS
WE DEPEND ON OUR CABLE PARTNERS TO UPGRADE TO THE TWO-WAY CABLE INFRASTRUCTURE
NECESSARY TO SUPPORT OUR @HOME SERVICE; THE AVAILABILITY AND TIMING OF THESE
UPGRADES ARE UNCERTAIN
Transmission of the @Home service and cable-based @Work services depends on
the availability of high-speed two-way HFC cable infrastructure. However, only a
portion of existing cable plant in the United States and in some international
markets has been upgraded to HFC cable, and even less is capable of high-speed
two-way transmission. As of December 31, 1998, approximately 23% of our North
American cable partners' cable
15
<PAGE> 17
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 HFC cable. However, our cable partners have limited experience
with these upgrades, and these investments have placed a significant strain on
the financial, managerial, operating and other resources of our cable partners,
most of which are already highly leveraged. Therefore, these infrastructure
investments have been, and we expect will continue to be, subject to change,
delay or cancellation. Although our commercial success depends on the successful
and timely completion of these infrastructure upgrades, most of our cable
partners are under no obligation to upgrade systems or to introduce, market or
promote our services. The failure of our cable partners to complete these
upgrades in a timely and satisfactory manner, or at all, would prevent us from
delivering high-performance Internet services and would significantly harm our
business.
OUR CABLE PARTNERS ARE NOT GENERALLY OBLIGATED TO CARRY OUR SERVICES, AND THE
EXCLUSIVITY OBLIGATIONS THAT PREVENT THEM FROM CARRYING COMPETING SERVICES ARE
LIMITED AND MAY BE TERMINATED
Our cable partners are subject to certain exclusivity obligations that
prohibit them from obtaining high-speed, greater than 128 kilobits per second,
residential consumer Internet services from any source other than us. However,
most of our cable partners are under no affirmative obligation to carry any of
our services, and the exclusivity obligations of our principal cable partners,
TCI, Comcast, Cox and Cablevision, expire on June 4, 2002, and may be terminated
sooner under certain circumstances. For example, our principal cable partners
may terminate all their exclusivity obligations upon a change in law that
materially impairs certain of their rights. Also, Comcast or Cox may terminate
all exclusivity obligations of our principal cable partners at any time if there
is a change of control of TCI that results, within one year, in the incumbent
directors of TCI no longer constituting a majority of the TCI board of
directors. In a letter agreement between AT&T and TCI, AT&T confirmed that it
was in AT&T's best interest to keep the exclusivity obligations that apply to
@Home's principal cable partners in place. Therefore, AT&T agreed not to
intentionally take or fail to take any actions with respect to the membership of
the TCI board of directors which would allow these exclusivity obligations to be
terminated.
Depending on their subscriber penetration rates, as of June 4, 1999 and as
of each anniversary of that date, Cox or Comcast has the right to terminate the
exclusivity provisions of our principal cable partners if AT&T and its
affiliates do not meet certain @Home subscriber penetration levels. On June 4,
1999, we expect that Cox will have this right, but Cox has agreed to waive it in
1999 so long as certain governance changes are approved by our board and
stockholders and are approved prior to July 22, 1999. We plan to submit the
proposed changes to the board for approval at our next board meeting later this
month and to our stockholders at our 1999 stockholder's meeting. Upon board
approval, including approval by the board designees of AT&T, Comcast and Cox,
our stockholders agreement will require AT&T, Comcast and Cox to vote their
shares in favor of the changes. These governance changes will generally require
board action to be approved by a majority of our board, which majority includes
the board representatives of AT&T and either Cox or Comcast. In addition, as
further consideration for Cox's waiver of its right to terminate exclusivity as
of June 4, 1999, AT&T has agreed to increase its subscriber acquisition goal for
the next twelve months above its current goal for that period.
16
<PAGE> 18
If Comcast or Cox terminates the exclusivity obligations, this could
significantly harm our business and cause an immediate drop in our stock price.
Finally, Comcast may terminate its own exclusivity obligations upon its election
after June 4, 1999 if it permits a portion of its equity in us to be repurchased
by us at Comcast's original cost. Comcast has informed us that it has entered
into an agreement with Microsoft Corporation under which Microsoft can require
Comcast to terminate its exclusivity obligations after June 4, 1999. Although
Microsoft has stated in the agreement that it has no present intention to do so,
Microsoft may be more likely than Comcast to terminate Comcast's exclusivity
obligations.
THE EXCLUSIVITY OBLIGATIONS OF OUR CABLE PARTNERS ARE LIMITED
The exclusivity obligations of our cable partners also are subject to
exceptions that would permit our principal cable partners and their affiliates
to engage in certain activities which could compete, directly or indirectly,
with our activities. For example, each of these cable partners and its
affiliates is permitted to:
- engage in any business other than the provision of high-speed residential
consumer Internet services, including competing with our @Work operations
- maintain voting equity interests of 10% or less in public companies that
directly compete with our @Home service and related Internet backbone
connectivity services
- acquire an interest in any business that competes with our high-speed
residential consumer Internet services, so long as the competitive
business is not its primary business
- acquire equity securities of public companies that compete with us,
provided that it does not control, or is not under common control with,
such companies
- operate a competing business in any cable system territory where the
exclusivity obligations have been terminated
OUR CABLE PARTNERS MAY OFFER CERTAIN SERVICES DESPITE THEIR EXCLUSIVITY
OBLIGATIONS
Most of our cable partners' exclusivity obligations are limited to
high-speed residential Internet services and do not extend to various excluded
services that they may offer without us. These excluded services include:
- telephony services
- services that are primarily work-related, such as @Work services
- residential Internet services that do not use the cable partners' cable
television infrastructures, regardless of data transmission speed
- local Internet services that do not require use of an Internet backbone
outside a single metropolitan area
- services that are utilized primarily to connect students to schools,
colleges or universities
- Internet telephony, Internet video telephony or Internet video
conferencing
- limited Internet services primarily intended for display on a television
such as some types of Internet-based digital set-top services
- Internet services that are primarily downstream services where the user
cannot send upstream commands in real-time
- streaming video services that include video segments longer than 10
minutes in duration
17
<PAGE> 19
In addition, our cable partners can engage in limited testing, trials and
similar activities with respect to businesses subject to their exclusivity
obligations. By engaging in the excluded services, most cable partners can
compete, directly or indirectly, with our activities, including our @Work
services.
WE ARE PROHIBITED FROM OFFERING THE EXCLUDED SERVICES
Until the later of June 4, 2002 or such time as a principal cable partner
is no longer in compliance with its exclusivity obligations, we may not offer
the excluded services described above using a principal cable partner's cable
plant, or to residences in the geographic areas served by its cable systems,
without its consent. These restrictions apply even if we have integrated an
excluded service with the @Home service in another geographic area. In the case
of streaming video transmissions that include video segments longer than 10
minutes in duration, we face increased obligations to our principal cable
partners that remain in compliance with their exclusivity obligations.
Specifically, we have agreed not to allow these video transmissions using their
cable infrastructure, or in the geographic areas served by their cable systems,
without their consent. Therefore, we may never have access to the cable
infrastructures of our principal cable partners for excluded services, and we
must negotiate a separate agreement, including a new revenue split, if
applicable, with each of the principal cable partners for each excluded service
that we seek to provide over their cable infrastructures.
WE ARE CONTROLLED BY TCI 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 10 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 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 the corporate governance changes described above are
implemented following our 1999 stockholder's meeting, TCI will no longer have
the ability to expand the board and fill vacancies, and approval of 75% of our
Series B directors, or four of five, will be required for most board actions.
In addition, we may not take certain corporate actions without the approval
of TCI's Series B directors and in certain cases the directors designated by
Comcast and Cox. Notwithstanding these provisions, all of our directors owe
fiduciary duties to our stockholders. 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 MAY NOT REALIZE THE EXPECTED BENEFITS FROM, AND COULD BE HARMED BY, AT&T'S
ACQUISITION OF TCI AND TCG
On March 9, 1999, AT&T merged with TCI. In addition, in July 1998, AT&T
acquired Teleport Communications Group, Inc., or TCG. While we believe that
AT&T's
18
<PAGE> 20
acquisition of TCI and TCG may benefit us by increasing the rate at which TCI's
cable facilities will be upgraded to the two-way HFC cable necessary to carry
our services, by allowing us to utilize the strength of AT&T's brand in
marketing the @Home service to consumers and by increasing the potential for
cooperation between us and TCG, these benefits may not be realized. Moreover,
upon a change of control of TCI that results within one year in the incumbent
directors of TCI no longer constituting a majority of the TCI board of
directors, either Cox or Comcast can terminate the exclusivity obligations that
apply to our principal cable partners. In a letter agreement between AT&T and
TCI, AT&T confirmed that it was in AT&T's best interests to keep the exclusivity
obligations that apply to @Home's principal cable partners in place. Therefore,
AT&T agreed not to intentionally take or fail to take any actions with respect
to the membership of the TCI board of directors which would allow these
exclusivity obligations to be terminated. However, if AT&T does not preserve the
TCI board of directors as described above, either Cox or Comcast would have the
right to terminate the exclusivity obligations of all our principal cable
partners. This would significantly harm our business and cause an immediate drop
in our stock price.
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 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.
WE DEPEND ON OUR CABLE PARTNERS FOR DISTRIBUTION; THIS CREATES CONFLICTS OF
INTEREST
Through their cable systems, our cable partners provide the principal
distribution network for our services, and they share the revenue from the @Home
services that are derived from our subscribers. Given our contractual and
business relationships with our cable partners, the interests of our cable
partners may not always coincide with our interests, and conflicts of interest
concerning the split of revenues and other matters exist. Because TCI,
Cablevision, Comcast and Cox all operate cable systems that are the primary
distributors of the @Home service, situations may arise where their interests
may diverge or appear to diverge from the interests of our other stockholders.
TCI and the other principal cable partners, acting through their board
designees, have the ability to cause us to take certain actions or prohibit us
from taking certain actions that may be favored by other stockholders or by the
other directors who are not affiliated with our
19
<PAGE> 21
principal cable partners. Our board, which is controlled by TCI, has the power,
subject to directors' fiduciary duties, to approve transactions in which our
principal cable partners have an interest, including amending or terminating
their distribution agreement with us or changing the revenue splits in their
favor. Under the agreements under which our U.S. cable partners distribute our
services, we receive 35% of monthly fees and fees for premium services. However,
most of these agreements, including the agreement with our principal cable
partners, contain contractual most favored nation provisions, which provide that
our principal cable partners are entitled to distribution arrangements and
related services on terms at least as favorable as those obtained by any other
cable system operator. Therefore, our principal cable partners have the power,
subject to their fiduciary duties, to cause us to approve more favorable
distribution arrangements, including more favorable revenue splits, for one or
more unaffiliated cable operators in order to receive more favorable
distribution arrangements themselves and reduce our share of subscriber fees.
WE DEPEND ON OUR CABLE PARTNERS TO MARKET, DELIVER AND SUPPORT THE @HOME SERVICE
Because subscribers to the @Home service will subscribe through a cable
partner, the cable partner will substantially control the customer relationship
with the subscriber. Each cable partner has complete discretion regarding the
pricing of the @Home service to subscribers in its territories, except for
certain premium services for which we may contract directly with the subscriber,
and a cable partner could use the @Home service as a loss leader in order to
increase demand for other products or services with more attractive terms. The
cable partners do not have any affirmative obligations, other than the payment
of revenue splits to us, with respect to marketing, installing and maintaining
infrastructure for, providing customer service for and billing for the @Home
service. In limited circumstances, such as a cable partner's failure to upgrade
a cable system or roll out the @Home service after it has committed to do so, we
may be entitled to certain cost reimbursements and to be released from certain
of our exclusivity obligations, neither of which may be an effective remedy for
the failure. Our business requires a substantial rollout of the @Home service,
and if a widespread rollout does not occur, our business will not be viable.
Moreover, our cable partners have in the past experienced, and may in the future
experience, delays in installing the @Home service in areas in which it has been
introduced. Our cable partners are expected to provide general customer service
to our subscribers and, under their distribution agreements, have the option to
provide technical support, rather than utilizing our service and support
capabilities. If a cable partner elects to provide technical support, we must
reimburse it for our avoided costs, and we would have little or no control over
the quality of customer service actually provided to subscribers of the @Home
service. If the customer service and support provided by our cable partners are
unsatisfactory to subscribers, consumer demand for the @Home service will likely
diminish.
OUR CABLE PARTNERS CONTROL THE TERMS OF DISTRIBUTION OF THE @HOME SERVICE
We and our cable partners have entered into agreements providing for the
distribution of the @Home service by our cable partners and their affiliates.
The economic and other terms of these agreements may be less favorable to us
than those that could have been negotiated had we been independent of our
principal cable partners. In addition, the agreements with our principal cable
partners contain provisions that permit a cable partner to change certain
aspects of the distribution of the @Home service without our approval. For
example, a principal cable partner has the option to provide certain customer
service functions that we currently provide and upon which our 35% revenue split
was based. If a principal cable partner elects to provide these services, it is
also entitled to reimbursement of our avoided costs.
20
<PAGE> 22
Similarly, the principal cable partners have certain rights to remove cable
systems from the approved rollout schedule or to substitute cable systems in
place of removed systems. These rights are contractual in nature and may be
exercised by the principal cable partners in their sole discretion. The exercise
by the principal cable partners of these contractual rights may significantly
harm our business. Our cable partners also control the rollout schedule of the
@Home service, and our principal cable partners hold certain priority rights
with respect to this rollout schedule. This priority could harm us because we
may be required to roll out our services to our principal cable partners before
rolling out the services to other cable system operators, even though the other
cable system operators may be ready to roll out the @Home service sooner or on
terms more favorable for us.
OUR PRINCIPAL CABLE PARTNERS CAN BLOCK ACCESS TO CERTAIN CONTENT AND SERVICES
Each principal cable partner has the right to exclude the promotion of
specified national content providers from the @Home service offered through its
cable systems, subject to an adjustment in the revenue split if the number of
such exclusions exceeds a specified number. In addition, a principal cable
partner has the right to block access to certain content, including streaming
video segments of more than ten minutes in duration, and we are obligated to
help block such access. We are also obligated to consult with and involve each
of the principal cable partners in the development of requirements for, design
of and introduction of enhancements, new features and new applications of the
@Home service. If principal cable partners representing a majority of the
residential subscribers who subscribe to the @Home service object to any
enhancement, feature or application, we have agreed not to implement that
enhancement, feature or application in the territories of the objecting cable
partners. If any of the cable partners exercise these rights to block access to
certain content or services in certain territories, we may be required to devote
substantial expenses and resources to provide different content and services in
different territories and to assist them in blocking such access. This could
significantly harm our business.
OUR CABLE PARTNERS MAY COMPETE WITH US FOR ADVERTISING AND PROGRAMMING REVENUE
While we retain 100% of the revenue from our programming of the designated
national area of the @Home service, our principal U.S. cable partners retain
100% of revenue generated from their programming of a designated local area of
the start page of the @Home service. These revenues could include advertising
fees, service fees, content provider charges, transaction fees and promotional
revenue. Accordingly, in exercising their right to program the local area, our
cable partners could place a significant amount of advertising or program
content on the @Home service for which we receive no revenues. For example,
given the national or regional coverage of their operations, any of our
principal cable partners and their affiliates could strike agreements with
advertisers that could effectively result in broad-based advertising campaigns
reaching significant regions of the United States in competition with our
advertising campaigns, generating revenue only for such cable partner and its
affiliates and not for us. In Canada, we share national advertising revenue with
our Canadian cable partners.
21
<PAGE> 23
WE DEPEND ON TCG FOR LOCAL TELECOMMUNICATIONS SERVICES FOR OUR @WORK SERVICES
We depend on TCG, which is owned by AT&T, to provide local
telecommunications services and co-location within TCG's facilities on favorable
economic terms. This relationship enables us to provide @Work services to an
entire metropolitan area in which TCG has facilities. If we were required to
obtain comparable telecommunications services from local exchange carriers, we
would effectively be limited to providing @Work services to commercial customers
within a ten-mile radius of one of our points of presence. As a result, we would
be required to build multiple points of presence to service an entire
metropolitan area, which would substantially increase our capital costs to enter
new markets and which could make such market entry uneconomical. If we were
required to pay standard local exchange carrier rates, the ongoing operating
costs for our @Work services would be substantially higher. The loss of our
strategic relationship with TCG would significantly harm our ability to deploy
our @Work services. In addition, TCG has acquired a provider of Internet-related
services to businesses and corporate customers and will compete directly with
the @Work Internet service. To the extent TCG acquires or enters into strategic
relationships with other Internet service providers, TCG may reduce its support
of the @Work services. Although there are alternative suppliers for TCG's
services, it could take a significant period of time for us to establish similar
relationships, and equivalent terms might not be available.
OUR PRINCIPAL CABLE PARTNERS MAY DISPOSE OF THEIR CABLE SYSTEMS, WHICH WOULD
REDUCE OUR POTENTIAL SUBSCRIBER BASE
Our agreements with our principal cable partners do not require that they
maintain a specified number of cable systems, subscribers or homes passed in
order to maintain their control over equity ownership of us. These principal
cable partners may dispose of a significant amount of their cable systems
without requiring that these cable systems remain subject to any exclusivity
provisions. However, to the extent that any of our principal cable partners
dispose of systems accounting for more than 20% of the number of homes passed in
its service areas as of June 4, 1996, subject to certain exceptions, without
causing such transferred homes to remain exclusive to us, then that principal
cable partner may be required to sell a proportionate amount of its equity
interest in us to our other principal cable partners at fair market value. For
example, TCI has completed the transfer or sale of certain cable systems and has
announced the proposed sale or transfer of additional cable systems and is
considering various plans and proposals that may result in the disposition of
other of its cable systems. Although TCI has informed us that it is attempting
to cause certain of these transferred systems to remain subject to TCI's
exclusivity obligations, these efforts may not be successful. These dispositions
could significantly harm us if the transferred homes do not remain exclusive.
22
<PAGE> 24
RISKS RELATING TO THE PROPOSED MERGER WITH EXCITE, INC.
WE WILL ISSUE APPROXIMATELY 1.0419 SHARES OF OUR SERIES A COMMON STOCK PER
EXCITE SHARE DESPITE CHANGES IN THE MARKET VALUE OF EXCITE COMMON STOCK OR OUR
SERIES A COMMON STOCK
There will be no adjustment to this exchange ratio if the market price of
either Excite common stock or our Series A common stock fluctuates. The specific
dollar value of our Series A common stock that Excite stockholders will receive
upon completion of the merger will depend on the market value of our Series A
common stock at the time of the merger. The share prices of both Excite common
stock and our Series A common stock are subject to price fluctuations in the
market for publicly-traded equity securities and have each experienced
significant volatility. We cannot predict the market prices for either Excite
common stock or our Series A common stock at any time before the completion of
the merger or the market price for our Series A common stock after the
completion of the merger.
EXCITE WILL FACE TECHNICAL, OPERATIONAL AND STRATEGIC CHALLENGES THAT MAY
PREVENT US FROM SUCCESSFULLY INTEGRATING EXCITE WITH US
The merger involves risks related to the integration and management of
acquired technology, operations and personnel. Our integration of Excite will be
a complex, time consuming and expensive process and may disrupt our business if
not completed in a timely and efficient manner. Following the merger, we must
operate as a combined organization utilizing common information and
communication systems, operating procedures, financial controls and human
resources practices. We and Excite may encounter substantial difficulties, costs
and delays involved in integrating the operations of our companies, including:
- potential incompatibility of business cultures
- perceived adverse changes in business focus
- potential conflicts in sponsor, advertising or content relationships
- the loss of key employees and diversion of the attention of management
from other ongoing business concerns
Any of these factors could harm our business.
THE MERGER COULD HARM KEY THIRD PARTY RELATIONSHIPS
The present and potential relationships of us and Excite with sponsors,
content providers, advertisers, users and subscribers may be harmed by the
proposed merger. Uncertainties regarding sponsorship, joint venture overlap and
new service development following the merger may cause these parties to delay
decisions regarding these relationships. Any changes in these relationships
could harm our business.
WE AND EXCITE MAY LOSE CERTAIN CONTRACTUAL RIGHTS DUE TO THE MERGER
We and Excite have contracts with many suppliers, customers and other
business partners. Some of these contracts require us and Excite to obtain the
consent, waiver or approval of these other parties in connection with the
proposed merger. If consent, waiver or approval cannot be obtained, we or Excite
may lose the right to use intellectual property
23
<PAGE> 25
or other rights that are necessary for smooth operation of the @Home or Excite
services. We and Excite have agreed to seek to secure the necessary consents,
waivers and approvals. However, we and Excite may not be able to obtain all of
the necessary consents, waivers and approvals. Failure to do so could harm our
business.
In addition, both we and Excite have granted exclusive rights to third
parties with regard to certain content, sponsorship or other strategic
relationships. Some of these rights conflict with rights granted by the other
party. We may not successfully resolve these conflicts and failure to do so
could harm our business.
ADDITIONAL RISKS RELATING TO EXCITE'S BUSINESS
EXCITE HAS NOT BEEN AND MAY NEVER BE PROFITABLE
Excite has incurred significant operating expenses since it was formed. As
of December 31, 1998, Excite had an accumulated deficit of $135.6 million.
Although Excite has had significant revenue growth in recent periods, it may not
be able to sustain this growth in future periods. Excite may never achieve
profitability.
ADDITIONAL RISKS RELATING TO EXCITE'S AGREEMENT WITH NETSCAPE
EXCITE ONLY RECEIVES REVENUES FROM CERTAIN PORTIONS OF NETCENTER
Excite will only receive revenues from the portions of Netcenter that are
co-branded with Excite. Excite will not receive any revenues from other areas of
the Netcenter service. If Netscape-programmed channels, such as news, sports and
entertainment, are more popular than co-branded channels with users and
advertisers, Excite's revenues could be adversely affected.
EXCITE MAY NOT RECOUP ITS INITIAL INVESTMENT
Excite paid Netscape a cash payment of $70 million when it signed the
Netcenter agreement. A substantial portion of this amount represented a
prepayment of Excite's royalty obligations under this agreement. If the
co-branded portions of the Netcenter service do not generate enough revenues
over the two-year term of the agreement, Excite would not be able to realize a
sufficient return on its investment. Netscape has not guaranteed any minimum
revenues to Excite. The ability of Netcenter to generate revenues involves a
number of risks, including:
- General risks relating to an advertising supported service discussed
elsewhere in this section
- Pricing competition from Netscape
- Netscape's ability to attract users to Netcenter, particularly because
while Netscape's Web browser features Netcenter, Microsoft's Web browser
does not
- Risks that Netscape-programmed channels will have more user traffic
- Risks that the premier provider placements of Excite will not generate
sufficient traffic to Excite
- Risks that Excite may not be able to sell a sufficient number of
advertisements on the co-branded portions of Netcenter
24
<PAGE> 26
NETSCAPE HAS A LICENSE TO USE EXCITE'S SEARCH TECHNOLOGY.
At the end of the term of the Netcenter agreement, Netscape could retain a
license to use Excite's Internet search technology. Therefore, after the term of
the Netcenter agreement, Netscape may be able to operate a competitive service
without paying Excite. Netscape could also sublicense this technology to a third
party. As a result, Excite could face increased competition.
NON-RENEWAL AND TERMINATION RISKS.
Netscape has no obligation to renew the Netcenter agreement. In addition,
if Netscape believes that Excite is delivering objectionable content on
Netcenter, it could elect to terminate the agreement if Excite does not remove
that content. If this occurred, Netscape would not be required to refund Excite
any amounts it prepaid or costs it incurred in performing under the Netcenter
agreement.
NETCENTER COMPETES WITH EXCITE.
Most of the services offered on Netcenter compete directly with Excite's
services. Therefore, Excite faces additional competition for both users and
advertisers from Netcenter. If Excite devotes significant resources towards
programming or selling and marketing the co-branded portions of Netcenter, these
efforts could harm Excite's ability to perform similar activities for the Excite
services. These efforts by Excite could also have the effect of helping to
support a competing business.
AMERICA ONLINE'S ACQUISITION OF NETSCAPE.
America Online is a competitor of Excite. In March 1999, America Online
acquired Netscape. Excite does not know what effect this acquisition by America
Online will have on its current relationship with Netscape or on any future
potential relationship with Netscape.
EXCITE DEPENDS ON SPONSORSHIP AGREEMENTS FOR REVENUES
Excite 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, for any reason, its business would be
adversely affected.
PRIVACY CONCERNS COULD HARM PORTIONS OF EXCITE'S BUSINESS
Excite's and certain of our services, as well as those of Excite's
subsidiary MatchLogic, use cookies to help deliver targeted advertising and help
compile demographic information about users. Cookies are bits of information on
a user's drive and are passed between a Web server and the user's Web browser.
These cookies can be placed on a user's hard drive without the user's consent or
knowledge. Due to privacy concerns, some
25
<PAGE> 27
commentators and governmental bodies have suggested that the use of cookies be
limited. In addition, many versions of Web browsers permit users to block or
delete cookies. Any reduction or limitation in the use of cookies could limit
Excite's or MatchLogic's ad targeting capabilities, which could harm their
businesses.
EXCITE MUST CONTINUE TO DEVELOP NEW SERVICES
Excite believes it will need to constantly update its service offerings on
its Web site in order to attract and retain users. If any new service is not
favorably received it could adversely affect Excite's reputation, brand and user
traffic. Excite could also experience difficulties or delays in developing new
services. In addition new services could contain undetected errors. Excite may
need to significantly redesign these services to correct any errors. Any
difficulty or delays could cause user dissatisfaction or result in lost or
delayed advertising revenues. Excite's business could be harmed if its new
services are not well received.
EXCITE'S BUSINESS DEPENDS ON THE CONTINUED GROWTH IN INTERNET USE
Excite operates in a new and rapidly evolving market. Excite's business
could be harmed if usage of the Internet or other online services does not
continue to grow. This growth could be hindered by a number of factors
including: the adequacy of the Internet's infrastructure to meet increased usage
demands; privacy and security concerns; and availability of cost-effective
service. Any of these issues could cause the Internet's performance or level of
usage to decline.
POTENTIAL LITIGATION WITH RESPECT TO INTELLECTUAL PROPERTY RIGHTS COULD HARM
EXCITE'S BUSINESS
Many parties, including competitors of Excite, are actively developing
search, indexing and related Internet technologies. Some of these parties have
taken, and Excite believes that others will take, steps to protect these
technologies. Therefore, Excite believes that disputes regarding the ownership
of such technologies are likely to arise in the future. For example, Lycos,
Inc., a competitor of Excite, has announced that it has received a patent with
respect to an Internet search technology. Although Excite has not received any
correspondence with respect to this announced patent and Excite does not believe
that any of its technologies infringes this patent, Lycos could, nevertheless,
initiate a lawsuit against Excite asserting patent infringement. Excite may not
be able to defend any litigation successfully. Even if successful, defending
litigation can be costly and divert management resources.
EXCITE'S MARKET IS INTENSELY COMPETITIVE
Excite competes with a number of companies both for users and advertisers.
Excite expects this competition will intensify, particularly because there are
few barriers to entry in Excite's market. Excite's competitors include:
- Web portal companies such as Infoseek's Go Network, Lycos, Netscape's
Netcenter, Yahoo!, Alta Vista, HotBot, CYNet's Snap service and LookSmart
- Online service providers such as America Online and Microsoft's MSN
service
- Large media companies, such as CBS, NBC, Time-Warner and USA Networks,
Inc., who have announced initiatives to develop Web services or partner
with Web companies
26
<PAGE> 28
- Other smaller companies providing Web-based and advertising supported
content
MatchLogic competes with AdForce and indirectly with DoubleClick Inc.,
which each offer advertising solutions for advertisers and Web sites. MatchLogic
also competes with NetGravity, Inc., which provides advertising management
software.
Many providers of Internet services have been entering into distribution
arrangements and other strategic relationships with other Internet service
companies or with other third parties. For example, CBS and America Online have
announced a strategic relationship. If these relationships are successful,
Excite's competitors could receive more users and page views, which could make
their services more attractive to advertisers.
Excite also competes with traditional advertising media, such as print,
radio and television, for a share of advertisers' total advertising budgets. If
advertisers do not perceive Internet advertising to be as effective as
traditional media, Excite's business could be harmed.
EXCITE DEPENDS ON A NUMBER OF THIRD PARTY RELATIONSHIPS
Excite depends on a number of third party relationships to provide users
and content for its services. Examples of some of these important relationships
include:
- Relationships with respect to the positioning of Excite's service on Web
browsers or other high-traffic Web sites
- Arrangements under which third parties provide content for Excite's
services
- Arrangements under which third parties provide services such as games or
email
- Relationships with ISPs and other third parties to provide communications
infrastructure for Excite
If Excite cannot renew these relationships on favorable terms, or if these
relationships terminate, Excite would have to enter into new relationships.
Excite may not be able to replace any of its important third party relationships
on reasonable terms, if at all. If Excite cannot replace any important
relationship, it could lose users or advertisers, which could harm Excite's
revenues. Even if Excite replaces any relationships or enters into new
relationships, Excite could incur increased costs such as distribution license
fees or selling and marketing expenses in order to pay for these relationships.
This prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
relating to future events or financial results. These statements include
statements indicating that "we believe," "we expect" or "we anticipate" that
certain events may occur or certain trends may continue, and similar statements
relating to future events or financial results. These forward-looking statements
are subject to material risks and uncertainties as indicated under the caption
"Risk Factors." Actual results could vary materially as a result of a number of
factors including those set forth in "Risk Factors" and elsewhere in this
prospectus.
27
<PAGE> 29
USE OF PROCEEDS
We will not receive any proceeds from the sale of the Series A common stock
by the selling stockholders.
DIVIDEND POLICY
We have never paid any cash dividends on our stock and we anticipate that,
for the foreseeable future, we will continue to retain any earnings for use in
the operation of our business and do not intend to pay dividends.
28
<PAGE> 30
SELLING STOCKHOLDERS
The following table presents information with respect to the selling
stockholders and the shares of our Series A common stock that they may offer
pursuant to this prospectus. Each of the selling stockholders named below was
formerly a stockholder or warrant holder of Narrative who acquired the shares
offered hereby pursuant to our acquisition of Narrative. To our knowledge, none
of the selling stockholders has, or within the past three years has had, any
position, office or other material relationship with us or any of our
predecessors or affiliates.
The term selling stockholders includes permitted transferees, such as
assignees by will or testimony. Furthermore, Greylock Equity Limited
Partnership, the Accel entities named below and the Carlyle Entities named below
are venture capital funds which may distribute their shares to their limited
partners. These limited partners may offer and sell shares with this prospectus
as long as the terms and conditions included in their rights agreement with us
are satisfied.
The share information provided in the table below is based on information
provided to us by each of the selling stockholders as of February 12, 1999. We
calculated beneficial ownership in accordance with Rule 13d-3 of the Exchange
Act as of this date. Also, a portion not exceeding 12% of each selling
stockholder's shares is being held in escrow pursuant to an escrow agreement
with us. Although we list these shares as shares that may be offered in the
table below, these shares may only be offered and sold under this prospectus if
and when these shares are released from escrow and returned to the selling
stockholders. We may update amend or supplement this prospectus from time to
time to update the disclosure in this section.
The selling stockholders may from time to time offer and sell any or all of
the shares under this prospectus. Because the selling stockholders are not
obligated to sell shares, and because selling stockholders may also acquire
publicly traded shares of our Series A common stock, we cannot estimate how many
shares each selling stockholder will beneficially own after this offering.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED BEFORE
THE OFFERING
-------------------- SHARES BEING
NAME NUMBER PERCENT OFFERED
---- --------- ------- ------------
<S> <C> <C> <C>
Greylock Equity Limited Partnership(1)..... 340,692 * 302,630
Hilmi Ozguc(2)............................. 213,518 * 71,270
Scott A. Kliger(2)......................... 213,518 * 71,270
Accel V L.P.(3)............................ 126,663 * 126,663
Carlyle Venture Partners L.P.(4)........... 115,826 * 115,826
John B. Landry(5).......................... 70,197 * 70,197
Allison Parker(6).......................... 55,614 * 55,614
Accel Internet/Strategic Technology Fund
L.P.(3).................................. 16,972 * 16,972
Carlyle U.S. Venture Partners L.P.(4)...... 15,361 * 15,361
Carlyle Venture Coinvestment
L.L.C.(4)(7)............................. 9,319 * 9,319
Accel Investors '96 L.P.(3)................ 7,543 * 7,543
Ellmore C. Patterson Partners(3)........... 3,457 * 3,457
Jamie L. Bertasi(2)........................ 2,758 * 921
Accel Keiretsu V L.P.(3)................... 2,514 * 2,514
</TABLE>
29
<PAGE> 31
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED BEFORE
THE OFFERING
-------------------- SHARES BEING
NAME NUMBER PERCENT OFFERED
---- --------- ------- ------------
<S> <C> <C> <C>
Silicon Valley Bank(8)..................... 1,776 * 1,776
Grant Schneider(9)(10)..................... 1,654 * 728
Alexandra Trevelyan(9)(10)................. 1,654 * 1,241
Patrick W. O'Brien(9)...................... 1,448 * 1,448
John Puopolo(9)............................ 1,117 * 1,117
Jim Coloprisco(9).......................... 820 * 820
Joanne Bryce(2)............................ 774 * 774
David White(9)............................. 717 * 717
Paul Santinelli(9)......................... 689 * 689
Nancy Wilson(9)............................ 622 * 622
Cathy Fielding(9).......................... 455 * 455
Sarah Groark(9)............................ 346 * 346
Carma Makarawicz(2)(10).................... 164 * 137
Wei-Meng Chee(9)........................... 138 * 138
Lauren Chatham(9).......................... 137 * 137
Mike Kopel(9).............................. 137 * 137
Mike Trinkala(9)........................... 99 * 99
--------- -- -------
TOTALS........................... 1,206,699 * 919,000
========= == =======
</TABLE>
- ---------------
* Each of the selling stockholders is currently the beneficial owner of less
than 1% of our outstanding Series A common stock, based on 107,312,141
shares of Series A common stock outstanding as of March 31, 1999.
(1) After the date of this prospectus, Greylock Equity Limited Partnership may
distribute its shares of our Series A Common Stock to:
- Henry F. McCance
- Howard E. Cox, Jr.
- William W. Helman
- Roger L. Evans
- Barbara P. Murray
- Sherman Fairchild Foundation, Inc.
- Emory A. Hamilton
- Caroline R. Alexander
- Dorothy A. Matz
- McCance Family Limited Partnership
- Ashbourne Partners III Limited Partnership
- David N. Strohm
- William S. Kaiser
- Mary H. Murphy
- Oneonta Properties
- Helen C. Alexander
- John D. Alexander, Jr.
- Henrietta A. George
- Thomas W. Keesee, Jr.
- Ashbourne Partners III Limited Partnership
- Henry H. Corning
- Key Trust Company of Ohio, N.A., Theodore T. Jones and Latham W. Murfey,
III, Trustees of Trust for the benefit of Alison C. Jones under agreement
established by Edith W. Corning dated 7/25/46 as amended
- Key Trust Company of Ohio, N.A., Edson Spencer, Jr. and David Warshawsky,
Trustees of Trust for the benefit of Samuel D. Long under agreement
established by Edith W. Corning dated 7/25/46 as amended
30
<PAGE> 32
- Key Trust Company of Ohio, N.A., Edson Spencer, Jr. and David Warshawsky
Trustees of Trust for the benefit of Maud-Alison Long under agreement
established by Edith W. Corning dated 7/25/46 as amended
- Key Trust Company of Ohio, N.A., Edson Spencer, Jr. David Warshawsky
Trustees of Trust for the benefit of Henry H. Corning under agreement
established by Edith W. Corning dated 7/25/46 as amended
- Dartmouth College
- Gothic Corporation, Michael J. Birck
- The Northern Trust Company
- Gabriel Schmergel
- John W. Brown Trust
- Peter Preuss
- William C. O'Neil, Jr.
- William J. Warner
- Mone Anathan, III
- Ronald J. Friedsam
- Tadeusz Witkowicz
- Joshua Boger
- Dirk I. Gates
- Field Venture Partners
- Poduska Family Limited Partnership TLP
- Robert E. Cook
- Trustee of The Daisy Trust
- Thomas H. Bruggere
- Grossman Family Partnership or its nominee Saturn & Co.
- Curt A. Rawley
- John M. Connolly
- Samuel J. Gerson
- David C. Mahoney,
- James A. Perakis
- Malcolm L. Gefter
- Goel Family Partnership
- Safi U. Qureshey, Trustee of Safi U. Qureshey Family Trust dated 5/21/84
- William M. Gibson
- Irwin F. Smith
- Robert A. Lawrence
- Neil L. Thompson
- Frechette Fund, Inc.
- Scaup & Co.
- Alexander V. d'Arbeloff
- Donald K. Miller
- Hill and Company
- PH Investments LLC
- PCW Fund, Inc.
- Massachusetts Institute of Technology
- Edward H. Ladd, Trustee under agreement dated 12/15/78 or its nominee,
Freya Fanning & Co.
- M-C Partners I Limited Partnership or its nominees, A. A. Welsh & Co. and
Atwell & Co.
- Fleet National Bank, Trustee of Orchard Trust under agreement dated
5/1/73
- Phemus Corporation
- Lillard Partners
- John Lillard Family Limited Partnership
- Louis F. Polk, Jr. Marital Trust
- Louis F. Polk, Jr., Trustee of Louis F. Polk, Sr. Rev. Trust dated
1/22/69
- Paula P. Lillard, Trustee of Louis F. Polk, Sr. Rev Trust dated 1/22/69
- Board of Trustees of Leland Stanford Junior University
- Polk Family Partnership,
- Julia L. Thorne Trust under
agreement dated 9/29/65
- Edwin Thorne
- Brinkley S. Thorne
- Wink Thorne
- Benjamin Thorne
- Standish Ventures III Limited Partnership
- Edwin Thorne Sole Trustee
- Gordon G. Thorne
- Snowball Trust
- Jennifer Hislop
- Brooks Walker, Jr.
- Brooks Walker, Jr. Trustee of M.K. Walker Trust dated 9/1/89
- Wellington S. Henderson, Trustee of Welling S. Henderson, Jr. Revocable
Trust dated 3/9/93
31
<PAGE> 33
- Harriett W. Henderson Trust under agreement dated 8/14/73 for the benefit
of Charles C. Henderson
- Brooks Walker III, Trustee of Walker Trust dated 12/24/74
- Harriett W. Henderson Trust under agreement dated 8/14/73 for the benefit
of James A. Henderson
- Harriett W. Henderson Trust under agreement dated 8/14/73 for the benefit
of Joan H. Henderson
- Harriett W. Henderson Trust under agreement dated 8/14/73 for the benefit
of Elena D. Henderson
- Harriett W. Henderson Trust under agreement dated 8/14/73 for the benefit
of Mark W. Henderson
- Ann M. Hatch Revocable Trust No. 2
- Richard Greene Trust for the benefit of Francis Timothy Hatch
- Susanna B. Place, Trustee SMBP Trust under agreement dated 2/28/85
- David Ayer
- Essex Equity Limited
Partnership V
- David E. Place
- William Elfers
- Frederick H. Bruenner
- Richard M. Place
- Daniel S. Gregory and Richard N. Hoehn, Trustees, under instrument
Place/Greylock Trust dated 12/27/78
- Roger L. Evans, Trustee of Roger and Jacqueline Evans Family Trust under
agreement dated 3/8/89
- Stephen Bochner, Trustee Evans Children's Trust under agreement dated
12/20/93
- Arthur Hughes, Trustee under instrument dated 2/2/94 Helman Children's
Trust for the benefit of Beatrice Page Helman
- Arthur Hughes, Trustee under instrument dated 2/2/94 Helman Children's
Trust for the benefit of William Wilson Helman V
- Robert N. Shapiro, Trustee of Robert P. Henderson 1994 Irrevocable Trust
dated 1/19/94
- Thomas McCance, Jr. and Keith Jennings, Trustees under agreement dated
11/16/76 for the benefit of Ellen L. McCance
- Henry F. McCance, Allison J. McCance and Keith S. Jennings under
instrument dated 12/22/93 Trustees of McCance Family Trust for the
benefit of Ellen Lee McCance
- Daniel Moseley, Trustee under agreement with Blodgett 1989 Family Trust
- John B. Jessup, Trustee of Julia Thorne Trust dated 9/29/65
- William S. Kaiser
- Thomas J. Watson, III
- Yale University
- Charles and Angela Waite
- Miriam A. Gilpatric
(2) The selling stockholder is an employee of At Home, with address at: care of
At Home Corporation, 425 Broadway Street, Redwood City, California 94063.
(3) The selling stockholder is a limited partnership affiliated with Accel
Partners, with address at: care of Accel Partners, attn: Carter Sednaoui,
One Palmer Square, Princeton, New Jersey 08542.
(4) The selling stockholder is a limited partnership affiliated with The
Carlyle Group, with address at: care of The Carlyle Group, attn: Brian
Hayhurst, 1001 Pennsylvania Avenue, Washington, D.C. 20001-2505.
32
<PAGE> 34
(5) Mr. Landry is the former Chairman of Narrative.
(6) Ms. Parker is a former employee and co-founder of Narrative.
(7) After the date of this prospectus, Carlyle Venture Coinvestment L.L.C. may
distribute its shares of our Series A common stock to:
- Allan M. Holt
- Brian Hayhurst
- Cammack Holdings Corporation
- David W. Dupree
- Frank C. Carlucci III
- Harry L. Alverson
- Jerome H. Powell
- Orange Crimson Holdings Corporation
- Stupar Holdings Corporation
- Brian Bailey
- Brooke Coburn
- David Henderson
- Edward J. Mathias
- Frontier Ventures Corporation
- James A. Barker III
- J. Mitchell Reese
- Ryan Schwarz
- Sulaiman S. Mamdani
(8) Silicon Valley Bank is currently a lender to At Home. Its address is care
of Silicon Valley Bancshares, attn: David Jaques, 3003 Tasman Drive
(HG100), Santa Clara, California 95054.
(9) The selling stockholder formerly had an employment relationship with
Narrative.
(10) The selling stockholder's beneficial ownership includes shares subject to
options that are exercisable currently or before April 14, 1999.
33
<PAGE> 35
PLAN OF DISTRIBUTION
The selling stockholders will be offering and selling all shares offered
and sold under this prospectus. We will not receive any of the proceeds of the
sales of the shares offered hereby. In connection with our acquisition of
Narrative, we entered into a rights agreement dated December 30, 1998 with all
of the selling stockholders. The registration statement of which this prospectus
forms a part has been filed pursuant to the rights agreement and shares may only
be offered or sold under this prospectus pursuant to the terms of the rights
agreement. However, selling stockholders may resell all or a portion of the
shares in open market transactions in reliance upon Rule 144 under the
Securities Act, provided they meet the criteria and conform to the requirements
of such rule. Pursuant to the rights agreement, shares may only be offered or
sold under this prospectus during the normal quarterly trading windows specified
by our insider trading policy. Each trading window typically begins on the third
trading day after we publicly report our operating results for the previous
calendar quarter and ends on the last day of the second month of each respective
calendar quarter (February, May, August and November).
Who may sell and applicable restrictions. The shares may be sold directly
by the selling stockholders from time to time. The selling stockholders may not
sell any of the shares offered in this prospectus, and selling stockholders
could transfer, devise or gift these shares by other means.
Alternatively, the selling stockholders may from time to time offer the
shares through brokers, dealers or agents that may receive compensation in the
form of discounts, concessions or commissions from the selling stockholders
and/or the purchasers of the shares for whom they may act as agent. In effecting
sales, broker-dealers that are engaged by the selling stockholders may arrange
for other broker-dealers to participate. The selling stockholders and any such
brokers, dealers or agents who participate in the distribution of the shares may
be deemed to be underwriters. Any profit on the sale of the shares by them and
any discounts, commissions or concessions received by any such broker, dealers
or agents might be deemed to be underwriting discounts and commissions under the
Securities Act. To the extent the selling stockholders may be deemed to be
underwriters, the selling stockholders may be subject to certain statutory
liabilities of, including, but not limited to, Sections 11, 12 and 17 of the
Securities Act and Rule 10b-5 under the Exchange Act. To our knowledge, there
are currently no plans, arrangements or understandings between any selling
stockholders and any broker, dealer, agent or underwriter regarding the sale of
the shares by the selling stockholders.
Shares that may not be sold under this prospectus. Pursuant to an escrow
agreement dated December 30, 1998, we will hold in escrow a total of
approximately 134,647 shares that are beneficially owned by the selling
stockholders until no later than March 31, 2000. Except for limited exceptions
set forth in the escrow agreements, these shares may not be sold or transferred
without our consent.
Pursuant to the rights agreement, certain selling stockholders who are
designated as key employees are restricted from selling, transferring or
otherwise disposing of their restricted shares, as defined in the rights
agreements, until December 30, 2001, except that:
- each key employee may currently dispose of up to 25% of his restricted
shares
- each key employee may dispose of up to another 25% of his restricted
shares on and after December 30, 1999 if he is still employed by us on
that date
34
<PAGE> 36
- each key employee may dispose of his remaining restricted shares on and
after December 30, 2000 if he is still employed by us on that date
Only the 25% of each key employee's restricted shares that may be sold now may
be sold or offered under this prospectus.
Prospectus delivery. Because selling stockholders 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 shares is made, a revised prospectus or
prospectus supplement, if required, will be distributed which will set forth:
- the name of such selling stockholder and of any participating
underwriters, broker-dealers or agents
- the aggregate amount and type of shares being offered
- the price at which such shares were sold and other material terms of the
offering
- any discounts, commissions, concessions and other items constituting
compensation from the selling stockholders and any discounts, commissions
or concessions allowed or paid to dealers
- that any such participating broker-dealers did not conduct any
investigation to verify the information set out or incorporated by
reference in this prospectus
Such 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 shares. In addition, if we
receive notice from a selling stockholder that a donee or pledgee intends to
sell more than 500 shares, a supplement to this prospectus will be filed.
Restrictions on manner of sales. The selling stockholders will act
independently from us in making decisions with respect to the timing, manner and
size of each sale. Such sales may be made over the Nasdaq National Market or
otherwise, at then prevailing market prices, at prices related to prevailing
market prices or at negotiated prices. The shares may be sold according to one
or more of the following methods:
- a block trade in which the involved broker or dealer will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction
- purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this prospectus
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers
- an exchange distribution in accordance with the rules of such exchange
- face-to-face transactions between sellers and purchasers without a
broker-dealer
- through the writing of options
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF OUR SERIES A COMMON
STOCK, INCLUDING
35
<PAGE> 37
THE ENTRY OF STABILIZING BIDS OR SYNDICATE COVERING TRANSACTIONS OR THE
IMPOSITION OF PENALTY BIDS. The selling stockholders and any other person
participating in such distribution will be subject to applicable provisions of
the Exchange Act and its rules and regulations, including Regulation M. This
regulation may limit the timing of purchases and sales of any of the shares by
the selling stockholders and any other such person. The anti-manipulation rules
under the Exchange Act may apply to sales of shares in the market and to the
activities of the selling stockholders and their affiliates. Furthermore,
Regulation M of the Exchange Act may restrict the ability of any person engaged
in the distribution of the shares to engage in market-making activities with
respect to the particular shares being distributed for a period of up to five
business days before the commencement of such distribution. All of the foregoing
may affect the marketability of the shares and the ability of any person or
entity to engage in market-making activities with respect to the shares.
Hedging and other certain transactions with broker-dealers. In connection
with distributions of the shares or otherwise, the selling stockholders may
enter into hedging transactions with broker-dealers. In connection with these
transactions, broker-dealers may engage in short sales of the shares registered
hereunder in the course of hedging the positions they assume with selling
stockholders. The selling stockholders may also sell shares short and redeliver
the shares to close out their short positions. The selling stockholders may also
enter into option or other transactions with broker-dealers which require the
delivery to the broker-dealer of the shares registered by the registration
statement of which this prospectus is a part. The broker-dealer may then resell
or otherwise transfer these shares using this prospectus. A selling stockholder
may also loan or pledge the shares registered by the registration statement of
which this prospectus is a part to a broker-dealer and the broker-dealer may
sell the shares so loaned or, upon a default, the broker-dealer may effect sales
of the pledged shares using this prospectus.
Expenses associated with registration. We have agreed to pay the expenses
of registering the shares under the Securities Act, including registration and
filing fees, printing expenses, administrative expenses and legal and accounting
fees. Each of the selling stockholders will bear its pro rata share of all
discounts, commissions or other amounts payable to underwriters, dealers or
agents as well as fees and disbursements for legal counsel retained by any
selling stockholder.
Indemnification. Under the rights agreement, we and the selling
stockholders have agreed to indemnify each other and specified other persons
against certain liabilities in connection with the offering of the shares,
including liabilities arising under the Securities Act. The selling stockholders
may also agree to indemnify any broker-dealer or agent that participates in
transactions involving sales of the shares against certain liabilities,
including liabilities arising under the Securities Act. In addition, Carlyle
Venture Coinvestment LLC and Greylock Equity Limited Partnership have each
agreed to indemnify us against certain liabilities, including liabilities
arising under the Securities Act, related to information about selling
stockholders that was provided by each of these two parties.
Prospectus updates; suspension of this offering. At any time a particular
offer of the shares is made, a revised prospectus or prospectus supplement, if
required, will be distributed. We will file such prospectus supplement or
post-effective amendment with the Securities and Exchange Commission to reflect
the disclosure of additional information with respect to the distribution of the
shares. Under the terms of the rights agreement, we may suspend the use of this
prospectus 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
36
<PAGE> 38
misleading in the light of the circumstances then existing. Upon the occurrence
of this type of event, a prospectus supplement or post-effective amendment, if
required, will be distributed to each selling stockholder. Each selling
stockholder has agreed not to trade shares from the time the selling stockholder
receives notice from us of this type of event until the selling stockholder
receives a prospectus supplement or amendment. This time period will not exceed
five trading days in any one instance.
Termination of this offering. The rights agreement requires that we use
commercially reasonable efforts to keep the registration statement of which this
prospectus is a part effective until December 30, 1999, or later in certain
limited circumstances. Therefore, this offering will terminate on the earlier
of: (1) the expiration of this registration period, or (2) the date on which all
shares offered hereby have been sold by the selling stockholders.
WHERE YOU CAN FIND MORE INFORMATION
The following documents that we have filed with the Securities and Exchange
Commission are incorporated by reference into this prospectus:
- the registration statement on Form S-3 of which this prospectus is a
part, and the exhibits and schedules filed and incorporated by reference
therewith
- our annual report on Form 10-K for the fiscal year ended December 31,
1998
- the registration of our Series A common stock on Form 8-A filed on June
13, 1997
- all other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since December 31, 1998, including: (1) our quarterly
reports on Form 10-Q for the fiscal quarters ended March 31, June 30 and
September 30, 1998, each as amended on February 8, 1999; (2) our report
on Form 8-K filed on January 14, 1999, as amended on February 19, 1999;
(3) our two reports on Form 8-K filed on January 21, 1999; and (4) our
report on Form 8-K filed on February 19, 1999
- 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.
We are subject to the informational requirements of the Securities Exchange
Act of 1934. Therefore, we file reports and other information with the
Securities and Exchange Commission. Reports, registration statements, proxy and
information statements, and other information that we have filed can be
inspected and copied at the public reference facilities maintained by the
Securities and Exchange Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may obtain copies of such material from the Public
Reference Section of the Securities and Exchange Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 at rates prescribed by the Commission. The public
may obtain information on the operation of the Public Reference Room by calling
the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and
Exchange Commission also maintains a World Wide Web site that contains reports,
proxy and information statements
37
<PAGE> 39
and other information that is filed electronically with the Securities and
Exchange Commission. This Web site can be accessed at http://www.sec.gov.
We have filed with the Securities and Exchange Commission a registration
statement on Form S-3 under the Securities Act with respect to the Series A
common stock offered by this prospectus. This prospectus does not contain all of
the information set forth in the registration statement, certain parts of which
are omitted in accordance with the rules and regulations of the Securities and
Exchange Commission. For further information with respect to us and our Series A
common stock, please refer to the registration statement. Statements contained
in this prospectus as to the contents of any contract or other document are not
necessarily complete and, in each instance, reference is made to the copy of
such contract or document filed as an exhibit to the registration statement.
Copies of the registration statement, including exhibits thereto, may be
inspected without charge at the Securities and Exchange Commission's principal
office in Washington, D.C., and you may obtain copies from this office upon
payment of the fees prescribed by the Securities and Exchange Commission.
We will furnish without charge to each person to whom a copy of this
prospectus is delivered, upon such person's written or oral request, a copy of
any and all of the information that has been incorporated by reference into this
prospectus (other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference into this prospectus as well). Requests
for such copies should be directed to At Home Corporation, 425 Broadway Street,
Redwood City, California 94063, Attention: David G. Pine, Vice President and
General Counsel, telephone: (650) 569-5000.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered hereby
will be passed upon for us by Fenwick & West LLP, Two Palo Alto Square, Palo
Alto, California 94306. Fenwick & West LLP holds an option to purchase 6,250
shares of our Series A common stock.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 1998, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements are incorporated by reference in reliance on the report of
Ernst & Young LLP given on their authority as experts in accounting and
auditing.
The financial statements of Narrative incorporated in this prospectus by
reference to the audited historical financial statements included as Exhibit
99.01 of our Form 8-K/A filed on February 18, 1999 have been so incorporated in
reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on their authority as
experts in auditing and accounting.
38
<PAGE> 40
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AT HOME CORPORATION
919,000 SHARES OF
SERIES A COMMON STOCK
---------------------------------------------
PROSPECTUS
---------------------------------------------
IN CONNECTION WITH THIS OFFERING, NO PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS. IF
SUCH INFORMATION IS GIVEN OR REPRESENTATIONS MADE, YOU MAY NOT RELY ON SUCH
INFORMATION OR REPRESENTATIONS AS HAVING BEEN AUTHORIZED BY US. THIS PROSPECTUS
IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THOSE REGISTERED HEREBY, NOR IS IT AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY SECURITIES WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. YOU MAY NOT IMPLY FROM THE DELIVERY OF THIS PROSPECTUS, NOR FROM ANY
SALE MADE UNDER THIS PROSPECTUS, THAT OUR AFFAIRS ARE UNCHANGED SINCE THE DATE
OF THIS PROSPECTUS OR THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS IS
CORRECT AS OF ANY TIME AFTER THE DATE OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 41
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses payable by the
Registrant in connection with the sale and distribution of the securities being
registered hereby. Normal commission expenses and brokerage fees are payable
individually by the selling stockholders. All amounts are estimated except the
Securities and Exchange Commission registration fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $25,054
Nasdaq National Market filing fee........................... 17,500
Accounting fees and expenses................................ 10,000
Legal fees and expenses..................................... 30,000
Miscellaneous............................................... 7,446
-------
Total............................................. $90,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by the Delaware General Corporation Law, the Registrant's
Certificate of Incorporation includes a provision that eliminates the personal
liability of its directors to the Registrant or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability:
- for any breach of the director's duty of loyalty to the corporation or
its stockholders
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law
- under Section 174 of the Delaware General Corporation Law
- 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:
- for mandatory indemnification, to the fullest extent permitted by
applicable law, for any person who is or was a director or officer, or is
or was serving at the request of the Registrant as a director, officer,
employee or agent of another corporation or of a partnership, joint
venture, trust, enterprise or nonprofit entity, including service with
respect to employee benefit plans, against all liability and loss
suffered and expenses (including attorneys' fees) reasonably incurred by
such person
- that the Registrant's obligation to indemnify any person who was or is
serving at the Registrant's request as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust,
enterprise or nonprofit entity must be reduced by any amount such person
may collect as indemnification from such other corporation, partnership,
joint venture, trust, enterprise or nonprofit entity
- that the Registrant must advance to all indemnified parties the expenses
(including attorney's fees) incurred in defending any proceeding provided
that indemnified
II-1
<PAGE> 42
parties (if they are directors or officers) must provide the Registrant
an undertaking to repay such advances if indemnification is determined to
be unavailable
- that the rights conferred in the Certificate of Incorporation are not
exclusive
- that the Registrant may not retroactively amend the Certification of
Incorporation provisions relating to indemnity
The indemnification provision in the Registrant's Certificate of
Incorporation and the Indemnification Agreements entered into between the
Registrant and each of its directors and executive officers may be sufficiently
broad to permit indemnification of the Registrant's directors and officers for
liabilities arising under the Securities Act. The Registrant has also obtained
directors' and officers' liability insurance. The following documents are hereby
incorporated by reference:
DOCUMENT
1. Form of Fourth Amended and Restated Certificate of Incorporation of the
Registrant filed July 16, 1997 (incorporated by reference to Exhibit
3.06 to Registrant's registration statement on Form S-1, File No.
333-27323, declared effective July 11, 1997).
2. Form of Indemnification Agreement entered into by the Registrant with
each of its directors and executive officers (incorporated by reference
to Exhibit 10.09 to the Registrant's registration statement on Form
S-1, File No. 333-27323, declared effective July 11, 1997).
Certain agreements related to the Registrant's acquisition of Narrative
provide for the indemnification of the Registrant and its directors, officers
and employees from and against certain liabilities, including losses by the
Registrant and its directors, officers and employees arising out of
misrepresentations or breaches by Narrative regarding its business, and certain
liabilities of the Registrant and its directors, officers and employees arising
under the Securities Act, the Exchange Act or other federal or state laws. In
addition, the escrow agreement referenced below provides that some shares of the
Registrant's Series A common stock will be held as collateral for the indemnity
obligations of the Narrative stockholders to the Registrant and its directors,
officers and employees. The following documents are incorporated by reference:
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
II-2
<PAGE> 43
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 (see Exhibit 99.02).
5. Letter Agreement dated February 9, 1999 between the Registrant and
Greylock Equity Limited Partnership (see Exhibit 99.03).
ITEM 16. EXHIBITS.
The following exhibits are filed herewith or incorporated by reference
herein:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
2.01 Agreement and Plan of Merger by and among the Registrant,
Transitory Corporation (a subsidiary of the Registrant) and
Narrative dated December 17, 1998 (incorporated by reference
to Exhibit 2.1 to the Registrant's report on Form 8-K filed
with the Securities and Exchange Commission on January 14,
1999).
2.02 Certificate of Merger, as filed on December 30, 1998 with
the Secretary of State of the State of Delaware
(incorporated by reference to Exhibit 2.2 to the
Registrant's report on Form 8-K filed with the Securities
and Exchange Commission on January 14, 1999).
2.03 Escrow Agreement dated December 30, 1998 by and among the
Registrant, Charles M. Hazard, Jr. as representative of the
Narrative stockholders and State Street Bank and Trust
Company of California, N.A. as escrow agent (incorporated by
reference to Exhibit 2.3 to the Registrant's report on Form
8-K filed with the Securities and Exchange Commission on
January 14, 1999).
2.04 Rights Agreement dated December 30, 1998 by and between the
Registrant and each of the Narrative stockholders
(incorporated by reference to Exhibit 2.4 to the
Registrant's report on Form 8-K filed with the Securities
and Exchange Commission on January 14, 1999).
3.01 Form of Fourth Amended and Restated Certificate of
Incorporation of the Registrant filed July 16, 1997
(incorporated by reference to Exhibit 3.06 to the
Registrant's registration statement on Form S-1, File No.
333-27323, declared effective July 11, 1997).
3.02 Form of Second Amended and Restated Bylaws of Registrant
effective July 16, 1997 (incorporated by reference to
Exhibit 3.05 to the Registrant's registration statement on
Form S-1, File No. 333-27323, declared effective July 11,
1997).
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, 1997).
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, 1997).
</TABLE>
II-3
<PAGE> 44
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
5.01 Opinion of Fenwick & West LLP regarding legality of the
securities being registered.*
23.01 Consent of Fenwick & West LLP (included in Exhibit 5.01).*
23.02 Consent of Ernst & Young LLP, Independent Auditors.
23.03 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
24.01 Power of attorney.*
99.01 Press release issued by Registrant on December 18, 1998
announcing its agreement to acquire Narrative (incorporated
by reference to Exhibit 99.1 to the Registrant's report on
Form 8-K filed with the Securities and Exchange Commission
on January 14, 1999).
99.02 Letter Agreement dated February 9, 1999 by and between the
Registrant and Carlyle Venture Coinvestment LLC.*
99.03 Letter Agreement dated February 9, 1999 by and between the
Registrant and Greylock Equity Limited Partnership.*
</TABLE>
- ---------------
* Previously filed.
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 such 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 such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-4
<PAGE> 45
(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 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to 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 therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(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 such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. If a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered 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 such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of such
issue.
II-5
<PAGE> 46
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
At Home Corporation, certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Redwood City, State of California, on this 8th day of April,
1999.
AT HOME CORPORATION
By: /s/ THOMAS A. JERMOLUK
-------------------------------
Thomas A. Jermoluk
Chairman, President and
Chief Executive Officer
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 April 8, 1999
- ---------------------------- Officer and Chairman of the
Thomas A. Jermoluk Board
PRINCIPAL FINANCIAL OFFICER:
/s/ KENNETH A. GOLDMAN* Senior Vice President and April 8, 1999
- ---------------------------- Chief Financial Officer
Kenneth A. Goldman
PRINCIPAL ACCOUNTING
OFFICER:
/s/ ROBERT A. LERNER* Corporate Controller April 8, 1999
- ----------------------------
Robert A. Lerner
ADDITIONAL DIRECTORS:
/s/ WILLIAM R. HEARST III* Vice Chairman April 8, 1999
- ----------------------------
William R. Hearst III
Director
- ----------------------------
C. Michael Armstrong
/s/ L. JOHN DOERR* Director April 8, 1999
- ----------------------------
L. John Doerr
/s/ LEO J. HINDERY* Director April 8, 1999
- ----------------------------
Leo J. Hindery
/s/ JOHN C. MALONE* Director April 8, 1999
- ----------------------------
John C. Malone
</TABLE>
II-6
<PAGE> 47
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Director
- ----------------------------
John C. Petrillo
/s/ BRIAN L. ROBERTS* Director April 8, 1999
- ----------------------------
Brian L. Roberts
/s/ JAMES R. SHAW* Director April 8, 1999
- ----------------------------
James R. Shaw
/s/ DAVID M. WOODROW* Director April 8, 1999
- ----------------------------
David M. Woodrow
</TABLE>
*By: /s/ DAVID G. PINE
-----------------------------------
David G. Pine
Attorney-in-fact
II-7
<PAGE> 48
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- -------------
<S> <C>
23.02 Consent of Ernst & Young LLP, Independent Auditors.
23.03 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
</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
Amendment No. 1 to the Registration Statement (Form S-3) and related Prospectus
of At Home Corporation for the registration of 919,000 shares of its Series A
common stock and to the incorporation by reference therein of our report dated
January 19, 1999, with respect to the consolidated financial statements of At
Home Corporation included in its Annual Report (Form 10-K) for the year ended
December 31, 1998, filed with the Securities and Exchange Commission.
Ernst & Young LLP
San Jose, California
April 7, 1999
<PAGE> 1
EXHIBIT 23.03
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
April 23, 1998, which appears in Exhibit 99.01 of the Current Report on Form
8-K/A of At Home Corporation dated February 19, 1999. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
April 7, 1999
