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Filed Pursuant to Rule 424(B)(3)
Registration NO. 333-32228
[LOGO OF EXCITE@HOME]
At Home Corporation
$500,000,000 principal amount
4 3/4% Convertible Subordinated Notes due 2006
Shares of Series A Common Stock
issuable upon conversion of the notes
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Excite@Home's Series A common stock trades on the Nasdaq National Market.
Last reported sale price on June 6, 2000: $19.63 per share.
Trading Symbol: ATHM
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THE OFFERING
With this prospectus, the selling securityholders named in this prospectus
or in prospectus supplements may offer and sell the notes or the shares of our
Series A common stock into which the notes may be converted.
Interest of 4 3/4% per year on the principal amount is payable semiannually
beginning June 15, 2000.
Holders may convert the notes into shares of our Series A common stock at
any time on or before December 15, 2006, at a conversion price of $56.52 per
share, subject to adjustment upon specified events. We may redeem our notes on
or after December 20, 2002 at the redemption prices listed in this prospectus,
plus accrued interest. Holders of the notes also may require us to redeem the
notes if a fundamental change of Excite@Home, as defined in the prospectus,
occurs before December 15, 2006. The notes are general unsecured obligations
and are subordinated in right of repayment below all of our existing and future
senior debt.
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Investing in the notes or our Series A common stock involves a high degree
of risk. Please carefully consider the "Risk Factors" beginning on page 2 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 June 7, 2000.
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TABLE OF CONTENTS
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U.S. Federal Income Tax
Prospectus Summary.................... 1 Considerations........................ 34
Risk Factors.......................... 2 Selling Securityholders............... 40
Ratio of Earnings to Fixed Charges.... 21 Plan of Distribution.................. 43
Use of Proceeds....................... 21 Legal Matters......................... 45
Dividend Policy....................... 21 Experts............................... 45
Description of Notes.................. 22 Where You Can Find More Information... 45
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ABOUT THIS PROSPECTUS
We make many statements in this prospectus under the captions "Prospectus
Summary," "Risk Factors" and elsewhere that are forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. These statements relate to our future plans, objectives,
expectations and intentions. We may identify these statements by the use of
words such as "believe," "expect," "anticipate," "intend" and "plan" and
similar expressions. These forward-looking statements involve risks and
uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including those we discuss in "Risk Factors" and elsewhere in this prospectus.
These forward- looking statements speak only as of the date of this prospectus,
and we caution you not to rely on these statements without also considering the
risks and uncertainties associated with these statements and our business.
@Home, Excite, Excite@Home, MatchLogic and the @ball logo are our registered
trademarks, and Excite Network is also our trademark. Other trademarks and
tradenames appearing in this prospectus are the property of their respective
holders.
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PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company, the notes being sold in this offering and
our financial statements and notes thereto appearing elsewhere in this
prospectus. Unless the context otherwise requires, the terms "we," "us," "our"
and Excite@Home refer to At Home Corporation and its wholly-owned subsidiaries.
Excite@Home is a global media company offering broadband Internet
connectivity, personalized web-based content and targeted advertising services.
Our @Home service provides broadband Internet access from consumers' homes over
the cable television infrastructure and offers end-to-end managed connectivity
services for businesses over both cable and digital telecommunications lines.
Our media services include the Excite Network, a leading consumer Internet
portal and MatchLogic, our targeted advertising service. The Excite Network
offers search, content, community, communications services and commerce
functionality to Internet users. Excite's media services focus on comprehensive
navigation, global reach and personalization technology to attract and retain
users and achieve market share. MatchLogic provides advertisers with targeted
ad campaign management and other advertising-related services designed to
improve the effectiveness of their advertising campaigns.
At Home Corporation was incorporated under the laws of Delaware in March
1995. Our principal executive offices are located at 450 Broadway Street,
Redwood City, California 94063. The primary telephone number for our principal
executive offices is (650) 556-5000.
THE OFFERING
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Securities Offered... $500,000,000 principal amount of 4 3/4% Convertible
Subordinated Notes due 2006.
Interest............. 4 3/4% per year on the principal amount, payable semi-
annually in arrears in cash on June 15 and December 15
of each year, beginning June 15, 2000.
Conversion........... You may convert each note into Series A common stock at
any time on or before December 15, 2006, at a conversion
price of $56.52 per share, subject to adjustment if
certain events affecting our Series A common stock
occur.
Subordination........ The notes will be subordinated to all of our existing
and future senior indebtedness and are effectively
subordinated to all debt and other liabilities of our
subsidiaries. As of April 30, 2000, we had approximately
$3.4 million of senior indebtedness outstanding and our
subsidiaries had approximately $74.8 million of
liabilities outstanding. Neither we nor our subsidiaries
are limited from incurring debt, including senior
indebtedness, under the indenture.
Optional Redemption.. We may redeem any of the notes on or after December 20,
2002, by giving you at least 30 days' notice. We may
redeem the notes either in whole or in part at the
redemption prices set forth in this prospectus, together
with accrued and unpaid interest.
Fundamental Change... If a fundamental change (as described under "Description
of Notes--Redemption at Option of the Holder") occurs on
or before December 15, 2006, you may require us to
purchase all or part of your notes at a redemption price
equal to 100% of the outstanding principal amount of the
notes being redeemed, plus accrued and unpaid interest.
Use of Proceeds...... We will not receive any cash from the sale of our notes
or Series A common stock offered with this prospectus.
NASDAQ National
Market Symbol ...... ATHM
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RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks described below are not the only ones facing
our company. Additional risks not presently known to us, or that we currently
deem immaterial, may also impair our business operations. Our business,
financial condition or results of operations could be seriously harmed by any
of these risks. The trading price of the notes or our Series A common stock
could decline due to any of these risks, and you may lose all or part of your
investment.
Risks Related to Excite@Home's Business
We may fail to integrate our business and technologies with the business and
technologies of Bluemountain.com and the other companies we have recently
acquired or may acquire.
We have completed several acquisitions recently, including our acquisitions
of iMALL, Inc. in October 1999, Bluemountain.com in December 1999 and others.
We intend to pursue additional acquisitions in the future. If we fail to
integrate these businesses, our quarterly and annual results may be adversely
affected. Integrating acquired organizations and products and services could
be expensive, time-consuming and a strain on our resources. Risks we could
face with respect to acquisitions include:
. the difficulty of integrating acquired technology or content and rights
into our services;
. the difficulty of assimilating the personnel of the acquired companies;
. the difficulty of coordinating and integrating geographically-dispersed
operations;
. our ability to retain customers of an acquired company;
. the potential disruption of our ongoing business and distraction of
management;
. the maintenance of brand recognition of acquired businesses;
. the failure to successfully develop acquired in-process technology;
. unanticipated expenses related to technology integration;
. the maintenance of uniform standards, corporate cultures, controls,
procedures and policies;
. the impairment of relationships with employees and customers as a result
of the integration of new management personnel.
In addition, we may be unable to identify future acquisition targets and we
may be unable to complete future acquisitions on reasonable terms.
Our @Home 2000 service may experience unforeseen problems as deployment
continues, and we may not be successful in integrating other aspects of
Excite's Internet services with the @Home service.
Although we have launched @Home 2000, which integrates the technology
platform of the @Home network broadband services with Excite's Internet
services, we have not fully integrated these services. In addition, @Home 2000
has not experienced significant traffic to date due to its recent release and
we cannot ensure that problems will not occur in widespread deployment.
Further integration of the Excite and MatchLogic services with the @Home
network broadband platform poses a number of technical challenges, including
difficulties associated with providing reliable updating and personalization
of content over @Home's broadband services and the difficulties associated
with applying the advertising services and targeting technologies of Excite's
MatchLogic subsidiary over the @Home broadband services. This is particularly
challenging because it is more difficult to provide regularly updated and
personalized information from distributed regional data centers, which we rely
upon to deliver our broadband services, than it is to deliver services from a
central data center, as Excite and MatchLogic currently do, in delivering
their narrowband services. We may not be able to achieve the same level of
reliability in providing updated and personalized Excite broadband content
over the @Home service as we have achieved with the Excite narrowband service.
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Recently-acquired businesses may not be successful.
We have recently acquired companies in an early stage of development and
with unproven business models. Acquired features, functions, products or
services may not achieve market acceptance.
iMALL. Prior to August 1998, substantially all of iMALL's revenues were
attributable to its seminar business. This business was discontinued in August
1998. iMALL has yet to achieve significant revenue from its current business of
providing turnkey electronic commerce services to online merchants or its other
shopping-oriented web sites. A market for iMALL's services may not develop, and
iMALL's services may not become widely accepted.
Bluemountain.com. The acquisition of Bluemountain.com also involves a number
of risks. For example, prior to the acquisition, the Bluemountain.com
electronic greeting card service only sold limited advertising on its web
sites. Bluemountain.com users may not accept a service that displays
advertising. Bluemountain.com users may not continue to use the
Bluemountain.com service for other reasons. For instance, competitive
electronic greeting card sites have increased in popularity. Also, the
popularity of electronic greeting card services could decline generally.
Additionally, advertisers may not choose to advertise on the Bluemountain.com
service if users do not accept advertising or purchase goods or services
advertised on Bluemountain.com in sufficient quantities.
During 2000, we have acquired Kendara, Inc. and Worldprints.com
International, Inc. and we expect to acquire several other companies during
2000. These companies have specific technology and other capabilities that we
may not be able to successfully integrate with our services or transition to
our online platforms. As a result, we may incur unexpected integration and
product development expenses that could harm our results of operations. We may
also be required to record charges to operations related to the impairment of
acquired technology or other intangible assets.
We have incurred and expect to continue to incur substantial losses.
At Home Corporation was incorporated in March 1995, commenced operations in
August 1995, and has incurred net losses in each fiscal period since its
inception. As of March 31, 2000, we had an accumulated deficit of $2,361
million, which includes depreciation and amortization, cost and amortization of
acquisition-related intangibles and deferred compensation and cost and
amortization of distribution agreements of approximately $2,317 million since
inception. In addition, we currently intend to increase capital expenditures
and operating expenses in order to expand our network, market and provide our
broadband services to potential subscribers and expand our international
operations. As a result of the acquisitions of Excite, iMALL, Bluemountain.com
and other companies, we anticipate that we will incur substantial non-cash
charges including those relating to the amortization of goodwill and other
intangible assets in future periods. Therefore, we anticipate that we will
incur significant net losses for the foreseeable future.
Our quarterly operating results may fluctuate because of a number of factors.
Our quarterly operating results may fluctuate significantly in the future as
a result of a variety of factors, many of which are outside of our control.
These factors include:
. the level of usage of the Internet in general and portal web sites in
particular;
. subscriber growth rates and prices charged by our cable partners;
. demand for Internet advertising;
. the addition or loss of advertisers;
. the level of user traffic on our web sites used for our narrowband
services;
. the mix of types of advertising we sell, such as the mix of targeted
advertising as compared to general rotation advertising;
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. the amount and timing of capital expenditures and other costs relating
to the expansion of our operations;
. the introduction of new products or services by us or our competitors;
. pricing changes for Internet-based advertising;
. the timing of marketing expenditures to promote our brands;
. costs incurred with respect to acquisitions;
. seasonality during the first quarter of each year associated with the
advertising business and Bluemountain.com; and
. general economic conditions.
Our expense levels are based in part on expectations of future revenue and,
to a large extent, are fixed. We may be unable to adjust spending quickly
enough to compensate for any unexpected revenue shortfall.
Our Internet advertising revenue is subject to seasonal fluctuations.
Historically, advertisers spend less in the first and third calendar quarters,
and user traffic for our narrowband services has historically been lower
during the summer and during year-end vacation and holiday periods.
Due to all of the foregoing factors and the other risks described in this
section, you should not rely on quarter-to-quarter comparisons of our results
of operations as an indication of future performance, particularly in light of
the number of acquisitions we have completed. It is possible that in some
future periods our results of operations may be below the expectations of
public market analysts and investors. In this event, the price of our Series A
common stock may fall.
If we do not develop new and enhanced features, products and services for our
narrowband and broadband services, we may not be able to attract and retain a
sufficient number of users.
Because of the competitiveness of our market, we believe it is important to
introduce additional or enhanced features, products and services in the future
in order to differentiate our services and retain our current users and
attract new users. Acquiring or developing new features, products and services
may require a substantial investment of personnel and financial and other
resources. If we introduce a feature, product or service that is not favorably
received by our current users, they may not continue using our services as
frequently and they may choose a competing service.
We must also continually enhance our products and services to incorporate
rapidly changing Internet technologies. We could incur substantial development
costs if we need to modify our products, services or infrastructure to adapt
to changes in Internet technologies. Our business could be harmed if we incur
significant costs to adapt to these changes. If we cannot adapt to these
changes, users may discontinue using our services. Additionally, a new
feature, product or service may not gain acceptance with users and we may not
achieve a return on our investment.
We may also experience difficulties that could delay or prevent us from
introducing new features, products or services. Furthermore, these features,
products or services may contain errors that are discovered after the feature,
product or services are introduced. We may need to modify their design
significantly to correct these errors. In addition, we must consult with and
involve our principal cable partners in the development and design of new
features, products or services for our broadband services. Therefore, the
process of introducing new broadband features, products and services is time
consuming and if our principal cable partners object to a new feature, product
or service, we could be prohibited from offering it in particular areas. Our
business could be adversely affected if we experience difficulties in
introducing new products and services or if users do not accept these new
products or services.
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We depend on the sale of advertisements on our services, and if online
advertising does not become accepted, or if users employ new technology to
block or filter online advertising, our business would be harmed.
We expect to derive a substantial amount of our revenues from the sale of
advertising on our services for the foreseeable future. No standards have been
widely accepted to measure the effectiveness of online advertising. If
standards do not develop, existing advertisers may not continue their current
levels of online advertising. Furthermore, advertisers that have traditionally
relied upon other advertising media may be reluctant to advertise online.
Advertisers that already have invested substantial resources in other
advertising methods may be reluctant to adopt a new strategy. Our business
would be harmed if the market for online advertising fails to develop or
develops more slowly than expected.
Different pricing models are used to sell online advertising. It is
difficult to predict which, if any, will emerge as the industry standard. This
makes it difficult to project future advertising rates and revenues. For
example, advertising rates based on the number of "click throughs," or user
requests for additional information made by clicking on the advertisement,
instead of rates based solely on the number of impressions, or number of times
an advertisement is displayed, could adversely affect our revenues because
impression-based advertising comprises a substantial majority of our current
advertising revenues. Our advertising revenues could be harmed if we are unable
to adapt to new forms of online advertising.
Moreover, "filter" software programs that limit or prevent advertising from
being delivered to a web user's computer are available. Other software programs
are able to hide a web user's identity and prevent "cookies" from being written
to, or read from, the user's hard drive. Cookies are bits of information keyed
to a specific memory location and passed to a web site server through the
user's browser software. This software prevents the proper operation of our
services, including personalization of the My Excite Start Page and targeted
banner advertising. Widespread adoption of software products such as these
could reduce the attractiveness of our personalization features and harm the
commercial viability of online advertising.
We must develop and maintain the awareness of our brands to attract consumers
and advertisers.
Maintaining and strengthening our brands is critical to achieving widespread
acceptance of our services by consumers and advertisers, particularly in light
of the competitive nature of our markets. Promoting and positioning our brands
will depend largely on the success of our marketing efforts and our ability to
provide high quality services. We may find it necessary to increase our
marketing budget or otherwise increase our financial commitment to creating and
maintaining brand loyalty among users. If we fail to promote and maintain our
brands or incur excessive expenses in an attempt to promote and maintain our
brands, our business could be harmed.
Privacy concerns could lead to legislation or new technology that could make
it more difficult for us to deliver targeted advertising.
Due to privacy concerns, some Internet commentators, consumer advocates and
governmental officials have suggested that the use of cookies be limited or
eliminated. In addition, certain currently available web browsers allow a user
to delete cookies or prevent cookies from being stored on the user's hard
drive, and technology that shields e-mail addresses, cookies and other
electronic means of identification could become commercially accepted. Any
reduction or limitation in the use of cookies through legislation, new
technology or otherwise, could limit the effectiveness of our ad targeting,
which could harm our business.
We could face liability related to the privacy of personal information about
our users.
Our narrowband services use cookies to deliver targeted advertising, help
compile demographic information about users and limit the frequency with which
an advertisement is shown to the user. Cookies are placed on the user's hard
drive, often without the user's knowledge or consent. We could face liability
relating
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to the collection and use of this information, as well as other misuses such as
unauthorized marketing. The Federal Trade Commission and some states have been
investigating Internet companies regarding their use of personal information,
and some groups have initiated legal action against Internet companies
regarding their privacy practices. In addition, the United States federal and
various state governments have proposed new laws restricting the collection and
use of information regarding Internet users. We could incur additional expenses
if new regulations regarding the use of personal information are introduced or
if government agencies choose to investigate our privacy practices.
The sponsorship advertising we sell subjects us to financial and other risks.
We derive a substantial portion of our revenues from sponsorship
arrangements. These are advertising relationships under which third parties
receive sponsored services and placements on our services in addition to
traditional banner advertisements across our services. These arrangements
expose us to potential financial risks, including the risk that we fail to
deliver required minimum levels of user impressions, that third party sponsors
do not perform their obligations under these agreements, or that they do not
renew the agreements at the end of their term. These arrangements also require
us to integrate sponsors' content with our services, which can require the
dedication of resources and programming and design efforts to accomplish. We
may not be able to attract additional sponsors or renew existing sponsorship
arrangements when they expire.
In addition, we have granted exclusivity provisions to some of our sponsors,
and may in the future grant additional exclusivity provisions. These
exclusivity provisions may have the effect of preventing us from accepting
advertising or sponsorship arrangements from certain advertisers during the
term of the agreements. Our inability to enter into further sponsorship or
advertising arrangements as a result of any exclusivity arrangements could harm
our business.
Our equity investments in other companies may not yield any returns.
We have made equity investments in many Internet companies, including joint
ventures in other countries. In most instances, these investments are in the
form of illiquid securities of private companies. These companies typically are
in an early stage of development and may be expected to incur substantial
losses. Due to recent market volatility, some of these companies may alter
plans to go public, and others that have gone public have experienced or may
experience significant decreases in the trading prices of their common stock.
Our investments in these companies may not yield any return. Furthermore, if
these companies are not successful, we could incur charges related to write-
downs or write-offs of assets. We also record and continue to record a share of
the net losses in some of these companies, up to our cost basis, if they are
equity investments. We intend to continue to invest in illiquid securities of
private companies and in joint ventures in the future. Losses or charges
resulting from these investments could harm our operating results.
We must maintain the security of our networks.
We have in the past experienced security breaches in our networks. We have
taken steps to prevent these breaches, to prevent users from sharing files via
the @Home service and to protect against bulk unsolicited e-mail. However,
actual problems with, as well as public concerns about, the security, privacy
and reliability of our networks may inhibit the acceptance of our services.
The need to securely transmit confidential information over the Internet has
been a significant barrier to electronic commerce and communications over the
Internet. Any well-publicized compromise of security could deter more people
from using the Internet or our services to conduct transactions that involve
transmitting confidential information, such as purchases of goods or services.
Because many of our advertisers seek to encourage people to use the Internet to
purchase goods or services, our business could be harmed if this were to occur.
We may also incur significant costs to protect against the threat of security
breaches or to alleviate problems caused by these breaches.
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Our limited experience with international operations may prevent us from
growing our business outside the United States.
A key component of our strategy is to expand into international markets and
offer broadband and narrowband services in those markets. We have 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. Some of our investments in international joint ventures include an
option to purchase the interests of other joint venture stockholders which, if
not exercised by a specified date, gives the other joint venture stockholders
the right to purchase our interest in the joint venture for a nominal price.
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 broadband and narrowband 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; and
. lack of a developed cable infrastructure in many international markets.
We may be liable for our links to third-party web sites.
We could be exposed to liability with respect to the third-party web sites
that may be accessible through our services. These claims may allege, among
other things, that by linking to web sites operated by third parties, we may
be liable for copyright or trademark infringement or other unauthorized
actions by third parties through these web sites. Other claims may be based on
errors or false or misleading information provided by our services. Our
business could be harmed due to the cost of investigating and defending these
claims, even to the extent these types of claims do not result in liability.
We may face potential liability from our electronic commerce-related
advertising arrangements.
Some of our advertising relationships provide that we may receive payments
based on the amount of goods or services purchased by consumers clicking from
our services to a seller's web site. These arrangements may expose us to legal
risks and uncertainties, including potential liabilities to consumers of the
advertised products and services. Although we carry general liability
insurance, our insurance may not cover potential claims of this type or may
not be adequate to indemnify us for all liability that may be imposed.
Some of the liabilities that may result from these arrangements include:
. potential liabilities for illegal activities that may be conducted by
the sellers;
. product liability or other tort claims relating to goods or services
sold through third-party e-commerce sites;
. claims for consumer fraud and false or deceptive advertising or sales
practices;
. breach of contract claims relating to purchases; and
. claims that items sold through these sites infringe third-party
intellectual property rights.
Even to the extent that these claims do not result in material liability,
investigating and defending these claims could harm our business.
Protection of our intellectual property rights is costly and difficult.
We regard our intellectual property, including our patents, copyrights,
trademarks, trade secrets, and similar intellectual property as critical to
our success. We rely upon patents, trademark and copyright law, trade
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secret protection and confidentiality and license agreements to protect our
proprietary rights. Effective protection of intellectual property may not be
available in every country in which our products and services are available.
We cannot guarantee that the steps we have taken to protect our proprietary
rights will be adequate.
We may be subject to intellectual property infringement claims which are
costly to defend and could limit our ability to use certain technologies in
the future.
Many parties are actively developing Internet-related technologies. We
believe that these parties will continue to take steps to protect these
technologies, including seeking patent protection. As a result, we believe
that disputes regarding the ownership of these technologies are likely to
arise in the future. From time to time, parties assert patent infringement
claims against us in the form of letters, lawsuits and other forms of
communications. In addition to patent claims, third parties may assert claims
against us alleging infringement of copyrights, trademark rights, trade secret
rights or other proprietary rights or alleging unfair competition.
We may incur substantial expenses in defending against third-party
infringement claims regardless of the merit of the claims. In the event that
there is a determination that we have infringed third-party proprietary
rights, we could incur substantial monetary liability and be prevented from
using the rights in the future.
Our business depends on the continued growth in Internet use.
We operate in a new and rapidly evolving market. Our business may be
adversely affected if usage of the Internet or other online services does not
continue to grow. This growth could be hindered by a number of factors
including the adequacy of the Internet's infrastructure to meet increased
usage demands, privacy and security concerns and the availability of cost-
effective services. Any of these issues could cause the Internet's performance
or level of usage to decline.
Our substantial leverage and debt service obligations may adversely affect
our cash flow.
We have substantial amounts of outstanding indebtedness, primarily from our
convertible subordinated debentures due 2018 and our 4 3/4% convertible
subordinated notes due 2006. We may be unable to generate cash sufficient to
pay the principal of, interest on and other amounts due in respect of our
indebtedness when due. As of March 31, 2000, the total principal amount of our
debt outstanding was $942 million. Our substantial leverage could have
significant negative consequences, including:
. increasing our vulnerability to general adverse economic and industry
conditions;
. limiting our ability to obtain additional financing;
. requiring the dedication of a substantial portion of our expected cash
flow from operations to service our indebtedness, thereby reducing the
amount of our expected cash flow available for other purposes, including
capital expenditures;
. limiting our flexibility in planning for, or reacting to, changes in our
business and the industry in which we compete; and
. placing us at a possible competitive disadvantage compared to less
leveraged competitors and competitors that have better access to capital
resources.
Future acquisitions could result in dilutive issuances of stock and the need
for additional financing.
We have typically paid for our acquisitions by issuing shares of our
capital stock. In the future, we may effect other large or small acquisitions
by using stock, and this will dilute our stockholders. We may also use cash to
buy companies or technologies in the future, as we did for a portion of the
purchase price for Bluemountain.com, and we may need to incur additional debt
to pay for these acquisitions. Acquisition financing may not be available on
favorable terms or at all. In addition, we will likely be required to amortize
significant amounts of goodwill and other intangible assets in connection with
future acquisitions, which will have a material effect on our results of
operations.
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We must manage our growth.
Our growth and recent acquisitions have placed a significant strain on our
managerial, operational, and financial resources. For example, we have grown
from 570 employees at December 31, 1998 to more than 2,400 employees at March
31, 2000. In addition, we plan to continue to hire additional personnel. To
manage our growth, we must continue to implement and improve our operational
and financial systems and to expand, train and manage our employee base. Any
failure to manage growth effectively could harm our business.
Government regulation and legal uncertainties relating to the Internet could
hinder the popularity of the Internet.
New Internet privacy and other laws. There are currently few laws or
regulations that specifically regulate communications or commerce on the
Internet. However, laws and regulations may be adopted in the future that
address issues such as user privacy, pricing, content and the characteristics
and quality of products and services. For example:
. The United States federal government and various state governments have
proposed limitations on the collection and use of information regarding
Internet users. In October 1998, the European Union adopted a directive
that may result in limitations on our ability to collect and use
information regarding Internet users in Europe.
. Several telecommunications companies have petitioned the Federal
Communications Commission to regulate Internet service providers and
online service providers in a manner similar to long distance telephone
carriers and to impose access fees on these companies. This could
increase the cost of transmitting data over the Internet.
. A portion of the Telecommunications Act, which has since been ruled
unconstitutional, sought to prohibit transmitting certain types of
information and content over the Internet.
Moreover, it may take years to determine the extent to which existing laws
relating to issues such as property ownership, libel and personal privacy are
applicable to the Internet. Any new laws or regulations relating to the
Internet could harm our business.
Tax laws. The tax treatment of the Internet and electronic commerce is
currently unsettled. A number of proposals have been made at the federal, state
and local level and by certain foreign governments that could impose taxes on
the sale of goods and services and certain other Internet activities. Our
business may be harmed by the passage of laws in the future imposing taxes or
other burdensome regulations on online commerce.
Other jurisdictions. Because our service is available in multiple states and
foreign countries, these jurisdictions may claim that we are required to
qualify to do business as a foreign corporation in each of these states and
foreign countries. If we fail to qualify as a foreign corporation in a
jurisdiction where we are required to do so, we could be subject to taxes and
penalties.
We could face liability for defamatory or indecent content provided on our
services.
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 against Internet and
online services providers. Our insurance may not adequately protect us from
these types of claims.
In addition, legislation has been proposed that prohibits, or imposes
liability for, transmission over the Internet of indecent content. The
imposition upon Internet and online service providers of potential liability
for information carried on or disseminated through their systems could require
us to implement measures to reduce
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our exposure to this liability. This may require that we expend substantial
resources or discontinue service or product offerings. The increased focus on
liability issues as a result of these lawsuits and legislative proposals could
impact the growth of Internet use. Furthermore, governments of some foreign
countries, 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 future success depends on our ability to attract, retain and motivate
highly skilled employees.
Our future success depends on our ability to attract, retain and motivate
highly skilled employees. Competition for employees in the Internet industry is
intense, particularly in the Silicon Valley where we are headquartered. Due to
the recent decline in the trading price of our common stock, we may face
challenges in attracting and retaining employees. Additionally, the exercise
price of a significant portion of our equity awards such as stock options may
be higher than the current trading price of our stock, and such stock options
may not retain the incentive effect intended at the time of issuance. We may
issue additional equity awards from time to time to retain employees and this
may dilute existing shareholders. We may be unable to attract, assimilate or
retain other highly qualified employees in the future. We have from time to
time experienced, and we expect to continue to experience in the future,
difficulty in hiring and retaining highly skilled employees with appropriate
qualifications. Recently, several members of executive management have resigned
from our company, and although we have replaced most of these employees, the
new employees have generally not had previous experience working together with
each other or other members of executive management. The risk of attracting and
retaining qualified employees is compounded by the fact that we are controlled
by our principal cable partners or by AT&T alone if the transactions
contemplated by the recently-announced agreements with our cable partners
become effective, and therefore we may not have the same flexibility as a
typical Silicon Valley company to pursue initiatives proposed by management.
Furthermore, certain key employees possess marketing, technical and other
expertise which is important to the operations of our business, and if these
employees leave, we may not be able to replace them with employees possessing
comparable skills.
Risks Relating to Excite@Home's Broadband Services
Our broadband business is unproven, and it may not achieve profitability.
The profit potential of our broadband business model is unproven and our
broadband services may not achieve widespread consumer or commercial
acceptance. We have had difficulty predicting whether the pricing models or
revenue sharing arrangements with our cable partners for our broadband services
will prove to be viable, whether demand for our broadband services will
continue at the prices our cable partners charge for our broadband services, or
whether current or future pricing levels will be sustainable. If these pricing
levels are not achieved or sustained or if our broadband services do not
achieve or sustain broad market acceptance, our business will be significantly
harmed.
Growth of our broadband service may be inhibited by factors beyond our
control.
Our ability to increase the number of subscribers to our broadband service
to achieve our business plans and generate future revenues will depend on many
factors which are beyond our control. For instance, some of our cable partners
have not achieved the subscriber levels that we had originally anticipated.
Other factors include:
. the rate at which our current and future cable partners upgrade their
cable infrastructures for two-way data services;
. 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;
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. the prices that our cable partners set for the @Home service and for its
installation;
. the speed at which our cable partners can complete the installations
required to initiate service for new subscribers;
. the commercial availability of self-installable, two-way modems that
comply with the recently adopted interface standards known as DOCSIS,
and the success of the roll-out of these products with the @Home
service; and
. the quality of customer and technical support our cable partners
provide.
We need to add subscribers at a rapid rate for our broadband business to
succeed, but we may not achieve our subscriber growth goals.
Our actual revenues or the rate at which we add new subscribers may differ
from our forecasts. We may not be able to increase our subscriber base enough
to meet our internal forecasts or the forecasts of industry analysts or to a
level that meets the expectations of investors. The rate at which subscribers
have increased in the past does not necessarily indicate the rate at which
subscribers may be expected to grow in the future.
Our broadband subscriber growth is limited by installation and price
constraints.
Installation of the @Home service generally requires a customer service
representative employed by a cable partner to install a cable modem at a
customer's location and therefore can be time consuming. If we are unable to
speed the installation of our service, our subscriber growth could be
constrained. 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 service. Recently, companies have begun to
offer free Internet access with the purchase of personal computers and some
Internet service providers have reduced or eliminated Internet access charges
in exchange for placing advertisements on a customer's computer screen. If
these promotions become more widely used, or if Internet access fees decline,
consumers may be less willing to pay a premium for broadband services, or our
broadband services in particular.
If we cannot maintain the scalability and speed of our @Home broadband
network, customers will not accept our broadband services.
Due to the limited deployment of our broadband services, the ability of our
broadband network to connect and manage a substantial number of subscribers at
high transmission speeds is unknown. Therefore, we face risks related to our
network's ability to be scaled up to accommodate increased subscriber levels
while maintaining performance. Our network may be unable to achieve or
maintain a high speed of data transmission, especially as the number of our
subscribers increases. Because of our reliance on regional data centers and
the cable infrastructure located in particular geographic areas to support our
broadband services, our and our cable partners' infrastructure must also be
able to accommodate increased subscribers in a particular area. If the
existing infrastructure for a geographic area does not accommodate additional
subscribers, network performance for an area could decline causing us to lose
subscribers in that area, especially if a cable partner was unwilling to
upgrade its infrastructure in that area.
In recent periods, the performance of the @Home network has experienced
some deterioration in some markets partially as a result of subscriber abuse
of the @Home service. While we are seeking to eliminate this abuse by
enforcing our acceptable-use policy and by limiting users' upstream bandwidth,
our failure to do so may result in slower network performance and reduced
customer demand for our services.
If new "DOCSIS" compliant and self-installable cable modems are not deployed
timely and successfully, our subscriber growth could be constrained.
Currently, each of our subscribers must typically obtain a cable modem from
a cable partner to access the @Home service. The North American cable industry
has recently adopted interface standards known as
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DOCSIS for hardware and software to support the delivery of data services over
the cable infrastructure utilizing compatible cable modems. Some of our cable
partners have chosen to delay deployments of the @Home service until the
commercial availability of DOCSIS-compliant cable modems is widespread, among
other reasons. Also, cable modem manufacturers have experienced, and may
continue to experience, production and delivery problems with cable modem
components that may restrict the number of modems available. Cable modem
manufacturers may also delay the production or delivery of cable modems for
various economic or other reasons. 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 because they are not able to obtain a
sufficient quantity of DOCSIS-compliant modems and if such modems do not become
widely available through other channels.
We believe that our ability to meet our subscriber goals depends on the
degree to which two-way cable modems become widely available in channels such
as personal computer manufacturers and retail outlets. Currently, this
widespread availability has not yet occurred. In addition, these modems must be
easy for consumers to install themselves, rather than requiring a customer
service representative to perform the installation. If two-way cable modems do
not become quickly available in outlets other than through cable television
companies, or if they cannot be installed easily by consumers, it would be
difficult for us to attract large numbers of additional subscribers and our
business would be harmed.
Our broadband business may be impacted by cable access proposals and other
government regulation.
Currently, our broadband services are not directly subject to regulations of
the Federal Communication Commission or any other federal, state or local
communications regulatory agency. However, there may be changes in the
regulatory environment relating to the Internet, cable television or
telecommunications markets. These changes could require regulatory compliance
by us, impact our exclusivity arrangements or limit our ability to provide
broadband services to our subscribers, and therefore could adversely affect our
revenues and results of operations. Such possible government regulations
include the following:
. The FCC or local agencies could require our cable partners to grant
competitors access to their cable systems. GTE, MindSpring Enterprises,
Inc., Consumers Union and other parties have requested Congress, the
Federal Communications Commission and state and local authorities to
require cable operators to provide Internet and online service providers
with unbundled access to their cable systems. Some parties have also
attempted to petition for unbundled access under existing cable
franchising rules, such as those for local programming access. If we or
our cable partners are classified as common carriers, or if government
authorities require third-party access to cable networks or unaffiliated
Internet service providers, our competitors may be able to provide
service over our cable partners' systems. The rates that our cable
partners charge for this third-party access, or for the @Home services,
could also be subject to rate regulation or tariffing requirements.
. Local governmental proceedings. Some local jurisdictions, including
Portland and Multnomah County, Oregon and Broward County, Florida, have
imposed third-party access requirements on AT&T and other cable
companies operating in those communities. The imposition of these
requirements has been challenged in Federal Courts. In June 1999, a U.S.
District Court upheld the third-party access requirement imposed on AT&T
by Portland and Multnomah County. This decision was appealed to the U.S.
Court of Appeals for the Ninth Circuit and arguments were presented to
the court in November 1999. Although appeals decisions have no time
limit, most rulings occur within three to twelve months after the date
arguments are presented. Numerous other local jurisdictions have
considered or are considering imposing similar third-party access
requirements and other municipalities may consider imposing similar
requirements in the future.
. Other litigation. In October 1999, GTE filed a lawsuit in a U.S.
District Court and in November 1999, a class action was filed, each
alleging violations by us of the federal antitrust laws. Although it is
too early to predict the outcome of this litigation, we could be forced
to pay damages, allow other service providers to utilize our network,
otherwise alter the way we do business or incur significant costs in
defending these litigations. Any of these outcomes could harm our
business. In addition, others could initiate litigation on similar legal
theories in the future.
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. Federal regulation. Regulatory changes that affect telecommunications
costs, limit usage of subscriber-related information or increase
competition from telecommunications companies could affect our pricing
or ability to market our broadband services successfully. For example,
changes in the regulation of cable television rates may affect the speed
at which our cable partners upgrade their cable systems to carry our
broadband services.
. Regulation by local franchise authorities. Many of our United States
cable partners' local cable affiliates have elected to classify the
provision of the @Home service as an additional cable service under
their local franchise agreements, and to pay franchise fees under those
agreements. Local franchise authorities may attempt to subject cable
systems to higher or different franchise fees, taxes or other
requirements in connection with their distribution of the @Home service.
There are thousands of franchise authorities, and thus it would be
difficult or impossible for us or our cable partners to operate without
a uniform set of franchise requirements.
We could lose subscribers, distribution relationships and revenues related to
broadband services to our competitors.
The markets for consumer and business broadband services are extremely
competitive, and we expect that competition will intensify in the future. Our
most direct competitors for broadband services include the following:
. Providers of cable-based Internet services. Media One Group, which AT&T
has agreed to acquire, and Time Warner Inc. have deployed high-speed
Internet access services over their local cable networks through their
own cable-based Internet service, Road Runner. We currently compete with
Road Runner to establish distribution arrangements with cable system
operators and we may compete for subscribers in the future if and when
our cable partners cease to be subject to their exclusivity obligations.
In addition, we compete with other providers of cable-based Internet
services, such as ISP Channel, Inc. and High Speed Access Corporation.
. Telecommunications providers. We compete with national long-distance and
local exchange carriers that offer high-speed, Internet access services
such as asymmetric digital subscriber line, known as DSL. Recently,
these services have been offered in a number of areas and at lower
prices than in the past. If the advanced services offered by these
companies are deregulated, this would further enhance the ability of
these companies to compete against our services.
. Internet and online service providers. We compete with Internet service
providers that provide basic Internet access services, online service
providers such as America Online, and other Internet portals and online
services that have announced broadband strategies, such as Yahoo!.
. Many of our competitors and potential competitors have substantially
greater financial, technical and marketing resources, larger subscriber
bases, longer operating histories, greater name recognition and more
established relationships with advertisers and content and application
providers than we do. These competitors may be able to undertake more
extensive marketing campaigns, adopt more aggressive pricing policies
and devote more resources to developing Internet services or online
content than we can. We may not be able to compete successfully against
current or future competitors. Competitive pressures could significantly
impact the growth of our broadband subscriber base and our ability to
renew and enter into new distribution agreements and as a result may
hurt our revenues.
. The proposed merger between America Online and Time Warner Inc. creates
uncertainties about which cable markets will be served by Road Runner on
an exclusive or non-exclusive basis, and the merger may improve Road
Runner's ability to negotiate distribution agreements with cable system
operators. Additionally, our principal shareholder, AT&T, will have a
substantial ownership interest in Time Warner and Road Runner if its
proposed merger with MediaOne is completed. This relationship between
America Online, AT&T, Time Warner and Road Runner creates further
uncertainties about
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which cable markets we will be able to serve and under what terms. The
proposed merger would also give America Online, the dominant dial-up
Internet service provider, the ability to utilize Road Runner's
technology as a basis for leveraging its marketing prowess and extensive
subscriber base to compete for customers in our cable markets once our
exclusivity agreements have expired. As a result, we may face intense
long-term competition for customers in previously exclusive cable
markets.
Our dependence on our network to provide our broadband services exposes us to
a significant risk of system failure.
Our broadband service operations are dependent upon our ability to support
our highly complex network infrastructure and avoid damage from fires,
earthquakes, floods, power losses, telecommunications failures and similar
events. The occurrence of a natural disaster or other unanticipated problem at
our network operations center or at a number of our regional data centers
could cause interruptions in our broadband 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 our broadband services. Any damage or failure that causes
interruptions in our network operations could harm our business.
Risks Related to Our Relationships With Our Cable Partners
The success of our business depends on our relationships with our cable
partners. We recently announced extended and modified distribution agreements
with AT&T, Comcast and Cox, which are subject to stockholder and regulatory
approvals, and we also have distribution agreements with other cable partners.
Additionally, we have agreed not to provide a variety of Internet services in
the areas covered by our cable partners. Our agreements with our cable
partners are complex and some of the risks associated with these relationships
are set forth below. Please also refer to our proxy statement for our 2000
annual stockholders meeting for a further description of these agreements.
We depend on our cable partners to upgrade to the two-way cable
infrastructure necessary to support the @Home service; the availability and
timing of these upgrades are uncertain.
Transmission of our broadband services depends on the availability of high-
speed two-way hybrid fiber coaxial cable infrastructure. However, only a
portion of existing cable plant in the United States and in some international
markets has been upgraded to two-way hybrid fiber coaxial cable, and even less
is capable of high-speed two-way transmission. As of March 31, 2000,
approximately 43% of our North American cable partners' cable infrastructure
was capable of delivering the @Home service. Our cable partners have announced
and are implementing major infrastructure investments in order to deploy two-
way hybrid fiber coaxial cable. However, these investments have placed a
significant strain on the financial, managerial, operating and other resources
of our cable partners, most of which are already highly leveraged. Therefore,
these infrastructure investments have been, and we expect will continue to be,
subject to change, delay or cancellation. Furthermore, because of
consolidation in the cable television industry, as well as the sale or
transfer of cable assets among cable television operators, many cable
companies have delayed upgrading particular systems that they plan to sell or
transfer. If these upgrades are not completed in a timely manner, our
broadband services may not be available on a widespread basis and we may not
be able to increase our subscriber base at the rate we anticipate. 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 broadband
services. As has happened in the past, even if a cable partner upgrades its
cable infrastructure, the upgraded infrastructure may not function properly,
and therefore may cause a delay in the availability of our broadband services
for particular areas. The failure of our cable partners to complete these
upgrades in a timely and satisfactory manner, or at all, would prevent us from
delivering broadband services and would significantly harm our business.
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Our cable partners are not generally obligated to carry our broadband
services, and the exclusivity obligations that prevent them from carrying
competing services may be terminated.
Most of our cable partners are currently subject to exclusivity obligations
that prohibit them from obtaining high-speed, greater than 128 kilobits per
second, residential consumer Internet services from any source other than us.
However, our cable partners are generally under no affirmative obligation to
carry any of our broadband services. The current exclusivity obligations of
our principal cable partners, AT&T, Comcast, Cox and Cablevision, expire on
June 4, 2002, and may be terminated sooner under some circumstances, as
follows:
. under the new agreements, Comcast or Cox may terminate their exclusivity
obligations to us, or their entire relationship with us, at any time on
or after June 4, 2001 by providing six months' prior written notice,
with the termination to become effective on the first June 4 or December
4 following this notice period, provided that they forfeit newly-issued
warrants to purchase shares of our Series A common stock;
. under the new agreements, Comcast may terminate its current exclusivity
obligations at any time if required to do so by Microsoft pursuant to an
agreement between those companies, in which case we may repurchase a
portion of Comcast's equity interest in Excite@Home;
. any principal cable partner may terminate all of its exclusivity
obligations upon a change in law that materially impairs its rights;
. Comcast or Cox may terminate all exclusivity obligations of our
principal cable partners at any time if there is a change of control of
TCI that results within 12 months in the incumbent TCI directors no
longer constituting a majority of TCI's board. AT&T, TCI, Comcast and
Cox have agreed, however, that AT&T's acquisition of TCI did not
constitute a change of control under the terms of the original
agreement; and
. Comcast or Cox may terminate the exclusivity provisions of our principal
cable partners as of June 4 of each year if AT&T and its affiliates do
not meet specified subscriber penetration levels for the @Home service.
Under the new agreements, Comcast and Cox were granted the right to sell
their shares of our Series A common stock to AT&T for a minimum price of $48 a
share at any time between January 1, 2001 and June 4, 2002. This right could
make it easier for Comcast or Cox to terminate their relationship with us
should they choose to do so.
Additionally, under the new agreements, once the current exclusivity
obligations expire on June 4, 2002, these cable partners have agreed to use us
as their provider of platform and connectivity services used in delivering
their high-speed Internet access services over their cable systems in the
United States through June 4, 2008 with respect to AT&T, and through June 4,
2006 with respect to Comcast and Cox. However, these agreements do not
prohibit these cable partners from offering consumers a choice to use other
service providers after June 4, 2002, or sooner with respect to Comcast or Cox
if they terminate their exclusivity obligations. Comcast or Cox may terminate
this new agreement at any time by providing six months' prior written notice,
with the termination to become effective on the first June 4 or December 4
following this notice period.
If the exclusivity obligations of our cable partners or our new agreements
with these cable partners are terminated, our business could be harmed
significantly and our stock price would likely suffer an immediate drop.
The letter agreement that we entered into with AT&T, Comcast and Cox on March
28, 2000 may subject us to legal risks.
On May 26, 2000, a purported class action suit was initiated in the San
Mateo County Superior Court by an alleged Excite@Home stockholder against
Excite@Home, AT&T Corp., Comcast Corporation and Cox
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Communications, Inc., as well as each member of our board of directors. The
complaint alleges that the defendants breached fiduciary duties to Excite@Home
stockholders by approving or entering into, as applicable, the letter agreement
among Excite@Home, AT&T, Comcast and Cox on March 28, 2000, and by agreeing to
consummate the transactions contemplated by this agreement. In the complaint,
the plaintiffs seek a court order nullifying the letter agreement, monetary
damages, and a court order establishing a stockholders' committee comprised of
unidentified class members to provide input regarding the transactions
contemplated by the letter agreement. We believe this action is without merit,
and intend to defend against this action vigorously. If the plaintiffs prevail,
we may not be able to proceed with the transactions proposed by the letter
agreement, which could seriously harm our business.
We have received notice from Cablevision Systems Corporation that
Cablevision asserts that the letter agreement dated March 28, 2000 among
Excite@Home, AT&T, Comcast and Cox violates the terms of our agreements with
Cablevision, and that Cablevision's consent to the March 28 letter agreement is
required before we can proceed with the transactions contemplated by that
agreement. Cablevision proposed that it be added as a party to the letter
agreement under the same terms as were granted to Comcast and Cox under the
letter agreement, or alternatively that we negotiate a termination of the
relationship between us and Cablevision. We disagree with Cablevision's
assertion that its consent is required for us to consummate the transactions
contemplated by the letter agreement.
Our cable partners may offer services that compete with the @Home service, but
we are prohibited from offering competing services.
Many of our cable partners' exclusivity obligations are limited to high-
speed residential Internet services and do not extend to various services that
they may offer without us. These services include, but are not limited
to, telephony services, commercial and business services similar to our @Work
service, Internet services that do not use the cable television infrastructure
or do not require use of an Internet backbone and limited Internet services
including streaming video and other downstream-only services. By providing
these services, most cable partners can compete, directly or indirectly, with
our broadband delivery activities.
Until the expiration of our principal cable partners' exclusivity
obligations, we may not offer the services described above using their plant,
or to residences in the geographic areas served by their cable systems, without
their consent. These restrictions apply even if we have integrated such a
service with the @Home service in another geographic area. For example, in
order to provide streaming video longer than 10 minutes in duration, we must
seek a principal cable partner's consent or negotiate a separate agreement,
including a new revenue split, if applicable, prior to offering the service. We
must similarly obtain our cable partners' consent or execute a separate
agreement to provide broadband services over alternate platforms including
fixed wireless, cellular or DSL infrastructures to any residential customers in
the cable partners' geographic area. If our principal cable partners do not
allow us to offer broadband services over alternate platforms, our market for
such services will be severely limited and our business could be harmed.
We depend on our cable partners to promote our services and obtain new
subscribers.
The rate at which we are able to obtain new subscribers depends not only on
the degree to which our cable partners upgrade their cable systems but also on
the level and effectiveness of the efforts of our cable partners to promote our
services. Our cable partners have achieved different levels of subscriber
penetration. In Canada, for example, where our cable partners have high levels
of upgraded cable systems and faced early competition from other providers of
high speed data services, we have relatively high levels of subscriber
penetration (exceeding those in the United States). Among our principal U.S.
cable partners, AT&T, Cox and Comcast are actively promoting our services and
are beginning to increase their penetration rates. Cablevision, however, has
deployed our service to only a small number of subscribers and continues to
offer its own online service called Optimum Online to the majority of
subscribers in cable systems deployed to date. We cannot predict the rate at
which our cable partners will add new subscribers to our services. If our cable
partners do not actively and effectively promote our services, we will not be
able to reach the level of subscribers necessary to achieve a profitable
business model.
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Cablevision has proposed that it be added as a party to the letter agreement
that we entered into with our principal cable partners on March 28, 2000 under
the same terms as were granted to Comcast and Cox under the letter agreement,
or alternatively that we negotiate a termination of the relationship between us
and Cablevision. We are also engaged in discussions with Cablevision concerning
disputes as to our respective obligations and performance with respect to the
distribution of the @Home service under the existing agreements. At this time,
we do not know what the result of our negotiations with Cablevision regarding
these matters will be, nor whether Excite@Home will continue to be a partner of
Cablevision under our existing agreements once these negotiations are
concluded.
We are currently controlled by our principal cable partners, and may become
subject to control by AT&T, and our interests may not always align with AT&T
or our other principal cable partners.
AT&T controls approximately 55% of our voting power. Currently, four of our
eleven directors are directors, officers or employees of AT&T or its
affiliates. AT&T currently owns all 30.8 million outstanding shares of our
Series B common stock, each of which carries ten votes per share. This Series B
common stock ownership gives AT&T the right to elect five Series B directors,
one of which is designated by Comcast and one of which is designated by Cox.
Currently, our board may take action only if approved by the board and by at
least 75%, or four of the five, of our Series B directors. As a result,
corporate actions generally require the approval of AT&T's three Series B
directors and one, or in some cases both, of the directors designated by
Comcast and Cox. Therefore, Comcast and Cox, acting together, may veto any
board action.
Under our new agreements with these cable partners, AT&T will acquire
additional voting control over us. If the transactions contemplated by these
agreements become effective, AT&T will have the right to elect at least a
majority of the board of directors. Comcast and Cox will waive their right to
elect directors to our board and their designees will resign their board
positions. All board actions will be decided by a majority vote of the board.
Currently, we depend on a continuing cooperative relationship with our
principal cable partners in order to approve board action and in order to take
action that requires stockholder consent. If the transactions contemplated by
our new agreements with our cable partners become effective, we will be subject
to both board and stockholder voting control by AT&T. It is possible that the
objectives of these companies, or AT&T if the transactions contemplated by our
new agreements become effective, will diverge from what management considers to
be our optimum strategy.
Warrants issued to our cable partners may result in additional dilution to our
stockholders.
We have entered into agreements with Cablevision, Rogers, Shaw and other
cable partners under which we issued warrants to purchase shares of our Series
A common stock. Under these agreements, warrants to purchase approximately 29.7
million shares of our Series A common stock at an average price of $2.09 per
share were exercisable as of March 31, 2000.
Under our new agreements with our principal cable partners, we granted or
will grant warrants to Comcast and Cox to purchase two shares of Series A
common stock and warrants to AT&T to purchase one share of Series A common
stock and one share of Series B common stock, for each home passed by the cable
systems located in the United States operated by each respective cable partner.
Warrants for an estimated 85 million shares in aggregate will be issued, and
each warrant will have an exercise price of $29.54 per share. We may grant
additional warrants in the future depending on increases in homes passed by
cable systems owned by these cable partners. Additionally, approximately 50
million shares of Series A common stock held by AT&T will be converted into
shares of Series B common stock, each share of which entitles AT&T to 10 votes
and which will therefore result in additional voting power for AT&T. We will
record the fair values of the warrants as they are earned by the cable partners
and amortize such amounts to operations over the terms of the new distribution
agreements.
To the extent that our principal cable partners, Cablevision, Rogers, Shaw
or other cable partners become eligible to and exercise their warrants, our
stockholders would experience substantial dilution. We also may
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issue additional stock, or warrants to purchase stock, at prices equal to or
less than fair market value in connection with efforts to expand distribution
of the @Home service.
Risks Related to Our Narrowband Services
Our narrowband services could lose users, advertisers and revenues to
competitors.
Our narrowband services compete with a number of companies both for users
and advertisers and, therefore, for revenues. We expect this competition will
intensify, particularly because there are few barriers to entry in this market.
These competitors include:
. Internet portal companies such as Disney's Go Network, Lycos, Netscape's
Netcenter, NBCi and Yahoo!;
. 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; and
. providers of a wide variety of online information, entertainment and
community services such as services that are targeted to vertical
markets or electronic commerce services.
Many providers of Internet services have been entering into distribution
arrangements, co-branding arrangements, content arrangements and other
strategic partnering arrangements with ISPs, online service providers,
providers of web browsers, operators of high-traffic web sites and other
businesses in an attempt to increase traffic and page views, thereby making
their web sites more attractive to advertisers, while also making it more
difficult for consumers to link to services. To the extent that our direct
competitors or other web site operators are able to enter into successful
strategic relationships, these competitors and web sites could experience
increases in traffic and page views, or the traffic and page views on our
narrowband services could remain constant or decline, either of which could
harm our business by making these web sites appear more attractive to
advertisers.
Many of our existing competitors, as well as a number of potential new
competitors, have longer operating histories in the Internet market, greater
name recognition, larger customer bases and significantly greater financial,
technical and marketing resources than we have. These competitors may be able
to undertake more
extensive marketing campaigns, adopt more aggressive pricing policies and make
more attractive offers to potential employees, distribution partners,
advertisers and content providers. Further, it is possible that our competitors
could develop search and retrieval services or other online services that are
equal or superior to ours or that achieve greater market acceptance than our
offerings.
The Internet in general, and our narrowband services specifically, also must
compete with traditional advertising media, such as print, radio and
television, for a share of advertisers' total advertising budgets. To the
extent that the Internet is not perceived as an effective advertising medium,
advertisers may be reluctant to devote a significant portion of their
advertising budgets to Internet advertising.
The proposed merger between Time Warner Inc. and America Online announced in
January 2000 would create a very large, diverse media conglomerate. The
combined companies may be able to use their diverse media holdings and Internet
service delivery capabilities to develop or expand Internet services and
content that could attract a significant number of new users and increased
traffic. Additionally, America Online will likely use Time Warner's
subscription-based services as an advertising mechanism to attract users to the
Internet access services provided by America Online and Road Runner. Increased
competition for users of Internet services and content may result in lower
subscriber growth rates for our online and Internet services and lower
advertising rates and decreased demand for advertising space on our web sites.
If usage of Internet portal sites by Internet users declines, our business
could be harmed.
The success of our Internet portal web sites is also dependent on Internet
users continuing to use "portal" web sites for their information needs. Some
Internet measurement services have reported that the number of
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<PAGE>
unique users of Internet portal sites has been decreasing in recent periods.
If Internet users begin to become less dependent on portal sites, and instead
go directly to particular web sites, our traffic levels could decrease as
measured by unique users, reach and pages views. As a result, the number of
advertising impressions and the attractiveness of our sites to advertisers
could be impacted, which would harm our media and advertising revenues.
Our systems may not be able to accommodate increases in the number of users
of our narrowband services.
Our web sites for the Excite Network are currently hosted and operated on a
computer network infrastructure separate from our broadband services. The
Excite Network must accommodate a high volume of traffic and deliver
frequently-updated information. The web sites for the Excite Network have in
the past, and may in the future, experience slower response times or other
problems for a variety of reasons. We also depend on third party information
providers to provide updated information and content for these services on a
timely basis. The Excite Network could experience disruptions or interruption
in service due to the failure or delay in the transmission or receipt of this
information. In addition, the users of these Excite Network services depend on
Internet service providers, online service providers and other web site
operators for access to the Excite Network. Each of these parties has
experienced significant outages in the past, and could experience outages,
delays and other difficulties due to system failures unrelated to our systems.
These types of occurrences could cause users to perceive the Excite Network as
not functioning properly and therefore cause them to use other services.
We depend on several third-party relationships for users, advertisers and
revenues.
We depend on a number of third party relationships to provide users and
content for the Excite Network, including agreements for links to our services
to be placed on high-traffic web sites and agreements for third parties to
provide content, games and e-mail for narrowband web sites. We are not
guaranteed of recouping our investments in these agreements through additional
users or advertising revenues, and we may have to pay penalties for
terminating agreements early. Some of these third parties could become our
competitors, or provide their services to our competitors, upon termination of
such relationships. If these relationships are terminated and we are not able
to replace them, we could lose users or advertisers.
Risks Related to this Offering
The notes are subordinated to senior indebtedness
The notes will be unsecured and subordinated in right of payment to all of
our existing and future senior indebtedness. In the event of our bankruptcy,
liquidation or reorganization or upon acceleration of the notes due to an
event of default under the indenture and in certain other events, our assets
will be available to pay obligations on the notes only after all secured
senior indebtedness has been paid. As a result, there may not be sufficient
assets remaining to pay amounts due on any or all of the outstanding notes.
Neither we nor our subsidiaries are prohibited from incurring debt, including
senior indebtedness, under the indenture. If we or our subsidiaries were to
incur additional debt or liabilities, our ability to pay our obligation on the
notes could be adversely affected. As of April 30, 2000, we had approximately
$3.4 million of senior indebtedness outstanding. We may from time to time
incur additional debt, including senior indebtedness. Our subsidiaries may
also from time to time incur other additional debt and liabilities. See
"Description of Notes--Subordination of Notes."
We conduct a substantial portion of our operations through our subsidiaries,
which may affect our ability to make payments on the notes
A substantial portion of our operations are conducted through our
subsidiaries. As a result, our cash flow and our ability to service our debt,
including the notes, is dependent upon the earnings of our subsidiaries. In
addition, we are dependent on the distribution of earnings, loans or other
payments by our subsidiaries to us.
Our subsidiaries are separate and distinct legal entities. Our subsidiaries
have no obligation to pay any amounts due on the notes or to provide us with
funds for our payment obligations, whether by dividends,
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<PAGE>
distributions, loans or other payments. In addition, any payment of dividends,
distributions, loans or advances by our subsidiaries to us could be subject to
statutory or contractual restrictions. Payments to us by our subsidiaries will
also be contingent upon our subsidiaries' earnings and business considerations.
Our right to receive any assets of any of our subsidiaries upon their
liquidation or reorganization, and therefore the right of the holders of the
notes to participate in those assets, will be effectively subordinated to the
claims of that subsidiary's creditors, including trade creditors. In addition,
even if we were a creditor of any of our subsidiaries, our rights as a creditor
would be subordinate to any security interest in the assets of our subsidiaries
and any indebtedness of our subsidiaries senior to that held by us. As of April
30, 2000, our subsidiaries had liabilities, including lease obligations and
trade payables but excluding intercompany liabilities, of approximately $74.8
million. These subsidiaries may incur additional liabilities in the future.
We may be unable to redeem the notes upon a fundamental change
Upon a fundamental change, you may require us to redeem all or a portion of
your notes. If a fundamental change were to occur, we may not have enough funds
to pay the redemption price for all tendered notes. In addition, in certain
situations, a fundamental change would result in an event of default under or
existing debentures. Any future credit agreements or other agreements relating
to our indebtedness may contain similar provisions, or expressly prohibit the
repurchase of the notes upon a fundamental change or may provide that a
fundamental change constitutes an event of default under that agreement. If a
fundamental change occurs at a time when we are prohibited from purchasing or
redeeming notes, we could seek the consent of our lenders to redeem the notes
or could attempt to refinance this debt. If we do not obtain a consent, we
could not purchase or redeem the notes. Our failure to redeem tendered notes
would constitute an event of default under this indenture, which might
constitute a default under the terms of our other indebtedness. In such
circumstances, or if a fundamental change would constitute an event of default
under our senior indebtedness, the subordination provisions of the indenture
would restrict payments to the holders of notes. The term "fundamental change"
is limited to certain specified transactions and may not include other events
that might adversely affect our financial condition. Our obligation to offer to
redeem the notes upon a fundamental change would not necessarily afford you
protection in the event of a highly leveraged transaction, reorganization,
merger or similar transaction involving Excite@Home. See "Description of
Notes--Redemption at Option of the Holder."
A public market may not develop for the notes
Prior to the offering there has been no trading market for the notes. The
initial purchasers have advised us that they currently intend to make a market
in the notes. However, the initial purchasers are not obligated to make a
market and may discontinue this market making activity at any time without
notice. In addition, market-making activity by the initial purchasers will be
subject to the limits imposed by the Securities Act and the Exchange Act. As a
result, we cannot assure you that any market for the notes will develop or, if
one does develop, that it will be maintained. If an active market for the notes
fails to develop or be sustained, the trading price of the notes could be
seriously harmed.
Our stock price may continue to experience large short-term fluctuations,
which may significantly affect the trading price of the notes
In recent periods, the price of our Series A common stock has fluctuated
greatly. Fluctuations in the trading price of our Series A common stock will
affect the trading price of the notes. These price fluctuations have been rapid
and severe and have left investors little time to react. The price of our
Series A common stock may continue to fluctuate greatly in the future due to a
variety of company specific factors, including:
. quarter to quarter variations in our operating results;
. shortfalls in revenue or earnings from levels expected by securities
analyst;
. announcements of technological innovations or new products or services
by other companies; and
. announcements by AT&T and our other partners relating to their
relationship with us or their deployment of the @Home service.
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<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the periods indicated is
as follows (in thousands):
<TABLE>
<CAPTION>
Period from
March 28, 1995 Year ended December 31,
(inception) to ------------------------------------------
December 31, 1995 1996 1997 1998 1999
----------------- -------- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
Deficiency of earnings
available to cover
fixed charges......... $(2,756) $(24,513) $(55,717) $(144,179) $(1,457,638)
</TABLE>
These computations include us and our consolidated subsidiaries. Earnings
consist of net loss plus fixed charges. Fixed charges consist of interest
expense, including amortization of debt issuance costs, and that portion of
rental expense we believe to be representative of interest.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the notes or the Series A
common stock by the selling securityholders under this prospectus. On December
20, 1999, we received approximately $486 million from the sale of the notes,
after deducting estimated expenses and the placement agents' discount. We used
$350 million of this amount to finance the cash component of the purchase price
for Bluemountain.com. We have used and intend to use the remaining net proceeds
for general corporate purposes, including working capital and capital
expenditures.
DIVIDEND POLICY
We have never paid any cash dividends on our Series A common stock, and we
do not anticipate paying any cash dividends in the foreseeable future.
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DESCRIPTION OF NOTES
The notes were issued under an indenture dated as of December 1, 1999,
between Excite@Home and State Street Bank and Trust Company of California,
N.A., as trustee. You may request a copy of the indenture from the trustee.
The following description is a summary of the material provisions of the
notes and the indenture. It does not purport to be complete. This summary is
subject to and is qualified by reference to all the provisions of the
indenture, including the definitions of certain terms used in the indenture.
Wherever particular provisions or defined terms of the indenture or form of
note are referred to, these provisions or defined terms are incorporated in
this prospectus by reference.
As used in this "Description of Notes" section, references to "Excite@Home,"
"we," "our" or "us" refer solely to At Home Corporation and not its
subsidiaries.
General
The notes are general unsecured obligations of Excite@Home. Our payment
obligations under the notes are subordinated to our senior indebtedness as
described under "--Subordination of Notes." The notes are convertible into
Series A common stock as described under "--Conversion of Notes." The notes are
limited to $500,000,000 aggregate principal amount. The notes were issued in
denominations of $1,000 and multiples of $1,000. The notes will mature on
December 15, 2006 unless earlier converted, redeemed at our option or redeemed
at your option upon a fundamental change.
We are not subject to any financial covenants under the indenture. In
addition, we are not restricted under the indenture from paying dividends,
incurring debt, including senior indebtedness, or issuing or repurchasing our
securities.
You are not afforded protection in the event of a highly leveraged
transaction or a change in control of Excite@Home under the indenture except to
the extent described below under "--Redemption at Option of the Holder."
We will pay interest on June 15 and December 15 of each year, beginning June
15, 2000 to record holders at the close of business on the preceding June 1 and
December 1, as the case may be, except:
. interest payable upon redemption will be paid to the person to whom
principal is payable, unless the redemption date is an interest payment
date; and
. as set forth in the next sentence.
In case you convert your note into Series A common stock during the period
after any record date but prior to the next interest payment date either:
. we will not be required to pay interest on the interest payment date if
the note has been called for redemption on a redemption date that occurs
during this period; or
. we will not be required to pay interest on the interest payment date if
the note is to be redeemed in connection with a fundamental change on a
repurchase date that occurs during this period; or
. if otherwise, any note not called for redemption that is submitted for
conversion during this period must also be accompanied by an amount
equal to the interest due on the interest payment date on the converted
principal amount, unless at the time of conversion there is a default in
the payment of interest on the notes. See "--Conversion of Notes."
We maintain an office in the Borough of Manhattan, the City of New York for
the payment of interest, which shall initially be an office or agency of the
trustee.
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<PAGE>
We may pay interest either:
. by check mailed to your address as it appears in the note register,
provided that if you are a holder with an aggregate principal amount in
excess of $2.0 million, you shall be paid, at your written election, by
wire transfer in immediately available funds; or
. by transfer to an account maintained by you in the United States.
However, payments to The Depository Trust Company, New York, New York, which
we refer to as DTC, will be made by wire transfer of immediately available
funds to the account of DTC or its nominee. Interest will be computed on the
basis of a 360-day year composed of twelve 30-day months.
Form, Denomination and Registration
The notes were issued:
. in fully registered form;
. without interest coupons; and
. in denominations of $1,000 principal amount and integral multiples of
$1,000.
Global Note, Book-Entry Form
Notes sold to "qualified institutional buyers" as defined in Rule 144A under
the Securities Act, whom we refer to as QIBs, are evidenced by global notes. We
have deposited the global notes with DTC and registered the global notes in the
name of Cede & Co. as DTC's nominee. Except as set forth below, a global note
may be transferred, in whole or in part, only to another nominee of DTC or to a
successor of DTC or its nominee.
QIBs may hold their interests in a global note directly through DTC if such
holder is a participant in DTC, or indirectly through organizations which are
participants in DTC (called "participants"). Transfers between participants
will be effected in the ordinary way in accordance with DTC rules and will be
settled in clearing house funds. The laws of some states require that certain
persons take physical delivery of securities in definitive form. As a result,
the ability to transfer beneficial interests in the global note to such persons
may be limited.
QIBs who are not participants may beneficially own interests in a global
note held by DTC only through participants, or certain banks, brokers, dealers,
trust companies and other parties that clear through or maintain a custodial
relationship with a participant, either directly or indirectly (called
"indirect participants"). So long as Cede & Co., as the nominee of DTC, is the
registered owner of a global note, Cede & Co. for all purposes will be
considered the sole holder of such global note. Except as provided below,
owners of beneficial interests in a global note will:
. not be entitled to have certificates registered in their names;
. not receive physical delivery of certificates in definitive registered
form; and
. not be considered holders of the global note.
We will pay interest on and the redemption price of a global note to Cede &
Co., as the registered owner of the global note, by wire transfer of
immediately available funds on each interest payment date or the redemption or
repurchase date, as the case may be. Neither we, the trustee nor any paying
agent will be responsible or liable:
. for the records relating to, or payments made on account of, beneficial
ownership interests in a global note; or
. for maintaining, supervising or reviewing any records relating to the
beneficial ownership interests.
We have been informed that DTC's practice is to credit participants'
accounts on that payment date with payments in amounts proportionate to their
respective beneficial interests in the principal amount represented
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<PAGE>
by a global note as shown on the records of DTC, unless DTC has reason to
believe that it will not receive payment on that payment date. Payments by
participants to owners of beneficial interests in the principal amount
represented by a global note held through participants are the responsibility
of the participants, as is now the case with securities held for the accounts
of customers registered in "street name."
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants, the ability of a person having a beneficial
interest in the principal amount represented by the global note to pledge such
interest to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interest, may be affected by the lack
of a physical certificate evidencing its interest.
Neither Excite@Home, the trustee, registrar, paying agent nor conversion
agent have any responsibility for the performance by DTC or its participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations. DTC has advised us that it will take any
action permitted to be taken by a holder of notes, including the presentation
of notes for exchange, only at the direction of one or more participants to
whose account with DTC interests in the global note are credited, and only in
respect of the principal amount of the notes represented by the global note as
to which the participant or participants has or have given such direction.
DTC has advised us that it is:
. a limited purpose trust company organized under the laws of the State of
New York;
. a member of the Federal Reserve System;
. a "clearing corporation" within the meaning of the Uniform Commercial
Code; and
. a "clearing agency" registered pursuant to the provisions of Section 17A
of the Exchange Act.
DTC was created to hold securities for its participants and to facilitate
the clearance and settlement of securities transactions between participants
through electronic book-entry changes to the accounts of its participants.
Participants include securities brokers, dealers, banks, trust companies and
clearing corporations and other organizations. Some of the participants or
their representatives, together with other entities, own DTC. Indirect access
to the DTC system is available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly.
DTC has agreed to the foregoing procedures to facilitate transfers of
interests in a global note among participants. However, DTC is under no
obligation to perform or continue to perform these procedures, and may
discontinue these procedures at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
us within 90 days, we will issue notes in certificated form in exchange for
global notes.
Certificated Notes
One note, which was sold to an investor that is an institutional accredited
investor, was issued in certificated form. In addition, QIBs may request that
certificated notes be issued in exchange for notes represented by a global
note.
Conversion of Notes
You may convert your note, in whole or in part, into Series A common stock
through the final maturity date of the notes, subject to prior redemption of
the notes. If we call notes for redemption, you may convert the notes only
until the close of business on the business day prior to the redemption date
unless we fail to pay the redemption price. If you have submitted your notes
for redemption upon a fundamental change, you may convert your notes only if
you withdraw your conversion election. You may convert your notes in part so
long as this part is $1,000 principal amount or an integral multiple of $1,000.
If any notes not called for redemption are converted after a record date for
any interest payment date and prior to the next interest payment date, the
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<PAGE>
notes must be accompanied by an amount equal to the interest payable on the
interest payment date on the converted principal amount unless a default exists
at the time of conversion.
The initial conversion price for the notes is $56.52 per share of Series A
common stock, subject to adjustment as described below. We will not issue
fractional shares of Series A common stock upon conversion of notes. Instead,
we will pay cash equal to the market price of the Series A common stock on the
business day prior to the conversion date. Except as described below, you will
not receive any accrued interest or dividends upon conversion.
To convert your note into Series A common stock you must:
. complete and manually sign the conversion notice on the back of the note
or facsimile of the conversion notice and deliver this notice to the
conversion agent;
. surrender the note to the conversion agent;
. if required, furnish appropriate endorsements and transfer documents;
. if required, pay all transfer or similar taxes; and
. if required, pay funds equal to interest payable on the next interest
payment date.
The date you comply with these requirements is the conversion date under the
indenture.
We will adjust the conversion price if the following events occur:
(1) we issue Series A common stock as a dividend or distribution on our
Series A common stock;
(2) we issue to all holders of Series A common stock certain rights or
warrants to purchase our Series A common stock;
(3) we subdivide or combine our Series A common stock;
(4) we distribute, to all holders of Series A common stock, any capital
stock, evidences of indebtedness or assets, including securities but
excluding:
. rights or warrants listed in (2) above;
. dividends or distributions listed in (1) above; and
. cash distributions listed in (5) below;
(5) we distribute cash, excluding any quarterly cash dividend on our
common stock to the extent that the aggregate cash dividend per share
of Series A common stock in any quarter does not exceed the greater
of:
. the amount per share of Series A common stock of the next preceding
quarterly cash dividend on the Series A common stock to the extent
that the preceding quarterly dividend did not require an adjustment
of the conversion price pursuant to this clause (5), as adjusted to
reflect subdivisions or combinations of the Series A common stock;
and
. 3.75% of the average of the last reported sale price of the Series A
common stock during the ten trading days immediately prior to the
declaration date of the dividend, and excluding any dividend or
distribution in connection with the liquidation, dissolution or
winding up of Excite@Home.
If an adjustment is required to be made under this clause (5) as a
result of a distribution that is a quarterly dividend, the adjustment
would be based upon the amount by which the distribution exceeds the
amount of the quarterly cash dividend permitted to be excluded pursuant
to this clause (5). If an adjustment is required to be made under this
clause (5) as a result of a distribution that is not a quarterly
dividend, the adjustment would be based upon the full amount of the
distribution;
(6) we or one of our subsidiaries makes a payment in respect of a tender
offer or exchange offer for our Series A common stock to the extent
that the cash and value of any other consideration included in
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<PAGE>
the payment per share of Series A common stock exceeds the current
market price per share of Series A common stock on the trading day next
succeeding the last date on which tenders or exchanges may be made
pursuant to such tender or exchange offer; and
(7) someone other than us or one of our subsidiaries makes a payment in
respect of a tender offer or exchange offer in which, as of the
closing date of the offer, our board of directors is not recommending
rejection of the offer. The adjustment referred to in this clause (7)
will only be made if:
. the tender offer or exchange offer is for an amount that increases
the offeror's ownership of common stock to more than 25% of the total
shares of common stock outstanding; and
. the cash and value of any other consideration included in the payment
per share of Series A common stock exceeds the current market price
per share of Series A common stock on the business day next
succeeding the last date on which tenders or exchanges may be made
pursuant to the tender or exchange offer.
However, the adjustment referred to in this clause (7) will generally
not be made if as of the closing of the offer, the offering documents
disclose a plan or an intention to cause us to engage in a consolidation
or merger of Excite@Home or a sale of all or substantially all of our
assets.
In the event that Excite@Home implements a rights agreement, it will
provide that upon conversion of the notes into common stock, the holders will
receive, in addition to common stock, the rights described under the rights
agreement, whether or not the rights have separated from common stock at the
time of conversion, subject to certain limited customary exceptions.
In the event that we effect a tracking stock arrangement such as that
described under "Risk Factors--We have not yet determined the terms of the
"tracking stock" that we plan to issue for our media business, nor the
corporate governance structure of our media business," or a similar
arrangement, by distributing common stock on our Series A common stock or
reclassifying our Series A common stock, we will be required to enter into a
supplemental indenture to provide that the notes will become convertible into:
(A) in the case of a reclassification, the shares of capital stock into
which the Series A common stock has been reclassified; and
(B) in the case of a stock distribution, in lieu of the adjustment
otherwise applicable under clause (4) above, the same number of shares
of Series A common stock into which the notes were convertible
immediately prior to such distribution plus the shares of other common
stock that would have been distributed on those shares of Series A
common stock if such shares of Series A common stock had been
outstanding on the applicable date.
Such supplemental indenture will provide for appropriate modifications to
the conversion privilege of the notes to reflect the fact that the notes have
become convertible into more than a single class of common stock as well as
appropriate conversion prices with respect to each class, which will be
subject to adjustment upon the occurrence of certain events affecting such
class of common stock on terms comparable to those summarized in this section.
The supplemental indenture will also provide for appropriate adjustments to
the fundamental change provisions described below under "--Redemption at
Option of the Holder." In the event of any transaction or event in connection
with which all or substantially all of any class of common stock into which
the notes are convertible (but not all of such classes) shall be exchanged
for, converted into, acquired for or constitute solely the right to receive
consideration, whether by means of an exchange offer, liquidation, tender
offer, consolidation, merger, combination, reclassification or otherwise,
which is not all or substantially all our common stock (or common stock of our
successor obligor on the notes) listed on, or that will be listed immediately
after the transaction or event on, a United States national securities
exchange or approved for quotation on the Nasdaq National Market or any
similar United States system of automated dissemination or quotations of
securities prices, then:
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<PAGE>
(X) such event or transaction shall not be treated as a fundamental change
within the meaning of the third clause of the definition of such term;
and
(Y) the conversion prices of the other class or classes of common stock
into which the notes are then convertible shall be adjusted as if a
distribution had been made with respect to such shares, in accordance
with the indenture.
Upon any such adjustment, the notes will no longer be convertible into such
shares and we will enter into an additional supplemental indenture to
appropriately reflect the changes to the conversion privileges applicable to
the notes and the fundamental change provisions described below under "--
Redemption at Option of the Holder."
In the event of:
. any reclassification of our Series A common stock; or
. a consolidation, merger or combination involving Excite@Home; or
. a sale or conveyance to another person of the property and assets of
Excite@Home as an entirety or substantially as an entirety,
in which holders of Series A common stock would be entitled to receive stock,
other securities, other property, assets or cash for their Series A common
stock, holders of notes will generally be entitled thereafter to convert their
notes into the same type of consideration received by Series A common stock
holders immediately prior to one of these types of events.
You may in certain situations be deemed to have received a distribution
subject to United States federal income tax as a dividend in the event of any
taxable distribution to holders of Series A common stock or in certain other
situations requiring a conversion price adjustment. See "U.S. Federal Income
Tax Considerations."
We may from time to time reduce the conversion price for a period of at
least 20 days if our board of directors has made a determination that this
reduction would be in our best interests. Any such determination by our board
will be conclusive. We would give holders at least 15 days' notice of any
reduction in the conversion price. In addition, we may reduce the conversion
price if our board of directors deems it advisable to avoid or diminish any
income tax to holders of Series A common stock resulting from any stock or
rights distribution. See "U.S. Federal Income Tax Considerations."
We will not be required to make an adjustment in the conversion price unless
the adjustment would require a change of at least 1% in the conversion price.
However, we will carry forward any adjustments that are less than one percent
of the conversion price. Except as described above in this section, we will not
adjust the conversion price for any issuance of our Series A common stock or
convertible or exchangeable securities or rights to purchase our Series A
common stock or convertible or exchangeable securities.
Optional Redemption by Excite@Home
The notes are not entitled to any sinking fund. At any time on or after
December 20, 2002, we may redeem the notes in whole or in part at the following
prices expressed as a percentage of the principal amount:
<TABLE>
<CAPTION>
Redemption
Period Price
------- ----------
<S> <C>
Beginning on December 20, 2002 and ending on December 14, 2003...... 102.714%
Beginning on December 15, 2003 and ending on December 14, 2004...... 102.036
Beginning on December 15, 2004 and ending on December 14, 2005...... 101.357
Beginning on December 15, 2005 and ending on December 14, 2006...... 100.679
</TABLE>
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and 100% at December 15, 2006. In each case, we will pay interest to, but
excluding, the redemption date. If the redemption date is an interest payment
date, interest shall be paid to the record holder on the relevant record date.
We are required to give notice of redemption by mail to holders not more than
60 but not than 30 days prior to the redemption date.
If less than all of the outstanding notes are to be redeemed, the trustee
shall select the notes to be redeemed in principal amounts of $1,000 or
integral multiples of $1,000 by lot, pro rata or by another method the trustee
considers fair and appropriate. If a portion of your notes is selected for
partial redemption and you convert a portion of your notes, the converted
portion shall be deemed to be of the portion selected for redemption.
We may not redeem the notes if we have failed to pay any interest or premium
on the notes and such failure to pay is continuing. We will issue a press
release if we redeem the notes.
Redemption at Option of the Holder
If a fundamental change occurs prior to December 15, 2006, you may require
us to redeem your notes, in whole or in part, on a repurchase date that is 30
days after the date of our notice of the fundamental change. The notes will be
redeemable in multiples of $1,000 principal amount.
We shall redeem the notes at a price equal to 100% of the principal amount
to be redeemed, plus accrued interest to, but excluding, the repurchase date.
If the repurchase date is an interest payment date, we will pay interest to the
record holder on the relevant record date.
We will mail to all record holders a notice of the fundamental change within
10 days after the occurrence of the fundamental change. We are also required to
deliver to the trustee a copy of the fundamental change notice. If you elect to
redeem your notes, you must deliver to us or our designated agent, on or before
the 30th day after the date of our fundamental change notice, your redemption
notice and any notes to be redeemed, duly endorsed for transfer. We will
promptly pay the redemption price for notes surrendered for redemption
following the repurchase date.
A "fundamental change" is deemed to have occurred at such time as
. any person (as the term "person" is used in Section 13(d)(3) or Section
14(d)(2) of the Exchange Act), other than us, any of our subsidiaries,
any of our or any of our subsidiaries' employee benefit plans, or any
Permitted Holder, files a Schedule 13D or 14D-1 under the Exchange Act
(or any successor schedule, form or report) disclosing that such person
has become the beneficial owner of 50% or more of the total voting power
in the aggregate of all classes of our capital stock then outstanding
normally entitled to vote in elections of directors, with certain
exceptions; or
. there shall be consummated any consolidation or merger of us pursuant to
which the Series A common stock would be converted into cash, securities
or other property, in each case, other than a consolidation or merger of
us in which the holders of common stock immediately prior to the
consolidation or merger have, directly or indirectly, at least a
majority of the total voting power in the aggregate of all classes of
capital stock of the continuing or surviving corporation normally
entitled to vote in elections of directors immediately after the
consolidation or merger; or
. the occurrence of any transaction or event in connection with which all
or substantially all Series A common stock shall be exchanged for,
converted into, acquired for or constitute solely the right to receive
consideration (whether by means of an exchange offer, liquidation,
tender offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise), all or substantially all of which does
not consist of common stock which is (or, upon consummation of or
immediately following such transaction or event, which will be) listed
on a United States national securities exchange or approved for
quotation on the Nasdaq National Market or any similar United States
system of automated dissemination of quotations of securities prices.
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"Permitted Holder" means:
. TCI, any person or entity which owns, directly or indirectly, a majority
of the total voting power of TCI, and any business entity at least a
majority of the total voting power of which is owned, directly or
indirectly, by TCI or any person or entity which owns, directly or
indirectly, a majority of the total voting power of TCI (but, in each
case, only so long as such voting power is so owned),
. AT&T, any person or entity which owns, directly or indirectly, a
majority of the total voting power of AT&T, and any business entity at
least a majority of the total voting power of which is owned, directly
or indirectly by AT&T or any person or entity which owns, directly or
indirectly, a majority of the total voting power of AT&T (but, in each
case, only so long as such voting power is so owned),
. any person who is a member of a "group" (as defined pursuant to Section
13(d)(3) of the Exchange Act) with TCI or AT&T, and
. any person or entity, a majority of the equity interests of which are
distributed, directly or indirectly, to the stockholders of TCI or AT&T,
as applicable, provided that TCI or AT&T own, directly or indirectly, a
majority of the equity interests and voting power of such person or
entity immediately prior to such distribution.
The indenture does not permit the Board of Directors to waive our obligation
to purchase notes at the option of a Holder in the event of a fundamental
change. We will comply with any applicable provisions of Rule 13e-4 and any
other tender offer rules under the Exchange Act in the event of a fundamental
change.
These fundamental change redemption rights could discourage a potential
acquiror of Excite@Home. However, this fundamental change redemption feature is
not the result of management's knowledge of any specific effort to obtain
control of Excite@Home by means of a merger, tender offer or solicitation, or
part of a plan by management to adopt a series of anti-takeover provisions. The
term "fundamental change" is limited to certain specified transactions and may
not include other events that might adversely affect our financial condition.
Our obligation to offer to redeem the notes upon a fundamental change would not
necessarily afford you protection in the event of a highly leveraged
transaction, reorganization, merger or similar transaction involving
Excite@Home.
We may be unable to redeem the notes in the event of a fundamental change.
If a fundamental change were to occur, we may not have enough funds to pay the
redemption price for all tendered notes. In addition, in certain situations, a
fundamental change would result in an event of default under our existing
credit facility. Our existing credit facility also prohibits redemptions of the
notes. Any future credit agreements or other agreements relating to our
indebtedness may contain similar provisions, or expressly prohibit the
repurchase of the notes upon a fundamental change or may provide that a
fundamental change constitutes an event of default under that agreement. If a
fundamental change occurs at a time when we are prohibited from purchasing or
redeeming notes, we could seek the consent of our lenders to redeem the notes
or could attempt to refinance this debt. If we do not obtain a consent, we
could not purchase or redeem the notes. Our failure to redeem tendered notes
would constitute an event of default under the indenture, which might
constitute a default under the terms of our other indebtedness. In such
circumstances, or if a fundamental change would constitute an event of default
under our senior indebtedness, the subordination provisions of the indenture
would restrict payments to the holders of notes.
Subordination of Notes
Indebtedness evidenced by the notes is subordinated in right of payment, as
set forth in the indenture, to the prior payment in full in cash or other
payment satisfactory to holders of all existing and future senior indebtedness.
Upon any payment or distribution of our assets to creditors upon any
dissolution, winding up, liquidation or reorganization of Excite@Home, whether
voluntary or involuntary, or in bankruptcy, insolvency, receivership
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or other similar proceedings, the holders of all senior indebtedness shall
first be entitled to receive payment in full in cash or other payment
satisfactory to the holders of senior indebtedness of all amounts due or to
become due thereon, or payment of such amounts shall have been provided for,
before the holders of the notes shall be entitled to receive any payment or
distribution with respect to any notes.
In addition, no payment may be made on the notes if any notes are declared
due and payable prior to their maturity by reason of the occurrence of an event
of default until the earlier of:
. 120 days after the date of such acceleration, or
. the payment in full of all senior indebtedness, but only if such payment
is then otherwise permitted under the terms of the indenture.
No payment of the principal, premium, if any, or interest (including
liquidated damages, if any) on the notes may be made by us if:
. any payment default on any senior indebtedness has occurred and is
continuing beyond any applicable grace periods, or
. any default other than a payment default with respect to senior
indebtedness occurs and is continuing that permits the acceleration of
the maturity of the senior indebtedness and the default is either the
subject of judicial proceedings or we receive a written notice of the
default (called a "senior indebtedness default notice").
We may resume payments on the notes when:
. the default with respect to the senior indebtedness is cured or waived
or ceases to exist or
. in the case of a non-payment default, 179 or more days pass after notice
of the default is received by us, provided that the terms of the
indenture otherwise permit the payment of the notes at that time.
If we receive a senior indebtedness default notice, then a similar notice
received within nine months thereafter relating to the same default on the same
issue of senior indebtedness shall not be effective to prevent the payment of
the notes as provided above.
The term "senior indebtedness" means the principal, premium, if any, and
unpaid interest, including bankruptcy interest, rent and end of term payments
payable on or in connection with, and, to the extent not included in the
foregoing, all amounts payable as fees, costs, expenses, liquidated damages,
indemnities, repurchase and other put obligations and other amounts to the
extent accrued or due on or in connection with all present and future secured:
(1) indebtedness of Excite@Home for borrowed money;
(2) obligations of Excite@Home evidenced by bonds, notes, notes or similar
instruments;
(3) all obligations of Excite@Home under:
. securities repurchase agreements,
. interest rate swaps, caps, collars, options and similar
arrangements,
. any foreign exchange contract, currency swap contract, futures
contract, currency option contract or other foreign currency hedge,
and
. credit swaps, caps, floors, collars and similar arrangements;
(4) obligations incurred, assumed or guaranteed by Excite@Home in
connection with the acquisition by it or a subsidiary of any business,
properties or assets (except purchase money indebtedness classified as
accounts payable under generally accepted accounting principals);
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(5) obligations of Excite@Home as lessee under leases required to be
capitalized on the balance sheet of the lessee under generally
accepted accounting principles and liabilities under any financing
lease or so-called "synthetic" lease transaction entered into by
Excite@Home;
(6) reimbursement of obligations of Excite@Home in respect of letters of
credit, bank guarantees or bankers' acceptances;
(7) obligations of Excite@Home to make payments to any entity as
consideration for the acquisition by us of subscribers to its current
Internet services or to future similar or related services, or to
acquire rights to transport data using assets owned by any other
entity; and
(8) obligations of Excite@Home under direct or indirect guarantees in
respect of, and obligations (contingent and otherwise) to purchase or
otherwise acquire, or otherwise assure a creditor against loss in
respect of, indebtedness or obligations of others of the kinds
referred to in clauses (1) through (7) above.
However, senior indebtedness does not include:
. any indebtedness or obligations of the kinds referred to in clauses (1)
through (7) above (collectively, "Debt") as to which, in the instrument
or agreement creating or evidencing the same or pursuant to which the
same is outstanding, it is expressly provided that such debt shall be
subordinated in right of payment to any other of our Debt, unless such
instrument or agreement expressly provides that such Debt shall be
senior in right of payment to the notes;
. all of our Debt that is not secured;
. accounts payable or other indebtedness to trade creditors created or
assumed by Excite@Home in the ordinary course of business;
. any of our Debt as to which, in the instrument or agreement creating or
evidencing the same or pursuant to which the same is outstanding, it is
expressly provided that such Debt shall not be senior in right of
payment to, or is on the same basis in right of payment with, or ranks
junior in right of payment to, the notes;
. our Debt in respect to the notes;
. any of our Debt to any subsidiaries; and
. the Convertible Subordinated Notes due 2018.
By reason of such subordination, in the event of dissolution, insolvency,
bankruptcy or other similar proceedings, upon any distribution of our assets
our unsecured creditors who are not holders of notes or holders of our senior
indebtedness may recover less, ratably, than holders of senior indebtedness and
may recover more, ratably, than the holders of notes.
Our right to receive any assets of any of our subsidiaries upon their
liquidation or reorganization, and therefore the right of the holders of the
notes to participate in those assets, is effectively subordinated to the claims
of that subsidiary's creditors, including trade creditors. In addition, even if
we were a creditor of any of our subsidiaries, our rights as a creditor would
be subordinate to any security interest in the assets of our subsidiaries and
any indebtedness of our subsidiaries senior to that held by us.
As of April 30, 2000, we had approximately $3.4 million in outstanding
borrowings (excluding accrued interest therein) that would have constituted
senior indebtedness. There are no restrictions in the indenture on the creation
of additional senior indebtedness or indebtedness. As of April 30, 2000, our
subsidiaries had liabilities, including trade payables and lease obligations
but excluding intercompany liabilities, of approximately $74.8 million. Our
subsidiaries may incur additional liabilities in the future.
Events of Default; Notice and Waiver
The following are events of default under the indenture:
. we fail to pay principal or premium, if any, upon redemption or
otherwise on the notes, whether or not the payment is prohibited by
subordination provisions;
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. we fail to pay any interest and liquidated damages, if any, on the
notes, whether or not the payment is prohibited by the subordination
provisions of the indenture;
. we fail to perform or observe any of the covenants in the indenture for
60 days after notice;
. we default on any bond, note, note or other evidence of indebtedness for
money borrowed of Excite@Home having an aggregate outstanding principal
amount of in excess of $10,000,000, which default shall have resulted in
such indebtedness being accelerated, without such indebtedness being
discharged or such acceleration having been rescinded or annulled within
20 days after receipt of notice thereof by us from the trustee from
holders of not less than 25% in aggregate principal amount at maturity
of the notes then outstanding, unless such default has been cured or
waived; or
. certain events involving bankruptcy, insolvency or reorganization of
Excite@Home.
The trustee may withhold notice to the holders of the notes of any default,
except defaults in payment of principal, premium, interest or liquidated
damages, if any, on the notes. However, the trustee must consider it to be in
the interest of the holders of the notes to withhold this notice.
If an event of default occurs and continues, the trustee or the holders of
at least 25% in principal amount of the outstanding notes may declare the
principal, premium, and accrued interest and liquidated damages, if any, on the
outstanding notes to be immediately due and payable. In case of certain events
of bankruptcy or insolvency involving Excite@Home, the principal, premium and
accrued interest and liquidated damages, if any, on the notes will
automatically become due and payable. However, if we cure all defaults, except
the nonpayment of principal, premium, interest or liquidated damages, if any,
that became due as a result of the acceleration, and meet certain other
conditions, with certain exceptions, this declaration may be cancelled and the
holder of a majority of the principal amount of outstanding notes may waive
these past defaults. Payments of principal, premium, or interest on the notes
that are not made when due will accrue interest at the annual rate of 4 3/4%
from the required payment date.
Upon any acceleration of the notes, the subordination provisions of the
indenture preclude any payment being made to holders of notes until the earlier
of:
. 120 days or more after the date of this acceleration; and
. the payment in full of all senior indebtedness, but only if such payment
is then otherwise permitted under the terms of the indenture.
Upon the expiration of any such payment blockage period, holders of notes
are required to pay over any amounts collected by such holders to the holders
of senior indebtedness to the extent necessary to pay all holders of senior
indebtedness in full in cash or other payment satisfactory to holders of senior
indebtedness. See "--Subordination of Notes" above.
The holders of a majority of outstanding notes have the right to direct the
time, method and place of any proceedings for any remedy available to the
trustee, subject to limitations specified in the indenture.
No holder of the notes may pursue any remedy under the indenture, except in
the case of a default in the payment of principal, premium or interest on the
notes, unless:
. the holder has given the trustee written notice of an event of default;
. the holders of at least 25% in principal amount of outstanding notes
make a written request, and offer reasonable indemnity, to the trustee
to pursue the remedy;
. the trustee does not receive an inconsistent direction from the holders
of a majority in principal amount of the notes; and
. the trustee fails to comply with the request within 60 days after
receipt.
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Modification of the Indenture
The consent of the holders of a majority in principal amount of the
outstanding notes is required to modify or amend the indenture. However, a
modification or amendment requires the consent of the holder of each
outstanding note if it would:
. extend the fixed maturity of any note;
. reduce the rate or extend the time for payment of interest of any note;
. reduce the principal amount or premium of any note;
. reduce any amount payable upon redemption of any note;
. adversely change our obligation to redeem any note upon a fundamental
change;
. impair the right of a holder to institute suit for payment on any note;
. change the currency in which any note is payable;
. impair the right of a holder to convert any note;
. adversely modify the subordination provisions of the indenture; or
. reduce the percentage of notes required for consent to any modification
of the indenture.
We are permitted to modify certain provisions of the indenture without the
consent of the holders of the notes.
Registration Rights
We entered into a registration rights agreement with the placement agents.
You generally will be required to be named as a selling securityholder in this
prospectus before you may sell securities with this prospectus. You will also
be required to comply with prospectus delivery requirements, and to agree to be
bound by applicable provisions of the registration rights agreement, including
some indemnification provisions. To be named as a selling stockholder, you must
complete and submit to us a notice and questionnaire in the form supplied by
us. If you do not complete and deliver a questionnaire or provide the other
information we may request, you will not be permitted to sell your registrable
securities with this prospectus.
Suspension of this offering. We may suspend the use of this prospectus and
registration statement:
. upon the occurrence or existence of any pending corporate development
that, in our reasonable discretion, makes it appropriate to suspend the
availability of this prospectus and the registration statement for a
discrete period of time; or
. if we learn of any event that causes this prospectus to include an
untrue statement of a material fact or omits to state a material fact
required to be stated in the prospectus or necessary to make the
statements in the prospectus not misleading in the light of the
circumstances then existing.
We may not suspend the use of the prospectus and registration statement more
than one time in any three-month period, or more than three times in any
twelve- month period, and each such suspension shall not exceed 30 days in
length, without incurring liquidated damages. However, if the suspension is due
to a pending corporate development, we may, without incurring an obligation to
pay liquidated damages, extend the suspension for an additional 30 days,
provided that the aggregate duration of all suspensions does not exceed 60 days
in any three-month period or 90 days in any twelve-month period.
If either type of event listed above occurs, then we will, if required by
the Securities Act or the rules and regulations thereunder, either file a post-
effective amendment to the registration statement or file an amended prospectus
or prospectus supplement, and distribute such amended prospectus or prospectus
supplement to each relevant selling securityholder. Each selling securityholder
has agreed not to trade securities from the time the
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selling securityholder receives notice from us of this type of event until the
selling securityholder receives a prospectus supplement or amendment.
Liquidated Damages. We will pay predetermined liquidated damages on the
notes at an annual rate equal to 0.5% of the principal amount of the notes, and
on the common stock at an annual rate equal to 0.5% of the conversion price, if
the prospectus is unavailable for periods in excess of those permitted above.
Rule 144A Information Requirement
We will furnish to the holders or beneficial holders of the notes or the
underlying Series A common stock and prospective purchasers, upon their
request, the information required under Rule 144A(d)(4) under the Securities
Act until such time as such securities are no longer "restricted securities"
within the meaning of Rule 144 under the Securities Act, assuming these
securities have not been owned by an affiliate of Excite@Home.
Information Concerning the Trustee
We have appointed State Street Bank and Trust Company of California, N.A.,
the trustee under the indenture, as paying agent, conversion agent, note
registrar and custodian for the notes. The trustee or its affiliates may
provide banking and other services to us in the ordinary course of their
business.
The indenture contains certain limitations on the rights of the trustee, as
long as it or any of its affiliates remains our creditor, to obtain payment of
claims in certain cases or to realize on certain property received on any claim
as security or otherwise. The trustee and its affiliates will be permitted to
engage in other transactions with us. However, if the trustee or any affiliate
continues to have any conflicting interest and a default occurs with respect to
the notes, the trustee must eliminate such conflict or resign.
U.S. FEDERAL INCOME TAX CONSIDERATIONS
As used in this section, references to "Excite@Home" refer solely to At Home
Corporation and not its subsidiaries.
The following is a summary of certain U.S. federal income tax considerations
relating to the purchase, ownership and disposition of the notes and common
stock into which notes may be converted, but does not purport to be a complete
analysis of all the potential tax considerations relating thereto. This summary
is based on laws, regulations, rulings and decisions now in effect, all of
which are subject to change or differing interpretation possibly with
retroactive effect. Except as specifically discussed below with regard to Non-
U.S. Holders, as defined below, this summary applies only to beneficial owners
that will hold notes and Series A common stock into which notes may be
converted as "capital assets" (within the meaning of Section 1221 of the
Internal Revenue Code of 1986, as amended (the "Code")) and who, for U.S.
federal income tax purposes, are:
. individual citizens or residents of the U.S.,
. corporations, partnerships or other entities created or organized in or
under the laws of the U.S. or of any political subdivision thereof
(unless, in the case of a partnership, Treasury Regulations otherwise
provide),
. estates, the incomes of which are subject to U.S. federal income
taxation regardless of the source of such income or
. trusts subject to the primary supervision of a U.S. court and the
control of one or more U.S. persons ("U.S. Holders").
Persons other than U.S. Holders, which we refer to as Non-U.S. Holders, are
subject to special U.S. federal income tax considerations, some of which are
discussed below. This discussion does not address tax
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considerations applicable to an investor's particular circumstances or to
investors that may be subject to special tax rules, such as banks, holders
subject to the alternative minimum tax, tax-exempt organizations, insurance
companies, foreign persons or entities (except to the extent specifically set
forth below), dealers in securities or currencies, persons that will hold notes
as a position in a hedging transaction, "straddle" or "conversion transaction"
for tax purposes or persons deemed to sell notes or Series A common stock under
the constructive sale provisions of the Code.
At Home has not sought any ruling from the Internal Revenue Service (the
"IRS") or an opinion of counsel with respect to the statements made and the
conclusions reached in the following summary, and there can be no assurance
that the IRS will agree with such statements and conclusions. In addition, the
IRS is not precluded from successfully adopting a contrary position. This
summary does not consider the effect of the federal estate or gift tax laws or
the tax laws (except as set forth below with respect to Non-U.S. Holders) of
any applicable foreign, state, local or other jurisdiction.
Investors considering the purchase of notes should consult their own tax
advisors with respect to the application of the United States federal income
tax laws to their particular situations as well as any tax consequences arising
under the federal estate or gift tax rules or under the laws of any state,
local or foreign taxing jurisdiction or under any applicable tax treaty.
U.S. Holders
Taxation of Interest
Interest paid on the notes will be included in the income of a U.S. Holder
as ordinary income at the time it is treated as received or accrued, in
accordance with such holder's regular method of accounting for U.S. federal
income tax purposes. Under Treasury Regulations, the possibility of an
additional payment under a note may be disregarded for purposes of determining
the amount of interest or original issue discount income to be recognized by a
holder in respect of such note (or the timing of such recognition) if the
likelihood of the payment, as of the date the notes are issued, is remote. A
holder may require Excite@Home to redeem any and all of his notes in the event
of a fundamental change. Excite@Home intends to take the position that a
"fundamental change" is remote under the Treasury Regulations, and does not
intend to treat the possibility of a "fundamental change" as affecting the
yield to maturity of any note. In the event this contingency occurs, it would
affect the amount and timing of the income that must be recognized by a U.S.
Holder of notes. There can be no assurance that the IRS will agree with such
position.
Sale, Exchange or Redemption of the Notes
Upon the sale, exchange (other than a conversion) or redemption of a note, a
U.S. Holder generally will recognize capital gain or loss equal to the
difference between:
. the amount of cash proceeds and the fair market value of any property
received on the sale, exchange or redemption (except to the extent such
amount is attributable to accrued interest income not previously
included in income, which will be taxable as ordinary income, or is
attributable to accrued interest that was previously included in income,
which amount may be received without generating further income) and
. such holder's adjusted tax basis in the note.
A U.S. Holder's adjusted tax basis in a note generally will equal the cost of
the note to such holder. Such capital gain or loss will be long-term capital
gain or loss if the U.S. Holder's holding period in the note is more than one
year at the time of sale, exchange or redemption. Long-term capital gains
recognized by certain non-corporate U.S. Holders, including individuals, will
generally be subject to a maximum rate of tax of 20%. The deductibility of
capital losses is subject to limitations.
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Conversion of the Notes
A U.S. Holder generally will not recognize any income, gain or loss upon
conversion of a note into Series A common stock except with respect to cash
received in lieu of a fractional share of Series A common stock. A U.S.
Holder's tax basis in the Series A common stock received on conversion of a
note will be the same as such holder's adjusted tax basis in the note at the
time of conversion, reduced by any basis allocable to a fractional share
interest, and the holding period for the Series A common stock received on
conversion will generally include the holding period of the note converted.
However, a U.S. Holder's tax basis in shares of Series A common stock
considered attributable to accrued interest generally will equal the amount of
such accrued interest included in income, and the holding period for such
shares shall begin on the date of conversion. To the extent that, as a result
of a reclassification, consolidation, merger or other transaction involving
Excite@Home, the notes become convertible in whole or in part into securities
of another entity or into other property, assets or cash, the holders may
recognize gain or loss upon conversion of notes.
Cash received in lieu of a fractional share of Series A common stock upon
conversion will be treated as a payment in exchange for the fractional share of
Series A common stock. Accordingly, the receipt of cash in lieu of a fractional
share of Series A common stock generally will result in capital gain or loss
(measured by the difference between the cash received for the fractional share
and the holder's adjusted tax basis in the fractional share).
Dividends
Distributions, if any, made on the Series A common stock after a conversion
generally will be included in the income of a U.S. Holder as ordinary dividend
income to the extent of Excite@Home's current and accumulated earnings and
profits. Distributions in excess of Excite@Home's current and accumulated
earnings and profits will be treated as a return of capital to the extent of
the U.S. Holder's basis in the Series A common stock and thereafter as capital
gain.
Holders of convertible debt instruments such as the notes may, in certain
circumstances, be deemed to have received distributions of stock if the
conversion price of such instruments is adjusted. Adjustments to the conversion
price made pursuant to a bona fide reasonable adjustment formula which has the
effect of preventing the dilution of the interest of the holders of the debt
instruments, however, will generally not be considered to result in a
constructive distribution of stock. Certain of the possible adjustments
provided in the notes, including, without limitation, adjustments in respect of
taxable dividends to stockholders of Excite@Home, will not qualify as being
pursuant to a bona fide reasonable adjustment formula. If such adjustments are
made, the U.S. Holders of notes will be deemed to have received constructive
distributions taxable as dividends to the extent of Excite@Home's current and
accumulated earnings and profits even though they have not received any cash or
property as a result of such adjustments. In certain circumstances, the failure
to provide for such an adjustment may result in taxable dividend income to the
U.S. Holders of Series A common stock.
Sale of Series A Common Stock
Upon the sale or exchange of Series A common stock a U.S. Holder generally
will recognize capital gain or loss equal to the difference between
. the amount of cash and the fair market value of any property received
upon the sale or exchange and
. such U.S. Holder's adjusted tax basis in the Series A common stock.
Such capital gain or loss will be long-term capital gain or loss if the U.S.
Holder's holding period in Series A common stock is more than one year at the
time of the sale or exchange. Long-term capital gains recognized by certain
non-corporate U.S. Holders, including individuals, will generally be subject to
a maximum rate of tax of 20%. A U.S. Holder's basis and holding period in
Series A common stock received upon conversion of a note
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are determined as discussed above under "Conversion of the Notes." The
deductibility of capital losses is subject to limitations.
Special Tax Rules Applicable to Non-U.S. Holders
In general, subject to the discussion below concerning backup withholding:
(a) Payments of principal or interest on the notes by Excite@Home or any
paying agent to a beneficial owner of a note that is a Non-U.S. Holder
will not be subject to U.S. withholding tax, provided that, in the
case of interest:
. such Non-U.S. Holder does not own, actually or constructively, 10%
or more of the total combined voting power of all classes of stock
of Excite@Home entitled to vote within the meaning of Section
871(h)(3) of the Code,
. such Non-U.S. Holder is not a "controlled foreign corporation" with
respect to which Excite@Home is a "related person" within the
meaning of the Code,
. such Non-U.S. Holder is not a bank receiving interest described in
Section 881(c)(3)(A) of the Code, and
. the certification requirements under Section 871(h) or Section
881(c) of the Code and Treasury Regulations thereunder are
satisfied;
(b) A Non-U.S. Holder of a note or Series A common stock will not be
subject to U.S. federal income tax on gains realized on the sale,
exchange or other disposition of such note or Series A common stock
unless
. such Non-U.S. Holder is an individual who is present in the U.S. for
183 days or more in the taxable year of sale, exchange or other
disposition, and certain conditions are met,
. such gain is effectively connected with the conduct by the Non- U.S.
Holder of a trade or business in the U.S. and, if certain U.S.
income tax treaties apply, is attributable to a U.S. permanent
establishment maintained by the Non-U.S. Holder,
. the Non-U.S. Holder is subject to Code provisions applicable to
certain U.S. expatriates, or
. in the case of Series A common stock held by a person who holds more
than 5% of such stock, Excite@Home is or has been, at any time
within the shorter of the five-year period preceding such sale or
other disposition or the period such Non-U.S. Holder held the Series
A common stock, a U.S. real property holding corporation (a
"USRPHC") for U.S. federal income tax purposes. Excite@Home does not
believe that it is currently a USRPHC or that it will become one in
the future;
(c) Interest on notes not excluded from U.S. withholding tax as described
in (a) above and dividends on Series A common stock after conversion
generally will be a subject to U.S. withholding tax at a 30% rate,
except where an applicable tax treaty provides for the reduction or
elimination of such withholding tax.
To satisfy the certification requirements referred to in (a) above, Sections
871(h) and 881(c) of the Code and currently effective Treasury Regulations
thereunder require that either:
. the beneficial owner of a note must certify, under penalties of perjury,
to Excite@Home or its paying agent, as the case may be, that such owner
is a Non-U.S. Holder and must-provide such owner's name and address, and
U.S. taxpayer identification number ("TIN"), if any, or
. a securities clearing organization, bank or other financial institution
that holds customer securities in the ordinary course of its trade or
business (a "Financial Institution") and holds the note on behalf of the
beneficial owner thereof must certify, under penalties of perjury, to
Excite@Home or its paying
37
<PAGE>
agent, as the case may be, that such certificate has been received from
the beneficial owner and must furnish the payer with a copy thereof.
Such requirement will be fulfilled if the beneficial owner of a note certifies
on IRS Form W-8 substitute form, under penalties of perjury, that it is a Non-
U.S. Holder and provides its name and address or any Financial Institution
holding the note on behalf of the beneficial owner files a statement with the
withholding agent to the effect that it has received such a statement from the
beneficial owner (and furnishes the withholding agent with a copy thereof).
Treasury Regulations effective for payments made after December 31, 2000,
will provide alternative methods for satisfying the certification requirements
described above and below, subject to certain grandfathering provisions. These
new regulations also require, in the case of notes held by a foreign
partnership, that (i) the certification be provided by the partners rather
than by the foreign partnership and (ii) the partnership provide certain
information, including a TIN. A look-through rule will apply in the case of
tiered partnerships.
If a Non-U.S. Holder of a note or Series A common stock is engaged in a
trade or business in the U.S. and if interest on the note, dividends on the
Series A common stock, or gain realized on the sale, exchange or other
disposition of the note or Series A common stock is effectively connected with
the conduct of such trade or business (and, if certain tax treaties apply, is
attributable to a U.S. permanent establishment maintained by the Non U.S.
Holder in the U.S.), the Non- U.S. Holder, although exempt from U.S.
withholding tax (provided that the certification requirements discussed in the
next sentence are met), will generally be subject to U.S. federal income tax
on such interest, dividends or gain on a net income basis in the same manner
as if it were a U.S. Holder. In lieu of the certificate described above, such
a Non-U.S. Holder will be required, under currently effective Treasury
Regulations, to provide Excite@Home with a properly executed IRS Form 4224 in
order to claim an exemption from withholding tax. In addition, if such Non-
U.S. Holder is a foreign corporation, it may be subject to a branch profits
tax equal to 30% (or such lower rate provided by an applicable treaty) of its
effectively connected earnings and profits for the taxable year, subject to
certain adjustments.
U.S. Federal Estate Tax
A note held by an individual who at the time of death is not a citizen or
resident of the U.S. (as specially defined for U.S. federal estate tax
purposes) will not be subject to U.S. federal estate tax if the individual did
not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of Excite@Home and, at the time of the
individual's death, payments with respect to such note would not have been
effectively connected with the conduct by such individual of a trade or
business in the U.S. Common stock held by an individual who at the time of
death is not a citizen or resident of the U.S. (as specially defined for U.S.
federal estate tax purposes) will be included in such individual's estate for
U.S. federal estate tax purposes, unless an applicable estate tax treaty
otherwise applies.
Non-U.S. Holders should consult with their tax advisors regarding U.S. and
foreign tax consequences with respect to the notes and Series A common stock.
Backup Withholding and Information Reporting
Backup withholding of U.S. federal income tax at a rate of 31% may apply to
payments pursuant to the terms of a note or Series A common stock to a U.S.
Holder that is not an "exempt recipient" and that fails to provide certain
identifying information, such as the holder's tax identification number, in
the manner required. Generally, individuals are not exempt recipients, whereas
corporations and certain other entities are exempt recipients. Payments made
in respect of a note or common stock must be reported to the Service, unless
the U.S. Holder is an exempt recipient or otherwise establishes an exemption.
In the case of payments of interest on a note to a Non-U.S. Holder,
Treasury Regulations provide that backup withholding and information reporting
will not apply to payments with respect to which either requisite
38
<PAGE>
certification has been received or an exemption has otherwise been established
(provided that neither Excite@Home nor a paying agent has actual knowledge that
the holder is a U.S. Holder or that the conditions of any other exemption are
not in fact satisfied).
Dividends on the common stock paid to Non-U.S. Holders that are subject to
U.S. withholding tax, as described above, generally will be exempt from U.S.
backup withholding tax but will be subject to certain information reporting.
Payments of the proceeds of the sale of a note or Series A common stock to
or through a foreign office of a U.S. broker or a foreign office of a broker
that is a U.S. related person (either a "controlled foreign corporation",
within the meaning of the Code, or a foreign person, 50% or more of whose gross
income from all sources for the three-year period ending with the close of its
taxable year preceding the payment was effectively connected with the conduct
of a trade or business within the U.S.) are currently subject to certain
information reporting requirements, unless the payee is an exempt recipient or
such broker has evidence in its records that the payee is a Non-U.S. Holder and
no actual knowledge that such evidence is false and certain other conditions
are met. Temporary Treasury Regulations indicate that such payments are not
currently subject to backup withholding.
Under current Treasury Regulations, payments of the proceeds of a sale of a
note or Series A common stock to or through the U.S. office of a broker will be
subject to information reporting and backup withholding unless the payee
certifies under penalties of perjury as to his or her status as a Non-U.S.
Holder and satisfies certain other qualifications (and no agent of the broker
who is responsible for receiving or reviewing such statement has actual
knowledge that it is incorrect) and provides his or her name and address or the
payee otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules from a payment to a
holder of a note or common stock will be allowed as a refund or credit against
such holder's U.S. federal income tax provided that the required information is
furnished to the IRS in a timely manner.
As noted above, new regulations will generally be applicable to payments
made after December 31, 2000. In general, these new regulations do not
significantly alter the substantive withholding and information reporting
requirements but unify current certification procedures and forms and clarify
reliance standards. Under these new regulations, special rules apply which
permit the shifting of primary responsibility for withholding to certain
financial intermediaries acting on behalf of beneficial owners. A holder of a
note or Series A common stock should consult with its tax advisor regarding the
application of the backup withholding rules to its particular situation, the
availability of an exemption therefrom, the procedure for obtaining such an
exemption, if available, and the impact of these new regulations on payments
made with respect to notes or Series A common stock after December 31, 2000.
The preceding discussion of certain U.S. federal income tax considerations
is for general information only and is not tax advice. Accordingly, each
prospective investor should consult its own tax adviser as to the particular
U.S. federal, state, and local tax consequences of purchasing, holding and
disposing of the notes and series a common stock of at home. Tax advisors
should also be consulted as to the U.S. estate and gift tax consequences and
the foreign tax consequences of purchasing, holding and disposing of the notes
and series a common stock of At Home, as well as the consequences of any
proposed change in applicable laws.
39
<PAGE>
SELLING SECURITYHOLDERS
The following table presents information with respect to the selling
securityholders and the principal amounts of notes and shares of our Series A
common stock issuable upon the conversion of these notes that each selling
securityholder may offer with this prospectus. The term "selling
securityholders" includes donees and pledgees selling securities received from
a named selling securityholder after the date of this prospectus. The notes
were originally issued by us and sold by the placement agents to qualified
institutional buyers and an institutional accredited investor in a transaction
exempt from the registration requirements of the Securities Act. To our
knowledge, except as disclosed below, none of the selling securityholders has,
or within the past three years has had, any position, office or other material
relationship with us or any of our affiliates.
Beneficial ownership is determined under the rules of the Securities and
Exchange Commission, and generally includes voting or investment power with
respect to securities. Unless indicated below, to our knowledge, the persons
and entities named in the table have sole voting and sole investment power with
respect to all securities beneficially owned. The principal amounts of notes
provided in the table below is based on information provided to us by each of
the selling securityholders as of approximately February 29, 2000. The number
of shares of Series A common stock that may be sold is calculated based on the
current conversion price of $56.52 per share. If each selling securityholder
named below converted all of its notes, each would own less than 1% of our
outstanding Series A common stock, based on 365,238,851 shares of our Series A
common stock outstanding as of April 30, 2000.
Since the date on which each provided this information, each selling
securityholder identified below may have sold, transferred or otherwise
disposed of all or a portion of their notes in a transaction exempt from the
registration requirements of the Securities Act. Because the selling
securityholders are not obligated to sell the notes or the Series A common
stock issuable upon the conversion of the notes, we cannot estimate the amount
of the notes or how many shares of our Series A common that each selling
securityholder will beneficially own after this offering. Information
concerning the selling securityholders may change from time to time and we may
update, amend or supplement this prospectus from time to time to update the
disclosure in this section. In addition, the conversion ratio, and therefore
the number of shares of our Series A common stock issuable upon conversion of
the notes, is subject to adjustment. Accordingly, the number of shares of
Series A common stock issuable upon conversion of the notes may increase or
decrease.
<TABLE>
<CAPTION>
Principal Shares of Shares of
amount of notes Series A Series A
beneficially common common
owned Percentage stock stock
that may of notes beneficially that may
Name be sold outstanding owned be sold
---- --------------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
AIG Sound Shore
Opportunity Holding Fund
Ltd...................... $ 3,000,000 * 53,082 53,082
AIG Sound Shore Strategic
Holding Fund Ltd......... $ 1,000,000 * 17,694 17,694
Alta Partners Holdings,
LDC...................... $ 9,500,000 1.9% 168,093 168,093
Arbitex Master Fund L.P... $ 2,000,000 * 35,388 35,388
Aristeia International,
Ltd...................... $ 1,330,000 * 23,533 23,533
Aristeia Trading, LLC..... $ 670,000 * 11,854 11,854
Associated Electric & Gas
Insurance Services
Limited.................. $ 800,000 * 14,155 14,155
Arkansas PERS............. $ 4,000,000 * 70,776 70,776
Banc of America Securities
LLC...................... $10,125,000 2.0% 179,151 179,151
Bank America Pension
Plan..................... $ 3,000,000 * 53,082 53,082
Bank Austria Cayman
Island, Ltd.............. $ 3,000,000 * 53,082 53,082
Bank Julius Baer & Co.
Ltd...................... $ 2,410,000 * 42,642 42,642
BBT Fund, L.P............. $ 4,000,000 * 70,776 70,776
Bear, Stearns & Co. Inc... $ 8,500,000 1.7% 150,399 150,399
Black Diamond Offshore
Ltd...................... $ 4,046,000 * 71,589 71,589
BNP Arbitrage SNC......... $ 9,500,000 1.9% 168,093 168,093
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
Principal Shares of Shares of
amount of notes Series A Series A
beneficially common common
owned Percentage stock stock
that may of notes beneficially that may
Name be sold outstanding owned be sold
---- --------------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
Boilermakers Blacksmiths
Pension Trust............ $ 2,750,000 * 48,658 48,658
CALAMOS Market Neutral
Fund-CALAMOS
Investment Trust......... $ 415,000 * 7,343 7,343
Carlisle Investments...... $ 500,000 * 8,847 8,847
Cede & Co................. $ 80,000 * 1,415 1,415
Circlet (IMA) Limited..... $ 2,500,000 * 44,235 44,235
Colgate-Palmolive Company
Retirement Trust......... $ 1,900,000 * 33,618 33,618
Consulting Group Capital
Markets Fund............. $ 250,000 * 4,423 4,423
Deephaven Domestic
Convertible Trading
Ltd...................... $ 4,000,000 * 70,776 70,776
Deeprock & Co............. $ 1,000,000 * 17,694 17,694
Delaware PERS............. $ 3,400,000 * 60,159 60,159
Delphi Foundation......... $ 40,000 * 707 707
Deutsche Bank Securities.. $63,355,000 12.7% 1,615,528 1,121,003
Donaldson Lufkin &
Jenrette Securities
Corporation.............. $ 9,500,000 1.9% 168,093 168,093
Double Black Diamond
Offshore LDC............. $12,988,000 2.6% 229,809 229,809
Duckbill & Co............. $ 2,000,000 * 35,388 35,388
ECT Investments, Inc...... $ 5,100,000 1.0% 90,239 90,239
Evergreen Income & Growth
Fund..................... $ 4,000,000 * 70,776 70,776
Family Service Life
Insurance Co............. $ 250,000 * 4,423 4,423
Forrestal Funding Master
Trust.................... $ 5,000,000 1.0% 88,470 88,470
General Motors
Foundation............... $ 410,000 * 7,254 7,254
General Motors Employees
Global Group Pension
Trust.................... $ 7,540,000 1.5% 159,612 133,412
Global Bermuda Limited
Partnership.............. $ 500,000 * 27,247 8,847
Goldman, Sachs & Co. (1).. $ 917,000 * 16,225 16,225
GranGem 23 41 LLC......... $ 660,000 * 11,678 11,678
Granville Capital
Corporation.............. $16,500,000 3.3% 291,951 291,951
Guardian Life Insurance
Co....................... $ 4,600,000 * 81,392 81,392
Guardian Pension Trust.... $ 150,000 * 2,654 2,654
HBK Master Fund L.P....... $18,100,000 3.6% 438,161 320,261
Highbridge International
LLC...................... $ 3,000,000 * 53,082 53,082
IBM Retirement Plan--High
Income................... $ 300,000 * 5,308 5,308
ICI American Holdings
Trust.................... $ 1,800,000 * 31,849 31,849
Jefferies & Company....... $ 1,430,000 * 25,302 25,302
JMG Capital Partners, LP.. $ 5,000,000 1.0% 108,120 88,470
JMG Triton Offshore Fund,
Ltd...................... $ 5,000,000 1.0% 336,138 88,470
John M. Olin Foundation... $ 2,300,000 * 40,696 40,696
J.P. Morgan Securities
Inc...................... $12,000,000 2.4% 212,328 212,328
KBC Financial Products
U.S.A.................... $16,000,000 3.2% 283,104 283,104
KD Offshore CV............ $ 1,000,000 * 17,694 17,694
Kellner, Dileo & Co....... $ 500,000 * 8,847 8,847
L.A. Fire and Police
Pension Fund............. $ 2,250,000 * 39,811 39,811
Lakeshore International
Ltd...................... $ 1,000,000 * 54,594 17,694
LDG Limited............... $ 250,000 * 4,423 4,423
Libertyview Funds L.P..... $ 1,000,000 * 17,694 17,694
Lipper Convertibles,
L.P...................... $ 9,000,000 1.8% 159,246 159,246
Mary Ann Hamilton......... $ 390,000 * 6,900 6,900
McMahan Securities Co.
L.P...................... $ 500,000 * 8,847 8,847
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
Principal Shares of Shares of
amount of notes Series A Series A
beneficially common common
owned Percentage stock stock
that may of notes beneficially that may
Name be sold outstanding owned be sold
---- --------------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
MichaelAngelo, L.P...... $ 2,000,000 * 35,388 35,388
Morgan Stanley Dean
Witter (2)............. $11,000,000 2.2% 294,718 194,634
Morgan Stanley Dean
Witter Convertible
Securities Trust....... $ 1,500,000 * 26,541 26,541
Motors Insurance
Corporation............ $ 2,010,000 * 35,564 35,564
Nomura Securities
International Inc...... $12,000,000 2.4% 253,886 212,328
Peoples Benefit Life
Insurance Company...... $ 2,000,000 * 35,388 35,388
Peoples Benefit Life
Insurance Company
(Teamsters)............ $ 2,000,000 * 35,388 35,388
Phoenix Goodwin High
Yield Fund............. $ 4,000,000 * 70,766 70,766
Pine Grove Equitized
Partners V LLC......... $ 1,000,000 * 17,694 17,694
PRIM Board.............. $ 5,800,000 1.1% 102,625 102,625
Quattro Fund............ $ 1,250,000 * 22,117 22,117
Ramius, L.P............. $ 2,000,000 * 35,388 35,388
RCG Baldwin, L.P........ $ 1,000,000 * 17,694 17,694
RCG Multi-Strategy
Account, L.P........... $ 2,000,000 * 35,388 35,388
Republic Short Term
Fund................... $ 95,000 * 1,680 1,680
Retail Clerks Pension
Trust.................. $ 3,000,000 * 53,082 53,082
Sage Capital............ $ 3,100,000 * 54,851 54,851
Salomon Smith Barney
Inc.................... $ 3,600,000 * 63,698 63,698
San Diego County
Employee's Retirement
Association............ $ 200,000 * 3,538 3,538
State of Maryland
Retirement Plan........ $ 2,500,000 * 44,235 44,235
State of Oregon Equity.. $11,000,000 2.2% 194,634 194,634
Tennessee Consolidated
Retirement Systems..... $ 5,000,000 1.0% 88,470 88,470
TQA Master Fund......... $ 1,000,000 * 17,694 17,694
TQA Master Plus Fund.... $ 5,250,000 1.1% 92,893 92,893
Value Line Convertible
Fund, Inc.............. $ 500,000 * 8,847 8,847
Vermogensverwaltung des
Kantons Zurich......... $ 5,250,000 1.1% 92,893 92,893
Warburg Dillon Read
LLC.................... $ 2,500,000 * 45,414 44,235
Wasserman Perella
Securities, Inc........ $ 5,000,000 1.0% 88,470 88,470
White River Securities
LLC.................... $ 8,500,000 1.7% 150,399 150,399
WM Advisors, Inc........ $ 75,000 * 1,327 1,327
WM Bond & Stock Fund.... $ 1,663,000 * 29,425 29,425
WM Variable Trust Bond &
Stock Fund............. $ 62,000 * 1,097 1,097
Worldwide Transactions
Ltd.................... $ 966,000 * 17,092 17,092
ZCM/HFR Index
Management, L.L.C...... $ 80,000 * 1,415 1,415
Zeneca Holdings Trust... $ 1,350,000 * 23,886 23,886
Other holders of
debentures or future
transferees of these
holders................ $ 91,743 18.3% 1,623,300(3) 1,623,300
</TABLE>
--------
* Less than 1%
(1) Goldman, Sachs & Co. served as a placement agent for the debentures and the
notes, and received customary compensation for these services.
(2) Morgan Stanley Dean Witter served as an underwriter for our initial public
offering and as a placement agent for the debentures and the notes, and
received customary compensation for these services.
(3) Assumes that any other holders of the notes, or any future transferees of
these holders, do not beneficially own any Series A common stock other than
the Series A common stock issuable upon conversion of the notes.
42
<PAGE>
PLAN OF DISTRIBUTION
The selling securityholders will be offering and selling all securities
offered and sold under this prospectus. We will not receive any of the proceeds
of the sales of these securities. In connection with this offering, we entered
into a registration rights agreement dated December 1, 1999 with the placement
agents of the notes. Securities may only be offered or sold with this
prospectus pursuant to the terms of the registration rights agreement. However,
selling securityholders may resell all or a portion of the securities in open
market transactions in reliance upon Rule 144 or Rule 144A under the Securities
Act, provided they meet the criteria and conform to the requirements of one of
these rules.
Who may sell and applicable restrictions. The securities may be sold
directly by the selling securityholders from time to time. The selling
securityholders may decide not to sell any of the securities offered with this
prospectus, and selling stockholders could transfer, devise or gift these
securities by other means.
Alternatively, the selling securityholders may from time to time offer the
securities through brokers, dealers or agents that may receive compensation in
the form of discounts, concessions or commissions from the selling
securityholders and/or the purchasers of the securities for whom they may act
as agent. In effecting sales, broker-dealers that are engaged by the selling
securityholders may arrange for other broker-dealers to participate. The
selling securityholders and any brokers, dealers or agents who participate in
the distribution of the securities may be deemed to be underwriters, and any
profits on the sale of the securities by them and any discounts, commissions or
concessions received by any broker, dealer or agent might be deemed to be
underwriting discounts and commissions under the Securities Act. To the extent
the selling securityholders may be deemed to be underwriters, the selling
securityholders may be subject to statutory liabilities, including, but not
limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under
the Exchange Act.
Prospectus delivery. The selling securityholders are subject to the
prospectus delivery requirements of the Securities Act. At any time a
particular offer of the securities is made, a revised prospectus or prospectus
supplement, if required, will be distributed which will disclose:
. the name of the selling securityholder and of any participating
underwriters, broker-dealers or agents;
. the aggregate amount and type of securities being offered;
. the price at which the securities were sold and other material terms
of the offering;
. any discounts, commissions, concessions and other items constituting
compensation from the selling securityholders and any discounts,
commissions or concessions allowed or reallowed or paid to dealers;
and
. that the participating broker-dealers did not conduct any
investigation to verify the information in this prospectus or
incorporated in this prospectus by reference.
The prospectus supplement or a post-effective amendment will be filed with the
Securities and Exchange Commission to reflect the disclosure of additional
information with respect to the distribution of the securities. In addition, if
we receive notice from a selling securityholder that a donee or pledgee intends
to sell more than 500 shares of Series A common stock, a supplement to this
prospectus will be filed.
Manner of sales. The selling securityholders will act independently of the
company in making decisions with respect to the timing, manner and size of each
sale. Sales may be made over the Nasdaq National Market or the over-the-counter
market. The shares may be sold at then prevailing market prices, at prices
related to prevailing market prices, at fixed prices or at negotiated prices.
The securities may be sold according to one or more of the following
methods:
. a block trade in which the broker or dealer so engaged will attempt
to sell the securities as agent but may position and resell a
portion of the block as principal to facilitate the transaction;
43
<PAGE>
. purchases by a broker or dealer as principal and resale by the
broker or dealer for its account as allowed under this prospectus;
. ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
. an exchange distribution under the rules of the exchange;
. face-to-face transactions between sellers and purchasers without a
broker-dealer; and
. by writing options.
Some persons participating in this offering may engage in transactions that
stabilize, maintain or otherwise affect the price of the securities, including
the entry of stabilizing bids or syndicate covering transactions or the
imposition of penalty bids. The selling securityholders and any other person
participating in a distribution will be subject to applicable provisions of the
Securities Act and the Exchange Act and the rules and regulations thereunder,
including Regulation M. Regulation M may limit the timing of purchases and
sales of any of the securities by the selling securityholders and any other
person. The anti-manipulation rules under the Exchange Act may apply to sales
of securities in the market and to the activities of the selling
securityholders and their affiliates. Furthermore, Regulation M of the Exchange
Act may restrict the ability of any person engaged in the distribution of the
securities to engage in market-making activities with respect to the particular
securities being distributed for a period of up to five business days before
the distribution. All of the foregoing may affect the marketability of the
securities and the ability of any person or entity to engage in market-making
activities with respect to the securities.
Hedging and other transactions with broker-dealers. In connection with
distributions of the securities, the selling securityholders may enter into
hedging transactions with broker-dealers. In connection with these
transactions, broker-dealers may engage in short sales of the registered
securities in the course of hedging the positions they assume with selling
securityholders. The selling securityholders may also sell securities short and
redeliver the securities to close out short positions. The selling
securityholders may also enter into option or other transactions with broker-
dealers which require the delivery to the broker-dealer of the registered
securities. The broker-dealer may then resell or transfer these securities
under this prospectus. A selling stockholder may also loan or pledge the
registered securities to a broker-dealer and the broker-dealer may sell the
securities so loaned or, upon a default, the broker-dealer may effect sales of
the pledged securities under this prospectus.
Expenses associated with registration. We have agreed to pay substantially
all of the expenses of registering the securities under the Securities Act and
of compliance with blue sky laws, including registration and filing fees,
printing and duplication expenses, administrative expenses, legal and
accounting fees, fees for one legal counsel retained by the selling
securityholders and fees of the trustee under the indenture pursuant to which
we originally issued the securities. If the notes or the underlying Series A
common stock are sold through underwriters or broker-dealers, the selling
securityholders will be responsible for underwriting discounts, underwriting
commissions and agent commissions.
Indemnification and contribution. In the registration rights agreement, we
and the selling securityholders have agreed to indemnify or provide
contribution to each other and specified other persons against some liabilities
in connection with the offering of the securities, including liabilities
arising under the Securities Act. The selling securityholders may also agree to
indemnify any broker-dealer or agent that participates in transactions
involving sales of the securities against some liabilities, including
liabilities arising under the Securities Act.
Termination of this offering. We have agreed to keep this registration
statement effective until all securities that may be sold with this prospectus
have been sold with this prospectus or sold under Rule 144 under the Securities
Act, or until the applicable holding periods under Rule 144(k), with respect to
such securities, assuming they are not held by one of our affiliates, have
expired.
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LEGAL MATTERS
Fenwick & West LLP, Palo Alto, California, has provided us with an opinion
as to legal matters in connection with the notes and the Series A common stock
that may be offered with this prospectus. Winthrop, Stimson, Putnam & Roberts,
New York, New York, has provided us with an opinion as to legal matters related
to the laws of the State of New York in connection with the notes.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our annual report on Form 10-K, as amended,
for the year ended December 31, 1999, as set forth in their report included
therein, which is incorporated by reference in this prospectus and elsewhere in
the registration statement. Our consolidated financial statements are
incorporated by reference in reliance on Ernst & Young LLP's report, given on
their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We incorporate into this prospectus by reference the following documents:
. the registration statement on Form S-3 of which this prospectus is a
part, and the documents filed as exhibits to the registration
statement and incorporated into the registration statement by
reference;
. our annual report on Form 10-K, as amended, for the year ended
December 31, 1999;
. all other reports filed under Section 13(a) or 15(d) of the Exchange
Act since December 31, 1999, including: (1) our quarterly report on
Form 10-Q for the quarter ended March 31, 2000; and (2) our current
reports on Form 8-K filed on April 3, 2000 and June 2, 2000;
. the description of our Series A common stock contained in our
registration statement on Form 8-A (File No. 000-22697), filed with
the Commission on June 13, 1997; and
. all other information that we file with the Securities and Exchange
Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act 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. Such inconsistent incorporated statement shall not be deemed,
except as modified or superceded, to constitute a part of this prospectus or
the registration statement.
Because we are subject to the informational requirements of the Exchange
Act, we file reports and other information with the Commission. You may obtain
copies of this material from the Public Reference Room of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 at rates prescribed by the
Commission. The public may obtain information on the operation of the Public
Reference Room by calling the Commission at 1-800-SEC-0330. Reports, proxy and
information statements and other information that we file electronically with
the Commission are available at the Commission's web site at
http://www.sec.gov.
We have filed with the Commission a registration statement on Form S-3 under
the Securities Act with respect to the notes and Series A common stock offered
with this prospectus. This prospectus does not contain all of the information
in the registration statement, parts of which we have omitted, as allowed under
the rules and regulations of the Commission. You should refer to the
registration statement for further information with respect to us, our notes
and our Series A common stock. Statements contained in this prospectus as to
the contents of any contract or other document, including the indenture and the
registration rights agreement, are not necessarily complete and, in each
instance, we refer you to the copy of each contract or document filed as an
exhibit to the registration statement.
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We will furnish without charge to each person to whom a copy of this
prospectus is delivered, upon written or oral request, a copy of the
information that has been incorporated into this prospectus by reference
(except exhibits, unless they are specifically incorporated by reference into
this prospectus). You should direct any requests for copies to At Home
Corporation, 450 Broadway Street, Redwood City, California 94063, Attention:
General Counsel, telephone: (650) 556-5000.
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[LOGO OF EXCITE@HOME]
At Home Corporation
$500,000,000 principal amount
4 3/4% Convertible Subordinated Notes due 2006
Shares of Series A common stock
issuable upon conversion of the notes
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PROSPECTUS
June 7, 2000
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You should rely only on the information contained in or incorporated by
reference into this prospectus. We have not authorized anyone to provide you
with different information. The selling securityholders are offering to sell,
and seeking offers to buy, the securities only in jurisdictions where offers
and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of the securities.
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